Bruker Corporation — Q2 2013 Form 10-Q
Reporting period: Three and six months ended June 30, 2013; filed August 8, 2013. Bruker designs and manufactures life-science and materials-research systems. Bruker Scientific Instruments (BSI) generated approximately 93% of first-half revenue; Bruker Energy & Supercon Technologies (BEST) accounted for the remainder. Amounts below are in millions of dollars except per-share data.
Financial performance
| Metric | Q2 2013 | Q2 2012 | First half 2013 | First half 2012 |
|---|---|---|---|---|
| Revenue | $454.9 | $420.7 | $848.3 | $826.3 |
| Gross profit / margin | $201.6 / 44.3% | $188.2 / 44.7% | $376.1 / 44.3% | $378.6 / 45.8% |
| Operating income / margin | $43.5 / 9.6% | $22.1 / 5.3% | $55.7 / 6.6% | $56.5 / 6.8% |
| Net income attributable to Bruker | $22.9 | $9.9 | $28.3 | $25.0 |
| Diluted EPS | $0.14 | $0.06 | $0.17 | $0.15 |
- Q2 revenue increased 8.1% year over year; excluding foreign exchange and recent acquisitions/divestitures, management reported growth of 9.5%. First-half revenue rose 2.7% reported and 4.3% on the same adjusted basis.
- First-half operating cash flow was negative $24.9, versus positive $41.9 a year earlier, primarily reflecting a $100.1 increase in working capital. Investing cash use was $32.1; financing provided $2.7. Cash declined to $250.9 from $310.6 at year-end 2012.
- At June 30, total debt was $336.5, nearly unchanged from $337.2 at year-end. Cash exceeded debt by approximately $85.6. Revolving facilities had $194.2 available, including $156.4 under the amended credit agreement. Current assets were $1,263.8 and current liabilities $602.8.
Changes and management commentary
- Q2 operating income nearly doubled, supported by higher revenue and lower SG&A and R&D spending. First-half operating income was slightly lower year over year. First-half gross margin weakened, which management attributed to yen-related currency effects, lower Bruker MAT volumes and pricing pressure.
- BSI first-half reported revenue grew 1.7%; adjusted growth was 3.5%. NMR and Bruker Optics were stronger, while mass spectrometry and atomic force microscopy faced weakness. BEST revenue rose 22.0% reported; results included $5.7 of technology-license revenue.
- Management cited continued soft demand in semiconductor and other industrial markets and uncertainty about its impact on the remainder of 2013. No specific full-year revenue or earnings guidance was provided. Management said existing cash and credit facilities were expected to support operating and investing needs for at least 12 months.
- First-half restructuring charges were $5.0; total other charges were $10.6, including $4.6 of professional fees related to the FCPA investigation. The cash-flow statement also reports a $16.0 write-down of demonstration inventories for the first half.
Risks, contingencies and other notable items
- The company disclosed an ongoing U.S. and Hong Kong governmental review related to its China operations and alleged improper payments identified in an internal investigation. Bruker is cooperating; possible penalties or other sanctions cannot be reasonably estimated, and no provision was recorded.
- New and existing patent, contract and other lawsuits include claims for unspecified damages and injunctive relief. The company disputes the claims; potential loss could not be reasonably estimated and no provision was recorded.
- Foreign exchange remains a material exposure: first-half transaction losses were $5.1 and currency translation reduced other comprehensive income by $25.3. Management also cited potential raw-material price exposure, including copper and niobium.
- The company was in compliance with debt covenants at quarter-end; disclosed leverage and interest-coverage ratios were 1.2 and 13.8. Controls and procedures were reported effective, with no material change in internal control over financial reporting during the quarter.
Investor verification priorities
- Assess whether first-half working-capital use, including receivables, inventory and customer advances, reverses and supports operating cash generation.
- Separate recurring operating performance from the $5.7 license revenue, restructuring, acquisition-related items and FCPA-related costs; review the company’s non-GAAP reconciliations.
- Monitor semiconductor and industrial demand, Bruker MAT performance, foreign-exchange sensitivity and the trend in gross margins.
- Track developments and potential financial exposure from the FCPA inquiries and disclosed litigation; management could not estimate possible losses.
- Reconcile reported gross-margin comparisons and adjusted measures against the full financial statements and MD&A before relying on them.