Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT of 1934

 

For the quarterly period ended June 30, 2018

 

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

 

For the transition period from                  to                 

 

Commission File Number 000-30833

 

BRUKER CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware

 

04-3110160

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

40 Manning Road, Billerica, MA 01821

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (978) 663-3660

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   x  No  o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  x  No  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer x

 

Accelerated filer o

Non-accelerated filer o  (Do not check if a smaller reporting company)

 

Smaller reporting company o

Emerging growth company o

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o    No x

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

 

Outstanding at August 6, 2018

Common Stock, $0.01 par value per share

 

156,320,780 shares

 

 

 



Table of Contents

 

BRUKER CORPORATION

 

Quarterly Report on Form 10-Q

For the Quarter Ended June 30, 2018

 

Index

 

 

 

Page

Part I

FINANCIAL INFORMATION

1

Item 1:

Unaudited Condensed Consolidated Financial Statements

1

 

Unaudited Condensed Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017

1

 

Unaudited Condensed Consolidated Statements of Income and Comprehensive Income (Loss) for the three and six months ended June 30, 2018 and 2017

2

 

Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017

3

 

Notes to Unaudited Condensed Consolidated Financial Statements

4

Item 2:

Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

Item 3:

Quantitative and Qualitative Disclosures About Market Risk

42

Item 4:

Controls and Procedures

43

Part II

OTHER INFORMATION

44

Item 1:

Legal Proceedings

44

Item 1A:

Risk Factors

44

Item 2:

Unregistered Sales of Equity Securities and Use of Proceeds

44

Item 3:

Defaults Upon Senior Securities

45

Item 4:

Mine Safety Disclosure

45

Item 5:

Other Information

45

Item 6:

Exhibits

45

 

Signatures

46

 



Table of Contents

 

PART I                                               FINANCIAL INFORMATION

 

ITEM 1.                                          UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

BRUKER CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data)

 

 

 

June 30,

 

December 31,

 

 

 

2018

 

2017

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

258.7

 

$

325.0

 

Short-term investments

 

 

114.2

 

Accounts receivable, net

 

278.8

 

319.3

 

Inventories

 

509.4

 

486.2

 

Other current assets

 

135.1

 

114.1

 

Total current assets

 

1,182.0

 

1,358.8

 

 

 

 

 

 

 

Property, plant and equipment, net

 

259.2

 

266.5

 

Goodwill

 

192.4

 

169.8

 

Intangibles, net and other long-term assets

 

172.4

 

153.4

 

Total assets

 

$

1,806.0

 

$

1,948.5

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current portion of long-term debt

 

$

15.0

 

$

 

Accounts payable

 

104.6

 

90.8

 

Customer advances

 

109.6

 

111.7

 

Other current liabilities

 

302.3

 

322.0

 

Total current liabilities

 

531.5

 

524.5

 

 

 

 

 

 

 

Long-term debt

 

205.6

 

415.6

 

Other long-term liabilities

 

283.6

 

274.9

 

 

 

 

 

 

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Preferred stock, $0.01 par value 5,000,000 shares authorized, none issued or outstanding

 

 

 

Common stock, $0.01 par value 260,000,000 shares authorized, 172,326,156 and 171,875,076 shares issued and 156,305,942 and 155,865,977 shares outstanding at June 30, 2018 and December 31, 2017, respectively

 

1.7

 

1.7

 

Treasury stock, at cost, 16,020,214 and 16,009,099 shares at June 30, 2018 and December 31, 2017, respectively

 

(401.4

)

(401.2

)

Accumulated other comprehensive income

 

14.8

 

27.0

 

Other shareholders’ equity

 

1,161.5

 

1,097.9

 

Total shareholders’ equity attributable to Bruker Corporation

 

776.6

 

725.4

 

Noncontrolling interest in consolidated subsidiaries

 

8.7

 

8.1

 

Total shareholders’ equity

 

785.3

 

733.5

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

1,806.0

 

$

1,948.5

 

 

The accompanying notes are an integral part of these statements.

 

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BRUKER CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)

(in millions, except per share data)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2018

 

2017

 

2018

 

2017

 

Product revenue

 

$

368.1

 

$

345.9

 

$

720.3

 

$

664.8

 

Service revenue

 

73.5

 

67.1

 

151.2

 

130.4

 

Other revenue

 

2.1

 

1.9

 

3.9

 

4.6

 

Total revenue

 

443.7

 

414.9

 

875.4

 

799.8

 

 

 

 

 

 

 

 

 

 

 

Cost of product revenue

 

188.7

 

191.5

 

374.3

 

364.2

 

Cost of service revenue

 

49.1

 

38.7

 

95.6

 

74.4

 

Cost of other revenue

 

0.7

 

0.2

 

0.9

 

0.3

 

Total cost of revenue

 

238.5

 

230.4

 

470.8

 

438.9

 

Gross profit

 

205.2

 

184.5

 

404.6

 

360.9

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

110.6

 

102.5

 

220.9

 

200.6

 

Research and development

 

43.6

 

40.3

 

86.8

 

77.9

 

Other charges, net

 

2.2

 

6.4

 

10.0

 

9.5

 

Total operating expenses

 

156.4

 

149.2

 

317.7

 

288.0

 

Operating income

 

48.8

 

35.3

 

86.9

 

72.9

 

 

 

 

 

 

 

 

 

 

 

Interest and other income (expense), net

 

(5.5

)

(5.1

)

(7.8

)

(11.1

)

Income before income taxes and noncontrolling interest in consolidated subsidiaries

 

43.3

 

30.2

 

79.1

 

61.8

 

Income tax provision

 

11.8

 

6.2

 

20.2

 

16.1

 

Consolidated net income

 

31.5

 

24.0

 

58.9

 

45.7

 

Net income attributable to noncontrolling interest in consolidated subsidiaries

 

0.3

 

0.6

 

0.7

 

0.7

 

Net income attributable to Bruker Corporation

 

$

31.2

 

$

23.4

 

$

58.2

 

$

45.0

 

 

 

 

 

 

 

 

 

 

 

Net income per common share attributable to Bruker Corporation shareholders:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.20

 

$

0.15

 

$

0.37

 

$

0.28

 

Diluted

 

$

0.20

 

$

0.15

 

$

0.37

 

$

0.28

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

156.1

 

159.5

 

156.0

 

159.6

 

Diluted

 

157.0

 

160.4

 

157.0

 

160.4

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

$

(5.4

)

$

71.6

 

$

46.4

 

$

109.1

 

Less: Comprehensive income (loss) attributable to noncontrolling interests

 

(0.2

)

1.0

 

0.4

 

1.2

 

Comprehensive income (loss) attributable to Bruker Corporation

 

$

(5.2

)

$

70.6

 

$

46.0

 

$

107.9

 

 

 

 

 

 

 

 

 

 

 

Dividend declared per common share

 

$

0.04

 

$

0.04

 

$

0.08

 

$

0.08

 

 

The accompanying notes are an integral part of these statements.

 

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BRUKER CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

 

 

 

Six Months Ended June 30,

 

 

 

2018

 

2017

 

Cash flows from operating activities:

 

 

 

 

 

Consolidated net income

 

$

58.9

 

$

45.7

 

Adjustments to reconcile consolidated net income to cash flows from operating activities:

 

 

 

 

 

Depreciation and amortization

 

32.4

 

31.1

 

Stock-based compensation expense

 

4.9

 

5.3

 

Deferred income taxes

 

(7.4

)

(2.2

)

Other non-cash expenses, net

 

24.8

 

1.8

 

Changes in operating assets and liabilities, net of acquisitions and divestitures:

 

 

 

 

 

Accounts receivable

 

36.6

 

16.9

 

Inventories

 

(44.8

)

(36.6

)

Accounts payable and accrued expenses

 

(13.6

)

(24.4

)

Income taxes payable, net

 

(15.7

)

(7.6

)

Deferred revenue

 

9.7

 

3.3

 

Customer advances

 

(0.3

)

(20.6

)

Other changes in operating assets and liabilities, net

 

(5.6

)

2.7

 

Net cash provided by operating activities

 

79.9

 

15.4

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of short-term investments

 

 

(118.5

)

Maturities of short-term investments

 

117.0

 

69.4

 

Cash paid for acquisitions, net of cash acquired

 

(37.6

)

(58.7

)

Purchases of property, plant and equipment

 

(17.5

)

(21.1

)

Proceeds from sales of property, plant and equipment

 

0.1

 

6.9

 

Net cash provided by (used in) investing activities

 

62.0

 

(122.0

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Repayments of the Note Purchase Agreement

 

 

(20.0

)

Repayments of revolving lines of credit

 

(202.5

)

(40.0

)

Proceeds from revolving lines of credit

 

7.5

 

79.0

 

Repayment of other debt, net

 

(0.8

)

(0.3

)

Proceeds from issuance of common stock, net

 

7.0

 

9.2

 

Payment of contingent consideration

 

(2.3

)

(3.5

)

Repurchase of common stock

 

 

(41.7

)

Payment of dividends

 

(12.5

)

(12.8

)

Cash payments to noncontrolling interest

 

 

(0.5

)

Net cash used in financing activities

 

(203.6

)

(30.6

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

(4.7

)

12.7

 

Net change in cash, cash equivalents and restricted cash

 

(66.4

)

(124.5

)

Cash, cash equivalents and restricted cash at beginning of period

 

328.9

 

345.9

 

Cash, cash equivalents and restricted cash at end of period

 

$

262.5

 

$

221.4

 

 

The accompanying notes are an integral part of these statements.

 

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BRUKER CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

1.              Description of Business

 

Bruker Corporation, together with its consolidated subsidiaries (“Bruker” or the “Company”), develops, manufactures and distributes high-performance scientific instruments and analytical and diagnostic solutions that enable its customers to explore life and materials at microscopic, molecular and cellular levels. Many of the Company’s products are used to detect, measure and visualize structural characteristics of chemical, biological and industrial material samples. The Company’s 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 represented approximately 90.7% and 90.2% of the Company’s revenues during the three and six months ended June 30, 2018, respectively, and 87.4% and 88.6% of the Company’s revenues during the three and six months ended June 30, 2017, respectively; and Bruker Energy & Supercon Technologies (BEST), which represented the remainder of the Company’s revenues.  For financial reporting purposes, the Bruker BioSpin Group, Bruker CALID Group and Bruker Nano Group 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 — The Bruker BioSpin Group designs, manufactures and distributes enabling life science tools based on magnetic resonance technology. The majority of the Bruker BioSpin Group’s revenues are generated by academic and government research customers. Other customers include pharmaceutical and biotechnology companies and nonprofit laboratories, as well as chemical, food and beverage, clinical and other industrial companies.

 

Bruker CALID (Chemicals, Applied Markets, Life Science, In-Vitro Diagnostics, Detection) — The Bruker CALID Group designs, manufactures and distributes life science mass spectrometry and ion mobility spectrometry solutions, analytical and process analysis instruments and solutions based on infrared and Raman molecular spectroscopy technologies and radiological/nuclear detectors for Chemical, Biological, Radiological, Nuclear and Explosive (CBRNE) detection. Customers of the Bruker CALID Group include: academic institutions and medical schools; pharmaceutical, biotechnology and diagnostics companies; contract research organizations; nonprofit or for-profit forensics laboratories; agriculture, food and beverage safety laboratories; environmental and clinical microbiology laboratories; hospitals and government departments and agencies.

 

Bruker Nano — The Bruker Nano Group designs, manufactures and distributes advanced X-ray instruments; atomic force microscopy instrumentation; advanced fluorescence optical microscopy instruments; analytical tools for electron microscopes and X-ray metrology; defect-detection equipment for semiconductor process control; handheld, portable and mobile X-ray fluorescence spectrometry instruments; and spark optical emission spectroscopy systems. Customers of the Bruker Nano Group include academic institutions, governmental customers, nanotechnology companies, semiconductor companies, raw material manufacturers, industrial companies, biotechnology and pharmaceutical companies and other businesses involved in materials analysis.

 

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 research and other applications, as well as ceramic high temperature superconductors primarily for energy grid and magnet applications.

 

The unaudited condensed consolidated financial statements represent the consolidated accounts of the Company. All intercompany accounts and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements as of June 30, 2018 and December 31, 2017, and for the three and six months ended June 30, 2018 and 2017, have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission

 

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(SEC) for Quarterly Reports on Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial information presented herein does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair statement have been included. The results for interim periods are not necessarily indicative of the results expected for any other interim period or the full year.

 

At June 30, 2018, the Company’s significant accounting policies and estimates, which are detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, have not changed other than for revenue recognition as detailed in Footnote 2.

 

2.              Revenue

 

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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. The new guidance was effective as of January 1, 2018 and was applied on a modified retrospective basis. The Company elected the practical expedient and only evaluated contracts for which substantially all revenue had not been recognized under ASC 605 with the cumulative effect of the new guidance recorded as of the date of initial application.  The impact of adoption was an increase to beginning retained earnings of $8.2 million, offset in part by a $2.1 million impact related to taxes. As the adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements, transitional disclosures were not provided.

 

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. The key elements of ASC 606 are: 1) identifying a contract with the customer; 2) identifying the performance obligations in the contract; 3) determining the transaction price; 4) allocating the transaction price to the performance obligations in the contract; and 5) recognizing revenue when (or as) each performance obligation is satisfied.

 

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Some of the Company’s contracts have multiple performance obligations, most commonly due to providing additional goods or services along with a system such as installation, accessories, parts and services. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service being provided to the customer. The Company’s best evidence of standalone selling price is its normal selling pricing and discounting practices for the specific product or service when sold on a standalone basis. Alternatively, when not sold separately, the Company may determine standalone selling price using an expected cost plus a margin approach.

 

The Company’s performance obligations are typically satisfied at a point in time, most commonly either on shipment or customer acceptance. Certain performance obligations, such as maintenance contracts and extended warranty, are recognized over time based on the contractual obligation period. In addition, certain arrangements to provide more customized deliverables may be satisfied over time based on the extent of progress towards completion. Typically, progress is measured using a cost-to-cost method based on cost incurred to date relative to total estimated costs upon completion as this best depicts the transfer of control to the customer. Application of the cost-to-cost method requires the Company to make reasonable estimates of the extent of progress toward completion and the total costs the Company expects to incur. Losses are recorded immediately when we estimate that contracts will ultimately result in a loss.

 

The Company includes costs incurred in connection with shipping and handling of products within selling, general and administrative costs. Amounts billed to customers in connection with these costs are included in total revenues. When control of the goods transfer prior to the completion of the Company’s obligation to ship the products to its customers, the Company has elected the practical expedient to account for the shipping services as a fulfillment cost. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period is one year or less or the amount is immaterial. The Company excludes from the transaction price all taxes assessed by a governmental authority on revenue-producing transactions that are collected by the Company from a customer.

 

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The Company requires an advance deposit based on the terms and conditions of contracts with customers for many of its contracts. Typically, revenue is recognized within one year of receiving an advance deposit. The Company does not have any material payment terms that extend beyond one year. For contracts where an advance payment is received greater than one year from expected revenue recognition, or a portion of the payment due extends beyond one year, the Company determined it does not constitute a significant financing component. There is minimal variable consideration included in the transaction price of the Company’s contracts.

 

The Company’s revenues and cash flows may be adversely impacted by unfavorable changes in economic or political conditions in the countries and markets in which they operate, including, among others, adverse changes in interest rates or tax rates, volatility in financial and commodity markets, contraction in the availability of credit in the marketplace, and changes in capital spending patterns.  Economic factors that could adversely influence demand for the Company’s products include uncertainty about global economic conditions leading to reduced levels of investment, changes in government spending levels and/or priorities, the size and availability of government budgets, customers’ and suppliers’ access to credit and other macroeconomic factors affecting government, academic or industrial spending behavior. Slower economic growth or deterioration in economic conditions could result in a decrease in government funding for scientific research, a delay in orders from current or potential customers or a reduction in purchases of our products.  The Company cannot predict how changes in economic conditions or political instability will affect customers and suppliers or how any negative impact on customers and suppliers might adversely impact the Company’s business results or financial condition.

 

The following table presents the Company’s revenues by Group and end customer geographical location for the three and six month periods ended June 30, 2018 (in millions):

 

 

 

Three Months
Ended June 30,

 

Six Months Ended
June 30,

 

 

 

2018

 

2018

 

Revenue by Group:

 

 

 

 

 

Bruker BioSpin

 

$

139.9

 

$

271.7

 

Bruker CALID

 

128.0

 

259.3

 

Bruker Nano

 

134.5

 

258.4

 

BEST

 

42.7

 

88.3

 

Eliminations

 

(1.4

)

(2.3

)

Total revenue

 

$

443.7

 

$

875.4

 

 

 

 

Three Months
Ended June 30,

 

Six Months Ended
June 30,

 

 

 

2018

 

2018

 

Revenue by End Customer Geography:

 

 

 

 

 

United States

 

$

108.4

 

$

213.2

 

Germany

 

48.9

 

90.4

 

Rest of Europe

 

111.9

 

231.8

 

Asia Pacific

 

135.5

 

262.4

 

Other

 

39.0

 

77.6

 

Total revenue

 

$

443.7

 

$

875.4

 

 

Revenue for the Company recognized at a point in time versus over time is as follows for the three and six month periods ended June 30, 2018 (in millions):

 

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Three Months
Ended June 30,

 

Six Months Ended
June 30,

 

 

 

2018

 

2018

 

Revenue recognized at a point in time

 

$

405.3

 

$

800.5

 

Revenue recognized over time

 

38.4

 

74.9

 

Total revenue

 

$

443.7

 

$

875.4

 

 

Remaining Performance Obligations

 

Remaining performance obligations represent the aggregate transaction price allocated to a promise to transfer a good or service which are fully or partially unsatisfied at the end of the period. As of June 30, 2018, remaining performance obligations were approximately $1,025.6 million. The Company expects to recognize revenue on approximately 77.9% of the remaining performance obligations over the next twelve months and the remaining performance obligations primarily within one to three years.

 

Contract Balances

 

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets) and deferred revenue, customer deposits and billings in excess of revenue recognized (contract liabilities) on the Company’s unaudited condensed consolidated balance sheets.

 

Contract assets—Most of the Company’s long-term contracts are billed as work progresses in accordance with the contract terms and conditions, either at periodic intervals or upon achievement of certain milestones. Billing often occurs subsequent to revenue recognition, resulting in contract assets. Contract assets are generally classified as current assets in the unaudited condensed consolidated balance sheets. The balance of contract assets as of June 30, 2018 and January 1, 2018, the date of adoption of ASC 606, was $22.0 million and $12.8 million, respectively.  The increase in the contract asset balance during the six month period ended June 30, 2018 is primarily a result of foreign currency translation and contracts which have been recognized as revenue during the six month period ending June 30, 2018 for which billing cannot contractually occur as of June 30, 2018.

 

Contract liabilities—The Company often receives cash payments from customers in advance of the Company’s performance, resulting in contract liabilities. These contract liabilities are classified as either current or long-term in the unaudited condensed consolidated balance sheet based on the timing of when revenue recognition is expected.  As of June 30, 2018 and January 1, 2018, the date of adoption of ASC 606, contract liabilities were $288.2 million and $291.3 million, respectively.   The decrease in the contract liability balance during the six month period ended June 30, 2018 is primarily a result of satisfying performance obligations and foreign currency translation which were offset in part by new cash payments received.  Approximately $100.7 million that was included in the contract liability balance at the date of adoption was recognized as revenue during the period.

 

3.              Acquisitions

 

2018

 

On April 8, 2018, the Company acquired a 100% interest in Anasys Instruments Corp. (“Anasys”), a privately held company, for a purchase price of $27.0 million with the potential for additional consideration based on revenue achievements in 2019 and 2020. Anasys develops and manufactures nanoscale infrared spectroscopy and thermal measurement instruments. Anasys will be integrated into the Bruker Nano Group within the BSI reportable segment. The acquisition of Anasys was accounted for under the acquisition method. The components and fair value allocation of the consideration transferred in connection with the acquisition were as follows (in millions):

 

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Consideration Transferred:

 

 

 

Cash paid

 

$

27.0

 

Contingent consideration

 

5.3

 

Total consideration transferred

 

$

32.3

 

 

 

 

 

Allocation of Consideration Transferred:

 

 

 

Inventories

 

2.8

 

Accounts receivable

 

0.8

 

Other current and non-current assets

 

1.1

 

Intangible assets:

 

 

 

Technology

 

7.3

 

Customer relationships

 

8.0

 

Backlog

 

1.8

 

Trade name

 

0.6

 

Goodwill

 

16.6

 

Deferred taxes, net

 

(3.2

)

Liabilities assumed

 

(3.5

)

Total consideration allocated

 

$

32.3

 

 

The preliminary fair value allocation included contingent consideration in the amount of $5.3 million, which represented the estimated fair value of future payments to the former shareholders of Anasys based on achieving annual revenue targets for the years 2019 and 2020. The Company expects to complete the fair value allocation in the fourth quarter of 2018. The amortization period for all intangible assets acquired in connection with Anasys is eight years, except for backlog which will be amortized over one year.

 

The results of Anasys, including the amount allocated to goodwill that 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 Anasys has not been presented because the impact on revenues, net income and total assets is not material.

 

2017

 

On May 5, 2017, the Company acquired 100% of the shares of Luxendo GmbH (“Luxendo”), a privately held spin-off of the European Molecular Biology Laboratory (EMBL), for a purchase price of Euro 17 million (approximately $18.8 million), with the potential for additional consideration based on revenue achievements in 2018 through 2021. Luxendo is a developer and manufacturer of proprietary light-sheet fluorescence microscopy instruments and the Company believes the acquisition enhances the Company’s portfolio of swept-field confocal, super-resolution, and multiphoton fluorescence microscope product lines for small organism embryology, live-cell imaging, brain development and cleared brain tissue and optogenetics applications. Luxendo is located in Heidelberg, Germany and is being integrated into the Bruker Nano Group within the BSI reportable segment. The acquisition of Luxendo was accounted for under the acquisition method. The components and fair value allocation of the consideration transferred in connection with the acquisition were as follows (in millions):

 

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Consideration Transferred:

 

 

 

Cash paid

 

$

20.1

 

Cash acquired

 

(1.3

)

Contingent consideration

 

3.1

 

Total consideration transferred

 

$

21.9

 

 

 

 

 

Allocation of Consideration Transferred:

 

 

 

Inventories

 

1.1

 

Other current and non-current assets

 

0.4

 

Property, plant and equipment

 

0.3

 

Intangible assets:

 

 

 

Existing technology

 

10.9

 

Trade name

 

0.8

 

Goodwill

 

11.2

 

Deferred taxes, net

 

(2.4

)

Liabilities assumed

 

(0.4

)

Total consideration allocated

 

$

21.9

 

 

The amortization period for intangible assets acquired in connection with the acquisition of Luxendo is ten years for trade names and seven years for technology.

 

The results of Luxendo, including the amount allocated to goodwill that 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 Luxendo has not been presented because the impact on revenues, net income and total assets is not material.

 

On January 23, 2017, the Company acquired 100% of the shares of Hysitron, Incorporated (“Hysitron”). The acquisition adds Hysitron’s nanomechanical testing instruments to the Company’s existing portfolio of atomic force microscopes, surface profilometers, and tribology and mechanical testing systems. Hysitron is included in the Bruker Nano Group within the BSI reportable segment. The acquisition of Hysitron was accounted for under the acquisition method. The components and fair value allocation of the consideration transferred in connection with the acquisition of Hysitron were as follows (in millions):

 

Consideration Transferred:

 

 

 

Cash paid

 

$

27.9

 

Cash acquired

 

(0.7

)

Contingent consideration

 

1.6

 

Total consideration transferred

 

$

28.8

 

 

 

 

 

Allocation of Consideration Transferred:

 

 

 

Accounts receivable, net

 

$

3.0

 

Inventories

 

3.8

 

Other current assets

 

0.2

 

Property, plant and equipment

 

0.6

 

Intangible assets:

 

 

 

Customer relationships

 

5.8

 

Existing technology

 

4.7

 

Trade name

 

1.2

 

Other

 

0.6

 

Goodwill

 

16.6

 

Deferred taxes, net

 

(4.1

)

Capital lease

 

(0.2

)

Liabilities assumed

 

(3.4

)

Total consideration allocated

 

$

28.8

 

 

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The amortization period for intangible assets acquired in connection with Hysitron is seven years for customer relationships, trademarks and other intangibles and five years for existing technology.

 

The results of Hysitron, including the amount allocated to goodwill that 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 Hysitron has not been presented because the impact on revenues, net income and total assets is not material.

 

4.              Stock-Based Compensation

 

On May 14, 2010, the Bruker Corporation 2010 Incentive Compensation Plan (the “2010 Plan”) was approved by the Company’s stockholders. The 2010 Plan provided for the issuance of up to 8,000,000 shares of the Company’s common stock. The 2010 Plan allowed a committee of the Board of Directors (the “Compensation Committee”) to grant incentive stock options, non-qualified stock options and restricted stock awards. The Compensation Committee had the authority to determine which employees would receive the awards, the amount of the awards and other terms and conditions of any awards. Awards granted under the 2010 Plan typically were made subject to a vesting period of three to five years.

 

On May 20, 2016, the Bruker Corporation 2016 Incentive Compensation Plan (the “2016 Plan”) was approved by the Company’s stockholders. With the approval of the 2016 Plan, no further grants will be made under the 2010 Plan. The 2016 Plan provides for the issuance of up to 9,500,000 shares of the Company’s common stock and permits the grant of awards of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, unrestricted stock, restricted stock units, performance shares and performance units, as well as cash-based awards. The 2016 Plan is administered by the Compensation Committee of the Board of Directors. The Compensation Committee has the authority to determine which employees will receive awards, the amount of any awards, and other terms and conditions of such awards. Awards granted under the 2016 Plan typically vest over a period of one to four years.

 

The Company recorded stock-based compensation expense as follows in the unaudited condensed consolidated statements of income and comprehensive income (loss) (in millions):

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2018

 

2017

 

2018

 

2017

 

Stock options

 

$

1.0

 

$

1.7

 

$

2.0

 

$

3.4

 

Restricted stock awards

 

0.2

 

0.4

 

0.4

 

0.7

 

Restricted stock units

 

1.2

 

0.6

 

2.5

 

1.2

 

Total stock-based compensation

 

$

2.4

 

$

2.7

 

$

4.9

 

$

5.3

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2018

 

2017

 

2018

 

2017

 

Costs of product revenue

 

$

0.3

 

$

0.4

 

$

0.7

 

$

0.8

 

Selling, general and administrative

 

1.8

 

1.9

 

3.5

 

3.7

 

Research and development

 

0.3

 

0.4

 

0.7

 

0.8

 

Total stock-based compensation

 

$

2.4

 

$

2.7

 

$

4.9

 

$

5.3

 

 

Stock-based compensation expense is recognized on a straight-line basis over the underlying requisite service period of the stock-based award.

 

Stock options to purchase the Company’s common stock are periodically awarded to executive officers and other employees of the Company subject to a vesting period of three to four years. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. There were no stock options awarded during the six months ended June 30, 2018.  Assumptions for the six months ended June 30, 2017 regarding volatility, expected life, 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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2017

 

Risk-free interest rates

 

1.78% - 2.09%

 

Expected life

 

5.56 years

 

Volatility

 

31.41% - 34.13%

 

Expected dividend yield

 

0.58% - 0.74%

 

 

Stock option activity for the six months ended June 30, 2018 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, 2017

 

3,235,673

 

$

20.16

 

 

 

 

 

Exercised

 

(402,354

)

17.65

 

 

 

 

 

Forfeited

 

(161,971

)

20.11

 

 

 

 

 

Outstanding at June 30, 2018

 

2,671,348

 

$

20.53

 

6.2

 

$

22.8

 

 

 

 

 

 

 

 

 

 

 

Exercisable at June 30, 2018

 

1,441,435

 

$

18.92

 

5.5

 

$

14.6

 

 

 

 

 

 

 

 

 

 

 

Exercisable and expected to vest at June 30, 2018 (a) 

 

2,526,346

 

$

20.42

 

6.1

 

$

21.8

 

 


(a)         In addition to the options that are vested at June 30, 2018, 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 June 30, 2018.

(b)         The aggregate intrinsic value is based on the positive difference between the fair value of the Company’s common stock price of $29.04 on June 30, 2018 and the exercise price of the underlying stock options.

 

The weighted average fair value of options granted was $7.57 per share during the six months ended June 30, 2017, with no corresponding amount in the current period.

 

The total intrinsic value of options exercised was $5.3 million and $6.7 million for the six months ended June 30, 2018 and 2017, respectively.

 

Restricted stock award activity for the six months ended June 30, 2018 was as follows:

 

 

 

Shares Subject
to Restriction

 

Weighted
Average Grant
Date Fair
Value

 

Outstanding at December 31, 2017

 

85,529

 

$

20.39

 

Vested

 

(11,584

)

19.87

 

Forfeited

 

(6,553

)

24.80

 

Outstanding at June 30, 2018

 

67,392

 

$

20.05

 

 

The total fair value of restricted stock vested was $0.2 million in each of the six months ended June 30, 2018 and 2017.

 

Restricted stock unit activity for the six months ended June 30, 2018 was as follows:

 

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Shares Subject
to Restriction

 

Weighted
Average Grant
Date Fair
Value

 

Outstanding at December 31, 2017

 

652,123

 

$

25.47

 

Granted

 

53,891

 

35.15

 

Vested

 

(49,619

)

22.87

 

Forfeited

 

(47,787

)

26.61

 

Outstanding at June 30, 2018

 

608,608

 

$

26.45

 

 

The total fair value of restricted stock units vested was $1.1 million and $0.2 million for the six months ended June 30, 2018 and 2017, respectively.

 

At June 30, 2018, the Company expects to recognize pre-tax stock-based compensation expense of $5.2 million associated with outstanding stock option awards granted under the Company’s stock plans over the weighted average remaining service period of 2.0 years. The Company expects to recognize additional pre-tax stock-based compensation expense of $0.5 million associated with outstanding restricted stock awards granted under the Company’s stock plans over the weighted average remaining service period of 1.0 year. The Company also expects to recognize additional pre-tax stock-based compensation expense of $11.3 million associated with outstanding restricted stock units granted under the 2016 Plan over the weighted average remaining service period of 2.8 years.

 

5.              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 and net income per common share attributable to Bruker Corporation shareholders (in millions, except per share amounts):

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2018

 

2017

 

2018

 

2017

 

Net income attributable to Bruker Corporation, as reported

 

$

31.2

 

$

23.4

 

$

58.2

 

$

45.0

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding-basic

 

156.1

 

159.5

 

156.0

 

159.6

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

Stock options and restricted stock awards and units

 

0.9

 

0.9

 

1.0

 

0.8

 

 

 

157.0

 

160.4

 

157.0

 

160.4

 

 

 

 

 

 

 

 

 

 

 

Net income per common share attributable to Bruker Corporation shareholders:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.20

 

$

0.15

 

$

0.37

 

$

0.28

 

Diluted

 

$

0.20

 

$

0.15

 

$

0.37

 

$

0.28

 

 

Stock options to purchase approximately 0.2 million shares and 1.2 million shares were excluded from the computation of diluted earnings per share in the three months ended June 30, 2018 and 2017, respectively, as their effect would have been anti-dilutive.  Approximately 0.2 million shares and 1.4 million shares were excluded from the computation of diluted earnings per share in the six months ended June 30, 2018 and 2017, respectively, as their effect would have been anti-dilutive.

 

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6.              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 following tables set forth the Company’s financial instruments that are measured at fair value on a recurring basis and presents them within the fair value hierarchy using the lowest level of input that is significant to the fair value measurement at June 30, 2018 and December 31, 2017 (in millions):

 

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Table of Contents

 

June 30, 2018

 

Total

 

Quoted Prices
in Active
Markets
Available
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

Embedded derivatives in purchase and delivery contracts

 

$

0.7

 

$

 

$

0.7

 

$

 

Foreign exchange contracts

 

0.6

 

 

0.6

 

 

Total assets recorded at fair value

 

$

1.3

 

$

 

$

1.3

 

$

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

Contingent consideration

 

$

13.0

 

$

 

$

 

$

13.0

 

Foreign exchange contracts

 

4.3

 

 

4.3

 

 

Embedded derivatives in purchase and delivery contracts

 

1.4

 

 

1.4

 

 

Fixed price commodity contracts

 

0.1

 

 

0.1

 

 

Total liabilities recorded at fair value

 

$

18.8

 

$

 

$

5.8

 

$

13.0

 

 

December 31, 2017

 

Total

 

Quoted Prices
in Active
Markets
Available
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

$

4.5

 

$

 

$

4.5

 

$

 

Embedded derivatives in purchase and delivery contracts

 

0.9

 

 

0.9

 

 

Fixed price commodity contracts

 

0.8

 

 

0.8

 

 

Total assets recorded at fair value

 

$

6.2

 

$

 

$

6.2

 

$

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

Contingent consideration

 

$

12.7

 

$

 

$

 

$

12.7

 

Foreign exchange contracts

 

0.1

 

 

0.1

 

 

Embedded derivatives in purchase and delivery contracts

 

2.9

 

 

2.9

 

 

Total liabilities recorded at fair value

 

$

15.7

 

$

 

$

3.0

 

$

12.7

 

 

The Company’s financial instruments consist primarily of cash equivalents, short-term investments, restricted cash, derivative instruments consisting of foreign exchange contracts, commodity contracts, derivatives embedded in certain purchase and sale contracts, accounts receivable, borrowings under a revolving credit agreement, 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, borrowings under a revolving credit agreement and accounts payable approximate fair value because of 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 fair value of the long-term fixed interest rate debt, which has been classified as Level 2, was $227.5 million and $231.3 million at June 30, 2018 and December 31, 2017, respectively, based on the outstanding amount at June 30, 2018 and December 31, 2017, market prices 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

 

14



Table of Contents

 

liabilities and did not elect the fair value option for any financial assets or liabilities which originated during the three or six months ended June 30, 2018 or 2017.

 

Excluded from the table above are cash equivalents, restricted cash and short-term investments related to time and call deposits. The Company has 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 95 days. The Company has classified these investments within cash and cash equivalents or short-term investments within the consolidated balance sheets based on call and maturity dates and these are not subject to fair value measurement. The following tables set forth the balances of cash equivalents, restricted cash and short-term investments as of June 30, 2018 and December 31, 2017:

 

 

 

June 30,

 

December 31,

 

 

 

2018

 

2017

 

Cash Equivalents

 

$

 

$

 

Restricted Cash

 

3.8

 

3.9

 

Short-term Investments

 

 

114.2

 

 

As part of certain acquisitions, 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 values the contingent considerations by using a Monte Carlo simulation or an income approach method.  The Monte Carlo method models future revenue and costs of goods sold projections and discounts the average results to present value.  The income approach method involves calculating the earnout payment based on the forecasted cash flows, adjusting the future earnout payment for the risk of reaching the projected financials, and then discounting the future payments to present value by the counterparty risk.  The counterparty risk considers the risk of the buyer having the cash to make the earnout payments and is commensurate with a cost of debt over an appropriate term.

 

For the six months ended June 30, 2018, additional contingent consideration of $0.6 million was recognized in earnings related to a recent acquisition within the Bruker Nano Group based upon an increase in forecasted revenue levels for the acquired business for the remainder of 2018 and was recorded within other charges, net in the unaudited condensed consolidated statements of income and comprehensive income (loss).

 

The following table sets forth the changes in contingent consideration liabilities for the six months ended June 30, 2018 (in millions):

 

Balance at December 31, 2017

 

$

12.7

 

Current period additions

 

5.3

 

Current period adjustments

 

0.6

 

Current period settlements

 

(5.5

)

Foreign currency effect

 

(0.1

)

Balance at June 30, 2018

 

$

13.0

 

 

7.              Restricted Cash

 

Restricted cash is included as a component of cash, cash equivalents, and restricted cash on the Company’s unaudited condensed consolidated statement of cash flows. 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.

 

The inclusion of restricted cash increased the balances of the unaudited condensed consolidated statement of cash flows as follows:

 

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Table of Contents

 

 

 

Six Months Ended June 30,

 

 

 

2018

 

2017

 

Beginning Balance

 

$

3.9

 

$

3.5

 

Ending Balance

 

3.8

 

3.7

 

 

8.              Inventories

 

Inventories consisted of the following (in millions):

 

 

 

June 30,

 

December 31,

 

 

 

2018

 

2017

 

Raw materials

 

$

158.4

 

$

152.0

 

Work-in-process

 

203.0

 

183.1

 

Finished goods

 

87.7

 

96.6

 

Demonstration units

 

60.3

 

54.5

 

Inventories

 

$

509.4

 

$

486.2

 

 

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 June 30, 2018 and December 31, 2017, the value of inventory-in-transit was $25.6 million and $41.4 million, respectively.

 

9.              Goodwill and Intangible Assets

 

The following table sets forth the changes in the carrying amount of goodwill for the six months ended June 30, 2018 (in millions):

 

Balance at December 31, 2017

 

$

169.8

 

Current period additions

 

24.3

 

Foreign currency effect

 

(1.7

)

Balance at June 30, 2018

 

$

192.4

 

 

The following is a summary of intangible assets (in millions):

 

 

 

June 30, 2018

 

December 31, 2017

 

 

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Net Carrying
Amount

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Net Carrying
Amount

 

Existing technology and related patents

 

$

206.8

 

$

(151.6

)

$

55.2

 

$

195.4

 

$

(138.9

)

$

56.5

 

Customer relationships

 

42.3

 

(15.0

)

27.3

 

34.6

 

(12.9

)

21.7

 

Non compete contracts

 

1.8

 

(1.7

)

0.1

 

1.8

 

(1.5

)

0.3

 

Trade names

 

4.8

 

(1.3

)

3.5

 

4.2

 

(0.9

)

3.3

 

Other

 

1.8

 

(0.5

)

1.3

 

 

 

 

Intangible assets subject to amortization

 

257.5

 

(170.1

)

87.4

 

236.0

 

(154.2

)

81.8

 

In-process research and development

 

0.6

 

 

0.6

 

0.6

 

 

0.6

 

Intangible assets

 

$

258.1

 

$

(170.1

)

$

88.0

 

$

236.6

 

$

(154.2

)

$

82.4

 

 

For the three months ended June 30, 2018 and 2017, the Company recorded amortization expense of $7.8 million and $7.5 million, respectively, related to intangible assets subject to amortization.  For the six months ended June 30, 2018 and 2017, the Company recorded amortization expense of $14.6 million and $14.4 million, respectively, related to intangible assets subject to amortization.

 

The goodwill and intangible assets acquired in the six months ended June 30, 2018 related primarily to the Anasys acquisitions.  Please see Note 3—Acquisitions, for additional details on the goodwill and intangibles acquired.

 

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10.       Debt

 

The Company’s debt obligations as of June 30, 2018 and December 31, 2017 consisted of the following (in millions):

 

 

 

June 30,

 

December 31,

 

 

 

2018

 

2017

 

US Dollar revolving loan under the 2015 Credit Agreement

 

$

 

$

195.0

 

US Dollar notes under the Note Purchase Agreement

 

220.0

 

220.0

 

Unamortized debt issuance costs under the Note Purchase Agreement

 

(0.6

)

(0.7

)

Capital lease obligations and other loans

 

1.2

 

1.3

 

Total debt

 

220.6

 

415.6

 

Current portion of long-term debt

 

(15.0

)

 

Total long-term debt, less current portion

 

$

205.6

 

$

415.6

 

 

On October 27, 2015, the Company entered into a new revolving credit agreement, referred to as the 2015 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 greatest 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 June 30, 2018, there were no outstanding borrowings under the 2015 Credit Agreement.

 

The following is a summary of the maximum commitments and the net amounts available to the Company under the 2015 Credit Agreement and other lines of credit with various financial institutions located primarily in Germany and Switzerland that are unsecured and typically due upon demand with interest payable monthly, at June 30, 2018 (in millions):

 

 

 

Weighted
Average
Interest Rate

 

Total Amount
Committed by
Lenders

 

Outstanding
Borrowings

 

Outstanding
Letters of
Credit

 

Total Amount
Available

 

2015 Credit Agreement

 

0.0

%

$

500.0

 

$

 

$

1.1

 

$

498.9

 

Other lines of credit

 

 

250.5

 

 

123.4

 

127.1

 

Total revolving lines of credit

 

 

 

$

750.5

 

$

 

$

124.5

 

$

626.0

 

 

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 consisted of the following:

 

·                  $20.0 million 3.16% Series 2012A Senior Notes, Tranche A, due January 18, 2017;

 

·                  $15.0 million 3.74% Series 2012A Senior Notes, Tranche B, due January 18, 2019;

 

·                  $105.0 million 4.31% Series 2012A Senior Notes, Tranche C, due January 18, 2022; and

 

·                  $100.0 million 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024.

 

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On January 18, 2017, the outstanding $20.0 million principal amount of Tranche A of the Senior Notes was repaid in accordance with the terms of the Note Purchase Agreement.

 

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 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 June 30, 2018, the Company was in compliance with the covenants of the Note Purchase Agreement and the 2015 Credit Agreement.  The Company’s leverage ratio (as defined in the respective agreements) was 0.66 and interest coverage ratio (as defined in the respective agreements) was 18.1.

 

11.       Derivative 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 did not have an outstanding balance as of June 30, 2018. The Company currently has fixed 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 and Switzerland, 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 income (loss). The Company had the following notional amounts outstanding under foreign exchange contracts at June 30, 2018 and December 31, 2017 (in millions):

 

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Buy

 

Notional
Amount in Buy
Currency

 

Sell

 

Maturity

 

Notional
Amount in U.S.
Dollars

 

Fair Value of
Assets

 

Fair Value of
Liabilities

 

June 30, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

Euro

 

51.7

 

U.S. Dollars

 

July 2018 to January 2019

 

$

64.4

 

$

 

$

3.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Dollars

 

16.5

 

Euro

 

July 2018

 

16.0

 

0.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Swiss Francs

 

12.5

 

U.S. Dollars

 

July 2018

 

13.0

 

 

0.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Dollars

 

3.1

 

Swiss Francs

 

July 2018

 

3.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Swiss Francs

 

1.1

 

Japanese Yen

 

July 2018

 

1.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Japanese Yen

 

120.9

 

Swiss Francs

 

July 2018

 

1.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Dollars

 

2.6

 

Japanese Yen

 

July 2018

 

2.5

 

0.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Japanese Yen

 

282.0

 

U.S. Dollars

 

July 2018

 

2.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Euro

 

1.7

 

Japanese Yen

 

July 2018

 

2.0

 

 

0.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Japanese Yen

 

219.8

 

Euro

 

July 2018

 

1.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Singapore Dollar

 

3.2

 

U.S. Dollars

 

July 2018

 

2.4

 

 

0.1

 

 

 

 

 

 

 

 

 

$

109.6

 

$

0.6

 

$

4.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2017:

 

 

 

 

 

 

 

 

 

 

 

 

 

Euro

 

59.5

 

U.S. Dollars

 

January 2018

 

$

67.0

 

$

4.5

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Swiss Francs

 

11.0

 

U.S. Dollars

 

January 2018

 

11.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Singapore Dollar

 

4.9

 

U.S. Dollars

 

January 2018

 

3.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Euro

 

1.8

 

Polish Zloty

 

January 2018

 

2.3

 

 

0.1

 

 

 

 

 

 

 

 

 

$

84.2

 

$

4.5

 

$

0.1

 

 

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 $110.9 million for the delivery of products and $3.7 million for the purchase of products at June 30, 2018 and $98.3 million for the delivery of products and $3.6 million for the purchase of products at December 31, 2017. 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 arrangements with certain customers under which it has a firm commitment to deliver copper based superconductor wire 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 June 30, 2018 and December 31, 2017, the Company had fixed price commodity contracts with notional amounts aggregating $6.8 million and $3.0 million, respectively. The changes in the fair value of these commodity contracts are recorded within interest and other income (expense), net in the unaudited condensed consolidated statements of income and comprehensive income (loss).

 

The fair value of the derivative instruments described above is recorded in the unaudited condensed consolidated balance sheets for the periods as follows (in millions):

 

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June 30,

 

December 31,

 

 

 

Balance Sheet Location

 

2018

 

2017

 

Derivative assets:

 

 

 

 

 

 

 

Foreign exchange contracts

 

Other current assets

 

$

0.6

 

$

4.5

 

Embedded derivatives in purchase and delivery contracts

 

Other current assets

 

0.6

 

0.9

 

Fixed price commodity contracts

 

Other current assets

 

 

0.8

 

Embedded derivatives in purchase and delivery contracts

 

Other long-term assets

 

0.1

 

 

 

 

 

 

 

 

 

 

Derivative liabilities:

 

 

 

 

 

 

 

Foreign exchange contracts

 

Other current liabilities

 

$

4.3

 

$

0.1

 

Embedded derivatives in purchase and delivery contracts

 

Other current liabilities

 

0.6

 

1.5

 

Fixed price commodity contracts

 

Other current liabilities

 

0.1

 

 

Embedded derivatives in purchase and delivery contracts

 

Other long-term liabilities

 

0.8

 

1.4

 

 

The impact on net income of unrealized gains and losses resulting from changes in the fair value of derivative instruments not designated as hedging instruments are as follows (in millions):

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2018

 

2017

 

2018

 

2017

 

Foreign exchange contracts

 

$

(3.8

)

$

6.1

 

$

(8.1

)

$

7.0

 

Embedded derivatives in purchase and delivery contracts

 

1.2

 

(3.0

)

1.3

 

(3.7

)

Fixed price commodity contracts

 

(0.3

)

0.1

 

(0.9

)

0.2

 

Net impact to interest and other income (expense)

 

$

(2.9

)

$

3.2

 

$

(7.7

)

$

3.5

 

 

The amounts related to derivative instruments not designated as hedging instruments are recorded within interest and other income (expense), net in the unaudited condensed consolidated statements of income and comprehensive income (loss).

 

12.       Provision for Income Taxes

 

On December 22, 2017 (Enactment Date), the President of the United States signed tax reform legislation (2017 Tax Act), which enacted a wide range of changes to the U.S. corporate income tax system, many of which differ significantly from the provisions of the previous U.S. tax law.  Also on December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118, which provides companies with additional guidance on how to implement the provisions of the 2017 Tax Act in their financial statements. The guidance provides for a measurement period, up to one year from the Enactment Date, in which provisional amounts may be adjusted when additional information is obtained, prepared or analyzed about facts and circumstances that existed as of the Enactment Date, if known, which would have impacted the amounts that were initially recorded by the Company.

 

The Company has not yet completed the assessment of the tax effects associated with the enactment of the 2017 Tax Act; however, a reasonable estimate has been made of the effects on the existing deferred tax balances and the one-time transition tax. Changes in the tax rates and laws are accounted for in the period of enactment. The Company expects to finalize the provisional estimates before the end of 2018 after completing the review and analysis, including reviews and analyses of any interpretations issued during this measurement period.

 

The 2017 Tax Act also transitions international taxation from a worldwide system to a modified territorial system and includes base erosion prevention measures on non-U.S. earnings, which has the effect of subjecting certain earnings of the Company’s foreign subsidiaries to U.S. taxation as global intangible low-taxed income (GILTI). These changes became effective beginning in 2018. The Company does not recognize deferred taxes for the basis differences expected to reverse as GILTI is incurred.  The Company instead accounts for any taxes assessed as period costs.

 

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Table of Contents

 

The actual results of the implementation of the 2017 Tax Act may materially differ from the Company’s current estimate due to, among other things, further guidance that may be issued by U.S. tax authorities or regulatory bodies including the SEC and the FASB to interpret the 2017 Tax Act. The Company will continue to analyze the 2017 Tax Act and any additional guidance that may be issued and finalize the full effects of applying the new legislation in the measurement period.

 

The Company accounts for income taxes using the asset and liability approach by recognizing deferred tax assets and liabilities for the expected future tax consequences of differences between the financial statement basis and the tax basis of assets and liabilities, calculated using enacted tax rates in effect for the year in which the differences are expected to be reflected in the tax return. The Company records a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. In addition, the Company accounts for uncertain tax positions that have reached a minimum recognition threshold.

 

The income tax provision for the three months ended June 30, 2018 and 2017 was $11.8 million and $6.2 million, respectively, representing effective tax rates of 27.3% and 20.5%, respectively.  The income tax provision for the six months ended June 30, 2018 and 2017 was $20.2 million and $16.1 million, respectively, representing effective tax rates of 25.5% and 26.1%, respectively.  The increase in the Company’s effective tax rate for the three ended June 30, 2018, compared to the same period in 2017, was primarily due to the non-recurring impact of unfavorable discrete items in the three month period ended June 30, 2018.  The decrease in the Company’s effective tax rate for the six months ended June 30, 2018, compared to the same period in 2017, was primarily due to the non-recurring impact of unfavorable discrete items in the six month period ended June 30, 2017. The Company’s effective tax rate may change over time as the amount or mix of income and taxes changes among the jurisdictions in which the Company is subject to tax.

 

As of June 30, 2018 and December 31, 2017, the Company had unrecognized tax benefits, excluding penalties and interest, of approximately $4.5 million and $4.4 million, respectively, which, if recognized, would result in a reduction of the Company’s effective tax rate. The Company recognizes penalties and interest related to unrecognized tax benefits in the provision for income taxes.  As of June 30, 2018 and December 31, 2017, approximately $0.4 million and $0.2 million, respectively, of accrued interest and penalties related to uncertain tax positions was included in other long-term liabilities on the Company’s unaudited condensed consolidated balance sheets.  No penalties and interest were recorded in the provision for income taxes for unrecognized tax benefits during the three and six months ended June 30, 2018 or June 30, 2017.

 

The Company files tax returns in the United States, which includes federal, state and local jurisdictions, and many foreign jurisdictions with varying statutes of limitations. The Company considers Germany, the United States and Switzerland to be its significant tax jurisdictions. The majority of the Company’s earnings are derived in Germany and Switzerland. Accounting for the various federal and local taxing authorities, the statutory rates for 2018 are approximately 30.0% and 20.0% for Germany and Switzerland, respectively. The mix of earnings in those two jurisdictions resulted in an increase of 4.0% from the U.S. statutory rate of 21.0% in the six months ended June 30, 2018. The Company has not been a party to any tax holiday agreements. The tax years 2013 to 2017 are open to examination in Germany and Switzerland. Tax years 2011 to 2017 remain open for examination in the United States.

 

13.       Commitments and Contingencies

 

In accordance with ASC Topic 450, Contingencies, the Company accrues anticipated costs of settlement, damages or other costs to the extent specific losses are probable and estimable.

 

Litigation and Related Contingencies

 

Lawsuits, claims and proceedings of a nature considered normal to its businesses may be pending from time to time against the Company. Third parties might allege that the Company or its collaborators are infringing their patent rights or that the Company is otherwise violating their intellectual property rights. Loss contingency provisions are recorded if the potential loss from any claim, asserted or unasserted, or legal proceeding is considered probable and the amount can be reasonably estimated or a range of loss can be determined. These accruals represent management’s best estimate of probable loss. Disclosure also is provided when it is reasonably possible that a loss will be incurred or when it is reasonably possible that the amount of a loss will exceed the recorded provision. The Company believes the outcome of pending proceedings, individually and in the aggregate, will not have a material impact on the Company’s financial statements. As of June 30, 2018 and December 31, 2017, no material accruals have been recorded for potential contingencies.

 

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Table of Contents

 

Governmental Investigations

 

The Company is subject from time to time to investigations by U.S. or foreign governmental agencies, from which civil, criminal or administrative proceedings could result.

 

On October 19, 2017, we received a notice of investigation and subpoena to produce documents from the Division of Enforcement of the SEC. The subpoena seeks information related to an employee terminated as part of a restructuring and certain matters involving the Company’s policies and accounting practices related to revenue recognition and restructuring activities, as well as related financial reporting, disclosure and compliance matters, since January 1, 2013. The subpoena also seeks information concerning, among other things, the Company’s previously identified material weakness in internal controls over the accounting for income taxes, related financial reporting matters and certain payments for non-employee travel expenses. The Company is producing documents in response to the subpoena and intends to continue to cooperate fully with the SEC’s investigation. Additionally, the Audit Committee of the Company’s Board of Directors, with the assistance of outside counsel, is conducting an internal investigation into practices of certain business partners in China and into the conduct of former employees of the Bruker Optics division in China that raised questions of compliance with laws, including the U.S. Foreign Corrupt Practices Act, and/or compliance with our business policies and code of conduct. The Company has voluntarily disclosed this matter to the SEC and U.S. Department of Justice. At this time, we are unable to predict the duration, scope or outcome of these investigations.

 

Letters of Credit and Guarantees

 

At June 30, 2018 and December 31, 2017, the Company had bank guarantees of $124.5 million and $138.8 million, 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.

 

14.       Shareholders’ Equity

 

Share Repurchase Program

 

In May 2017, the Company’s Board of Directors approved a share repurchase program under which repurchases of common stock up to $225.0 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. No repurchases occurred in the three and six months ended June 30, 2018.  Any future repurchases will be funded from cash on hand, future cash flows from operations and available borrowings under the revolving credit facility.

 

Cash Dividends on Shares of Common Stock

 

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. Under the dividend policy, the Company will target a cash dividend to the Company’s shareholders in the amount of $0.16 per share per annum, payable in equal quarterly installments. The following is a summary of the dividends paid in the periods ended June 30, 2018 and 2017 (in millions):

 

 

 

2018

 

Dividends Paid on

 

March 23

 

June 22

 

Shareholders of Record as of

 

March 6

 

June 4

 

Aggregate Cost

 

$

6.3

 

$

6.2

 

 

 

 

2017

 

Dividends Paid on

 

March 24

 

June 23

 

Shareholders of Record as of

 

March 8

 

June 5

 

Aggregate Cost

 

$

6.4

 

$

6.4

 

 

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 shareholders. The dividend policy may be suspended or cancelled at the discretion of the Board of Directors at any time.

 

Accumulated Other Comprehensive Income (Loss)

 

Comprehensive income (loss) refers to revenues, expenses, gains and losses that under U.S. GAAP are included in other comprehensive income (loss), but excluded from net income as these amounts are recorded directly as an adjustment to

 

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shareholders’ equity, net of tax. The Company’s other comprehensive income (loss) is composed primarily of foreign currency translation adjustments and changes in the funded status of defined benefit pension plans. The following is a summary of comprehensive income (loss) (in millions):

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2018

 

2017

 

2018

 

2017

 

Consolidated net income

 

$

31.5

 

$

24.0

 

$

58.9

 

$

45.7

 

Foreign currency translation adjustments

 

(39.4

)

49.5

 

(14.6

)

65.1

 

Pension liability adjustments, net of tax

 

2.5

 

(1.9

)

2.1

 

(1.7

)

Net comprehensive income

 

(5.4

)

71.6

 

46.4

 

109.1

 

Less: Comprehensive income (loss) attributable to noncontrolling interests

 

(0.2

)

1.0

 

0.4

 

1.2

 

Comprehensive income (loss) attributable to Bruker Corporation

 

$

(5.2

)

$

70.6

 

$

46.0

 

$

107.9

 

 

The following is a summary of the components of accumulated other comprehensive income (loss), net of tax, at June 30, 2018 (in millions):

 

 

 

Foreign
Currency
Translation

 

Pension
Liability
Adjustment

 

Accumulated
Other
Comprehensive
Income (Loss)

 

Balance at December 31, 2017

 

$

72.2

 

$

(45.2

)

$

27.0

 

Other comprehensive income (loss) before reclassifications

 

(14.3

)

0.9

 

(13.4

)

Amounts reclassified from other comprehensive income (loss), net of tax of $0.1 million

 

 

1.2

 

1.2

 

Net current period other comprehensive income (loss)

 

(14.3

)

2.1

 

(12.2

)

Balance at June 30, 2018

 

$

57.9

 

$

(43.1

)

$

14.8

 

 

15.          Noncontrolling Interests

 

Noncontrolling interests represent the minority shareholders’ proportionate share of the Company’s majority owned subsidiaries. The following table sets forth the changes in noncontrolling interests (in millions):

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2018

 

2017

 

2018

 

2017

 

Balance at beginning of period

 

$

8.8

 

$

6.9

 

$

8.1

 

$

6.7

 

Net income

 

0.3

 

0.6

 

0.7

 

0.7

 

Foreign currency translation adjustments

 

(0.4

)

0.4

 

(0.3

)

0.5

 

Impact of ASC 606 adoption

 

 

(0.5

)

0.2

 

(0.5

)

Balance at end of period

 

$

8.7

 

$

7.4

 

$

8.7

 

$

7.4

 

 

16.         Other Charges, Net

 

The components of other charges, net were as follows (in millions):

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2018

 

2017

 

2018

 

2017

 

Information technology transformation costs

 

$

0.9

 

$

0.9

 

$

2.4

 

$

2.1

 

Restructuring charges

 

0.6

 

2.4

 

3.9

 

3.9

 

Acquisition-related charges

 

0.1

 

2.9

 

1.1

 

3.3

 

Other

 

0.6

 

0.2

 

2.6

 

0.2

 

Other charges, net

 

$

2.2

 

$

6.4

 

$

10.0

 

$

9.5

 

 

23



Table of Contents

 

Restructuring Initiatives

 

Restructuring charges for the three and six month periods ended June 30, 2018 included charges for various programs which were recorded in the accompanying unaudited condensed consolidated statements of income and comprehensive income (loss).  The charges for the three and six month periods ended June 30, 2017 related primarily to the previously reported and completed 2016 and 2015 restructuring plans.

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2018

 

2017

 

2018

 

2017

 

Cost of revenues

 

$

0.1

 

$

1.4

 

$

0.3

 

$

 

Other charges, net

 

0.6

 

2.4

 

3.9

 

3.9

 

 

 

$

0.7

 

$

3.8

 

$

4.2

 

$

3.9

 

 

The following table sets forth the changes in restructuring reserves for the six months ended June 30, 2018 (in millions):

 

 

 

Total

 

Severance

 

Exit Costs

 

Provisions
for Excess
Inventory