NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1Description of Business
Bruker Corporation, together with its consolidated subsidiaries ("Bruker" or the "Company"), is a designer and manufacturer of high-performance
scientific instruments and analytical and diagnostic solutions that enable our customers to explore life and materials at microscopic, molecular and cellular levels. Many of our products are used to
detect, measure and visualize structural characteristics of chemical, biological and industrial material samples. Our products address the rapidly evolving needs of a diverse array of customers in
life science research, pharmaceuticals, biotechnology, applied markets, cell biology, clinical research, microbiology, in-vitro diagnostics, nanotechnology and materials science research.
The
Company has two reportable segments,
Bruker Scientific Instruments (BSI)
, which represents approximately 92% of the Company's revenues
during the year ended December 31, 2015, and
Bruker Energy & Supercon Technologies (BEST)
, which represents the remainder of the business.
Within BSI, the Company is organized into three operating segments: the Bruker BioSpin Group, the Bruker CALID Group and the Bruker Nano Group. For financial reporting purposes, the Bruker BioSpin,
Bruker CALID and Bruker Nano operating segments are aggregated into the BSI reportable segment because each has similar economic characteristics, production processes, service offerings, types and
classes of customers, methods of distribution and regulatory environments.
Bruker BioSpin
Bruker BioSpin designs, manufactures and distributes enabling life science tools based on magnetic resonance and preclinical imaging technologies. Bruker BioSpin sells various
systems utilizing magnetic resonance technology, including magnetic resonance imaging (MRI) systems, nuclear magnetic resonance systems (NMR) and electron paramagnetic resonance systems (EPR), as well
as OEM MRI magnets sold to medical device manufacturers. Bruker BioSpin also sells single and multiple modality systems using MRI, position emission tomography (PET), single photon emission tomography
(SPECT), computed tomography (CT), magnetic particle imaging (MPI) and optical imaging (fluorescence and bioluminescence) technologies to preclinical markets.
Bruker CALID (
C
hemicals,
A
pplied Markets,
L
ife Science,
I
n-Vitro Diagnostics,
D
etection)
Bruker CALID designs, manufactures and distributes life science mass spectrometry instruments that can be integrated and used along with other sample preparation or chromatography
instruments, as well as Chemical, Biological, Radiological, Nuclear and Explosive (CBRNE) detection products. Bruker CALID also designs, manufactures and distributes instruments based on Raman
molecular spectroscopy technologies. Bruker CALID's mass spectrometry units are typically used in applications of expression proteomics, clinical proteomics, metabolic and peptide biomarker profiling,
drug discovery and development, molecular diagnostics research, molecular and systems biology, basic molecular medicine research and clinical microbiology.
Bruker Nano
Bruker Nano designs, manufactures and distributes spectroscopy and microscopy instruments for the understanding of composition and structure in material science and life science
samples. The instruments are based on advanced technologies in X-ray fluorescence spectroscopy (XRF), X-ray diffraction (XRD), X-ray micro computed tomography
(
m
CT), atomic force microscopy (AFM), stylus and optical metrology (SOM) and fluorescence microscopy (FM), and also include analytical tools for electron
microscopes, handheld, portable and mobile X-ray fluorescence and spark optical emission spectroscopy systems.
The
Company's BEST reportable segment develops and manufactures superconducting and non-superconducting materials and devices for use in renewable energy, energy infrastructure,
healthcare and "big science" research. The segment focuses on metallic low temperature superconductors for use in magnetic resonance imaging, nuclear magnetic resonance, fusion energy
8
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research
and other applications, as well as ceramic high temperature superconductors primarily for energy grid and magnet applications.
Note 2Summary of Significant Accounting Policies
The accompanying consolidated financial statements reflect the application of certain significant accounting policies as described below and
elsewhere in the notes to the consolidated financial statements.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and all majority and wholly-owned subsidiaries. All
intercompany accounts and transactions have been eliminated.
Noncontrolling Interests
Noncontrolling interests represents the minority shareholders' proportionate share of the Company's majority-owned subsidiaries. The portion of
net income or net loss attributable to non-controlling interests is presented as net income attributable to noncontrolling interests in consolidated subsidiaries in the consolidated statements of
income and comprehensive income (loss), and the portion of other comprehensive income (loss) of these subsidiaries is presented in the consolidated statements of shareholders' equity.
Subsequent Events
The Company has evaluated all subsequent events and determined that there are no material recognized or unrecognized subsequent events, or any
subsequent events required to be mentioned in the footnotes to the consolidated financial statements, other than the item disclosed in Note 23Subsequent Event.
Cash and Cash Equivalents
Cash and cash equivalents primarily include cash on hand, money market funds and time deposits with original maturities of three months or less
at the date of acquisition. Time deposits represent amounts on deposit in banks and temporarily invested in instruments with maturities of three months or less at the time of purchase. Certain of
these investments represent deposits which
are not insured by the FDIC or any other government agency. Cash equivalents are carried at cost, which approximates fair value.
Short-term Investments
Short-term investments represent time and call deposits with original maturities of greater than three months at the date of acquisition.
Short-term investments are classified as available-for-sale and are reported at fair value, with unrealized gains (losses) excluded from earnings and reported, net of tax, in accumulated other
comprehensive income (loss) within the accompanying consolidated balance sheets. There were no unrealized gains (losses) recorded as of December 31, 2015 and 2014, as cost approximates fair
value.
Restricted Cash
The Company has certain subsidiaries which are required by local governance to maintain restricted cash balances to cover future employee
benefit payments. Restricted cash balances are classified as non-current unless, under the terms of the applicable agreements, the funds will be released from restrictions within one year from the
balance sheet date. The current and non-current portion of restricted cash is recorded within other current assets and other long-term assets, respectively, in the accompanying consolidated balance
sheets.
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Table of Contents
Derivative Financial Instruments and Hedging Activities
All derivatives, whether designated in a hedging relationship or not, are recorded on the consolidated balance sheets at fair value. The
accounting for changes in fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging
relationship. For those derivative instruments that are designated and qualify as hedging instruments, the Company must designate the hedging instrument, based on the exposure being hedged, as a fair
value hedge, cash flow hedge or a hedge of a net investment in a foreign operation.
A
fair value hedge is a derivative instrument designated for the purpose of hedging the exposure of changes in fair value of an asset or a liability resulting from a particular risk. If
the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are both recognized in the same caption in
the consolidated statements of income and comprehensive income (loss).
Fair Value of Financial Instruments
The Company applies the following hierarchy to determine the fair value of financial instruments, which prioritizes the inputs 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 levels in the
hierarchy 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
valuation techniques that may be used by the Company to determine the fair value of Level 2 and Level 3 financial instruments are the market approach, the income
approach and the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income
approach uses valuation techniques to convert future amounts to a single present value based on current market expectations about those future amounts, including present value techniques,
option-pricing models and the excess earnings method. The cost approach is based on the amount that would be required to replace the service capacity of an asset (replacement cost).
The
Company's financial instruments consist primarily of cash equivalents, short-term investments, restricted cash, derivative instruments consisting of forward foreign exchange
contracts, commodity contracts, derivatives embedded in certain purchase and sale contracts, accounts receivable, short-term borrowings, accounts payable, contingent consideration and long-term debt.
The carrying amounts of the Company's cash equivalents, short-term investments and restricted cash, accounts receivable, short-term borrowings and accounts payable approximate fair value caused by
their short-term nature. Derivative assets and liabilities are measured at fair value on a recurring basis. The Company's long-term debt consists principally of a private placement arrangement entered
into in 2012 with various fixed interest rates based on the maturity date.
The
Company has evaluated the estimated fair value of financial instruments using available market information and management's estimates. The use of different market assumptions and/or
estimation methodologies could have a significant effect on the estimated fair value amounts.
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Table of Contents
Concentration of Credit Risk
Financial instruments which subject the Company to credit risk consist of cash, cash equivalents, short-term investments, derivative
instruments, accounts receivables and restricted cash. The risk with respect to cash, cash equivalents and short-term investments is minimized by the Company's policy of investing in short-term
financial instruments issued by highly-rated financial institutions. The risk with respect to derivative instruments is minimized by the Company's policy of
entering into arrangements with highly-rated financial institutions. The risk with respect to accounts receivables is minimized by the creditworthiness and diversity of the Company's customers. The
Company performs periodic credit evaluations of its customers' financial condition and generally requires an advanced deposit for a portion of the purchase price. Credit losses have been within
management's expectations and the allowance for doubtful accounts totaled $9.1 million and $10.1 million as of December 31, 2015 and 2014, respectively. As of December 31,
2015 and 2014, no single customer represented 10% or more of the Company's accounts receivable. For the years ended December 31, 2015, 2014 and 2013, no single customer represented 10% or more
of the Company's total revenue.
Inventories
Components of inventory include raw materials, work-in-process, demonstration units and finished goods. Demonstration units include systems
which are located in the Company's demonstration laboratories or installed at the sites of potential customers and are considered available for sale. Finished goods include in-transit systems that
have been shipped to the Company's customers, but not yet installed and accepted by the customer. All inventories are stated at the lower of cost or market. Cost is determined principally by the
first-in, first-out method for a majority of subsidiaries and by average-cost for certain other subsidiaries. The Company reduces the carrying value of its 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 condition of
demonstration inventories. The Company records a charge to cost of revenue for the amount required to reduce the carrying value of inventory to net realizable value. Costs associated with the
procurement of inventories, such as inbound freight charges and purchasing and receiving costs, are capitalized as part of inventory and are also included in the cost of revenue line item within the
consolidated statements of income and comprehensive income (loss).
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Major improvements are capitalized while
expenditures for maintenance, repairs and minor improvements are charged to expense as incurred. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation and
amortization are eliminated from the accounts and any resulting gain or loss is reflected in the consolidated statements of income and comprehensive income (loss). Depreciation and amortization are
calculated on a straight-line basis over the estimated useful lives of the assets as follows:
|
|
|
|
|
Buildings
|
|
25-40 years
|
|
Machinery and equipment
|
|
3-10 years
|
|
Computer equipment and software
|
|
3-5 years
|
|
Furniture and fixtures
|
|
3-10 years
|
|
Leasehold improvements
|
|
Lesser of 15 years or the remaining lease term
|
Goodwill and Intangible Assets
Goodwill and indefinite-lived intangible assets are not amortized, but are evaluated for impairment on an annual basis, or on an interim basis
when events or changes in circumstances indicate that the
11
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carrying
value may not be recoverable. In assessing the recoverability of goodwill and indefinite-lived intangible assets, the Company must make assumptions regarding the estimated future cash flows,
and other factors, to determine the fair value of these assets. If these estimates or their related assumptions change in the future, the Company may be required to record impairment charges against
these assets in the reporting period in which the impairment is determined.
The
Company tests goodwill for impairment at the reporting unit level, which is the operating segment or one level below an operating segment. The Company has the option of performing a
qualitative assessment to determine whether further impairment testing is necessary before performing the
two-step quantitative assessment. If as a result of the qualitative assessment, it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, a quantitative
impairment test will be required. Otherwise, no further testing will be required. If a quantitative impairment test is performed, the first step involves comparing the fair values of the applicable
reporting units with their aggregate carrying values, including goodwill. The Company generally determines fair value of reporting units using a weighting of both the market and the income
methodologies. Estimating the fair value of the reporting units requires significant judgment by management. If the carrying amount of a reporting unit exceeds the fair value of the reporting unit,
the Company performs the second step of the goodwill impairment test to measure the amount of the impairment. In the second step of the goodwill impairment test the Company compares the implied fair
value of the reporting unit's goodwill with the carrying value of that goodwill.
In
process research and development, or IPR&D, acquired as part of business combinations under the acquisition method represents ongoing development work associated with enhancements to
existing products, as well as the development of next generation products. IPR&D is initially capitalized at fair value as an intangible asset with an indefinite life and assessed for impairment on an
annual basis, or when indicators of impairment are identified. When the IPR&D project is complete, it is reclassified as a finite-lived intangible asset and is amortized over its estimated useful
life, typically seven to ten years. If an IPR&D project is abandoned before completion or is otherwise determined to be impaired, the value of the asset or the amount of the impairment is charged to
the consolidated statements of income and comprehensive income (loss) in the period the project is abandoned or impaired.
Intangible
assets with a finite useful life are amortized on a straight-line basis over their estimated useful lives as follows:
|
|
|
|
|
Existing technology and related patents
|
|
3-10 years
|
|
Customer and distributor relationships
|
|
5-12 years
|
|
Trade names
|
|
5-10 years
|
Impairment of Long-Lived Assets
Impairment losses are recorded on long-lived assets used in operations when indicators of impairment are present and the quoted market price, if
available, or the estimated fair value of those assets are less than the assets' carrying value. Impairment losses are charged to the consolidated statements of income and comprehensive income (loss)
for the difference between the fair value and carrying value of the asset.
Warranty Costs and Deferred Revenue
The Company typically provides 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 and is included as a current liability on the accompanying consolidated balance sheets. The Company's warranty reserve reflects estimated material and labor costs
for potential product issues for which the Company expects to incur an obligation. The Company's estimates of anticipated rates of warranty
12
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claims
and costs are primarily based on historical information. The Company assesses the adequacy of the warranty reserve on a quarterly basis and adjusts the amount as necessary. If the historical
data used to calculate the adequacy of the warranty reserve is not indicative of future requirements, additional or reduced warranty reserves may be required.
The
Company also offers to its customers extended warranty and service agreements extending beyond the initial warranty for a fee. These fees are recorded as deferred revenue and
recognized ratably into income over the life of the extended warranty contract or service agreement.
Income Taxes
Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial
statement carrying amounts and the income tax basis of assets and liabilities. A valuation allowance is applied against any net deferred tax asset if, based on the available evidence, it is more
likely than not that some or all of the deferred tax assets will not be realized.
The
Company records liabilities related to uncertain tax positions in accordance with the guidance that clarifies the accounting for uncertainty in income taxes recognized in a Company's
financial statements. This guidance prescribes a minimum recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to
be taken in a tax return.
Customer Advances
The Company typically requires an advance deposit under the terms and conditions of contracts with customers. These deposits are recorded as a
liability until revenue is recognized on the specific contract in accordance with the Company's revenue recognition policy.
Revenue Recognition
The Company recognizes 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 transfers based upon customer acceptance for a system
that has been delivered and installed at a customer facility or, for certain systems, upon shipping terms. For systems that include customer-specific acceptance criteria, the Company is required to
assess when it can demonstrate the acceptance criteria has been met, which generally is upon customer acceptance and evidence of installation.
When
products are sold through an independent distributor or a strategic distribution partner who assumes responsibility for installation, the Company recognizes the system sale when the
product has been shipped and title and risk of loss have been transferred to the distributor. The Company's distributors do not have price protection rights or rights of return; however, the Company's
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 or when the price is not
fixed or determinable.
For
transactions that include multiple elements, arrangement consideration is allocated to each element using the fair value hierarchy as required by ASU No. 2009-13. The Company
limits the amount of revenue recognized for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations, or subject to
customer-specific return or refund privileges.
13
Table of Contents
The Company determines the fair value of its products and services based upon vendor specific objective evidence ("VSOE"). The Company determines VSOE based on
its normal selling pricing and discounting practices for the specific product or service when sold on a stand-alone basis. In determining VSOE, the Company's policy requires a substantial majority of
selling prices for a product or service to be within a reasonably narrow range. The Company also considers the class of customer, method of distribution and the geographies into which products and
services are being sold when determining VSOE.
If
VSOE cannot be established, the Company attempts to establish the selling price based on third-party evidence ("TPE"). VSOE cannot be established in instances where a product or
service has not been sold separately, stand-alone sales are too infrequent or product pricing is not within a sufficiently narrow range. TPE is determined based on competitor prices for similar
deliverables when sold separately.
When
the Company cannot determine VSOE or TPE, it uses estimated selling price ("ESP") in its allocation of arrangement consideration. The objective of ESP is to determine the price at
which the Company would typically transact a stand-alone sale of the product or service. ESP is determined by
considering a number of factors including the Company's pricing policies, internal costs and gross profit objectives, method of distribution, market research and information, recent technological
trends, competitive landscape and geographies. The Company analyzes the selling prices used in its allocation of arrangement consideration, at a minimum, on an annual basis. Selling prices will be
analyzed more frequently if a significant change in the Company's business or other factors necessitate more frequent analysis or if the Company experiences significant variances in its selling
prices.
Revenue
from accessories and parts is recognized upon shipment. Service revenue is recognized as the services are performed or ratably over the contractual obligation and includes
maintenance contracts, extended warranty, training, application support and on-demand services.
The
Company also has contracts for which it applies the percentage-of-completion model and completed contract model of revenue recognition. Application of the percentage-of-completion
method requires the Company to make reasonable estimates of the extent of progress toward completion of the contract and the total costs the Company will incur under the contract and losses are
recorded immediately when we estimate that contracts will ultimately result in a loss. Changes in the estimates could affect the timing of revenue recognition.
Other
revenues are primarily comprised of licensing arrangements, which is recognized ratably over the term of the related contracts.
Shipping and Handling Costs
The Company includes costs incurred in connection with shipping and handling of products within selling, general and administrative expenses in
the accompanying consolidated statements of income and comprehensive income (loss). Shipping and handling costs were $20.6 million, $26.2 million and $26.7 million in the years
ended December 31, 2015, 2014 and 2013, respectively. Amounts billed to customers in connection with these costs are included in total revenues.
Research and Development
Research and development costs are expensed as incurred and include salaries, wages and other personnel related costs, material costs and
depreciation, consulting costs and facility costs.
Software Costs
Purchased software is capitalized at cost and is amortized over the estimated useful life, generally three years. Software developed for use in
the Company's products is expensed as incurred until
14
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technological
feasibility is reasonably assured and is classified as research and development expense. Subsequent to the achievement of technological feasibility, amounts are capitalizable, however,
to date such amounts have not been material.
Advertising
The Company expenses advertising costs as incurred. Advertising expenses were $12.9 million, $10.7 million and $9.6 million
during the years ended December 31, 2015, 2014 and 2013, respectively.
Stock-Based Compensation
The Company recognizes stock-based compensation expense in the consolidated statements of income and comprehensive income (loss) based on the
fair value of the share-based award at the grant date. The Company's primary types of share-based compensation are stock options and restricted stock units. The Company recorded stock-based
compensation expense for the years ended December 31, 2015, 2014 and 2013, as follows (in millions):
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|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
2013
|
|
Stock options
|
|
$
|
7.1
|
|
$
|
6.7
|
|
$
|
5.3
|
|
Restricted stock
|
|
|
0.9
|
|
|
2.7
|
|
|
1.3
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation
|
|
$
|
8.0
|
|
$
|
9.4
|
|
$
|
6.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
expense is amortized on a straight-line basis over the underlying vesting terms of the share-based award. Stock options to purchase the Company's common stock are
periodically awarded to executive officers and other employees of the Company, and members of the Company's Board of Directors, 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 term, dividend yield and risk-free interest rates are
required for the Black-Scholes model and are presented in the table below:
|
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|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
2013
|
|
Risk-free interest rates
|
|
|
1.58%-1.91%
|
|
|
1.78%-2.10%
|
|
|
1.07%-2.45%
|
|
Expected life
|
|
|
6.0-6.25 years
|
|
|
6.0-6.25 years
|
|
|
6.5 years
|
|
Volatility
|
|
|
35.10%-52.23%
|
|
|
53.07%-56.24%
|
|
|
54.9%
|
|
Expected dividend yield
|
|
|
|
|
|
|
|
|
|
|
The
risk-free interest rate is based on 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 term of
a new option. Expected volatility is based on a number of factors, but the Company currently believes that the exclusive use of its historical volatility results in the best estimate of the grant-date
fair value of employee stock options because it reflects the market's current expectations of future volatility. The expected dividend yield was not considered in the option pricing formula since the
Company had not historically paid dividends and had no plan to do so as of December 31, 2015. In addition, the Company utilizes an estimated forfeiture rate when calculating the stock-based
compensation expense for the period. The Company has applied estimated forfeiture rates derived from an analysis of historical data of 5.8%, 5.1% and 7.0% for the years ended December 31, 2015,
2014 and 2013, respectively, in determining the expense recorded in the accompanying consolidated statements of income and comprehensive income (loss).
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Table of Contents
Earnings Per Share
Net income per common share attributable to Bruker Corporation shareholders is calculated by dividing net income attributable to Bruker
Corporation 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 under the treasury stock method.
The
following table sets forth the computation of basic and diluted weighted average shares outstanding for the years ended December 31, (in millions, except per share data):
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|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
2013
|
|
Net income attributable to Bruker Corporation, as reported
|
|
$
|
101.6
|
|
$
|
56.7
|
|
$
|
80.1
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
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|
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|
|
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|
|
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|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding-basic
|
|
|
168.2
|
|
|
167.8
|
|
|
166.5
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
Stock options and restricted stock units
|
|
|
0.9
|
|
|
1.7
|
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
169.1
|
|
|
169.5
|
|
|
168.5
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
|
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|
|
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|
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|
|
|
|
|
Net income per common share attributable to Bruker Corporation shareholders:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.60
|
|
$
|
0.34
|
|
$
|
0.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.60
|
|
$
|
0.33
|
|
$
|
0.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Stock
options to purchase approximately 1.3 million shares, 0.1 million shares and 0.4 million shares were excluded from the computation of diluted earnings per
share for the years ended December 31, 2015, 2014 and 2013, respectively, because their effect would have been anti-dilutive.
In
May 2015, the Company's Board of Directors approved a share repurchase program (the "Anti-Dilutive Repurchase Program") under which the Company may repurchase the Company's common
stock in amounts intended to approximately offset, on an annual basis, the dilutive effect of shares that have been, or may be, issued pursuant to option or restricted stock awards under the Company's
2010 Incentive Compensation Plan. A total of 1,245,000 shares were repurchased at an aggregate cost of $24.9 million under the Anti-Dilutive Repurchase Program.
In
November 2015, the Company's Board of Directors suspended the Anti-Dilutive Repurchase Program until January 1, 2017 and approved an additional share repurchase program (the
"Repurchase Program") under which repurchases of common stock up to $225 million may occur from time to time, in amounts, at prices, and at such times as the Company deems appropriate, subject
to market conditions, legal requirements and other considerations. A total of 2,837,042 shares were repurchased at an aggregate cost of $65.0 million as of December 31, 2015 under the
Repurchase Program. The Repurchase Program will continue in 2016 and the Company intends to fund any additional repurchases from cash on hand, future cash flows from operations and available
borrowings under the revolving credit facility.
The
repurchased shares are reflected within Treasury stock in the accompanying consolidated balance sheet at December 31, 2015.
Employee Benefit Plans
The Company recognizes the over-funded or under-funded status of defined benefit pension and other postretirement defined benefit plans as an
asset or liability, respectively, in its consolidated
16
Table of Contents
balance
sheets and recognizes changes in the funded status in the year in which the changes occur through other comprehensive income (loss).
Other Comprehensive Income (Loss)
Other comprehensive income (loss) refers to revenues, expenses, gains and losses that are excluded from net income as these amounts are recorded
directly as an adjustment to shareholders' equity, net of tax. The Company's other comprehensive income (loss) was composed of foreign currency translation adjustments and pension liability
adjustments.
Foreign Currency Translation
Assets and liabilities of the Company's foreign subsidiaries, where the functional currency is the local currency, are translated into U.S.
dollars using year-end exchange rates, or historical rates, as appropriate. Revenues and expenses of foreign subsidiaries are translated at the average exchange rates in effect during the year.
Adjustments resulting from financial statement translations are included as a separate component of shareholders' equity. Gains and losses resulting from translation of foreign currency monetary
transactions are reported in interest and other income (expense), net in the consolidated statements of income and comprehensive income (loss) for all periods presented. The Company has certain
intercompany foreign currency transactions that are deemed to be of a long-term investment nature. Exchange adjustments related to those transactions are made directly to a separate component of
shareholders' equity.
Risk and Uncertainties
The Company is subject to risks common to its industry including, but not limited to, global economic conditions, rapid technological change,
government and academic funding levels, changes in commodity prices, spending patterns from its customers, protection of its intellectual property, availability of key raw materials and components,
compliance with existing and future regulation by government agencies and fluctuations in foreign currency exchange rates.
Contingencies
The Company is subject to proceedings, lawsuits and other claims related to patents, product and other matters. The Company assesses the
likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies is
made after analysis of each individual issue. The required reserves may change in the future because of new developments in each situation or changes in settlement strategy in assessing these matters.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period.
Significant
estimates and judgments made by management in preparing these financial statements include revenue recognition, allowances for doubtful accounts, write-downs for excess and
obsolete inventory, estimated fair values used to record impairment charges related to intangible assets, goodwill, and other long-lived assets, amortization periods, expected future cash flows used
to evaluate the recoverability of long-lived assets, stock-based compensation expense, warranty allowances,
17
Table of Contents
restructuring
and other related charges, contingent liabilities and the recoverability of the Company's net deferred tax assets.
Although
the Company regularly reassesses the assumptions underlying these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in
the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results
may differ from management's estimates if these results differ from historical experience or other assumptions prove not to be substantially accurate, even if such assumptions are reasonable when
made.
Note 3Acquisitions
In October 2015, the Company completed the acquisition of Jordan Valley Semiconductors, Ltd. ("Jordan Valley"), a company headquartered
in Israel that provides X-ray metrology and defect-detection equipment for semiconductor process control. The acquisition of Jordan Valley was accounted for under the acquisition method. The
components and fair value allocation of the consideration transferred in connection with the acquisition of Jordan Valley were as follows (in millions):
|
|
|
|
|
Consideration Transferred:
|
|
|
|
|
Cash paid
|
|
$
|
35.4
|
|
Cash acquired
|
|
|
(6.8
|
)
|
Contingent consideration
|
|
|
4.1
|
|
|
|
|
|
|
Total consideration transferred
|
|
$
|
32.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of Consideration Transferred:
|
|
|
|
|
Accounts receivable
|
|
$
|
3.8
|
|
Inventories
|
|
|
10.5
|
|
Other current assets
|
|
|
2.2
|
|
Property, plant and equipment
|
|
|
1.6
|
|
Intangible assets:
|
|
|
|
|
Customer relationships
|
|
|
6.8
|
|
Existing technology
|
|
|
6.0
|
|
Trade name
|
|
|
1.5
|
|
Goodwill
|
|
|
6.3
|
|
Liabilities assumed
|
|
|
(6.0
|
)
|
|
|
|
|
|
Total consideration transferred
|
|
$
|
32.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
fair value allocation included contingent consideration in the amount of $4.1 million, which represented the estimated fair value of future payments to the former shareholders
of Jordan Valley based on achieving annual revenue and gross margin targets for the years 2016-2017. The maximum potential future payments related to the contingent consideration is
$15 million. The Company completed the fair value allocation in the fourth quarter of 2015. The amortization period for intangible assets acquired in connection with Jordan Valley is
7 years for customer relationships, existing technology and trade name.
The
results of Jordan Valley, including the amount allocated to goodwill which is attributable to expected synergies and not expected to be deductible for tax purposes, have been
included in the BSI Segment from the date of acquisition. Pro forma financial information reflecting the acquisition of Jordan Valley has not been presented because the impact on revenues, net income
and total assets is not material.
18
Table of Contents
Note 4Fair Value of Financial Instruments
The Company measures the following financial assets and liabilities at fair value on a recurring basis. The following tables set forth the
Company's financial instruments and presents them within the fair value hierarchy using the lowest level of input that is significant to the fair value measurement at December 31, 2015 and 2014
(in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Total
|
|
Quoted Prices
in Active
Markets
Available
(Level 1)
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
$
|
201.2
|
|
$
|
201.2
|
|
$
|
|
|
$
|
|
|
Restricted cash
|
|
|
1.5
|
|
|
1.5
|
|
|
|
|
|
|
|
Embedded derivatives in purchase and delivery contracts
|
|
|
0.5
|
|
|
|
|
|
0.5
|
|
|
|
|
Long-term restricted cash
|
|
|
2.6
|
|
|
2.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets recorded at fair value
|
|
$
|
205.8
|
|
$
|
205.3
|
|
$
|
0.5
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration
|
|
$
|
4.6
|
|
$
|
|
|
$
|
|
|
$
|
4.6
|
|
Foreign exchange contracts
|
|
|
1.3
|
|
|
|
|
|
1.3
|
|
|
|
|
Embedded derivatives in purchase and delivery contracts
|
|
|
0.5
|
|
|
|
|
|
0.5
|
|
|
|
|
Fixed price commodity contracts
|
|
|
0.4
|
|
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities recorded at fair value
|
|
$
|
6.8
|
|
$
|
|
|
$
|
2.2
|
|
$
|
4.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014
|
|
Total
|
|
Quoted Prices
in Active
Markets
Available
(Level 1)
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
$
|
67.9
|
|
$
|
67.9
|
|
$
|
|
|
$
|
|
|
Short-term investments
|
|
|
178.0
|
|
|
178.0
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
1.8
|
|
|
1.8
|
|
|
|
|
|
|
|
Embedded derivatives in purchase and delivery contracts
|
|
|
0.6
|
|
|
|
|
|
0.6
|
|
|
|
|
Long-term restricted cash
|
|
|
3.4
|
|
|
3.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets recorded at fair value
|
|
$
|
251.7
|
|
$
|
251.1
|
|
$
|
0.6
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration
|
|
$
|
11.9
|
|
$
|
|
|
$
|
|
|
$
|
11.9
|
|
Foreign exchange contracts
|
|
|
5.1
|
|
|
|
|
|
5.1
|
|
|
|
|
Embedded derivatives in purchase and delivery contracts
|
|
|
0.4
|
|
|
|
|
|
0.4
|
|
|
|
|
Fixed price commodity contracts
|
|
|
0.2
|
|
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities recorded at fair value
|
|
$
|
17.6
|
|
$
|
|
|
$
|
5.7
|
|
$
|
11.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
financial instruments are classified within level 2 because there is not an active market for each derivative contract. However, the inputs used to calculate the value
of the instruments are obtained from active markets.
19
Table of Contents
The
fair value of the long-term fixed interest rate debt, which has been classified as Level 2, was $252.1 million and $257.2 million at December 31, 2015 and
2014, respectively, based on market and observable sources with similar maturity dates.
The
Company measures certain assets and liabilities at fair value with changes in fair value recognized in earnings. Fair value treatment may be elected either upon initial recognition
of an eligible asset or liability or, for an existing asset or liability, if an event triggers a new basis of accounting. The Company did not elect to remeasure any of its existing financial assets or
liabilities during the year ended December 31, 2015.
As
part of certain acquisitions in 2015, 2014 and 2013, the Company recorded contingent consideration liabilities that have been classified as Level 3 in the fair value hierarchy.
The contingent consideration represents the estimated fair value of future payments to the former shareholders of applicable acquired companies based on achieving annual revenue and gross margin
targets in certain years as specified in the purchase and sale agreements. The Company initially valued the contingent consideration by using a Monte Carlo simulation which models future revenue and
costs of goods sold projections and discounts the average results to present value. Changes to the fair value of the contingent consideration recognized in earnings for the years ended
December 31, 2015 and December 31, 2014 were ($7.7) million and $0.8 million, respectively, and were recorded to other charges, net in the consolidated statements of income and
comprehensive income (loss). The adjustment for the year ended December 31, 2015 included a reversal of certain contingent consideration, as it was determined that certain financial targets
related to the applicable products would not meet the required thresholds for payment. The following table sets forth the changes in contingent consideration liabilities for the years ended
December 31, 2015 and 2014 (in millions):
|
|
|
|
|
Balance at December 31, 2013
|
|
$
|
7.0
|
|
Current period additions
|
|
|
4.7
|
|
Current period adjustments
|
|
|
0.8
|
|
Current period settlements
|
|
|
(0.5
|
)
|
Foreign currency effect
|
|
|
(0.1
|
)
|
|
|
|
|
|
Balance at December 31, 2014
|
|
|
11.9
|
|
Current period additions
|
|
|
4.1
|
|
Current period adjustments
|
|
|
(7.7
|
)
|
Current period settlements
|
|
|
(3.6
|
)
|
Foreign currency effect
|
|
|
(0.1
|
)
|
|
|
|
|
|
Balance at December 31, 2015
|
|
$
|
4.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
the second quarter of 2014, the Company commenced a program to enter into time deposits with varying maturity dates ranging from one to twelve months, as well as call deposits for
which the Company has the ability to redeem the invested amounts over a period of 31 to 95 days. The Company has classified these investments within cash and cash equivalents or short-term
investments within the consolidated balance sheets based on the call and maturity dates. There are no cash equivalents and $201.2 million of short-term investments outstanding as of
December 31, 2015.
Short-term
investments are classified as available-for-sale and are reported at fair value, with unrealized gains (losses) excluded from earnings and reported, net of tax, in accumulated
other comprehensive income (loss) within the accompanying consolidated balance sheets. There were no unrealized gains (losses) recorded as of December 31, 2015 and 2014. On a quarterly basis,
the Company reviews its short-term investments to determine if there have been any events that could create an impairment. None were noted for the years ended December 31, 2015 and 2014.
20
Table of Contents
Note 5Accounts Receivable
The following is a summary of trade accounts receivable at December 31, (in millions):
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
Gross accounts receivable
|
|
$
|
243.8
|
|
$
|
303.3
|
|
Allowance for doubtful accounts
|
|
|
(9.1
|
)
|
|
(10.1
|
)
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
$
|
234.7
|
|
$
|
293.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
allowance for doubtful accounts is management's estimate of credit losses in the accounts receivable. The allowance for doubtful accounts is based on a number of factors, including
an evaluation of customer credit worthiness, the age of the outstanding receivable, economic trends and historical experience. The allowance for doubtful accounts is reviewed on a quarterly basis and
changes
in estimates are reflected in the period in which they become known. The Company records account balances against the allowance after all means of collection have been exhausted and the potential for
recovery is considered remote. Provisions for doubtful accounts are recorded in selling, general and administrative expenses in the accompanying consolidated statements of income and comprehensive
income (loss).
The
following is a summary of the activity in the Company's allowance for doubtful accounts at December 31, (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
Beginning of
Period
|
|
Additions
Charged to
Expense
|
|
Deductions
Amounts
Written Off
|
|
Foreign
Currency
Impact
|
|
Balance at
End of Period
|
|
2015
|
|
$
|
10.1
|
|
$
|
2.1
|
|
$
|
(2.5
|
)
|
$
|
(0.6
|
)
|
$
|
9.1
|
|
2014
|
|
|
7.9
|
|
|
5.5
|
|
|
(2.5
|
)
|
|
(0.8
|
)
|
|
10.1
|
|
2013
|
|
|
7.9
|
|
|
1.3
|
|
|
(1.3
|
)
|
|
|
|
|
7.9
|
|
Note 6Inventories
Inventories consisted of the following at December 31, (in millions):
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
Raw materials
|
|
$
|
158.8
|
|
$
|
159.5
|
|
Work-in-process
|
|
|
131.1
|
|
|
169.5
|
|
Finished goods
|
|
|
93.3
|
|
|
109.9
|
|
Demonstration units
|
|
|
38.8
|
|
|
38.5
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
$
|
422.0
|
|
$
|
477.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finished
goods include in-transit systems that have been shipped to the Company's customers but not yet installed and accepted by the customer. As of December 31, 2015 and 2014,
inventory-in-transit was $44.7 million and $58.6 million, respectively.
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 product 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 revenue related to
the write-down of demonstration units to net realizable value were $19.4 million, $28.2 million and $32.7 million for the years ended December 31, 2015, 2014 and 2013,
respectively.
21
Table of Contents
Note 7Property, Plant and Equipment, Net
The following is a summary of property, plant and equipment, net by major asset class at December 31, (in millions):
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
Land
|
|
$
|
27.6
|
|
$
|
29.7
|
|
Building and leasehold improvements
|
|
|
261.9
|
|
|
272.1
|
|
Machinery, equipment, software and furniture and fixtures
|
|
|
314.0
|
|
|
320.9
|
|
|
|
|
|
|
|
|
|
|
|
|
603.5
|
|
|
622.7
|
|
Less accumulated depreciation and amortization
|
|
|
(372.4
|
)
|
|
(372.8
|
)
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
231.1
|
|
$
|
249.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
expense, which includes the amortization of leasehold improvements, for the years ended December 31, 2015, 2014 and 2013 was $32.6 million,
$39.5 million and $40.5 million, respectively.
During
the year ended December 31, 2015, the Company recorded an impairment charge of $2.1 million representing the write down to fair value of certain property, plant and
equipment, net in the Bruker BioSpin Group related to restructuring and outsourcing activities during the year. These impairment charges are recorded within "Impairment of assets" in the accompanying
consolidated statements of income and comprehensive income (loss). Please see Note 17Other Charges, net, for additional details on the Bruker BioSpin Group restructuring
activities.
In
July 2014, the Company's Board of Directors approved a plan (the "Plan") to divest certain assets and implement a restructuring program in the former Chemical and Applied Markets
(CAM) Division within the Bruker CALID Group. The Plan was developed as a result of management's conclusion that the former CAM business would be unable to achieve acceptable financial performance in
the next two years. Please see Note 17Other Charges, net, for additional details on the Plan. The Company determined the Plan was an indicator requiring the evaluation of property,
plant and equipment within that reporting unit for recoverability. The Company performed a valuation during 2014 and determined that the property, plant and equipment within the former CAM Division
were impaired. The Company recorded an impairment charge of $5.5 million in the year ended December 31, 2014 to reduce the remaining value of those assets to fair value. In addition, the
Company determined, based upon projected cash flows generated by certain assets in the BEST Segment, that an impairment charge of $5.1 million was necessary during the year ended
December 31, 2014 to reduce the carrying value of those assets to their estimated fair values. These impairment charges are recorded within "Impairment of assets" in the accompanying
consolidated statements of income and comprehensive income (loss).
22
Table of Contents
Note 8Goodwill and Intangible Assets
The following table sets forth the changes in the carrying amount of goodwill for the years ended December 31, 2015 and 2014 (in
millions):
|
|
|
|
|
Balance at December 31, 2013
|
|
$
|
127.4
|
|
Current period additions
|
|
|
5.1
|
|
Current period adjustments
|
|
|
(0.1
|
)
|
Foreign currency impact
|
|
|
(4.6
|
)
|
|
|
|
|
|
Balance at December 31, 2014
|
|
|
127.8
|
|
Current period additions
|
|
|
6.3
|
|
Current period adjustments
|
|
|
0.5
|
|
Impairment
|
|
|
(0.7
|
)
|
Foreign currency impact
|
|
|
(3.3
|
)
|
|
|
|
|
|
Balance at December 31, 2015
|
|
$
|
130.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
December 31, 2015 and 2014, all goodwill was allocated within the BSI Segment. The goodwill acquired in 2015 relates to the acquisition of Jordan Valley. The goodwill acquired
in 2014 relates to the acquisition of Vutara, Inc., a provider of high-speed, three-dimensional (3D), super-resolution fluorescence microscopy for life science applications.
During
the year ended December 31, 2015, the Company recorded an impairment charge of $0.7 million representing the impairment of goodwill in the Bruker BioSpin Group
related to certain restructuring and outsourcing activities during the year. The Company performed its annual impairment evaluation using a quantitative and qualitative approach at December 31,
2015 and 2014, respectively, and concluded the fair values of each of our reporting units was significantly greater than their carrying amounts, and therefore, no additional impairment was required.
The
following is a summary of intangible assets at December 31, (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Existing technology and related patents
|
|
$
|
154.5
|
|
$
|
(95.5
|
)
|
$
|
59.0
|
|
$
|
149.8
|
|
$
|
(81.7
|
)
|
$
|
68.1
|
|
Customer relationships
|
|
|
18.4
|
|
|
(5.9
|
)
|
|
12.5
|
|
|
13.4
|
|
|
(5.6
|
)
|
|
7.8
|
|
Non compete conracts
|
|
|
1.8
|
|
|
(0.6
|
)
|
|
1.2
|
|
|
1.8
|
|
|
(0.2
|
)
|
|
1.6
|
|
Trade names
|
|
|
1.6
|
|
|
(0.2
|
)
|
|
1.4
|
|
|
0.2
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets subject to amortization
|
|
|
176.3
|
|
|
(102.2
|
)
|
|
74.1
|
|
|
165.2
|
|
|
(87.7
|
)
|
|
77.5
|
|
In-process research and development
|
|
|
0.6
|
|
|
|
|
|
0.6
|
|
|
6.3
|
|
|
|
|
|
6.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
$
|
176.9
|
|
$
|
(102.2
|
)
|
$
|
74.7
|
|
$
|
171.5
|
|
$
|
(87.7
|
)
|
$
|
83.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the years ended December 31, 2015, 2014 and 2013, the Company recorded amortization expense of approximately $20.7 million, $20.2 million and
$20.8 million, respectively, in the consolidated statements of income and comprehensive income (loss). During the year ended December 31, 2015, the Company recorded an impairment charge
of $1.8 million representing the impairment of intangible assets in the Bruker BioSpin Group related to certain restructuring and outsourcing activities during the year. During the year ended
December 31, 2014, the Company recorded an impairment charge of $0.9 million representing the impairment of intangible assets in the former CAM Division related to the Plan described
above.
23
Table of Contents
The
estimated future amortization expense related to amortizable intangible assets at December 31, 2015 is as follows (in millions):
|
|
|
|
|
2016
|
|
$
|
21.3
|
|
2017
|
|
|
21.1
|
|
2018
|
|
|
16.8
|
|
2019
|
|
|
4.9
|
|
2020
|
|
|
4.0
|
|
Thereafter
|
|
|
6.0
|
|
|
|
|
|
|
Total
|
|
$
|
74.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 9Other Current Liabilities
The following is a summary of other current liabilities at December 31, (in millions):
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
Deferred revenue
|
|
$
|
77.0
|
|
$
|
89.0
|
|
Accrued compensation
|
|
|
88.5
|
|
|
87.7
|
|
Accrued warranty
|
|
|
19.6
|
|
|
21.6
|
|
Income taxes payable
|
|
|
25.1
|
|
|
19.2
|
|
Other taxes payable
|
|
|
25.4
|
|
|
17.6
|
|
Derivative liabilities
|
|
|
2.2
|
|
|
5.7
|
|
Other accrued expenses
|
|
|
65.7
|
|
|
60.6
|
|
|
|
|
|
|
|
|
|
Other current liabilities
|
|
$
|
303.5
|
|
$
|
301.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following table sets forth the changes in accrued warranty for the years ended December 31, 2015 and 2014 (in millions):
|
|
|
|
|
Balance at December 31, 2013
|
|
$
|
26.7
|
|
Accruals for warranties issued during the year
|
|
|
19.5
|
|
Settlements of warranty claims
|
|
|
(22.5
|
)
|
Foreign currency impact
|
|
|
(2.1
|
)
|
|
|
|
|
|
Balance at December 31, 2014
|
|
|
21.6
|
|
Accruals for warranties issued during the year
|
|
|
21.1
|
|
Settlements of warranty claims
|
|
|
(21.7
|
)
|
Foreign currency impact
|
|
|
(1.4
|
)
|
|
|
|
|
|
Balance at December 31, 2015
|
|
$
|
19.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
Table of Contents
Note 10Debt
The Company's debt obligations consist of the following as of December 31, (in millions):
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
US Dollar revolving loan under the 2015 Agreement
|
|
$
|
25.0
|
|
$
|
|
|
US Dollar revolving loan under the Amended Credit Agreement
|
|
|
|
|
|
112.5
|
|
US Dollar notes under the Note Purchase Agreement
|
|
|
240.0
|
|
|
240.0
|
|
Capital lease obligations and other loans
|
|
|
1.7
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
266.7
|
|
|
355.0
|
|
Current portion of long-term debt
|
|
|
(0.7
|
)
|
|
(0.8
|
)
|
|
|
|
|
|
|
|
|
Total long-term debt, less current portion
|
|
$
|
266.0
|
|
$
|
354.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
May 2011, the Company entered into an amendment to, and restatement of, its credit agreement, referred to as the Amended Credit Agreement. The Amended Credit Agreement provided a
maximum commitment on the Company's revolving credit line of $250.0 million and a maturity date of May 2016. Borrowings under the revolving credit line of the Amended Credit Agreement accrued
interest, at the Company's option, at either (a) the greater of (i) the prime rate, (ii) the federal funds rate plus 0.50% and (iii) adjusted LIBOR plus 1.00% or
(b) LIBOR, plus margins ranging from 0.80% to 1.65%. There was also a facility fee ranging from 0.20% to 0.35%. The Amended Credit Agreement was repaid in full in October 2015.
On
October 27, 2015, the Company entered into a new revolving credit agreement, referred to as the 2015 Credit Agreement, and terminated the Amended Credit Agreement. The 2015
Credit Agreement provides a maximum commitment on the Company's revolving credit line of $500 million and a maturity date of October 2020. Borrowings under the revolving credit line of the 2015
Credit Agreement accrue interest, at the Company's option, at either (a) the greater of (i) the prime rate, (ii) the federal funds rate plus 0.50% and (iii) adjusted LIBOR
plus 1.00%, plus margins ranging from 0.00% to 0.30% or (b) LIBOR, plus margins ranging from 0.90% to 1.30%. There is also a facility fee ranging from 0.10% to 0.20%.
Borrowings
under the 2015 Credit Agreement are secured by guarantees from certain material subsidiaries, as defined in the 2015 Credit Agreement. The 2015 Credit Agreement also requires
the Company to maintain certain financial ratios related to maximum leverage and minimum interest coverage (as defined in the 2015 Credit Agreement). Specifically, the Company's leverage ratio cannot
exceed 3.5 and the Company's interest coverage ratio cannot be less than 2.5. In addition to the financial ratios, the 2015 Credit Agreement contains negative covenants, including among others,
restrictions on liens, indebtedness of the Company and its subsidiaries, asset sales, dividends and transactions with affiliates. Failure to comply with any of these restrictions or covenants may
result in
an event of default on the 2015 Credit Agreement, which could permit acceleration of the debt and require the Company to prepay the debt before its scheduled due date.
As
of December 31, 2015, the Company was in compliance with the covenants of the 2015 Credit Agreement. The Company's leverage ratio (as defined in the 2015 Credit Agreement) was
1.0 and interest coverage ratio (as defined in the 2015 Credit Agreement) was 14.9.
25
Table of Contents
The following is a summary of the maximum commitments and the net amounts available to the Company at December 31, 2015 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average
Interest
Rate
|
|
Total Amount
Committed by
Lenders
|
|
Outstanding
Borrowings
|
|
Outstanding
Letters of
Credit
|
|
Total
Amount
Available
|
|
2015 Credit Agreement
|
|
|
1.5
|
%
|
$
|
500.0
|
|
$
|
25.0
|
|
$
|
1.0
|
|
$
|
474.0
|
|
Other lines of credit
|
|
|
|
|
|
234.4
|
|
|
|
|
|
136.7
|
|
|
97.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revolving loans
|
|
|
|
|
$
|
734.4
|
|
$
|
25.0
|
|
$
|
137.7
|
|
$
|
571.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
lines of credit are with various financial institutions located primarily in Germany and Switzerland. The Company's other revolving lines of credit are unsecured and typically due
upon demand with interest payable monthly.
In
January 2012, the Company entered into a note purchase agreement, referred to as the Note Purchase Agreement, with a group of accredited institutional investors. Pursuant to the Note
Purchase
Agreement, the Company issued and sold $240.0 million of senior notes, referred to as the Senior Notes, which consist of the following:
-
-
$20 million 3.16% Series 2012A Senior Notes, Tranche A, due January 18, 2017;
-
-
$15 million 3.74% Series 2012A Senior Notes, Tranche B, due January 18, 2019;
-
-
$105 million 4.31% Series 2012A Senior Notes, Tranche C, due January 18, 2022; and
-
-
$100 million 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024.
Under
the terms of the Note Purchase Agreement, the Company may issue and sell additional senior notes up to an aggregate principal amount of $600 million, subject to certain
conditions. Interest on the Senior Notes is payable semi-annually on January 18 and July 18 of each year. The Senior Notes are unsecured obligations of the Company and are fully and
unconditionally guaranteed by certain of the Company's direct and indirect subsidiaries. The Senior Notes rank pari passu in right of repayment with the Company's other senior unsecured indebtedness.
The Company may prepay some or all of the Senior Notes at any time in an amount not less than 10% of the original aggregate principal amount of the Senior Notes to be prepaid, at a price equal to the
sum of (a) 100% of the principal amount thereof, plus accrued and unpaid interest, and (b) the applicable make-whole amount, upon not less than 30 and no more than 60 days written
notice to the holders of the Senior Notes. In the event of a change in control of the Company, as defined in the Note Purchase Agreement, the Company may be required to prepay the Notes at a price
equal to 100% of the principal amount thereof, plus accrued and unpaid interest.
The
Note Purchase Agreement contains affirmative covenants, including, without limitation, maintenance of corporate existence, compliance with laws, maintenance of insurance and
properties, payment of taxes, addition of subsidiary guarantors and furnishing notices and other information. The Note Purchase Agreement also contains certain restrictive covenants that restrict the
Company's ability
to, among other things, incur liens, transfer or sell assets, engage in certain mergers and consolidations and enter into transactions with affiliates. The Note Purchase Agreement also includes
customary representations and warranties and events of default. In the case of an event of default arising from specified events of bankruptcy or insolvency, all outstanding Senior Notes will become
due and payable immediately without further action or notice. In the case of payment events of defaults, any holder of Senior Notes affected thereby may declare all Senior Notes held by it due and
payable immediately. In the case of any other event of default, a majority of the holders of the Senior Notes may declare all the Senior Notes to be due and payable immediately. Pursuant to the Note
Purchase Agreement, so long as any Senior Notes are outstanding the Company will not permit (i) its leverage ratio, as determined
26
Table of Contents
pursuant
to the Note Purchase Agreement, as of the end of any fiscal quarter to exceed 3.50 to 1.00, (ii) its interest coverage ratio as determined pursuant to the Note Purchase Agreement as of
the end of any fiscal quarter for any period of four consecutive fiscal quarters to be less than 2.50 to 1 or (iii) priority debt at any time to exceed 25% of consolidated net worth, as
determined pursuant to the Note Purchase Agreement.
As
of December 31, 2015, the Company was in compliance with the covenants of the Note Purchase Agreement. The Company's leverage ratio (as defined in the Note Purchase Agreement)
was 1.0 and interest coverage ratio (as defined in the Note Purchase Agreement) was 14.9.
Annual
maturities of debt outstanding at December 31, 2015 are as follows (in millions):
|
|
|
|
|
2016
|
|
$
|
0.7
|
|
2017
|
|
|
20.1
|
|
2018
|
|
|
0.2
|
|
2019
|
|
|
15.2
|
|
2020
|
|
|
25.1
|
|
Thereafter
|
|
|
205.4
|
|
|
|
|
|
|
Total
|
|
$
|
266.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense for the years ended December 31, 2015, 2014 and 2013, was $13.0 million, $13.3 million and $13.4 million, respectively.
Note 11Derivative Instruments and Hedging Activities
Interest Rate Risks
The Company's 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 Company's interest rate risk relates to amounts outstanding under the 2015 Credit Agreement, which totaled $25.0 million at
December 31, 2015. The Company currently has a higher level of fixed rate debt than variable rate debt, which limits the exposure to adverse movements in interest rates.
Foreign Exchange Rate Risk Management
The Company generates a substantial portion of its revenues and expenses in international markets, principally Germany and other countries in
the European Union, Switzerland 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 periodically enters into foreign currency contracts in order to minimize the volatility that fluctuations in currency translation have on its monetary transactions. 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 twelve months. These transactions do not qualify for hedge accounting and, accordingly, the instrument is recorded at fair value with the corresponding gains and losses recorded in the
consolidated statements of income and comprehensive
27
Table of Contents
income
(loss). The Company had the following notional amounts outstanding under foreign currency contracts at December 31, (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buy
|
|
Notional
Amount in
Buy Currency
|
|
Sell
|
|
Maturity
|
|
Notional
Amount in
U.S. Dollars
|
|
Fair Value
of Assets
|
|
Fair Value
of Liabilities
|
|
December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euro
|
|
|
21.1
|
|
U.S. Dollars
|
|
January 2016
|
|
$
|
24.2
|
|
$
|
|
|
$
|
1.2
|
|
Swiss Francs
|
|
|
5.9
|
|
U.S. Dollars
|
|
April 2016
|
|
|
6.0
|
|
|
|
|
|
0.1
|
|
U.S. Dollars
|
|
|
6.0
|
|
Israel Shekel
|
|
April 2016
|
|
|
6.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
36.2
|
|
$
|
|
|
$
|
1.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euro
|
|
|
43.3
|
|
U.S. Dollars
|
|
January 2015 to September 2015
|
|
$
|
55.4
|
|
$
|
|
|
$
|
2.9
|
|
U.S. Dollars
|
|
|
0.3
|
|
Euro
|
|
February 2015 to December 2015
|
|
|
0.3
|
|
|
|
|
|
|
|
Euro
|
|
|
0.1
|
|
British Pounds
|
|
January 2015 to June 2015
|
|
|
0.1
|
|
|
|
|
|
|
|
Yen
|
|
|
5.7
|
|
Euro
|
|
March 2015
|
|
|
0.1
|
|
|
|
|
|
|
|
Swiss Francs
|
|
|
41.4
|
|
U.S. Dollars
|
|
January 2015
|
|
|
43.9
|
|
|
|
|
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
99.8
|
|
$
|
|
|
$
|
5.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 contracts, denominated in currencies other than the functional currency of the
transacting parties, amounted to $59.0 million for the delivery of products and $4.1 million for the purchase of products at December 31, 2015 and $41.1 million for the
delivery of products and $8.7 million for the purchase of products at December 31, 2014. The changes in the fair value of these embedded derivatives are recorded in interest and other
income (expense), net in the consolidated statements of income and comprehensive income (loss).
Commodity Price Risk Management
The Company has an arrangement with a customer under which it has a firm commitment to deliver copper based superconductors at a fixed price. In
order to minimize the volatility that fluctuations in the price of copper have on the Company's sales of these commodities, the Company enters into commodity hedge contracts. At December 31,
2015 and 2014, the Company has fixed price commodity contracts with notional amounts aggregating $2.0 million and $2.7 million, respectively. The changes in the fair value of these
commodity contracts are recorded in interest and other income (expense), net in the consolidated statements of income and comprehensive income (loss).
The
fair value of the derivative instruments described above are recorded in the consolidated balance sheets for the years ended December 31, 2015 and 2014 as follows (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Location
|
|
2015
|
|
2014
|
|
Derivative assets:
|
|
|
|
|
|
|
|
|
|
Embedded derivatives in purchase and delivery contracts
|
|
Other current assets
|
|
$
|
0.5
|
|
$
|
0.6
|
|
Derivative liabilities:
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
Other current liabilities
|
|
$
|
1.3
|
|
$
|
5.1
|
|
Embedded derivatives in purchase and delivery contracts
|
|
Other current liabilities
|
|
|
0.5
|
|
|
0.4
|
|
Fixed price commodity contracts
|
|
Other current liabilities
|
|
|
0.4
|
|
|
0.2
|
|
The
impact on net income of unrealized gains and losses resulting from changes in the fair value of derivative instruments for the years ending December 31 are as follows (in
millions) and are
28
Table of Contents
recorded
within interest and other income (expense), net in the consolidated statements of income and comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
2013
|
|
Foreign exchange contracts
|
|
$
|
3.8
|
|
$
|
(7.4
|
)
|
$
|
0.5
|
|
Embedded derivatives in purchase and delivery contracts
|
|
|
(0.2
|
)
|
|
0.4
|
|
|
(0.2
|
)
|
Fixed price commodity contracts
|
|
|
(0.2
|
)
|
|
(0.3
|
)
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (expense), net
|
|
$
|
3.4
|
|
$
|
(7.3
|
)
|
$
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 12Income Taxes
The domestic and foreign components of income before taxes are as follows for the years ended December 31, (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
2013
|
|
Domestic
|
|
$
|
31.6
|
|
$
|
(83.2
|
)
|
$
|
(42.4
|
)
|
Foreign
|
|
|
96.4
|
|
|
184.5
|
|
|
167.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
128.0
|
|
$
|
101.3
|
|
$
|
124.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
components of the income tax provision are as follows for the years ended December 31, (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
2013
|
|
Current income tax (benefit) expense:
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
5.7
|
|
$
|
(1.1
|
)
|
$
|
0.2
|
|
State
|
|
|
1.3
|
|
|
0.4
|
|
|
0.2
|
|
Foreign
|
|
|
50.0
|
|
|
50.8
|
|
|
35.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current income tax expense
|
|
|
57.0
|
|
|
50.1
|
|
|
35.4
|
|
Deferred income tax (benefit) expense:
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(31.1
|
)
|
|
0.7
|
|
|
(1.8
|
)
|
State
|
|
|
(2.4
|
)
|
|
(0.1
|
)
|
|
(0.6
|
)
|
Foreign
|
|
|
(0.4
|
)
|
|
(9.0
|
)
|
|
9.8
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred income tax (benefit) expense
|
|
|
(33.9
|
)
|
|
(8.4
|
)
|
|
7.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
$
|
23.1
|
|
$
|
41.7
|
|
$
|
42.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
Table of Contents
The
income tax provision differs from the tax provision computed at the U.S federal statutory rate due to the following significant components for the years ended December 31,:
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
2013
|
|
Statutory tax rate
|
|
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
Foreign tax rate differential
|
|
|
(3.6
|
)
|
|
(12.1
|
)
|
|
(10.2
|
)
|
Permanent differences
|
|
|
(2.0
|
)
|
|
9.6
|
|
|
12.0
|
|
Tax contingencies
|
|
|
2.3
|
|
|
(0.9
|
)
|
|
(1.1
|
)
|
Change in tax rates
|
|
|
1.3
|
|
|
(1.6
|
)
|
|
0.1
|
|
Withholding taxes
|
|
|
8.1
|
|
|
0.6
|
|
|
0.1
|
|
State income taxes, net of federal benefits
|
|
|
(0.9
|
)
|
|
0.2
|
|
|
0.1
|
|
Purchase accounting
|
|
|
0.8
|
|
|
0.7
|
|
|
0.8
|
|
Tax credits
|
|
|
(1.1
|
)
|
|
(4.3
|
)
|
|
(8.6
|
)
|
Other
|
|
|
(2.7
|
)
|
|
(1.2
|
)
|
|
0.6
|
|
Change in valuation allowance for unbenefited losses
|
|
|
(19.2
|
)
|
|
15.2
|
|
|
5.5
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
18.0
|
%
|
|
41.2
|
%
|
|
34.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
tax effect of temporary items that give rise to significant portions of the deferred tax assets and liabilities are as follows as of December 31, (in millions):
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
2.0
|
|
$
|
1.0
|
|
Accrued expenses
|
|
|
4.7
|
|
|
0.8
|
|
Compensation
|
|
|
30.1
|
|
|
21.0
|
|
Investments
|
|
|
1.4
|
|
|
0.6
|
|
Deferred revenue
|
|
|
0.2
|
|
|
3.9
|
|
Net operating loss carryforwards
|
|
|
16.0
|
|
|
30.3
|
|
Fixed assets
|
|
|
0.8
|
|
|
|
|
Inventory
|
|
|
2.9
|
|
|
|
|
Foreign tax and other tax credit carryforwards
|
|
|
32.3
|
|
|
21.8
|
|
Unrealized currency gain/loss
|
|
|
6.1
|
|
|
0.2
|
|
Warranty reserve
|
|
|
|
|
|
1.1
|
|
Other
|
|
|
7.5
|
|
|
5.7
|
|
|
|
|
|
|
|
|
|
Gross deferred tax assets
|
|
|
104.0
|
|
|
86.4
|
|
Less valuation allowance
|
|
|
(37.2
|
)
|
|
(57.4
|
)
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
66.8
|
|
|
29.0
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
0.6
|
|
|
2.9
|
|
Fixed assets
|
|
|
|
|
|
1.9
|
|
Foreign statutory reserves
|
|
|
5.3
|
|
|
4.5
|
|
Investments
|
|
|
|
|
|
0.1
|
|
Inventory
|
|
|
|
|
|
0.3
|
|
Intangibles
|
|
|
9.4
|
|
|
13.1
|
|
Accrued expenses
|
|
|
8.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
23.3
|
|
|
22.8
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
43.5
|
|
$
|
6.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
Table of Contents
The
Company uses the liability method to account for income taxes. Under this method, deferred income taxes are recognized for the future tax consequences of differences between the tax
and financial accounting bases of assets and liabilities at each reporting period. Deferred income taxes are based on enacted tax laws and statutory tax rates applicable to the period in which these
differences are expected to affect taxable income. A valuation allowance is established when necessary to reduce deferred tax assets to the expected realized amounts.
The
Company can only recognize a deferred tax asset to the extent this it is "more likely than not" that these assets will be realized. Judgments around realizability depend on the
availability and weight of both positive and negative evidence. After considering all available evidence at December 31, 2015 the Company established valuation allowances against a portion of
its deferred tax assets in the U.S. and certain other jurisdictions as it is more likely than not that these assets will not be realized. In particular, the Company recorded a partial valuation
allowance against its U.S. net deferred tax assets, which was comprised of deductible temporary differences and tax credit carryforwards. In determining the realizability of these assets, the Company
considered numerous factors including historical profitability, the character and amount of estimated future taxable income and prudent and feasible tax planning strategies.
The
Company's valuation allowance at December 31, 2015 decreased $20.1 million as compared to December 31, 2014, including a reduction to the beginning of the year
valuation allowance of $20.8 million, to account for a change in judgment with respect to the realizability of the Company's U.S. deferred tax assets. This decrease was primarily attributable
to U.S. net operating loss and foreign tax credit usage as a result of the repatriation of $235.3 million of foreign earnings to the United States during 2015 prompted by adverse interest rate
conditions in Europe that were unfavorably impacting cash balances. Among the evidence supporting the Company's conclusion around realizability of these deferred tax assets was the elimination of
recent cumulative U.S. losses as well as expected future near term U.S. taxable income.
As
of December 31, 2015, the Company had approximately $3.0 million of net operating loss carryforwards available to reduce state taxable income; approximately
$42.4 million of German Trade Tax net operating losses that are carried forward indefinitely; and $42.9 million of other foreign net operating losses that are expected to expire at
various times beginning in 2018. The Company also had U.S. federal tax credits of approximately $27.8 million available to offset future tax liabilities that expire at various dates, which
include research and development tax credits of $14.0 million expiring at various times through 2034, foreign tax credits of $13.8 million expiring at various times through 2024, and
state research and development tax credits of $7.1 million. Utilization of these credits and state net operating losses may be subject to annual limitations due to the ownership percentage
change limitations provided by the Internal Revenue Code Section 382 and similar state provisions. In the event of a deemed change in control under Internal Revenue Code Section 382, an
annual limitation on the utilization of net operating losses and credits may result in the expiration of all or a portion of the net operating loss and credit carryforwards.
The
Company reflects certain foreign statutory reserves in its tabular reconciliation of unrecognized tax benefits. These unrecognized tax benefits are presented as a reduction of the
associated net deferred tax assets.
The
Company has indefinitely reinvested the earnings of its subsidiaries in the cumulative amount of approximately $1,456.1 million as of December 31, 2015, and therefore,
has not provided for U.S. income taxes that could result from the distribution of such earnings to the U.S. parent. If these earnings were ultimately distributed to the U.S. in the form of dividends
or otherwise, or if the shares of the subsidiaries were sold or transferred, the Company would likely be subject to additional U.S. income taxes, net of the impact of any available foreign tax
credits. The Company estimates the amount of unrecognized deferred U.S. income taxes on these undistributed earnings to be approximately $120 million.
31
Table of Contents
The Company has gross unrecognized tax benefits, excluding interest, of approximately $26.9 million as of December 31, 2015, of which
$13 million, if recognized, would reduce the Company's effective tax rate. In the next twelve months it is reasonably possible that the Company will reduce its unrecognized tax benefits by
$5.2 million due to statutes of limitations expiring and favorably settling with taxing authorities which would reduce the Company's effective tax rate. A tabular reconciliation of the
beginning and ending amount of unrecognized tax benefits is as follows (in millions):
|
|
|
|
|
Gross unrecognized tax benefits at December 31, 2012
|
|
$
|
61.1
|
|
Gross decreasestax positions in prior periods
|
|
|
(0.5
|
)
|
Gross increasescurrent period tax positions
|
|
|
0.7
|
|
Settlements
|
|
|
(7.1
|
)
|
Lapse of statutes
|
|
|
(2.5
|
)
|
|
|
|
|
|
Gross unrecognized tax benefits at December 31, 2013
|
|
|
51.7
|
|
Gross decreasestax positions in prior periods
|
|
|
(6.4
|
)
|
Gross decreasescurrent period tax positions
|
|
|
(0.3
|
)
|
Settlements
|
|
|
(0.6
|
)
|
Lapse of statutes
|
|
|
(4.4
|
)
|
|
|
|
|
|
Gross unrecognized tax benefits at December 31, 2014
|
|
|
40.0
|
|
Gross decreasestax positions in prior periods
|
|
|
(1.5
|
)
|
Gross increasescurrent period tax positions
|
|
|
0.4
|
|
Settlements
|
|
|
(2.7
|
)
|
Lapse of statutes
|
|
|
(3.0
|
)
|
|
|
|
|
|
Gross unrecognized tax benefits at December 31, 2015
|
|
$
|
33.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company's policy is to include accrued interest and penalties related to unrecognized tax benefits and income tax liabilities, when applicable, in income tax expense. As of
December 31, 2015 and 2014, the Company had approximately $4.7 million and $3.6 million, respectively, of accrued interest and penalties related to uncertain tax positions
included in other long-term liabilities in the consolidated balance sheets. Penalties and interest related to unrecognized tax benefits of $1.4 million and $0.1 million were recorded in
the provision for income taxes during the year ended December 31, 2015 and 2014, respectively.
The
Company files tax returns in the U.S., which include federal, state and local jurisdictions and many foreign jurisdictions with varying statutes of limitations. The Company considers
Germany, the U.S. and Switzerland to be its significant tax jurisdictions. The tax years 2009 to 2014 are open tax years in these significant foreign jurisdictions. In the first quarter of 2014, the
Company settled a tax audit in the U.S. for the tax year 2010. In the third quarter of 2015, the Company settled tax audits in Germany and Italy. The settlement was immaterial to the consolidated
financial statements. Tax years 2011 to 2014 remain open for examination in the U.S.
Note 13Employee Benefit Plans
Defined Benefit Plans
Substantially all of the Company's 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.
32
Table of Contents
Net Periodic Pension Cost
The components of net periodic benefit costs for the years ended December 31, 2015, 2014 and 2013 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
2013
|
|
Components of net periodic benefit costs:
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
7.2
|
|
$
|
4.8
|
|
$
|
5.5
|
|
Interest cost
|
|
|
2.5
|
|
|
4.6
|
|
|
4.1
|
|
Expected return on plan assets
|
|
|
(2.3
|
)
|
|
(4.1
|
)
|
|
(3.8
|
)
|
Settlement loss recognized
|
|
|
10.2
|
|
|
|
|
|
|
|
Amortization of net loss
|
|
|
4.1
|
|
|
0.1
|
|
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit costs
|
|
$
|
21.7
|
|
$
|
5.4
|
|
$
|
8.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
net periodic benefit costs for the year ended December 31, 2015 includes a one-time, non-cash settlement loss of $10.2 million as the Company outsourced its pension
plan in Switzerland to an outside insurance provider, transferred certain plan assets and pension obligations for retirees and other certain members of the population, made certain plan design changes
and re-measured the liability.
The
Company measures its benefit obligation and the fair value of plan assets as of December 31st each year. The changes in benefit obligations and plan assets under the
defined benefit pension plans, projected benefit obligation and funded status of the plans were as follows at December 31, (in millions):
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
|
$
|
207.2
|
|
$
|
183.1
|
|
Service cost
|
|
|
7.2
|
|
|
4.8
|
|
Interest cost
|
|
|
2.5
|
|
|
4.6
|
|
Plan participant contributions
|
|
|
3.9
|
|
|
3.8
|
|
Plan curtailments
|
|
|
(0.3
|
)
|
|
(0.6
|
)
|
Benefits paid
|
|
|
1.3
|
|
|
(7.1
|
)
|
Actuarial loss (gain)
|
|
|
7.5
|
|
|
42.1
|
|
Plan amendments
|
|
|
14.7
|
|
|
|
|
Plan settlements
|
|
|
(39.7
|
)
|
|
|
|
Premiums paid
|
|
|
(1.4
|
)
|
|
|
|
Plan combinations
|
|
|
0.9
|
|
|
|
|
Impact of foreign currency exchange rates
|
|
|
(4.6
|
)
|
|
(23.5
|
)
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year
|
|
|
199.2
|
|
|
207.2
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
|
139.6
|
|
|
141.0
|
|
Return on plan assets
|
|
|
(3.7
|
)
|
|
12.0
|
|
Plan participant and employer contributions
|
|
|
9.5
|
|
|
9.5
|
|
Benefits paid
|
|
|
1.3
|
|
|
(7.1
|
)
|
Plan settlements
|
|
|
(39.7
|
)
|
|
|
|
Premiums paid
|
|
|
(1.4
|
)
|
|
|
|
Plan combinations
|
|
|
0.1
|
|
|
|
|
Impact of foreign currency exchange rates
|
|
|
0.4
|
|
|
(15.8
|
)
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year
|
|
|
106.1
|
|
|
139.6
|
|
|
|
|
|
|
|
|
|
Net funded status
|
|
$
|
(93.1
|
)
|
$
|
(67.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
Table of Contents
The
accumulated benefit obligation for the defined benefit pension plans is $189.7 million and $198.4 million at December 31, 2015 and 2014, respectively. All
defined benefit pension plans have an
accumulated benefit obligation and projected benefit obligation in excess of plan assets at December 31, 2015 and 2014.
The
following amounts were recognized in the accompanying consolidated balance sheets for the Company's defined benefit plans at December 31, (in millions):
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
Current liabilities
|
|
$
|
(1.5
|
)
|
$
|
(1.4
|
)
|
Non-current liabilities
|
|
|
(91.6
|
)
|
|
(66.2
|
)
|
|
|
|
|
|
|
|
|
Net benefit obligation
|
|
$
|
(93.1
|
)
|
$
|
(67.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following pre-tax amounts were recognized in accumulated other comprehensive income (loss) for the Company's defined benefit plans at December 31, (in millions):
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
Reconciliation of amounts recognized in the consolidated balance sheets:
|
|
|
|
|
|
|
|
Prior service cost
|
|
$
|
(12.2
|
)
|
$
|
|
|
Net actuarial loss
|
|
|
(48.5
|
)
|
|
(48.8
|
)
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
|
|
(60.7
|
)
|
|
(48.8
|
)
|
Accumulated contributions in excess of net periodic benefit cost
|
|
|
(32.4
|
)
|
|
(18.8
|
)
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
(93.1
|
)
|
$
|
(67.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
amount in accumulated other comprehensive income (loss) at December 31, 2015 expected to be recognized as amortization of net loss within net periodic benefit cost in 2016 is
$4.1 million.
For
the defined benefit pension plans, the Company uses a corridor approach to amortize actuarial gains and losses. Under this approach, net actuarial gains or losses in excess of ten
percent of the larger of the projected benefit obligation or the fair value of plan assets are amortized over the average remaining service of active participants who are expected to receive benefits
under the plans.
The
range of assumptions used for defined benefit pension plans reflects the different economic environments within the various countries. The range of assumptions used to determine the
projected benefit obligations for the years ended December 31, are as follows:
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
2013
|
Discount rates
|
|
0.3%-2.5%
|
|
0.7%-2.4%
|
|
0.7%-3.8%
|
Expected return on plan assets
|
|
0.0%-3.0%
|
|
2.9%
|
|
3.0%
|
Expected rate of compensation increase
|
|
1.0%-3.0%
|
|
1.0%-3.0%
|
|
1.0%-3.0%
|
To
determine the expected long-term rate of return on pension plan assets, the Company considers current asset allocations, as well as historical and expected returns on various asset
categories of plan assets. For the defined benefit pension plans, the Company applies the expected rate of return to a market-related value of assets, which stabilizes variability in assets to which
the expected return is applied.
34
Table of Contents
Asset Allocations by Asset Category
The fair value of the Company's pension plan assets at December 31, 2015 and 2014, by asset category and by level in the fair value
hierarchy, is as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Total
|
|
Quoted Prices in
Active Markets
Available (Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable Inputs
(Level 3)
|
|
Plan Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign corporations (b)
|
|
$
|
0.7
|
|
$
|
0.7
|
|
$
|
|
|
$
|
|
|
Foreign governments (b)
|
|
|
0.5
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.2
|
|
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign corporations (c)
|
|
|
0.1
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate (d)
|
|
|
0.1
|
|
|
0.1
|
|
|
|
|
|
|
|
Swiss Life Collective BVG Foundation (f)
|
|
|
104.7
|
|
|
|
|
|
104.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total plan assets
|
|
$
|
106.1
|
|
$
|
1.4
|
|
$
|
104.7
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014
|
|
Total
|
|
Quoted Prices in
Active Markets
Available (Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable Inputs
(Level 3)
|
|
Plan Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents (a)
|
|
$
|
138.2
|
|
$
|
138.2
|
|
$
|
|
|
$
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign corporations (b)
|
|
|
0.4
|
|
|
0.4
|
|
|
|
|
|
|
|
Foreign governments (b)
|
|
|
0.7
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.1
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign corporations (c)
|
|
|
0.1
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate (d)
|
|
|
0.1
|
|
|
0.1
|
|
|
|
|
|
|
|
Other (e)
|
|
|
0.1
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total plan assets
|
|
$
|
139.6
|
|
$
|
139.6
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Cash
and cash equivalents consist primarily of highly liquid investments, including cash on hand.
-
(b)
-
Foreign
Corporate and Government bond investments had an average rating of AA.
-
(c)
-
International
equities primarily include investments in large market capitalization stocks.
-
(d)
-
Real
estate includes Swiss public real estate funds which generate returns in line with the Swiss property market by investing in residential and commerical
properties throughout Switzerland.
-
(e)
-
Includes
private equity, raw materials and alternative investment funds.
-
(f)
-
The
Company's pension plan in Switzerland is outsourced to Swiss Life AG, an outside insurance provider. Under the insurance contract, the plan assets are invested
in Swiss Life Collective BVG
35
Table of Contents
Foundation
(the Foundation), which is an umbrella fund for which the retirement savings and interest rates are guaranteed a minimum of 1.75% on the mandatory withdrawal portion, as defined by Swiss
law, and 1.25% on the non-mandatory portion. The Foundation utilizes plan administrators and investment managers to oversee the investment allocation process, set long-term strategic targets and
monitor asset allocations. The target allocations are 75% bonds, including cash, 5% equity investments and 20% real estate and mortgages. Should the Foundation yield a return greater than the
guaranteed amounts, the Company, according to Swiss law, shall receive 90% of the additional return with Swiss Life AG retaining 10%. The withdrawal benefits and interest allocations are secured at
all times by Swiss Life AG.
Contributions and Estimated Future Benefit Payments
During 2016, the Company expects contributions to be consistent with 2015. The estimated future benefit payments are based on the same
assumptions used to measure the Company's benefit obligation at December 31, 2015. The following benefit payments reflect future employee service as appropriate (in millions):
|
|
|
|
|
2016
|
|
$
|
2.3
|
|
2017
|
|
|
2.4
|
|
2018
|
|
|
2.7
|
|
2019
|
|
|
3.5
|
|
2020
|
|
|
3.8
|
|
2021-2025
|
|
|
24.4
|
|
Other Benefit Plans
The Company sponsors various defined contribution plans that cover certain domestic and international employees. The Company may make
contributions to these plans at its discretion. The Company contributed $6.5 million, $7.1 million and $5.3 million to such plans in the years ended December 31, 2015, 2014
and 2013, respectively.
Note 14Commitments and Contingencies
Operating Leases
Certain buildings, office equipment and vehicles are leased under agreements that are accounted for as operating leases. Total rental expense
under operating leases was $23.0 million, $22.8 million and $24.6 million during the years ended December 31, 2015, 2014 and 2013, respectively. Future minimum lease
payments under non-cancelable operating leases at December 31, 2015, for each of the next five years and thereafter are as follows (in millions):
|
|
|
|
|
2016
|
|
$
|
17.0
|
|
2017
|
|
|
12.0
|
|
2018
|
|
|
8.4
|
|
2019
|
|
|
6.0
|
|
2020
|
|
|
5.0
|
|
Thereafter
|
|
|
13.1
|
|
|
|
|
|
|
Total
|
|
$
|
61.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Leases
The Company leases certain buildings under agreements that are classified as capital leases. The cost of the buildings under the capital leases
is included in the consolidated balance sheets as property,
36
Table of Contents
plant
and equipment and was $2.7 million and $7.5 million at December 31, 2015 and 2014. Accumulated amortization of the leased buildings at December 31, 2015 and 2014 was
$0.7 million and $2.9 million, respectively. Amortization expense related to assets under capital leases is included in depreciation expense. The obligations related to capital leases
are recorded as a component of long-term debt or the current portion of long-term debt in the consolidated balance sheets, depending on when the lease payments are due.
Unconditional Purchase Commitments
The Company has entered into unconditional purchase commitments, in the ordinary course of business, that include agreements to purchase goods,
services or fixed assets and to pay royalties that are enforceable and legally binding and that specify all significant terms including: fixed or minimum quantities to be purchased; fixed, minimum or
variable price provisions; and the approximate timing of the transaction. Purchase commitments exclude agreements that are cancelable at any time without penalty. The aggregate amount of the Company's
unconditional purchase commitments totaled $109.5 million at December 31, 2015 and the majority of these commitments are expected to be settled during 2016.
License Agreements
The Company has entered into cross-licensing agreements for various technologies that allow other companies to utilize certain of its patents
and related technologies over various periods or into perpetuity. Income from these agreements for the years ended December 31, 2015, 2014 and 2013 was $2.5 million, $2.6 million
and $9.5 million, respectively, and is classified in other revenue in the consolidated statements of income and comprehensive income (loss). The unearned portions of proceeds from the
cross-licensing agreements are classified as short-term or long-term deferred revenue depending on when the revenue will be earned.
The
Company has also entered into license agreements allowing it to utilize certain patents. If these patents are used in connection with a commercial product sale, the Company pays
royalties on the related product revenues. Licensing fees for the years ended December 31, 2015, 2014 and 2013, were $3.2 million, $3.3 million and $4.0 million,
respectively, and are recorded in cost of product revenue in the consolidated statements of income and comprehensive income (loss).
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 pending proceedings, individually and in the aggregate, will not have a material impact on the Company's financial position or results of operations. As of
December 31, 2015 and 2014, no accruals have been recorded for potential contingencies.
Internal Investigation and Compliance Matters
As previously reported, the Audit Committee of the Company's Board of Directors, assisted by independent outside counsel and an independent
forensic consulting firm, conducted an internal investigation in response to anonymous communications received by the Company alleging improper conduct in connection with the China operations of the
Company's Bruker Optics subsidiary. The Audit Committee's investigation, which began in 2011 and was completed in the first quarter of 2012, included a review of compliance by Bruker Optics and its
employees in China and
Hong Kong with the requirements of the Foreign Corrupt Practices Act ("FCPA") and other applicable laws and regulations.
37
Table of Contents
The investigation found evidence indicating that payments were made that improperly benefited employees or agents of government-owned enterprises in China and
Hong Kong. The investigation also found evidence that certain employees of Bruker Optics in China and Hong Kong failed to comply with the Company's policies and standards of conduct. As a result, the
Company took personnel actions, including the termination of certain individuals. The Company also terminated its business relationships with certain third party agents, implemented an enhanced FCPA
compliance program, and strengthened the financial controls and oversight at its subsidiaries operating in China and Hong Kong. During 2011, the Company also initiated a review of the China operations
of its other subsidiaries, with the assistance of an independent audit firm. On the basis of that review, the Company identified additional employees in Bruker subsidiaries operating in China who
failed to comply with the Company's policies and standards of conduct, and took additional personnel actions at certain of its subsidiaries as a result.
The
Company voluntarily contacted the United States Securities and Exchange Commission and the United States Department of Justice in August 2011 to advise both agencies of the internal
investigation by the Audit Committee regarding the China operations of the Company's Bruker Optics subsidiary. In October 2011, the Company also reported that existence of the internal investigation
to the Hong Kong Joint Financial Intelligence Unit and Independent Commission Against Corruption.
Effective
December 15, 2014, the Company consented to the entry of an administrative cease-and-desist order (Order) by the SEC concerning violations of the books and records and
internal controls provisions of the FCPA. Pursuant to the Order, the Company paid an aggregate amount of $2.4 million, consisting of $1.7 million in disgorgement, $0.3 million in
prejudgment interest, and a $0.4 million penalty. This was recorded within interest and other income (expense), net in the accompanying consolidated statements of income and comprehensive
income (loss). The Company has been advised that all investigative matters have been completed as of December 31, 2014.
Letters of Credit and Guarantees
At December 31, 2015 and 2014, the Company had bank guarantees of $137.7 million and $150.3 million, respectively, related
primarily to customer advances. These arrangements guarantee the refund of advance payments received from customers in the event that the merchandise is not delivered or warranty obligations are not
fulfilled in compliance with the terms of the contract. These guarantees affect the availability of the Company's lines of credit.
Indemnifications
The Company enters into standard indemnification arrangements in the Company's ordinary course of business. Pursuant to these arrangements, the
Company indemnifies, holds harmless, and agrees to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, generally the Company's business partners or customers,
in connection with any patent, or any copyright or other intellectual property infringement claim by any third party with respect to its products. The term of these indemnification agreements is
generally perpetual anytime after the execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these agreements is unlimited. The Company
believes the estimated fair value of these agreements is minimal based on historical experiences.
The
Company has entered into indemnification agreements with its directors and officers that may require the Company to: indemnify its directors and officers against liabilities that may
arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct of a culpable nature; advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified; and obtain directors' and officers' insurance if available on reasonable terms, which the Company currently has in place.
38
Table of Contents
Note 15Shareholders' Equity
Bruker Corporation Stock Plan
In February 2010, the Bruker BioSciences Corporation Amended and Restated 2000 Stock Option Plan, or the 2000 Plan, expired at the end of its
scheduled ten-year term. On March 9, 2010, the Company's Board of Directors unanimously approved and adopted the Bruker Corporation 2010 Incentive Compensation Plan, or the 2010 Plan, and on
May 14, 2010, the 2010 Plan was approved by the Company's stockholders. The 2010 Plan provides for the issuance of up to 8,000,000 shares of the Company's common stock. The Plan allows a
committee of the Board of Directors (the "Committee") to grant incentive stock options, non-qualified stock options and restricted stock awards. 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.
Stock
option activity for the year ended December 31, 2015 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
Subject to
Options
|
|
Weighted
Average
Option Price
|
|
Weighted
Average
Remaining
Contractual
Term (Yrs)
|
|
Aggregate
Intrinsic Value
(in millions) (b)
|
|
Outstanding at December 31, 2014
|
|
|
4,810,588
|
|
$
|
15.24
|
|
|
|
|
|
|
|
Granted
|
|
|
1,107,477
|
|
|
19.81
|
|
|
|
|
|
|
|
Exercised
|
|
|
(926,042
|
)
|
|
11.81
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(354,744
|
)
|
|
19.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2015
|
|
|
4,637,279
|
|
$
|
16.72
|
|
|
6.5
|
|
$
|
35.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2015
|
|
|
2,355,197
|
|
$
|
14.08
|
|
|
4.7
|
|
$
|
24.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable and expected to vest at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 (a)
|
|
|
4,504,918
|
|
$
|
16.64
|
|
|
6.5
|
|
$
|
34.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
In
addition to the options that are vested at December 31, 2015, the Company expects a portion of the unvested options to vest in the future. Options expected
to vest in the future are determined by applying an estimated forfeiture rate to the options that are unvested as of December 31, 2015.
-
(b)
-
The
aggregate intrinsic value is based on the positive difference between the fair value of the Company's common stock price of $24.27 on December 31, 2015,
or the date of exercises, as appropriate, and the exercise price of the underlying stock options.
The
weighted average fair values of options granted was $7.82, $10.81 and $10.37 per share for the years ended December 31, 2015, 2014 and 2013, respectively.
The
total intrinsic value of options exercised was $8.2 million, $10.0 million and $8.1 million for the years ended December 31, 2015, 2014 and 2013,
respectively.
Unrecognized
pre-tax stock-based compensation expense of $16.7 million related to stock options awarded under the 2010 Plan is expected to be recognized over the weighted average
remaining service period of 2.2 years for stock options outstanding at December 31, 2015.
Restricted
shares of the Company's common stock are periodically awarded to executive officers, directors and certain key employees of the Company, subject to service restrictions, which
vest ratably over periods of four to five years. The restricted shares of common stock may not be sold or transferred during the restriction period. Stock-based compensation for restricted stock is
recorded based on the stock price on the grant date and charged to expense ratably throughout the restriction
39
Table of Contents
period.
The following table summarizes information about restricted stock activity during the year ended December 31, 2015:
|
|
|
|
|
|
|
|
|
|
Shares
Subject to
Restriction
|
|
Weighted
Average Grant
Date Fair
Value
|
|
Outstanding at December 31, 2014
|
|
|
309,725
|
|
$
|
17.20
|
|
Granted
|
|
|
135,677
|
|
|
19.83
|
|
Vested
|
|
|
(56,395
|
)
|
|
17.02
|
|
Forfeited
|
|
|
(145,857
|
)
|
|
17.42
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2015
|
|
|
243,150
|
|
$
|
18.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
total fair value of restricted stock vested was $1.0 million, $3.0 million and $1.4 million for the years ended December 31, 2015, 2014 and 2013,
respectively.
Unrecognized
pre-tax stock-based compensation expense of $3.9 million related to restricted stock awarded under the 2010 Plan is expected to be recognized over the weighted
average remaining service period of 2.8 years for awards outstanding at December 31, 2015.
Note 16Accumulated Other Comprehensive Income (Loss)
The following is a summary of the components of accumulated other comprehensive income (loss), net of tax, at December 31, (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Currency
Translation
|
|
Pension
Liability
Adjustment
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Balance at December 31, 2012
|
|
$
|
170.3
|
|
$
|
(32.5
|
)
|
$
|
137.8
|
|
Other comprehensive income
|
|
|
27.3
|
|
|
15.0
|
|
|
42.3
|
|
Realized loss on reclassification
|
|
|
|
|
|
2.3
|
|
|
2.3
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2013
|
|
|
197.6
|
|
|
(15.2
|
)
|
|
182.4
|
|
Other comprehensive income (loss)
|
|
|
(131.6
|
)
|
|
(22.7
|
)
|
|
(154.3
|
)
|
Realized loss on reclassification
|
|
|
|
|
|
0.1
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2014
|
|
|
66.0
|
|
|
(37.8
|
)
|
|
28.2
|
|
Other comprehensive income (loss)
|
|
|
(62.8
|
)
|
|
(23.6
|
)
|
|
(86.4
|
)
|
Realized loss on reclassification
|
|
|
|
|
|
14.0
|
|
|
14.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015
|
|
$
|
3.2
|
|
$
|
(47.4
|
)
|
$
|
(44.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
Table of Contents
Note 17Other Charges, Net
The components of other charges, net for the years ended December 31, 2015, 2014 and 2013, were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
2013
|
|
Acquisition-related expenses (income), net
|
|
$
|
(7.2
|
)
|
$
|
2.9
|
|
$
|
3.6
|
|
Professional fees incurred in connection with internal investigation
|
|
|
0.4
|
|
|
3.2
|
|
|
6.1
|
|
Pension settlement charge
|
|
|
10.2
|
|
|
|
|
|
|
|
Information technology transformation costs
|
|
|
8.9
|
|
|
4.0
|
|
|
|
|
Restructuring charges
|
|
|
8.1
|
|
|
11.1
|
|
|
18.2
|
|
Factory relocation charges
|
|
|
|
|
|
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
Other charges, net
|
|
$
|
20.4
|
|
$
|
21.2
|
|
$
|
28.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
2013, 2014 and 2015, the Company commenced and executed productivity improvement initiatives at both BSI and BEST in an effort to better optimize its operations. These restructuring
initiatives include the divestiture of certain non-core businesses, outsourcing of various manufacturing activities, transferring or ceasing operations at certain facilities and an overall
right-sizing within the Company based on the then current business environments.
The
Company recorded total restructuring charges during the year ended December 31, 2015, 2014 and 2013 of $29.3 million, $36.1 million and $25.3 million,
respectively, related to these initiatives. For the year ended December 31, 2015, restructuring charges of $28.4 million related to the BSI Segment and of $0.9 million related to
the BEST Segment. These charges consisted of $7.0 million of inventory provisions for excess inventory, $15.9 million of severance costs and $6.4 million of exit related costs,
such as professional service and facility exit charges. For the year ended December 31, 2014, the charges were all within the BSI Segment and consisted of $11.8 million of inventory
provisions for excess inventory, $15.5 million of severance costs and $8.8 million of exit related costs. For the year ended December 31, 2013, $23.0 million related to the
BSI Segment and $2.3 million related to the BEST
Segment, and consisted of $2.1 million of inventory provisions for excess inventory, $17.9 million of severance costs and $5.3 million of exit related costs. During the year ended
December 31, 2015, 2014 and 2013, the Company recorded restructuring charges of $21.2 million, $25.0 million and $7.1 million, respectively, as a component of Cost of
Revenue, and $8.1 million, $11.1 million and $18.2 million, respectively, as a component of Other Charges, net in the accompanying consolidated statements of income and
comprehensive income (loss).
The
Company commenced a restructuring initiative in 2015 within the Bruker BioSpin Group, which was developed as a result of a revenue decline that occurred during the second half of
2014 and continued during the first half of 2015. This initiative is intended to improve Bruker BioSpin Group's operating results. Restructuring actions are expected to result in a reduction of
employee headcount within the Bruker BioSpin Group of approximately 9%. Included in the total restructuring charges discussed above are restructuring expenses related to this initiative recorded
during the year ended December 31, 2015 in the amount of $14.1 million, consisting of $2.1 million for inventory write-downs and $12.0 million of severance and exit costs,
of which $12.3 was recorded as a component of Cost of Revenue and $1.8 million as a component of Other Charges, net in the accompanying consolidated statement of income and comprehensive income
(loss). The restructuring also includes the closure and consolidation of certain Bruker BioSpin manufacturing facilities. The Company determined the restructuring was an indicator requiring the
evaluation of property, plant and equipment for recoverability. The Company performed an evaluation during the year ended December 31, 2015 and determined that certain property, plant and
equipment were impaired and recorded an impairment charge of $2.1 million to reduce those assets to fair value. This impairment charge is recorded within
41
Table of Contents
"Impairment
of assets" in the accompanying consolidated statement of income and comprehensive income (loss) for the year ended December 31, 2015. Total restructuring and other one-time charges
related to this initiative continuing into 2016 are expected to be between $3 and $5 million, which all relate to employee separation and facility exit costs.
Included
in the total restructuring charges are expenses specifically related to the Plan in the former CAM Division. From inception of the Plan in the third quarter of 2014, cumulative
restructuring expenses recorded have been $18.8 million, consisting of $10.3 million of inventory write-downs and $8.5 million of severance and exit costs. Expenses expected to be
incurred under the 2014 Plan have been substantially completed during the year ended December 31, 2015.
In
addition, in September and October 2014 the Company divested the assets of the former CAM Division's Inductively Coupled Plasma-Mass Spectrometry (ICP-MS) product line and the Gas
Chromatography (GC) and GC single-quadrupole (GC-SQ) GC-MS mass spectrometry products, respectively. The gain on sale of the product lines of $8.0 million was recorded as part of Interest and
Other Income (Expense), net within the accompanying consolidated statement of income and comprehensive income (loss) for the year ended December 31, 2014.
The
following table sets forth the changes in the restructuring reserves for the years ended December 31, 2015 and 2014 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Severance
|
|
Exit Costs
|
|
Provisions for
Excess
Inventory
|
|
Balance at December 31, 2013
|
|
$
|
11.5
|
|
$
|
8.4
|
|
$
|
1.1
|
|
$
|
2.0
|
|
Restructuring charges
|
|
|
36.1
|
|
|
15.5
|
|
|
8.8
|
|
|
11.8
|
|
Cash payments
|
|
|
(22.9
|
)
|
|
(14.6
|
)
|
|
(8.2
|
)
|
|
(0.1
|
)
|
Non-cash adjustments
|
|
|
(7.5
|
)
|
|
(1.4
|
)
|
|
(0.3
|
)
|
|
(5.8
|
)
|
Foreign currency impact
|
|
|
(1.1
|
)
|
|
(0.8
|
)
|
|
(0.1
|
)
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2014
|
|
|
16.1
|
|
|
7.1
|
|
|
1.3
|
|
|
7.7
|
|
Restructuring charges
|
|
|
29.3
|
|
|
15.9
|
|
|
6.4
|
|
|
7.0
|
|
Cash payments
|
|
|
(18.0
|
)
|
|
(11.9
|
)
|
|
(5.1
|
)
|
|
(1.0
|
)
|
Non-cash adjustments
|
|
|
(2.9
|
)
|
|
(0.2
|
)
|
|
(0.2
|
)
|
|
(2.5
|
)
|
Foreign currency impact
|
|
|
(1.4
|
)
|
|
(0.6
|
)
|
|
|
|
|
(0.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015
|
|
$
|
23.1
|
|
$
|
10.3
|
|
$
|
2.4
|
|
$
|
10.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 18Interest and Other Income (Expense), Net
The components of interest and other income (expense), net for the years ended December 31, 2015, 2014 and 2013, were as follows (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
2013
|
|
Interest income
|
|
$
|
1.2
|
|
$
|
0.8
|
|
$
|
1.0
|
|
Interest expense
|
|
|
(13.0
|
)
|
|
(13.3
|
)
|
|
(13.4
|
)
|
Exchange losses on foreign currency transactions
|
|
|
(5.5
|
)
|
|
(2.0
|
)
|
|
(10.4
|
)
|
(Loss) gain on disposal of product line
|
|
|
(0.2
|
)
|
|
8.3
|
|
|
0.9
|
|
Other
|
|
|
(0.2
|
)
|
|
2.1
|
|
|
(1.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income (expense), net
|
|
$
|
(17.7
|
)
|
$
|
(4.1
|
)
|
$
|
(23.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42
Table of Contents
Note 19Business Segment Information
The Company has two reportable segments, BSI and BEST, as discussed in Note 1 to the consolidated financial statements.
Selected
business segment information is presented below for the years ended December 31, (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
2013
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
BSI
|
|
$
|
1,499.2
|
|
$
|
1,674.6
|
|
$
|
1,709.5
|
|
BEST
|
|
|
133.7
|
|
|
152.9
|
|
|
147.4
|
|
Eliminations (a)
|
|
|
(9.1
|
)
|
|
(18.6
|
)
|
|
(17.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
1,623.8
|
|
$
|
1,808.9
|
|
$
|
1,839.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss):
|
|
|
|
|
|
|
|
|
|
|
BSI
|
|
$
|
133.2
|
|
$
|
99.8
|
|
$
|
138.9
|
|
BEST
|
|
|
11.5
|
|
|
3.4
|
|
|
9.5
|
|
Corporate, eliminations and other (b)
|
|
|
1.0
|
|
|
2.2
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income
|
|
$
|
145.7
|
|
$
|
105.4
|
|
$
|
148.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Represents
product and service revenue between reportable segments.
-
(b)
-
Represents
corporate costs and eliminations not allocated to the reportable segments.
The
Company recorded an impairment charge of $4.6 million for the year ended December 31, 2015 within the BSI Segment. The Company recorded an impairment charge of
$11.5 million for the year ended December 31, 2014, of which $6.4 million was within the BSI Segment and $5.1 million within the BEST Segment. Please see
Note 7Property, Plant and Equipment, net and Note 8Goodwill and Other Intangible Assets, for description of impairment charges recorded in 2015 and 2014. These
impairment charges are included within "Impairment of assets" in the accompanying consolidated statements of income and comprehensive income (loss).
Total
assets by segment as of and for the years ended December 31, are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
Assets:
|
|
|
|
|
|
|
|
BSI
|
|
$
|
1,715.3
|
|
$
|
1,827.7
|
|
BEST
|
|
|
79.1
|
|
|
101.2
|
|
Eliminations and other (a)
|
|
|
(63.5
|
)
|
|
(64.1
|
)
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,730.9
|
|
$
|
1,864.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Assets
not allocated to the reportable segments and eliminations of intercompany transactions.
43
Table of Contents
Total
capital expenditures and depreciation and amortization by segment are presented below for the years ended December 31, (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
2013
|
|
Capital Expenditures:
|
|
|
|
|
|
|
|
|
|
|
BSI
|
|
$
|
30.1
|
|
$
|
31.5
|
|
$
|
44.9
|
|
BEST
|
|
|
4.1
|
|
|
2.3
|
|
|
5.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditures
|
|
$
|
34.2
|
|
$
|
33.8
|
|
$
|
50.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization:
|
|
|
|
|
|
|
|
|
|
|
BSI
|
|
$
|
50.5
|
|
$
|
55.1
|
|
$
|
56.4
|
|
BEST
|
|
|
2.8
|
|
|
4.6
|
|
|
4.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation and amortization
|
|
$
|
53.3
|
|
$
|
59.7
|
|
$
|
61.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
and property, plant and equipment, net by geographical area as of and for the year ended December 31, are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
2013
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
380.4
|
|
$
|
387.6
|
|
$
|
359.7
|
|
Germany
|
|
|
198.9
|
|
|
215.1
|
|
|
188.9
|
|
Rest of Europe
|
|
|
479.6
|
|
|
522.9
|
|
|
583.7
|
|
Asia Pacific
|
|
|
414.9
|
|
|
495.5
|
|
|
529.1
|
|
Other
|
|
|
150.0
|
|
|
187.8
|
|
|
178.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
1,623.8
|
|
$
|
1,808.9
|
|
$
|
1,839.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
Property, plant and equipment, net:
|
|
|
|
|
|
|
|
United States
|
|
$
|
43.2
|
|
$
|
45.9
|
|
Germany
|
|
|
125.9
|
|
|
143.8
|
|
Rest of Europe
|
|
|
54.7
|
|
|
53.6
|
|
Asia Pacific
|
|
|
4.2
|
|
|
4.7
|
|
Other
|
|
|
3.1
|
|
|
1.9
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment, net
|
|
$
|
231.1
|
|
$
|
249.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 20Related Parties
The Company leases certain office space from certain of its principal shareholders, including a director and executive officer and another
member of the Company's Board of Directors, and members of their immediate families, which have expiration dates ranging from 2016 to 2020. Total rent expense under these leases was
$1.8 million, $2.0 million and $2.6 million for each of the years ended December 31, 2015, 2014 and 2013, respectively.
During
the years ended December 31, 2014 and 2013, the Company incurred expenses of $2.4 million and $5.3 million, respectively, to a law firm in which one of the
former members of its Board of Directors is a partner.
During
the years ended December 31, 2014 and 2013, the Company incurred expenses of $0.1 million and $0.2 million, respectively, to a financial services firm in
which one of the former members of its Board of Directors is a partner.
44
Table of Contents
During
the years ended December 31, 2014 and 2013, the Company recorded revenue of $0.9 million and $0.1 million, respectively, from commercial transactions with a
life science supply company in which a member of the Company's Board of Directors is Chairman, President and Chief Executive Officer and another member of the Company's Board of Directors was formerly
a director.
During
the years ended December 31, 2015 and 2014, the Company recorded revenue of $0.7 million and $1.9 million, respectively, and incurred expenses of
$0.1 million for the year ended December 31,
2014, arising from commercial transactions with a life sciences company in which a member of the Company's Board of Directors, who joined the Board of Directors in 2014, is Chairman and Chief
Executive Officer.
During
the year ended December 31, 2015, the Company recorded revenue of $0.5 million from commercial transactions with a thermal analysis company in which a member of our
Board of Directors serves as a consultant.
Note 21Recent Accounting Pronouncements
In November 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-17,
Balance Sheet Classification of
Deferred Taxes
, which eliminates the current requirement to present deferred tax assets and liabilities as current and
noncurrent in a classified balance sheet. Instead, entities will be required to classify all deferred tax assets and liabilities as noncurrent. The guidance is effective for annual periods, and
interim periods within those annual periods, beginning after December 15, 2016, with early adoption permitted. The Company elected to early adopt this standard prospectively and all deferred
taxes are shown as noncurrent in the consolidated balance sheet as of December 31, 2015.
In
September 2015, the FASB issued ASU No. 2015-16,
Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period
Adjustments
. ASU 2015-16 eliminates the requirement that an acquirer in a business combination account for measurement-period adjustments retrospectively. Instead, an
acquirer will recognize a measurement-period adjustment during the period in which it determines the amount of the adjustment, including the effect on earnings of any amounts it would have recorded in
previous periods if the accounting had been completed at the acquisition date. The guidance is effective for public business entities for fiscal years, including interim periods within those fiscal
years, beginning after December 15, 2015, with early adoption permitted. The Company does not expect the adoption of ASU No. 2015-16 to have a material impact on our consolidated
financial statements.
In
July 2015, the FASB issued ASU No. 2015-11,
Simplifying the Measurement of Inventory
. The new guidance eliminates the
measurement of inventory at market value, and inventory will now be measured at the lower of cost and net realizable value. The ASU defines net realizable value as the estimated selling prices in the
ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. No other changes were made to the current guidance on inventory measurement. ASU
No. 2015-11 is effective for interim and annual periods beginning after December 15, 2016. Early application is permitted and should be applied prospectively. The Company is evaluating
the provisions of this statement and has not determined what impact the adoption of ASU No. 2015-11 will have on the Company's consolidated financial statements.
In
April 2015, the FASB issued ASU No. 2015-03,
Simplifying the Presentation of Debt Issuance Costs
. The new guidance changes the
presentation of debt issuance costs in the balance sheet to a reduction of the related debt liability instead of classifying as an asset. The income statement presentation of debt issuance costs is
unchanged. ASU No. 2015-03 is effective for annual periods beginning after December 15, 2015, and interim periods within those years. Early application is permitted and the guidance is
to be applied retrospectively to all prior periods presented. In August 2015, the FASB issued ASU No. 2015-15,
Presentation and Subsequent Measurement of Debt Issuance
45
Table of Contents
Costs Associated with Line-of-Credit Arrangements,
excluding debt issuance costs related to line-of-credit arrangements from the scope of ASU No. 2015-03. The Company
does not expect the adoption of ASU No. 2015-03 to have a material impact on its consolidated balance sheet.
In
May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers,
which supersedes the revenue recognition
requirements under Accounting Standards Codification (ASC) Topic 605. The new guidance was the result of a joint project between the FASB and the International Accounting Standards Board to
clarify the principles for recognizing revenue and to develop common revenue standards for U.S. GAAP and International Financial Reporting Standards. The core principle of the new guidance is
that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services. ASU No. 2014-09 was originally effective prospectively for annual periods beginning after December 15, 2016, and interim periods within those years. Early
application was not permitted. In August 2015, the FASB elected to defer the effective date of ASU No. 2014-09 by one year to annual periods beginning after December 15, 2017, with early
application permitted as of the original effective date. The Company is currently assessing the impact the adoption of this standard may have on its consolidated financial statements upon adoption.
Note 22Quarterly Financial Data (Unaudited)
A summary of operating results for the quarterly periods in the years ended December 31, 2015 and 2014, is set forth below (in millions,
except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
March 31
|
|
June 30
|
|
September 30 (1)
|
|
December 31 (1)
|
|
Year ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
353.5
|
|
$
|
396.0
|
|
$
|
396.1
|
|
$
|
478.2
|
|
Gross profit
|
|
|
160.2
|
|
|
169.4
|
|
|
167.5
|
|
|
211.5
|
|
Operating income
|
|
|
15.2
|
|
|
31.6
|
|
|
28.2
|
|
|
70.7
|
|
Net income attributable to Bruker Corporation
|
|
|
6.5
|
|
|
21.9
|
|
|
11.8
|
|
|
61.4
|
|
Net income per common share attributable to Bruker Corporation shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.04
|
|
$
|
0.13
|
|
$
|
0.07
|
|
$
|
0.37
|
|
Diluted
|
|
$
|
0.04
|
|
$
|
0.13
|
|
$
|
0.07
|
|
$
|
0.36
|
|
Year ended December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
423.7
|
|
$
|
457.4
|
|
$
|
419.8
|
|
$
|
508.0
|
|
Gross profit
|
|
|
179.7
|
|
|
200.5
|
|
|
167.3
|
|
|
215.8
|
|
Operating income
|
|
|
20.6
|
|
|
35.4
|
|
|
4.9
|
|
|
44.5
|
|
Net income attributable to Bruker Corporation
|
|
|
8.7
|
|
|
16.4
|
|
|
5.5
|
|
|
26.1
|
|
Net income per common share attributable to Bruker Corporation shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.05
|
|
$
|
0.10
|
|
$
|
0.03
|
|
$
|
0.16
|
|
Diluted
|
|
$
|
0.05
|
|
$
|
0.10
|
|
$
|
0.03
|
|
$
|
0.15
|
|
-
(1)
-
The
second, third and fourth quarter of 2015 includes impairment of assets of $1.8 million, $2.5 million and $0.3 million, respectively,
comprised of goodwill, definite-lived intangible assets and other long-lived assets.
The
third and fourth quarter of 2014 includes impairment of assets of $6.9 million and $4.6 million, respectively, comprised of definite-lived intangible assets and other long-lived
assets.
46
Table of Contents
Note 23Subsequent Event
On February 22, 2016, the Company announced the establishment of a dividend policy and the declaration by its Board of Directors of an
initial quarterly cash dividend in the amount of $0.04 per share of the Company's issued and outstanding common stock. The dividend will be paid on March 24, 2016 to stockholders of record as
of March 4, 2016. Under the dividend policy, the Company will target a cash dividend to the Company's stockholders in the amount of $0.16 per share per annum, payable in equal quarterly
installments. Subsequent dividend declarations and the establishment of record and payment dates for such future dividend payments, if any, are subject to the Board of Directors' continuing
determination that the dividend policy is in the best interests of the Company's stockholders. The dividend policy may be suspended or cancelled at the discretion of the Board of Directors at any
time.
47
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