Bruker Corp 10-Q for FY2024 Q1
Bruker Corp (BRKR)
About this 10-Q
Bruker Corp filed this 10-Q on May 10, 2024, covering the quarter ended March 31, 2024 (FY2024 Q1).
Headline figures
Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $721.7M
- up 5.3% from $685.3M a year earlier
- Net income
- $50.9M
- down 33.5% from net income of $76.5M a year earlier
- Diluted EPS
- $0.35
- down 32.7% from $0.52 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
For the quarterly period ended
For the transition period from to
Commission File Number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
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Trading Symbols(s)
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Name of each exchange on which registered
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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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
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Class
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Outstanding at May 8, 2024
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Common Stock, $0.01 par value per share |
BRUKER CORPORATION
Quarterly Report on Form 10-Q
For the Quarter Ended March 31, 2024
Table of Contents
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Page |
Part I |
3 |
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Item 1: |
3 |
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Unaudited Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 |
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4 |
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5 |
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6 |
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7 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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Item 2: |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
29 |
Item 3: |
38 |
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Item 4: |
40 |
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Part II |
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Item 1: |
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Item 1A: |
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Item 2: |
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Item 5: |
41 |
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Item 6: |
42 |
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43 |
2
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)
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March 31, |
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December 31, |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Inventories |
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Other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Goodwill |
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Intangible assets, net |
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Operating lease assets |
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Deferred tax assets |
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Other long-term assets |
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Total assets |
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$ |
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$ |
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LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Current portion of long-term debt |
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$ |
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$ |
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Accounts payable |
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Deferred revenue and customer advances |
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Other current liabilities |
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Total current liabilities |
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Long-term debt |
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Long-term deferred revenue and customer advances |
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Deferred tax liabilities |
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Operating lease liabilities |
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Accrued pension |
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Other long-term liabilities |
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Total liabilities |
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$ |
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$ |
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(Note 16) |
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Redeemable noncontrolling interests |
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Shareholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Treasury stock, at cost, |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive (loss) income, net of tax |
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Total shareholders’ equity attributable to Bruker Corporation |
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Noncontrolling interests in consolidated subsidiaries |
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Total shareholders’ equity |
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Total liabilities, redeemable noncontrolling interests and shareholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these financial statements.
3
BRUKER CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data)
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Three Months Ended |
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2024 |
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2023 |
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Product revenue |
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$ |
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$ |
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Service and other revenue |
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Total revenue |
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Cost of product revenue |
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Cost of service and other revenue |
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Total cost of revenue |
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Gross profit |
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Operating expenses: |
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Selling, general and administrative |
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Research and development |
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Other charges, net |
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Total operating expenses |
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Operating income |
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Interest and other income (expense), net |
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( |
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Income before income taxes, equity in income of unconsolidated |
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Income tax provision |
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Equity in income of unconsolidated investees, net of tax |
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Net income |
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Net income attributable to noncontrolling interests in consolidated |
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Net income attributable to Bruker Corporation |
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$ |
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$ |
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Net income per common share attributable to Bruker Corporation |
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Basic |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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Weighted average common shares outstanding: |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these financial statements.
4
BRUKER CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
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Three Months Ended March 31, |
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2024 |
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2023 |
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Net income |
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$ |
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$ |
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Other comprehensive (loss) income: |
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Foreign currency translation adjustments, net of tax expense (benefit) of $ |
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( |
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Derivatives designated as hedging instruments net of tax expense (benefit) |
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( |
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Pension and other postretirement benefit liability adjustments net of tax expense of $ |
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Total other comprehensive (loss) income |
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( |
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Total Comprehensive income |
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Less: Comprehensive income attributable to noncontrolling interests |
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Less: Comprehensive loss attributable to redeemable noncontrolling |
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( |
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Total Comprehensive income attributable to Bruker Corporation |
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$ |
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$ |
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The accompanying notes are an integral part of these financial statements.
5
BRUKER CORPORATION
(in millions, except share data)
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Redeemable |
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Number of Common |
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Common |
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Number of Treasury |
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Treasury |
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Additional |
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Retained |
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Accumulated |
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Total |
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Noncontrolling |
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Total |
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Balance at December 31, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Stock options exercised |
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— |
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— |
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— |
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— |
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— |
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Restricted stock units vested |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Employee stock purchase plan |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Cash dividends declared and paid to |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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— |
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( |
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Loans to noncontrolling interest |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Consolidated net (loss) income |
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( |
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— |
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— |
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— |
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— |
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Other comprehensive income |
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( |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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( |
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Balance at March 31, 2024 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these financial statements.
6
BRUKER CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE NONCONTROLLING INTERESTS AND SHAREHOLDERS’ EQUITY
(in millions, except share data)
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Redeemable |
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Number of Common |
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Common |
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Number of Treasury |
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Treasury |
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Additional |
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Retained |
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Accumulated |
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Total |
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Noncontrolling |
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Total |
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Balance at December 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Stock options exercised |
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— |
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— |
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Restricted stock units vested |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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Employee stock purchase plan |
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— |
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— |
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— |
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Shares repurchased |
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— |
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( |
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— |
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— |
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— |
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Cash dividends declared and paid to |
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— |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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Biognosys acquisition - other shareholders |
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— |
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— |
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— |
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— |
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— |
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Other shareholders of majority-owned acquisitions |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Proceeds from the sale of noncontrolling interests |
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— |
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— |
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— |
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— |
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Consolidated net (loss) income |
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( |
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— |
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— |
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— |
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— |
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Other comprehensive income |
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— |
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— |
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Balance at March 31, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these financial statements.
7
BRUKER CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
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Three Months Ended |
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2024 |
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2023 |
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Cash flows from operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to cash flows from operating activities: |
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Depreciation and amortization |
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Stock-based compensation expense |
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Deferred income taxes |
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( |
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Impairment of minority investments and other long-lived assets |
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Gain on sale of property, plant and equipment |
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( |
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Other non-cash expenses, net |
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( |
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Changes in operating assets and liabilities, net of acquisitions and divestitures: |
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Accounts receivable |
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Inventories |
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( |
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( |
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Accounts payable and accrued expenses |
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|
( |
) |
|
|
|
|
Income taxes payable, net |
|
|
( |
) |
|
|
( |
) |
Deferred revenue and customer advances |
|
|
|
|
|
|
||
Other changes in operating assets and liabilities, net |
|
|
( |
) |
|
|
( |
) |
Net cash provided by operating activities |
|
|
|
|
|
|
||
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchases of property, plant and equipment |
|
|
( |
) |
|
|
( |
) |
Cash paid for minority investments |
|
|
( |
) |
|
|
( |
) |
Cash paid for acquisitions, net of cash acquired |
|
|
( |
) |
|
|
( |
) |
Proceeds from sales of property, plant and equipment |
|
|
|
|
|
|
||
Net proceeds from cross-currency swap agreements |
|
|
|
|
|
|
||
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Repayments of revolving line of credit |
|
|
( |
) |
|
|
|
|
Proceeds from revolving line of credit |
|
|
|
|
|
|
||
Repayment of long-term debt |
|
|
( |
) |
|
|
( |
) |
Repayment of 2012 Note Purchase Agreement |
|
|
( |
) |
|
|
|
|
Repayment of 2019 Term Note Agreement |
|
|
( |
) |
|
|
( |
) |
Payment of deferred financing costs |
|
|
( |
) |
|
|
|
|
Proceeds from issuance of common stock, net |
|
|
|
|
|
|
||
Payment of contingent consideration |
|
|
|
|
|
( |
) |
|
Payment of dividends to common shareholders |
|
|
( |
) |
|
|
( |
) |
Repurchase of common stock |
|
|
|
|
|
( |
) |
|
Proceeds from (payment for) the sale (purchase) of noncontrolling interests |
|
|
( |
) |
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
|
|
|
( |
) |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
|
|
Net change in cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
( |
) |
Cash, cash equivalents and restricted cash at beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash at end of period |
|
$ |
|
|
$ |
|
||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
||
Restricted cash period beginning balance |
|
$ |
|
|
$ |
|
||
Restricted cash period ending balance |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these financial statements.
7
BRUKER CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
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
BSI BioSpin Segment designs, manufactures and distributes enabling life science tools based on magnetic resonance technology. BSI BioSpin Segment’s revenues are generated by academic and government research customers, pharmaceutical and biotechnology companies and nonprofit laboratories, as well as chemical, food and beverage, clinical and other industrial companies.
BSI CALID Segment designs, manufactures and distributes life science mass spectrometry, applied 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 BSI CALID Segment include academic institutions and medical schools; pharmaceutical, biotechnology and diagnostics companies; contract research organizations; nonprofit and for-profit forensics laboratories; agriculture, food and beverage safety laboratories; environmental and clinical microbiology laboratories; hospitals and government departments and agencies.
BSI NANO Segment 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; spark optical emission spectroscopy systems; chip cytometry products and services for targeted spatial proteomics, multi-omic services; optofluidic and proteomic barcoding platforms; and products and services for spatial genomics research. Customers of the BSI NANO Segment include academic institutions, governmental customers, nanotechnology companies, semiconductor companies, raw material manufacturers, industrial companies, biotechnology and pharmaceutical companies and other businesses involved in materials research and life science research analysis.
BEST 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.
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 March 31, 2024 and December 31, 2023, and for the three months ended March 31, 2024 and 2023, 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 (“SEC”). Accordingly, the financial information presented herein does not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair 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 March 31, 2024, the Company’s significant accounting policies, which are detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, have not changed.
Risks and Uncertainties
The Company is subject to the same risks and uncertainties as disclosed in its Annual Report on Form 10-K filed with the SEC on February 29, 2024, however, as of January 1, 2024, the Company is subject to new risks related to its self-funded health insurance. Effective January 1, 2024, the Company is self-insured for health care claims for eligible participating U.S. employees subject to certain deductibles and limitations. The Company determines its liability for claims incurred but not reported for insurance liabilities
8
Use of Estimates
9
In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-09 – Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires enhanced income tax disclosures, including disaggregation of information in the rate reconciliation table and disaggregation of information related to income taxes paid as presented on the Cash Flow Statement. This guidance is effective for annual reporting periods beginning after December 15, 2024. The Company is evaluating the potential impact of ASU 2023-09 on the Company’s consolidated financial statements and related disclosures.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segments Disclosures (“ASU 2023-07”). The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”). These significant segment expenses are included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. All disclosure requirements under ASC 2023-07 are also required for public entities with a single reportable segment. This guidance is effective for annual reporting periods beginning after December 15, 2023, and interim periods after December 15, 2024. The Company is evaluating the potential impact of ASU 2023-07 on the Company’s consolidated financial statements and related disclosures.
The following table presents the Company’s revenue by Segment (in millions):
|
|
Three Months Ended |
|
|
|||||
|
|
2024 |
|
|
2023 |
|
|
||
Revenue by Segment: |
|
|
|
|
|
|
|
||
BSI BioSpin |
|
$ |
|
|
$ |
|
|
||
BSI CALID |
|
|
|
|
|
|
|
||
BSI NANO |
|
|
|
|
|
|
|
||
BEST |
|
|
|
|
|
|
|
||
Eliminations (a) |
|
|
( |
) |
|
|
( |
) |
|
Total revenue |
|
$ |
|
|
$ |
|
|
||
Revenue for the Company recognized at a point in time versus over time is as follows (in millions):
|
|
Three Months Ended |
|
|
|||||
|
|
2024 |
|
|
2023 |
|
|
||
Revenue recognized at a point in time |
|
$ |
|
|
$ |
|
|
||
Revenue recognized over time |
|
|
|
|
|
|
|
||
Total revenue |
|
$ |
|
|
$ |
|
|
||
The following table presents the Company’s revenue by End Customer Geography (in millions):
|
|
Three Months Ended |
|
|
|||||
|
|
2024 |
|
|
2023 |
|
|
||
Revenue by End Customer Geography: |
|
|
|
|
|
|
|
||
United States |
|
$ |
|
|
$ |
|
|
||
Germany |
|
|
|
|
|
|
|
||
Rest of Europe |
|
|
|
|
|
|
|
||
China |
|
|
|
|
|
|
|
||
Rest of Asia Pacific |
|
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
|
||
Total revenue |
|
$ |
|
|
$ |
|
|
||
10
Remaining Performance Obligations
Remaining performance obligations represent the aggregate transaction price allocated to a promise to transfer a good or service that is fully or partially unsatisfied at the end of the period. As of March 31, 2024, remaining performance obligations were approximately $
Contract Balances
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, note receivables and 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 classified as either other current assets or other long-term assets in the unaudited condensed consolidated balance sheets. The balance of contract assets as of March 31, 2024 and December 31, 2023 was $
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 sheets based on the timing of when revenue recognition is expected. As of March 31, 2024 and December 31, 2023, the contract liabilities were $
Inventories consisted of the following (in millions):
|
|
March 31, |
|
|
December 31, |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work-in-process |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Demonstration units |
|
|
|
|
|
|
||
Total Inventories |
|
$ |
|
|
$ |
|
||
Finished goods include in-transit systems shipped to the Company’s customers for which control has not passed to the customers. As of March 31, 2024 and December 31, 2023, the value of finished goods inventory-in-transit was $
Other current assets consisted of the following (in millions):
|
|
March 31, |
|
|
December 31, |
|
||
Unbilled and notes receivable |
|
$ |
|
|
$ |
|
||
Income and other taxes receivable |
|
|
|
|
|
|
||
Prepaid expenses |
|
|
|
|
|
|
||
Deposits with vendors |
|
|
|
|
|
|
||
Derivative asset |
|
|
|
|
|
|
||
Interest rate cross-currency swap agreements |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Other current assets |
|
$ |
|
|
$ |
|
||
11
The Company does not expect the amounts allocated to goodwill to be deductible for tax purposes.
2024
In the three months ending March 31, 2024, the Company completed various acquisitions that collectively complemented its existing product offerings of the Company’s existing businesses.
|
|
Chemspeed Technologies AG |
|
Spectral Instruments Imaging LLC |
|
Nion, LLC |
|
Other |
|
Total |
|
|||||
Segment |
|
BSI BBIO |
|
BSI BBIO |
|
BSI NANO |
|
Various |
|
|
|
|||||
Consideration Transferred: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash paid |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||
Cash acquired |
|
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Fair value of contingent consideration |
|
|
|
|
|
|
|
|
|
|
|
|||||
Working capital adjustment |
|
|
|
|
|
|
( |
) |
|
|
|
|
||||
Total consideration transferred, net of cash acquired |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||
Allocation of Consideration Transferred: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Accounts receivable |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||
Inventories |
|
|
|
|
|
|
|
|
|
|
|
|||||
Other current assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
Property, plant and equipment |
|
|
|
|
|
|
|
|
|
|
|
|||||
Other assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
Intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Technology |
|
|
|
|
|
|
|
|
|
|
|
|||||
Customer relationships |
|
|
|
|
|
|
|
|
|
|
|
|||||
Backlog |
|
|
|
|
|
|
|
|
|
|
|
|||||
Trade name |
|
|
|
|
|
|
|
|
|
|
|
|||||
Goodwill |
|
|
|
|
|
|
|
|
|
|
|
|||||
Liabilities assumed |
|
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Total consideration allocated |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||
Chemspeed Technologies, AG
On March 6, 2024, the Company acquired
The Company has recorded the provisional determination of the fair value of the identifiable assets acquired and liabilities assumed based on the information available to us as of the time of the issuance of these financial statements. Accordingly, the values recognized are subject to change until the Company finalizes the allocation of the consideration transferred during the measurement period, which is no later than one year from acquisition date. The final determination may result in asset and liability values that are different than the preliminary estimates. The fair value of the identifiable intangible assets has been estimated using the income approach through a discounted cash flow analysis. The cash flow analysis is based on the forecasts used by the Company to price the acquisition, and the discount rates applied were benchmarked by referencing the implied rate of return of the Company’s pricing model and the weighted average cost of capital. The amortization period for the intangible assets acquired is
Results of acquired operations of Chemspeed
The results of the acquired operations of Chemspeed have been included in the consolidated financial statements of the Company since its acquisition date of March 6, 2024. For the period from March 6, 2024 through March 31, 2024, Chemspeed had total revenues of $
12
Acquisition-related expenses incurred in connection with the Chemspeed acquisition were not material. These expenses primarily include legal and professional services. These acquisition-related expenses were recorded within Other Charges, Net in the consolidated statement of operations.
Supplemental Pro Forma Information (unaudited)
The supplemental pro forma financial information presented below is for illustrative purposes only and does not include the pro forma adjustments that would be required under Article 11 of Regulation S-X for pro forma financial information. The following supplemental pro forma financial information, is not necessarily indicative of the financial position or results of operations that would have been realized if the Company's combination with Chemspeed had been completed on January 1, 2023 and January 1, 2024, does not reflect synergies that might have been achieved as a result of the combination, and is not indicative of future operating results or financial position.
|
|
March 31, 2023 |
|
|
March 31, 2024 |
|
||||||||||||||||||
|
|
Before Adjustments |
|
|
Pro forma |
|
|
After Adjustments |
|
|
Before Adjustments |
|
|
Pro forma |
|
|
After Adjustments |
|
||||||
Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Net (loss) income |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
The supplemental pro forma financial information reflects pro forma adjustments which primarily include:
Spectral Instruments Imaging, LLC
On February 1, 2024, the Company acquired
The Company completed its provisional fair value allocation subject to the final net working capital adjustment. The fair value of the identifiable intangible assets has been estimated using the income approach through a discounted cash flow analysis. The cash flow analysis is based on the forecasts used by the Company to price the acquisition, and the discount rates applied were benchmarked by referencing the implied rate of return of the Company’s pricing model and the weighted average cost of capital. The amortization period for the intangible assets acquired is
Nion, LLC
On January 2, 2024, the Company acquired
The Company completed its provisional fair value allocation subject to the final net working capital adjustment. The fair value of the identifiable intangible assets has been estimated using the income approach through a discounted cash flow analysis. The cash flow analysis is based on the forecasts used by the Company to price the acquisition, and the discount rates applied were benchmarked by referencing the implied rate of return of the Company’s pricing model and the weighted average cost of capital. The amortization period for the intangible assets acquired is
13
31, 2024, the revenues and results of operations included in the consolidated financial statements of the Company were not material. Additional pro forma information combining the results of operations of the Company and this acquisition have not been included as the revenues and expenses were not material.
Other 2024 Acquisitions
In the three months ended March 31, 2024, the Company acquired other businesses which were accounted for under the acquisition method that complemented the Company’s existing product offerings.
The Company completed its provisional fair value allocations of these other wholly owned acquisitions subject to the final net working capital adjustment for certain of these acquisitions. The fair values of these identifiable intangible assets have been estimated using the income approach through a discounted cash flow analysis. The cash flow analysis is based on the forecasts used by the Company to price the acquisitions, and the discount rates applied were benchmarked by referencing the implied rate of return of the Company’s pricing model and the weighted average cost of capital. The amortization period for the intangible assets acquired is to
The following table reflects the consideration transferred and the respective reporting segment for the acquisition (in millions):
Name of Acquisition |
|
Date Acquired |
|
Segment |
|
Total |
|
|
Cash |
|
||
Phasefocus Holdings Limited |
|
March 1, 2024 |
|
BSI NANO |
|
$ |
|
|
$ |
|
||
Nanophoton Corporation |
|
February 5, 2024 |
|
BSI CALID |
|
$ |
|
|
$ |
|
||
Tornado Spectral Systems, Inc. |
|
January 1, 2024 |
|
BSI CALID |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
$ |
|
|
$ |
|
||
2024 Minority and Equity-method investments
During the three months ended March 31, 2024, the Company also completed a minority investment. The investment is accounted for under the alternative measurement, and as such, the investment value also represents the carrying value at March 31, 2024. The following table reflects the consideration transferred for the investments (in millions):
Name |
|
Financial |
|
Date Acquired |
|
Total |
|
|
Cash |
|
||
Other Investments |
|
Other long-term assets |
|
February 22, 2024 |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
$ |
|
|
$ |
|
||
In the three months ended March 31, 2024, the Company did not record any realized gains or unrealized gains related to its minority investments and did not recognize any impairment charges related to its minority investments.
Subsequent Events - Acquisitions
On April 30, 2024, the Company completed the acquisition of
On May 6, 2024, the Company acquired for approximately $
14
amend the judgment. The Plaintiffs have asked the Court in their post-trial motions to enhance the damages award. The Court has not yet ruled on the post-trial motions.
2023
In the three months ended March 31, 2023, the Company completed the following acquisition that complemented the Company’s existing product offerings.
|
|
Biognosys, AG |
|
|
Segment |
|
BSI CALID |
|
|
Consideration Transferred: |
|
|
|
|
Cash paid |
|
$ |
|
|
Cash acquired |
|
|
( |
) |
Holdback |
|
|
|
|
Fair value of redeemable noncontrolling interest - other shareholders |
|
|
|
|
Total consideration transferred |
|
$ |
|
|
Allocation of Consideration Transferred: |
|
|
|
|
Accounts receivable |
|
$ |
|
|
Inventories |
|
|
|
|
Other current assets |
|
|
|
|
Property, plant and equipment |
|
|
|
|
Other assets |
|
|
|
|
Intangible assets: |
|
|
|
|
Technology |
|
|
|
|
Customer relationships |
|
|
|
|
Backlog |
|
|
|
|
Trade name |
|
|
|
|
Goodwill |
|
|
|
|
Liabilities assumed (a) |
|
|
( |
) |
Total consideration allocated |
|
$ |
|
|
Biognosys, AG
On January 3, 2023, the Company acquired
Concurrent with the acquisition, the Company entered into an agreement with the noncontrolling interest holders that provides the Company with the right to purchase, and the noncontrolling interest holders with the right to sell, the remaining
The rights (embedded derivative) to the option shares can be sold at a minimum redemption value provided certain post combination employment services are met or at fair value, if above the floor, on the purchase or sell date. Therefore, the portion assigned to the minimum redemption value of option value of the hybrid instrument, which is tied to continued employment of the noncontrolling interest holders, was classified as a long-term liability on the consolidated balance sheet. The hybrid instrument was initially measured at fair value on the acquisition date and shall be accreted over the post combination service period. The acquisition date fair value of the hybrid instrument which is an embedded derivative was not material.
The rights associated with the portion of the noncontrolling interest above the minimum redemption value are contingently redeemable at the option of the Company or the noncontrolling interest holders. As redemption of the rights is contingently
15
redeemable at the option of the noncontrolling interest shareholders, the Company classifies the carrying amount of these rights in the mezzanine section on the consolidated balance sheet, which is presented above the equity section and below liabilities. The redeemable noncontrolling interest is initially measured at fair value on the acquisition date and subsequently at the greater of the amount that would be paid if settlement occurred as of the balance sheet date based on fair value as defined in the purchase agreement and its carrying amount adjusted for net (loss) income attributable to the noncontrolling interest. Adjustments to the carrying value of the redeemable noncontrolling interest are recorded through retained earnings.
The amortization period for the intangible assets acquired is seven years for the technology and nine years for the customer relationships. The trade name was determined to have an indefinite life. The Company expects to amortize backlog through the end of 2025.
Other 2023 Acquisitions
In the three months ended March 31, 2023, the Company acquired various other businesses which were accounted for under the acquisition method that complemented the Company’s existing product offerings. The following table reflects the consideration transferred and the respective reporting segment for the acquisitions (in millions):
Name of Acquisition |
|
Date Acquired |
|
Segment |
|
Total |
|
|
Cash |
|
||
Acquifer Imaging GmbH and Deltabyte GmbH |
|
January 4, 2023 |
|
BSI NANO |
|
$ |
|
|
$ |
|
||
Other majority owned acquisitions |
|
Various |
|
BSI CALID |
|
|
|
|
|
|
||
|
|
|
|
|
|
$ |
|
|
$ |
|
||
2023 Minority and Equity-method investments
During the three months ended March 31, 2023, the Company also completed minority investments that complemented the Company's existing product offerings. The following table reflects the consideration transferred and the respective reporting segment for the investments (in millions):
Name |
|
Acquisition / |
|
Financial |
|
Date Acquired |
|
Total |
|
|
Cash |
|
||
Other Investments |
|
Investment |
|
Other long-term assets |
|
Various |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||
In the three months ended March 31, 2023, the Company recognized $
Goodwill
The following table sets forth the changes in the carrying amount of goodwill (in millions):
|
|
|
|
|
Balance at December 31, 2023 |
|
$ |
|
|
Current period additions/adjustments |
|
|
|
|
Foreign currency effect |
|
|
( |
) |
Balance at March 31, 2024 |
|
$ |
|
|
16
Intangible Assets
The following is a summary of intangible assets (in millions):
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||||||||||||||||||
|
|
Gross |
|
|
Accumulated |
|
|
Net Carrying |
|
|
Gross |
|
|
Accumulated |
|
|
Net Carrying |
|
||||||
Existing technology and related patents |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Customer relationships |
|
|
|
|
|
( |
) |
|
$ |
|
|
|
|
|
|
( |
) |
|
|
|
||||
Trade names |
|
|
|
|
|
( |
) |
|
$ |
|
|
|
|
|
|
( |
) |
|
|
|
||||
Other |
|
|
|
|
|
( |
) |
|
$ |
|
|
|
|
|
|
( |
) |
|
|
|
||||
Intangible assets |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
For the three months ended March 31, 2024, and 2023, the Company recorded amortization expense of $
On a quarterly basis, the Company reviews its goodwill and intangible assets to determine if there have been any triggering events that could indicate an impairment. There were
The Company’s debt obligations consist of the following (in millions):
|
|
March 31, |
|
|
December 31, |
|
||
CHF notes (in U.S. Dollars) under the 2024 Term Loan Agreement due 2027 |
|
$ |
— |
|
|
$ |
— |
|
CHF notes (in U.S. Dollars) under the 2024 Term Loan Agreement due 2029 |
|
|
— |
|
|
|
— |
|
CHF notes (in U.S. Dollars) under the 2024 Term Loan Agreement due 2031 |
|
|
— |
|
|
|
— |
|
CHF notes (in U.S. Dollars) under the 2024 Note Purchase Agreement due 2034 |
|
|
— |
|
|
|
— |
|
CHF notes (in U.S. Dollars) under the 2024 Note Purchase Agreement due 2036 |
|
|
— |
|
|
|
— |
|
CHF notes (in U.S. Dollars) under the 2024 Note Purchase Agreement due 2039 |
|
|
— |
|
|
|
— |
|
EUR notes (in U.S. Dollars) under the 2021 Note Purchase Agreement due 2031 |
|
|
|
|
|
|
||
CHF notes (in U.S. Dollars) under the 2019 Note Purchase Agreement due 2029 |
|
|
|
|
|
|
||
CHF notes (in U.S. Dollars) under the 2021 Note Purchase Agreement due 2031 |
|
|
|
|
|
|
||
CHF revolving loan (in U.S. Dollars) under the 2024 Revolving Credit Agreement |
|
|
|
|
|
— |
|
|
U.S. Dollar notes under the 2019 Term Loan Agreement annual payments of $ |
|
|
|
|
|
|
||
U.S. Dollar notes under the 2012 Note Purchase Agreement due 2024 |
|
|
— |
|
|
|
|
|
Unamortized debt issuance costs |
|
|
( |
) |
|
|
( |
) |
Other loans |
|
|
|
|
|
|
||
Total notes and loans outstanding |
|
|
|
|
|
|
||
Finance lease obligations |
|
|
|
|
|
|
||
Total debt |
|
|
|
|
|
|
||
Current portion of long-term debt and finance lease obligations |
|
|
( |
) |
|
|
( |
) |
Total long-term debt, less current portion |
|
$ |
|
|
$ |
|
||
17
The following is a summary of the maximum commitments and the net amounts available to the Company under the 2024 Revolving 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 March 31, 2024 (in millions):
|
|
Weighted |
|
Total Amount |
|
|
Outstanding |
|
|
Outstanding |
|
|
Total |
|
||||
2024 Amended and Restated Credit |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Bank guarantees and working capital line |
|
varies |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total revolving lines of credit |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of March 31, 2024, the Company was in compliance with the financial covenants of all debt agreements.
As of March 31, 2024, the Company had several cross-currency and interest rate swap agreements with a notional value of $
2024 Term Loans
On March 29, 2024, the Company, as borrower, entered into (i) a term loan agreement (the “Three- and Five-Year Term Loan Agreement”) with Bank of America, N.A., as administrative agent, BofA Securities, Inc., JPMorgan Chase Bank, N.A., TD Bank, N.A. and Wells Fargo Bank, N.A. acting as joint lead arrangers and joint bookrunners, the other agents party thereto and the other banks or other financial institutions or entities from time to time party thereto as lenders and (ii) a term loan agreement with Bank of America, N.A., as administrative agent, BofA Securities, Inc., acting as sole arranger and bookrunner (the “Seven-Year Term Loan Agreement” and together with the Three- and Five-Year Term Loan Agreement, the “Term Loan Agreements”), and the other banks or other financial institutions or entities from time to time party thereto as lenders.
The Three- and Five-Year Term Loan Agreement provides for a (i) CHF
Loans under the Term Loan Agreements will be repayable in full at maturity, subject to scheduled quarterly amortization payments on (i) the three-year and five-year term loan facilities beginning in June 2024 and (ii) the seven-year term loan facility beginning in June 2026, and, in each case, may also be prepaid at the Company’s option in whole or in part without premium or penalty. The Term Loan Agreements contain representations and warranties, affirmative and negative covenants, and events of default, which the Company believes are usual and customary for an agreement of this type. The obligations under the Term Loan Agreements are unsecured and are fully and unconditionally guaranteed by certain of the Company’s subsidiaries.
The other terms of the Term Loan Agreements are substantially similar to the terms of the 2024 Revolving Credit Agreement, including representations and warranties, affirmative, negative and financial covenants, and events of default.
18
On April 29, 2024, the Company borrowed a total of CHF
2024 Note Purchase Agreement
On February 1, 2024, and February 8, 2024, the Company entered into two note purchase agreements, referred to as the 2024 Note Purchase Agreements, with a group of accredited institutional investors. Pursuant to the 2024 Note Purchase Agreements, on April 15, 2024, the Company issued and sold CHF
2024 Amended and Restated Credit Agreement
On January 18, 2024, the Company entered into the First Amendment to the 2019 Revolving Credit Agreement (the “Amended and Restated Credit Agreement” or “RCA”) to modify certain definitions within the agreement. The Amended and Restated Credit Agreement increased the aggregate principal amount from $
The RCA includes affirmative, negative and financial covenants and events of default customary for financings of this type. The negative covenants include, among others, restrictions on liens, indebtedness of the Company and its subsidiaries, asset sales, dividends, and transactions with affiliates. The financial covenants require the Company to maintain a maximum leverage ratio of
Following the quarter ended March 31, 2024, the Company borrowed additional amounts of approximately $
On January 18, 2024, the Company paid off the $
19
The Company measures the following financial assets and liabilities at fair value on a recurring basis.
March 31, 2024 |
|
Total |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Time deposits and money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
Interest rate and cross-currency swap agreements |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Forward currency contracts |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Embedded derivatives in purchase and delivery contracts |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Fixed price commodity contracts |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Debt securities available for sale |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total assets recorded at fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent consideration |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Hybrid instruments liability |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Liability awards |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Forward currency contracts |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Embedded derivatives in purchase and delivery contracts |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total liabilities recorded at fair value |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
December 31, 2023 |
|
Total |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Time deposits and money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
Interest rate and cross-currency swap agreements |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Forward currency contracts |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Embedded derivatives in purchase and delivery contracts |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Fixed price commodity contracts |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Debt securities available for sale |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total assets recorded at fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent consideration |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Hybrid instruments liability |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Liability awards |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Forward currency contracts |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total liabilities recorded at fair value |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|||
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.
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 and did not elect the fair value option for any financial assets or liabilities which originated during the three months ended March 31, 2024, or the year ended December 31, 2023.
20
The fair value of the Company's long-term fixed interest rate debt was $
Debt securities consist of investments in redeemable preferred stock. Debt securities are classified as either current or long-term investments based on their contractual maturities unless the Company intends to sell an investment within the next twelve months, in which case it is classified as current on the consolidated balance sheets. Debt securities are classified as available for sale and are carried at fair value.
Contingent consideration recorded within other current and other long-term liabilities represents the estimated fair value of future payments to the former shareholders as part of certain acquisitions. The contingent consideration is primarily based on the applicable acquired company achieving annual revenue and gross margin targets in certain years as specified in the relevant purchase and sale agreement. The Company initially values the contingent consideration on the acquisition date 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. Changes in fair value subsequent to acquisition are recognized in “Acquisition-related expenses, net” included in Other Charges, net, in the Consolidated Statements of Income and Comprehensive Income.
The following table sets forth the changes in contingent consideration liabilities (in millions):
|
|
|
|
|
Balance at December 31, 2023 |
|
$ |
|
|
Current period additions |
|
|
|
|
Current period adjustments |
|
|
|
|
Current period settlements |
|
|
( |
) |
Foreign currency effect |
|
|
( |
) |
Balance at March 31, 2024 |
|
$ |
|
|
As part of the 2018 Mestrelab Research, S.L. (“Mestrelab”), 2022 PreOmics, 2023 Biognosys, Zontal and MIRO acquisitions and certain other majority owned acquisitions, the Company entered into agreements with the noncontrolling interest holders that provide the Company with the right to purchase, and the noncontrolling interest holders with the right to sell, the remaining ownerships for cash at contractually defined redemption values. These rights (embedded derivatives) can be adjusted upon certain events related to post combination employment services. As the options are tied to continued employment, the Company classified the hybrid instruments (noncontrolling interests with embedded derivatives) as long-term liabilities on the consolidated balance sheet. Subsequent to the acquisitions, the carrying value of the hybrid instruments are remeasured to fair value with changes recorded to stock-based compensation expense in proportion to the respective requisite service period vested. The Company classified the hybrid instruments as Level 3 in the fair value hierarchy.
The following table sets forth the changes in hybrid instruments liability (in millions):
|
|
|
|
|
Balance at December 31, 2023 |
|
$ |
|
|
Acquisitions |
|
|
|
|
Current period adjustments |
|
|
|
|
Foreign currency effect |
|
|
( |
) |
Balance at March 31, 2024 |
|
$ |
|
|
21
Commodity Price Risk Management
The Company has arrangements with certain customers 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. As commodity contracts settle, gains (losses) as a result of changes in fair values are adjusted to the contracts with the customers through revenues.
Foreign Exchange Rate Risk Management
The Company had the following notional amounts outstanding under foreign exchange contracts, cross-currency interest rate swap agreements and long-term debt designated as net investment hedges and the respective fair value of the financial instruments recorded in the consolidated balance sheets as follows (in millions):
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||||||||||
|
|
Notional (in USD) |
|
|
Fair Value |
|
|
Notional (in USD) |
|
|
Fair Value |
|
||||
Financial instruments designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate cross-currency swap agreements |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
Long-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Long-term debt |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Total financial instruments designated as hedging instruments |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Financial instruments not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward currency contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Embedded derivatives in purchase and delivery contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||
Fixed price commodity contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total financial instruments not designated as hedging instruments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total financial instruments |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
In addition, the Company periodically enters into purchase and sales contracts denominated in currencies other than the functional currency of the Company's subsidiaries in 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 approximately $
22
The following is a summary of the gain (loss) included in the consolidated statements of income and comprehensive income related to the financial instruments described above (in millions):
|
|
|
|
Three Months Ended March 31, |
|
|
|||||
|
|
Financial Statement Classification |
|
2024 |
|
|
2023 |
|
|
||
Financial instruments not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
||
|
Interest and other income (expense), net |
|
$ |
|
|
$ |
( |
) |
|
||
|
Interest and other income (expense), net |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
Financial instruments designated as cash flow hedging instruments |
|
|
|
|
|
|
|
|
|
||
|
Interest and other income (expense), net |
|
$ |
|
|
$ |
|
|
|||
Financial instruments designated as net investment hedging instruments |
|
|
|
|
|
|
|
|
|
||
|
Interest and other income (expense), net |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
||
Total |
|
|
|
$ |
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Three Months Ended March 31, |
|
|
|||||
|
|
Financial Statement Classification |
|
2024 |
|
|
2023 |
|
|
||
Financial instruments designated as cash flow hedging instruments |
|
|
|
|
|
|
|
|
|
||
Interest rate cross-currency swap agreements |
|
Accumulated other comprehensive income, net of tax |
|
$ |
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
Financial instruments designated as net investment hedging instruments |
|
|
|
|
|
|
|
|
|
||
Interest rate cross-currency swap agreements |
|
Accumulated other comprehensive income, net of tax |
|
$ |
|
|
$ |
( |
) |
|
|
|
Accumulated other comprehensive income, net of tax |
|
|
|
|
|
( |
) |
|
||
|
|
|
|
|
|
|
|
( |
) |
|
|
Total |
|
|
|
$ |
|
|
$ |
( |
) |
|
|
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 March 31, 2024, and 2023 was $
As of March 31, 2024, and December 31, 2023, the Company had gross unrecognized tax benefits, excluding penalties and interest, of approximately $
The Company files tax returns in the United States, which include 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 2024 are approximately
23
The following table sets forth the computation of basic and diluted weighted average common shares outstanding and net income per common share attributable to Bruker shareholders (in millions, except per share amounts):
|
|
Three Months Ended March 31, |
|
|
|||||
|
|
2024 |
|
|
2023 |
|
|
||
Net income attributable to Bruker Corporation |
|
$ |
|
|
$ |
|
|
||
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
||
Weighted average common shares outstanding - basic |
|
|
|
|
|
|
|
||
Effect of dilutive securities: |
|
|
|
|
|
|
|
||
Stock options and restricted stock units |
|
|
|
|
|
|
|
||
Weighted average common shares outstanding - diluted |
|
|
|
|
|
|
|
||
Net income per common share attributable to Bruker Corporation shareholders: |
|
|
|
|
|
|
|
||
Basic |
|
$ |
|
|
$ |
|
|
||
Diluted |
|
$ |
|
|
$ |
|
|
||
The following common share equivalents have been excluded from the computation of diluted weighted average common shares outstanding, as their effect would have been anti-dilutive (amounts in millions of shares):
|
|
Three Months Ended March 31, |
|
|
|||||
|
|
2024 |
|
|
2023 |
|
|
||
Stock options |
|
|
|
|
|
|
|
||
Share Repurchase Program
In May 2021, the Company’s Board of Directors approved a share repurchase program (the “2021 Repurchase Program”) authorizing the purchase of up to $
In May 2023, the Company’s Board of Directors approved a share repurchase program (the “2023 Repurchase Program”) authorizing the purchase of up to $
During the three months ended March 31, 2024, the Company did
During the three months ended March 31, 2023, the Company purchased a total of
In August 2022, the Inflation Reduction Act (“IRA”) was signed into law in the United States. The IRA introduced new tax provisions, including a
Stock-Based Compensation
The Company recorded stock-based compensation expense as follows in the unaudited condensed consolidated statements of income and comprehensive income (in millions):
24
|
|
Three Months Ended |
|
|
|||||
|
|
2024 |
|
|
2023 |
|
|
||
Stock options |
|
$ |
|
|
$ |
|
|
||
Restricted stock units |
|
|
|
|
|
|
|
||
Employee Stock Purchase Plan |
|
|
|
|
|
|
|
||
Total stock-based compensation expense |
|
$ |
|
|
$ |
|
|
||
|
|
Three Months Ended |
|
|
|||||
|
|
2024 |
|
|
2023 |
|
|
||
Cost of product revenue |
|
$ |
|
|
$ |
|
|
||
Selling, general and administrative |
|
|
|
|
|
|
|
||
Research and development |
|
|
|
|
|
|
|
||
Total stock-based compensation expense |
|
$ |
|
|
$ |
|
|
||
In addition to the awards above, the Company recorded stock-based compensation expense within other charges, net of $
At March 31, 2024, the Company expected to recognize pre-tax stock-based compensation expense of $
The components of other charges, net were as follows (in millions):
|
|
Three Months Ended March 31, |
|
|
|||||
|
|
2024 |
|
|
2023 |
|
|
||
Information technology transformation costs |
|
$ |
|
|
$ |
|
|
||
Restructuring charges |
|
|
|
|
|
|
|
||
Acquisition-related expenses, net |
|
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
|
||
Other charges, net |
|
$ |
|
|
$ |
|
|
||
Restructuring Initiatives
Restructuring charges include charges for various programs that were recorded in the accompanying unaudited condensed consolidated statements of income and comprehensive income.
|
|
Three Months Ended March 31, |
|
|
|||||
|
|
2024 |
|
|
2023 |
|
|
||
Cost of revenues |
|
$ |
|
|
$ |
|
|
||
Other charges, net |
|
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
||
The following table sets forth the changes in restructuring reserves (in millions):
|
|
Total |
|
|
Severance |
|
|
Exit Costs |
|
|
Provisions |
|
||||
Balance at December 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Restructuring charges |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Other, non-cash adjustments and foreign currency effect |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Balance at March 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
25
In October 2023, the Company announced a restructuring plan associated with BCA (formerly PhenomeX), a component of the NANO reportable segment, to optimize costs and to facilitate integration efforts. The restructuring plan includes a reduction in headcount, consolidation of leased facilities, and a planned change in future product offerings. The restructuring plan is expected to be completed during 2024.
In connection with the BCA restructuring plan, the Company recorded and accrued severance and termination charges of $
Certain other restructuring programs relating to in reductions in force recorded by the BSI NANO, BSI Biospin, BSI CALID and Corporate segments in 2024 were not material. In April 2024, the Company announced a global restructuring program to reduce personnel costs affecting the BBIO and CALID Segments. The Company expects to incur additional restructuring charges of $
The components of interest and other income (expenses), net were as follows (in millions):
|
|
Three Months Ended March 31, |
|
|
|||||
|
|
2024 |
|
|
2023 |
|
|
||
Interest income |
|
$ |
|
|
$ |
|
|
||
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
Impairment of minority investments |
|
|
|
|
|
( |
) |
|
|
Exchange gains (losses) on foreign currency transactions |
|
|
|
|
|
( |
) |
|
|
Pension components |
|
|
|
|
|
( |
) |
|
|
Other income (expense) |
|
|
|
|
|
( |
) |
|
|
Interest and other income (expense), net |
|
$ |
|
|
$ |
( |
) |
|
|
For the three months ended March 31, 2024, the Company had $
In accordance with Accounting Standards Codification (“ASC”) Topic 450, Contingencies, the Company accrues anticipated costs of settlement, damages or other costs to the extent specific losses are probable and reasonably estimable. These accruals are adjusted periodically as assessments change or additional information becomes available.
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. The outcome of any of these proceedings cannot be accurately predicted, and the ultimate resolution of any of these existing matters, net of amounts accrued in the Company's balance sheet, may have a material adverse effect on the Company's business or financial condition.
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. An adverse outcome in any of these proceedings could result in one of more of the following and have material impact on our business or consolidated results of operations and financial position: (i) loss of patent protection; (ii) inability to continue to engage in certain activities; (iii) payment of significant damages, royalties, penalties and/or
26
license fees to third parties; and, (iv) with respect to products acquired through acquisitions accounted for as business combinations, potentially significant intangible asset impairment charges.
In September 2019, Luxendo GmbH (“Luxendo”), a subsidiary of Bruker Corporation, was sued in Germany by Carl Zeiss Microscopy GmbH, a subsidiary of Carl Zeiss AG (“Zeiss”), for infringement of a registered German utility model. After the utility model was canceled by the German Patent and Trademark Office in 2021, Zeiss withdrew its infringement action at the end of 2022 and the proceedings were terminated. However, a parallel European patent application, a family member of the utility model, is still pending in the European Patent Office (“EPO”). The Company is closely monitoring progress in the granting procedure and does not believe that a grant is imminent. The Company is presently unable to predict the EPO's final decision on the patent application.
In addition, the Company is subject to regulation by national, state and local government agencies in the United States and other countries in which the Company operates. From time to time, the Company is the subject of governmental investigations often involving regulatory, marketing and other business practices. These governmental investigations may result in the commencement of civil and criminal proceedings, fines, penalties and administrative remedies which could have a material adverse effect on the Company's financial position, results of operations and/or liquidity.
As of March 31, 2024 and December 31, 2023, the Company has
27
The Company has four reportable segments, BSI BioSpin, BSI CALID, BSI NANO and BEST, as discussed in Note 1 to the unaudited condensed consolidated financial statements. See Note 3 for revenue by reportable segment.
Operating income by reportable segment are presented below (in millions):
|
|
Three Months Ended March 31, |
|
|
|||||
|
|
2024 |
|
|
2023 |
|
|
||
Operating (loss) income: |
|
|
|
|
|
|
|
||
BSI BioSpin |
|
$ |
|
|
$ |
|
|
||
BSI CALID |
|
|
|
|
|
|
|
||
BSI NANO |
|
|
|
|
|
|
|
||
BEST |
|
|
|
|
|
|
|
||
Corporate, eliminations and other (a) |
|
|
( |
) |
|
|
( |
) |
|
Total operating income |
|
$ |
|
|
$ |
|
|
||
Total assets by reportable segment are as follows (in millions):
|
|
March 31, |
|
|
December 31, |
|
||
Assets: |
|
|
|
|
|
|
||
BSI BioSpin, BSI CALID, BSI NANO & Corporate |
|
$ |
|
|
$ |
|
||
BEST |
|
$ |
|
|
|
|
||
Eliminations and other (a) |
|
$ |
( |
) |
|
|
( |
) |
Total assets |
|
$ |
|
|
$ |
|
||
The Company is unable, without unreasonable effort or expense, to disclose the amount of total assets held by each of its BSI BioSpin, BSI CALID and BSI NANO Segments as well as the Corporate function and further, the Company’s chief operating decision maker does not receive any asset information by operating segment.
28
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with our interim unaudited condensed consolidated financial statements and the notes to those statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q, and in conjunction with the unaudited condensed consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2023.
Any statements other than statements of historical fact contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Quarterly Report on Form 10-Q may be deemed to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Without limiting the foregoing, the words “believe,” “anticipate,” “plan,” “expect,” “seek,” “may,” “will,” “intend,” “estimate,” “should” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements include, but are not limited to, statements regarding:
Actual results may differ from those referred to in any forward-looking statements due to a number of factors, including, but not limited to, the risks described in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 and in this Quarterly Report on Form 10-Q, including the factors presented on page 32. We expressly disclaim any intent or obligation to update these forward-looking statements other than as required by law.
Non-GAAP Measures
Although our unaudited condensed consolidated financial statements have been prepared in accordance with GAAP, we believe that describing revenue and expenses, excluding the effects of foreign currency, acquisitions and divestitures, as well as certain other charges, net, provides meaningful supplemental information regarding our performance. We rely internally on certain measures that are not calculated according to GAAP. These measures are organic revenue, free cash flow, non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP operating income and non-GAAP operating margin. Our management believes that these financial measures provide relevant and useful information that is widely used by equity analysts, investors and competitors in our industry, as well as by our management, in assessing both consolidated and business unit performance.
We define the term organic revenue as GAAP revenue excluding the effect of foreign currency translation changes and the effect of acquisitions and divestitures. We define the term non-GAAP gross profit as GAAP gross profit with certain non-GAAP measures excluded and non-GAAP gross profit margin as GAAP gross profit margin with certain non-GAAP measures excluded. We define the term non-GAAP operating income as GAAP operating income with certain non-GAAP measures excluded and non-GAAP operating margin as GAAP operating margin with certain non-GAAP measures excluded. These non-GAAP measures exclude costs related to restructuring actions, acquisition and related integration expenses, amortization of acquired intangible assets, costs associated with our global information technology transition initiatives, and other non-operational costs, and we believe these are useful measures to evaluate our continuing business.
We define free cash flow as GAAP net cash provided by operating activities less additions to property, plant, and equipment. We believe free cash flow is a useful measure to evaluate our business as it indicates the amount of cash generated after additions to
29
property, plant, and equipment which is available for, among other things, investments in our business, acquisitions, share repurchases, dividends and repayment of debt.
We regularly use these non-GAAP financial measures internally to understand, manage, and evaluate our business results and make operating decisions. We also measure our employees and compensate them, in part, based on such non-GAAP measures and use this information for our planning and forecasting activities. These measures may also be useful to investors in evaluating the underlying operating performance of our business. The presentation of these non-GAAP financial measures is not intended to be a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and it may be different from non-GAAP financial measures used by other companies, and therefore, may not be comparable among companies.
30
OVERVIEW
We are a developer, manufacturer and distributor 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. Our corporate headquarters are located in Billerica, Massachusetts. We maintain major technical and manufacturing centers in Europe, Asia and North America and we have sales offices located throughout the world. Bruker is organized into four reportable segments: the Bruker Scientific Instruments (BSI) BioSpin Segment, the BSI CALID Segment, the BSI NANO Segment and the Bruker Energy & Supercon Technologies (BEST) Segment.
Revenue for the three months ended March 31, 2024, increased by $36.4 million, or 5.3%, to $721.7 million, compared to $685.3 million for the comparable period in 2023. The revenue growth was attributed to an increase of 3.8% from acquisitions, offset by a decrease of 0.1% from unfavorable foreign exchange rate movements. Excluding the unfavorable effects of foreign exchange rate movements and our recent acquisitions, our organic revenue, a non-GAAP measure, increased 1.6%. Revenue increases were driven by demand for our differentiated high-value scientific instruments and life science solutions compared to the same period in 2023.
Our gross profit margin decreased to 48.9% during the three months ended March 31, 2024, as compared to 52.5% in the same period in 2023, as a result of product mix, acquisitions and unfavorable foreign exchange rate movements.
Our income tax provision in the three months ended March 31, 2024 and 2023, was $19.8 million and $29.9 million, respectively, representing effective tax rates of 27.7% and 28.0%, respectively. The decrease in our effective tax rate was primarily due to change in jurisdictional mix, and the impact of discrete items.
Diluted earnings per share for the three months ended March 31, 2024, was $0.35, a decrease of $0.17 compared to $0.52 per share in the same period in 2023. The decrease in diluted earnings per share in the three months ended March 31, 2024, was driven by lower net income, partially offset by lower weighted average shares outstanding as compared to the three months ended March 31, 2023, due to share repurchases under our repurchase program.
The following table presents a reconciliation from net cash provided by operating activities, which is the most directly comparable GAAP operating financial measure, to free cash flow, a non-GAAP measure, as used by management (in millions):
|
|
Three Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
GAAP net cash provided by operating activities |
|
$ |
21.8 |
|
|
$ |
87.5 |
|
Less: purchases of property, plant and equipment |
|
|
(21.4 |
) |
|
|
(25.0 |
) |
Free cash flow |
|
$ |
0.4 |
|
|
$ |
62.5 |
|
The following table presents reconciliations from gross profit and gross profit margin, which are the most directly comparable GAAP operating performance measures, to non-GAAP gross profit and non-GAAP gross profit margin as used by management (in millions):
|
|
Three Months Ended March 31, |
|
|
|||||||||||||
|
|
2024 |
|
|
2023 |
|
|
||||||||||
Gross profit |
|
$ |
352.8 |
|
|
|
48.9 |
% |
|
$ |
359.7 |
|
|
|
52.5 |
% |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restructuring costs |
|
|
3.7 |
|
|
|
0.5 |
% |
|
|
0.2 |
|
|
|
— |
|
|
Acquisition-related costs |
|
|
3.0 |
|
|
|
0.4 |
% |
|
|
0.1 |
|
|
|
— |
|
|
Purchased intangible amortization |
|
|
7.8 |
|
|
|
1.1 |
% |
|
|
5.4 |
|
|
|
0.8 |
% |
|
Other costs |
|
|
2.1 |
|
|
|
0.3 |
% |
|
|
0.5 |
|
|
|
0.1 |
% |
|
Non-GAAP gross profit |
|
$ |
369.4 |
|
|
|
51.2 |
% |
|
$ |
365.9 |
|
|
|
53.4 |
% |
|
Our non-GAAP gross profit margin decreased in the three months ended March 31, 2024, as compared to the same period in 2023, due to transitory factors, including product mix, acquisitions and unfavorable foreign exchange rate movements.
31
The following table presents reconciliations from operating income and operating margin, which are the most directly comparable GAAP operating performance measures, to non-GAAP operating income and non-GAAP operating margin as used by management (in millions):
|
|
Three Months Ended March 31, |
|
|
|||||||||||||
|
|
2024 |
|
|
2023 |
|
|
||||||||||
Operating income |
|
$ |
64.8 |
|
|
|
9.0 |
% |
|
$ |
122.7 |
|
|
|
17.9 |
% |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restructuring costs |
|
|
7.2 |
|
|
|
1.0 |
% |
|
|
0.5 |
|
|
|
0.1 |
% |
|
Acquisition-related costs |
|
|
7.1 |
|
|
|
1.0 |
% |
|
|
3.0 |
|
|
|
0.4 |
% |
|
Purchased intangible amortization |
|
|
16.2 |
|
|
|
2.2 |
% |
|
|
10.7 |
|
|
|
1.6 |
% |
|
Other costs |
|
|
5.4 |
|
|
|
0.8 |
% |
|
|
2.5 |
|
|
|
0.3 |
% |
|
Non-GAAP operating income |
|
$ |
100.7 |
|
|
|
14.0 |
% |
|
$ |
139.4 |
|
|
|
20.3 |
% |
|
Our non-GAAP operating margin decreased in the three months ended March 31, 2024, as compared to the same period in 2023, due to the impact of the same factors impacting gross margins: product mix, acquisition and unfavorable foreign exchange rate movements. We also increased planned sales and marketing activities and investments in our research and development capabilities, as compared to 2023.
We can experience quarter-to-quarter fluctuations in our operating results as a result of various factors, some of which are outside our control, such as:
Several of these factors have in the past affected and continue to affect the amount and timing of revenue recognized on sales of our products and receipt of related payments and will likely continue to do so in the future. Accordingly, our operating results in any particular quarter may not necessarily be an indication of any future quarter’s operating performance.
Maintaining business continuity and service levels to our customers
Ensuring our ability to supply our enabling technologies and solutions and maintaining high service levels for our customers is a top priority for Bruker. We are continuing capital investments in production facilities for efficiencies and expansion. We continue to encounter supply chain risks associated with the global economy and increasing geopolitical tensions, including inflation, banking industry volatility, the threat of recession, financial liquidity, currency volatility or devaluation, and the worldwide shortage of semiconductor chips, components, and raw materials such as copper.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
This discussion and analysis of our financial condition and results of operations is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to: revenue recognition; stock-based compensation expense; restructuring and other related charges; income taxes, including the recoverability of deferred tax assets; allowance for doubtful accounts; inventory reductions for excess and obsolete inventories; estimated fair values of
32
long-lived assets used to measure the recoverability of long-lived assets; intangible assets and goodwill; expected future cash flows used to measure the recoverability of intangible assets and long-lived assets; warranty costs; derivative financial instruments; and contingent liabilities. We base our estimates and judgments on our historical experience, current market and economic conditions, industry trends, and other assumptions that we believe are reasonable and form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates and historical experience.
We believe the following critical accounting policies and estimates to be both those most important to the portrayal of our financial position and results of operations and those that require the most estimation and subjective judgment:
For a further discussion of our critical accounting policies, please refer to our Annual Report on Form 10-K for the year ended December 31, 2023.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2024, compared to the Three Months Ended March 31, 2023
Consolidated Results
The following table presents our results (in millions):
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||
|
|
2024 |
|
|
2023 |
|
|
Dollar |
|
|
Percentage |
|
||||
Product revenue |
|
$ |
586.9 |
|
|
$ |
567.1 |
|
|
$ |
19.8 |
|
|
|
3.5 |
% |
Service and other revenue |
|
|
134.8 |
|
|
|
118.2 |
|
|
|
16.6 |
|
|
|
14.0 |
% |
Total revenue |
|
|
721.7 |
|
|
|
685.3 |
|
|
|
36.4 |
|
|
|
5.3 |
% |
Cost of product revenue |
|
|
291.7 |
|
|
|
257.2 |
|
|
|
34.5 |
|
|
|
13.4 |
% |
Cost of service and other revenue |
|
|
77.2 |
|
|
|
68.4 |
|
|
|
8.8 |
|
|
|
12.9 |
% |
Total cost of revenue |
|
|
368.9 |
|
|
|
325.6 |
|
|
|
43.3 |
|
|
|
13.3 |
% |
Gross profit |
|
|
352.8 |
|
|
|
359.7 |
|
|
|
(6.9 |
) |
|
|
(1.9 |
)% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative |
|
|
195.3 |
|
|
|
162.7 |
|
|
|
32.6 |
|
|
|
20.0 |
% |
Research and development |
|
|
81.8 |
|
|
|
69.0 |
|
|
|
12.8 |
|
|
|
18.6 |
% |
Other charges, net |
|
|
10.9 |
|
|
|
5.3 |
|
|
|
5.6 |
|
|
|
105.7 |
% |
Total operating expenses |
|
|
288.0 |
|
|
|
237.0 |
|
|
|
51.0 |
|
|
|
21.5 |
% |
Operating income |
|
|
64.8 |
|
|
|
122.7 |
|
|
|
(57.9 |
) |
|
|
(47.2 |
)% |
Interest and other income (expense), net |
|
|
6.8 |
|
|
|
(16.1 |
) |
|
|
22.9 |
|
|
|
(142.2 |
)% |
Income before income taxes, equity in income of unconsolidated |
|
|
71.6 |
|
|
|
106.6 |
|
|
|
(35.0 |
) |
|
|
(32.8 |
)% |
Income tax provision |
|
|
19.8 |
|
|
|
29.9 |
|
|
|
(10.1 |
) |
|
|
(33.8 |
)% |
Equity in income of unconsolidated investees, net of tax |
|
|
0.2 |
|
|
|
0.7 |
|
|
|
(0.5 |
) |
|
|
(71.4 |
)% |
Net income |
|
|
52.0 |
|
|
|
77.4 |
|
|
|
(25.4 |
) |
|
|
(32.8 |
)% |
Net income attributable to noncontrolling interests in consolidated |
|
|
1.1 |
|
|
|
0.9 |
|
|
|
0.2 |
|
|
|
22.2 |
% |
Net income attributable to Bruker Corporation |
|
$ |
50.9 |
|
|
$ |
76.5 |
|
|
$ |
(25.6 |
) |
|
|
(33.5 |
)% |
33
Revenue
The following table presents revenue, change in revenue and revenue growth by reportable segment (in millions):
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||
|
|
2024 |
|
|
2023 |
|
|
Dollar |
|
|
Percentage |
|
||||
BSI BioSpin |
|
$ |
182.8 |
|
|
$ |
180.3 |
|
|
$ |
2.5 |
|
|
|
1.4 |
% |
BSI CALID |
|
|
227.9 |
|
|
|
236.7 |
|
|
|
(8.8 |
) |
|
|
-3.7 |
% |
BSI NANO |
|
|
240.4 |
|
|
|
209.6 |
|
|
|
30.8 |
|
|
|
14.7 |
% |
BEST |
|
|
73.1 |
|
|
|
62.2 |
|
|
|
10.9 |
|
|
|
17.5 |
% |
Eliminations (a) |
|
|
(2.5 |
) |
|
|
(3.5 |
) |
|
|
1.0 |
|
|
|
|
|
Total revenue |
|
$ |
721.7 |
|
|
$ |
685.3 |
|
|
$ |
36.4 |
|
|
|
5.3 |
% |
Revenue increases were driven by growing demand for our differentiated instruments and solutions as well as pricing actions taken primarily to address inflation cost pressures. For the three months ended March 31, 2024, the BSI BioSpin Segment recorded modest revenue growth across biopharma, academic & government, and industrial research segments. The decrease in revenue in the BSI CALID Segment for the three months ended March 31, 2024, relates primarily to the timing of shipments which are expected to occur in the second quarter of 2024. Bruker Microbiology & Infection Diagnostics (BMID) revenues increased modestly for the three months ended March 31, 2024, driven by MALDI BioTyper consumables growth. The BSI NANO Segment revenue increase for the three months ended March 31, 2024, was driven by strong demand across all key markets.
Geographically in the three months ended March 31, 2024, our North American revenue grew 13.5%, Asia Pacific revenue decreased by 7.3%, and European revenue increased by 10.1% compared to the same period in 2023.
Gross Profit
Gross profit and gross profit margin decreased in the three months ended March 31, 2024, as compared to the same period in 2023, a result of product mix, acquisitions, and unfavorable foreign exchange rate movements.
Selling, General and Administrative
Our selling, general and administrative expenses for the three months ended March 31, 2024, increased to 27.1% of total revenue, from 23.7% of total revenue for the comparable period in 2023. The increase as a percentage of revenue was a result of inflation and increased planned investments in sales and marketing compared to the same period in 2023. Primary investments are related to additional headcount and personnel expenses as well as increased consulting and professional fees related to, tax, audit and audit-related fees.
Research and Development
Our research and development expenses for the three months ended March 31, 2024 increased to 11.3% of total revenue from 10.1% of total revenue for the comparable period in 2023. The increase as a percentage of revenue is a result of our increased investment in research and development capabilities, especially in our key Project Accelerate 2.0 initiatives. Investments are primarily related to additional headcount and personnel expenses as well as increased consulting and professional fees related to research and development activities.
Other Charges, Net
Other charges, net for the three months ended March 31, 2024, consisted of $4.1 million of acquisition-related charges, $0.8 million of costs associated with our global information technology (IT) transformation activities, $1.2 million of long-lived asset impairment, $1.3 million of other charges and $3.5 million of restructuring costs principally related to the BCA acquisition as detailed in Note 14 Other Charges, net. Acquisition-related charges relate primarily to transaction costs on potential and consummated acquisitions, integration costs of newly acquired entities, and stock-based compensation expense related to the fair value changes of hybrid instruments. The IT transformation initiative is a multi-year project aimed at updating and integrating our global enterprise resource planning and human resource information systems.
Other charges, net for the three months ended March 31, 2023, consisted of $2.9 million of acquisition-related charges related to acquisitions primarily completed in 2023, $0.5 million of costs associated with our global IT transformation activities, $0.3 million of restructuring costs and $1.6 million of other charges. Acquisition-related charges relate primarily to the integration costs of newly
34
acquired entities and the cost of post combination employment services in the period acquired. The IT transformation initiative is a multi-year project aimed at updating and integrating our global enterprise resource planning and human resource information systems.
Operating Income
The following table presents operating income and operating margins on revenue by reportable segment (in millions):
|
|
Three Months Ended March 31, |
|
|||||||||||||
|
|
2024 |
|
|
2023 |
|
||||||||||
|
|
Operating |
|
|
Percentage of |
|
|
Operating |
|
|
Percentage of |
|
||||
BSI BioSpin |
|
$ |
31.2 |
|
|
|
17.1 |
% |
|
$ |
47.4 |
|
|
|
26.3 |
% |
BSI CALID |
|
|
41.1 |
|
|
|
18.0 |
% |
|
|
57.6 |
|
|
|
24.3 |
% |
BSI NANO |
|
|
10.8 |
|
|
|
4.5 |
% |
|
|
29.4 |
|
|
|
14.0 |
% |
BEST |
|
|
8.1 |
|
|
|
11.1 |
% |
|
|
8.0 |
|
|
|
12.9 |
% |
Corporate, eliminations and other (a) |
|
|
(26.4 |
) |
|
|
|
|
|
(19.7 |
) |
|
|
|
||
Total operating income |
|
$ |
64.8 |
|
|
|
9.0 |
% |
|
$ |
122.7 |
|
|
|
17.9 |
% |
(a) Represents corporate costs and eliminations not allocated to the reportable segments. Unallocated costs include general and administrative expenses not directly incurred by the segments such as professional fees incurred for the quarterly reviews and annual audit of the consolidated financial statements, personnel costs of corporate accounting, finance, legal and IT resources, and other expense items.
Our operating income decreased in the three months ended March 31, 2024, as compared to the same period in 2023, due to higher selling, general and administrative expenses, research and development costs, as well as higher acquisition and restructuring costs as compared to the same period in the prior year.
Our operating income margin decreased in the three months ended March 31, 2024, as compared to the same period in 2023, due to unfavorable product mix, the impact of foreign exchange rate movements, acquisitions, and inflation offset by favorable pricing and volume leverage.
Interest and Other Income (Expense), Net
The increase in interest and other income (expense), net in the three months ended March 31, 2024, as compared to the same period in 2023 was due to higher foreign currency exchange gains of $8.9 million driven by strengthening of the U.S. dollar against other currencies. This foreign exchange gain includes an unrealized gain recognized on a forward contract taken to minimize risks from fluctuations in the Euro currency in anticipation of the closing of our acquisition of ELITechGroup in the quarter ending June 30, 2024, the purchase price of which is denominated in Euro.
Income Tax Provision
The 2024 and 2023 effective tax rates were estimated using projected annual pre-tax income on a jurisdictional basis. Expected tax benefits, including tax credits and incentives, the impact of changes to valuation allowances and the effect of jurisdictional differences in statutory tax rates were also considered in the calculation.
The effective tax rates for the three months ended March 31, 2024 and 2023, were 27.7% and 28.0%, respectively. The decrease in the Company's effective tax rate was primarily due to change in jurisdictional mix, and the impact of discrete items. The Company also recorded discrete tax impacts during the three months ended March 31, 2024.
Equity in Income of Unconsolidated Investees, net of tax
Equity in Income of Unconsolidated Investees, net of tax represents the Company’s proportional share of the earnings or losses as reported by equity-method investees.
Net Income Attributable to Noncontrolling Interests
The net income attributable to noncontrolling interests represented the minority shareholders’ proportionate share of the net income recorded by our majority-owned subsidiaries.
35
LIQUIDITY AND CAPITAL RESOURCES
We anticipate that our existing cash and credit facilities will be sufficient to support our operating and investing needs for at least the next twelve months. Our future cash requirements could be affected by acquisitions that we may complete, purchases of our common stock or the payment of dividends in the future. Historically, we have financed our growth and liquidity needs through cash flow generation from operations and a combination of debt financings and issuances of common stock. In the future, there are no assurances that we will continue to generate cash flow from operations or that additional financing alternatives will be available to us, if required, or, if available, will be obtained on terms favorable to us.
Cash, cash equivalents at March 31, 2024 and December 31, 2023 totaled $340.1 million and $488.3 million, respectively, of which $300.9 million and $398.4 million, respectively, related to cash and cash equivalents held outside of the United States in our foreign subsidiaries, most significantly in the Netherlands, Switzerland, and China.
The following table presents our cash flows from operating activities, investing activities and financing activities for the periods presented (in millions):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Net cash provided by operating activities |
|
$ |
21.8 |
|
|
$ |
87.5 |
|
Net cash used in investing activities |
|
|
(304.2 |
) |
|
|
(108.2 |
) |
Net cash provided by (used in) financing activities |
|
|
151.7 |
|
|
|
(30.7 |
) |
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
|
(17.6 |
) |
|
|
4.1 |
|
Net change in cash, cash equivalents and restricted cash |
|
$ |
(148.3 |
) |
|
$ |
(47.3 |
) |
Net cash provided by operating activities during the three months ended March 31, 2024, resulted primarily from net income adjusted for non-cash items of $85.2 million, partially offset by a change in operating assets and liabilities, net of acquisitions and divestitures of $63.4 million. The decrease in net income adjusted for non-cash items was due to lower net income. The increase in the change in operating assets and liabilities, net of acquisitions and divestitures was primarily due to higher working capital requirements for newly acquired businesses, strategic inventory management to handle supply chain challenges, timing of shipments which are expected to occur in the second quarter of 2024, increase in tax payments, and payables offset by modestly higher collections of receivables due to increased revenues at the end of the period.
Net cash used in investing activities during the three months ended March 31, 2024, resulted primarily from acquisitions of $274.5 million, purchases of property, plant and equipment of $21.4 million, and minority investments of $10.0 million, offset by $1.2 million of net proceeds from cross-currency swap agreements and $0.5 million of net proceeds from sales of property, plant and equipment. Net cash used in investing activities during the three months ended March 31, 2023, resulted primarily from acquisitions of $88.1 million, purchases of property, plant and equipment of $25.0 million, and minority investments of $8.2 million, offset by $10.7 million of net proceeds from sale of property, plant and equipment.
Net cash provided by financing activities during the three months ended March 31, 2024, was primarily from cash received from the revolving line of credit $268.9, offset by cash paid for repayment of the 2012 Note Purchase Agreement $100.0 million, repayment of long term debt $3.4 million, and for the payment of dividends $7.3 million. Net cash used in financing activities during the three months ended March 31, 2023, was primarily from cash paid for purchases of common stock under our repurchase program of $22.4 million, and $7.4 million for the payment of dividends.
Share Repurchase Program
In May 2021, our Board of Directors approved a share repurchase program (the “2021 Repurchase Program”) authorizing the purchase of up to $500.0 million of our common stock over a two-year period, in amounts, at prices, and at such times as we deem appropriate, subject to market conditions, legal requirements and other considerations. Authorization for the remaining $94.4 million on the 2021 Repurchase Program expired in May 2023.
In May 2023, our Board of Directors approved a share repurchase program (the “2023 Repurchase Program”) authorizing the purchase of up to $500.0 million of our common stock over a two-year period, in amounts, at prices, and at such times as we deem appropriate, subject to market conditions, legal requirements and other considerations. At March 31, 2024, $369.9 million remains available for future purchase under the 2023 Repurchase Program.
During the three months ended March 31, 2024, we did not purchase any shares under the 2023 Repurchase Program.
36
During the three months ended March 31, 2023, we purchased a total of 315,318 shares at an aggregate cost of $22.2 million under the 2021 Repurchase Program.
In August 2022, the Inflation Reduction Act (“IRA”) was signed into law in the United States. The IRA introduced new tax provisions, including a 1.0% excise tax on stock repurchases. We expect additional guidance and regulations to be issued in future periods and will continue to assess its potential impact on our business as further information becomes available. The estimated excise tax on stock repurchases is not material and is recorded in other current liabilities and additional paid in capital. No additional accrual was recorded for estimated excise tax for the three months ended March 31, 2024.
Credit Facilities
We have a total outstanding debt of $1.4 billion as of March 31, 2024, and a revolving credit facility that provides for up to $900 million of backup liquidity to finance working capital needs, refinance or reduce existing indebtedness, and for general corporate use. In addition, the facility provides for an uncommitted incremental facility whereby, under certain circumstances, we may, at our option, increase the amount of the revolving facility or incur term loans in an aggregate amount not to exceed $400 million. Outstanding borrowings as of May 10, 2024, drawn from this facility were $805 million in aggregate.
For a summary of the fair and carrying values of our outstanding debt as of March 31, 2024, and December 31, 2023, please read Note 8, Debt and Note 9, Fair Value of Financial Instruments, to our unaudited condensed consolidated financial statements included in this report. For additional information on our outstanding debt and credit facility please read, Note 12, Debt, to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.
As of March 31, 2024, we had no off-balance sheet arrangements.
As of March 31, 2024, we were compliant with the financial covenants of these debt agreements.
RECENT ACCOUNTING PRONOUNCEMENTS
Information regarding recent accounting standard changes and developments is incorporated by reference from Part I, Item 1, Unaudited Condensed Consolidated Financial Statements, of this document and should be considered an integral part of this Item 2. See Note 2 in the Notes to the Unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for recently adopted and issued accounting standards.
37
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are potentially exposed to market risks associated with changes in foreign currency translation rates, interest rates and commodity prices. We selectively use financial instruments to reduce these risks. All transactions related to risk management techniques are authorized and executed pursuant to our policies and procedures. Analytical techniques used to manage and monitor foreign currency translation and interest rate risk include market valuations and sensitivity analysis.
Foreign Currency Risk
We generate a substantial portion of our revenues in international markets, principally Germany and other countries in the European Union, Switzerland and Japan, which exposes our operations to the risk of exchange rate fluctuations. The impact of currency exchange rate movements can be positive or negative in any period. Our costs related to sales in foreign currencies are largely denominated in the same respective currencies, reducing our transaction risk exposure. However, for foreign currency denominated sales in certain regions, such as Japan, where we do not incur significant costs denominated in Japanese Yen, we are more exposed to the impact of foreign currency fluctuations.
For sales not denominated in U.S. dollars, if there is an increase in the rate at which a foreign currency is exchanged for U.S. dollars, it will require more of the foreign currency to equal a specified amount of U.S. dollars than before the rate increase. In such cases, if we price our products in the foreign currency, we will receive less in U.S. dollars than we would have received before the rate increase went into effect. If we price our products in U.S. dollars and competitors price products in local currency, an increase in the relative strength of the U.S. dollar could result in our prices not being competitive in a market where business is transacted in the local currency. For example, if the U.S. dollar strengthened against the Japanese Yen, our Japanese-based competitors would have a greater pricing advantage over us.
Changes in foreign currency translation rates, compared to the comparative prior year period, decreased our revenue by 0.1% and 4.5% for the three months ended March 31, 2024 and 2023, respectively.
Assets and liabilities of our foreign subsidiaries, where the functional currency is the local currency, are translated into U.S. dollars using period-end exchange rates. 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. For the three months ended March 31, 2024 and 2023, we recorded net gains (losses) from currency translation adjustments of $(77.2) million and $25.8 million, respectively. Amounts reported in interest and other income (expense), net, for the three months ended March 31, 2023, include a cumulative currency translation adjustment loss of $2.7 million recognized from substantially liquidating our Russian operations. A 10% depreciation in functional currencies, relative to the U.S. Dollar, at March 31, 2024, would have resulted in a reduction of shareholders’ equity of approximately $376.3 million. Gains and losses resulting from foreign currency transactions are reported in interest and other income (expense), net in the unaudited condensed consolidated statements of income and comprehensive income.
We periodically enter into forward currency contracts in order to minimize the volatility that fluctuations in currency translation have on our monetary transactions. Under these arrangements, we typically agree 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 12 months, with some agreements extending to longer periods. 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 unaudited condensed consolidated statements of income and comprehensive income. In anticipation of the closing of our acquisition of ELITechGroup in the quarter ending June 31, 2024, the purchase price of which is denominated in Euro, and to minimize risks in fluctuations of the Euro, the Company entered into a forward contract to buy Euro and sell Swiss Francs. As of March 31, 2024, we recorded an unrealized foreign exchange gain of $11.1 million in interest and other income ( expense), net, related to this forward contract.
As of March 31, 2024, we had several cross-currency and interest rate swap agreements with a notional value of $137.3 million of U.S. dollar to Swiss Franc and a notional value of $137.3 million of U.S. dollar to Euro to hedge the variability in the movement of foreign currency exchange rates on portions of our Euro and Swiss Franc denominated net asset investments. Under the GAAP hedge accounting guidance, changes in fair value of the derivative that relates to changes in the foreign currency spot rate are recorded in the currency translation adjustment in comprehensive (loss) income and remain in accumulated comprehensive (loss) income in shareholders’ equity until the sale or substantial liquidation of the foreign operation. For the three months ended March 31, 2024 and 2023, we recorded net gains (losses) from the changes in fair value of the derivatives of $11.6 million and $(4.6) million, respectively.
We will apply hedge accounting for our additional Swiss Franc denominated borrowings drawn down in April 2024 under our debt agreements, proceeds of which were used to fund our acquisitions.
38
For the three months ended March 31, 2024 and 2023, we recorded net gains (losses) from the changes in fair value, net of tax, of the 2021 Note Purchase Agreement and the 2019 Note Purchase Agreement of $50.5 million and $(6.1) million, respectively.
From time to time, we have entered into forward exchange contracts designed to minimize the volatility that fluctuations in foreign currency have on our cash flows related to purchases and sales denominated in foreign currencies. Under these arrangements, we agree 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 typically with maturities of less than 12 months with some agreements extending to longer periods. These transactions are recorded at fair value with the corresponding gains and losses recorded in interest and other income (expense), net in the unaudited condensed consolidated statements of income and comprehensive income. At March 31, 2024 and December 31, 2023, we had foreign exchange contracts with notional amounts aggregating $1,365.9 million and $489.5 million, respectively. We will continue to evaluate our currency risks and, in the future, may utilize foreign currency contracts more frequently.
Interest Rate Risk
We regularly invest excess cash in short-term investments that are subject to changes in interest rates. We believe that the market risk arising from holding these financial instruments is minimal because of our policy of investing in short-term financial instruments issued by highly rated financial institutions.
Our exposure related to adverse movements in interest rates is derived primarily from outstanding floating rate debt instruments that are indexed to short-term market rates. We currently have a higher level of fixed rate debt than variable rate debt, which limits the exposure to adverse movements in interest rates.
Commodity Price Risk
We are exposed to certain commodity risks associated with prices for various raw materials. The prices of copper and certain other raw materials, particularly niobium-tin, used to manufacture superconductors, have increased significantly over the last decade. Copper and niobium-tin are the main components of low temperature superconductors and continued commodity price increases for copper and niobium, as well as other raw materials, may negatively affect our profitability. Periodically, we enter into commodity forward purchase contracts to minimize the volatility that fluctuations in the price of copper have on our sales of these products. At March 31, 2024 and December 31, 2023, we had fixed price commodity contracts with notional amounts aggregating $6.3 million and $8.4 million, respectively. The fair value of the fixed price commodity contracts at March 31, 2024 and December 31, 2023 was $0.4 million and $0.3 million, respectively. As commodity contracts settle, gains (losses) as a result of changes in fair values are adjusted to the contracts with the customers through revenues. We will continue to evaluate our commodity risks and may utilize commodity forward purchase contracts more frequently in the future.
Inflation Risk
We are subject to inflationary cost pressures across global supply chain networks. Certain components, parts, or materials are experiencing significant cost pressures that have impacted or may impact our cost of operations in future periods. Further, inflation has increased our general and administrative expenses and may vary between countries in which we operate. We continue to evaluate these cost increases in relation to our new orders and may continue to see a negative impact on our financial results for a period of time.
39
Credit Risk
Economic conditions remain volatile and continue to be affected by inflation, high interest rates, supply chain disruptions and recent bank failures. We have cash and investments with certain banking institutions and money market funds in the United States and Europe where we have operations that have been the subject of concern regarding their financial conditions. Cash and investments held in these accounts exceed the Federal Deposit Insurance Corporation insurance limits. In the event of failure of any of the banking institutions where we maintain our cash and investments, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. We have a risk assessment process to evaluate the Company’s credit counterparties and we continue to closely monitor the developments in the financial markets and take steps to minimize potential impact to our business.
ITEM 4. CONTROLS AND PROCEDURES
We have established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)) that are designed to ensure that material information relating to us, including our consolidated subsidiaries, is made known to our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer and principal accounting officer) by others within our organization. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2024. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of March 31, 2024.
Management concluded that the unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q fairly state, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with GAAP.
Changes in Internal Controls over Financial Reporting
There have been no changes in our internal control over financial reporting during the three months ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
40
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are involved in lawsuits, claims, and proceedings, including, but not limited to, patent, customer, labor and employment and commercial matters, which arise in the ordinary course of business. As of March 31, 2024, the Company is not party to any material pending legal proceedings, other than ordinary routine litigation incidental to the Company’s business, to which the Company or any of its subsidiaries is a party or of which any of their property is the subject. However, the outcome of any of these proceedings cannot be accurately predicted, and the ultimate resolution of any of these existing matters may have a material adverse effect on the Company's business or financial condition.
In September 2019, Luxendo GmbH (“Luxendo”), a subsidiary of Bruker Corporation, was sued in Germany by Carl Zeiss Microscopy GmbH, a subsidiary of Carl Zeiss AG (“Zeiss”), for infringement of a registered German utility model. After the utility model was canceled by the German Patent and Trademark Office in 2021, Zeiss withdrew its infringement action at the end of 2022 and the proceedings were terminated. However, a parallel European patent application, relating to a family member of the utility model, is pending in the European Patent Office (“EPO”). The Company is closely monitoring progress in the granting procedure and does not believe that a grant is imminent. The Company is presently unable to predict the EPO's final decision on the patent application.
In addition, we are subject to regulation by national, state and local government agencies in the United States and other countries in which we operate. From time to time, we are the subject of governmental investigations often involving regulatory, marketing and other business practices. These governmental investigations may result in the commencement of civil and criminal proceedings, fines, penalties and administrative remedies which could have a material adverse effect on our financial position, results of operations and/or liquidity.
ITEM IA. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, which could materially affect our business, financial condition or future results. The risks described in this report and in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Pursuant to a share repurchase program approved by the Board of Directors and announced on May 12, 2023 (the “2023 Repurchase Program”), the Company is permitted to purchase up to $500 million of shares of its common stock over a two-year period. The Company did not make any purchases of its common stock during the quarter ended March 31, 2024.
ITEM 5. OTHER INFORMATION
Rule 10b-5 Trading Plans
During the quarter ended March 31, 2024, none of the Company's directors or officers informed the Company of the
41
ITEM 6. EXHIBITS
Exhibit No.
|
Description
|
10.1 |
|
10.2^ |
|
10.3 |
|
10.4 |
|
10.5 |
|
10.6 |
|
31.1* |
Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
31.2* |
Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
32.1* |
|
|
|
101.INS* |
Inline XBRL Instance Document |
|
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101.SCH* |
Inline XBRL Taxonomy Extension Schema Document |
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101.CAL* |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF* |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB* |
Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE* |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104* |
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 has been formatted in Inline XBRL (included in Exhibit 101) |
* Filed or furnished herewith.
^ Certain exhibits and schedules have been omitted in accordance with Regulation S-K Item 601(a)(5). Bruker Corporation agrees to furnish to the SEC a copy of any omitted exhibits or schedules upon request of the SEC.
42
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: May 10, 2024 |
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BRUKER CORPORATION |
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By: |
/s/ FRANK H. LAUKIEN, PH.D. |
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Frank H. Laukien, Ph.D. |
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President, Chief Executive Officer and Chairman |
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(Principal Executive Officer) |
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Date: May 10, 2024 |
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By: |
/s/ GERALD N. HERMAN |
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Gerald N. Herman |
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Executive Vice President and Chief Financial Officer |
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(Principal Financial Officer and Principal Accounting Officer) |
43
EXHIBIT 31.1
CERTIFICATION
I, Frank H. Laukien, certify that:
Date: May 10, 2024 |
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By: |
/s/ FRANK H. LAUKIEN, PH.D. |
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Frank H. Laukien, Ph.D. |
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President, Chief Executive Officer and Chairman |
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(Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION
I, Gerald N. Herman, certify that:
Date: May 10, 2024 |
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By: |
/s/ GERALD N. HERMAN |
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Gerald N. Herman |
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Executive Vice President and Chief Financial Officer |
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(Principal Financial Officer and Principal Accounting |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Bruker Corporation (Company) on Form 10-Q for the three months ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (Report), each of the undersigned, Frank H. Laukien, President, Chief Executive Officer and Chairman of the Board of Directors of the Company, and Gerald N. Herman, Chief Financial Officer and Executive Vice President of the Company, certifies, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
Date: May 10, 2024 |
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By: |
/s/ FRANK H. LAUKIEN, PH.D. |
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Frank H. Laukien, Ph.D. |
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President, Chief Executive Officer and Chairman |
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(Principal Executive Officer) |
Date: May 10, 2024 |
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By: |
/s/ GERALD N. HERMAN |
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Gerald N. Herman |
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Executive Vice President and Chief Financial Officer |
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(Principal Financial Officer and Principal Accounting Officer) |