**U.S. SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

** **

**FORM 10-Q**

** **

**(Mark One)**

**x**                              QUARTERLYREPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

** **

**FOR THE QUARTERLY PERIODENDED JUNE 30, 2007**

** **

**o**                                 TRANSITIONREPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

** **

**FOR THE TRANSITION PERIODFROM                    TO                    **

** **

**Commission FileNumber  000-30833**

** **

**Bruker BioSciences Corporation**

(Exact name of registrant as specified in its charter)

 

| **DELAWARE**                     |   | **04-3110160**          |
|----------------------------------|--------|-------------------------|
| (State or other  jurisdiction of |   | (I.R.S. Employer        |
| incorporation or  organization)  |   | Identification  Number) |

 

**40Manning Park****Billerica, MA  01821**(Address of principal executive offices)

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

Indicate by checkmarkwhether the registrant:  (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.   Yes x   No o

Indicate by checkmark whether the registrant is a large acceleratedfiler, an accelerated filer, or a non-accelerated filer (as defined inRule 12b-2 of the Exchange Act). 
| Large accelerated filer   o | Accelerated filer   x | Non-accelerated filer   o |
|---------------------------------------|---------------------------------|-------------------------------------|

 

Indicate by checkmarkwhether the registrant is a shell company (as defined in Exchange Act Rule12b-2).   Yes o   No x

As of August 6, 2007,there were 105,413,633 shares of the Registrant’s common stock outstanding.

 

 

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Bruker BioSciencesCorporationForm 10-QFor the Quarter Ended June 30, 2007Index
|              | ** ** | ** **                                                                                                           | ** ** | **PAGE  NUMBER** |
|--------------|------------|----------------------------------------------------------------------------------------------------------------------|------------|------------------|
|         |       |                                                                                                                 |       |             |
| **PART  I**  | ** ** | **FINANCIAL  INFORMATION**                                                                                           |       | 3                |
| ITEM  1:     |       | Financial  Statements:                                                                                               |       | 3                |
|         |       | Unaudited Condensed Consolidated Balance Sheets as of  June 30, 2007 and December 31, 2006                      |       | 3                |
|         |       | Unaudited Condensed Consolidated Statements of  Operations for the three and six months ended June 30, 2007 and 2006 |       | 4                |
|         |       | Unaudited Condensed Consolidated Statements of Cash  Flows for the three and six months ended June 30, 2007 and 2006 |       | 5                |
|         |       | Notes to Unaudited Condensed Consolidated Financial  Statements                                                      |       | 6                |
| ITEM 2:      |       | Management’s Discussion and Analysis of Financial  Condition and Results of Operations                          |       | 14               |
| ITEM 3:      |       | Quantitative and Qualitative Disclosures about Market  Risk                                                          |       | 25               |
| ITEM  4:     |       | Controls  and Procedures                                                                                             |       | 27               |
| **PART  II** | ** ** | **OTHER  INFORMATION**                                                                                               |       | 27               |
| ITEM 1:      |       | Legal Proceedings                                                                                                    |       | 27               |
| ITEM 1A:     |       | Risk Factors                                                                                                         |       | 27               |
| ITEM 2:      |       | Unregistered Sales of Equity Securities and Use of  Proceeds                                                         |       | 27               |
| ITEM 3:      |       | Defaults Upon Senior Securities                                                                                      |       | 28               |
| ITEM 4:      |       | Submission of Matters to a Vote of Security Holders                                                                  |       | 28               |
| ITEM 5:      |       | Other Information                                                                                                    |       | 28               |
| ITEM 6:      |       | Exhibits                                                                                                             |       | 29               |
|         |       | SIGNATURES                                                                                                           |       | 30               |

 

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**PARTI   FINANCIAL INFORMATION**

**ITEM1:  Financial Statements**

Bruker BioSciences CorporationUnaudited Condensed Consolidated Balance Sheets(in thousands, except share and per share data)
| ** **                                                                                                                                                                                                        | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                                        | ** ** | **2007**          | ** ** | **2006**              | ** ** |
|                                                                                                                                                                                                              |       |              |       |                  |       |
| **ASSETS**                                                                                                                                                                                                        | ** ** | ** **        | ** ** | ** **            | ** ** |
| Current assets:                                                                                                                                                                                                   |       |              |       |                  |       |
| Cash and cash  equivalents                                                                                                                                                                                        |       | $                 | 41,933     |                  | $          | 52,147 |   |
| Accounts  receivable, net                                                                                                                                                                                         |       | 72,171            |       | 79,604                |       |
| Due from  affiliated companies                                                                                                                                                                                    |       | 2,666             |       | 9,028                 |       |
| Inventories                                                                                                                                                                                                       |       | 169,895           |       | 134,504               |       |
| Other current  assets                                                                                                                                                                                             |       | 24,995            |       | 19,461                |       |
|                                                                                                                                                                                                              |       |              |       |                  |       |
| Total current  assets                                                                                                                                                                                             |       | 311,660           |       | 294,744               |       |
| Property, plant and  equipment, net                                                                                                                                                                               |       | 95,035            |       | 90,349                |       |
| Goodwill, intangible  and other assets                                                                                                                                                                            |       | 53,791            |       | 48,094                |       |
|                                                                                                                                                                                                              |       |              |       |                  |       |
| Total assets                                                                                                                                                                                                      |       | $                 | 460,486    |                  | $          | 433,187 |   |
|                                                                                                                                                                                                              |       |              |       |                  |       |
| **LIABILITIES AND SHAREHOLDERS’  EQUITY**                                                                                                                                                                    | ** ** | ** **        | ** ** | ** **            | ** ** |
| Current liabilities:                                                                                                                                                                                              |       |              |       |                  |       |
| Short-term  borrowings                                                                                                                                                                                            |       | $                 | 15,395     |                  | $          | 21,857 |   |
| Accounts payable                                                                                                                                                                                                  |       | 27,597            |       | 23,102                |       |
| Due to  affiliated companies                                                                                                                                                                                      |       | 5,773             |       | 5,901                 |       |
| Customer  advances                                                                                                                                                                                                |       | 44,033            |       | 49,461                |       |
| Other current  liabilities                                                                                                                                                                                        |       | 96,959            |       | 94,807                |       |
|                                                                                                                                                                                                              |       |              |       |                  |       |
| Total current  liabilities                                                                                                                                                                                        |       | 189,757           |       | 195,128               |       |
|                                                                                                                                                                                                              |       |              |       |                  |       |
| Long-term debt                                                                                                                                                                                                    |       | 17,564            |       | 22,863                |       |
| Other long-term  liabilities                                                                                                                                                                                      |       | 31,515            |       | 23,730                |       |
| Commitments and  contingencies (Note 14)                                                                                                                                                                          |       |              |       |                  |       |
| Preferred stock, $0.01  par value, 5,000,000 shares authorized, none  issued or outstanding at June 30, 2007 or December 31, 2006                                                                                 |       | —            |       | —                |       |
| Common stock, $0.01 par  value, 200,000,000 shares authorized, 105,429,042 shares issued and  105,418,696 shares outstanding at June 30, 2007 and 102,561,129 shares issued  and outstanding at December 31, 2006 |       | 1,047             |       | 1,020                 |       |
| Treasury stock, at  cost, 10,346 shares and 0 shares at June 30, 2007 and December 31, 2006,  respectively                                                                                                        |       | (92               | )          | —                |       |
| Other stockholders’  equity                                                                                                                                                                                  |       | 220,695           |       | 190,446               |       |
|                                                                                                                                                                                                              |       |              |       |                  |       |
| Total shareholders’  equity                                                                                                                                                                                  |       | 221,650           |       | 191,466               |       |
|                                                                                                                                                                                                              |       |              |       |                  |       |
| Total liabilities and shareholders’ equity                                                                                                                                                                   |       | $                 | 460,486    |                  | $          | 433,187 |   |

 

*See theaccompanying notes to financial statements.*

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Bruker BioSciences CorporationUnaudited Condensed Consolidated Statements of Operations(in thousands, except per share data)
| ** **                                                                             | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|----------------------------------------------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                                                             | ** ** | **June 30,**                | ** ** | **June 30,**              | ** ** |
| ** **                                                                             | ** ** | **2007**                         | ** ** | **2006**                       | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                                                                   |       |                             |       |                           |       |   |   |   |   |
| Product revenue                                                                        |       | $                                | 106,646    |                           | $          | 88,335 |   | $ | 202,008 |   | $ | 172,176 |   |
| Service revenue                                                                        |       | 14,959                           |       | 11,899                         |       | 29,950 |   | 22,270 |   |
| Other revenue                                                                          |       | 78                               |       | 249                            |       | 232 |   | 893 |   |
|                                                                                   |       |                             |       |                           |       |   |   |   |   |
| Total revenue                                                                          |       | 121,683                          |       | 100,483                        |       | 232,190 |   | 195,339 |   |
|                                                                                   |       |                             |       |                           |       |   |   |   |   |
| Cost of product  revenue                                                               |       | 58,790                           |       | 48,042                         |       | 106,601 |   | 92,755 |   |
| Cost of service  revenue                                                               |       | 9,862                            |       | 6,218                          |       | 19,930 |   | 12,605 |   |
|                                                                                   |       |                             |       |                           |       |   |   |   |   |
| Total cost of revenue                                                                  |       | 68,652                           |       | 54,260                         |       | 126,531 |   | 105,360 |   |
| Gross profit                                                                           |       | 53,031                           |       | 46,223                         |       | 105,659 |   | 89,979 |   |
|                                                                                   |       |                             |       |                           |       |   |   |   |   |
| Operating  expenses:                                                                   |       |                             |       |                           |       |   |   |   |   |
| Sales and  marketing                                                                   |       | 24,088                           |       | 20,900                         |       | 47,852 |   | 39,732 |   |
| General and  administrative                                                            |       | 7,988                            |       | 6,473                          |       | 15,480 |   | 13,080 |   |
| Research and  development                                                              |       | 13,926                           |       | 12,284                         |       | 27,539 |   | 24,559 |   |
| Acquisition  related charges                                                           |       | —                           |       | 3,692                          |       | — |   | 4,868 |   |
|                                                                                   |       |                             |       |                           |       |   |   |   |   |
| Total operating expenses                                                               |       | 46,002                           |       | 43,349                         |       | 90,871 |   | 82,239 |   |
| Operating income                                                                       |       | 7,029                            |       | 2,874                          |       | 14,788 |   | 7,740 |   |
|                                                                                   |       |                             |       |                           |       |   |   |   |   |
| Interest and  other income (expense), net                                              |       | 319                              |       | 2,332                          |       | (206 | ) | 4,013 |   |
|                                                                                   |       |                             |       |                           |       |   |   |   |   |
| Income before  income tax provision and minority interest in consolidated subsidiaries |       | 7,348                            |       | 5,206                          |       | 14,582 |   | 11,753 |   |
|                                                                                   |       |                             |       |                           |       |   |   |   |   |
| Income tax  provision                                                                  |       | 2,323                            |       | 2,623                          |       | 5,590 |   | 5,863 |   |
|                                                                                   |       |                             |       |                           |       |   |   |   |   |
| Income before  minority interest in consolidated subsidiaries                          |       | 5,025                            |       | 2,583                          |       | 8,992 |   | 5,890 |   |
| Minority interest  in consolidated subsidiaries                                        |       | 60                               |       | 45                             |       | 146 |   | 93 |   |
|                                                                                   |       |                             |       |                           |       |   |   |   |   |
| Net income                                                                             |       | $                                | 4,965      |                           | $          | 2,538 |   | $ | 8,846 |   | $ | 5,797 |   |
|                                                                                   |       |                             |       |                           |       |   |   |   |   |
| Net income per  common share—basic                                                |       | $                                | 0.05       |                           | $          | 0.03 |   | $ | 0.09 |   | $ | 0.06 |   |
| Net income per  common share—diluted                                              |       | $                                | 0.05       |                           | $          | 0.02 |   | $ | 0.08 |   | $ | 0.06 |   |
| Weighted average  common shares outstanding:                                           |       |                             |       |                           |       |   |   |   |   |
| Basic                                                                                  |       | 104,183                          |       | 101,456                        |       | 103,505 |   | 101,430 |   |
| Diluted                                                                                |       | 106,798                          |       | 101,869                        |       | 106,186 |   | 101,779 |   |

 

*See theaccompanying notes to financial statements.*

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Bruker BioSciences CorporationUnaudited Condensed Consolidated Statements of Cash Flows(in thousands)
| ** **                                                | ** ** | **Six Months Ended** | ** ** |
|-----------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                | ** ** | **June 30,**              | ** ** |
| ** **                                                | ** ** | **2007**                       | ** ** | **2006** | ** ** |
| **Operating  activities:**                                | ** ** | ** **                     | ** ** | ** ** | ** ** |
| Net cash (used  in) provided by operating activities      |       | $                              | (6,356     | ) | $ | 4,439 |   |
|                                                      |       |                           |       |   |   |
| **Investing  activities:**                                | ** ** | ** **                     | ** ** | ** ** | ** ** |
| Purchases of property and equipment                       |       | (8,245                         | )          | (2,460 | ) |
| Redemption of short-term investments                      |       | —                         |       | 46,460 |   |
| Acquisitions, net of cash acquired                        |       | (2,468                         | )          | (3,970 | ) |
| Changes in restricted cash                                |       | (262                           | )          | (107 | ) |
|                                                      |       |                           |       |   |   |
| Net cash (used  in) provided by investing activities      |       | (10,975                        | )          | 39,923 |   |
|                                                      |       |                           |       |   |   |
| **Financing  activities:**                                | ** ** | ** **                     | ** ** | ** ** | ** ** |
| (Repayments of) proceeds from short-term borrowings,  net |       | (10,594                        | )          | 1,163 |   |
| Repayments of long-term debt, net                         |       | (1,354                         | )          | (1,318 | ) |
| Proceeds from issuance of common stock                    |       | 18,417                         |       | 155 |   |
| Repurchase of common stock                                |       | (92                            | )          | — |   |
|                                                      |       |                           |       |   |   |
| Net cash  provided by financing activities                |       | 6,377                          |       | — |   |
|                                                      |       |                           |       |   |   |
| Effect of  exchange rate changes on cash                  |       | 740                            |       | 2,431 |   |
|                                                      |       |                           |       |   |   |
| Net change in  cash and cash equivalents                  |       | (10,214                        | )          | 46,793 |   |
| Cash and cash  equivalents at beginning of period         |       | 52,147                         |       | 62,632 |   |
|                                                      |       |                           |       |   |   |
| Cash and cash  equivalents at end of period               |       | $                              | 41,933     |   | $ | 109,425 |   |
|                                                      |       |                           |       |   |   |
| **Non-Cash  Financing Activities**                        | ** ** | ** **                     | ** ** | ** ** | ** ** |
| Issuance of  common stock related to acquisitions         |       | $                              | 269        |   | $ | 1,294 |   |

 

*See theaccompanying notes to financial statements.*

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Bruker BioSciences Corporation

Notes to Unaudited Condensed Consolidated Financial Statements

**1. Descriptionof Business and Basis of Presentation**

Bruker BioSciencesCorporation and its wholly-owned subsidiaries (the “Company”, “we,’’ “us,” or “our”)design, manufacture, service and market proprietary life science and materialsresearch systems based on mass spectrometry core technology platforms, X-raytechnologies, optical emission spectroscopy (OES) technology, and infrared andRaman molecular spectroscopy technology. The Company also sells a broad rangeof field analytical systems for chemical, biological, radiological and nuclear(CBRN) detection. The Company maintains major technical and manufacturingcenters in Europe, North America and Japan and sales offices throughout theworld. The Company’s diverse customer base includes pharmaceutical,biotechnology and proteomics companies, academic institutions, advancedmaterials and semiconductor industries and government agencies.

The financialstatements represent the consolidated accounts of the Company and itswholly-owned subsidiaries. All significant intercompany accounts andtransactions have been eliminated in consolidation. The condensed consolidatedfinancial statements as of and for the three and six months ended June 30, 2007and 2006 have been prepared in accordance with accounting principles generallyaccepted in the United States of America for interim financial information andwith Article 10 of Regulation S-X. Accordingly, the financialinformation presented herein does not include all of the information andfootnotes required by accounting principles generally accepted in the UnitedStates of America for complete financial statements. In the opinion ofmanagement, all adjustments (consisting only of normal recurring adjustments)considered necessary for a fair presentation have been included. The resultsfor interim periods are not necessarily indicative of the results to beexpected for the full year.

On July 1,2006, the Company completed its acquisition of Bruker Optics Inc. (“BrukerOptics”). Both the Company and Bruker Optics were majority owned by fiveaffiliated stockholders prior to the acquisition. As a result, the acquisitionof Bruker Optics by the Company was considered a business combination ofcompanies under common control. The consolidated balance sheets, statements ofoperations, statements of cash flows and notes to the financial statementspresented in this Quarterly Report on Form 10-Q have been restated by combiningthe historical consolidated financial statements of the Company with those ofBruker Optics for periods prior to the acquisition.

TheCompany reports financial results on the basis of the following three businesssegments:

1.                                       *Bruker AXS* is a leading developer andprovider of life science and advanced materials research tools based on X-raytechnology tools for advanced X-ray and spark-OES instrumentation used innon-destructive molecular materials and elemental analysis in academic,research and industrial applications.

2.                                       *Bruker Daltonics* is a leading developerand provider of life science tools based on mass spectrometry and also developsand provides a broad range of field analytical systems for CBRN detection.

3.                                       *Bruker Optics* is a leading developer andprovider of research, analytical and process analysis instruments and solutionsbased on infrared and Raman molecular spectroscopy technologies.

**2. PublicOffering of Common Stock**

On February 12,2007, the Company and a group of selling stockholders completed a publicoffering of 11,960,000 shares of its common stock, of which 2,530,000 were soldby the Company and 9,430,000 were sold by four selling shareholders, at $7.10per share, generating net proceeds of approximately $16.9 million to theCompany and approximately $63.2 million to the selling stockholders, in theaggregate.

**3. Acquisitions**

On July 1,2006, the Company completed the acquisition of all of the outstanding stock ofBruker Optics in accordance with the terms of the stock purchase agreement datedas of April 17, 2006. The acquisition of Bruker Optics represented abusiness combination of companies under common control due to the majorityownership of both companies by five related individuals as an affiliatedshareholder group. As a result, the acquisition, as it related to the sharesowned by these affiliated shareholders (approximately 96%), was accounted forat historical carrying value. The acquisition of the shares of thenon-affiliated shareholders (approximately 4%) was accounted for at fair value,in a manner similar to the acquisition of a minority interest. The excesspurchase price of the interest not under common control over the fair value ofthe related net assets was recorded as intangible assets and goodwill.

Upon completion ofthe acquisition, the Company paid an aggregate of $135 million of considerationto the Bruker Optics stockholders and holders of Bruker Optics stock options,of which approximately $79 million was paid in cash and approximately $56million was paid in restricted unregistered shares of Company common stock. Thefair value of the consideration paid for the acquisition of the minorityinterest was approximately $5.2 million, including cash of $4.8 millionand common stock valued at 

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$0.4 million. The value of the shares of commonstock issued to the non-affiliated shareholder in connection with the mergerwas determined using a trailing average of the closing market prices of theCompany’s stock for a period of ten consecutive trading days ending three daysprior to the closing of the acquisition, which occurred on July 1, 2006.

TheCompany engaged RSM McGladrey, Inc., a third party valuation firm, to assistmanagement in appraising the fair value of certain assets acquired. Theappraisal was completed in the second quarter of 2007. The following tablesummarizes the fair values of assets acquired and liabilities assumed at thedate of acquisition of the minority interest (in thousands):

| Current assets                 |   | $       | 42,387 |   |
|--------------------------------|--------|---------|--------|--------|
| Property, plant  and equipment |   | 13,174  |   |
| Intangible  assets             |   | 53,846  |   |
| Other assets                   |   | 72      |   |
| Total assets                   |   | 109,479 |   |
| Current  liabilities           |   | 34,488  |   |
| Long-term debt                 |   | 3,463   |   |
| Other  liabilities             |   | 2,074   |   |
| Total liabilities assumed      |   | 40,025  |   |
| Net assets                     |   | 69,454  |   |
| Minority  interest percentage  |   | 4.1     | %      |
| Net assets  acquired           |   | 2,848   |   |
| Goodwill                       |   | 2,294   |   |
| Total purchase  price          |   | $       | 5,142  |   |

 

The purchase pricefor the 4.1% minority interest acquired was allocated to the net assetsacquired on a pro rata basis in accordance with Statement of Financial AccountingStandards (“SFAS”) No. 141,*BusinessCombinations*. Accordingly, acquisition related intangibles total$2.2 million and are being amortized over four years. In addition,approximately $2.7 million of acquired intangible assets were assigned toin-process research and development projects of which the 4.1% minorityinterest, or approximately $0.1 million, was written off at the date ofacquisition in accordance with FASB Interpretation No. 4,*Applicability of FASB Statement No. 2 toBusiness Combinations Accounted for by the Purchase Method*. Theprojects that were estimated to qualify as acquired in-process research anddevelopment projects were those that had not yet reached technology feasibilityand for which no future alternative uses existed.

The $2.3 millionof goodwill acquired from Bruker Optics in connection with the acquisition wasassigned to the Company’s Bruker Optics subsidiary, currently a reportableoperating segment, and will not be deductible for tax purposes since theacquisition was a tax-free acquisition.

On January 1,2007, the Company acquired all of the assets of Keca Metal Products, Ltd. (“Keca”), a Texas partnership located inSpring, Texas. The aggregate purchase price for Keca was $0.6 million and wasfunded with cash on hand. Keca provides specialized machining services,primarily to Bruker Optics. The results of Keca have been included in theBruker Optics segment from the date of acquisition.

On June 30, 2007, the Company acquiredAnalys-Konsult AB (“AKAB”), a distributor and service provider of scientificinstrumentation based in Sweden. The aggregate purchase price of AKAB wasapproximately $0.8 million, of which approximately $0.5 million was paid incash and approximately $0.3 million was funded by the issuance of an aggregateof 29,740 restricted unregistered shares of the Company’s common stock, parvalue $0.01 per share, to AKAB’s shareholders. The results of AKAB have beenincluded in the Bruker AXS segment from the date of acquisition.

Pro formafinancial information reflecting the Keca or AKAB acquisitions has not beenpresented as the impact on revenues and net income and net income per commonshare would not have been material.

**4.Provision for Income Taxes**

The income tax provision for the three months endedJune 30, 2007 was $2.3 million compared to an income tax provision of $2.6million for the three months ended June 30, 2006, representing effective taxrates of 31.7% and 50.4%, respectively. The income tax provision for the sixmonths ended June 30, 2007 was $5.6 million compared to an income tax provisionof $5.9 million for the six months ended June 30, 2006, representing effectivetax rates of 38.3% and 49.9%, respectively. Our effective tax rate reflects ourtax provision for non-U.S. entities only, since no benefit was recognized forcumulative losses incurred in the U.S. We will maintain a full valuationallowance for our U.S. net operating losses until evidence exists that it ismore likely than not that the loss carryforward amounts will be utilized to offsetU.S. taxable income. Our tax rate may change over time as the amount or mix ofincome and taxes outside the U.S. changes. Our effective tax rate is calculatedusing our projected annual pre-tax income or loss and is affected by researchand development tax credits, the expected level of other tax benefits, and theimpact of changes to the valuation allowance, as well as changes in the mix ofour pre-tax income and losses among jurisdictions with varying statutory taxrates and credits.

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In July 2006, the Financial Accounting Standards Boardissued FASB Interpretation No. 48, *Accounting for Uncertaintyin Income Taxes—an interpretation of FASB Statement 109* (“FIN 48”). Amongother things, FIN 48 provides guidance to address uncertainty in tax positionsand clarifies the accounting for income taxes by prescribing a minimumrecognition threshold which income tax positions must achieve before beingrecognized in the financial statements. In addition, FIN 48 requiresexpanded annual disclosures, including a rollforward of the beginning andending aggregate unrecognized tax benefits as well as specific detail relatedto tax uncertainties for which it is reasonably possible the amount ofunrecognized tax benefit will significantly increase or decrease within twelvemonths*.* The Company adoptedFIN 48 on January 1, 2007, and recorded a reduction of retained earningsof $751,000 effective January 1, 2007. The Company has unrecognized taxbenefits of approximately $2.0 million as of January 1, 2007, of which $2.0million, if recognized, would result in a reduction of the Company’s effectivetax rate. As of June 30, 2007, the Company does not expect any material changesto unrecognized tax positions within the next twelve months.

The Companyrecognizes penalties and interest related to unrecognized tax benefits in theprovision for income taxes. As of June 30, 2007, approximately $467,000 ofaccrued interest related to uncertain tax positions was included in othercurrent liabilities on our consolidated balance sheet, of which $51,000 and$104,000 was recorded during the three and six months ended June 30, 2007,respectively.

The tax years 2003 to 2006 are open tax years in ourmajor taxing jurisdictions. The Company files returns in many foreign and statejurisdictions with varying statutes of limitations.

**5.Equity-Based Compensation**

In2000, the Board of Directors adopted and the stockholders approved the 2000Stock Option Plan. The 2000 Stock Option Plan provided for the issuance of upto 2,200,000 shares of common stock in connection with awards under the Plan.The 2000 Stock Option Plan allows a committee of the Board of Directors togrant incentive stock options, non-qualified stock options, stock appreciationrights and stock awards (including restricted stock and phantom shares). Thecommittee has the authority to determine which employees will receive theawards, the amount of the awards and other terms and conditions of the awards.Awards granted by the committee typically vest over a period of three-to-fiveyears.

On July 1,2003, the Company’s stockholders approved an amendment and restatement of the2000 Stock Option Plan to change the plan name and increase the number ofshares available for issuance. The name of the amended plan is the Bruker BioSciencesCorporation Amended and Restated 2000 Stock Option Plan. Theamendment authorized 4,132,000 additional shares of common stock of theCompany issuable pursuant to the plan. On June 29, 2006, the Company’sstockholders approved an increase in the number of shares available forissuance under the plan from 6,320,000 shares to 8,000,000 shares, an increaseof 1,680,000 shares.

The total numberof shares issuable under the plan is 8,000,000, all of which have beenregistered on Form S-8 (Reg. No. 333-47836, 333-107294 and333-137090).

As ofJune 30, 2007, the Company’s primary types of share-based compensation werestock options and restricted stock. The Company recorded stock-basedcompensation expense for the three and six months ended June 30, 2007 and 2006as follows (in thousands):
| ** **                                  | ** ** | **Three months ended**June 30, | ** ** | **Six months ended**June 30, | ** ** |
|---------------------------------------------|------------|-----------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                  | ** ** | **2007**                                      | ** ** | **2006**                                    | ** ** | **2007** | ** ** | **2006** | ** ** |
| Stock options                               |       | $                                             | 241        |                                        | $          | 281 |   | $ | 474 |   | $ | 536 |   |
| Restricted stock                            |       | 162                                           |       | 37                                          |       | 323 |   | 74 |   |
| Total  stock-based compensation, pre-tax    |       | 403                                           |       | 318                                         |       | 797 |   | 610 |   |
| Tax benefit                                 |       | (113                                          | )          | (145                                        | )          | (223 | ) | (145 | ) |
| Total stock-based  compensation, net of tax |       | $                                             | 290        |                                        | $          | 173 |   | $ | 574 |   | $ | 465 |   |

 

Restrictedshares of the Company’s common stock are periodically awarded to executiveofficers, directors and certain key employees of the Company subject to aservice restriction which expires ratably over a period of three-to-five years.The restricted shares of common stock may not be sold or transferred during therestriction period. Stock compensation for restricted stock is recorded basedon the stock price on the grant date and charged to expense ratably through therestriction period. The following table summarizes information about restrictedstock activity during the six months ended June 30, 2007:

8

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|                                   | ** ** | ** **          | ** ** | **Weighted**        | ** ** |
|-----------------------------------|------------|---------------------|------------|---------------------|------------|
| ** **                        | ** ** | **Shares**          | ** ** | **Average**         | ** ** |
| ** **                        | ** ** | **Subject to** | ** ** | **Grant Date** | ** ** |
| ** **                        | ** ** | **Restriction**     | ** ** | **Fair Value** | ** ** |
| Outstanding at  December 31, 2006 |       | 628,200             |       | $                   | 5.29       |   |
| Granted                           |       | 33,050              |       | 8.08                |       |
| Vested                            |       | (27,840             | )          | 5.18                |       |
| Forfeited                         |       | (4,200              | )          | 5.52                |       |
| Outstanding at June 30,  2007     |       | 629,210             |       | $                   | 5.44       |   |

 

Unrecognizedpretax expense of $2.8 million related to restricted stock awards is expectedto be recognized over the weighted average remaining service period of 3.8years for awards outstanding at June 30, 2007.

Thefair value of each option award is estimated on the date of grant using theBlack-Scholes option-pricing model. Assumptions regarding volatility, expectedterm, dividend yield and risk-free interest rate are required for theBlack-Scholes model. Volatility and expected term assumptions are based on theCompany’s historical experience. The risk-free interest rate is based on a U.S.treasury note with a maturity similar to the option award’s expected life. Theassumptions for volatility, expected life, dividend yield and risk-free interestrate are presented in the table below:

|                          | ** ** | **2007**         | ** ** | **2006** | ** ** |
|--------------------------|------------|------------------|------------|----------|------------|
| Risk-free  interest rate |       | 4.52%–4.81% |       | 3.80%    |       |
| Expected life            |       | 6.5 years        |       | 5 years  |       |
| Volatility               |       | 82.0%            |       | 105.0%   |       |
| Expected  dividend yield |       | 0%               |       | 0%       |       |

 

Allstock options granted had an exercise price equal to the market value of theunderlying common stock on the date of grant. Stock option activity for the sixmonths ended June 30, 2007 was as follows:
| ** **                        | ** ** | ** **          | ** ** | ** **   | ** ** | **Weighted**        | ** ** | ** **                             | ** ** |
|-----------------------------------|------------|---------------------|------------|--------------|------------|---------------------|------------|----------------------------------------|------------|
| ** **                        | ** ** | ** **          | ** ** | **Weighted** | ** ** | **Average**         | ** ** | **Aggregate**                          | ** ** |
| ** **                        | ** ** | **Shares**          | ** ** | **Average**  | ** ** | **Remaining**       | ** ** | **Intrinsic**                          | ** ** |
| ** **                        | ** ** | **Subject to** | ** ** | **Option**   | ** ** | **Contractual**     | ** ** | **Value**                              | ** ** |
| ** **                        | ** ** | **Options**         | ** ** | **Price**    | ** ** | **Term (Yrs)** | ** ** | **($’s in 000’s)** | ** ** |
| Outstanding at  December 31, 2006 |       | 3,671,425           |       | $            | 6.25       |                |       |                                   |       |   |
| Granted                           |       | 292,346             |       | 7.61         |       |                |       |                                   |       |
| Exercised                         |       | (274,978            | )          | 5.10         |       |                |       |                                   |       |
| Forfeited                         |       | (30,500             | )          | 11.20        |       |                |       |                                   |       |
| Outstanding at  June 30, 2007     |       | 3,658,293           |       | $            | 6.40       |                | 4.8        |                                   | $          | 12,116 |   |
| Exercisable at  June 30, 2007     |       | 2,622,660           |       | $            | 6.72       |                | 4.5        |                                   | $          | 8,578 |   |

 

Thefollowing table summarizes information about stock options outstanding andexercisable at June 30, 2007:
| ** **               | ** ** | **Options  Outstanding** | ** ** | **Options  Exercisable** | ** ** |
|--------------------------|------------|--------------------------|------------|--------------------------|------------|
| ** **               | ** ** | ** **               | ** ** | **Weighted**             | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **               | ** ** | ** **               | ** ** | **Average**              | ** ** | **Weighted** | ** ** | **Aggregate** | ** ** | ** ** | ** ** | **Weighted** | ** ** | **Aggregate** | ** ** |
| ** **               | ** ** | ** **               | ** ** | **Remaining**            | ** ** | **Average** | ** ** | **Intrinsic** | ** ** | ** ** | ** ** | **Average** | ** ** | **Intrinsic** | ** ** |
| **Range of**        | ** ** | **Number**               | ** ** | **Contractual**          | ** ** | **Exercise** | ** ** | **Value** | ** ** | **Number** | ** ** | **Exercise** | ** ** | **Value** | ** ** |
| **Exercise Prices** | ** ** | **Outstanding**          | ** ** | **Term (Yrs)**      | ** ** | **Price** | ** ** | **($’s in 000’s)** | ** ** | **Exercisable** | ** ** | **Price** | ** ** | **($’s in 000’s)** | ** ** |
| $ 2.12 to $4.00     |       | 744,434                  |       | 4.3                      |       | $ | 3.21 |   | $ | 4,319 |   | 595,251 |   | $ | 3.12 |   | $ | 3,473 |   |
| $ 4.01 to $6.00     |       | 1,697,154                |       | 4.9                      |       | 5.17 |   | 6,517 |   | 1,079,796 |   | 5.12 |   | 4,202 |   |
| $ 6.01 to $10.00    |       | 686,356                  |       | 6.4                      |       | 7.15 |   | 1,280 |   | 417,264 |   | 6.85 |   | 903 |   |
| $ 10.01 to  $13.00  |       | 204,349                  |       | 4.7                      |       | 11.02 |   | — |   | 204,349 |   | 11.01 |   | — |   |
| $ 13.01 and  above  |       | 326,000                  |       | 3.8                      |       | 15.65 |   | — |   | 326,000 |   | 15.65 |   | — |   |
|                     |       | 3,658,293                |       | 4.8                      |       | $ | 6.40 |   | $ | 12,116 |   | 2,622,660 |   | $ | 6.72 |   | $ | 8,578 |   |

 

The intrinsic valuesabove are based on the Company’s closing stock price of $9.01 on June 30, 2007.The weighted-average grant-date fair value of options granted during the sixmonths ended June 30, 2007 was $5.70. Unrecognized pretax expense of $3.6million related to stock options is expected to be recognized over the weightedaverage remaining service period of 2.6 years for awards outstanding at June30, 2007.

9

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**6. Inventories**

Inventoriesconsisted of the following as of June 30, 2007 and December 31, 2006 (inthousands):

|                     | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|---------------------|------------|-------------------|------------|-----------------------|------------|
| ** **          | ** ** | **2007**          | ** ** | **2006**              | ** ** |
| Raw materials       |       | $                 | 51,822     |                  | $          | 45,361 |   |
| Work in process     |       | 51,526            |       | 42,269                |       |
| Demonstration units |       | 17,006            |       | 14,678                |       |
| Finished goods      |       | 49,541            |       | 32,196                |       |
| Total inventories   |       | $                 | 169,895    |                  | $          | 134,504 |   |

 

**7. Goodwill and Other Intangible Assets**

Thefollowing is a summary of other intangible assets subject to amortization as ofJune 30, 2007 and December 31, 2006 (in thousands):
| ** **                               | ** ** | ** **        | ** ** | **June 30, 2007** | ** ** | **December 31, 2006** | ** ** |
|------------------------------------------|------------|-------------------|------------|-----------------------------|------------|---------------------------------|------------|
| ** **                               | ** ** | **Useful**        | ** ** | **Gross**                   | ** ** | ** **                      | ** ** | **Net** | ** ** | **Gross** | ** ** | ** ** | ** ** | **Net** | ** ** |
| ** **                               | ** ** | **Lives**         | ** ** | **Carrying**                | ** ** | **Accumulated**                 | ** ** | **Carrying** | ** ** | **Carrying** | ** ** | **Accumulated** | ** ** | **Carrying** | ** ** |
| ** **                               | ** ** | **in Years** | ** ** | **Amount**                  | ** ** | **Amortization**                | ** ** | **Amount** | ** ** | **Amount** | ** ** | **Amortization** | ** ** | **Amount** | ** ** |
| Existing technology and  related patents |       | 4 to 5            |       | $                           | 6,335      |                            | $          | (2,613 | ) | $ | 3,722 |   | $ | 6,172 |   | $ | (1,916 | ) | $ | 4,256 |   |
| Customer relationships                   |       | 5                 |       | 1,115                       |       | (399                            | )          | 716 |   | 1,108 |   | (288 | ) | 820 |   |
| Trade names                              |       | 5 to 10           |       | 439                         |       | (147                            | )          | 292 |   | 718 |   | (215 | ) | 503 |   |
| Total amortizable intangible assets      |       |              |       | $                           | 7,889      |                            | $          | (3,159 | ) | $ | 4,730 |   | $ | 7,998 |   | $ | (2,419 | ) | $ | 5,579 |   |

 

For the threemonths ended June 30, 2007 and 2006, the Company recorded amortization expenseof approximately $0.4 million and $0.1 million, respectively, related to otheramortizable intangible assets.  For thesix months ended June 30, 2007 and 2006, the Company recorded amortizationexpense of approximately $0.8 million and $0.2 million, respectively, relatedto other amortizable intangible assets.

Theestimated future amortization expense related to other amortizable intangibleassets is as follows (in thousands):

| For the year ending December 31, | ** ** | **(in thousands)** | ** ** |
|-----------------------------------------------------------|------------|-------------------------|------------|
| 2007(a)                                                   |       | $                       | 634        |   |
| 2008                                                      |       | 1,239                   |       |
| 2009                                                      |       | 1,210                   |       |
| 2010                                                      |       | 1,088                   |       |
| 2011                                                      |       | 510                     |       |
| Thereafter                                                |       | 49                      |       |
| Total                                                     |       | $                       | 4,730      |   |

----

(a) Amount represents estimated amortization expense for theremaining six months ending December 31, 2007.

The carryingamount of goodwill as of June 30, 2007 and December 31, 2006 was $39.6million and $39.8 million, respectively, and is primarily included in theBruker AXS segment. The Company performs its annual test for indications ofimpairment as of December 31st each year. The Company completed itsannual test for impairment as of December 31, 2006 and determined thatgoodwill was not impaired at that time.

**8. Warranty Costs**

TheCompany typically provides a one-year parts and labor warranty with thepurchase of equipment. The anticipated cost for this one-year warranty isaccrued upon recognition of the sale and is included as a current liability onthe balance sheet. The Company also offers to its customers warranty andservice agreements extending beyond the initial year of warranty for a fee.These fees are 

10

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recorded as deferred revenue and amortized into incomeover the life of the extended warranty contract.

Changesin the Company’s accrued warranty liability during the six months ended June30, 2007 were as follows (in thousands):

| Warranty accrual at December  31, 2006            |   | $      | 13,274 |   |
|---------------------------------------------------|--------|--------|--------|--------|
| Accruals for warranties  issued during the period |   | 5,825  |   |
| Settlements of warranty  claims                   |   | (5,408 | )      |
| Foreign currency impact                           |   | 232    |   |
| Warranty accrual at June 30, 2007                 |   | $      | 13,923 |   |

 

**9. Line of Credit**

On July 5, 2006,the Company issued a demand promissory note for a $40 million line of credit inthe United States. The Company initially borrowed $20 million to finance aportion of the Bruker Optics purchase price; on July 18, 2006 the Companyborrowed an additional $10 million to finance the acquisition of KeyMaster. Asof June 30, 2007, the Company had $40 million available on the line of credit.The note bears interest at the bank’s prime rate, LIBOR plus 1%, or a LIBORadvantage rate plus 1% at the request of the Company.  All of the Company’sobligations under the line of credit are secured by a pledge to the bank of100% of the capital stock of each of the Company’s wholly-owned domesticsubsidiaries, each of which also pledged a portion of the stock of certain oftheir foreign subsidiaries.

**10. Employee Benefit Plans**

The Company has adefined benefit retirement plan that covers substantially all employees of theBruker AXS German subsidiary who were employed as of September 30, 1997.The plan provides pension benefits based upon final average salary and years ofservice.

Thenet periodic pension benefit cost includes the following components during thethree and six months ended June 30, 2007 and 2006 (in thousands):
| ** **                                           | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                           | ** ** | **2007**                                        | ** ** | **2006**                                      | ** ** | **2007** | ** ** | **2006** | ** ** |
| **Components of net periodic pension  benefit cost** | ** ** | ** **                                      | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** |
| Service cost                                         |       | $                                               | 279        |                                          | $          | 180 |   | $ | 558 |   | $ | 345 |   |
| Interest cost                                        |       | 127                                             |       | 100                                           |       | 254 |   | 192 |   |
| Recognized actuarial  loss                           |       | —                                          |       | —                                        |       | — |   | — |   |
| Amortization                                         |       | (4                                              | )          | (5                                            | )          | (8 | ) | (8 | ) |
| Net periodic benefit cost                            |       | $                                               | 402        |                                          | $          | 275 |   | $ | 804 |   | $ | 529 |   |

 

To date, the Companyhas not funded the defined benefit plan and is not required to makecontributions during the remainder of 2007.

**11. Earnings Per Share**

Basic earnings pershare is calculated by dividing net earnings by the weighted-average number ofcommon shares outstanding during the period. Except where the result would beantidilutive, the diluted earnings per share computation includes the effect ofshares which would be issuable upon the exercise of outstanding stock options,reduced by the number of shares which are assumed to be purchased by theCompany from the resulting proceeds at the average market price during theperiod.

11

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Thefollowing table sets forth the computation of basic and diluted average sharesoutstanding for the three and six months ended June 30, 2007 and 2006 (inthousands):
| ** **                                        | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|---------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                        | ** ** | **2007**                                        | ** ** | **2006**                                      | ** ** | **2007** | ** ** | **2006** | ** ** |
| Net income, as reported                           |       | $                                               | 4,965      |                                          | $          | 2,538 |   | $ | 8,846 |   | $ | 5,797 |   |
| **Weighted average shares  outstanding:**         | ** ** | ** **                                      | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** |
| Weighted average  shares outstanding—basic   |       | 104,183                                         |       | 101,456                                       |       | 103,505 |   | 101,430 |   |
| Effect of  dilutive securities:                   |       |                                            |       |                                          |       |   |   |   |   |
| Stock options  and restricted stock               |       | 2,615                                           |       | 413                                           |       | 2,681 |   | 349 |   |
| Weighted average  shares outstanding—diluted |       | 106,798                                         |       | 101,869                                       |       | 106,186 |   | 101,779 |   |
| Net income per share—basic                   |       | $                                               | 0.05       |                                          | $          | 0.03 |   | $ | 0.09 |   | $ | 0.06 |   |
| Net income per share—diluted                 |       | $                                               | 0.05       |                                          | $          | 0.02 |   | $ | 0.08 |   | $ | 0.06 |   |

 

The totalanti-diluted shares outstanding for the six months ended June 30, 2007 and 2006were 530,000 and 1,893,000, respectively.

**12.Interest and Other Income (Expense), Net**

Thecomponents of interest and other income (expense), net, were as follows for thethree and six months ended June 30, 2007 and 2006 (in thousands):
| ** **                                                          | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|---------------------------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                                          | ** ** | **2007**                         | ** ** | **2006**                       | ** ** | **2007** | ** ** | **2006** | ** ** |
| Interest income                                                     |       | $                                | 386        |                           | $          | 924 |   | $ | 674 |   | $ | 1,645 |   |
| Interest expense                                                    |       | (478                             | )          | (500                           | )          | (909 | ) | (794 | ) |
| Exchange losses on  foreign currency transactions                   |       | (46                              | )          | (701                           | )          | (602 | ) | (1,097 | ) |
| Appreciation of the  fair value of derivative financial instruments |       | 347                              |       | 2,315                          |       | 580 |   | 3,775 |   |
| Other                                                               |       | 110                              |       | 294                            |       | 51 |   | 484 |   |
| Interest and other income (expense), net                            |       | $                                | 319        |                           | $          | 2,332 |   | $ | (206 | ) | $ | 4,013 |   |

 

**13. Comprehensive Income**

Comprehensiveincome refers to revenues, expenses, gains and losses that under accountingprinciples generally accepted in the United States of America are included inother comprehensive income, but excluded from net income as these amounts arerecorded directly as an adjustment to stockholders’ equity, net of tax. The following is a summary of comprehensive income for the three and six monthsended June 30, 2007 and 2006 (in thousands):
| ** **                               | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                               | ** ** | **2007**                         | ** ** | **2006**                       | ** ** | **2007** | ** ** | **2006** | ** ** |
| Net income                               |       | $4,965                           |       | $2,538                         |       | $8,846 |   | $5,797 |   |
| Foreign currency translation adjustments |       | 1,066                            |       | 5,860                          |       | 2,698 |   | 8,514 |   |
| Total comprehensive income               |       | $6,031                           |       | $8,398                         |       | $11,544 |   | $14,311 |   |

 

**14. Commitments and Contingencies**

Lawsuits, claimsand proceedings of a nature considered normal to its businesses may be pendingfrom time to time against the Company. The Company believes the outcome ofthese proceedings, if any, will not have a material impact on the Company’sfinancial position or results of operations.

**15. Letters of Credit and Guarantees**

As of June 30,2007 and December 31, 2006, the Company had bank guarantees of $11.1million and $9.1 million, respectively,

12

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for its customer advances. These bank guaranteesaffect the availability of the Company’s lines of credit.

**16. Business Segment Information**

SFAS No. 131,*Disclosures about Segments of an Enterprise andRelated Information* (“SFAS 131”), establishes standards forreporting information about reportable segments in financial statements ofpublic business enterprises. SFAS 131 also establishes standards for relateddisclosures about products and services, geographic areas and major customers.The Company reports financial results on the basis of three reportablesegments: Bruker AXS, Bruker Daltonics and Bruker Optics. Bruker AXSmanufactures and distributes advanced X-ray instrumentation and spark-OESinstrumentation used in non-destructive molecular and elemental analysis inacademic, research and industrial applications.  Bruker Daltonicsmanufactures and distributes mass spectrometry instruments that can beintegrated and used with other analytical instruments. Bruker Opticsmanufactures and distributes infrared and Raman molecular spectroscopyinstruments and solutions that can be used in analytical and researchapplications. Bruker BioSciences Corporation, the parent company of Bruker AXS,Bruker Daltonics and Bruker Optics, is the corporate entity that principallyincurs certain public company costs.

Selectedreportable segment financial information for the three and six months endedJune 30, 2007 and 2006 is presented below (in thousands):
| ** **                   | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                   | ** ** | **2007**                         | ** ** | **2006**                       | ** ** | **2007** | ** ** | **2006** | ** ** |
| **Revenue:**                 | ** ** | ** **                       | ** ** | ** **                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| Bruker AXS                   |       | $53,300                          |       | $39,113                        |       | $105,243 |   | $76,970 |   |
| Bruker Daltonics             |       | 40,628                           |       | 39,830                         |       | 79,690 |   | 77,359 |   |
| Bruker Optics                |       | 30,275                           |       | 23,558                         |       | 52,023 |   | 44,856 |   |
| Eliminations (a)             |       | (2,520                           | )          | (2,018                         | )          | (4,766 | ) | (3,846 | ) |
| Total                        |       | $121,683                         |       | $100,483                       |       | $232,190 |   | $195,339 |   |
|                         |       |                             |       |                           |       |   |   |   |   |
| **Operating income (loss):** | ** ** | ** **                       | ** ** | ** **                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| Bruker AXS                   |       | $4,024                           |       | $1,599                         |       | $8,280 |   | $2,660 |   |
| Bruker Daltonics             |       | (1,178                           | )          | 1,660                          |       | 1,282 |   | 4,465 |   |
| Bruker Optics                |       | 5,278                            |       | 1,657                          |       | 7,505 |   | 4,443 |   |
| Eliminations (a)             |       | 102                              |       | (390                           | )          | (18 | ) | (359 | ) |
| Corporate                    |       | (1,197                           | )          | (1,652                         | )          | (2,261 | ) | (3,469 | ) |
| Total                        |       | $7,029                           |       | $2,874                         |       | $14,788 |   | $7,740 |   |

----

(a)             representstransactions between segments which are eliminated in consolidation.

**17. Recent Accounting Pronouncements**

InFebruary 2007, the FASB issued SFAS No. 159,*The Fair Value Option for Financial Assets andLiabilities, Including an amendment of FASB Statement No. 115* (“SFAS159”). This Statement permits entities to choose to measure many financialinstruments and certain other items at fair value that are not currentlyrequired to be measured at fair value. SFAS 159 is effective as of thebeginning of fiscal 2008. The Company has not yet assessed the effect, if any,that adoption of SFAS 159 will have on its results of operations and financialposition.

InSeptember 2006, the FASB issued SFAS No. 157,*Fair Value Measurements* (“SFAS 157”).This Statement is effective for financial statements issued for fiscal yearsbeginning after November 15, 2007. SFAS 157 provides a common fair valuehierarchy for companies to follow in determining fair value measurements in thepreparation of financial statements and expands disclosure requirementsrelating to how such fair value measurements were developed. SFAS 157 clarifiesthe principle that fair value should be based on the assumptions that themarketplace would use when pricing an asset or liability, rather than companyspecific data. The Company is currently assessing the impact that SFAS 157 willhave on its results of operations and financial position.

13

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**ITEM2:  Management’s Discussion and Analysis of Financial Condition andResults of Operations**

The following discussion of our financial conditionand results of operations should be read in conjunction with our interimcondensed consolidated financial statements and the notes to those statementsincluded in Part 1, Item 1 of this Quarterly Report on Form 10-Q, andin conjunction with the consolidated financial statements contained in ourAnnual Report on Form 10-K for the year ended December 31, 2006.

Statements contained in Management’s Discussion andAnalysis of Financial Condition and Results of Operations which express that we“believe”, “anticipate”, “expect” or “plan to”, as well as other statementswhich are not historical fact, are forward-looking statements within themeaning of the Private Securities Litigation Act of 1995. Actual events orresults may differ materially from those set forth in forward-lookingstatements. Certain factors that might cause such a difference are discussed in“Factors Affecting Our Business, Operating Results and Financial Condition” setforth in our Annual Report on Form 10-K for the year endedDecember 31, 2006.

**OVERVIEW**

The following management’s discussion and analysis offinancial condition and results of operations (MD&A) describes theprincipal factors affecting the results of our operations, financial condition,and changes in financial condition, as well as our critical accounting policiesand estimates. MD&A is organized as follows:

·                     *Executive overview.* This section providesa general description and history of our business, a brief discussion of ourreportable segments and significant recent developments in our business.

·                     *Critical accounting policies and estimates.*This section discusses the accounting estimates that are considered importantto our financial condition and results of operations and require us to exercisesubjective or complex judgments in their application.

·                     *Results of operations.* This sectionprovides our analysis of the significant line items in our consolidatedstatement of operations for the three and six months ended June 30, 2007compared to the three and six months ended June 30, 2006.

·                     *Liquidity and capital resources.* Thissection provides an analysis of our liquidity and cash flow and a discussion ofour outstanding debt and commitments.

**EXECUTIVE OVERVIEW**

Bruker BioSciences and its wholly-owned subsidiariesdesign, manufacture, market and service proprietary life science and materialsresearch systems based on mass spectrometry core technology platforms, X-raytechnologies, optical emission spectroscopy (OES) technologies, and molecularspectroscopy technologies. We also manufacture and distribute a broad range offield analytical systems for chemical, biological, radiological and nuclear, orCBRN, detection. We report financial results on the basis of three reportablesegments: Bruker AXS, Bruker Daltonics and Bruker Optics.

Bruker AXS primarily engages in the business ofmanufacturing and distributing advanced instrumentation and automated solutionsbased on X-ray and spark-OES technologies with the purpose of addressing theneeds of our customers in the discovery of new drugs, drug targets and advancedmaterials, as well as industrial QA/QC applications. Typical customers ofBruker AXS’ products and solutions include biotechnology and pharmaceuticalcompanies, semiconductor industries, chemical, cement, metals and petroleumcompanies, raw material manufacturers, and academic and government researchinstitutions.  Bruker Daltonics is a leadingmanufacturer of innovative mass spectrometry-based instruments and accessoriesused by pharmaceutical, biotechnology, proteomics and molecular diagnosticscompanies, academic institutions, and government agencies in their researchthat can also be integrated and used along with other analytical instruments.Bruker Daltonics also manufactures and distributes a broad range of fieldanalytical systems for CBRN detection. Bruker Optics is a leading developer,manufacturer and provider of research, analytical and process analysisinstruments and solutions based on infrared and Raman molecular spectroscopytechnology. Typical customers of Bruker Optics’ products and solutions includepharmaceutical and biotechnology companies, cement and petroleum companies,food, beverage and agricultural industries, and academic and governmentresearch institutions.

We maintain major technical and manufacturing centersin Europe, North America and Japan, we have sales offices located throughoutthe world and our corporate headquarters is located in Billerica,Massachusetts. Our business strategy is to capitalize on our proven ability toinnovate and generate rapid revenue growth, both organically and throughacquisitions. Our revenue growth strategy, combined with improvements to ourgross profit margins over time and increased leverage on our research anddevelopment, sales and marketing and distribution investments and general andadministrative expenses, are expected to enhance our operating margins andimprove our earnings in the future.

For the six months ended June 30, 2007, our revenuesgrew by 19% to $232.2 million, with acquisitions and foreign exchange ratechanges each contributing approximately 5% of this growth. We continue tofocus on improving our profitability and we have made progress with higher netincome year-over-year.  We continue to invest in incremental sales andmarketing 

14

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initiatives, primarily headcount increases, which hasresulted in our sales and marketing expenses as a percentage of product andservice revenue increasing year-over-year.  We expect these investments toresult in increased revenues in future periods.  While our general andadministrative expenses remained constant as a percentage of revenue, ourincreased revenues enabled us to leverage our research and development expensesas a percentage of product and service revenue during the first six months of2007 compared to the first six months of 2006.

**CriticalAccounting Policies and Estimates**

The discussion and analysis of our financial conditionand results of operations is based upon our consolidated financial statements,which have been prepared in accordance with accounting principles generallyaccepted in the United States of America. The preparation of these financialstatements requires that we make estimates and assumptions that affect thereported amounts of assets and liabilities and the disclosure of contingentassets and liabilities at the date of the financial statements and reportedamounts of revenues and expenses during the reporting period. On an ongoingbasis, management evaluates its estimates and judgments, including thoserelated to revenue recognition, allowance for doubtful accounts, inventories,goodwill, long-lived assets, warranty costs and income taxes. We base ourestimates and judgments on historical experience, current market and economicconditions, our observance of industry trends and other assumptions that webelieve are reasonable and form the basis for making judgments about thecarrying value of assets and liabilities that are not readily apparent fromother sources. Actual results could differ from these estimates.

We believe the following critical accounting policiesto be both those most important to the portrayal of our financial condition andthose that require the most subjective judgment.

·                     *Revenue recognition.* We recognize revenuefrom system sales when persuasive evidence of an arrangement exists, the priceis fixed or determinable, title and risk of loss has been transferred to thecustomer and collectibility of the resulting receivable is reasonably assured.Title and risk of loss is generally transferred to the customer upon receipt ofa signed customer acceptance form for a system that has been shipped,installed, and for which the customer has been trained. As a result, the timingof customer acceptance or readiness could cause our reported revenues to differmaterially from expectations. When products are sold through an independentdistributor, a strategic distribution partner or an unconsolidated affiliateddistributor, which assumes responsibility for installation, we recognize thesystem sale when the product has been shipped and title and risk of loss havebeen transferred. Our distributors do not have price protection rights or rightsto return; however, our products are generally warranted to be free from defectfor a period of one year. Revenue is deferred until cash is received when asignificant portion of the fee is due over one year after delivery,installation and acceptance of a system. For arrangements with multipleelements, we recognize revenue for each element based on the fair value of theelement, provided all other criteria for revenue recognition have been met. Thefair value for each element provided in multiple element arrangements istypically determined by referencing historical pricing policies when theelement is sold separately. Changes in our ability to establish the fair valuefor each element in multiple element arrangements could affect the timing ofrevenue recognition. Revenue from accessories and parts is recognized uponshipment and service revenue is recognized as the services are performed. Werecord grant revenue from government contracts by deferring any up-frontpayments received and recording the revenue for research and developmentactivities systematically over the life of the contract as the services areprovided.

·                     *Warranty costs.* We normally provide aone-year parts and labor warranty with the purchase of equipment. Theanticipated cost for this one-year warranty is accrued upon recognition of thesale and is included as a current liability on the balance sheet. Although ourfacilities undergo quality assurance and testing procedures throughout theproduction process, our warranty obligation is affected by product failurerates, material usage and service delivery costs incurred in correcting aproduct failure. Although our actual warranty costs have historically beenconsistent with expectations, to the extent warranty claim activity or costsassociated with servicing those claims differ from our estimates, revisions tothe warranty accrual may be required.

·                     *Inventories.* Inventories are stated at thelower of cost or market, with cost determined by the first-in, first-outmethod. We maintain an allowance for excess and obsolete inventory to reflectthe expected un-saleable or un-refundable inventory based on an evaluation ofslow moving products. If ultimate usage or demand varies significantly fromexpected usage or demand, additional write-downs may be required, resulting ina charge to operations.

·                    *Goodwill, other intangible assets, and otherlong-lived assets.* We perform an evaluation of whether goodwill isimpaired annually or when events occur or circumstances change that would morelikely than not reduce the fair value of a reporting unit below its carryingamount. Fair value is determined using market comparables for similarbusinesses or forecasts of discounted future cash flows. We also review otherintangible assets and other long-lived assets when indication of potentialimpairment exists, such as a significant reduction in cash flows associatedwith the assets. Should the fair value of our long-lived assets decline becauseof reduced operating performance, market declines, or other indicators ofimpairment, a charge to operations for impairment may be necessary.

·                     *Allowance for doubtful accounts.* Wemaintain allowances for doubtful accounts for estimated losses resulting fromthe inability of our customers to pay amounts due. If the financial conditionof our customers were to deteriorate, reducing their ability to make payments,additional allowances would be required and would result in a charge tooperations.

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·                     *Income taxes.* We estimate the degree towhich tax assets and loss carryforwards will result in a benefit based onexpected profitability by tax jurisdiction, and provide a valuation allowancefor tax assets and loss carryforwards that we believe will more likely than notgo unused. If it becomes more likely than not that a tax asset or losscarryforward will be used for which a reserve has been provided, we reverse therelated valuation allowance. If our actual future taxable income by taxjurisdiction differs from estimates, additional allowances or reversals ofreserves may be necessary.

**Results ofOperations**

***Three months ended June 30, 2007 compared to the threemonths ended June 30, 2006***

***Revenue***

The followingtable presents revenue, change in revenue and revenue growth by reportablesegment for the three months ended June 30, 2007 and 2006 (dollars inthousands):
| ** **       | ** ** | ** ** | ** ** | ** ** | ** ** | ** **        | ** ** | **Percentage** | ** ** |
|------------------|------------|------------|------------|------------|------------|-------------------|------------|----------------|------------|
| ** **       | ** ** | **2007**   | ** ** | **2006**   | ** ** | **$ Change** | ** ** | **Change**     | ** ** |
| Bruker AXS       |       | $          | 53,300     |       | $          | 39,113            |       | $              | 14,187     |   | 36.3 | % |
| Bruker Daltonics |       | 40,628     |       | 39,830     |       | 798               |       | 2.0            | %          |
| Bruker Optics    |       | 30,275     |       | 23,558     |       | 6,717             |       | 28.5           | %          |
| Eliminations(a)  |       | (2,520     | )          | (2,018     | )          | (502              | )          |           |       |
|             |       |       |       |       |       |              |       |           |       |
| Total Revenue    |       | $          | 121,683    |       | $          | 100,483           |       | $              | 21,200     |   | 21.1 | % |

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(a)             representsrevenue recorded on transactions between segments which is eliminated inconsolidation.

Bruker AXS’revenue increased by $14.2 million, or 36.3%, to $53.3 million for the threemonths ended June 30, 2007 compared to $39.1 million for the comparable periodin 2006. Included in this change in revenue is approximately $1.3 millionfrom the impact of foreign exchange. Excluding the effect of foreign exchange, revenueincreased by 33.0%. The increase in revenue is attributable to the businessesacquired in the second half of 2006, which represented approximately 14% of therevenue growth, and an increase in materials research system sales, othersystem revenue and aftermarket revenue. Other system revenue relates primarilyto the distribution of products not manufactured by Bruker AXS. X-ray systems,other system and aftermarket revenue as a percentage of Bruker AXS’ product andservice revenue were as follows during the three months ended June 30, 2007 and2006 (dollars in thousands):
| ** **                         | ** ** | **2007**    | ** ** | **2006**                          | ** ** |
|------------------------------------|------------|-------------|------------|-----------------------------------|------------|
| ** **                         | ** ** | ** **  | ** ** | **Percentage of**            | ** ** | ** ** | ** ** | **Percentage of** | ** ** |
| ** **                         | ** ** | ** **  | ** ** | **Segment Product**          | ** ** | ** ** | ** ** | **Segment Product** | ** ** |
| ** **                         | ** ** | **Revenue** | ** ** | **and Service Revenue** | ** ** | **Revenue** | ** ** | **and Service Revenue** | ** ** |
| X-Ray Systems                      |       | $           | 35,467     |                              | 66.6       | % | $ | 25,587 |   | 65.5 | % |
| Other System  Revenue              |       | 4,869       |       | 9.1                               | %          | 1,931 |   | 4.9 | % |
| Bruker AXS  Aftermarket            |       | 12,964      |       | 24.3                              | %          | 11,595 |   | 29.6 | % |
|                               |       |        |       |                              |       |   |   |   |   |
| Total Product  and Service Revenue |       | $           | 53,300     |                              | 100        | % | $ | 39,113 |   | 100 | % |

 

Bruker Daltonics’ revenue increased by $0.8 million,or 2.0%, to $40.6 million for the three months ended June 30, 2007 compared to$39.8 million for the comparable period in 2006. Included in this change inrevenue is approximately $1.7 million from the impact of foreign exchange.Excluding the effect of the foreign exchange benefit, revenue decreased by2.4%. The decrease in revenue excluding the effect of foreign exchange is aresult of reduced OEM sales for certain life science systems, decreased directlife science system sales and lower grant revenue, partially offset byincreased sales of CBRN detection systems and aftermarket revenueyear-over-year. Aftermarket revenues include accessory sales, consumables,training and services. Included in other revenue during the three months endedJune 30, 2007 and 2006 are grant revenues from various projects for early-stageresearch and development projects funded by the German government. Life sciencesystems, CBRN detection systems and aftermarket revenue as a percentage ofBruker Daltonics’ product and service revenue were as follows during the threemonths ended June 30, 2007 and 2006 (dollars in thousands):

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| ** **                    | ** ** | **2007**    | ** ** | **2006**                          | ** ** |
|-------------------------------|------------|-------------|------------|-----------------------------------|------------|
| ** **                    | ** ** | ** **  | ** ** | **Percentage of**            | ** ** | ** ** | ** ** | **Percentage of** | ** ** |
| ** **                    | ** ** | ** **  | ** ** | **Segment Product**          | ** ** | ** ** | ** ** | **Segment Product** | ** ** |
| ** **                    | ** ** | **Revenue** | ** ** | **and Service Revenue** | ** ** | **Revenue** | ** ** | **and Service Revenue** | ** ** |
| Life Science  Systems         |       | $           | 28,380     |                              | 70.0       | % | $ | 30,651 |   | 77.4 | % |
| CBRN Detection  Systems       |       | 4,153       |       | 10.2                              | %          | 2,045 |   | 5.2 | % |
| Bruker Daltonics  Aftermarket |       | 8,017       |       | 19.8                              | %          | 6,901 |   | 17.4 | % |
| Product and Service Revenue   |       | 40,550      |       | 100                               | %          | 39,597 |   | 100 | % |
| Grant Revenue                 |       | 78          |       |                              |       | 233 |   |   |   |
| Total Revenue                 |       | $           | 40,628     |                              |       |   | $ | 39,830 |   |   |   |

 

Bruker Optics’ revenue increased by $6.7 million,or 28.5%, to $30.3 million for the three months ended June 30, 2007 compared to$23.6 million for the comparable period in 2006. Included in this change in revenueis approximately $1.0 million from the impact of foreign exchange.Excluding the effect of foreign exchange, revenue increased by 24.1%.  The increase in revenue excluding the effectof foreign exchange is primarily due to higher sales of molecular spectroscopysystems year-over-year. Sales increased, in part, as a result of severalcustomer delayed installations and delays in production due to vendor suppliedproducts which occurred in the first quarter and resulted in revenue being recognizedin the second quarter.  For the threemonths ended June 30, 2007, we recognized $2.6 million in revenue from ourorder with the Chinese State Food and Drug Administration, compared to $3.6million in revenue from this order in the same period in 2006. Aftermarketrevenues include accessory sales, consumables, training and services. Othersystem revenue relates primarily to the distribution of products notmanufactured by Bruker Optics. Molecular spectroscopy systems, other system andaftermarket revenue as a percentage of Bruker Optics’ product and servicerevenue were as follows during the three months ended June 30, 2007 and 2006(dollars in thousands):
| ** **                         | ** ** | **2007**    | ** ** | **2006**                          | ** ** |
|------------------------------------|------------|-------------|------------|-----------------------------------|------------|
| ** **                         | ** ** | ** **  | ** ** | **Percentage of**            | ** ** | ** ** | ** ** | **Percentage of** | ** ** |
| ** **                         | ** ** | ** **  | ** ** | **Segment Product**          | ** ** | ** ** | ** ** | **Segment Product** | ** ** |
| ** **                         | ** ** | **Revenue** | ** ** | **and Service Revenue** | ** ** | **Revenue** | ** ** | **and Service Revenue** | ** ** |
| Molecular  Spectroscopy Systems    |       | $           | 23,905     |                              | 79.0       | % | $ | 18,312 |   | 77.7 | % |
| Other System  Revenue              |       | 2,054       |       | 6.8                               | %          | 1,400 |   | 6.0 | % |
| Bruker Optics  Aftermarket         |       | 4,316       |       | 14.2                              | %          | 3,846 |   | 16.3 | % |
|                               |       |        |       |                              |       |   |   |   |   |
| Total Product  and Service Revenue |       | $           | 30,275     |                              | 100        | % | $ | 23,558 |   | 100 | % |

 

***Cost of Revenue***

The following table presents cost of product andservice revenue and gross profit margins on product and service revenue byreportable segment for the three months ended June 30, 2007 and 2006 (dollarsin thousands):
| ** **             | ** ** | **2007**         | ** ** | **2006**              | ** ** |
|------------------------|------------|------------------|------------|-----------------------|------------|
| ** **             | ** ** | **Cost of** | ** ** | **Gross Profit** | ** ** | **Cost of** | ** ** | **Gross Profit** | ** ** |
| ** **             | ** ** | **Revenue**      | ** ** | **Margin**            | ** ** | **Revenue** | ** ** | **Margin** | ** ** |
| Bruker AXS             |       | $                | 29,677     |                  | 44.3       | % | $ | 21,865 |   | 44.1 | % |
| Bruker Daltonics       |       | 25,824           |       | 36.3                  | %          | 23,161 |   | 41.5 | % |
| Bruker Optics          |       | 15,611           |       | 48.4                  | %          | 11,321 |   | 51.9 | % |
| Eliminations(a)        |       | (2,460           | )          |                  |       | (2,087 |   |   |   |
|                   |       |             |       |                  |       |   |   |   |   |
| Total Cost of  Revenue |       | $                | 68,652     |                  | 43.5       | % | $ | 54,260 |   | 45.9 | % |

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(a)             representsthe cost of revenues between segments which is eliminated in consolidation.

Bruker AXS’ cost of product and service revenue forthe three months ended June 30, 2007 was $29.7 million, resulting in a grossprofit margin of 44.3%, compared to cost of product and service revenue of$21.9 million, or a gross profit margin of 44.1%, for the comparable period in2006. The increase in gross profit margin is primarily attributable to bettercapacity utilization as a result of increased revenues year-over-year, thehigher margin businesses acquired in the second half of 2006 and the realizationof benefits from various ongoing gross profit margin improvement programs,partially offset by lower gross profit margins realized on other systemrevenues.

Bruker Daltonics’ cost of product and service revenuefor the three months ended June 30, 2007 was $25.8 million, resulting in agross profit margin of 36.3%, compared to cost of product and service revenueof $23.2 million, or a gross profit margin of 41.5%, for the comparable periodin 2006. The decrease in gross profit margin is primarily attributable to aone-time $1.5 million charge associated with our Fourier Transform MassSpectrometry (“FTMS”) product line in the second quarter of 2007 partiallyoffset by increased CBRN detection system revenues year-over-year.

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Bruker Optics’ cost of product and service revenue forthe three months ended June 30, 2007 was $15.6 million, resulting in a grossprofit margin of 48.4%, compared to cost of product and service revenue of$11.3 million, or a gross profit margin of 51.9%, for the comparable period in2006. The decrease in gross profit margin is primarily attributable to a changein product mix year-over-year within the molecular spectroscopy systems,specifically lower sales of Fourier Transform Near Infrared (“FT-NIR”) systemsin the second quarter of 2007 compared to the second quarter of 2006.

***Sales and Marketing***

The following table presents sales and marketingexpense and sales and marketing expense as a percentage of product and servicerevenue by reportable segment for the three months ended June 30, 2007 and 2006(dollars in thousands):
| ** **                 | ** ** | **2007**           | ** ** | **2006**                          | ** ** |
|----------------------------|------------|--------------------|------------|-----------------------------------|------------|
| ** **                 | ** ** | ** **         | ** ** | **Percentage of**            | ** ** | ** ** | ** ** | **Percentage of** | ** ** |
| ** **                 | ** ** | **Sales and** | ** ** | **Segment Product**          | ** ** | **Sales and** | ** ** | **Segment Product** | ** ** |
| ** **                 | ** ** | **Marketing**      | ** ** | **and Service Revenue** | ** ** | **Marketing** | ** ** | **and Service Revenue** | ** ** |
| Bruker AXS                 |       | $                  | 10,727     |                              | 20.1       | % | $ | 8,289 |   | 21.2 | % |
| Bruker Daltonics           |       | 7,178              |       | 17.7                              | %          | 7,137 |   | 18.0 | % |
| Bruker Optics              |       | 6,183              |       | 20.4                              | %          | 5,474 |   | 23.2 | % |
|                       |       |               |       |                              |       |   |   |   |   |
| Total Sales and  Marketing |       | $                  | 24,088     |                              | 19.8       | % | $ | 20,900 |   | 20.8 | % |

 

Bruker AXS’ sales and marketing expense for the threemonths ended June 30, 2007 increased to $10.7 million, or 20.1% of product andservice revenue, from $8.3 million, or 21.2% of product and service revenue forthe comparable period in 2006. The increase in sales and marketing expense isprimarily attributable to increased headcount related to the acquisitionscompleted during the second half of 2006 and higher commissions on increasedrevenues from our core business year-over-year.

Bruker Daltonics’ sales and marketing expense for thethree months ended June 30, 2007 increased to $7.2 million, or 17.7% of productand service revenue, from $7.1 million, or 18.0% of product and service revenuefor the comparable period in 2006. The increase in sales and marketing expenseis attributable to incremental investments in various sales and marketinginitiatives, primarily related to an increase in applications resources.

Bruker Optics’ sales and marketing expense for thethree months ended June 30, 2007 increased to $6.2 million, or 20.4% of productand service revenue, from $5.5 million, or 23.2% of product and service revenuefor the comparable period in 2006. The increase in sales and marketing expenseis primarily attributable to higher commissions on increased revenues and neworder bookings year-over-year.

***General and Administrative***

The following table presents general andadministrative expense and general and administrative expense as a percentageof product and service revenue by reportable segment for the three months endedJune 30, 2007 and 2006 (dollars in thousands):
| ** **                        | ** ** | **2007**             | ** ** | **2006**                          | ** ** |
|-----------------------------------|------------|----------------------|------------|-----------------------------------|------------|
| ** **                        | ** ** | ** **           | ** ** | **Percentage of**            | ** ** | ** ** | ** ** | **Percentage of** | ** ** |
| ** **                        | ** ** | **General and** | ** ** | **Segment Product**          | ** ** | **General and** | ** ** | **Segment Product** | ** ** |
| ** **                        | ** ** | **Administrative**   | ** ** | **and Service Revenue** | ** ** | **Administrative** | ** ** | **and Service Revenue** | ** ** |
| Bruker AXS                        |       | $                    | 3,612      |                              | 6.8        | % | $ | 3,181 |   | 8.1 | % |
| Bruker Daltonics                  |       | 2,153                |       | 5.3                               | %          | 1,620 |   | 4.1 | % |
| Bruker Optics                     |       | 1,429                |       | 4.7                               | %          | 941 |   | 4.0 | % |
| Corporate                         |       | 794                  |       |                              |       | 731 |   |   |   |
|                              |       |                 |       |                              |       |   |   |   |   |
| Total General  and Administrative |       | $                    | 7,988      |                              | 6.6        | % | $ | 6,473 |   | 6.5 | % |

 

Bruker AXS’ general and administrative expenses forthe three months ended June 30, 2007 increased to $3.6 million, or 6.8% ofproduct and service revenue, from $3.2 million, or 8.1% of product and servicerevenue for the comparable period in 2006. The increase in general andadministrative expenses is primarily due to intangible asset amortization associatedwith the acquisitions completed during the second half of 2006 and external taxconsulting fees incurred in the second quarter of 2007.

Bruker Daltonics’ general and administrative expensefor the three months ended June 30, 2007 increased to $2.2 million, or 5.3% ofproduct and service revenue, from $1.6 million, or 4.1% of product and servicerevenue for the comparable period of 2006. The increase in general andadministrative expenses is primarily attributable to external tax consultingfees incurred in the second quarter of 2007 and a decrease in general andadministrative expenses in the second quarter of 2006 which resulted from thecollection in that quarter of accounts receivable balances which previously hadbeen written-off.

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Bruker Optics’ general and administrative expenses forthe three months ended June 30, 2007 increased to $1.4 million, or 4.7% ofproduct and service revenue, from $0.9 million, or 4.0% of product and servicerevenue for the comparable period of 2006. The increase in general andadministrative expenses is primarily attributable to the allocated corporategeneral and administrative expenses associated with being part of a publiccompany and external tax consulting fees incurred in the second quarter of 2007.

Corporate general and administrative expense for thethree months ended June 30, 2007 and 2006 was essentially flat year-over-year.Corporate general and administrative expense represents expenses associatedwith being a public company not allocated to our reportable segments, includinglegal fees, audit and consulting fees, salaries and filing fees.

***Research and Development***

The following table presents research and developmentexpense and research and development expense as a percentage of product and servicerevenue by reportable segment for the three months ended June 30, 2007 and 2006(dollars in thousands):
| ** **                     | ** ** | **2007**              | ** ** | **2006**                          | ** ** |
|--------------------------------|------------|-----------------------|------------|-----------------------------------|------------|
| ** **                     | ** ** | ** **            | ** ** | **Percentage of**            | ** ** | ** ** | ** ** | **Percentage of** | ** ** |
| ** **                     | ** ** | **Research and** | ** ** | **Segment Product**          | ** ** | **Research and** | ** ** | **Segment Product** | ** ** |
| ** **                     | ** ** | **Development**       | ** ** | **and Service Revenue** | ** ** | **Development** | ** ** | **and Service Revenue** | ** ** |
| Bruker AXS                     |       | $                     | 5,262      |                              | 9.9        | % | $ | 4,225 |   | 10.8 | % |
| Bruker Daltonics               |       | 6,769                 |       | 16.7                              | %          | 6,394 |   | 16.1 | % |
| Bruker Optics                  |       | 1,895                 |       | 6.3                               | %          | 1,665 |   | 7.1 | % |
|                           |       |                  |       |                              |       |   |   |   |   |
| Total Research and Development |       | $                     | 13,926     |                              | 11.5       | % | $ | 12,284 |   | 12.3 | % |

 

Bruker AXS’ research and development expense for thethree months ended June 30, 2007 increased to $5.3 million, or 9.9% of productand service revenue, from $4.2 million, or 10.8% of product and service revenuefor the comparable period in 2006.  Theincrease in research and development expense is primarily attributable to anincrease in headcount resulting from the acquisitions completed during thesecond half of 2006.

Bruker Daltonics’ research and development expense forthe three months ended June 30, 2007 increased to $6.8 million, or 16.7% ofproduct and service revenue, from $6.4 million, or 16.1% of product and servicerevenue for the comparable period in 2006. The increase in research anddevelopment expense is primarily attributable to changes in foreign currenciesyear-over-year, primarily the Euro, as a majority of research and developmentis performed in Germany.

Bruker Optics’ research and development expense forthe three months ended June 30, 2007 increased to $1.9 million, or 6.3% ofproduct and service revenue, from $1.7 million, or 7.1% of product and servicerevenue for the comparable period in 2006. The increase in research and development expense is primarilyattributable to changes in foreign currencies year-over-year, primarily theEuro, as a majority of research and development is performed in Germany.

***Acquisition Related Charges***

On April 18, 2006, we announced that we hadentered into a definitive agreement to acquire all of the stock of molecularspectroscopy company Bruker Optics. The acquisition of Bruker Optics wasapproved by our shareholders on June 29, 2006 and was subsequently completed onJuly 1, 2006. This acquisition represented a business combination of companiesunder common control due to a majority ownership by individuals of both BrukerBioSciences and Bruker Optics and, as a result, transaction costs have beenexpensed as incurred rather than being included in the purchase priceallocation. During the second quarter of 2006, we incurred acquisition relatedcharges totaling $3.7 million, which consisted of investment banking, legal andaccounting fees, compensation earned by the special committee of our Board ofDirectors and antitrust regulation filing fees.

***Interest and Other Income (Expense), Net***

Interest and other income (expense), net, during thethree months ended June 30, 2007 was $0.3 million, compared to $2.3 millionduring the three months ended June 30, 2006. During the three months ended June30, 2007, the major components within interest and other income (expense), net,were net interest expense of $(0.1) million and the appreciation of the fairvalue of derivative financial instruments of $0.3 million. During the threemonths ended June 30, 2006, the major components within interest and otherincome (expense), net, were net interest income of $0.4 million, losses onforeign currency transactions of $(0.7) million and the appreciation of thefair value of derivative financial instruments of $2.3 million.

19

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***Provision for Income Taxes***

The income tax provision for the three months endedJune 30, 2007 was $2.3 million compared to an income tax provision of $2.6million for the three months ended June 30, 2006, representing effective taxrates of 32% and 50%, respectively. The lower effective tax rate in the secondquarter of 2007 compared to the second quarter of 2006 was due to the effect ofU.S. operations being profitable in the second quarter of 2007 for which therewas no tax provision required because of cumulative U.S. net operating lossesthat are subject to a full valuation allowance. Our effective tax rate iscalculated using our projected annual pre-tax income or loss and is affected byresearch and development tax credits, the expected level of other tax benefits,and the impact of changes to the valuation allowance, as well as changes in themix of our pre-tax income and losses among jurisdictions with varying statutorytax rates and credits.

***Minority Interest in Consolidated Subsidiaries***

Minority interest in consolidated subsidiaries for thethree months ended June 30, 2007 was $60,000 compared to $45,000 in thecomparable period of 2006. The minority interest in subsidiaries represents theminority shareholders’ proportionate share of net income of those subsidiariesfor the three months ended June 30, 2007 and 2006. For the three months endedJune 30, 2007 and 2006, the minority interest relates to our two majority-ownedsubsidiaries, Incoatec GmbH and Baltic Scientific Instruments Ltd.

***Six months ended June 30, 2007 compared to the sixmonths ended June 30, 2006***

***Revenue***

The following table presents revenue, change inrevenue and revenue growth by reportable segment for the six months ended June30, 2007 and 2006 (dollars in thousands):
| ** **       | ** ** | ** ** | ** ** | ** ** | ** ** | ** **        | ** ** | **Percentage** | ** ** |
|------------------|------------|------------|------------|------------|------------|-------------------|------------|----------------|------------|
| ** **       | ** ** | **2007**   | ** ** | **2006**   | ** ** | **$ Change** | ** ** | **Change**     | ** ** |
| Bruker AXS       |       | $          | 105,243    |       | $          | 76,970            |       | $              | 28,273     |   | 36.7 | % |
| Bruker Daltonics |       | 79,690     |       | 77,359     |       | 2,331             |       | 3.0            | %          |
| Bruker Optics    |       | 52,023     |       | 44,856     |       | 7,167             |       | 16.0           | %          |
| Eliminations(a)  |       | (4,766     | )          | (3,846     | )          | (920              | )          |           |       |
|             |       |       |       |       |       |              |       |           |       |
| Total Revenue    |       | $          | 232,190    |       | $          | 195,339           |       | $              | 36,851     |   | 18.9 | % |

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(a)             representsrevenue recorded on transactions between segments which is eliminated inconsolidation.

Bruker AXS’ revenue increased by $28.3 million, or36.7%, to $105.2 million for the six months ended June 30, 2007 compared to$77.0 million for the comparable period in 2006. Included in this change in revenueis approximately $3.8 million from the impact of foreign exchange.Excluding the effect of foreign exchange, revenue increased by 31.8%. Theincrease in revenue is attributable to the businesses acquired in the secondhalf of 2006, which represented approximately 12% of the revenue growth, and anincrease in materials research system sales, other system revenue andaftermarket revenue. Other system revenue relates primarily to the distributionof products not manufactured by Bruker AXS. X-ray systems, other system andaftermarket revenue as a percentage of Bruker AXS’ product and service revenuewere as follows during the six months ended June 30, 2007 and 2006 (dollars inthousands):
| ** **                         | ** ** | **2007**    | ** ** | **2006**                          | ** ** |
|------------------------------------|------------|-------------|------------|-----------------------------------|------------|
| ** **                         | ** ** | ** **  | ** ** | **Percentage of**            | ** ** | ** ** | ** ** | **Percentage of** | ** ** |
| ** **                         | ** ** | ** **  | ** ** | **Segment Product**          | ** ** | ** ** | ** ** | **Segment Product** | ** ** |
| ** **                         | ** ** | **Revenue** | ** ** | **and Service Revenue** | ** ** | **Revenue** | ** ** | **and Service Revenue** | ** ** |
| X-Ray Systems                      |       | $           | 70,453     |                              | 66.9       | % | $ | 51,276 |   | 66.6 | % |
| Other System  Revenue              |       | 9,425       |       | 9.0                               | %          | 2,687 |   | 3.5 | % |
| Bruker AXS  Aftermarket            |       | 25,365      |       | 24.1                              | %          | 23,007 |   | 29.9 | % |
|                               |       |        |       |                              |       |   |   |   |   |
| Total Product  and Service Revenue |       | $           | 105,243    |                              | 100        | % | $ | 76,970 |   | 100 | % |

 

Bruker Daltonics’ revenue increased by$2.3 million, or 3.0%, to $79.7 million for the six months ended June 30,2007 compared to $77.4 million for the comparable period in 2006. Included inthis change in revenue is approximately $3.8 million from the impact offoreign exchange. Excluding the effect of the foreign exchange benefit, revenuedecreased by 1.9%. The decrease in revenue excluding the effect of foreignexchange is a result of reduced OEM sales for certain life science systems andsubstantially reduced grant revenue, partially offset by increased direct salesof life science systems and CBRN detection systemsyear-over-year.  Aftermarket revenues include accessory sales,consumables, training and services. Included in other revenue during the sixmonths ended June 30, 2007 and 2006 are grant revenues from various projectsfor early-stage research and development projects funded by the German andUnited States governments. Life science systems, CBRN detection systems andaftermarket revenue as a percentage of Bruker Daltonics’ product and servicerevenue were as follows during the six months ended June 30, 2007 and 2006(dollars in thousands):

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| ** **                    | ** ** | **2007**    | ** ** | **2006**                          | ** ** |
|-------------------------------|------------|-------------|------------|-----------------------------------|------------|
| ** **                    | ** ** | ** **  | ** ** | **Percentage of**            | ** ** | ** ** | ** ** | **Percentage of** | ** ** |
| ** **                    | ** ** | ** **  | ** ** | **Segment Product**          | ** ** | ** ** | ** ** | **Segment Product** | ** ** |
| ** **                    | ** ** | **Revenue** | ** ** | **and Service Revenue** | ** ** | **Revenue** | ** ** | **and Service Revenue** | ** ** |
| Life Science  Systems         |       | $           | 55,273     |                              | 69.6       | % | $ | 59,601 |   | 77.9 | % |
| CBRN Detection  Systems       |       | 7,658       |       | 9.6                               | %          | 3,416 |   | 4.5 | % |
| Bruker Daltonics  Aftermarket |       | 16,529      |       | 20.8                              | %          | 13,465 |   | 17.6 | % |
| Product and Service Revenue   |       | 79,460      |       | 100                               | %          | 76,482 |   | 100 | % |
| Grant Revenue                 |       | 230         |       |                              |       | 877 |   |   |   |
| Total Revenue                 |       | $           | 79,690     |                              |       |   | $ | 77,359 |   |   |   |

 

Bruker Optics’ revenue increased by $7.2 million,or 16.0%, to $52.0 million for the six months ended June 30, 2007 compared to$44.9 million for the comparable period in 2006. Included in this change inrevenue is approximately $2.1 million from the impact of foreign exchange.Excluding the effect of foreign exchange, revenue increased by 11.4%.  The increase in revenue excluding the effectof foreign exchange is due to higher sales of molecular spectroscopy systemsyear-over-year and higher aftermarket revenue. For the six months ended June 30, 2007, we recognized $4.1 million inrevenue from our order with the Chinese State Food and Drug Administrationcompared to $3.7 million in revenues from this order in the same period in2006.   Aftermarket revenues includeaccessory sales, consumables, training and services. Other system revenuerelates primarily to the distribution of products not manufactured by BrukerOptics. Molecular spectroscopy systems, other system and aftermarket revenue asa percentage of Bruker Optics’ product and service revenue were as followsduring the six months ended June 30, 2007 and 2006 (dollars in thousands):
| ** **                         | ** ** | **2007**    | ** ** | **2006**                          | ** ** |
|------------------------------------|------------|-------------|------------|-----------------------------------|------------|
| ** **                         | ** ** | ** **  | ** ** | **Percentage of**            | ** ** | ** ** | ** ** | **Percentage of** | ** ** |
| ** **                         | ** ** | ** **  | ** ** | **Segment Product**          | ** ** | ** ** | ** ** | **Segment Product** | ** ** |
| ** **                         | ** ** | **Revenue** | ** ** | **and Service Revenue** | ** ** | **Revenue** | ** ** | **and Service Revenue** | ** ** |
| Molecular  Spectroscopy Systems    |       | $           | 39,339     |                              | 75.6       | % | $ | 33,701 |   | 75.1 | % |
| Other System  Revenue              |       | 3,724       |       | 7.2                               | %          | 3,943 |   | 8.8 | % |
| Bruker Optics  Aftermarket         |       | 8,960       |       | 17.2                              | %          | 7,212 |   | 16.1 | % |
|                               |       |        |       |                              |       |   |   |   |   |
| Total Product  and Service Revenue |       | $           | 52,023     |                              | 100        | % | $ | 44,856 |   | 100 | % |

 

***Cost of Revenue***

The following table presents cost of product and servicerevenue and gross profit margins on product and service revenue by reportablesegment for the six months ended June 30, 2007 and 2006 (dollars in thousands):
| ** **            | ** ** | **2007**         | ** ** | **2006**              | ** ** |
|-----------------------|------------|------------------|------------|-----------------------|------------|
| ** **            | ** ** | **Cost of** | ** ** | **Gross Profit** | ** ** | **Cost of** | ** ** | **Gross Profit** | ** ** |
| ** **            | ** ** | **Revenue**      | ** ** | **Margin**            | ** ** | **Revenue** | ** ** | **Margin** | ** ** |
| Bruker AXS            |       | $                | 58,525     |                  | 44.4       | % | $ | 43,156 |   | 43.9 | % |
| Bruker Daltonics      |       | 46,742           |       | 41.2                  | %          | 44,354 |   | 42.0 | % |
| Bruker Optics         |       | 25,791           |       | 50.3                  | %          | 22,081 |   | 50.8 | % |
| Eliminations(a)       |       | (4,527           | )          |                  |       | (4,231 | ) |   |   |
|                  |       |             |       |                  |       |   |   |   |   |
| Total Cost of Revenue |       | $                | 126,531    |                  | 45.5       | % | $ | 105,360 |   | 45.8 | % |

----

(a)             representsthe cost of revenues between segments which is eliminated in consolidation.

Bruker AXS’ cost of product and service revenue forthe six months ended June 30, 2007 was $58.5 million, resulting in a grossprofit margin of 44.4%, compared to cost of product and service revenue of$43.2 million, or a gross profit margin of 43.9%, for the comparable period in2006. The increase in gross profit margin is primarily attributable to bettercapacity utilization as a result of increased revenues year-over-year, thehigher margin businesses acquired in the second half of 2006 and therealization of benefits from various ongoing gross profit margin improvementprograms, partially offset by lower gross profit margins realized on othersystem revenues.

Bruker Daltonics’ cost of product and service revenuefor the six months ended June 30, 2007 was $46.7 million, resulting in a grossprofit margin of 41.2%, compared to cost of product and service revenue of$44.4 million, or a gross profit margin of 42.0%, for the comparable period in2006.  The decrease in gross profitmargin is primarily attributable to a one-time $1.5 million charge associatedwith our FTMS product line in the second quarter of 2007 and a change in mix insales of life science systems, partially offset by increased CBRN detectionsystem revenues year-over-year.

 

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Bruker Optics’ cost of product and service revenue forthe six months ended June 30, 2007 was $25.8 million, resulting in a grossprofit margin of 50.3%, compared to cost of product and service revenue of$22.1 million, or a gross profit margin of 50.8%, for the comparable period in2006.  The decrease in gross profitmargin is primarily attributable to a change in product mix year-over-yearwithin the molecular spectroscopy systems, specifically lower sales of FT-NIRsystems in the first half of 2007 compared to the first half of 2006.

***Sales and Marketing***

The following table presents sales and marketingexpense and sales and marketing expense as a percentage of product and servicerevenue by reportable segment for the six months ended June 30, 2007 and 2006(dollars in thousands):
| ** **                | ** ** | **2007**           | ** ** | **2006**                          | ** ** |
|---------------------------|------------|--------------------|------------|-----------------------------------|------------|
| ** **                | ** ** | ** **         | ** ** | **Percentage of**            | ** ** | ** ** | ** ** | **Percentage of** | ** ** |
| ** **                | ** ** | **Sales and** | ** ** | **Segment Product**          | ** ** | **Sales and** | ** ** | **Segment Product** | ** ** |
| ** **                | ** ** | **Marketing**      | ** ** | **and Service Revenue** | ** ** | **Marketing** | ** ** | **and Service Revenue** | ** ** |
| Bruker AXS                |       | $                  | 21,228     |                              | 20.2       | % | $ | 16,491 |   | 21.4 | % |
| Bruker Daltonics          |       | 14,473             |       | 18.2                              | %          | 12,907 |   | 16.9 | % |
| Bruker Optics             |       | 12,151             |       | 23.4                              | %          | 10,334 |   | 23.0 | % |
|                      |       |               |       |                              |       |   |   |   |   |
| Total Sales and Marketing |       | $                  | 47,852     |                              | 20.6       | % | $ | 39,732 |   | 20.4 | % |

 

Bruker AXS’ sales and marketing expense for the sixmonths ended June 30, 2007 increased to $21.2 million, or 20.2% of product andservice revenue, from $16.5 million, or 21.4% of product and service revenuefor the comparable period in 2006. The increase in sales and marketing expenseis primarily attributable to increased headcount related to the acquisitionscompleted during the second half of 2006.

Bruker Daltonics’ sales and marketing expense for thesix months ended June 30, 2007 increased to $14.5 million, or 18.2% of productand service revenue, from $12.9 million, or 16.9% of product and servicerevenue for the comparable period in 2006. The increase in sales and marketingexpense is attributable to incremental investments in various sales andmarketing initiatives, primarily related to an increase in product specialists,direct sales, inside sales and applications resources.

Bruker Optics’ sales and marketing expense for the sixmonths ended June 30, 2007 increased to $12.2 million, or 23.4% of product andservice revenue, from $10.3 million, or 23.0% of product and service revenuefor the comparable period in 2006. The increase in sales and marketing expenseis primarily attributable to higher commissions on increased revenues and neworder bookings year-over-year.

***General and Administrative***

The following table presents general and administrativeexpense and general and administrative expense as a percentage of product andservice revenue by reportable segment for the six months ended June 30, 2007and 2006 (dollars in thousands):
| ** **                        | ** ** | **2007**             | ** ** | **2006**                          | ** ** |
|-----------------------------------|------------|----------------------|------------|-----------------------------------|------------|
| ** **                        | ** ** | ** **           | ** ** | **Percentage of**            | ** ** | ** ** | ** ** | **Percentage of** | ** ** |
| ** **                        | ** ** | **General and** | ** ** | **Segment Product**          | ** ** | **General and** | ** ** | **Segment Product** | ** ** |
| ** **                        | ** ** | **Administrative**   | ** ** | **and Service Revenue** | ** ** | **Administrative** | ** ** | **and Service Revenue** | ** ** |
| Bruker AXS                        |       | $                    | 6,844      |                              | 6.5        | % | $ | 6,205 |   | 8.1 | % |
| Bruker Daltonics                  |       | 4,330                |       | 5.4                               | %          | 3,540 |   | 4.6 | % |
| Bruker Optics                     |       | 2,842                |       | 5.5                               | %          | 1,932 |   | 4.3 | % |
| Corporate                         |       | 1,464                |       |                              |       | 1,403 |   |   |   |
|                              |       |                 |       |                              |       |   |   |   |   |
| Total General and  Administrative |       | $                    | 15,480     |                              | 6.7        | % | $ | 13,080 |   | 6.7 | % |

 

Bruker AXS’ general and administrative expenses forthe six months ended June 30, 2007 increased to $6.8 million, or 6.5% ofproduct and service revenue, from $6.2 million, or 8.1% of product and servicerevenue for the comparable period in 2006. The increase in general andadministrative expenses is primarily due to intangible asset amortizationassociated with the acquisitions completed during the second half of 2006 andto external tax consulting fees incurred in the second quarter of 2007.

Bruker Daltonics’ general and administrative expensefor the six months ended June 30, 2007 increased to $4.3 million, or 5.4% ofproduct and service revenue, from $3.5 million, or 4.6% of product and servicerevenue for the comparable period of 2006. The increase in general and administrative expenses is primarilyattributable to external tax consulting fees incurred in the 

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second quarter of 2007 and a decrease in general andadministrative expenses in the second quarter of 2006 which resulted from thecollection in that quarter of accounts receivable balances which previously hadbeen written-off.

Bruker Optics’ general and administrative expenses forthe six months ended June 30, 2007 increased to $2.8 million, or 5.5% ofproduct and service revenue, from $1.9 million, or 4.3% of product and servicerevenue for the comparable period of 2006.  The increase in general and administrative expenses is primarilyattributable to the allocated corporate general and administrative expenses associatedwith being part of a public company and external tax consulting fees incurredin the second quarter of 2007.

Corporate general and administrative expense for thesix months ended June 30, 2007 remained essentially flat year-over-year.Corporate general and administrative expense represents expenses associatedwith being a public company not allocated to our reportable segments, includinglegal fees, audit and consulting fees, salaries and filing fees.

***Research and Development***

The following table presents research and developmentexpense and research and development expense as a percentage of product andservice revenue by reportable segment for the six months ended June 30, 2007and 2006 (dollars in thousands):
| ** **                      | ** ** | **2007**              | ** ** | **2006**                          | ** ** |
|---------------------------------|------------|-----------------------|------------|-----------------------------------|------------|
| ** **                      | ** ** | ** **            | ** ** | **Percentage of**            | ** ** | ** ** | ** ** | **Percentage of** | ** ** |
| ** **                      | ** ** | **Research and** | ** ** | **Segment Product**          | ** ** | **Research and** | ** ** | **Segment Product** | ** ** |
| ** **                      | ** ** | **Development**       | ** ** | **and Service Revenue** | ** ** | **Development** | ** ** | **and Service Revenue** | ** ** |
| Bruker AXS                      |       | $                     | 10,470     |                              | 9.9        | % | $ | 8,627 |   | 11.2 | % |
| Bruker Daltonics                |       | 13,096                |       | 16.5                              | %          | 12,366 |   | 16.2 | % |
| Bruker Optics                   |       | 3,973                 |       | 7.6                               | %          | 3,566 |   | 7.9 | % |
|                            |       |                  |       |                              |       |   |   |   |   |
| Total Research and  Development |       | $                     | 27,539     |                              | 11.9       | % | $ | 24,559 |   | 12.6 | % |

 

Bruker AXS’ research and development expense for thesix months ended June 30, 2007 increased to $10.5 million, or 9.9% of productand service revenue, from $8.6 million, or 11.2% of product and service revenuefor the comparable period in 2006.  Theincrease in research and development expense is primarily attributable to anincrease in headcount and materials resulting from the acquisitions completedduring the second half of 2006.

Bruker Daltonics’ research and development expense forthe six months ended June 30, 2007 increased to $13.1 million, or 16.5% ofproduct and service revenue, from $12.4 million, or 16.2% of product andservice revenue for the comparable period in 2006. The increase in research anddevelopment expense is primarily attributable to changes in foreign currenciesyear-over-year, primarily the Euro, as a majority of research and developmentis performed in Germany.

Bruker Optics’ research and development expense for thesix months ended June 30, 2007 increased to $4.0 million, or 7.6% of productand service revenue, from $3.6 million, or 7.9% of product and service revenuefor the comparable period in 2006. The increase in research and developmentexpense is primarily attributable to changes in foreign currenciesyear-over-year, primarily the Euro, as a majority of research and developmentis performed in Germany.

***Acquisition Related Charges***

On April 18, 2006, we announced that we hadentered into a definitive agreement to acquire all of the stock of molecularspectroscopy company Bruker Optics. The acquisition of Bruker Optics wasapproved by our shareholders on June 29, 2006 and was subsequently completed onJuly 1, 2006. This acquisition represented a business combination of companiesunder common control due to a majority ownership by individuals of both BrukerBioSciences and Bruker Optics and, as a result, transaction costs have beenexpensed as incurred rather than being included in a purchase price allocation.During the six months ended June 30, 2006, we incurred acquisition relatedcharges totaling $4.9 million, which consisted of investment banking, legal andaccounting fees, compensation earned by the special committee of our Board ofDirectors and antitrust regulation filing fees.

***Interest and Other Income (Expense), Net***

Interest and other income (expense), net, during thesix months ended June 30, 2007 was $(0.2) million, compared to $4.0 million duringthe six months ended June 30, 2006. During the six months ended June 30, 2007,the major components within interest and other income (expense), net, were netinterest expense of $(0.2) million, losses on foreign currency transactions of$(0.6) million and the appreciation of the fair value of derivative financialinstruments of $0.6 million. During the six months ended June 30, 2006, themajor components within interest and other income (expense), net, were netinterest income of $0.9 million, losses on foreign currency transactions of$(1.1) million and the appreciation of the fair value of derivative financialinstruments of $3.8 million.

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***Provision for Income Taxes***

The income tax provision for the six months ended June30, 2007 was $5.6 million compared to an income tax provision of $5.9 millionfor the six months ended June 30, 2006, representing effective tax rates of 38%and 50%, respectively. The lower effective tax rate in the first six months of2007 compared to the first six months of 2006 was due to the effect of U.S.operations being profitable in the second quarter of 2007 for which there wasno tax provision required because of cumulative U.S. net operating losses thatare subject to a full valuation allowance. Our effective tax rate is calculatedusing our projected annual pre-tax income or loss and is affected by researchand development tax credits, the expected level of other tax benefits, and theimpact of changes to the valuation allowance, as well as changes in the mix ofour pre-tax income and losses among jurisdictions with varying statutory taxrates and credits.

***Minority Interest in Consolidated Subsidiaries***

Minority interest in consolidated subsidiaries for thesix months ended June 30, 2007 was $146,000 compared to $93,000 in thecomparable period of 2006. The minority interest in subsidiaries represents theminority shareholders’ proportionate share of net income of those subsidiariesfor the six months ended June 30, 2007 and 2006. For the six months ended June30, 2007 and 2006, the minority interest relates to our two majority-ownedsubsidiaries, Incoatec GmbH and Baltic Scientific Instruments Ltd.

**LIQUIDITYAND CAPITAL RESOURCES**

We currently anticipate that our existing cash will besufficient to support our operating and investing needs for at least the nexttwelve months, but this depends on our profitability and our ability to manageworking capital requirements. Future cash requirements could also be affectedby potential acquisitions that we may consider. Historically, we have financedour growth through a combination of debt financings and issuances of common stock.Most recently, on February 12, 2007, we and a group of sellingstockholders completed a public offering which generated net proceeds ofapproximately $16.9 million to us. In the future, there can be noassurance that additional financing alternatives will be available to us ifrequired, or if available, will be obtained with terms favorable to us.

During the six months ended June 30, 2007, net cashused by operating activities was $6.4 million, compared to net cash provided byoperating activities of $4.4 million during the six months ended June 30,2006. The change in cash generated/used by operating activities was primarilyattributable to an increase in inventory balances and a decrease in customerdeposits, partially offset by improved operating results in the first half of2007 compared to 2006, a decrease in trade accounts receivable and an increasein accounts payable.

During the six months ended June 30, 2007, investingactivities used $11.0 million in cash compared to net cash provided byinvesting activities of $39.9 million during the six months ended June 30,2006. Cash used by investing activities during the six months ended June 30,2007 was attributable primarily to $8.2 million in capital expenditures and$2.5 million used for acquisitions, net of cash acquired. Cash provided byinvesting activities during the six months ended June 30, 2006 was attributableprimarily to approximately $46.5 million from the redemption of short-terminvestments.

In connection with our November 2005 acquisitionof Roentec AG, additional consideration, in the amount of approximately $2.0million, may be paid to Roentec’s former management, employee and consultantshareholders based on the 2006 and 2007 revenue performance of Roentec. Ifthese payments are required, they will be comprised of either, at our option,50% our restricted common stock and 50% cash, or 100% cash. For 2006,approximately $1.3 million in cash was paid in March 2007 to Roentec’s formershareholders.

On January 17, 2006, we acquired Socabim SAS, aprivately-held company focused on advanced X-ray analysis software formaterials research based in Paris, France. The initial aggregate purchase priceof approximately $8.8 million was paid through the issuance of 267,302restricted shares of our common stock to Socabim’s two largest shareholders,which had an aggregate value of approximately $1.3 million as of the date ofissuance, and an aggregate of $7.5 million was paid to all of the Socabimselling shareholders from cash on hand. Additional cash consideration, in theamount of approximately $1.5 million in total, may be paid through 2009 basedon the future performance of Socabim. For 2006, approximately $356,000 in cashwas paid in 2007 to Socabim’s former shareholders.

On September 6, 2006, we acquired all of the capitalstock of Quantron, a spark-OES company based in Kleve, Germany.  Inaccordance with the stock purchase agreement, at the closing, we paid anaggregate of approximately $6.3 million of consideration to the Sellers, ofwhich approximately $5.0 million was paid in cash and approximately $1.3million was paid through the issuance of an aggregate of 202,223 restrictedunregistered shares of our common stock, par value $0.01 per share, to Quantron’stwo largest shareholders. Pursuant to the earn-out provisions of the stockpurchase agreement, up to an aggregate of $4.7 million of additional cashconsideration may be paid through 2009 based on the future performance ofQuantron.

On January 1, 2007, we acquired all of the assets of Keca Metal Products, Ltd. (“Keca”), aTexas partnership located in Spring, Texas. The aggregate purchase price for Keca was $0.6 million and was fundedwith cash on hand.

On June 30, 2007, we acquired all of the capital stockof Analys-Konsult AB (“AKAB”), a distributor and service provider of scientificinstrumentation based in Sweden.  Theaggregate purchase price of AKAB was approximately $0.8 million, 

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of which approximately $0.5 million was paid in cashand approximately $0.3 million was paid through the issuance of an aggregate of29,740 restricted unregistered shares of our common stock, par value $0.01 pershare, to AKAB’s shareholders.

During the six months ended June 30, 2007, financingactivities provided $6.4 million of cash compared to no cash provided or usedby financing activities during the six months ended June 30, 2006. The changein cash provided by financing activities in the first six months of 2007 wasdue to approximately $16.9 million in net proceeds from the public offering ofcommon stock offset by $10.6 million in net repayments of short-termborrowings.

At June 30, 2007, we had a demand line of credit withCitizens Bank in the United States with a maximum available amount of$40.0 million. The line of credit is secured by a pledge to the bank of100% of the capital stock of each of the Company’s wholly-owned domesticsubsidiaries, each of which also pledged a portion of the stock of certain oftheir foreign subsidiaries. As of June 30, 2007, $40.0 million under our U.S.line of credit was available. We also maintain revolving lines of credittotaling approximately $31.1 million with various German, Japanese and Swedishbanks. The German, Japanese and Swedish lines of credits are unsecured and asof June 30, 2007 approximately $8.6 million, in the aggregate, wasoutstanding on these lines of credit.

In addition to our lines of credit, we have bothshort-term and long-term notes payable with outstanding balances aggregating$24.4 million as of June 30, 2007. The interest rates on these obligationsrange from 1.8% to 8.01%. We entered into an interest rate swap to hedge thevariability of cash flows related to changes in interest rates on borrowings ofvariable debt obligations and pay a 4.6% fixed rate of interest and receive avariable rate of interest based on the Securities Industry and FinancialMarkets Association SWAP Index. The interest rate swap has a notional value of$1.7 million which decreases in conjunction with the State of Wisconsinindustrial revenue bonds (IRB) payment schedule until the interest rate swapand IRB agreements terminate in December 2013.

The following table summarizes maturities for oursignificant financial obligations as of June 30, 2007 (in thousands):
| ** **                       | ** ** | ** ** | ** ** | **Less than** | ** ** | **1–3** | ** ** | **4–5** | ** ** | **More than** | ** ** |
|----------------------------------|------------|------------|------------|--------------------|------------|--------------|------------|--------------|------------|--------------------|------------|
| **Contractual Obligations** | ** ** | **Total**  | ** ** | **1 year**    | ** ** | **years**    | ** ** | **years**    | ** ** | **5 years**   | ** ** |
| Short-term  borrowings           |       | $          | 15,395     |               | $          | 15,395       |       | $            | —     |               | $          | — |   | $ | — |   |
| Long-term  borrowings            |       | 17,564     |       | —             |       | 14,462       |       | 2,181        |       | 921                |       |
| Pension                          |       | 12,145     |       | 144                |       | 652          |       | 1,209        |       | 10,140             |       |
|                             |       |       |       |               |       |         |       |         |       |               |       |
| Total contractual  obligations   |       | $          | 45,104     |               | $          | 15,539       |       | $            | 15,114     |               | $          | 3,390 |   | $ | 11,061 |   |

 

In connection with some of our outstanding debt, weare required to maintain certain financial ratios and meet other financialcriteria. Additionally, we are subject to a variety of restrictive covenantsthat require bank consent if not met. As of June 30, 2007, the latestmeasurement date, we were in compliance with all financial covenants.

As of June 30, 2007, we had approximately$10.9 million of net operating loss carryforwards available to reducefuture U.S. taxable income. These losses have various expiration dates through2026. We also had foreign tax credits of approximately $9.9 million that expirein 2016 and research and development tax credits of approximately$3.1 million available to offset future U.S. tax liabilities that expireat various dates through 2025.

**RecentAccounting Pronouncements**

In February 2007, the FASB issued SFASNo. 159,*The Fair Value Option forFinancial Assets and Liabilities, Including an amendment of FASB StatementNo. 115* (“SFAS 159”). This Statement permits entities to chooseto measure many financial instruments and certain other items at fair valuethat are not currently required to be measured at fair value. SFAS 159 iseffective as of the beginning of fiscal 2008. The Company has not yet assessedthe effect, if any, that adoption of SFAS 159 will have on its results ofoperations and financial position.

In September 2006, the FASB issued SFASNo. 157,*Fair Value Measurements*(“SFAS 157”). This Statement is effective for financial statements issued forfiscal years beginning after November 15, 2007. SFAS 157 provides a commonfair value hierarchy for companies to follow in determining fair valuemeasurements in the preparation of financial statements and expands disclosurerequirements relating to how such fair value measurements were developed. SFAS157 clarifies the principle that fair value should be based on the assumptionsthat the marketplace would use when pricing an asset or liability, rather thancompany specific data. The Company is currently assessing the impact that SFAS157 will have on its results of operations and financial position.

**ITEM3:  Quantitative and Qualitative Disclosures About Market Risk**

We are potentially exposed to market risk associatedwith changes in foreign exchange and interest rates for which we selectivelyuse financial instruments to reduce related market risks. An instrument istreated as a hedge if it is effective in offsetting the impact of volatility inour underlying exposure. We have also entered into instruments which are noteffective 

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derivatives under the requirements of SFASNo. 133, and therefore such instruments are not designated as hedges. Alltransactions are authorized and executed pursuant to our policies andprocedures. Analytical techniques used to manage and monitor foreign exchangeand interest rate risk include market valuations and sensitivity analysis.

The Company regularly invests excess cash in overnightrepurchase agreements and interest-bearing investment-grade securities that wehold for the duration of the term of the respective instrument and are subjectto changes in short-term interest rates. The Company believes that the marketrisk arising from holding these financial instruments is minimal.

The Company’s exposure to market risks associated withchanges in interest rates relates primarily to the increase or decrease in theamount of interest income earned on its investment portfolio. The Companyensures the safety and preservation of invested funds by limiting default risk,market risk and reinvestment risk. The Company mitigates default risk byinvesting in investment grade securities. Declines in interest rates over timewill, however, reduce the Company’s interest income.

**Impactof Foreign Currencies**

We sell products in many countries, and a substantialportion of sales and expenses are denominated in foreign currencies,principally in the Euro and Japanese Yen. Fluctuations in the rate of exchangebetween the U.S. dollar and foreign currencies could adversely affect ourfinancial results. Costs related to these sales are largely denominated in thesame respective currencies, thereby limiting our transaction risk exposure.However, for sales not denominated in U.S. dollars, if there is an increase inthe rate at which a foreign currency is exchanged for U.S. dollars, it willrequire 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 productsin the foreign currency, we will receive less in U.S. dollars than we didbefore the rate increase went into effect. If we price our products in U.S.dollars and competitors price their products in local currency, an increase inthe relative strength of the U.S. dollar could result in our prices not beingcompetitive in a market where business is transacted in the local currency.

We have entered into forward currency exchangecontracts having maturities of less than twelve months with notional amountsaggregating $3.1 million. These contracts involve the purchase of Japanese Yen,Taiwan Dollars, Singapore Dollars, U.S. Dollars and EURO currency at fixed U.S.dollar and EURO amounts. The notional amounts of the contracts are intended tohedge receivables in U.S. dollars and EURO. These transactions do not qualifyfor hedge accounting under SFAS No. 133. Accordingly, the instruments aremarked-to-market with the corresponding gains and losses recorded in otherincome (expense) in the current period.

At the end of each reporting period, we obtainthird-party verification as to the fair value of these instruments.  As ofJune 30, 2007 and 2006, the currency exchange contracts had an unfavorable fairvalue of $(0.0) million and a favorable fair value of $0.8 million,respectively. The instruments’ fair market values are recorded net of eachother on the balance sheet.  Inconnection with these instruments, we recorded a net gain of $0.0 million and$2.3 million during the three months ended June 30, 2007 and 2006, respectivelyand a net gain of $0.2 million and $3.8 million during the six months endedJune 30, 2007 and 2006, respectively.

Realized foreign exchange losses were approximately$(0.0) million and $(0.7) million for the three months ended June 30,2007 and 2006, respectively and approximately $(0.6) million and$(1.1) million for the six months ended June 30, 2007 and 2006,respectively. As we continue to expand internationally, we evaluate currencyrisks and may enter into foreign exchange contracts on a more consistent basisor from time to time as circumstances require to mitigate foreign currencyexposure.

We have entered into foreign-denominated debtobligations. The currency effects of the debt obligations are reflected ininterest and other income (expense), net, on the consolidated statement ofoperations. We also have foreign-denominated intercompany borrowingarrangements with our Bruker Daltonik GmbH subsidiary in Germany that affectedaccumulated other comprehensive income (loss). A 10% increase or decrease ofthe respective foreign exchange rate with our Bruker Daltonik GmbHsubsidiary in Germany would result in a change in accumulated othercomprehensive income (loss) of approximately $3.0 million or $(2.4)million, respectively.

**Impactof Interest Rates**

Our exposure related to adverse movements in interestrates is derived primarily from outstanding floating rate debt instruments thatare indexed to short-term market rates and cash equivalents. Our objective inmanaging our exposure to interest rates is to decrease the volatility thatchanges in interest rates might have on our earnings and cash flows. To achievethis objective, we use a fixed rate agreement to adjust a portion of our debtthat is subject to variable interest rates.

In the United States, we have entered into an interestrate swap arrangement to limit the interest rate exposure on our $2.0 millionindustrial revenue bond to a fixed rate of 4.6%. We pay a 4.6% fixed rate ofinterest and receive a variable rate of interest based on the SecuritiesIndustry and Financial Markets Association SWAP Index on a $1.7 millionnotional amount. Net interest payments or receipts are recorded as adjustmentsto interest expense. In addition, the instrument is recorded at fair marketvalue on our balance sheet, and changes in the fair market value are recordedin current earnings since the arrangement is not considered an effective hedge.As of June 30, 2007, the fair value of the instrument was approximately$(0.1) million, net of tax, and is recorded as a liability on the balancesheet.

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In 2002, we entered into two derivative financialinstruments: a cross currency interest rate swap and an interest rate swap. Thecross currency interest rate swap is for 5.0 million Euro and we receivesemiannual interest payments in Euro based on a variable interest rate equal tothe six-month EURIBOR rate in exchange for semiannual payments in Swiss francsat a fixed rate of 4.97%. The interest rate swap of 3.0 million Euroreduced the 6-month EURIBOR rate by 1.80% per annum until January 4, 2007.We entered into the financial instruments to manage our exposure to interestrates and foreign exchange risk. Until the instruments become an effectivehedge, the instruments are considered speculative and are marked-to-marketthrough interest and other income (expense), net, on the consolidated statementof operations. As of June 30, 2007 and 2006, the cross currency interest rateswap had a favorable fair value of $0.6 million and an unfavorable value of$(0.0) million, respectively. As of June 30, 2006, the interest rate swap had afair value of approximately $(0.1) million.

A 10% increase or decrease in the average cost of ourvariable rate debt would not result in a material change in pre-tax interestexpense.

**Inflation**

We do not believe inflation had a material impact onour business or operating results during any of the periods presented.

**ITEM4:  Controls and Procedures**

Our Company’s management, with the participation ofthe Chief Executive Officer and Chief Financial Officer, has conducted anevaluation of the effectiveness of our disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30,2007. Based on this evaluation, the Chief Executive Officer and Chief FinancialOfficer have concluded that our disclosure controls were effective at June 30,2007.

We maintain internal controls and procedures designedto ensure that we are able to collect the information subject to requireddisclosure in reports we file with the United States Securities and ExchangeCommission, and to process, summarize and disclose this information within thetime specified by the rules set forth by the Securities and ExchangeCommission.

There were no changes in our internal control overfinancial reporting that occurred during the quarter ended June 30, 2007 thatmaterially affected, or are reasonably likely to affect, our internal controlover financial reporting.

**PARTII  OTHER INFORMATION**

**ITEM1:  Legal Proceedings**

**General**

The Company may, from time to time, be involved inlegal proceedings in the ordinary course of business. The Company is notcurrently involved in any pending legal proceedings that, either individuallyor taken as a whole, are reasonably likely in management’s judgment tomaterially harm our business, prospects, results of operations or financialcondition, nor have any such legal proceedings been threatened.

**ITEM1A:  Risk Factors**

*In addition to theother information set forth in this report, you should carefully consider thefactors discussed in Part I, “Item 1A. Risk Factors” in our Annual Reporton Form 10-K for the year ended December 31, 2006, which couldmaterially affect our business, financial condition or future results. Therisks described in our Annual Report on Form 10-K are not the only risksfacing our Company. Additional risks and uncertainties not currently known tous or that we currently deem to be immaterial also may materially adverselyaffect our business, financial condition and/or operating results.*

*There have been nomaterial changes to the risk factors disclosed in Part I, “Item 1A. RiskFactors” in our Annual Report on Form 10-K for the fiscal year ended December31, 2006.*

**ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds**

The following table sets forth all purchases made by oron behalf of the Company or any “affiliated purchaser,” as defined in Rule10b-18(a)(3) under the Exchange Act, of shares of our common stock during eachmonth in the second quarter of 2007.

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| ** **                       | ** ** | ** **             | ** ** | ** **                   | ** ** | **Total Number**          | ** ** | **Approximate**                  | ** ** |
|----------------------------------|------------|------------------------|------------|------------------------------|------------|--------------------------------|------------|----------------------------------|------------|
| ** **                       | ** ** | ** **             | ** ** | ** **                   | ** ** | **of Shares**             | ** ** | **Dollar Value of**    | ** ** |
| ** **                       | ** ** | ** **             | ** ** | ** **                   | ** ** | **Purchased as**          | ** ** | **Shares that May**    | ** ** |
| ** **                       | ** ** | **Total Number**  | ** ** | ** **                   | ** ** | **Part of Publicly** | ** ** | **Yet Be Purchased**   | ** ** |
| ** **                       | ** ** | **of Shares**     | ** ** | **Average Price**       | ** ** | **Announced**                  | ** ** | **Under the Programs** | ** ** |
| **Period**                       | ** ** | **Purchased (1)** | ** ** | **Paid per Share** | ** ** | **Programs**                   | ** ** | **(in millions)**           | ** ** |
| April 1, 2007 to  April 30, 2007 |       |                   |       |                         |       |                           |       |                             |       |
| May 1, 2007 to  May 31, 2007     |       | 255,000                |       | $                            | 8.67       |                           |       |                             |       |   |
| June 1, 2007 to  June 30, 2007   |       |                   |       |                         |       |                           |       |                             |       |
|                             |       |                   |       |                         |       |                           |       |                             |       |
| Total                            |       | 255,000                |       | $                            | 8.67       |                           | —     |                             | —     |   |

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(1)             Allshare repurchases were open-market purchases made by the Company’s ChiefExecutive Officer, were effected in accordance with the Safe Harbor Provisionsof Rule 10b-18 of the Securities and Exchange Act and were previously disclosedby the affiliated purchaser on Forms 4 filed with the U.S. Securities andExchange Commission.

**ITEM 3: Defaults Upon Senior Securities**

None.

**ITEM 4: Submission of Matters to a Vote of Security Holders**

(a)  The Annual Meeting of Stockholders of theCompany was held on May 16, 2007.

(b)  Proxies representing 98,486,413 shares were received (totalshares outstanding as of the Record Date were 105,310,178).  The resultsof the voting at the Annual Meeting are set forth below:

(i)  To elect the following fourClass I directors, each to hold a three-year term:
|        |   | (i)    | Dr. Wolf-Dieter Emmerich |   |   |       |   |   |
|--------|--------|--------|--------------------------|--------|--------|------------|--------|--------|
|   |   |   |                     |   |   |       |   |   |
|   |   |   | Votes for                |   |   | 98,043,437 |   |   |
|   |   |   | Votes withheld           |   |   | 442,976    |   |   |
|   |   |   |                     |   |   |       |   |   |
|   |   | (ii)   | Ms. Brenda J. Furlong    |   |   |       |   |   |
|   |   |   |                     |   |   |       |   |   |
|   |   |   | Votes for                |   |   | 97,915,280 |   |   |
|   |   |   | Votes withheld           |   |   | 571,133    |   |   |
|   |   |   |                     |   |   |       |   |   |   |
|   |   | (iii)  | Dr. Frank H. Laukien     |   |   |       |   |   |
|   |   |   |                     |   |   |       |   |   |
|   |   |   | Votes for                |   |   | 81,754,282 |   |   |
|   |   |   | Votes withheld           |   |   | 16,732,131 |   |   |
|   |   |   |                     |   |   |       |   |   |   |
|   |   | (iv)   | Mr. Richard A. Packer    |   |   |       |   |   |
|   |   |   |                     |   |   |       |   |   |
|   |   |   | Votes for                |   |   | 97,900,395 |   |   |
|   |   |   | Votes withheld           |   |   | 586,018    |   |   |

 

(ii)  To ratify the selection ofErnst & Young LLP as the Company’s independent registered public accountingfirm for fiscal year 2007:
|        |   |   | Votes for        |   |   | 98,258,558 |   |   |
|--------|--------|--------|------------------|--------|--------|------------|--------|--------|
|   |   |   | Votes against    |   |   | 206,148    |   |   |
|   |   |   | Votes abstaining |   |   | 21,706     |   |   |

 

Except as set forth above, there were no shares abstaining and nobroker non-voting shares cast.

**ITEM 5: Other Information**

None.

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**ITEM 6: Exhibits**
| 31.1   |   | Certification by Chief Executive Officer pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002 (1). |
|--------|--------|----------------------------------------------------------------------------------------------------------|
| 31.2   |   | Certification by Chief Financial Officer pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002 (1). |
| 32.1   |   | Certification by Chief Executive Officer and Chief  Financial Officer pursuant to 18 U.S.C.              |
|   |   | Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002 (2).       |

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(1)             Filedherewith

(2)             Furnishedherewith

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**SIGNATURES**

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.
|                      | BRUKER BIOSCIENCES CORPORATION |
|----------------------|--------------------------------|
|                 |                           |   |
| Date: August 8, 2007 | By:                            | /s/ Frank H. Laukien, Ph.D. |
|                 | * *                       | Frank H. Laukien, Ph.D. |
|                 | * *                       | *President, Chairman, Chief Executive Officer, and  Director* |
|                 | * *                       | *(Principal Executive Officer)* |
| * *             | * *                       | * * |
| Date: August 8, 2007 | By:                            | /s/ William J. Knight |
|                 | * *                       | William J. Knight |
|                 | * *                       | *Chief Financial Officer* |
|                 | * *                       | *(Principal Financial and Accounting Officer)* |

 

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