Table of Contents
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT of 1934
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For
the quarterly period ended March 31, 2010
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT of 1934
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For
the transition period from
to
Commission
File Number 000-30833
BRUKER
CORPORATION
(Exact name of
registrant as specified in its charter)
Delaware
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04-3110160
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(State or other
jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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40
Manning Road, Billerica, MA 01821
(Address of principal executive offices) (Zip
Code)
Registrants
telephone number, including area code:
(978) 663-3660
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
o
Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate
Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T during the preceding 12
months (or for such shorter period that the registrant was required to submit
and post such files). Yes
o
No
o
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company. See the definitions of accelerated
filer, large accelerated filer, smaller reporting company in Rule 12b-2
of the Exchange Act. (Check one):
Large
accelerated filer
o
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Accelerated
filer
x
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Non-accelerated
filer
o
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Smaller
reporting company
o
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(Do not check if
a smaller reporting company)
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Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes
o
No
x
Indicate the number of
shares outstanding of each of the issuers classes of common stock, as of the
latest practicable date.
Class
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Outstanding
at May 3, 2010
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Common Stock, $0.01 par value per share
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164,685,449 shares
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Table
of Contents
BRUKER
CORPORATION
Quarterly
Report on Form 10-Q
For
the Quarter Ended March 31, 2010
Index
Table of Contents
PART I
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FINANCIAL
INFORMATION
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ITEM
1.
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UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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BRUKER
CORPORATION
UNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEETS
(in
millions, except share data)
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March 31,
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December 31,
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2010
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2009
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ASSETS
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Current
assets:
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|
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Cash
and cash equivalents
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$
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203.1
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$
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207.1
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Restricted
cash
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3.5
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|
2.0
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Accounts
receivable, net
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174.9
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184.1
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Inventories
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431.2
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422.8
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Other
current assets
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61.6
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57.5
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Total
current assets
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874.3
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873.5
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Property,
plant and equipment, net
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212.0
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223.4
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Intangibles
and other long-term assets
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73.3
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75.1
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Total
assets
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$
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1,159.6
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$
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1,172.0
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LIABILITIES AND SHAREHOLDERS
EQUITY
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Current
liabilities:
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Short-term
borrowings
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$
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0.1
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$
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0.1
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Current
portion of long-term debt
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23.5
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21.9
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Accounts
payable
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53.7
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49.8
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|
Customer
advances
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218.3
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219.2
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Other
current liabilities
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248.4
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249.2
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Total
current liabilities
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544.0
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540.2
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Long-term
debt
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109.6
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115.7
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Other
long-term liabilities
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88.1
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97.3
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Commitments
and contingencies (Note 16)
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Shareholders
equity:
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Preferred
stock, $0.01 par value 5,000,000 shares authorized, none issued or
outstanding at March 31, 2010 and December 31, 2009
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Common
stock, $0.01 par value 260,000,000 shares authorized, 164,677,306 and
164,384,679 shares issued and 164,659,850 and 164,371,384 outstanding at
March 31, 2010 and December 31, 2009, respectively
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1.6
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1.6
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Treasury
stock at cost, 17,456 at March 31, 2010 and 13,295 at December 31,
2009
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(0.2
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)
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(0.1
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)
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Other
shareholders equity
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414.9
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415.7
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Total
shareholders equity attributable to Bruker Corporation
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416.3
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417.2
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Noncontrolling
interest in consolidated subsidiaries
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1.6
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1.6
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Total
shareholders equity
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417.9
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418.8
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Total
liabilities and shareholders equity
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$
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1,159.6
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$
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1,172.0
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|
The
accompanying notes are an integral part of these statements.
1
Table of Contents
BRUKER
CORPORATION
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in
millions, except per share data)
|
|
Three
Months Ended
March 31,
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|
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2010
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2009
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Product
revenue
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$
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244.0
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$
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202.2
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Service
revenue
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31.5
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26.9
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Other
revenue
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2.2
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1.4
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Total
revenue
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277.7
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230.5
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Cost
of product revenue
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134.2
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111.7
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Cost
of service revenue
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17.2
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16.1
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Total
cost of revenue
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151.4
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127.8
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Gross
profit
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126.3
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102.7
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Operating
expenses:
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Sales
and marketing
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49.1
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42.6
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General
and administrative
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17.0
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16.3
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Research
and development
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32.8
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29.1
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Restructuring
charges
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0.2
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Acquisition-related
charges
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0.3
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0.4
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Total
operating expenses
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99.4
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88.4
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Operating
income
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26.9
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14.3
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Interest
and other income (expense), net
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(0.3
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)
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0.1
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Income
before income taxes and noncontrolling interest in consolidated subsidiaries
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26.6
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14.4
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Income
tax provision
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10.6
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5.8
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Consolidated
net income
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16.0
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8.6
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Net
income (loss) attributable to noncontrolling interest in consolidated
subsidiaries
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(0.1
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)
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0.2
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Net
income attributable to Bruker Corporation
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$
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16.1
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$
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8.4
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Net
income per common share attributable to
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|
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Bruker
Corporation shareholders:
|
|
|
|
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Basic
and diluted
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$
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0.10
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$
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0.05
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|
|
|
|
|
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Weighted
average common shares outstanding:
|
|
|
|
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Basic
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164.1
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163.3
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Diluted
|
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165.6
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164.3
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The
accompanying notes are an integral part of these statements.
2
Table of Contents
BRUKER
CORPORATION
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in
millions)
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Three Months Ended
March 31,
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2010
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2009
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Cash
flows from operating activities:
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Consolidated
net income
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$
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16.0
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$
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8.6
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Adjustments
to reconcile net income to cash flows from operating activities:
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Depreciation
and amortization
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7.5
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6.6
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Amortization
of deferred financing costs
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0.2
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0.2
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Stock-based
compensation
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1.6
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1.8
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Deferred
income taxes
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(9.9
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)
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(1.7
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)
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Other
non-cash income
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|
|
|
(1.9
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)
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Changes
in operating assets and liabilities:
|
|
|
|
|
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Accounts
receivable
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4.5
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20.6
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Inventories
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(26.0
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)
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(16.9
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)
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Accounts
payable
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5.9
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6.6
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Customer
deposits
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6.1
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5.9
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Other
changes in operating assets and liabilities, net
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(0.4
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)
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(16.7
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)
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Net
cash provided by operating activities
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5.5
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13.1
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|
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|
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Cash
flows from investing activities:
|
|
|
|
|
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Purchases
of property, plant and equipment
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(5.4
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)
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(3.9
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)
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Acquisitions,
net of cash acquired
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|
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(0.7
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)
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Net
cash used in investing activities
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(5.4
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)
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(4.6
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)
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|
|
|
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Cash
flows from financing activities:
|
|
|
|
|
|
Repayments
of revolving lines of credit, net
|
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(0.1
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)
|
(15.6
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)
|
Repayment
of term debt
|
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(4.1
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)
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(2.0
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)
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Changes
in restricted cash
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(1.7
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)
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(0.2
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)
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Issuance
of common stock under stock plans
|
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1.6
|
|
|
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Net
cash used in financing activities
|
|
(4.3
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)
|
(17.8
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)
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Effect
of exchange rate changes on cash and cash equivalents
|
|
0.2
|
|
(8.5
|
)
|
Net
change in cash and cash equivalents
|
|
(4.0
|
)
|
(17.8
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)
|
Cash
and cash equivalents at beginning of period
|
|
207.1
|
|
166.2
|
|
Cash
and cash equivalents at end of period
|
|
$
|
203.1
|
|
$
|
148.4
|
|
The
accompanying notes are an integral part of these statements.
3
Table of Contents
BRUKER
CORPORATION
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
1.
Description of Business
Bruker Corporation and
its wholly-owned subsidiaries (the Company) is a designer and manufacturer of
proprietary life science and materials research systems and associated products
that address the rapidly evolving needs of a diverse array of customers in life
science, pharmaceutical, biotechnology and molecular diagnostics research, as
well as in materials and chemical analysis in various industries and government
applications. The Companys core technology platforms include X-ray
technologies, magnetic resonance technologies, mass spectrometry technologies,
optical emission spectroscopy and infrared and Raman molecular spectroscopy
technologies. The Company also manufactures and distributes a broad range of
field analytical systems for chemical, biological, radiological, nuclear and
explosives, or CBRNE, detection. The Company also develops and manufactures low
temperature and high temperature superconducting wire and superconducting
devices for use in advanced magnet technology, physics research and energy
applications. The Company maintains major technical and manufacturing centers
in Europe, North America and Japan, and has sales offices located throughout
the world. The Companys diverse customer base includes life science,
pharmaceutical, biotechnology and molecular diagnostic research companies, academic
institutions, advanced materials and semiconductor industries and government
agencies.
Management reports
results on the basis of the following two segments:
·
Scientific Instruments.
The operations of this segment include
the design, manufacture and distribution of advanced instrumentation and
automated solutions based on X-ray technology, spark-optical emission
spectroscopy technology, atomic force microscopy technology, magnetic resonance
technology, mass spectrometry technology and infrared and Raman molecular
spectroscopy technology. Typical customers of the Scientific Instruments
segment include pharmaceutical, biotechnology, molecular diagnostic companies;
academic institutions; medical schools; other non-profit organizations;
clinical microbiology laboratories; government departments and agencies;
nanotechnology, semiconductor, chemical, cement, metals and petroleum
companies; and food, beverage and agricultural analysis companies and
laboratories.
·
Energy &
Supercon Technologies.
The operations of this segment include development and production of
low temperature superconducting and high temperature superconducting wires for
use in advanced magnet technology and energy applications as well as electron
and ion linear accelerators, superconducting and normal conducting accelerator
cavities, other accelerator components, insertion devices, prototype
superconducting fault current limiters, prototype crystal growth magnets, and
highly specialized manufacturing services for physics and energy research and a
variety of other scientific applications. Typical customers of the Energy &
Supercon Technologies segment include companies in the medical, power and
energy, and processing industries, private and public research and development
laboratories in the fields of fundamental and applied sciences and energy
research, and academic institutions and government agencies.
The financial statements
represent the consolidated accounts of the Company. All significant
intercompany accounts and transactions have been eliminated in consolidation.
The unaudited condensed consolidated financial statements as of and for the
three months ended March 31, 2010 and 2009 have been prepared in
accordance with accounting principles generally accepted in the United States (GAAP)
for interim financial information and pursuant to the rules and
regulations of the Securities and Exchange Commission for Quarterly Reports on Form 10-Q
and Article 10 of Regulation S-X. Accordingly, the financial information
presented herein does not include all of the information and footnotes required
by GAAP for complete financial statements. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, considered
necessary for a fair presentation have been included. The results for interim
periods are not necessarily indicative of the results expected for the full
year. Certain prior year amounts have been reclassified to conform to the
current year presentation. These reclassifications had no effect on previously reported
net income or shareholders equity.
4
Table of Contents
2.
Acquisitions
In March 2010,
the Company announced it entered into a definitive asset purchase agreement to
acquire certain product lines of Varian, Inc. (Varian), which Agilent
Technologies, Inc. (Agilent) committed to divest in connection with
obtaining regulatory approval for Agilents previously announced acquisition of
Varian. The Company will acquire certain assets and assume certain liabilities
in Varians inductively coupled plasma mass spectrometry instruments business,
laboratory gas chromatography instruments business, and gas chromatography
triple-quadrupole mass spectrometry instruments business, for cash
consideration of $37.5 million. The Company is evaluating the allocation of the
purchase price. The acquisition is subject to customary closing conditions and
regulatory approvals and the Company expects it to close in the second quarter
of 2010.
In April 2009,
the Company acquired substantially all of the assets of the research
instruments portion of ACCEL Instruments GmbH (the RI business) from Varian
Medical Systems, Inc. The acquisition of the RI business was accounted for
under the acquisition method. The RI business, located in Bergisch Gladbach,
Germany, consists of the development and manufacture of electron and ion linear
accelerators, superconducting and normal conducting accelerator cavities,
insertion devices, superconducting fault current limiters, other accelerator
components and specialty superconducting magnets for physics and energy
research and a variety of other scientific applications. The consideration
transferred in acquiring the RI business was approximately $0.4 million and
consisted entirely of cash. The Company acquired approximately $2.8 million of
receivables, $4.4 million of inventory, $2.2 million of other current assets
and $4.9 million of property, plant and equipment in this acquisition and
assumed approximately $12.1 million of current liabilities. The Company also
recorded $0.5 million representing the fair value of a noncontrolling interest.
In 2009, in connection with the acquisition of the RI business, the Company
recorded a gain of approximately $1.3 million that was recorded as a component
of acquisition-related charges in the consolidated statements of operations. A
gain of $2.1 million was initially recorded in the second quarter of 2009 based
on a preliminary purchase price allocation, but was subsequently reduced by
$0.8 million in the fourth quarter of 2009 based on the final allocation. The
results of the RI business have been included in the Energy & Supercon
Technologies segment from the date of acquisition. Pro forma financial
information reflecting the acquisition of the RI business has not been
presented because the impact on revenues, net income and net income per common
share attributable to Bruker Corporation shareholders is not material.
3.
Stock-Based Compensation
As of March 31,
2010, the Companys primary types of share-based compensation were in the form
of stock options and restricted stock. The Company recorded stock-based
compensation expense for the three months ended March 31, 2010 and 2009 as
follows (in millions):
|
|
2010
|
|
2009
|
|
Stock
options
|
|
$
|
1.3
|
|
$
|
1.3
|
|
Restricted
stock
|
|
0.3
|
|
0.5
|
|
Total
stock-based compensation, pre-tax
|
|
1.6
|
|
1.8
|
|
Tax
benefit
|
|
0.3
|
|
0.4
|
|
Total
stock-based compensation, net of tax
|
|
$
|
1.3
|
|
$
|
1.4
|
|
Compensation expense is
amortized on a straight-line basis over the underlying vesting terms. Stock
options to purchase the Companys common stock are periodically awarded to
executive officers and other employees of the Company subject to a vesting
period of three to five years. The fair value of each option award is estimated
on the date of grant using the Black-Scholes option-pricing model. Assumptions
regarding volatility, expected life, dividend yield and risk-free interest rate
are required for the Black-Scholes model and are presented in the table below:
|
|
2010
|
|
2009
|
|
Risk-free
interest rate
|
|
3.00%-3.37
|
%
|
1.71%-3.60
|
%
|
Expected
life
|
|
6.5 years
|
|
6.5 years
|
|
Volatility
|
|
62.0
|
%
|
64.0
|
%
|
Expected
dividend yield
|
|
0.0
|
%
|
0.0
|
%
|
5
Table
of Contents
The risk-free interest
rate is the yield on zero-coupon U.S. Treasury securities for a period that is
commensurate with the expected life assumption. Expected life is determined
through the simplified method as defined in the Securities and Exchange
Commission Staff Accounting Bulletin No. 110. The Company believes that
this is the best estimate of the expected life of a new option. Expected
volatility can be based on a number of factors but the Company currently
believes that the exclusive use of historical volatility results in the best
estimate of the grant-date fair value of employee stock options because it
reflects the markets current expectations of future volatility. Expected
dividend yield was not considered in the option pricing formula since the
Company does not pay dividends and has no current plans to do so in the future.
The terms of some of the Companys indebtedness also currently restricts its
ability to pay dividends to its shareholders.
Bruker
Corporation Stock Plan
In February 2008,
the Companys shareholders approved an amendment to increase the number of
shares available under the Bruker BioSciences Corporation Amended and Restated
2000 Stock Option Plan (the Plan) by 2,000,000 shares, up to a total of
10,000,000 shares. The Plan allows a committee of the Board of Directors (the Committee)
to grant incentive stock options, non-qualified stock options, stock appreciation
rights and stock awards (including the use of restricted stock and phantom
shares). The Committee has the authority to determine which employees will
receive the awards, the amount of the awards and other terms and conditions of
the award. Awards granted by the Committee typically vest over a period of
three to five years. The Plan, as approved and subsequently amended by the
shareholders, had a term of ten years and expired in February 2010. On March 9,
2010, the Companys Board of Directors unanimously approved and adopted the
Bruker Corporation 2010 Incentive Compensation Plan (the 2010 Plan). If the
2010 Plan is approved by the stockholders at the Companys annual meeting in May 2010,
it will become effective and provide for the issuance of up to 8,000,000 shares
of the Companys common stock.
At March 31, 2010,
the Company expects to recognize pre-tax stock-based compensation expense of
$13.1 million associated with outstanding stock option awards granted under the
Plan over the weighted average remaining service period of 2.0 years. In
addition, the Company expects to recognize additional pre-tax stock-based
compensation expense of $2.2 million associated with outstanding restricted
stock awards granted under the Plan over the weighted average remaining service
period of 1.2 years.
Bruker
Energy & Supercon Technologies Stock Plan
In October 2009, the
Board of Directors of Bruker Energy & Supercon Technologies, Inc.
(BEST), a wholly-owned direct subsidiary of the Company, adopted the Bruker
Energy & Supercon Technologies, Inc. 2009 Stock Option Plan (the BEST
Plan). The BEST Plan provides for the issuance of up to 1,600,000 shares of
BEST common stock in connection with awards under the Plan. The Plan allows a
committee of the BEST Board of Directors to grant incentive stock options and
non-qualified stock options.
At March 31, 2010,
the Company expects to recognize pre-tax stock-based compensation expense of
$1.6 million associated with outstanding stock option awards granted under the
BEST Plan over the weighted average remaining service period of 4.3 years.
4.
Earnings Per Share
Net income per share is
calculated by dividing net income by the weighted-average shares outstanding
during the period. The diluted net income per share computation includes the
effect of shares which would be issuable upon the exercise of outstanding stock
options and the vesting of restricted stock, reduced by the number of shares,
which are assumed to be purchased by the Company from the resulting proceeds at
the average market price during the period.
The following table sets
forth the computation of basic and diluted average shares outstanding for the
three months ended March 31, 2010 and 2009 (in millions, except per share
amounts):
6
Table
of Contents
|
|
2010
|
|
2009
|
|
Net
income attributable to Bruker Corporation, as reported
|
|
$
|
16.1
|
|
$
|
8.4
|
|
|
|
|
|
|
|
Weighted
average shares outstanding:
|
|
|
|
|
|
Weighted
average shares outstanding-basic
|
|
164.1
|
|
163.3
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
Stock
options and restricted stock
|
|
1.5
|
|
1.0
|
|
|
|
165.6
|
|
164.3
|
|
|
|
|
|
|
|
Net
income per common share attributable to Bruker Corporation shareholders:
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
0.10
|
|
$
|
0.05
|
|
Stock options to purchase
approximately 0.4 million shares and 4.6 million shares were excluded from the
computation of diluted earnings per share in the three months ended March 31,
2010 and 2009, respectively, because the exercise price of the stock options
exceeded the average market price of the Companys common stock and, as a
result, would have had an anti-dilutive effect.
5.
Fair Value of Financial Instruments
The Company applies the
following hierarchy, which prioritizes the input used to measure fair value
into three levels and bases the categorization within the hierarchy upon the
lowest level of input that is available and significant to the fair value
measurement. The three levels are
defined as follows:
Level 1:
Inputs
to the valuation methodology are quoted prices (unadjusted) for identical
assets or liabilities in active markets.
Level 2:
Inputs
to the valuation methodology include quoted prices for similar assets and
liabilities in active markets, and inputs that are observable for the asset or
liability, either directly or indirectly, for substantially the full term of
the financial instrument.
Level 3:
Inputs
to the valuation methodology are unobservable and significant to the fair value
measurement.
The Company measures the
following financial assets and liabilities at fair value on a recurring basis.
The fair value of these financial assets and liabilities was determined using
the following inputs at March 31, 2010 (in millions):
|
|
Total
|
|
Quoted Prices in
Active Markets
Available (Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable Inputs
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Cash
equivalents
|
|
$
|
96.8
|
|
$
|
96.8
|
|
$
|
|
|
$
|
|
|
Restricted
cash
|
|
3.5
|
|
3.5
|
|
|
|
|
|
Long-term
restricted cash
|
|
2.9
|
|
2.9
|
|
|
|
|
|
Foreign
exchange contracts
|
|
0.1
|
|
|
|
0.1
|
|
|
|
Total
assets recorded at fair value
|
|
$
|
103.3
|
|
$
|
103.2
|
|
$
|
0.1
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Interest
rate swap
|
|
$
|
3.7
|
|
$
|
|
|
$
|
3.7
|
|
$
|
|
|
Embedded
derivatives in purchase and delivery contracts
|
|
2.2
|
|
|
|
2.2
|
|
|
|
Foreign
exchange contracts
|
|
0.3
|
|
|
|
0.3
|
|
|
|
Total
liabilities recorded at fair value
|
|
$
|
6.2
|
|
$
|
|
|
$
|
6.2
|
|
$
|
|
|
The Companys financial
instruments consist primarily of cash equivalents, restricted cash, derivative
instruments consisting of forward contracts, options and an interest rate swap,
accounts receivable, short-term borrowings, accounts payable and long-term
debt. The carrying amounts of the Companys cash equivalents, restricted cash,
accounts receivable,
7
Table
of Contents
short-term borrowings and
accounts payable approximate fair value due to their short-term nature.
Derivative assets and liabilities are measured at fair value on a recurring
basis. The fair value of derivative
instruments is based on quotes received from third party banks. These values
represent the estimated amount the Company would receive or pay to terminate
the agreements taking into consideration current foreign exchange or interest
rates, as well as the creditworthiness of the counterparty. The Companys
long-term debt consists primarily of variable rate arrangements with interest
rates that reset every three months and, as a result, reflect current interest
rates. Consequently, the carrying value of the Companys long-term debt
approximates fair value.
6.
Inventories
Inventories consisted of
the following as of March 31, 2010 and December 31, 2009 (in
millions):
|
|
March 31,
2010
|
|
December 31,
2009
|
|
Raw materials
|
|
$
|
110.3
|
|
$
|
108.8
|
|
Work-in-process
|
|
148.7
|
|
134.6
|
|
Demonstration
units
|
|
37.7
|
|
41.3
|
|
Finished goods
|
|
134.5
|
|
138.1
|
|
Inventories
|
|
$
|
431.2
|
|
$
|
422.8
|
|
The Company reduces the
carrying value of its demonstration inventories for differences between its
cost and estimated net realizable value through a charge to cost of revenue
that is based on a number of factors including the age of the unit, the
physical condition of the unit and an assessment of technological obsolescence.
Amounts recorded in cost of product revenue related to the write-down of
demonstration units to net realizable value were $5.6 million and $5.8 million
for the three months ended March 31, 2010 and 2009, respectively.
Finished goods include
in-transit systems that have been shipped to the Companys customers but have
not yet been installed and accepted by the customer. As of March 31, 2010
and December 31, 2009, inventory-in-transit was $67.5 million and $80.8
million, respectively.
7.
Goodwill and Other Intangible Assets
The following table sets
forth the changes in the carrying amount of goodwill for the three months ended
March 31, 2010 (in millions):
Balance
at December 31, 2009
|
|
$
|
47.5
|
|
Goodwill
acquired during the period
|
|
|
|
Foreign
currency impact
|
|
(1.3
|
)
|
Balance
at March 31, 2010
|
|
$
|
46.2
|
|
Goodwill is not
amortized, instead, goodwill is tested for impairment on a reporting unit basis
annually, or on an interim basis when events or changes in circumstances
warrant. The Company performed its annual test for impairment as of December 31,
2009 and determined that goodwill and other intangible assets were not impaired
at that time. The Company did not identify any indicators of impairment during
the three month period ended March 31, 2010.
The following is a
summary of other intangible assets subject to amortization at March 31,
2010 and December 31, 2009 (in millions):
8
Table
of Contents
|
|
March 31,
2010
|
|
December 31,
2009
|
|
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Existing
technology and related patents
|
|
$
|
14.1
|
|
$
|
(10.9
|
)
|
$
|
3.2
|
|
$
|
14.4
|
|
$
|
(10.7
|
)
|
$
|
3.7
|
|
Customer
relationships
|
|
2.0
|
|
(1.0
|
)
|
1.0
|
|
2.0
|
|
(0.9
|
)
|
1.1
|
|
Trade
names
|
|
0.4
|
|
(0.2
|
)
|
0.2
|
|
0.4
|
|
(0.3
|
)
|
0.1
|
|
Intangible
assets subject to amortization, net
|
|
$
|
16.5
|
|
$
|
(12.1
|
)
|
$
|
4.4
|
|
$
|
16.8
|
|
$
|
(11.9
|
)
|
$
|
4.9
|
|
For the three months
ended March 31, 2010 and 2009, the Company recorded amortization expense
of $0.5 million and $0.4 million, respectively, related to intangible assets
subject to amortization.
8.
Debt
At March 31, 2010
and December 31, 2009, the Companys debt obligations consisted of the
following (in millions):
|
|
March 31,
|
|
December 31,
|
|
|
|
2010
|
|
2009
|
|
t
erm loan under the Credit Agreement
|
|
$
|
127.5
|
|
$
|
131.3
|
|
|
|
|
|
|
|
Euro
bank loans at fixed rate of 2.95%, collateralized by land and buildings of
Bruker Daltonik GmbH, quarterly principal payments and monthly interest payments
due and payable through 2010
|
|
0.1
|
|
0.3
|
|
|
|
|
|
|
|
Capital
lease obligations
|
|
5.5
|
|
6.0
|
|
Total
long-term debt
|
|
133.1
|
|
137.6
|
|
Current
portion of long-term debt
|
|
(23.5
|
)
|
(21.9
|
)
|
Total
long-term debt, less current portion
|
|
$
|
109.6
|
|
$
|
115.7
|
|
In 2008, the Company
entered into a credit agreement with a syndication of lenders (the Credit
Agreement) which provides for a revolving credit line with a maximum
commitment of $230.0 million and a term facility of $150.0 million. The
outstanding principal and interest under the term loan is payable in quarterly
installments through December 2012. Borrowings under the Credit Agreement
bear interest, at the Companys option, at either (i) the higher of the
prime rate or the federal funds rate plus 0.50%, or (ii) adjusted LIBOR,
plus margins ranging from 0.40% to 1.25% and a facility fee ranging from 0.10%
to 0.20%. As of March 31, 2010, the weighted average interest rate of
borrowings under the term facility of the Credit Agreement was approximately
2.6%.
Borrowings under the
Credit Agreement are secured by the pledge to the banks of 100% of the capital
stock of each of the Companys wholly-owned domestic subsidiaries and 65% of
the capital stock of certain of the Companys direct or indirect wholly-owned
foreign subsidiaries. The Credit Agreement also requires the Company to
maintain certain financial ratios related to leverage ratios and interest
coverage ratios as defined in the Credit Agreement. In addition to the
financial ratios, the Credit Agreement restricts, among other things, the
Companys ability to do the following: make certain payments; incur additional
debt; incur certain liens; make certain investments, including derivative
agreements; merge, consolidate, sell or transfer all or substantially all of
the Companys assets; and enter into certain transactions with affiliates. As
of March 31, 2010, the latest measurement date, the Company was in
compliance with the covenants under the Credit Agreement.
In addition to its
long-term arrangements, the Company had the following amounts outstanding under
revolving loan arrangements:
9
Table
of Contents
|
|
March 31,
|
|
December 31,
|
|
|
|
2010
|
|
2009
|
|
Revolving
loans under the Credit Agreement
|
|
$
|
|
|
$
|
|
|
Other
revolving loans
|
|
0.1
|
|
0.1
|
|
Total
short-term borrowings
|
|
$
|
0.1
|
|
$
|
0.1
|
|
The following is a
summary of the maximum commitments and net amounts available to the Company
under revolving loans as of March 31, 2010 (in millions):
|
|
Weighted
Average
Interest Rate
|
|
Total Amount
Committed by
Lenders
|
|
Outstanding
Borrowings
|
|
Outstanding
Letters of
Credit
|
|
Total Amount
Available
|
|
Credit
Agreement
|
|
0.0
|
%
|
$
|
230.0
|
|
$
|
|
|
$
|
2.5
|
|
$
|
227.5
|
|
Other
revolving loans
|
|
2.9
|
%
|
122.0
|
|
0.1
|
|
88.2
|
|
33.7
|
|
Total
revolving loans
|
|
2.9
|
%
|
$
|
352.0
|
|
$
|
0.1
|
|
$
|
90.7
|
|
$
|
261.2
|
|
Other revolving loans are
with various financial institutions located primarily in Germany, Switzerland
and France. The Companys other revolving lines of credit are typically due
upon demand with interest payable monthly. Certain of these lines of credit are
unsecured while others are secured by the accounts receivable and inventory of the
related subsidiary.
9.
Derivative Instruments and Hedging
Activities
Interest
Rate Risks
The Companys exposure to
interest rate risk relates primarily to outstanding variable rate debt and
adverse movements in the related short-term market rates. The most significant
component of the Companys interest rate risk relates to amounts outstanding
under the Credit Agreement. In April 2008, the Company entered into an
interest rate swap arrangement to manage its exposure to interest rate
movements and the related effect on its variable rate debt. Under this interest
rate swap arrangement, the Company will pay a fixed rate of approximately 3.8%
and receive a variable rate based on three month LIBOR. The initial notional
amount of this interest rate swap was $90.0 million and it amortizes in
proportion to the term debt component of the Credit Agreement through December 2012.
At March 31, 2010, the notional amount of this interest rate swap was
$76.5 million. The Company concluded that this swap met the criteria to qualify
as an effective hedge of the variability of cash flows of the interest payments
and accounts for the interest rate swap as a cash flow hedge. Accordingly, the
Company reflects changes in the fair value of the effective portion of this
interest rate swap in accumulated other comprehensive income, a component of
shareholders equity. As of March 31, 2010 and December 31, 2009, the
Company recorded a liability of $3.7 million and $3.5 million, respectively,
related to the fair value of the interest rate swap that is recorded in other
current liabilities in the consolidated balance sheets. Amounts recorded in
accumulated other comprehensive income (loss) are reclassified to interest and
other income (expense), net in the consolidated statement of operations when
either the forecasted transaction occurs or it becomes probable that the
forecasted transaction will not occur. The Company expects $2.4 million of the
accumulated loss to be reclassified into earnings over the next twelve months.
Foreign Exchange Rate Risk Management
The Company generates a
substantial portion of its revenues and expenses in international markets,
principally Europe and Japan, which subjects its operations to the exposure of
exchange rate fluctuations. The impact of currency exchange rate movement can
be positive or negative in any period. The Company, from time to time, has
entered into foreign currency contracts in order to minimize the volatility
that fluctuations in currency exchange rates have on the Companys cash flows
related to purchases and sales denominated in foreign currencies. In addition,
the Company periodically enters into purchase and sales contracts denominated
in currencies other than the functional currency of the parties to the
transaction. The Company accounts for these transactions separately valuing the
embedded derivative component of these contracts.
The Company periodically
enters into foreign currency contracts, primarily forward and option contracts,
to minimize the volatility that fluctuations in currency exchange rates have on
the Companys cash flows related to purchases and sales denominated in foreign
currencies. Under these arrangements, the Company typically agrees to purchase
a fixed amount of a foreign currency in exchange for a fixed amount of U.S.
Dollars or other currencies on specified dates with maturities of less than two
years. These transactions do not qualify for hedge accounting and, accordingly,
the instrument is recorded at fair
10
Table
of Contents
value with the
corresponding gains and losses recorded in interest and other income (expense),
net in the consolidated statements of operations. At March 31, 2010, and December 31,
2009, the following foreign currency contracts were outstanding:
|
|
|
|
Notional Amount at
|
|
Notional Amount at
|
|
Buy
|
|
Sell
|
|
March 31, 2010
|
|
December 31, 2009
|
|
Swiss
Francs
|
|
U.S. Dollars
|
|
$
|
12.8
|
|
$
|
13.1
|
|
U.S.
Dollars
|
|
Euro
|
|
|
|
6.7
|
|
Euro
|
|
U.S. Dollars
|
|
13.2
|
|
5.5
|
|
|
|
|
|
$
|
26.0
|
|
$
|
25.3
|
|
The Company also has
various unsettled contracts related to the purchase and delivery of certain
products. The contracts, denominated in currencies other than the functional
currency of the transacting parties, amounted to $32.3 million for the delivery
of products and $0.2 million for the purchase of products at March 31,
2010 and $30.4 million for the delivery of products and $0.2 million for the
purchase of products at December 31, 2009. The changes in the fair value
of these embedded derivatives are recorded in interest and other income
(expense), net in the consolidated statements of operations.
The fair value of the
derivative instruments described above is recorded in our consolidated balance
sheets for the periods ended March 31, 2010 and December 31, 2009 as
follows (in millions):
|
|
|
|
Fair Value
|
|
|
|
Balance Sheet Location
|
|
March 31,
2010
|
|
December 31,
2009
|
|
Derivative
assets:
|
|
|
|
|
|
|
|
Foreign
exchange contracts
|
|
Other current assets
|
|
$
|
0.1
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Derivative
liabilities:
|
|
|
|
|
|
|
|
Interest
rate swap contract
|
|
Other current
liabilities
|
|
$
|
3.7
|
|
$
|
3.5
|
|
Embedded
derivatives
|
|
Other current
liabilities
|
|
2.2
|
|
1.5
|
|
Foreign
exchange contracts
|
|
Other current
liabilities
|
|
0.3
|
|
|
|
The losses recognized in
other comprehensive income related to the effective portion of the interest
rate swap designated as a hedging instrument for the periods ended March 31,
2010 and 2009 are as follows (in millions):
|
|
2010
|
|
2009
|
|
Interest
rate swap contract
|
|
$
|
(0.9
|
)
|
$
|
(0.4
|
)
|
|
|
|
|
|
|
|
|
The losses related to the
effective portion of the interest rate swap designated as a hedging instrument
that were reclassified from other comprehensive income and recognized in net
income for the periods ended March 31, 2010 and 2009 are as follows (in
millions):
|
|
2010
|
|
2009
|
|
Interest
rate swap contract
|
|
$
|
(0.7
|
)
|
$
|
(0.5
|
)
|
|
|
|
|
|
|
|
|
The Company did not
recognize any amounts related to ineffectiveness in the results of operations
for the periods ended March 31, 2010 and 2009.
The impact on net income of changes in the
fair value of derivative instruments not designated as hedging instruments for
the periods ended March 31, 2010 and 2009 are as follows (in millions):
11
Table of Contents
|
|
March 31,
|
|
|
|
2010
|
|
2009
|
|
Foreign
exchange contracts
|
|
$
|
(0.2
|
)
|
$
|
0.3
|
|
Embedded
derivatives
|
|
(0.7
|
)
|
1.5
|
|
Income
(expense), net
|
|
$
|
(0.9
|
)
|
$
|
1.8
|
|
The amounts recorded in
the results of operations related to derivative instruments not designated as
hedging instruments are recorded in interest and other income (expense), net.
10.
Restructuring Activities
In the first quarter of
2010, the Company recorded restructuring charges of $0.2 million, which related
primarily to severance incurred in connection with the closing of a production
facility in Herzogenrath, Germany and relocating the associated operations.
These charges were recorded in the Scientific Instruments segment. The Company
does not expect to incur any additional costs related to this move and expects
to have made all of the severance payments by the end of the 2010. The
liability for restructuring charges is recorded in other current liabilities in
the unaudited condensed consolidated balance sheets. The charges related to
this restructuring reserve are as follows (in millions):
|
|
Total
|
|
Severance
|
|
Balance
at December 31, 2009
|
|
$
|
|
|
$
|
|
|
Restructuring
charges
|
|
0.2
|
|
0.2
|
|
Cash
payments
|
|
|
|
|
|
Foreign
currency impact
|
|
|
|
|
|
Balance
at March 31, 2010
|
|
$
|
0.2
|
|
$
|
0.2
|
|
11.
Employee Benefit Plans
Substantially all of the
Companys employees in Switzerland, France and Japan, as well as certain
employees in Germany, are covered by Company-sponsored defined benefit pension
plans. Retirement benefits are generally earned based on years of service and
compensation during active employment. Eligibility is generally determined in
accordance with local statutory requirements; however, the level of benefits and
terms of vesting varies among plans.
The net periodic pension
cost consists of the following components for the three months ended March 31,
2010 and 2009 (in millions):
|
|
2010
|
|
2009
|
|
Components
of net periodic benefit costs:
|
|
|
|
|
|
Service
cost
|
|
$
|
0.9
|
|
$
|
0.9
|
|
Interest
cost
|
|
1.2
|
|
1.0
|
|
Expected
return on plan assets
|
|
(0.9
|
)
|
(0.9
|
)
|
Amortization
of prior service costs
|
|
0.3
|
|
|
|
Net
periodic benefit costs
|
|
$
|
1.5
|
|
$
|
1.0
|
|
The Company made
contributions of $0.6 million to its defined benefit plans during the three
months ended March 31, 2010 and estimates contributions of $1.9 million
will be made during the remainder of 2010.
12.
Interest and Other Income (Expense),
Net
The components of
interest and other income (expense), net, were as follows for the three months
ended March 31, 2010 and 2009 (in millions):
12
Table
of Contents
|
|
2010
|
|
2009
|
|
Interest
income
|
|
$
|
0.1
|
|
$
|
0.4
|
|
Interest
expense
|
|
(1.5
|
)
|
(2.3
|
)
|
Exchange
gains on foreign currency transactions
|
|
0.5
|
|
1.3
|
|
Other
|
|
0.6
|
|
0.7
|
|
Interest
and other income (expense), net
|
|
$
|
(0.3
|
)
|
$
|
0.1
|
|
13.
Provision for Income Taxes
The Company accounts for
income taxes using the asset and liability approach by recognizing deferred tax
assets and liabilities for the expected future tax consequences of differences
between the financial statement basis and the tax basis of assets and
liabilities, calculated using enacted tax rates in effect for the year in which
the differences are expected to be reflected in the tax return. The Company
records a valuation allowance to reduce deferred tax assets to the amount that
is more likely than not to be realized. In addition, the Company also accounts for
uncertain tax positions that have reached a minimum recognition threshold.
The income tax provision
for the three months ended March 31, 2010 was $10.6 million compared to
$5.8 million for the three months ended March 31, 2009, representing
effective tax rates of 39.8% and 40.3%, respectively. The Companys effective tax rate generally
reflects the tax provision (benefit) for non-U.S. entities only, since no
benefit was recognized for cumulative losses incurred in the U.S. A full
valuation allowance will be maintained against all U.S. deferred tax assets,
including U.S. net operating losses and tax credits, until evidence exists that
it is more likely than not that the loss carryforward and credit amounts will
be utilized to offset U.S. taxable income. The Companys tax rate may change
over time as the amount or mix of income and taxes outside the U.S. changes.
The effective tax rate is calculated using projected annual pre-tax income or
loss and is affected by research and development tax credits, the expected
level of other tax benefits, the impact of changes to the valuation allowance,
and changes in the mix of the Companys pre-tax income and losses among
jurisdictions with varying statutory tax rates and credits.
The Company has
unrecognized tax benefits of approximately $24.0 million as of March 31,
2010, of which $14.8 million, if recognized, would result in a reduction of the
Companys effective tax rate. The Company recognizes penalties and interest
related to unrecognized tax benefits in the provision for income taxes. As of March 31,
2010 and December 31, 2009, approximately $4.1 million and $3.8 million,
respectively, of accrued interest and penalties related to uncertain tax
positions was included in other current liabilities on the unaudited condensed
consolidated balance sheets. Penalties and interest related to unrecognized tax
benefits in the provision for income taxes of $0.2 million and $0.1 million
were recorded during the three months ended March 31, 2010 and 2009,
respectively.
The Company files returns
in many foreign and state jurisdictions with varying statutes of limitations,
but considers its significant tax jurisdictions to include the United States,
Germany and Switzerland. The tax years 2003 to 2008 are open tax years in these
major taxing jurisdictions. One of the Companys Swiss entities is currently
being audited for the tax years 2003 through 2006 and the audit is expected to
be completed during 2010. In addition, all of the Companys German subsidiaries
are under tax audit for the years 2003 through 2008. The Company cannot
reasonably predict the timing or outcome of these audits.
14.
Accumulated Other Comprehensive
Income (Loss)
Comprehensive income
(loss) refers to revenues, expenses, gains and losses that under GAAP are
included in other comprehensive income, but excluded from net income as these
amounts are recorded directly as an adjustment to shareholders equity, net of
tax. The following is a summary of comprehensive loss for the three months
ended March 31, 2010 and 2009 (in millions):
13
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|
|
2010
|
|
2009
|
|
Consolidated
net income
|
|
$
|
16.0
|
|
$
|
8.6
|
|
Foreign
currency translation adjustments
|
|
(20.0
|
)
|
(26.4
|
)
|
Unrealized
losses on interest rate swap:
|
|
|
|
|
|
Unrealized
holding losses arising during the period
|
|
(0.9
|
)
|
(0.4
|
)
|
Less:
reclassification adjustments for settlements included in the determination of
net loss
|
|
0.7
|
|
0.5
|
|
Pension
liability adjustments
|
|
0.1
|
|
1.0
|
|
Total
comprehensive loss
|
|
(4.1
|
)
|
(16.7
|
)
|
Less:
Comprehensive income attributable to noncontrolling interests
|
|
(0.1
|
)
|
0.2
|
|
Comprehensive
loss attributable to Bruker Corporation
|
|
$
|
(4.0
|
)
|
$
|
(16.9
|
)
|
15.
Noncontrolling Interests
Net income (loss)
attributable to noncontrolling interests for the three months ended March 31,
2010 and 2009 was $(0.1) million and $0.2 million, respectively. The net loss attributable to noncontrolling
interests for the March 31, 2010 period represents the minority
shareholders proportionate share of the net loss recorded by five
majority-owned indirect subsidiaries, Bruker Baltic Ltd., Bruker Labmate Pvt.
Ltd., InCoaTec GmbH and Perch Solutions OY, which are included in the
Scientific Instruments segment, and RI Research Instruments GmbH, which is
included in the Energy & Supercon Technologies segment. The net income
attributable to noncontrolling interests for the March 31, 2009 period
relates to the minority shareholders proportionate share of the net income
recorded by three majority-owned indirect subsidiaries, Bruker Baltic Ltd.,
InCoaTec GmbH and Perch Solutions OY. There were no transfers to or from the
noncontrolling interests during the three months ended March 31, 2010 or
2009.
16.
Commitments and Contingencies
Legal
Lawsuits, claims and
proceedings of a nature considered normal to its businesses may be pending from
time to time against the Company. The Company believes the outcome of these
proceedings, if any, will not have a material impact on the Companys financial
position or results of operations. As of March 31, 2010 and December 31,
2009, no accruals have been recorded for such potential contingencies.
Letters of Credit and Guarantees
At March 31, 2010
and December 31, 2009, the Company had bank guarantees of $90.7 million
and $87.0 million, respectively, for its customer advances. These
arrangements guarantee the refund of advance payments received from customers
in the event that the merchandise is not delivered in compliance with the terms
of the contract. Certain of these guarantees affect the availability of the
Companys lines of credit.
17.
Business Segment Information
The Companys reportable
segments are organized by the types of products and services provided. The
Company has combined the Bruker AXS, Bruker BioSpin, Bruker Daltonics and
Bruker Optics operating segments into the Scientific Instruments reporting
segment because each has similar economic characteristics, product processes
and services, types and classes of customers, methods of distribution and
regulatory environments.
Management evaluates
segment operating performance and allocates resources based on operating income
(loss). The Company uses this measure because it helps provide an understanding
of our core operating results. Selected business segment information is
presented below for the three months ended March 31, 2010 and 2009 (in
millions):
14
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|
|
2010
|
|
2009
|
|
Revenue:
|
|
|
|
|
|
Scientific
Instruments
|
|
$
|
260.3
|
|
$
|
223.6
|
|
Energy &
Supercon Technologies
|
|
20.7
|
|
8.1
|
|
Eliminations
(a)
|
|
(3.3
|
)
|
(1.2
|
)
|
Total
revenue
|
|
$
|
277.7
|
|
$
|
230.5
|
|
|
|
|
|
|
|
Operating
Income (Loss):
|
|
|
|
|
|
Scientific
Instruments
|
|
$
|
27.7
|
|
$
|
16.1
|
|
Energy &
Supercon Technologies
|
|
(0.5
|
)
|
(2.4
|
)
|
Corporate,
eliminations and other (b)
|
|
(0.3
|
)
|
0.6
|
|
Total
operating income
|
|
$
|
26.9
|
|
$
|
14.3
|
|
(a) Represents
product and service revenue between reportable segments.
(b) Represents
costs and eliminations not allocated to the reportable segments.
Total assets by segment
as of March 31, 2010 and December 31, 2009 are as follows (in
millions):
|
|
March 31,
|
|
December 31,
|
|
|
|
2010
|
|
2009
|
|
Assets:
|
|
|
|
|
|
Scientific
Instruments
|
|
$
|
1,132.2
|
|
$
|
1,139.7
|
|
Energy &
Supercon Technologies
|
|
66.6
|
|
70.3
|
|
Eliminations
and other (a)
|
|
(39.2
|
)
|
(38.0
|
)
|
Total
assets
|
|
$
|
1,159.6
|
|
$
|
1,172.0
|
|
(a) Represents
assets not allocated to the reportable segments and eliminations of intercompany
transactions.
18.
Recent Accounting Pronouncements
In June 2009, the
FASB issued Codification Topic No. 105,
Generally
Accepted Accounting Principles
. Codification Topic No. 105 is
effective for fiscal years and interim periods, ending after September 15,
2009. Codification Topic No. 105 is intended to improve financial
reporting by identifying the FASB Accounting Standards Codification and rules and
interpretive releases of the SEC under authority of federal securities laws as
the sole sources of authoritative accounting principles to be used in preparing
financial statements that are presented in conformity with GAAP for SEC
registrants. The adoption of Codification Topic No. 105 did not have a
material impact on the Companys results of operations, financial position or
cash flows.
In January 2010, the
FASB issued Accounting Standards Update 2010-06,
Fair Value
Measurements and Disclosures (Topic 820)Improving Disclosures about Fair Value
Measurements
. Accounting Standards Update 2010-06 will require new
disclosures about transfers in and out of Levels 1 and 2 of the fair value
hierarchy and activity, including purchases, sales, issuances and settlements,
in Level 3 fair value measurements. The requirements of Accounting Standards
Update 2010-06 will be effective for interim and annual periods beginning after
December 15, 2009, except for the disclosures about purchases, sales,
issuances and settlements in Level 3 fair value measurements which will be
effective for interim and annual periods beginning after December 15,
2010. The Company is currently assessing the impact that the additional
disclosure requirements will have on its results of operations and financial
position.
In September 2009,
the Emerging Issues Task Force reached consensus on FASB Accounting Standards
Update 2009-14,
Software (Topic 985)Certain Revenue
Arrangements That Include Software Elements
. FASB Accounting
Standards Updates 2009-14 changes the accounting model for revenue arrangements
that include both tangible products and software elements. Under this guidance,
tangible products containing software components and non-software components
that function together to deliver the tangible products essential
functionality are excluded from the software revenue guidance in Subtopic
985-605,
Software-Revenue Recognition
. In
addition, hardware components of a tangible product containing software
components are
15
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always excluded from the
software revenue guidance. FASB Accounting Standards Updates 2009-14 is
effective prospectively for revenue arrangements entered into or materially
modified in fiscal years beginning on or after June 15, 2010, however,
early adoption is permitted. The Company is currently assessing the impact that
this update will have on its results of operations and financial position and
when the Company will adopt these requirements.
In September 2009,
the Emerging Issues Task Force reached consensus on FASB Accounting Standards
Update 2009-13,
Revenue Recognition (Topic
605)Multiple-Deliverable Revenue Arrangements.
FASB Accounting
Standards Update 2009-13 addresses the accounting for multiple-deliverable
arrangements to enable vendors to account for products or services separately
rather than as a combined unit. Specifically, this guidance amends the criteria
in Subtopic 605-25,
Revenue
Recognition-Multiple-Element Arrangements,
for separating
consideration in multiple-deliverable arrangements. This guidance establishes a
selling price hierarchy for determining the selling price of a deliverable,
which is based on: (a) vendor-specific objective evidence; (b) third-party
evidence; or (c) estimates. This guidance also eliminates the residual
method of allocation and requires that arrangement consideration be allocated
at the inception of the arrangement to all deliverables using the relative
selling price method. In addition, this guidance significantly expands required
disclosures related to a vendors multiple-deliverable revenue arrangements.
FASB Accounting Standards Update 2009-13 is effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on
or after June 15, 2010, however, early adoption is permitted. The Company
is currently assessing the impact that this update will have on its results of
operations and financial position and when the Company will adopt these
requirements.
ITEM
2.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
The following discussion
of our financial condition and results of operations should be read in
conjunction with our interim unaudited condensed consolidated financial
statements and the notes to those statements included in Part 1, Item 1 of
this Quarterly Report on Form 10-Q, and in conjunction with the
consolidated financial statements contained in our Annual Report on Form 10-K
for the year ended December 31, 2009.
Statements contained in
Managements Discussion and Analysis of Financial Condition and Results of
Operations, which express that we believe, anticipate, plan, expect, seek,
estimate, or should, as well as other statements, which are not historical
fact, are forward-looking statements within the meaning of the Private
Securities Litigation Act of 1995. Actual events or results may differ
materially from those set forth in forward-looking statements. Certain factors
that might cause such a difference are discussed in Factors Affecting Our
Business, Operating Results and Financial Condition set forth in our Annual
Report on Form 10-K for the year ended December 31, 2009.
OVERVIEW
The following Managements
Discussion and Analysis of Financial Condition and Results of Operations, or
MD&A, describes the principal factors affecting the results of our
operations, financial condition and changes in financial condition, as well as
our critical accounting policies and estimates. Our MD&A is organized as
follows:
·
Executive overview
. This section provides a general
description and history of our business, a brief discussion of our reportable
segments, significant recent developments in our business and other
opportunities, challenges we face and risks that may impact our business in the
future.
·
Critical accounting
policies
. This
section discusses the accounting estimates that are considered important to our
financial position and results of operations and that require us to exercise
subjective or complex judgments in their application.
·
Results of operations
. This section provides our analysis of
the significant line items on our unaudited condensed consolidated statement of
operations for the three months ended March 31, 2010 compared to the three
months ended March 31, 2009.
·
Liquidity and capital
resources
. This
section provides an analysis of our liquidity and cash flow and discussions of
our outstanding debt and commitments and matters relating to our common stock.
16
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·
Recent accounting
pronouncements
.
This section provides information about new accounting standards that have been
issued but for which adoption is not yet required.
EXECUTIVE
OVERVIEW
Business
Overview
Bruker Corporation
and its wholly-owned subsidiaries design, manufacture, service and market
proprietary life science and materials research systems based on its core
technology platforms, including X-ray technologies, magnetic resonance
technologies, mass spectrometry technologies, optical emission spectroscopy and
infrared and Raman molecular spectroscopy technologies. We sell a broad range
of field analytical systems for chemical, biological, radiological, nuclear and
explosive, or CBRNE, detection. We also develop and manufacture low temperature
and high temperature superconducting wire products and superconducting wire and
superconducting devices for use in advanced magnet technology, physics research
and energy applications. Our diverse customer base includes life science,
pharmaceutical, biotechnology and molecular diagnostic research companies,
academic institutions, advanced materials and semiconductor industries and
government agencies. We maintain major technical and manufacturing centers in
Europe, North America and Japan and we have sales offices located throughout
the world. Our corporate headquarters are located in Billerica, Massachusetts.
Our
business strategy is to capitalize on our ability to innovate and generate
rapid revenue performance, both organically and through acquisitions. Our
revenue growth strategy, combined with anticipated improvements to our gross
profit margins and increased leverage on our research and development, sales
and marketing and distribution investments and general and administrative
expenses, is expected to enhance our operating margins and improve our earnings
in the future.
We are organized
into five operating segments, representing each of our five divisions: Bruker
AXS, Bruker BioSpin, Bruker Daltonics, Bruker Optics and Bruker Energy &
Supercon Technologies. Bruker AXS is in the business of manufacturing and
distributing advanced X-ray, spark-optical emission spectroscopy and atomic
force microscopy instrumentation used in non-destructive molecular and
elemental analysis. Bruker BioSpin is in the business of manufacturing and
distributing enabling life science tools based on magnetic resonance
technology. Bruker Daltonics is in the business of manufacturing and
distributing mass spectrometry instruments that can be integrated and used
along with other analytical instruments, as well as our CBRNE detection
products. Bruker Optics is in the business of manufacturing and distributing
research, analytical and process analysis instruments and solutions based on
infrared and Raman molecular spectroscopy technologies. Bruker Energy &
Supercon Technologies is in the business of developing and producing low
temperature superconducting and high temperature superconducting wires for use
in advanced magnet technology and energy applications as well as linear
accelerators, accelerator cavities, insertion devices, superconducting fault
current limiters, other accelerator components and specialty superconducting
magnets for physics and energy research and a variety of other scientific
applications.
We have combined
the Bruker AXS, Bruker BioSpin, Bruker Daltonics and Bruker Optics operating
segments into the Scientific Instruments reporting segment because each has
similar economic characteristics, product processes and services, types and
classes of customers, methods of distribution and regulatory environments. As
such, management reports its results based on the following segments:
·
Scientific Instruments.
The operations of this
segment include the design, manufacture and distribution of advanced
instrumentation and automated solutions based on X-ray technology,
spark-optical emission spectroscopy technology, atomic force microscopy,
magnetic resonance technology, mass spectrometry technology and infrared and
Raman molecular spectroscopy technology. Typical customers of the Scientific
Instruments segment include pharmaceutical, biotechnology and diagnostic
companies; academic institutions; medical schools; other non-profit
organizations; clinical microbiology laboratories; government departments and
agencies; nanotechnology, semiconductor, chemical, cement, metals and petroleum
companies; and food, beverage and agricultural analysis companies and
laboratories.
·
Energy & Supercon
Technologies.
The
operations of this segment include development and production of low
temperature superconducting and high temperature superconducting wires for use
in advanced magnet technology and energy applications as well as electron and
ion linear accelerators, superconducting and normal conducting accelerator
cavities, other accelerator components, insertion devices, prototype
superconducting fault current
17
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limiters, prototype crystal growth magnets, and highly
specialized manufacturing services for physics and energy research and a
variety of other scientific applications. Typical customers of the Energy &
Supercon Technologies segment include companies in the medical, power and
energy, and processing industries; private and public research and development
laboratories in the fields of fundamental and applied sciences and energy
research; and academic institutions and government agencies.
Financial
Overview
For the three months
ended March 31, 2010, our revenue increased by $47.2 million, or 20.5%, to
$277.7 million, compared to $230.5 million for the comparable period in 2009.
Included in this change in revenue is an increase of approximately $18.7
million from the impact of foreign exchange due to the weakening of the U.S.
Dollar versus the Euro and other foreign currencies. Excluding the effect of
foreign exchange, revenue increased by $28.5 million, or 12.4%. The increase in
revenue on a currency adjusted basis is attributable to both the Scientific
Instruments segment, which increased by $19.2 million, or 8.6%, and the Energy &
Supercon Technologies segment, which increased by $11.4 million, or
140.7%. Revenue in the Scientific
Instruments segment reflects an increase in sales of all of our core
technologies, particularly in magnetic resonance and mass spectrometry. The mix
of products sold in the Scientific Instruments segment reflects increased
demand from academic and government customers and industrial customers. We
attribute the increase in sales of magnetic resonance and mass spectrometry
products and spending by academic and government customers to our new product
introductions over the last twelve to eighteen months and to stimulus packages
implemented by governments of various countries, including the U.S., Germany,
Japan and China. The improvement in revenues from our industrial customers
quarter-over-quarter continues to reflect a gradual turnaround for these
markets. We remain cautiously optimistic that the industrial markets we serve
will continue to improve through 2010 but we will continue to closely monitor
the apparent recovery in these markets. The Energy & Supercon Technologies
segment revenue increased due to strong demand for low temperature
superconducting wire and the acquisition of the RI business from Varian Medical
Systems, Inc., which was completed at the beginning of the second quarter
of 2009.
Income from operations
for the three months ended March 31, 2010 was $26.9 million, resulting in
an operating margin of 9.7%, compared to income from operations of $14.3
million, resulting in an operating margin of 6.2%, for the comparable period in
2009. The increase in operating margin is primarily the result of the higher
revenue described above and the corresponding improvement in our gross profit
margins. Our gross profit margin for the first quarter of 2010 was 45.5%,
compared with 44.6% for the comparable period in 2009. Higher gross profit
margins resulted primarily from changes in product mix, specifically an
increase in revenues from high-end instrumentation, including our newly
introduced products which were designed to carry higher gross margins than our
previous generations of products. The increase in revenue also allowed us to
better utilize our production facilities and leverage our fixed production
costs. We also reduced production costs through various cost saving initiatives.
We incurred approximately
$1.5 million of interest expense during the three months ended March 31,
2010 compared to $2.3 million for the comparable period in 2009. Of the total
interest expense incurred during the three months ended March 31, 2010,
approximately $1.3 million related to a credit facility that we entered into
during the first quarter of 2008. We initially borrowed $351.0 million under
this credit facility in order to finance the acquisition of Bruker BioSpin. In
the first three months of 2010, we repaid approximately $3.8 million of the
amounts outstanding under this credit agreement and, from the inception of this
agreement, we have reduced the net amount outstanding by approximately $223.5
million.
Our effective tax rate
for the three months ended March 31, 2010 was 39.8%, compared to 40.3% for
the comparable period in 2009. The change in our effective tax rate relates
primarily to the amount and mix of income and taxes outside the U.S. because we
are not able to record a tax benefit on losses incurred in the U.S.
Our net income
attributable to the shareholders of Bruker Corporation for the three months
ended March 31, 2010 was $16.1 million, or $0.10 per diluted share,
compared to $8.4 million, or $0.05 per diluted share, for the comparable period
in 2009.
CRITICAL
ACCOUNTING POLICIES
This discussion and
analysis of our financial condition and results of operations is based upon our
unaudited condensed consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United
States of America. The preparation of these financial statements requires that
we make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities at the
date of the
18
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financial statements and
reported amounts of revenues and expenses during the reporting period. On an
ongoing basis, management evaluates its estimates and judgments, including
those related to revenue recognition, income taxes, allowance for doubtful
accounts, inventories, goodwill, other intangible assets and long-lived assets,
warranty costs and derivative financial instruments. We base our estimates and
judgments on historical experience, current market and economic conditions,
industry trends and other assumptions that we believe are reasonable and form
the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results
could differ from these estimates.
We believe the following
critical accounting policies to be both those most important to the portrayal
of our financial position and results of operations and those that require the
most subjective judgment.
Revenue
recognition.
We recognize revenue from system sales when
persuasive evidence of an arrangement exists, the price is fixed or determinable,
title and risk of loss has been transferred to the customer and collectability
of the resulting receivable is reasonably assured. Title and risk of loss
generally are transferred to the customer upon receipt of a signed customer
acceptance form for a system that has been shipped, installed, and for which
the customer has been trained. As a result, the timing of customer acceptance
or readiness could cause our reported revenues to differ materially from
expectations. When products are sold through an independent distributor or a
strategic distribution partner who assumes responsibility for installation, we
recognize the system sale when the product has been shipped and title and risk
of loss have been transferred to the distributor. Our distributors do not have
price protection rights or rights of return; however, our products are
typically warranted to be free from defect for a period of one year. Revenue is
deferred until cash is received when collectability is not reasonably assured,
such as when a significant portion of the fee is due over one year after
delivery, installation and acceptance of a system. For arrangements with
multiple elements, we recognize revenue for each element based on the relative
fair value of the elements, provided all other criteria for revenue recognition
have been met. The fair value for each element provided in multiple element
arrangements is typically determined by referencing the prices charged when the
element is sold separately. If there is objective and reliable evidence of the
fair value of the undelivered items in an arrangement, but no such evidence for
the delivered items, we use the residual method to allocate the arrangement
consideration. Changes in our ability to establish the fair value for each
element in multiple element arrangements could affect the timing of revenue
recognition. Revenue from accessories and parts is recognized upon shipment and
service revenue is recognized as the services are performed. We also have
contracts for which we apply the percentage-of-completion method for revenue
recognition. Application of the percentage-of-completion method requires us to
make reasonable estimates of the extent of progress toward completion of the
contract and the total costs we will incur under the contract. Changes in our
estimates could affect the timing of revenue recognition. Grant revenue is
recognized when we complete the services required under the grant.
Income
taxes.
The
determination of income tax expense requires us to make certain estimates and
judgments concerning the calculation of deferred tax assets and liabilities, as
well as the deductions, carryforwards and credits that are available to reduce
taxable income. Deferred tax assets and liabilities arise from differences in
the timing of the recognition of revenue and expenses for financial statement
and tax purposes. Deferred tax assets and liabilities are measured using the
tax rates in effect for the year in which these temporary differences are
expected to be settled. We estimate the degree to which tax assets and loss
carryforwards will result in a benefit based on expected profitability by tax
jurisdiction, and we provide a valuation allowance for tax assets and loss
carryforwards that we believe will more likely than not go unused. If it
becomes more likely than not that a tax asset or loss carryforward will be used
for which a reserve has been provided, we reverse the related valuation
allowance. If our actual future taxable income by tax jurisdiction differs from
estimates, additional allowances or reversals of reserves may be necessary. In
addition, we only recognize benefits for tax positions that we believe are more
likely than not of being sustained upon review by a taxing authority with
knowledge of all relevant information. We reevaluate our uncertain tax
positions on a quarterly basis and any changes to these positions as a result
of tax audits, tax laws or other facts and circumstances could result in
additional charges to operations.
Allowance
for doubtful accounts.
We maintain allowances for doubtful accounts for estimated losses
resulting from the inability of our customers to pay amounts due. If the
financial condition of our customers were to deteriorate, reducing their
ability to make payments, additional allowances would be required, resulting in
a charge to operations.
Inventories.
Inventories are stated at the lower of
cost or market, with costs determined by the first-in, first-out method for a
majority of subsidiaries and by average cost for certain international subsidiaries.
We record provisions to account for excess and obsolete inventory to reflect
the expected non-saleable or non-refundable inventory based on an evaluation of
slow moving products. Inventories also include demonstration units located in
our demonstration laboratories or installed at the sites of potential
customers. We consider our demonstration units to be available for sale. We
reduce the carrying value of demonstration inventories for differences between
cost and estimated net realizable value, taking into consideration usage in the
preceding twelve months, expected demand, technological obsolescence and other
information including the physical
19
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condition of the unit. If
ultimate usage or demand varies significantly from expected usage or demand,
additional write-downs may be required, resulting in additional charges to
operations.
Goodwill,
other intangible assets and other long-lived assets.
We evaluate whether goodwill is impaired
annually and when events occur or circumstances change. We test goodwill for
impairment at the reporting unit level (the operating segment or one level
below an operating segment). The performance of the test involves a two-step
process. The first step of the impairment test involves comparing the fair
values of the applicable reporting units with their aggregate carrying values,
including goodwill. We generally determine the fair value of our reporting
units using an income approach methodology of valuation that includes the
discounted cash flow method. Estimating the fair value of the reporting units
requires significant judgments by management about the future cash flows. If the
carrying amount of a reporting unit exceeds the fair value of the reporting
unit, we perform the second step of the goodwill impairment test to measure the
amount of the impairment. In the second step of the goodwill impairment test we
compare the implied fair value of the reporting units goodwill with the
carrying value of that goodwill. We also review finite-lived intangible assets
and other long-lived assets when indication of potential impairment exists,
such as a significant reduction in undiscounted cash flows associated with the
assets. Should the fair value of our long-lived assets decline because of
reduced operating performance, market declines, or other indicators of
impairment, a charge to operations for impairment may be necessary.
Warranty
costs.
We
normally provide a one year parts and labor warranty with the purchase of
equipment. The anticipated cost for this warranty is accrued upon recognition
of the sale based on historical warranty rates and our assumptions of future
warranty claims. The warranty accrual is included as a current liability on the
consolidated balance sheets. Although our products undergo quality assurance
and testing procedures throughout the production process, our warranty
obligation is affected by product failure rates, material usage and service
delivery costs incurred in correcting a product failure. Although our actual
warranty costs have historically been consistent with expectations, to the
extent warranty claim activity or costs associated with servicing those claims
differ from our estimates, revisions to the warranty accrual may be required.
Derivative
financial instruments.
All derivative instruments are recorded as assets or liabilities at
fair value, which is calculated as an estimate of the future cash flows, and
subsequent changes in a derivatives fair value are recognized in income,
unless specific hedge accounting criteria are met. Changes in the fair value of
a derivative that is highly effective and designated as a cash flow hedge are
recognized in accumulated other comprehensive income until the forecasted
transaction occurs or it becomes probable that the forecasted transaction will
not occur. We perform an assessment at the inception of the hedge and on a
quarterly basis thereafter, to determine whether our derivatives are highly
effective in offsetting changes in the value of the hedged items. Any changes
in the fair value resulting from hedge ineffectiveness are immediately
recognized as income or expense.
RESULTS
OF OPERATIONS
Three Months Ended March 31, 2010 compared to the Three
Months Ended March 31, 2009
Consolidated Results
The following table
presents our results for the three months ended March 31, 2010 and 2009
(dollars in millions, except per share data):
20
Table of Contents
|
|
Three Months Ended
March 31,
|
|
|
|
2010
|
|
2009
|
|
Product
revenue
|
|
$
|
244.0
|
|
$
|
202.2
|
|
Service
revenue
|
|
31.5
|
|
26.9
|
|
Other
revenue
|
|
2.2
|
|
1.4
|
|
Total
revenue
|
|
277.7
|
|
230.5
|
|
|
|
|
|
|
|
Cost
of product revenue
|
|
134.2
|
|
111.7
|
|
Cost
of service revenue
|
|
17.2
|
|
16.1
|
|
Total
cost of revenue
|
|
151.4
|
|
127.8
|
|
Gross
profit
|
|
126.3
|
|
102.7
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
Sales
and marketing
|
|
49.1
|
|
42.6
|
|
General
and administrative
|
|
17.0
|
|
16.3
|
|
Research
and development
|
|
32.8
|
|
29.1
|
|
Restructuring
charges
|
|
0.2
|
|
|
|
Acquisition-related
charges
|
|
0.3
|
|
0.4
|
|
Total
operating expenses
|
|
99.4
|
|
88.4
|
|
Operating
income
|
|
26.9
|
|
14.3
|
|
|
|
|
|
|
|
Interest
and other income (expense), net
|
|
(0.3
|
)
|
0.1
|
|
Income
before income taxes and noncontrolling interest in consolidated subsidiaries
|
|
26.6
|
|
14.4
|
|
Income
tax provision
|
|
10.6
|
|
5.8
|
|
Consolidated
net income
|
|
16.0
|
|
8.6
|
|
Net
income (loss) attributable to noncontrolling interest in consolidated
subsidiaries
|
|
(0.1
|
)
|
0.2
|
|
Net
income attributable to Bruker Corporation
|
|
$
|
16.1
|
|
$
|
8.4
|
|
|
|
|
|
|
|
Net
income per common share attributable to
|
|
|
|
|
|
Bruker
Corporation shareholders:
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
0.10
|
|
$
|
0.05
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding:
|
|
|
|
|
|
Basic
|
|
164.1
|
|
163.3
|
|
Diluted
|
|
165.6
|
|
164.3
|
|
Revenue
Our revenue increased by
$47.2 million, or 20.5%, to $277.7 million for the three months ended March 31,
2010, compared to $230.5 million for the comparable period in 2009. Included in
this change in revenue is an increase of approximately $18.7 million from the
impact of foreign exchange due to the weakening of the U.S. Dollar versus the
Euro and other foreign currencies. Excluding the effect of foreign exchange,
revenue increased by 12.4%. Revenues from the Scientific Instruments segment
increased, on a currency adjusted basis, by $19.2 million, or 8.6%. Revenue in
the Scientific Instruments segment reflects an increase in sales of all our
core technologies, particularly in magnetic resonance and mass spectrometry.
The mix of products sold in the Scientific Instruments segment reflects
increased demand from academic and government customers and industrial
customers. We attribute the increase in spending by academic and government
customers to our new product introductions over the last twelve to eighteen
months and to stimulus packages implemented by governments of various
countries, including the U.S., Germany, Japan and China. We continued to
benefit from a gradual improvement in the industrial markets that we serve and
remain cautiously optimistic that the apparent recovery in these
21
Table
of Contents
markets will continue.
Revenues from the Energy & Supercon Technologies segment increased, on
a currency adjusted basis, by $11.4 million, or 140.7%. The increase in revenue
was the result of strong demand for low temperature superconducting wire and
the acquisition of the RI business, which was completed at the beginning of the
second quarter of 2009.
Cost of Revenue
Our cost of product and
service revenue for the three months ended March 31, 2010, was $151.4
million, resulting in a gross profit margin of 45.5%, compared to cost of
product and service revenue of $127.8 million, resulting in a gross profit
margin of 44.6%, for the comparable period in 2009. Gross profits increased
because of the increase in revenues described above and changes in product mix.
The change in product mix reflects an increase in revenues from high-end
instrumentation, including our newly introduced products which were designed to
carry higher gross margins than previous generations of our products. The
increase in revenue also allowed us to better utilize our production facilities
and leverage our fixed production costs. We also reduced production costs
through various cost saving initiatives.
Sales and Marketing
Our sales and marketing
expense for the three months ended March 31, 2010 increased to $49.1
million, or 17.8% of product and service revenue, from $42.6 million, or 18.6%
of product and service revenue, for the comparable period in 2009. The increase
in sales and marketing expense is attributable to increases in headcount in support
of planned revenue growth and changes in foreign currency exchange rates,
primarily the Euro.
General and Administrative
Our general and
administrative expense for the three months ended March 31, 2010 increased
to $17.0 million, or 6.2% of product and service revenue, from $16.3 million,
or 7.1% of product and service revenue, for the comparable period in 2009. The increase in general and administrative
expense is attributable mainly to changes in foreign currency exchange rates,
primarily the Euro.
Research and Development
Our research and
development expense for the three months ended March 31, 2010 increased to
$32.8 million, or 11.9% of product and service revenue, from $29.1 million, or
12.7% of product and service revenue, for the comparable period in 2009. We
continue to make incremental investments in research and development projects that
we believe will generate future growth. The increase in research and
development expense is also partly attributable to changes in foreign currency
exchange rates, primarily the Euro, as a majority of our research and
development is performed in Europe.
Restructuring Charges
In the first quarter of
2010, we recorded restructuring charges of $0.2 million, which related
primarily to severance incurred in connection with the closing of a production
facility in Herzogenrath, Germany and relocating the associated
operations. We do not expect to incur
any additional costs related to this move and expect to have made all of the
severance payments by the end of 2010.
Acquisition-Related Charges
Acquisition-related
charges of $0.3 million recorded in the first quarter of 2010 relate entirely
to the Scientific Instruments segment. In the first quarter of 2010, we
announced that we entered into a definitive asset purchase agreement to acquire
certain product lines of Varian, Inc., or Varian, which Agilent
Technologies, Inc., or Agilent, committed to divest in connection with
obtaining regulatory approval for Agilents previously announced acquisition of
Varian. We will acquire certain assets and assume certain liabilities in Varians
inductively coupled plasma mass spectrometry instruments business, laboratory
gas chromatography instruments business, and gas chromatography
triple-quadrupole mass spectrometry instruments business. This acquisition is
subject to customary closing conditions and regulatory approvals and we expect
it to close in the second quarter of 2010. We currently expect that we will
incur an additional $0.5 million of acquisition-related charges in connection
with this acquisition in the second quarter of 2010.
22
Table of Contents
Acquisition-related
charges of $0.4 million recorded in the first quarter of 2009 relate entirely
to the Energy & Supercon Technologies segment. These
acquisition-related costs were incurred in connection with the April 2009
acquisition of the RI business from Varian Medical Systems, Inc.
Interest and Other Income (Expense), Net
Interest and other income
(expense), net during the three months ended March 31, 2010 was $(0.3)
million, compared to $0.1 million for the comparable period of 2009.
During the three months
ended March 31, 2010, the major components within interest and other
income (expense), net were net interest expense of $1.4 million, offset,
in part, by other income of $0.6 million and realized and unrealized gains on
foreign currency transactions of $0.5 million. Other income recorded in
the first quarter of 2010 includes an insurance settlement that we received of
approximately $0.8 million. During the three months ended March 31, 2009,
the major component within interest and other income (expense), net, were
realized and unrealized gains on foreign currency transactions of
$1.3 million and other income of $0.7 million offset, in part, by net
interest expense of $1.9 million.
Income Tax Provision
Our effective tax rate
generally reflects our tax provision for non-U.S. entities only since no
benefit was recognized for losses incurred in the U.S. We will maintain a full
valuation allowance against all U.S. deferred tax assets, including our U.S.
net operating losses and tax credits, until evidence exists that it is more
likely than not that the loss carryforward and credit amounts will be utilized
to offset U.S. taxable income. Our tax rate may change over time as the amount
and mix of income and taxes outside the U.S. changes. The effective tax rate is
calculated using our projected annual pre-tax income or loss and is affected by
tax credits, the expected level of other tax benefits, and the impact of
changes to the valuation allowance, as well as changes in the mix of our
pre-tax income and losses among jurisdictions with varying statutory tax rates
and credits.
The income tax provision
for the three months ended March 31, 2010, was $10.6 million compared to
$5.8 million for the three months ended March 31, 2009, representing
effective tax rates of 39.8% and 40.3%, respectively. This change in our
effective tax rate relates primarily to the amount and mix of income and taxes
outside of the U.S.
Net Income (Loss) Attributable to Noncontrolling Interests
Net income (loss)
attributable to noncontrolling interests for the three months ended March 31,
2010 was $(0.1) million compared to $0.2 million for the comparable period of
2009. Net income (loss) attributable to noncontrolling interests represents the
minority shareholders proportionate share of the net income (loss) recorded by
five majority-owned indirect subsidiaries, Bruker Baltic Ltd., Bruker Labmate
Pvt. Ltd., InCoaTec GmbH and Perch Solutions OY, which are included in the
Scientific Instruments segment, and RI Research Instruments GmbH, which is
included in the Energy & Supercon Technologies segment.
Net Income Attributable to Bruker Corporation
Our net income for the
three months ended March 31, 2010, was $16.1 million, or $0.10 per diluted
share, compared to $8.4 million, or $0.05 per diluted share for the comparable
period in 2009.
Segment Results
Revenue
The following table
presents revenue, change in revenue and revenue growth by reportable segment
for the three months ended March 31, 2010 and 2009 (dollars in millions):
23
Table
of Contents
|
|
Three Months Ended
|
|
Dollar
|
|
Percentage
|
|
|
|
2010
|
|
2009
|
|
Change
|
|
Change
|
|
Scientific
Instruments
|
|
$
|
260.3
|
|
$
|
223.6
|
|
$
|
36.7
|
|
16.4
|
%
|
Energy &
Supercon Technologies
|
|
20.7
|
|
8.1
|
|
12.6
|
|
155.6
|
%
|
Eliminations
(a)
|
|
(3.3
|
)
|
(1.2
|
)
|
(2.1
|
)
|
|
|
|
|
$
|
277.7
|
|
$
|
230.5
|
|
$
|
47.2
|
|
20.5
|
%
|
(a) Represents
product and service revenue between reportable segments.
Scientific Instruments Segment Revenues
Scientific Instruments
segment revenue increased by $36.7 million, or 16.4%, to
$260.3 million for the three months ended March 31, 2010, compared to
$223.6 million for the comparable period in 2009. Included in this change
in revenue is an increase of approximately $17.5 million from the impact of
foreign exchange due to the weakening of the U.S. Dollar versus the Euro and
other foreign currencies. Excluding the effect of foreign exchange, revenue
increased by 8.6%. The increase in revenue, excluding the effect of foreign
exchange, reflects an increase in sales of all of our core technologies,
particularly in magnetic resonance and mass spectrometry. The mix of products
sold in the Scientific Instruments segment reflects increased demand from
academic and government customers and industrial customers. We attribute the
increase in spending by academic and government customers to new product
introductions over the last twelve to eighteen months and stimulus packages
implemented by governments of various countries, including the U.S., Germany,
Japan and China. We continued to benefit from a gradual improvement in the
industrial markets that we serve.
System revenue and
aftermarket revenue as a percentage of total Scientific Instruments segment
revenue were as follows during the three months ended March 31, 2010 and
2009 (dollars in millions):
|
|
2010
|
|
2009
|
|
|
|
Revenue
|
|
Percentage of
Segment
Revenue
|
|
Revenue
|
|
Percentage of
Segment
Revenue
|
|
System
revenue
|
|
$
|
206.4
|
|
79.3
|
%
|
$
|
176.6
|
|
79.0
|
%
|
Aftermarket
revenue
|
|
53.9
|
|
20.7
|
%
|
47.0
|
|
21.0
|
%
|
Total
revenue
|
|
$
|
260.3
|
|
100.0
|
%
|
$
|
223.6
|
|
100.0
|
%
|
System revenues in the
Scientific Instruments segment include X-ray systems, optical emission
spectroscopy systems, atomic force microscopy systems, nuclear magnetic
resonance systems, magnetic resonance imaging systems, electron paramagnetic
imaging systems, mass spectrometry systems, CBRNE detection systems and
molecular spectroscopy systems. Aftermarket revenues in the Scientific
Instruments segment include accessory sales, consumables, training and
services.
Energy & Supercon Technologies Segment Revenues
Energy &
Supercon Technologies segment revenue increased by $12.6 million, or
155.6%, to $20.7 million for the three months ended March 31, 2010,
compared to $8.1 million for the comparable period in 2009. Included in
this change in revenue is an increase of approximately $1.2 million from
the impact of foreign exchange. Excluding the effect of foreign exchange,
revenue increased by 140.7%. The increase in revenue was the result of strong
demand for low temperature superconducting wire and the acquisition of the RI business
from Varian Medical Systems, Inc., which was completed at the beginning of
the second quarter of 2009.
System and wire revenue
and aftermarket revenue as a percentage of total Energy & Supercon
Technologies segment revenue were as follows during the three months ended March 31,
2010 and 2009 (dollars in millions):
24
Table of Contents
|
|
2010
|
|
2009
|
|
|
|
Revenue
|
|
Percentage of
Segment
Revenue
|
|
Revenue
|
|
Percentage of
Segment
Revenue
|
|
System
and wire revenue
|
|
$
|
19.9
|
|
96.1
|
%
|
$
|
7.6
|
|
93.8
|
%
|
Aftermarket
revenue
|
|
0.8
|
|
3.9
|
%
|
0.5
|
|
6.2
|
%
|
Total
revenue
|
|
$
|
20.7
|
|
100.0
|
%
|
$
|
8.1
|
|
100.0
|
%
|
System and wire revenues
in the Energy & Supercon Technologies segment include low and high
temperature superconducting wire and electron and ion linear accelerators,
superconducting and normal conducting accelerator cavities, insertion devices,
superconducting fault current limiters, other accelerator components and
specialty superconducting magnets for physics and energy research and a variety
of other scientific applications. Aftermarket revenues in the Energy &
Supercon Technologies segment include services and accessory sales.
Income (Loss) from Operations
The following table
presents income (loss) from operations and operating margins on revenue by
reportable segment for the three months ended March 31, 2010 and 2009
(dollars in millions):
|
|
2010
|
|
2009
|
|
|
|
Operating
Income (Loss)
|
|
Percentage of
Segment
Revenue
|
|
Operating
Income (Loss)
|
|
Percentage of
Segment
Revenue
|
|
Scientific
Instruments
|
|
$
|
27.7
|
|
10.6
|
%
|
$
|
16.1
|
|
7.2
|
%
|
Energy &
Supercon Technologies
|
|
(0.5
|
)
|
(2.4
|
)%
|
(2.4
|
)
|
(29.6
|
)%
|
Corporate,
eliminations and other (a)
|
|
(0.3
|
)
|
|
|
0.6
|
|
|
|
Total
operating income
|
|
$
|
26.9
|
|
9.7
|
%
|
$
|
14.3
|
|
6.2
|
%
|
(a) Represents
corporate costs and eliminations not allocated to the reportable segments.
Scientific Instruments
segment income from operations for the three months ended March 31, 2010
was $27.7 million, resulting in an operating margin of 10.6%, compared to
income from operations of $16.1 million, resulting in an operating margin of
7.2%, for the comparable period in 2009. Income from operations in the
Scientific Instruments segment improved as a result of the higher revenues
described above and an improvement in gross profit margins.
In the first quarter of
2010, gross profit margin as a percentage of revenue in the Scientific
Instruments increased to 47.1% from 45.3% for the comparable period in 2009.
The improvement in gross profit margin reflects a change in product mix. In the
first quarter of 2010, revenues reflected an increase in high-end
instrumentation, including our newly introduced products which were designed to
carry higher gross margins than our previous generations of products. The
increase in revenue also allowed us to better utilize our production facilities
and leverage our fixed production costs. We also reduced production costs
through various cost saving initiatives.
In the first quarter of
2010, operating expenses, excluding acquisition-related and restructuring
charges, in the Scientific Instruments increased to $94.3 million, or 36.2% of
segment product and service revenue, from $85.4 million, or 38.2% of segment
product and service revenue for the comparable period in 2009. This increase is
a function of incremental investments in sales and marketing activities and
research and development activities that we believe will generate future growth
and changes in foreign currency exchange rates.
Energy &
Supercon Technologies segment loss from operations for the three months ended March 31,
2010 was $(0.5) million, resulting in an operating margin of (2.4)%,
compared to a loss from operations of $(2.4) million, resulting in an operating
margin of (29.6)%, for the comparable period in 2009. Loss from operations in
the Energy & Supercon Technologies segment decreased as a result of
the higher revenues described above.
25
Table
of Contents
LIQUIDITY
AND CAPITAL RESOURCES
We currently anticipate
that our existing cash and credit facilities will be sufficient to support our
operating and investing needs for at least the next twelve months, but this
depends on our profitability and our ability to manage working capital
requirements. Our future cash requirements will also be affected by acquisitions
that we may make in the future. Historically, we have financed our growth
through cash flow generation and a combination of debt financings and issuances
of common stock. In the future, there are no assurances that additional
financing alternatives will be available to us if required, or if available,
will be obtained on terms favorable to us.
During the three months
ended March 31, 2010, net cash provided by operating activities was $5.5
million, resulting primarily from $15.4 million of consolidated net income
adjusted for non-cash items offset, in part, by $9.9 million of net changes in
working capital. During the three months ended March 31, 2009, net cash
provided by operating activities was $13.1 million, resulting primarily from
$13.6 million of consolidated net income adjusted for non-cash items.
During the three months
ended March 31, 2010, net cash used by investing activities was
$5.4 million, compared to net cash used by investing activities of
$4.6 million during the three months ended March 31, 2009. Cash used
by investing activities during the three months ended March 31, 2010 was
attributable to capital expenditures. Cash used by investing activities during
the three months ended March 31, 2009 was attributable primarily to
$3.9 million of capital expenditures and $0.7 million used for
acquisitions. Capital expenditures during the three months ended March 31,
2010 were at a level consistent with our planned capital spending of $20.0
million to $30.0 million in 2010.
During the three months
ended March 31, 2010, net cash used by financing activities was
$4.3 million, compared to net cash used by financing activities of
$17.8 million during the three months ended March 31, 2009. Cash used
by financing activities during the three months ended March 31, 2010 and March 31,
2009 was primarily attributable to $4.2 million and $17.6 million,
respectively, of net debt repayments under various long-term and short-term
arrangements.
At March 31, 2010,
we had outstanding debt totaling $133.2 million consisting of $127.5 million
outstanding under the Credit Agreement, $0.1 million outstanding under other
long-term debt arrangements, $0.1 million outstanding under other revolving
lines of credit and $5.5 million under capital lease obligations. At December 31,
2009, we had outstanding debt totaling $137.7 million consisting of $131.3
million outstanding under the term loan component of the Credit Agreement, $0.3
million outstanding under other long-term debt arrangements, $0.1 million
outstanding under other revolving lines of credit and $6.0 million under
capital lease obligations.
In February 2008, we entered into a credit agreement with a
syndication of lenders, which we refer to as the Credit Agreement. The Credit
Agreement provides a revolving credit line with a maximum commitment of $230.0
million and a term loan facility of $150.0 million. The outstanding principal
and interest under the term loan is payable in quarterly installments through December 2012.
Borrowings under the Credit Agreement bear interest, at our option, at either (i) the
higher of the prime rate or the federal funds rate plus 0.50%, or (ii) adjusted
LIBOR, plus margins ranging from 0.40% to 1.25% and a facility fee ranging from
0.10% to 0.20%. As of March 31, 2010, the weighted average interest rate
of borrowings under the term facility of the Credit Agreement was approximately
2.6%.
Borrowings under the Credit Agreement are secured by the pledge to the
banks of 100% of the capital stock of each of our wholly-owned domestic subsidiaries
and 65% of the capital stock of certain of our wholly-owned direct or indirect
foreign subsidiaries. The Credit Agreement also requires that we maintain
certain financial ratios related to maximum leverage and minimum interest
coverage, as defined in the Credit Agreement. Specifically, our leverage ratio
cannot exceed 3.0 and our interest coverage ratio cannot be less than 3.0. In
addition to the financial ratios, the Credit Agreement restricts, among other
things, our ability to do the following: make certain payments; incur
additional debt; incur certain liens; make certain investments, including
derivative agreements; merge, consolidate, sell or transfer all or
substantially all of our assets; and enter into certain transactions with
affiliates. Our failure to comply with any of these restrictions or covenants
may result in an event of default under the applicable debt instrument, which
could permit acceleration of the debt under that instrument and require us to
prepay that debt before its scheduled due date. As of March 31, 2010, the
latest measurement date, we were in compliance with the covenants of the Credit
Agreement.
Other long-term debt at March 31, 2010 consists of a
collateralized arrangement with a financial institution in Germany and is at a
fixed interest rate of 2.95%. The term of this arrangement is through June 2010.
Other revolving loans are with various financial institutions located
primarily in Germany, Switzerland and France. The following is a summary of the
maximum commitments and net amounts available to the Company under revolving
loans as of March 31, 2010 (in millions):
26
Table of Contents
|
|
Weighted
Average
Interest Rate
|
|
Total Amount
Committed by
Lenders
|
|
Outstanding
Borrowings
|
|
Outstanding
Letters of
Credit
|
|
Total Amount
Available
|
|
Credit
Agreement
|
|
0.0
|
%
|
$
|
230.0
|
|
$
|
|
|
$
|
2.5
|
|
$
|
227.5
|
|
Other
revolving loans
|
|
2.9
|
%
|
122.0
|
|
0.1
|
|
88.2
|
|
33.7
|
|
Total
revolving loans
|
|
2.9
|
%
|
$
|
352.0
|
|
$
|
0.1
|
|
$
|
90.7
|
|
$
|
261.2
|
|
As of March 31, 2010, we had approximately $4.1 million of net
operating loss carryforwards available to reduce future U.S. taxable
income. However, these losses are
severely limited in terms of their use. The Company also has approximately
$49.0 million of German Trade Tax net operating losses that are carried forward
indefinitely and U.S. tax credits of approximately $4.4 million available to
offset future tax liabilities that expire at various dates. U.S. tax credits,
after the filing of the 2008 U.S. Federal tax return in September 2009,
include foreign tax credits of $2.5 million expiring in various years through
2019 and research and development tax credits of $1.8 million expiring at
various dates through 2025 and other credits of $0.1 million. These operating
losses and tax credit carryforwards may be subject to limitations under
provisions of the Internal Revenue Code.
The following table summarizes maturities for our significant financial
obligations as of March 31, 2010 (in millions):
Contractual Obligations
|
|
Total
|
|
Less than 1
Year
|
|
1-3 Years
|
|
4-5 Years
|
|
More than 5
Years
|
|
Revolving
lines of credit
|
|
$
|
0.1
|
|
$
|
0.1
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Long-term
debt, including current portion
|
|
133.1
|
|
23.5
|
|
107.0
|
|
2.6
|
|
|
|
Derivative
liabilities
|
|
6.1
|
|
4.5
|
|
1.6
|
|
|
|
|
|
Uncertain
tax contingencies
|
|
24.0
|
|
|
|
24.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Uncertain tax contingencies are positions taken or expected to be taken
on an income tax return that may result in additional payments to tax
authorities. The total amount of uncertain tax contingencies is included in the
1-3 Years column as we are not able to reasonably estimate the timing of potential
future payments. If a tax authority agrees with the tax position taken or
expected to be taken or the applicable statute of limitations expires, then
additional payments will not be necessary.
Nasdaq Compliance
Collin
J. DSilva, a former independent member of our Board and the Boards Audit
Committee, voluntarily resigned from service on the Audit Committee, effective March 9,
2010, and from service on the Board, effective
March 31, 2010, in
connection with joining the Company as President of the newly-formed Chemical
Analysis Division of Bruker Daltonics. On
March 24, 2010, we notified Nasdaq that due to the vacancy on our
Audit Committee created by Mr. DSilvas
resignation from the Audit Committee, we are no longer in compliance with
Nasdaq Listing Rule 5605 (Rule 5605), which requires that the Audit
Committee be comprised of at least three members, each of whom are independent. On March 25, 2010, we received notice
from Nasdaq advising that, as result of Mr. DSilvas resignation from the
Audit Committee, we are not in compliance with Rule 5605 and confirming
that we are provided a cure period until September 7, 2010 to
regain compliance. Additionally, on April 1, 2010, we received notice from
Nasdaq that, due to the resignation of Mr. DSilva from our Board, we are
not in compliance with the majority independent director requirements set forth
in Rule 5605. Nasdaq has provided a cure period until September 27,
2010 to regain compliance with the majority independence requirements. Our
Board is actively seeking a replacement for Mr. DSilva to serve on our
Board and Audit Committee and we intend to regain compliance with the corporate
governance requirements of the Nasdaq Listing Rules as expeditiously as
possible prior to the expiration of the cure periods provided under these
rules.
RECENT
ACCOUNTING PRONOUNCEMENTS
In June 2009, the
Financial Accounting Standards Board, or FASB, issued Accounting Standards
Codification (Codification) Topic No. 105,
Generally
Accepted Accounting Principles
. Codification Topic No. 105 is
effective for fiscal years, and interim periods, ending after September 15,
2009. Codification Topic No. 105 is intended to improve financial
reporting by identifying the FASB Accounting Standards Codification and rules and
interpretive releases of the Securities and Exchange Commission, or SEC, under
authority of federal securities laws as the sole sources of authoritative
accounting principles to be used in preparing financial statements that are
presented in conformity with accounting principles generally accepted in the
United States of America for SEC registrants. The adoption of Codification
Topic No. 105 did not have a material impact on our results of operations,
financial position or cash flows.
In January 2010, the
FASB issued Accounting Standards Update 2010-06,
Fair Value
Measurements and Disclosures (Topic 820)Improving Disclosures about Fair Value
Measurements
. Accounting Standards Update 2010-06 will require new
disclosures about transfers in and out of Levels 1 and 2 of the fair value
hierarchy and activity, including purchases, sales, issuances and settlements,
in Level 3 fair value measurements. The requirements of Accounting Standards
Update 2010-06 will be effective for interim and annual periods beginning after
December 15, 2009, except for the disclosures about purchases, sales,
issuances and settlements in Level 3 fair value measurements which will be
effective for interim and annual periods beginning after December 15,
2010. We are currently assessing the impact that the additional disclosure
requirements will have on our results of operations and financial position.
In September 2009,
the Emerging Issues Task Force reached consensus on FASB Accounting Standards
Update 2009-14,
Software (Topic 985)Certain Revenue
Arrangements That Include Software Elements
. FASB Accounting
Standards Updates 2009-14 changes the accounting model for revenue arrangements
that include both tangible products and software elements. Under this guidance,
tangible products containing software components and non-software components
that function together to deliver the tangible products essential
functionality are excluded from the software revenue guidance in Subtopic No. 985-
27
Table
of Contents
605,
Software-Revenue
Recognition.
In addition, hardware components of a tangible product
containing software components are always excluded from the software revenue
guidance. FASB Accounting Standards Updates 2009-14 is effective prospectively
for revenue arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010. However, early adoption is permitted.
We are currently assessing the impact that this update will have on our results
of operations and financial position and when we will adopt these requirements.
In September 2009,
the Emerging Issues Task Force reached consensus on FASB Accounting Standards
Update 2009-13,
Revenue Recognition (Topic
605)Multiple-Deliverable Revenue Arrangements
. FASB Accounting
Standards Update 2009-13 addresses the accounting for multiple-deliverable
arrangements to enable vendors to account for products or services separately
rather than as a combined unit. Specifically, this guidance amends the criteria
in Subtopic No. 605-25,
Revenue
Recognition-Multiple-Element Arrangements,
for separating
consideration in multiple-deliverable arrangements. This guidance establishes a
selling price hierarchy for determining the selling price of a deliverable,
which is based on: (a) vendor-specific objective evidence; (b) third-party
evidence; or (c) estimates. This guidance also eliminates the residual
method of allocation and requires that arrangement consideration be allocated
at the inception of the arrangement to all deliverables using the relative
selling price method. In addition, this guidance significantly expands required
disclosures related to a vendors multiple-deliverable revenue arrangements. FASB
Accounting Standards Update 2009-13 is effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on
or after June 15, 2010, however, early adoption is permitted. We are
currently assessing the impact that this update will have on our results of
operations and financial position and when we will adopt these requirements.
ITEM
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
We are exposed to market
risks associated with changes in foreign exchange rates and interest rates. We
selectively use financial instruments to reduce these risks. All transactions
related to risk management techniques are authorized and executed pursuant to
our policies and procedures. Analytical techniques used to manage and monitor
foreign exchange and interest rate risk include market valuations and
sensitivity analysis.
Impact of Foreign Currencies
We generate a substantial
portion of our revenues in international markets, principally Europe and Japan,
which subjects our operations to the exposure of exchange rate fluctuations.
The impact of currency exchange rate movement can be positive or negative in
any period. Our costs related to sales in foreign currencies are largely
denominated in the same respective currencies, limiting our transaction risk
exposure. However, for sales not denominated in U.S. Dollars, if there is an
increase in the rate at which a foreign currency is exchanged for U.S. Dollars,
it will require more of the foreign currency to equal a specified amount of
U.S. Dollars than before the rate increase. In such cases, if we price our
products in the foreign currency, we will receive less in U.S. Dollars than we
did before the rate increase went into effect. If we price our products in U.S.
Dollars and competitors price their products in local currency, an
increase in the relative strength of the U.S. Dollar could result in our prices
not being competitive in a market where business is transacted in the local
currency.
Our net foreign exchange
gains were $0.5 million and $1.3 million for the three months ended March 31,
2010 and 2009, respectively. From time to time, we enter into foreign currency
contracts in order to minimize the volatility that fluctuations in exchange
rates have on our cash flows related to purchases and sales denominated in
foreign currencies. We will continue to evaluate our currency risks and in the
future may utilize foreign currency contracts more frequently as part of a
transactional hedging program.
Impact of Interest Rates
We regularly invest
excess cash in short-term investments that are subject to changes in interest
rates. We believe that the market risk arising from holding these financial
instruments is minimal.
Our exposure related to
adverse movements in interest rates is derived primarily from outstanding
floating rate debt instruments that are indexed to short-term market rates. Our
objective in managing our exposure to interest rates is to decrease the
volatility that changes in interest rates might have on our earnings and cash
flows. To achieve this objective we entered into interest rate swaps and cross
currency rate swaps in order to minimize the volatility that changes in
interest rates might have on earnings and cash flows. A 10% increase or
decrease in the average cost of our variable rate debt would not result in a
material
28
Table
of Contents
change in pre-tax
interest expense.
In April 2008, we
entered into an interest rate swap arrangement to pay a fixed rate of
approximately 3.8% and receive a variable rate based on three month LIBOR
through December 31, 2012. The initial notional amount of this interest
swap was $90.0 million and amortizes in proportion to the term debt
component of our Credit Agreement. At March 31, 2010, the outstanding
notional amount of this swap was $76.5 million. We have determined that this
swap is an effective hedge of the variability of cash flows of the interest
payments.
Inflation
We do not believe
inflation had a material impact on our business or operating results during any
of the periods presented.
ITEM
4.
|
CONTROLS
AND PROCEDURES
|
We have established
disclosure controls and procedures that are designed to ensure that material
information relating to us, including our consolidated subsidiaries, is made
known to our Chief Executive Officer (principal executive officer) and Chief
Financial Officer (principal financial officer) by others within our
organization. Under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
we conducted an evaluation of the effectiveness of our disclosure controls and
procedures as of March 31, 2010. Based on this evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective, as of March 31, 2010, to ensure
that the information required to be disclosed by us in the reports that we file
or submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the SECs rules and
forms.
There were no changes in
our internal control over financial reporting that occurred during the quarter
ended March 31, 2010 that materially affected, or are reasonably likely to
affect, our internal control over financial reporting.
PART II
|
OTHER
INFORMATION
|
ITEM
1.
|
LEGAL
PROCEEDINGS
|
Except as set forth
below, there have been no material changes to the legal proceedings disclosed
in Part I, Item 3. Legal Proceedings in our Annual Report on Form 10-K
for the year ended December 31, 2009.
As previously reported,
in November 2008 a former employee of Bruker Corporation filed a complaint
with the Massachusetts Commission Against Discrimination alleging age
discrimination. The Massachusetts Commission Against Discrimination recently
commenced its investigation and the Company responded to a request for
information on April 23, 2010. The Company believes the complaint made by
the former employee to be without merit and intends to cooperate fully in the
investigation.
In addition to the other
information set forth in this report, you should carefully consider the factors
discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K
for the year ended December 31, 2009, which could materially affect our
business, financial condition or future results. The risks described in this
report and in our Annual Report on Form 10-K are not the only risks facing
our Company. Additional risks and uncertainties not currently known to us or
that we currently deem to be immaterial also may materially adversely affect
our business, financial condition and/or operating results.
There have been no
material changes to the risk factors previously disclosed in our Annual Report
on Form 10-K for the fiscal year ended December 31, 2009.
29
Table
of Contents
ITEM
2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
The following table sets
forth all purchases made by or on behalf of the Company or any affiliated
purchaser, as defined in Rule 10b-18(a)(3) under the Exchange Act,
of shares of our common stock during each month in the first quarter of 2010.
Period
|
|
Total Number of
Shares
Purchased
|
|
Average Price
Paid per Share
|
|
Total Number of
Shares
Purchased as
Part of Publicly
Announced Plans
or Programs
|
|
Maximum
Number of
Shares that May
Yet Be Purchased
Under the Plans
or Programs
|
|
January 1
- January 31, 2010
|
|
|
|
$
|
|
|
|
|
|
|
February 1
- February 28, 2010
|
|
|
|
|
|
|
|
|
|
March 1
- March 31, 2010
|
|
200,000
|
|
14.18
|
|
|
|
|
|
|
|
200,000
|
|
$
|
14.18
|
|
|
|
|
|
All purchases were made
by the Companys Chief Executive Officer, Frank H. Laukien. Shares were
purchased in open market purchases effected in accordance with the safe harbor
provisions of Rule 10b-18 of the Exchange Act and in a private transaction.
These purchases were previously disclosed on Forms 4 filed with the U.S.
Securities and Exchange Commission.
ITEM
3.
|
DEFAULTS
UPON SENIOR SECURITIES
|
None.
ITEM
4.
|
[REMOVED
AND RESERVED]
|
ITEM
5.
|
OTHER
INFORMATION
|
None.
Exhibit
No.
|
|
Description
|
31.1
|
|
Certification by Chief
Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002(1)
|
31.2
|
|
Certification by Chief
Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002(1)
|
32.1
|
|
Certification by Chief
Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002(2)
|
(1) Filed
herewith.
(2) Furnished
herewith.
30
Table of Contents
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
BRUKER CORPORATION
|
|
|
|
|
Date: May 10, 2010
|
By:
|
/s/ FRANK H. LAUKIEN,
PH.D.
|
|
|
Frank H. Laukien, Ph.D.
President, Chief
Executive Officer and Chairman (Principal Executive Officer)
|
|
|
|
|
Date: May 10, 2010
|
By:
|
/s/ BRIAN P. MONAHAN
|
|
|
Brian P. Monahan
Chief Financial Officer
(Principal Financial Officer)
|
31
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