Table ofContents

 

 

** **

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**Form 10-Q**

 

| **x**      | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT of 1934**  |
|------------|---------------------------------------------------------------------------------------------------------|
| ** ** | ** **                                                                                              |
| ** ** | **For the quarterly period ended September 30, 2010**                                              |
| ** ** | ** **                                                                                              |
| **o**      | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT of 1934** |

 

**For the transition period from                to**

 

**Commission File Number 000-30833**

 

**BRUKERCORPORATION**

(Exactname of registrant as specified in its charter)

 

| **Delaware**                                                           | ** ** | **04-3110160**                               |
|------------------------------------------------------------------------|------------|----------------------------------------------|
| (State  or other jurisdiction of

 incorporation or organization) |       | (I.R.S.  Employer

 Identification No.) |

 

**40 Manning Road, Billerica, MA 01821**

 (Addressof principal executive offices) (Zip Code)

 

Registrant’stelephone number, including area code:**(978) 663-3660**

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 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 past90 days.  Yes     x     No     o

 

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

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer or a smaller reporting company. See the definitions of “acceleratedfiler, large accelerated filer, smaller reporting company” in Rule 12b-2of the Exchange Act. (Check one):

 

| Large  accelerated filer o                |   | Accelerated  filer x         |
|------------------------------------------------|--------|-----------------------------------|
| Non-accelerated  filer o                  |   | Smaller  reporting company o |
| (Do  not check if a smaller reporting company) |   |                              |

 

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

 

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

 

| **Class**                                | ** ** | **Outstanding  at November 2, 2010** |
|------------------------------------------|------------|-------------------------------------------|
| Common  Stock, $0.01 par value per share | ** ** | 164.844.564 shares                        |

 

 

 

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**B****RUKER CORPORATION**

 

**Quarterly Report on Form 10-Q**

**For the Quarter Ended September 30, 2010**

 

**Index**

 
| ** **       | ** ** | ** **                                                                                                                       | ** ** | **Page** |
|------------------|------------|----------------------------------------------------------------------------------------------------------------------------------|------------|----------|
| **Part I**  | ** ** | **FINANCIAL  INFORMATION**                                                                                                       |       | 1        |
| Item 1:          |       | Unaudited  Condensed Consolidated Financial Statements                                                                           |       | 1        |
|             |       | Unaudited  Condensed Consolidated Balance Sheets as of September 30, 2010 and  December 31, 2009                       |       | 1        |
|             |       | Unaudited  Condensed Consolidated Statements of Operations for the three and nine months  ended September 30, 2010 and 2009 |       | 2        |
|             |       | Unaudited  Condensed Consolidated Statements of Cash Flows for the nine months ended  September 30, 2010 and 2009           |       | 3        |
|             |       | Notes to  Unaudited Condensed Consolidated Financial Statements                                                                  |       | 4        |
| Item 2:          |       | Management’s Discussion and Analysis of  Financial Condition and Results of Operations                                      |       | 17       |
| Item 3:          |       | Quantitative  and Qualitative Disclosures About Market Risk                                                                      |       | 36       |
| Item 4:          |       | Controls and  Procedures                                                                                                         |       | 37       |
| **Part II** | ** ** | **OTHER  INFORMATION**                                                                                                           |       | 37       |
| Item 1:          |       | Legal Proceedings                                                                                                                |       | 37       |
| Item 1A:         |       | Risk Factors                                                                                                                     |       | 38       |
| Item 2:          |       | Unregistered  Sales of Equity Securities and Use of Proceeds                                                                     |       | 38       |
| Item 3:          |       | Defaults Upon  Senior Securities                                                                                                 |       | 38       |
| Item 4:          |       | [Removed and Reserved]                                                                                                           |       | 38       |
| Item 5:          |       | Other Information                                                                                                                |       | 38       |
| Item 6:          |       | Exhibits                                                                                                                         |       | 38       |
|             |       | Signatures                                                                                                                       |       | 40       |

 

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** **

**PART I****                                                      ****FINANCIAL INFORMATION**

 

**ITEM 1.****                                                    ****UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

 

**BRUKER CORPORATION**

**UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS**

**(in millions, except share and per share data)**

** **
| ** **                                                                                                                                                                                                                  | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                                                  | ** ** | **2010**               | ** ** | **2009**              | ** ** |
| **ASSETS**                                                                                                                                                                                                                  |       |                   |       |                  |       |
| Current assets:                                                                                                                                                                                                             |       |                   |       |                  |       |
| Cash and cash equivalents                                                                                                                                                                                                   |       | $                      | 188.0      |                  | $          | 207.1 |   |
| Restricted cash                                                                                                                                                                                                             |       | 2.5                    |       | 2.0                   |       |
| Accounts receivable, net                                                                                                                                                                                                    |       | 195.4                  |       | 184.1                 |       |
| Inventory                                                                                                                                                                                                                   |       | 487.8                  |       | 422.8                 |       |
| Other current assets                                                                                                                                                                                                        |       | 80.3                   |       | 57.5                  |       |
| Total current assets                                                                                                                                                                                                        |       | 954.0                  |       | 873.5                 |       |
|                                                                                                                                                                                                                        |       |                   |       |                  |       |
| Property, plant and equipment, net                                                                                                                                                                                          |       | 218.7                  |       | 223.4                 |       |
| Intangibles and other long-term assets                                                                                                                                                                                      |       | 104.4                  |       | 75.1                  |       |
| Total assets                                                                                                                                                                                                                |       | $                      | 1,277.1    |                  | $          | 1,172.0 |   |
|                                                                                                                                                                                                                        |       |                   |       |                  |       |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY**                                                                                                                                                                              |       |                   |       |                  |       |
| Current liabilities:                                                                                                                                                                                                        |       |                   |       |                  |       |
| Short-term borrowings                                                                                                                                                                                                       |       | $                      | 27.1       |                  | $          | 22.0 |   |
| Accounts payable                                                                                                                                                                                                            |       | 60.1                   |       | 49.8                  |       |
| Customer advances                                                                                                                                                                                                           |       | 211.7                  |       | 219.2                 |       |
| Other current liabilities                                                                                                                                                                                                   |       | 292.7                  |       | 249.2                 |       |
| Total current liabilities                                                                                                                                                                                                   |       | 591.6                  |       | 540.2                 |       |
|                                                                                                                                                                                                                        |       |                   |       |                  |       |
| Long-term debt                                                                                                                                                                                                              |       | 94.3                   |       | 115.7                 |       |
| Other long-term liabilities                                                                                                                                                                                                 |       | 97.2                   |       | 97.3                  |       |
| Commitments and contingencies (Note 18)                                                                                                                                                                                     |       | —                 |       | —                |       |
|                                                                                                                                                                                                                        |       |                   |       |                  |       |
| Shareholders’ Equity:                                                                                                                                                                                                  |       |                   |       |                  |       |
| Preferred stock, $0.01 par value 5,000,000 shares  authorized,   none issued or outstanding at September 30, 2010 and December 31,  2009                                                                          |       | —                 |       | —                |       |
| Common stock, $0.01 par value 260,000,000 shares  authorized,   164,861,846 and 164,384,679 shares issued and 164,844,627 and 164,371,384  outstanding at September 30, 2010 and December 31, 2009,  respectively |       | 1.6                    |       | 1.6                   |       |
| Treasury stock at cost, 17,219 at  September 30, 2010 and 13,295 at December 31, 2009                                                                                                                             |       | (0.2                   | )          | (0.1                  | )          |
| Other shareholders’ equity                                                                                                                                                                                             |       | 490.4                  |       | 415.7                 |       |
| Total shareholders’ equity attributable to Bruker  Corporation                                                                                                                                                         |       | 491.8                  |       | 417.2                 |       |
| Noncontrolling interest in consolidated  subsidiaries                                                                                                                                                                       |       | 2.2                    |       | 1.6                   |       |
| Total shareholders’ equity                                                                                                                                                                                             |       | 494.0                  |       | 418.8                 |       |
|                                                                                                                                                                                                                        |       |                   |       |                  |       |
| Total liabilities and shareholders’ equity                                                                                                                                                                             |       | $                      | 1,277.1    |                  | $          | 1,172.0 |   |

 

*The accompanying notes are an integral part of thesestatements.*

 

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**BRUKER CORPORATION**

**UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OFOPERATIONS**

**(in millions, except per share data)**

** **
| ** **                                                                              | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|-----------------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                                              | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                                                                              | ** ** | **2010**                         | ** ** | **2009**                        | ** ** | **2010** | ** ** | **2009** | ** ** |
| Product revenue                                                                         |       | $                                | 269.7      |                            | $          | 230.7 |   | $ | 780.7 |   | $ | 655.8 |   |
| Service revenue                                                                         |       | 39.1                             |       | 32.4                            |       | 103.1 |   | 87.6 |   |
| Other revenue                                                                           |       | 1.4                              |       | 2.0                             |       | 5.0 |   | 4.7 |   |
| Total revenue                                                                           |       | 310.2                            |       | 265.1                           |       | 888.8 |   | 748.1 |   |
|                                                                                    |       |                             |       |                            |       |   |   |   |   |
| Cost of product revenue                                                                 |       | 143.5                            |       | 127.9                           |       | 426.8 |   | 364.8 |   |
| Cost of service revenue                                                                 |       | 19.8                             |       | 18.0                            |       | 53.1 |   | 50.2 |   |
| Total cost of revenue                                                                   |       | 163.3                            |       | 145.9                           |       | 479.9 |   | 415.0 |   |
| Gross profit                                                                            |       | 146.9                            |       | 119.2                           |       | 408.9 |   | 333.1 |   |
|                                                                                    |       |                             |       |                            |       |   |   |   |   |
| Operating expenses:                                                                     |       |                             |       |                            |       |   |   |   |   |
| Selling, general and administrative                                                     |       | 72.2                             |       | 61.2                            |       | 201.9 |   | 180.1 |   |
| Research and development                                                                |       | 32.5                             |       | 31.6                            |       | 96.5 |   | 91.8 |   |
| Amortization of acquisition-related intangible  assets                                  |       | 1.0                              |       | 0.4                             |       | 2.1 |   | 1.3 |   |
| Other charges (credits), net                                                            |       | 1.9                              |       | —                          |       | 4.3 |   | (0.6 | ) |
| Total operating expenses                                                                |       | 107.6                            |       | 93.2                            |       | 304.8 |   | 272.6 |   |
|                                                                                    |       |                             |       |                            |       |   |   |   |   |
| Operating income                                                                        |       | 39.3                             |       | 26.0                            |       | 104.1 |   | 60.5 |   |
|                                                                                    |       |                             |       |                            |       |   |   |   |   |
| Interest and other income (expense), net                                                |       | (1.1                             | )          | (1.8                            | )          | (5.6 | ) | (4.6 | ) |
|                                                                                    |       |                             |       |                            |       |   |   |   |   |
| Income before income taxes and noncontrolling  interest in consolidated subsidiaries    |       | 38.2                             |       | 24.2                            |       | 98.5 |   | 55.9 |   |
| Income tax provision                                                                    |       | 10.3                             |       | 8.1                             |       | 31.7 |   | 18.5 |   |
|                                                                                    |       |                             |       |                            |       |   |   |   |   |
| Consolidated net income                                                                 |       | 27.9                             |       | 16.1                            |       | 66.8 |   | 37.4 |   |
| Net income (loss) attributable to noncontrolling  interest in consolidated subsidiaries |       | 0.5                              |       | (0.3                            | )          | 0.7 |   | (0.3 | ) |
| Net income attributable to Bruker Corporation                                           |       | $                                | 27.4       |                            | $          | 16.4 |   | $ | 66.1 |   | $ | 37.7 |   |
|                                                                                    |       |                             |       |                            |       |   |   |   |   |
| Net income per common share attributable to                                             |       |                             |       |                            |       |   |   |   |   |
| Bruker Corporation shareholders:                                                        |       |                             |       |                            |       |   |   |   |   |
| Basic and diluted                                                                       |       | $                                | 0.17       |                            | $          | 0.10 |   | $ | 0.40 |   | $ | 0.23 |   |
|                                                                                    |       |                             |       |                            |       |   |   |   |   |
| Weighted average common shares outstanding:                                             |       |                             |       |                            |       |   |   |   |   |
| Basic                                                                                   |       | 164.5                            |       | 163.5                           |       | 164.3 |   | 163.4 |   |
| Diluted                                                                                 |       | 165.7                            |       | 165.0                           |       | 165.6 |   | 164.7 |   |

 

*The accompanying notes are an integral part of thesestatements.*

 

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**BRUKER CORPORATION**

**UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS**

**(in millions)**

 
| ** **                                                                                 | ** ** | **Nine Months Ended** | ** ** |
|--------------------------------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                                 | ** ** | **September 30,**          | ** ** |
| ** **                                                                                 | ** ** | **2010**                        | ** ** | **2009** | ** ** |
| Cash flows from operating activities:                                                      |       |                            |       |   |   |
| Consolidated net income                                                                    |       | $                               | 66.8       |   | $ | 37.4 |   |
| Adjustments to reconcile consolidated net income  to cash flows from operating activities: |       |                            |       |   |   |
| Depreciation and amortization                                                              |       | 23.8                            |       | 20.4 |   |
| Amortization of deferred financing costs                                                   |       | 0.5                             |       | 0.5 |   |
| Stock-based compensation                                                                   |       | 5.0                             |       | 4.8 |   |
| Deferred income taxes                                                                      |       | (7.5                            | )          | (6.8 | ) |
| Gain on bargain purchase                                                                   |       | —                          |       | (2.1 | ) |
| Other non-cash expense                                                                     |       | 1.7                             |       | 0.5 |   |
| Changes in operating assets and liabilities:                                               |       |                            |       |   |   |
| Accounts receivable                                                                        |       | (11.4                           | )          | 26.9 |   |
| Inventories                                                                                |       | (55.5                           | )          | 7.7 |   |
| Accounts payable                                                                           |       | 10.8                            |       | 0.6 |   |
| Customer advances                                                                          |       | (2.1                            | )          | (16.6 | ) |
| Other changes in operating assets and liabilities,  net                                    |       | 30.6                            |       | (6.0 | ) |
| Net cash provided by operating activities                                                  |       | 62.7                            |       | 67.3 |   |
|                                                                                       |       |                            |       |   |   |
| Cash flows from investing activities:                                                      |       |                            |       |   |   |
| Purchases of property, plant and equipment                                                 |       | (20.5                           | )          | (8.9 | ) |
| Acquisitions, net of cash acquired                                                         |       | (37.8                           | )          | (1.6 | ) |
| Net cash used in investing activities                                                      |       | (58.3                           | )          | (10.5 | ) |
|                                                                                       |       |                            |       |   |   |
| Cash flows from financing activities:                                                      |       |                            |       |   |   |
| Repayments of revolving lines of credit, net                                               |       | (0.5                            | )          | (51.5 | ) |
| Repayment of term debt                                                                     |       | (15.8                           | )          | (20.1 | ) |
| Changes in restricted cash                                                                 |       | (0.8                            | )          | (0.7 | ) |
| Issuance of common stock under stock plans                                                 |       | 2.7                             |       | 0.6 |   |
| Cash payments to noncontrolling interests                                                  |       | (0.1                            | )          | — |   |
| Net cash used in financing activities                                                      |       | (14.5                           | )          | (71.7 | ) |
| Effect of exchange rate changes on cash and cash  equivalents                              |       | (9.0                            | )          | (2.8 | ) |
| Net change in cash and cash equivalents                                                    |       | (19.1                           | )          | (17.7 | ) |
| Cash and cash equivalents at beginning of period                                           |       | 207.1                           |       | 166.2 |   |
| Cash and cash equivalents at end of period                                                 |       | $                               | 188.0      |   | $ | 148.5 |   |

 

*The accompanying notes are an integral part of thesestatements.*

 

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**BRUKER CORPORATION**

**NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIALSTATEMENTS**

 

**1.****             ****Descriptionof Business**

 

Bruker Corporation and itswholly-owned subsidiaries (“Bruker” or the “Company”) is a designer andmanufacturer of proprietary life science and materials research systems andassociated products that address the rapidly evolving needs of a diverse arrayof customers in life science, pharmaceutical, biotechnology and moleculardiagnostics research, as well as in materials and chemical analysis in variousindustries and government applications. The Company’s core technology platformsinclude X-ray technologies, magnetic resonance technologies, mass spectrometrytechnologies, optical emission spectroscopy and infrared and Raman molecularspectroscopy technologies. The Company also manufactures and distributes abroad range of field analytical systems for chemical, biological, radiological,nuclear and explosives, or CBRNE, detection. The Company also develops andmanufactures low temperature and high temperature superconducting materials,consisting primarily of wire, and superconducting devices for use in advancedmagnet technology, physics research and energy applications. The Companymaintains major technical and manufacturing centers in Europe, North Americaand Japan, and has sales offices located throughout the world. The Company’sdiverse customer base includes life science, pharmaceutical, biotechnology andmolecular diagnostic research companies, academic institutions, advancedmaterials and semiconductor manufacturers and government agencies.

 

Management reports resultson the basis of the following two segments:

 

·                  *ScientificInstruments.  *The operations ofthis segment include the design, manufacture and distribution of advancedinstrumentation and automated solutions based on X-ray technology,spark-optical emission spectroscopy technology, atomic force microscopy,magnetic resonance technology, mass spectrometry technology and infrared andRaman molecular spectroscopy technology. Typical customers of the ScientificInstruments segment include pharmaceutical, biotechnology and moleculardiagnostic companies, academic institutions, medical school and othernon-profit organizations, and clinical microbiology laboratories, governmentdepartments and agencies, and nanotechnology, semiconductor, chemical, cement,metals and petroleum companies, and food, beverage and agricultural analysiscompanies and laboratories.

 

·                  *Energy &Supercon Technologies.* The operations of this segment include thedesign, manufacture and marketing of superconducting materials, primarilymetallic low temperature superconductors, for use in magnetic resonanceimaging, nuclear magnetic resonance, fusion energy research and otherapplications, and ceramic high temperature superconductors primarily for fusionenergy research applications. The Company also utilizes its low temperature andhigh temperature superconductors to develop, manufacture and market devicesthat have applications primarily in “big science” research. Typical customersof the Energy & Supercon Technologies segment include companies in themedical, power and energy, and processing industries, private and public researchand development laboratories in the fields of fundamental and applied sciencesand energy research, academic institutions and government agencies.

 

The Company has announcedplans to sell a minority ownership position in its Bruker Energy &Supercon Technologies, Inc. (“BEST”) subsidiary through an initial publicoffering of the capital stock of BEST. The Company believes the offering willprovide Bruker shareholders greater visibility into BEST’s performance andgrowth and strengthen BEST’s access to financing for its revenue growthinitiatives, including the development of products for the renewable energy andenergy infrastructure markets.

 

The financial statementsrepresent the consolidated accounts of the Company. All significantintercompany accounts and transactions have been eliminated in consolidation.The unaudited condensed consolidated financial statements as of and for thethree and nine months ended September 30, 2010 and 2009 have been preparedin accordance with accounting principles generally accepted in the UnitedStates (“GAAP”) for interim financial information and pursuant to therules and regulations of the Securities and Exchange Commission (“SEC”)for Quarterly Reports on Form 10-Q and Article 10 of Regulation S-X.Accordingly, the financial information presented herein does not include all ofthe information and footnotes required by GAAP for complete financialstatements. In the opinion of management, all adjustments, consisting only ofnormal recurring adjustments, considered necessary for a fair presentation havebeen included. The results for interim periods are not necessarily indicativeof the results expected for the full year. Certain prior year amounts have beenreclassified to conform to the current year presentation. Thesereclassifications had no effect on previously reported net income orshareholders’ equity.

 

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**2.****             ****Acquisitions**

 

On October 7, 2010, theCompany completed the acquisition of Veeco Metrology Inc., a scanning probe microscopy and optical industrialmetrology instruments business (the “nano surfaces business”), from VeecoInstruments Inc. for cashconsideration of $229.4 million. The Company financed the acquisition with$167.6 million borrowed under a revolving credit agreement and the balance withcash on hand. The acquired business complements the Company’sexisting atomic force microscopy products and expands the Company’s offeringsto industrial and applied markets, specifically in the fields of materials andnanotechnology research and analysis. Under the purchase agreement $22.9million of the purchase price was paid into escrow pending the resolution ofindemnification obligations and working capital obligations of the seller.

 

On May 19, 2010, theCompany completed the acquisition of three former Varian, Inc. productlines which Agilent Technologies, Inc. divested in connection withobtaining regulatory approval for its May 14, 2010 acquisition of Varian.The Company acquired certain assets and assumed certain liabilities in Varian’sinductively coupled plasma mass spectrometry instruments business, laboratorygas chromatography instruments business, and gas chromatographytriple-quadrupole mass spectrometry instruments business (collectively, the “chemicalanalysis business”) for cash consideration of $37.5 million. The acquiredbusiness complements the Company’s existing mass spectrometry products andexpands the Company’s offerings to industrial and applied markets that we didnot previously serve.

 

The acquisition of thechemical analysis business is being accounted for under the acquisition method.The Company made the following adjustments to its allocation of theconsideration transferred in the third quarter of 2010 (in millions):

 
| ** **                    | ** ** | **Acquisition Date Fair Values, as Initially Reported** | ** ** | **Measurement Period Adjustments** | ** ** | **Acquisition Date Fair Values, as Adjusted** | ** ** |
|-------------------------------|------------|---------------------------------------------------------|------------|------------------------------------|------------|-----------------------------------------------|------------|
| Accounts receivable           |       | $                                                       | —     |                               | $          | 9.2                                           |       | $ | 9.2 |   |
| Inventory                     |       | 13.0                                                    |       | 3.6                                |       | 16.6                                          |       |
| Property, plant and equipment |       | 2.8                                                     |       | (0.4                               | )          | 2.4                                           |       |
| Intangible assets             |       | 9.7                                                     |       | 12.2                               |       | 21.9                                          |       |
| Goodwill                      |       | 22.0                                                    |       | (20.4                              | )          | 1.6                                           |       |
| Liabilities assumed           |       | (10.0                                                   | )          | (4.2                               | )          | (14.2                                         | )          |
|                          |       | $                                                       | 37.5       |                               | $          | —                                        |       | $ | 37.5 |   |

 

The Company expects tofinalize the allocation of the consideration transferred in connection with thechemical analysis business in the fourth quarter of 2010.The Company has notfinalized the valuation of inventory, intangible assets and certain assumedliabilities. The measurement period adjustments made during the third quarterof 2010 did not have a material impact on the results of operations for thethree months ended September 30, 2010 and would not have had a materialimpact on the results of operations for the three months ended June 30,2010.

 

The results of the chemicalanalysis business have been included in the Scientific Instruments segment fromthe date of acquisition. Pro forma financial information reflecting the acquisitionof the chemical analysis business has not been presented because the impact onrevenues, net income and net income per common share attributable to BrukerCorporation shareholders is not material.

 

In April 2009, theCompany acquired substantially all of the assets of the research instrumentsportion of ACCEL Instruments GmbH (the “RI business”) from Varian MedicalSystems, Inc. The acquisition of the RI business was accounted for underthe acquisition method. The RI business, located in Bergisch Gladbach, Germany,consists of the development and manufacture of electron and ion linearaccelerators, superconducting and normal conducting accelerator cavities,insertion devices, superconducting fault current limiters, other acceleratorcomponents and specialty superconducting magnets for physics and energyresearch and a variety of other scientific applications. The considerationtransferred in acquiring the RI business was approximately $0.4 million andconsisted entirely of cash. The Company acquired approximately $2.8 million ofreceivables, $4.4 million of inventory, $2.2 million of other current assetsand $4.9 million of property, plant and equipment in this acquisition andassumed approximately $12.1 million of current liabilities. The Company alsorecorded $0.5 million representing the fair value of a noncontrolling interest.In 2009, in connection with the acquisition of the RI business, the Companyrecorded a gain of approximately $1.3 million that was recorded as a componentof acquisition-related charges in the 

 

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consolidated statements ofoperations. A gain of $2.1 million was initially recorded in the second quarterof 2009 based on a preliminary purchase price allocation, but was subsequentlyreduced by $0.8 million in the fourth quarter of 2009 based on the finalallocation. The results of the RI business have been included in the Energy &Supercon Technologies segment from the date of acquisition. Pro forma financialinformation reflecting the acquisition of the RI business has not beenpresented because the impact on revenues, net income and net income per commonshare attributable to Bruker Corporation shareholders is not material.

 

**3.****             ****Stock-BasedCompensation**

 

The Company’s primary typesof share-based compensation are in the form of stock options and restrictedstock. The Company recorded stock-based compensation expense for the three andnine months ended September 30, 2010 and 2009 as follows (in millions):

 
| ** **                                 | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|--------------------------------------------|------------|----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                 | ** ** | **2010**                                                 | ** ** | **2009**                                                | ** ** | **2010** | ** ** | **2009** | ** ** |
| Stock options                              |       | $                                                        | 1.4        |                                                    | $          | 1.2 |   | $ | 4.2 |   | $ | 3.7 |   |
| Restricted stock                           |       | 0.3                                                      |       | 0.3                                                     |       | 0.8 |   | 1.1 |   |
| Total stock-based compensation, pre-tax    |       | 1.7                                                      |       | 1.5                                                     |       | 5.0 |   | 4.8 |   |
| Tax benefit                                |       | 0.3                                                      |       | 0.3                                                     |       | 0.8 |   | 0.9 |   |
| Total stock-based compensation, net of tax |       | $                                                        | 1.4        |                                                    | $          | 1.2 |   | $ | 4.2 |   | $ | 3.9 |   |

 

Compensation expense isamortized on a straight-line basis over the underlying vesting terms of theshare-based award. Stock options to purchase the Company’s common stock areperiodically awarded to executive officers and other employees of the Companysubject to a vesting period of three to five years. The fair value of eachoption award is estimated on the date of grant using the Black-Scholesoption-pricing model. Assumptions regarding volatility, expected life, dividendyield and risk-free interest rate are required for the Black-Scholes model andare presented in the table below:

 
| ** **              | ** ** | **2010**    | ** ** | **2009**    | ** ** |
|-------------------------|------------|-------------|------------|-------------|------------|
| Risk-free interest rate |       | 1.85%-3.46% |       | 1.71%-3.60% |       |
| Expected life           |       | 6.5 years   |       | 6.5 years   |       |
| Volatility              |       | 62.0%       |       | 64.0%       |       |
| Expected dividend yield |       | 0.0%        |       | 0.0%        |       |

 

The risk-free interest rateis the yield on zero-coupon U.S. Treasury securities for a period that iscommensurate with the expected life assumption. Expected life is determinedthrough the simplified method as defined in the SEC Staff Accounting BulletinNo. 110. The Company believes that this is the best estimate of theexpected life of a new option. Expected volatility can be based on a number offactors but the Company currently believes that the exclusive use of historicalvolatility results in the best estimate of the grant-date fair value ofemployee stock options because it reflects the market’s current expectations offuture volatility. Expected dividend yield was not considered in the optionpricing formula since the Company does not pay dividends and has no currentplans to do so in the future. The terms of some of the Company’s indebtednessalso currently restrict its ability to pay dividends to its shareholders.

 

***Bruker Corporation Stock Plan***

 

In February 2010, theBruker BioSciences Corporation Amended and Restated 2000 Stock Option Plan (the“2000 Plan”) expired at the end of its scheduled ten-year term. On March 9,2010, the Company’s Board of Directors unanimously approved and adopted theBruker Corporation 2010 Incentive Compensation Plan (the “2010 Plan”) and on May 14,2010, the 2010 Plan was approved by the Company’s stockholders. The 2010 Planprovides for the issuance of up to 8,000,000 shares of the Company’s commonstock. The Plan allows a committee of the Board of Directors (the “Committee”)to grant incentive stock options, non-qualified stock options and restrictedstock awards. The Committee has the authority to determine which employees willreceive the awards, the amount of the awards and other terms and conditions ofthe award. Awards granted by the Committee typically vest over a period ofthree to five years.

 

At September 30, 2010,the Company expects to recognize pre-tax stock-based compensation expense of$11.1 million associated with outstanding stock option awards granted under theCompany’s stock plans over the weighted average remaining service period of 1.6years. In addition, the Company expects to recognize additional pre-taxstock-based compensation expense of $1.6 million associated with outstandingrestricted stock awards granted under the Company’s stock plans over theweighted average remaining service period of 0.6 years.

 

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***Bruker Energy & Supercon Technologies Stock Plan***

 

In October 2009, theBoard of Directors of BEST adopted the Bruker Energy & SuperconTechnologies, Inc. 2009 Stock Option Plan (the “BEST Plan”). The BEST Planprovides for the issuance of up to 1,600,000 shares of BEST common stock inconnection with awards under the BEST Plan. The BEST Plan allows a committee ofthe BEST Board of Directors to grant incentive stock options, non-qualifiedstock options and restricted stock awards. The Compensation Committee of theBEST Board of Directors has the authority to determine which employees willreceive the awards, the amount of the awards and other terms and conditions ofthe award. Awards granted pursuant to the BEST Plan typically vest over aperiod of three to five years.

 

At September 30, 2010,the Company expects to recognize pre-tax stock-based compensation expense of$1.9 million associated with outstanding stock option awards granted under theBEST Plan over the weighted average remaining service period of 3.6 years.

 

**4.****             ****EarningsPer Share**

 

Net income per share iscalculated by dividing net income by the weighted-average shares outstandingduring the period. The diluted net income per share computation includes theeffect of shares which would be issuable upon the exercise of outstanding stockoptions and the vesting of restricted stock, reduced by the number of sharesassumed to be purchased by the Company based on the treasury stock method.

 

The following table setsforth the computation of basic and diluted average shares outstanding for thethree and nine months ended September 30, 2010 and 2009 (in millions,except per share amounts):

 
| ** **                                                                     | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|--------------------------------------------------------------------------------|------------|----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                                     | ** ** | **2010**                                                 | ** ** | **2009**                                                | ** ** | **2010** | ** ** | **2009** | ** ** |
| Net income attributable to Bruker Corporation                                  |       | $                                                        | 27.4       |                                                    | $          | 16.4 |   | $ | 66.1 |   | $ | 37.7 |   |
|                                                                           |       |                                                     |       |                                                    |       |   |   |   |   |
| Weighted average common shares outstanding:                                    |       |                                                     |       |                                                    |       |   |   |   |   |
| Weighted average common shares outstanding-basic                               |       | 164.5                                                    |       | 163.5                                                   |       | 164.3 |   | 163.4 |   |
| Effect of dilutive securities:                                                 |       |                                                     |       |                                                    |       |   |   |   |   |
| Stock options and restricted stock                                             |       | 1.2                                                      |       | 1.5                                                     |       | 1.3 |   | 1.3 |   |
|                                                                           |       | 165.7                                                    |       | 165.0                                                   |       | 165.6 |   | 164.7 |   |
|                                                                           |       |                                                     |       |                                                    |       |   |   |   |   |
| Net income per common share attributable   to Bruker Corporation shareholders: |       |                                                     |       |                                                    |       |   |   |   |   |
| Basic and diluted                                                              |       | $                                                        | 0.17       |                                                    | $          | 0.10 |   | $ | 0.40 |   | $ | 0.23 |   |

 

Stock options to purchaseapproximately 0.5 million shares and 2.1 million shares were excluded from thecomputation of diluted earnings per share in the three months ended September 30,2010 and 2009, respectively, and approximately 0.4 million shares and 3.3million shares were excluded from the computation of diluted earnings per sharein the nine months ended September 30, 2010 and 2009, respectively, astheir effect would have been anti-dilutive.

 

**5.****             ****Fair Valueof Financial Instruments**

 

The Company applies thefollowing hierarchy, which prioritizes the input used to measure fair valueinto three levels and bases the categorization within the hierarchy upon thelowest level of input that is available and significant to the fair valuemeasurement. The three levels are defined as follows:

 

*Level 1:**    *Inputs to the valuationmethodology are quoted prices (unadjusted) for identical assets or liabilitiesin active markets.

 

*Level 2:**    *Inputs to the valuationmethodology include quoted prices for similar assets and liabilities in activemarkets, and inputs that are observable for the asset or liability, eitherdirectly or indirectly, for substantially the full term of the financialinstrument.

 

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*Level 3:**    *Inputs to the valuationmethodology are unobservable and significant to the fair value measurement.

 

The Company measures thefollowing financial assets and liabilities at fair value on a recurring basis.The fair value of these financial assets and liabilities was determined usingthe following inputs at September 30, 2010 (in millions):

 
| ** **                                               | ** ** | ** ** | ** ** | **Quoted Prices in Active Markets Available** | ** ** | **Significant Other Observable Inputs** | ** ** | **Significant Unobservable Inputs** | ** ** |
|----------------------------------------------------------|------------|------------|------------|-----------------------------------------------|------------|-----------------------------------------|------------|-------------------------------------|------------|
| ** **                                               | ** ** | **Total**  | ** ** | **(Level 1)**                                 | ** ** | **(Level 2)**                           | ** ** | **(Level 3)**                       | ** ** |
| Assets:                                                  |       |       |       |                                          |       |                                    |       |                                |       |
| Cash equivalents                                         |       | $          | 93.2       |                                          | $          | 93.2                                    |       | $                                   | —     |   | $ | — |   |
| Embedded derivatives in purchase and delivery  contracts |       | 0.1        |       | —                                        |       | 0.1                                     |       | —                              |       |
| Foreign exchange contracts                               |       | 0.7        |       | —                                        |       | 0.7                                     |       | —                              |       |
| Total assets recorded at fair value                      |       | $          | 94.0       |                                          | $          | 93.2                                    |       | $                                   | 0.8        |   | $ | — |   |
|                                                     |       |       |       |                                          |       |                                    |       |                                |       |
| Liabilities:                                             |       |       |       |                                          |       |                                    |       |                                |       |
| Interest rate swap                                       |       | $          | 3.7        |                                          | $          | —                                  |       | $                                   | 3.7        |   | $ | — |   |
| Embedded derivatives in purchase and delivery  contracts |       | 3.4        |       | —                                        |       | 3.4                                     |       | —                              |       |
| Foreign exchange contracts                               |       | 0.7        |       | —                                        |       | 0.7                                     |       | —                              |       |
| Total liabilities recorded at fair value                 |       | $          | 7.8        |                                          | $          | —                                  |       | $                                   | 7.8        |   | $ | — |   |

 

The Company’s financialinstruments consist primarily of cash equivalents, derivative instrumentsconsisting of forward foreign exchange contracts and an interest rate swap,accounts receivable, short-term borrowings, accounts payable and long-termdebt. The carrying amounts of the Company’s cash equivalents, accountsreceivable, short-term borrowings and accounts payable approximate fair valuedue to their short-term nature. Derivative assets and liabilities are measuredat fair value on a recurring basis. The fair value of derivative instruments isbased primarily on quotes received from third party banks. These valuesrepresent the estimated amount the Company would receive or pay to terminatethe agreements taking into consideration current foreign exchange or interestrates, as well as the creditworthiness of the counterparty. The Company’slong-term debt consists primarily of variable rate arrangements with interestrates that reset every three months and, as a result, reflect current interestrates. Consequently, the carrying value of the Company’s long-term debtapproximates fair value.

 

**6.****             ****Inventories**

 

Inventories consisted of thefollowing as of September 30, 2010 and December 31, 2009 (inmillions):

 
| ** **          | ** ** | **September 30,  2010** | ** ** | **December 31,  2009** | ** ** |
|---------------------|------------|------------------------------|------------|-----------------------------|------------|
| Raw materials       |       | $                            | 132.0      |                        | $          | 108.8 |   |
| Work-in-process     |       | 181.4                        |       | 134.6                       |       |
| Demonstration units |       | 47.2                         |       | 41.3                        |       |
| Finished goods      |       | 127.2                        |       | 138.1                       |       |
| Inventories         |       | $                            | 487.8      |                        | $          | 422.8 |   |

 

The Company reduces thecarrying value of its demonstration inventories for differences between its costand estimated net realizable value through a charge to cost of product revenuethat is based on a number of factors including the age of the unit, thephysical condition of the unit and an assessment of technological obsolescence.Amounts recorded in cost of product revenue related to the write-down ofdemonstration units to net realizable value were $6.0 million and $7.0 millionfor the three months ended September 30, 2010 and 2009, respectively and$17.3 million and $18.9 million for the nine months ended September 30,2010 and 2009, respectively.

 

Finished goods includein-transit systems that have been shipped to the Company’s customers but havenot yet been installed and accepted by the customer. As of September 30,2010 and December 31, 2009, inventory-in-transit was $63.4 million and$80.8 million, respectively.

 

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**7.****             ****Goodwilland Other Intangible Assets**

 

The following table setsforth the changes in the carrying amount of goodwill for the nine months endedSeptember 30, 2010 (in millions):

 
| Balance at December 31, 2009   |   | $    | 47.5   |   |
|-------------------------------------|--------|------|--------|--------|
| Goodwill acquired during the period |   | 1.9  |   |
| Foreign currency impact             |   | (1.0 | )      |
| Balance at September 30, 2010  |   | $    | 48.4   |   |

 

Goodwill is not amortized,instead, goodwill is tested for impairment on a reporting unit basis annually,or on an interim basis when events or changes in circumstances warrant. TheCompany performed its annual test for impairment as of December 31, 2009and determined that goodwill and other intangible assets were not impaired atthat time. The Company did not identify any indicators of impairment during thenine month period ended September 30, 2010 that would warrant an interimtest.

 

The following is a summaryof other intangible assets subject to amortization at September 30, 2010and December 31, 2009 (in millions):

 
| ** **                                     | ** ** | **September 30, 2010**    | ** ** | **December 31, 2009**        | ** ** |
|------------------------------------------------|------------|---------------------------|------------|------------------------------|------------|
| ** **                                     | ** ** | **Gross Carrying Amount** | ** ** | **Accumulated Amortization** | ** ** | **Net Carrying Amount** | ** ** | **Gross Carrying Amount** | ** ** | **Accumulated Amortization** | ** ** | **Net Carrying Amount** | ** ** |
| Existing technology and related patents        |       | $                         | 20.1       |                         | $          | (11.8 | ) | $ | 8.3 |   | $ | 14.4 |   | $ | (10.7 | ) | $ | 3.7 |   |
| Customer relationships                         |       | 17.8                      |       | (1.6                         | )          | 16.2 |   | 2.0 |   | (0.9 | ) | 1.1 |   |
| Trade names                                    |       | 0.4                       |       | (0.2                         | )          | 0.2 |   | 0.4 |   | (0.3 | ) | 0.1 |   |
| Intangible assets subject to amortization, net |       | $                         | 38.3       |                         | $          | (13.6 | ) | $ | 24.7 |   | $ | 16.8 |   | $ | (11.9 | ) | $ | 4.9 |   |

 

For the three months ended September 30,2010 and 2009, the Company recorded amortization expense of $1.0 million and$0.4 million, respectively, related to intangible assets subject toamortization. For the nine months ended September 30, 2010 and 2009, theCompany recorded amortization expense of $2.1 million and $1.3 million,respectively, related to intangible assets subject to amortization.

 

**8.****             ****Debt**

 

At September 30, 2010and December 31, 2009, the Company’s debt obligations consisted of thefollowing (in millions):

 
| ** **                                                                                                                                                                                      | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                      | ** ** | **2010**               | ** ** | **2009**              | ** ** |
| US Dollar term loan under the Credit Agreement                                                                                                                                                  |       | $                      | 116.3      |                  | $          | 131.3 |   |
|                                                                                                                                                                                            |       |                   |       |                  |       |
| Euro bank loans at fixed rate of 2.95%,  collateralized by land and buildings of Bruker Daltonik GmbH, quarterly  principal payments and monthly interest payments due and payable through 2010 |       | —                 |       | 0.3                   |       |
|                                                                                                                                                                                            |       |                   |       |                  |       |
| Capital lease obligations                                                                                                                                                                       |       | 5.1                    |       | 6.0                   |       |
| Total long-term debt                                                                                                                                                                            |       | 121.4                  |       | 137.6                 |       |
| Current portion of long-term debt                                                                                                                                                               |       | (27.1                  | )          | (21.9                 | )          |
| Total long-term debt, less current portion                                                                                                                                                      |       | $                      | 94.3       |                  | $          | 115.7 |   |

 

In 2008, the Company enteredinto a credit agreement with a syndication of lenders (the “Credit Agreement”)which provides for a revolving credit line with a maximum commitment of $230.0million and a term facility of $150.0 million. The outstanding principal andinterest under the term loan is payable in quarterly installments throughDecember 2012. Borrowings under the Credit Agreement bear interest, at theCompany’s option, at either (i) the higher of the prime rate or thefederal funds rate plus 0.50%, or (ii) adjusted LIBOR, plus marginsranging from 0.40% to 1.25% and a facility fee ranging from 0.10% to 0.20%. Asof September 30, 2010, the weighted average interest rate of borrowingsunder the term facility of the Credit Agreement was approximately 2.7%.

 

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Borrowings under the CreditAgreement are secured by the pledge to the banks of 100% of the capital stockof each of the Company’s wholly-owned domestic subsidiaries and 65% of thecapital stock of certain of the Company’s direct or indirect wholly-ownedforeign subsidiaries. The Credit Agreement also requires the Company tomaintain certain financial ratios related to leverage ratios and interestcoverage ratios as defined in the Credit Agreement. In addition to thefinancial ratios, the Credit Agreement restricts, among other things, theCompany’s ability to do the following: make certain payments; incur additionaldebt; incur certain liens; make certain investments, including derivativeagreements; merge, consolidate, sell or transfer all or substantially all ofthe Company’s assets; and enter into certain transactions with affiliates. Asof September 30, 2010, the latest measurement date, the Company was incompliance with the covenants under the Credit Agreement.

 

In addition to its long-termarrangements, the Company had the following amounts outstanding under revolvingloan arrangements (in millions):

 
| ** **                                 | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                 | ** ** | **2010**               | ** ** | **2009**              | ** ** |
| Revolving loans under the Credit Agreement |       | $                      | —     |                  | $          | — |   |
| Other revolving loans                      |       | —                 |       | 0.1                   |       |
| Total short-term borrowings                |       | $                      | —     |                  | $          | 0.1 |   |

 

The following is a summaryof the maximum commitments and net amounts available to the Company underrevolving loans as of September 30, 2010 (in millions):

 
| ** **            | ** ** | **Weighted  Average  Interest Rate** | ** **          | **Total Amount  Committed by  Lenders** | ** ** | **Outstanding  Borrowings** | ** ** | **Outstanding  Letters of  Credit** | ** ** | **Total Amount  Available** | ** ** |
|-----------------------|------------|-------------------------------------------|---------------------|---------------------------------------------------|------------|-----------------------------|------------|------------------------------------------|------------|----------------------------------|------------|
| Credit Agreement      |       | —                                    | %    | $                                                 | 230.0      |                        | $          | —                                   |       | $                                | 1.5        |   | $ | 228.5 |   |
| Other revolving loans |       | —                                    | %                   | 112.6                                             |       | —                      |       | 90.9                                     |       | 21.7                             |       |
| Total revolving loans |       |                                      |                | $                                                 | 342.6      |                        | $          | —                                   |       | $                                | 92.4       |   | $ | 250.2 |   |

 

On October 1, 2010, weborrowed $170.0 million underthe revolving loan component of the Credit Agreement to finance our acquisitionand the working capital requirements of the nano surfaces business. Theborrowing under the Credit Agreement reduced the total amount available to usfrom our lenders.

 

Other revolving loans arewith various financial institutions located primarily in Germany, Switzerlandand France. The Company’s other revolving loans are typically due upon demandwith interest payable monthly. Certain of these loans are unsecured whileothers are secured by the accounts receivable and inventory of the relatedsubsidiary.

 

**9.     DerivativeInstruments and Hedging Activities**

 

**InterestRate Risks**

 

The Company’s exposure tointerest rate risk relates primarily to outstanding variable rate debt andadverse movements in the related short-term market rates. The most significantcomponent of the Company’s interest rate risk relates to amounts outstandingunder the Credit Agreement. In April 2008, the Company entered into aninterest rate swap arrangement to manage its exposure to interest ratemovements and the related effect on its variable rate debt. Under this interestrate swap arrangement, the Company will pay a fixed rate of approximately 3.8%and receive a variable rate based on three month LIBOR. The initial notionalamount of this interest rate swap was $90.0 million and it amortizes inproportion to the term debt component of the Credit Agreement throughDecember 2012. At September 30, 2010, the notional amount of thisinterest rate swap was $69.8 million. The Company concluded that this swap metthe criteria to qualify as an effective hedge of the 

 

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variability of cash flows ofthe interest payments and accounts for the interest rate swap as a cash flowhedge. Accordingly, the Company reflects changes in the fair value of theeffective portion of this interest rate swap in accumulated other comprehensiveincome, a separate component of shareholders’ equity. As of September 30,2010 and December 31, 2009, the Company recorded a liability of $3.7million and $3.5 million, respectively, related to the fair value of theinterest rate swap that is included in other current liabilities in theconsolidated balance sheets. Amounts recorded in accumulated othercomprehensive income (loss) are reclassified to interest and other income(expense), net in the consolidated statement of operations when either theforecasted transaction occurs or it becomes probable that the forecastedtransaction will not occur. The Company expects $2.2 million of the accumulatedloss to be reclassified into earnings over the next twelve months.

 

**Foreign Exchange Rate Risk Management**

 

The Company generates asubstantial portion of its revenues in international markets, principallyGermany and other countries in the European Union, Switzerland and Japan, whichsubjects our operations to the exposure of exchange rate fluctuations. Theimpact of currency exchange rate movement can be positive or negative in anyperiod.

 

The Company periodicallyenters into foreign currency contracts, primarily forward contracts, tominimize the volatility that fluctuations in currency exchange rates have onthe Company’s cash flows related to purchases and sales denominated in foreigncurrencies. Under these arrangements, the Company typically agrees to purchasea fixed amount of a foreign currency in exchange for a fixed amount of U.S.Dollars or other currencies on specified dates with maturities of less than twoyears. These transactions do not qualify for hedge accounting and, accordingly,the instrument is recorded at fair value with the corresponding gains andlosses recorded in interest and other income (expense), net in the consolidatedstatements of operations. At September 30, 2010, and December 31,2009, the following foreign currency contracts were outstanding (in millions):

 
| ** **    | ** ** | ** **          | ** ** | **Notional Amount**           |
|---------------|------------|---------------------|------------|------------------------------------|
| **Buy**       | ** ** | **Sell**            | ** ** | **September 30,   2010** | ** ** | **December 31,  2009** |
| Euro          |       | Australian  Dollars |       | $                                  |  2.1 |   | $ |  — |
| Euro          |       | U.S.  Dollars       |       | 20.3                               |   | 5.5 |
| Swiss  Francs |       | Euro                |       | 18.5                               |   | — |
| Swiss  Francs |       | U.S.  Dollars       |       | 64.0                               |   | 13.1 |
| U.S.  Dollars |       | Euro                |       | —                             |   | 6.7 |
| U.S.  Dollars |       | Swiss  Francs       |       | 49.7                               |   | — |
|          |       |                |       | $                                  |  154.6 |   | $ |  25.3 |

 

In addition, the Companyperiodically enters into purchase and sales contracts denominated in currenciesother than the functional currency of the parties to the transaction. TheCompany accounts for these transactions separately valuing the “embeddedderivative” component of these contracts. The contracts, denominated incurrencies other than the functional currency of the transacting parties, amountedto $18.8 million for the delivery of products and $0.2 million for the purchaseof products at September 30, 2010 and $30.4 million for the delivery ofproducts and $0.2 million for the purchase of products at December 31,2009. The changes in the fair value of these embedded derivatives are recordedin interest and other income (expense), net in the consolidated statements ofoperations.

 

The fair value of theforeign exchange derivative instruments described above is recorded in ourconsolidated balance sheets for the periods ended September 30, 2010 andDecember 31, 2009 as follows (in millions):

 

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| ** **                                               | ** ** | ** **                           | ** ** | **Fair Value**          | ** ** |
|----------------------------------------------------------|------------|--------------------------------------|------------|------------------------------|------------|
| ** **                                               | ** ** | **Balance Sheet Location** | ** ** | **September 30,  2010** | ** ** | **December 31,  2009** | ** ** |
| Derivative assets:                                       | ** ** | ** **                           |       |                         | ** ** | ** ** | ** ** |
| Embedded derivatives in purchase and delivery  contracts |       | Other current assets                 |       | $                            | 0.1        |   | $ | — |   |
| Foreign exchange contracts                               |       | Other current assets                 |       | 0.7                          |       | — |   |
| ** **                                               | ** ** | ** **                           | ** ** | ** **                   | ** ** | ** ** | ** ** |
| Derivative liabilities:                                  | ** ** | ** **                           |       |                         |       |   |   |
| Interest rate swap contract                              |       | Other current liabilities            |       | $                            | 3.7        |   | $ | 3.5 |   |
| Embedded derivatives in purchase and delivery  contracts |       | Other current liabilities            |       | 3.4                          |       | 1.5 |   |
| Foreign exchange contracts                               |       | Other current liabilities            |       | 0.7                          |       | — |   |

 

The losses recognized inother comprehensive income related to the effective portion of the interestrate swap designated as a hedging instrument for the three and nine monthsended September 30, 2010 and 2009 are as follows (in millions):

 
| ** **                  | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-----------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                  | ** ** | **2010**                                             | ** ** | **2009**                                            | ** ** | **2010** | ** ** | **2009** | ** ** |
| Interest rate swap contract |       | $                                                    | (0.7       | )                                                   | $          | (1.0 | ) | $ | (2.2 | ) | $ | (0.9 | ) |
|                             |            |                                                      |            |                                                     |            |  |  |  |  |  |  |  |  |

 

The losses related to theeffective portion of the interest rate swap designated as a hedging instrumentthat were reclassified from other comprehensive income and recognized in netincome for the three and nine months ended September 30, 2010 and 2009 areas follows (in millions):

 
| ** **                  | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-----------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                  | ** ** | **2010**                                             | ** ** | **2009**                                            | ** ** | **2010** | ** ** | **2009** | ** ** |
| Interest rate swap contract |       | $                                                    | (0.6       | )                                                   | $          | (0.7 | ) | $ | (2.0 | ) | $ | (1.8 | ) |
|                             |            |                                                      |            |                                                     |            |  |  |  |  |  |  |  |  |

 

The Company did notrecognize any amounts related to ineffectiveness in the results of operationsfor the three and nine months ended September 30, 2010 and 2009.

 

The impact on net income ofchanges in the fair value of derivative instruments not designated as hedginginstruments for the three and nine months ended September 30, 2010 and2009 are as follows (in millions):

 
| ** **                                               | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|----------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                               | ** ** | **2010**                                             | ** ** | **2009**                                            | ** ** | **2010** | ** ** | **2009** | ** ** |
| Foreign exchange contracts                               |       | $                                                    | 1.3        |                                                | $          | (1.0 | ) | $ | — |   | $ | (1.0 | ) |
| Embedded derivatives in purchase and delivery  contracts |       | 0.5                                                  |       | (0.7                                                | )          | (1.8 | ) | (0.1 | ) |
| Income (expense), net                                    |       | $                                                    | 1.8        |                                                | $          | (1.7 | ) | $ | (1.8 | ) | $ | (1.1 | ) |

 

The amounts recorded in theresults of operations related to derivative instruments not designated ashedging instruments are recorded in interest and other income (expense), net.

** **

**10.  OtherCharges (Credits), Net**

** **

The components of othercharges (credits), net, were as follows for the three and nine months ended September 30,2010 and 2009 (in millions):

 

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| ** **                                                                  | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|-----------------------------------------------------------------------------|------------|----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                                  | ** ** | **2010**                                                 | ** ** | **2009**                                                | ** ** | **2010** | ** ** | **2009** | ** ** |
|                                                                        |       |                                                     |       |                                                    |       |   |   |   |   |
| Acquisition-related charges                                                 |       | $                                                        | 1.0        |                                                    | $          | — |   | $ | 1.7 |   | $ | 0.8 |   |
| Transition-related charges incurred in connection  with acquired businesses |       | 0.9                                                      |       | —                                                  |       | 1.4 |   | — |   |
| Loss on divestiture of businesses                                           |       | —                                                   |       | —                                                  |       | 1.0 |   | — |   |
| Restructuring charges (Note 11)                                             |       | —                                                   |       | —                                                  |       | 0.2 |   | — |   |
| Impairment charges (Note 12)                                                |       | —                                                   |       | —                                                  |       | — |   | 0.7 |   |
| Gain on bargain purchase (Note 2)                                           |       | —                                                   |       | —                                                  |       | — |   | (2.1 | ) |
| Other charges (credits), net                                                |       | $                                                        | 1.9        |                                                    | $          | — |   | $ | 4.3 |   | $ | (0.6 | ) |

** **

**11.  RestructuringCharges**

 

Inthe first quarter of 2010, the Company recorded restructuring charges of $0.2million, which related primarily to severance incurred in connection with theclosing of a production facility in Herzogenrath, Germany and relocating theassociated operations. These charges were recorded in the ScientificInstruments segment. The Company does not expect to incur any additional costsrelated to this move. The liability for restructuring charges was included inother current liabilities in the unaudited condensed consolidated balancesheets. The charges related to this restructuring reserve are as follows (inmillions):

 
| ** **                         | ** ** | **Total** | ** ** | **Severance** | ** ** |
|------------------------------------|------------|-----------|------------|---------------|------------|
| Balance at December 31, 2009  |       | $         | —     |          | $          | — |   |
| Restructuring charges              |       | 0.2       |       | 0.2           |       |
| Cash payments                      |       | (0.2      | )          | (0.2          | )          |
| Foreign currency impact            |       | —    |       | —        |       |
| Balance at September 30, 2010 |       | $         | —     |          | $          | — |   |

** **

**12.  ImpairmentCharges**

** **

In the second quarter of2009, the Company recorded an impairment charge of $0.7 million, whichconsisted of certain fixed assets used in the production of certainsuperconducting wire. The impairment loss was recorded because the Companydetermined that the carrying value of the assets exceeded their fair valuebased on the estimated undiscounted operating cash flows generated by thoseassets. The impairment charge was allocated to the Energy & SuperconTechnologies segment and has been recorded as a component of other charges(credits), net in the unaudited condensed consolidated statements ofoperations.

** **

**13.  EmployeeBenefit Plans**

** **

Substantially all of theCompany’s employees in Switzerland, France and Japan, as well as certainemployees in Germany, are covered by Company-sponsored defined benefit pensionplans. Retirement benefits are generally earned based on years of service andcompensation during active employment. Eligibility is generally determined inaccordance with local statutory requirements; however, the level of benefitsand terms of vesting varies among plans.

 

The net periodic pensioncost consists of the following components for the three and nine months endedSeptember 30, 2010 and 2009 (in millions): 

 
| ** **                                | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|-------------------------------------------|------------|----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                | ** ** | **2010**                                                 | ** ** | **2009**                                                | ** ** | **2010** | ** ** | **2009** | ** ** |
| Components of net periodic benefit costs: |       |                                                     |       |                                                    |       |   |   |   |   |
| Service cost                              |       | $                                                        | 1.3        |                                                    | $          | 1.3 |   | $ | 3.3 |   | $ | 3.4 |   |
| Interest cost                             |       | 1.5                                                      |       | 1.3                                                     |       | 4.0 |   | 3.4 |   |
| Expected return on plan assets            |       | (0.9                                                     | )          | (1.0                                                    | )          | (2.7 | ) | (3.0 | ) |
| Amortization of prior service costs       |       | —                                                   |       | —                                                  |       | 0.5 |   | — |   |
| Net periodic benefit costs                |       | $                                                        | 1.9        |                                                    | $          | 1.6 |   | $ | 5.1 |   | $ | 3.8 |   |

 

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The Company madecontributions of $1.9 million to its defined benefit plans during the ninemonths ended September 30, 2010 and estimates contributions of $0.7million will be made during the remainder of 2010.

** **

**14.  Interestand Other Income (Expense), Net**

** **

The components of interestand other income (expense), net, were as follows for the three and nine monthsended September 30, 2010 and 2009 (in millions):

 
| ** **                                                | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|-----------------------------------------------------------|------------|----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                | ** ** | **2010**                                                 | ** ** | **2009**                                                | ** ** | **2010** | ** ** | **2009** | ** ** |
| Interest income                                           |       | $                                                        | 0.1        |                                                    | $          | 0.4 |   | $ | 0.4 |   | $ | 1.2 |   |
| Interest expense                                          |       | (1.2                                                     | )          | (1.8                                                    | )          | (4.0 | ) | (6.2 | ) |
| Exchange gains (losses) on foreign currency  transactions |       | (0.1                                                     | )          | (0.8                                                    | )          | (2.0 | ) | (0.2 | ) |
| Other                                                     |       | 0.1                                                      |       | 0.4                                                     |       | — |   | 0.6 |   |
| Interest and other income (expense), net                  |       | $                                                        | (1.1       | )                                                       | $          | (1.8 | ) | $ | (5.6 | ) | $ | (4.6 | ) |

** **

**15.  Provisionfor Income Taxes**

** **

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

 

The income tax provision forthe three months ended September 30, 2010 and 2009 was $10.3 million and$8.1 million, respectively, representing effective tax rates of 27.0% and33.5%, respectively. The income tax provision for the nine months ended September 30,2010 and 2009 was $31.7 million and $18.5 million, respectively, representingeffective tax rates of 32.2% and 33.1%, respectively. In the third quarter of2010, the Company completed a study of its research and development activitiesand identified additional U.S. Federal tax credits of approximately $2.8million. These credits reduced our effective tax rate by approximately 7.3% and2.8% for the three and nine month periods ended September 30, 2010,respectively.

 

The Company’s effective taxrate mainly reflects the tax provision (benefit) for non-U.S. entities only. Afull valuation allowance will be maintained against all U.S. deferred taxassets, including U.S. net operating losses and tax credits, until evidenceexists that it is more likely than not that the loss carryforward and creditamounts will be utilized to offset U.S. taxable income. The Company’s tax ratemay change over time as the amount or mix of income and taxes outside the U.S.changes. The effective tax rate is calculated using projected annual pre-taxincome or loss and is affected by research and development tax credits, theexpected level of other tax benefits, the impact of changes to the valuationallowance, and changes in the mix of the Company’s pre-tax income and lossesamong jurisdictions with varying statutory tax rates and credits.

 

The Company has unrecognizedtax benefits of approximately $25.6 million as of September 30, 2010, ofwhich $17.3 million, if recognized, would result in a reduction of the Company’seffective tax rate. The Company recognizes penalties and interest related tounrecognized tax benefits in the provision for income taxes. As of September 30,2010 and December 31, 2009, approximately $4.5 million and $3.8 million,respectively, of accrued interest and penalties related to uncertain taxpositions was included in other current liabilities on the unaudited condensedconsolidated balance sheets. Penalties and interest related to unrecognized taxbenefits in the provision for income taxes of $0.2 million were recorded duringthe three months ended September 30, 2010 and 2009, and $0.7 million and$0.6 million were recorded during the nine months ended September 30, 2010and 2009, respectively.

 

The Company files returns inmany foreign and state jurisdictions with varying statutes of limitations, butconsiders its significant tax jurisdictions to include the United States,Germany and Switzerland. The tax years 2003 to 2009 are open tax years in thesemajor taxing jurisdictions. One of the Company’s Swiss entities is currentlybeing audited for the tax years 2003 through 2006. In addition, a majority ofthe Company’s German subsidiaries are under tax audit for the years 2003through 2008. The Company cannot reasonably predict the timing or outcome ofthese audits.

 

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** **

**16.  AccumulatedOther Comprehensive Income (Loss)**

** **

Comprehensive income (loss)refers to revenues, expenses, gains and losses that under GAAP are included inother comprehensive income, but excluded from net income as these amounts arerecorded directly as an adjustment to shareholders’ equity, net of tax. Thefollowing is a summary of comprehensive income (loss) for the three and ninemonths ended September 30, 2010 and 2009 (in millions):

 
| ** **                                                                                            | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|-------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                                                            | ** ** | **2010**                                                 | ** ** | **2009**                                                | ** ** | **2010** | ** ** | **2009** | ** ** |
| Consolidated net income                                                                               |       | $                                                        | 27.9       |                                                    | $          | 16.1 |   | $ | 66.8 |   | $ | 37.4 |   |
| Foreign currency translation adjustments                                                              |       | 53.3                                                     |       | 19.5                                                    |       | 2.6 |   | 15.8 |   |
| Unrealized gains (losses) on interest rate swap:                                                      |       |                                                     |       |                                                    |       |   |   |   |   |
| Unrealized holding gains (losses) arising during  the period                                          |       | (0.7                                                     | )          | (1.0                                                    | )          | (2.2 | ) | (0.9 | ) |
| Less reclassification adjustments for settlements  included in the determination of net income (loss) |       | 0.6                                                      |       | 0.7                                                     |       | 2.0 |   | 1.8 |   |
| Pension liability adjustments                                                                         |       | (2.0                                                     | )          | —                                                  |       | (1.6 | ) | 1.0 |   |
| Total comprehensive income (loss)                                                                     |       | 79.1                                                     |       | 35.3                                                    |       | 67.6 |   | 55.1 |   |
| Less: Comprehensive income (loss) attributable to  noncontrolling interests                           |       | 0.5                                                      |       | (0.3                                                    | )          | 0.7 |   | (0.3 | ) |
| Comprehensive income (loss) attributable to Bruker  Corporation                                       |       | $                                                        | 78.6       |                                                    | $          | 35.6 |   | $ | 66.9 |   | $ | 55.4 |   |

** **

**17.  NoncontrollingInterests**

** **

Net income (loss)attributable to noncontrolling interests for the three months ended September 30,2010 and 2009 was $0.5 million and $(0.3) million, respectively. Netincome (loss) attributable to noncontrolling interests for the nine monthsended September 30, 2010 and 2009 was $0.7 million and $(0.3) million,respectively. The net income (loss) attributable to noncontrollinginterests represents the minority shareholders’ proportionate share of the netloss recorded by the Company’s majority-owned indirect subsidiaries.

 

In the second quarter of2010, the Company sold its ownership interest in Bruker Baltic Ltd. to one ofits minority shareholders as part of its efforts to consolidate production andknow-how into certain key locations. In addition, the Company made a payment of$0.1 million to certain minority shareholders of RI Research Instruments GmbHduring the second quarter of 2010.

** **

**18.  Commitmentsand Contingencies**

** **

***Legal***

 

Lawsuits, claims andproceedings of a nature considered normal to its businesses may be pending fromtime to time against the Company. The Company believes the outcome of theseproceedings, if any, will not have a material impact on the Company’s financialposition or results of operations. As of September 30, 2010, the Companyrecorded an accrual to recognize an expected loss from a patent infringementaction brought by The Research Foundation of the State University of New York.At December 31, 2009, no accruals had been recorded for such potential contingencies.

 

***Letters of Credit and Guarantees***

 

At September 30, 2010and December 31, 2009, the Company had bank guarantees of $92.4 millionand $87.0 million, respectively, for its customer advances. Thesearrangements guarantee the refund of advance payments received from customersin the event that the merchandise is not delivered in compliance with the termsof the contract. Certain of these guarantees affect the availability of theCompany’s lines of credit.

** **

**19.  BusinessSegment Information**

** **

The Company’s reportablesegments are organized by the types of products and services provided. TheCompany has combined the Bruker AXS, Bruker BioSpin, Bruker Daltonics andBruker Optics operating segments into the Scientific Instruments reportingsegment because each has similar economic characteristics, product processesand services, types and classes of customers, methods of distribution andregulatory environments.

 

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Management evaluates segmentoperating performance and allocates resources based on operating income (loss).The Company uses this measure because it helps provide an understanding of ourcore operating results. Selected business segment information is presentedbelow for the three and nine months ended September 30, 2010 and 2009 (inmillions):

 
| ** **                              | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|-----------------------------------------|------------|----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                              | ** ** | **2010**                                                 | ** ** | **2009**                                                | ** ** | **2010** | ** ** | **2009** | ** ** |
| Revenue:                                | ** ** | ** **                                               | ** ** | ** **                                              | ** ** | ** ** | ** ** | ** ** | ** ** |
| Scientific Instruments                  |       | $                                                        | 290.5      |                                                    | $          | 251.6 |   | $ | 835.7 |   | $ | 716.5 |   |
| Energy & Supercon Technologies |       | 22.4                                                     |       | 14.2                                                    |       | 61.2 |   | 36.0 |   |
| Eliminations (a)                        |       | (2.7                                                     | )          | (0.7                                                    | )          | (8.1 | ) | (4.4 | ) |
| Total revenue                           |       | $                                                        | 310.2      |                                                    | $          | 265.1 |   | $ | 888.8 |   | $ | 748.1 |   |
|                                    |       |                                                     |       |                                                    |       |   |   |   |   |
| Operating Income (Loss):                | ** ** | ** **                                               | ** ** | ** **                                              | ** ** | ** ** | ** ** |   | ** ** |
| Scientific Instruments                  |       | $                                                        | 40.4       |                                                    | $          | 26.9 |   | $ | 108.5 |   | $ | 63.4 |   |
| Energy & Supercon Technologies |       | (0.8                                                     | )          | (1.2                                                    | )          | (3.0 | ) | (4.3 | ) |
| Corporate, eliminations and other (b)   |       | (0.3                                                     | )          | 0.3                                                     |       | (1.4 | ) | 1.4 |   |
| Total operating income                  |       | $                                                        | 39.3       |                                                    | $          | 26.0 |   | $ | 104.1 |   | $ | 60.5 |   |

----

(a) Represents product and service revenuebetween reportable segments. 

(b) Represents corporate costs and eliminationsnot allocated to the reportable segments. 

 

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Total assets by segment asof September 30, 2010 and December 31, 2009 are as follows (inmillions):

 
| ** **                              | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                              | ** ** | **2010**               | ** ** | **2009**              | ** ** |
| Assets:                                 | ** ** | ** **             | ** ** | ** **            | ** ** |
| Scientific Instruments                  |       | $                      | 1,251.2    |                  | $          | 1,139.7 |   |
| Energy & Supercon Technologies |       | 70.8                   |       | 70.3                  |       |
| Eliminations and other (a)              |       | (44.9                  | )          | (38.0                 | )          |
| Total assets                            |       | $                      | 1,277.1    |                  | $          | 1,172.0 |   |

----

(a)         Represents assets notallocated to the reportable segments and eliminations of intercompanytransactions.

 

**20.****      ****RecentAccounting Pronouncements**

 

In September 2009, theEmerging Issues Task Force reached consensus on FASB Accounting StandardsUpdate 2009-14,*Software (Topic 985)—CertainRevenue Arrangements That Include Software Elements*. FASB AccountingStandards Updates 2009-14 changes the accounting model for revenue arrangementsthat include both tangible products and software elements. Under this guidance,tangible products containing software components and non-software componentsthat function together to deliver the tangible product’s essentialfunctionality are excluded from the software revenue guidance in Subtopic985-605,* Software-Revenue Recognition*. In addition, hardwarecomponents of a tangible product containing software components are alwaysexcluded from the software revenue guidance. FASB Accounting Standards Updates2009-14 is effective prospectively for revenue arrangements entered into ormaterially modified in fiscal years beginning on or after June 15, 2010, however,early adoption is permitted. The Company is currently assessing the impact thatthis update will have on its results of operations and financial position andwhen the Company will adopt these requirements.

 

In September 2009, theEmerging Issues Task Force reached consensus on FASB Accounting StandardsUpdate 2009-13,*Revenue Recognition (Topic605)—Multiple-Deliverable Revenue Arrangements.* FASB AccountingStandards Update 2009-13 addresses the accounting for multiple-deliverablearrangements to enable vendors to account for products or services separatelyrather than as a combined unit. Specifically, this guidance amends the criteriain Subtopic 605-25,*RevenueRecognition-Multiple-Element Arrangements,* for separatingconsideration in multiple-deliverable arrangements. This guidance establishes aselling price hierarchy for determining the selling price of a deliverable,which is based on: (a) vendor-specific objective evidence;(b) third-party evidence; or (c) estimates. This guidance alsoeliminates the residual method of allocation and requires that arrangementconsideration be allocated at the inception of the arrangement to alldeliverables using the relative selling price method. In addition, thisguidance significantly expands required disclosures related to a vendor’smultiple-deliverable revenue arrangements. FASB Accounting Standards Update2009-13 is effective prospectively for revenue arrangements entered into ormaterially modified in fiscal years beginning on or after June 15, 2010,however, early adoption is permitted. The Company is currently assessing theimpact that this update will have on its results of operations and financialposition and when the Company will adopt these requirements.

 
| **ITEM 2.** | **MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS** |
|-------------|-------------------------------------------------------------------------------------------------|

 

The following discussion ofour financial condition and results of operations should be read in conjunctionwith our interim unaudited condensed consolidated financial statements and thenotes to those statements included in Part 1, Item 1 of thisQuarterly Report on Form 10-Q, and in conjunction with the consolidatedfinancial statements contained in our Annual Report on Form 10-K for theyear ended December 31, 2009.

 

Statements contained inManagement’s Discussion and Analysis of Financial Condition and Results ofOperations, which express that we “believe,” “anticipate,” “plan,” “expect,” “seek,”“estimate,” or “should,” as well as other statements, which are not historicalfact, are forward-looking statements within the meaning of the PrivateSecurities Litigation Act of 1995. Actual events or results may differmaterially from those set forth in forward-looking statements. Certain factorsthat might cause such a difference are discussed in “Factors Affecting OurBusiness, Operating Results and Financial Condition” set forth in our AnnualReport on Form 10-K for the year ended December 31, 2009.

 

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**OVERVIEW**

 

The following Management’sDiscussion and Analysis of Financial Condition and Results of Operations, orMD&A, describes the principal factors affecting the results of ouroperations, financial condition and changes in financial condition, as well asour critical accounting policies and estimates. Our MD&A is organized asfollows:

 

·                  *Executiveoverview*. This section provides a general description andhistory of our business, a brief discussion of our reportable segments,significant recent developments in our business and other opportunities,challenges we face and risks that may impact our business in the future.

 

·                  *Criticalaccounting policies*. This section discusses the accounting estimatesthat are considered important to our financial position and results ofoperations and that require us to exercise subjective or complex judgments intheir application.

 

·                  *Resultsof operations*. This section provides our analysis of thesignificant line items on our unaudited condensed consolidated statement ofoperations for the three and nine months ended September 30, 2010 comparedto the three and nine months ended September 30, 2009.

 

·                  *Liquidityand capital resources*. This section provides an analysis of ourliquidity and cash flow and discussions of our outstanding debt and commitmentsand matters relating to our common stock.

 

·                  *Recentaccounting pronouncements*. This section provides information about newaccounting standards that have been issued but for which adoption is not yetrequired.

 

**EXECUTIVEOVERVIEW**

 

**BusinessOverview**

 

Bruker Corporation and itswholly-owned subsidiaries design, manufacture, service and market proprietarylife science and materials research systems based on its core technologyplatforms, including X-ray technologies, magnetic resonance technologies, massspectrometry technologies, optical emission spectroscopy and infrared and Ramanmolecular spectroscopy technologies. We sell a broad range of field analyticalsystems for chemical, biological, radiological, nuclear and explosive, orCBRNE, detection. We also develop and manufacture low temperature and hightemperature superconducting wire products and superconducting wire andsuperconducting devices for use in advanced magnet technology, physics researchand energy applications. Our diverse customer base includes life science,pharmaceutical, biotechnology and molecular diagnostic research companies,academic institutions, advanced materials and semiconductor industries andgovernment agencies. We maintain major technical and manufacturing centers inEurope, North America and Japan and we have sales offices located throughoutthe world. Our corporate headquarters are located in Billerica, Massachusetts.

 

Our business strategy is tocapitalize on our ability to innovate and generate rapid revenue performance,both organically and through acquisitions. Our revenue growth strategy,combined with anticipated improvements to our gross profit margins andincreased leverage on our research and development, sales and marketing anddistribution investments and general and administrative expenses, is expectedto enhance our operating margins and improve our earnings in the future.

 

On May 19, 2010, wecompleted our acquisition of three former Varian, Inc. product lines whichAgilent Technologies, Inc., divested in connection with obtainingregulatory approval for its May 14, 2010 acquisition of Varian. TheCompany acquired certain assets and assumed certain liabilities in Varian’sinductively coupled plasma mass spectrometry instruments business, laboratorygas chromatography instruments business, and gas chromatography triple-quadrupolemass spectrometry instruments business, collectively, the chemical analysisbusiness. The chemical analysis business complements our existing massspectrometry products and expands our offerings to industrial and appliedmarkets that we did not previously serve and also provides opportunities tosupply customers with equipment packages that have a broader range ofapplications and value.

 

On August 16, 2010, weannounced that we entered into a Stock Purchase Agreement with VeecoInstruments Inc. and Veeco Metrology Inc. to acquire Veeco’s scanning probemicroscopy and optical industrial metrology instruments business, or the nano surfaces business. We completed theacquisition of the nanosurfaces business on October 7, 2010. We believe that the acquired businesscomplements our existing atomic force microscopy products and expands ourofferings to industrial and applied markets, specifically, in the fields ofmaterials and nanotechnology research and analysis.

 

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We are organized into fiveoperating segments, representing each of our five divisions: Bruker AXS, BrukerBioSpin, Bruker Daltonics, Bruker Optics and Bruker Energy & SuperconTechnologies. Bruker AXS is in the business of manufacturing and distributingadvanced X-ray, spark-optical emission spectroscopy and atomic force microscopyinstrumentation used in non-destructive molecular and elemental analysis.Bruker BioSpin is in the business of manufacturing and distributing enablinglife science tools based on magnetic resonance technology. Bruker Daltonics isin the business of manufacturing and distributing mass spectrometry instrumentsthat can be integrated and used along with other analytical instruments, aswell as our CBRNE detection products. Bruker Optics is in the business ofmanufacturing and distributing research, analytical and process analysisinstruments and solutions based on infrared and Raman molecular spectroscopytechnologies. Bruker Energy & Supercon Technologies is in the businessof developing and producing superconductivity-based materials andsuperconductivity-enabled devices.

 

We have combined the BrukerAXS, Bruker BioSpin, Bruker Daltonics and Bruker Optics operating segments intothe Scientific Instruments reporting segment because each has similar economiccharacteristics, product processes and services, types and classes ofcustomers, methods of distribution and regulatory environments. As such,management reports its results based on the following segments:

 

·                  *ScientificInstruments.  *The operations ofthis segment include the design, manufacture and distribution of advancedinstrumentation and automated solutions based on X-ray technology,spark-optical emission spectroscopy technology, atomic force microscopy,magnetic resonance technology, mass spectrometry technology and infrared andRaman molecular spectroscopy technology. Typical customers of the ScientificInstruments segment include pharmaceutical, biotechnology, and moleculardiagnostic companies, academic institutions, medical school and othernon-profit organizations, and clinical microbiology laboratories, governmentdepartments and agencies, and nanotechnology, semiconductor, chemical, cement,metals and petroleum companies, and food, beverage and agricultural analysiscompanies and laboratories.

 

·                  *Energy &Supercon Technologies. * Theoperations of this segment include the design, manufacture and marketing ofsuperconducting materials, primarily metallic low temperature superconductors,for use in magnetic resonance imaging, nuclear magnetic resonance and fusionenergy research and other applications, and ceramic high temperaturesuperconductors primarily for fusion energy research applications. We alsoutilize our low temperature and high temperature superconductors to develop,manufacture and market devices that have applications primarily in “bigscience” research. Typical customers of the Energy & SuperconTechnologies segment include companies in the medical, power and energy, andprocessing industries, private and public research and development laboratoriesin the fields of fundamental and applied sciences and energy research, academicinstitutions and government agencies.

 

We have announced plans tosell a minority ownership position in our Bruker Energy & SuperconTechnologies, Inc. (“BEST”) subsidiary through an initial public offeringof the capital stock of BEST. We believe the offering will provide ourshareholders greater visibility into BEST’s performance and growth andstrengthen BEST’s access to financing for its revenue growth initiatives,including the development of products for the renewable energy and energyinfrastructure markets.

 

**FinancialOverview**

 

For the three months ended September 30,2010, our revenue increased by $45.1 million, or 17.0%, to $310.2 million,compared to $265.1 million for the comparable period in 2009. Included in thischange in revenue is a decrease of approximately $18.1 million from the impactof foreign exchange due to the strengthening of the U.S. Dollar versus the Euroand other foreign currencies and an increase of approximately $17.1 millionattributable to the acquisition of the chemical analysis business. Excludingthe effect of foreign exchange and the acquisition, revenue increased by $46.1million, or 17.4%. The increase in revenue on an adjusted basis is attributableto both the Scientific Instruments segment, which increased by $37.6 million,or 14.9%, and the Energy & Supercon Technologies segment, whichincreased by $10.5 million, or 73.9%. Revenue in the Scientific Instrumentssegment reflects an increase in sales from many of our core technologies,particularly in magnetic resonance, mass spectrometry and X-ray. Revenues inthe Energy & Supercon Technologies segment increased due to higher demandfor low temperature superconducting wire.

 

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For the nine months ended September 30,2010, our revenue increased by $140.7 million, or 18.8%, to $888.8 million,compared to $748.1 million for the comparable period in 2009. Included in thischange in revenue is a decrease of approximately $5.3 million from the impactof foreign exchange due to the strengthening of the U.S. Dollar versus the Euroand other foreign currencies and an increase of approximately $27.6 millionattributable to the acquisitions of the chemical analysis business and theresearch instruments business. Excluding the effect of foreign exchange and theacquisitions, revenue increased by $118.4 million, or 15.8%. The increase inrevenue on an adjusted basis is attributable to both the Scientific Instrumentssegment, which increased by $101.3 million, or 14.1%, and the Energy &Supercon Technologies segment, which increased by $20.8 million, or 57.8%.Revenue in the Scientific Instruments segment reflects an increase in sales ofall of our core technologies, particularly in magnetic resonance, X-ray andmass spectrometry. Revenues in the Energy & Supercon Technologiessegment increased due to higher demand for low temperature superconductingwire.

 

The mix of products sold inthe Scientific Instruments segment in the three and nine months ended September 30,2010 reflects increased demand from academic, government and industrialcustomers. We attribute the increase in sales of magnetic resonance and massspectrometry products and spending by academic and government customers to ournew product introductions over the last twelve to eighteen months and tostimulus packages implemented by governments of various countries, includingthe U.S., Germany, Japan and China. The improvement in revenues from ourindustrial customers reflects an ongoing economic improvement in these endmarkets. In general, the spending patterns of our industrial customers werenegatively impacted by the global recession through the first half of 2009.Over the last several quarters we have experienced an increase in demand fromthese customers and we remain optimistic that the industrial markets we servewill continue to improve. However, we will continue to monitor the recovery ofthese markets given the current economic environment. Additionally, while manyEuropean governments have announced their intentions to reduce overallspending, a number of our key European markets, including Germany, France andthe U.K., have announced that research spending will remain stable, or grow insome cases. Based on the recent announcements from these governments and recentannouncements from the European Union, we believe that funding for the majorityof our products and markets will remain stable, or grow, in most of our keyEuropean markets.

 

Income from operations forthe three months ended September 30, 2010 was $39.3 million, resulting inan operating margin of 12.7%, compared to income from operations of $26.0million, resulting in an operating margin of 9.8%, for the comparable period in2009. The increase in operating margin is primarily the result of the higherrevenue described above and a corresponding improvement in our gross profitmargins. Our gross profit margin for the third quarter of 2010 was 47.4%,compared with 45.0% for the comparable period in 2009. The increase in revenuealso allowed us to leverage our selling, general and administrative costs andour research and development costs, which decreased to 33.8% of revenue for thethree months ended September 30, 2010 compared with 35.0% of revenue forthe comparable period of 2009. Improvements in operating margins areattributable to both the Scientific Instruments segment, which increased by$13.5 million, improving operating margins by 3.2%, and the Energy &Supercon Technologies segment which decreased its operating loss by $0.4million, improving operating margins by 4.9%.

 

Income from operations forthe nine months ended September 30, 2010 was $104.1 million, resulting inan operating margin of 11.7%, compared to income from operations of $60.5million, resulting in an operating margin of 8.1%, for the comparable period in2009. The increase in operating margin is primarily the result of higherrevenue described above and a corresponding improvement in our gross profitmargins. Our gross profit margin as a percentage of revenue was 46.0% for thefirst nine months of 2010 and 44.5% for the comparable period in 2009. Theincrease in revenue also allowed us to leverage our selling, general andadministrative costs and our research and development costs, which decreased to33.6% of revenue for the nine months ended September 30, 2010 comparedwith 36.3% of revenue for the comparable period of 2009. Improvements inoperating margins are attributable to both the Scientific Instruments segment,which increased by $45.1 million, improving operating margins by 4.2%, and theEnergy & Supercon Technologies segment which decreased its operatingloss by $1.3 million, improving operating margins by 7.0%.

 

Higher gross profit marginsin the three and nine months ended September 30, 2010 resulted primarilyfrom changes in product mix, specifically an increase in revenues from high-endinstrumentation, including our newly introduced products which were designed tocarry higher gross margins than our previous generations of products, and theweakening of the Euro, which favorably impacts our gross profit margins as amajority of our production is performed in Europe. The increase in revenue alsoallowed us to better utilize our production facilities and leverage our fixedproduction costs.

 

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We incurred approximately$4.0 million of interest expense during the nine months ended September 30,2010 compared to $6.2 million for the comparable period in 2009. Of the totalinterest expense incurred in the first nine months of 2010, approximately $3.6million related to a credit facility that we entered into during the firstquarter of 2008. We initially borrowed $351.0 million under this creditfacility in order to finance the acquisition of Bruker BioSpin. In the firstnine months of 2010, we repaid approximately $15.0 million of the amountsoutstanding under this credit agreement and, from the inception of thisagreement through September 30, 2010, we reduced the net amountoutstanding by approximately $234.7 million. However, in October 2010, weborrowed $170.0 million under the revolving component of this credit agreementto finance our acquisition and the working capital requirements of the nano surfaces business. The amountborrowed is at an interest rate of less than 1% and will result inapproximately $0.3 million of incremental interest expense in the fourthquarter of 2010.

 

Our effective tax rate forthe three months ended September 30, 2010 was 27.0%, compared to 33.5% forthe comparable period in 2009. Our effective tax rate for the nine months endedSeptember 30, 2010 was 32.2%, compared to 33.1% for the comparable periodin 2009. In the third quarter of 2010, the Company completed a study of itsresearch and development activities and identified additional U.S. Federal taxcredits of approximately $2.8 million. These credits reduced our effective taxrate by approximately 7.3% and 2.8% for the three and nine month periods ended September 30,2010, respectively. The remaining change in our effective tax rate relatesprimarily to the amount and mix of income and taxes outside the U.S.

 

Our net income attributableto the shareholders of Bruker Corporation for the three months ended September 30,2010 was $27.4 million, or $0.17 per diluted share, compared to $16.4 million,or $0.10 per diluted share, for the comparable period in 2009. Our net incomeattributable to the shareholders of Bruker Corporation for the nine monthsended September 30, 2010 was $66.1 million, or $0.40 per diluted share,compared to $37.7 million, or $0.23 per diluted share, for the comparableperiod in 2009.

 

**CRITICALACCOUNTING POLICIES**

 

This discussion and analysisof our financial condition and results of operations is based upon ourunaudited condensed consolidated financial statements, which have been preparedin accordance with accounting principles generally accepted in the UnitedStates of America. The preparation of these financial statements requires thatwe make estimates and assumptions that affect the reported amounts of assetsand liabilities and the disclosure of contingent assets and liabilities at thedate of the financial statements and reported amounts of revenues and expensesduring the reporting period. On an ongoing basis, management evaluates itsestimates and judgments, including those related to revenue recognition, incometaxes, allowance for doubtful accounts, inventories, goodwill, other intangibleassets and long-lived assets, warranty costs and derivative financialinstruments. We base our estimates and judgments on historical experience, currentmarket and economic conditions, 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 followingcritical accounting policies to be both those most important to the portrayalof our financial position and results of operations and those that require themost subjective judgment.

 

*Revenuerecognition.*We recognize revenue from system sales whenpersuasive evidence of an arrangement exists, the price is fixed ordeterminable, title and risk of loss has been transferred to the customer andcollectability of the resulting receivable is reasonably assured. Title andrisk of loss generally are transferred to the customer upon receipt of a signedcustomer acceptance form for a system that has been shipped, installed, and forwhich the customer has been trained. As a result, the timing of customeracceptance or readiness could cause our reported revenues to differ materiallyfrom expectations. When products are sold through an independent distributor ora strategic distribution partner who assumes responsibility for installation,we recognize the system sale when the product has been shipped and title andrisk of loss have been transferred to the distributor. Our distributors do nothave price protection rights or rights of return; however, our products aretypically warranted to be free from defect for a period of one year. Revenue isdeferred until cash is received when collectability is not reasonably assured,such as when a significant portion of the fee is due over one year afterdelivery, installation and acceptance of a system. For arrangements withmultiple elements, we recognize revenue for each element based on the relativefair value of the elements, provided all other criteria for revenue recognitionhave been met. The fair value for each element provided in multiple elementarrangements is typically determined by referencing the prices charged when theelement is sold separately. If there is objective and reliable evidence of thefair value of the undelivered items in an arrangement, but no such evidence forthe delivered items, we use the residual method to allocate the arrangementconsideration. Changes in our ability to establish 

 

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the fair value for eachelement in multiple element arrangements could affect the timing of revenuerecognition. Revenue from accessories and parts is recognized upon shipment andservice revenue is recognized as the services are performed. We also havecontracts for which we apply the percentage-of-completion method for revenuerecognition. Application of the percentage-of-completion method requires us tomake reasonable estimates of the extent of progress toward completion of thecontract and the total costs we will incur under the contract. Changes in ourestimates could affect the timing of revenue recognition. Grant revenue isrecognized when we complete the services required under the grant.

 

*Incometaxes.*The determination of income tax expense requires us to make certainestimates and judgments concerning the calculation of deferred tax assets andliabilities, as well as the deductions, carryforwards and credits that areavailable to reduce taxable income. Deferred tax assets and liabilities arisefrom differences in the timing of the recognition of revenue and expenses forfinancial statement and tax purposes. Deferred tax assets and liabilities aremeasured using the tax rates in effect for the year in which these temporarydifferences are expected to be settled. We estimate the degree to which taxassets and loss carryforwards will result in a benefit based on expectedprofitability by tax jurisdiction, and we provide a valuation allowance for taxassets and loss carryforwards that we believe will more likely than not gounused. 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. In addition, we only recognize benefits for taxpositions that we believe are more likely than not of being sustained uponreview by a taxing authority with knowledge of all relevant information. Wereevaluate our uncertain tax positions on a quarterly basis and any changes tothese positions as a result of tax audits, tax laws or other facts andcircumstances could result in additional charges to operations.

 

*Allowancefor doubtful accounts.* We maintain allowances for doubtful accountsfor estimated losses resulting from the inability of our customers to payamounts due. If the financial condition of our customers were to deteriorate,reducing their ability to make payments, additional allowances would berequired, resulting in a charge to operations.

 

*Inventories.* Inventoriesare stated at the lower of cost or market, with costs determined by thefirst-in, first-out method for a majority of subsidiaries and by average costfor certain international subsidiaries. We record provisions to account forexcess and obsolete inventory to reflect the expected non-saleable ornon-refundable inventory based on an evaluation of slow moving products.Inventories also include demonstration units located in our demonstrationlaboratories or installed at the sites of potential customers. We consider ourdemonstration units to be available for sale. We reduce the carrying value ofdemonstration inventories for differences between cost and estimated netrealizable value, taking into consideration usage in the preceding twelvemonths, expected demand, technological obsolescence and other informationincluding the physical condition of the unit. If ultimate usage or demandvaries significantly from expected usage or demand, additional write-downs maybe required, resulting in additional charges to operations.

 

*Goodwill,other intangible assets and other long-lived assets.* We evaluatewhether goodwill is impaired annually and when events occur or circumstanceschange. We test goodwill for impairment at the reporting unit level (theoperating segment or one level below an operating segment). The performance ofthe test involves a two-step process. The first step of the impairment testinvolves comparing the fair values of the applicable reporting units with theiraggregate carrying values, including goodwill. We generally determine the fairvalue of our reporting units using an income approach methodology of valuationthat includes the discounted cash flow method. Estimating the fair value of thereporting units requires significant judgments by management about the futurecash flows. If the carrying amount of a reporting unit exceeds the fair valueof the reporting unit, we perform the second step of the goodwill impairmenttest to measure the amount of the impairment. In the second step of thegoodwill impairment test we compare the implied fair value of the reportingunit’s goodwill with the carrying value of that goodwill. We also reviewfinite-lived intangible assets and other long-lived assets when indications ofpotential impairment exists, such as a significant reduction in undiscountedcash flows associated with the assets. Should the fair value of our long-livedassets decline because of reduced operating performance, market declines, orother indicators of impairment, a charge to operations for impairment may benecessary.

 

*Warrantycosts.* We normally provide a one year parts and labor warranty with thepurchase of equipment. The anticipated cost for this warranty is accrued uponrecognition of the sale based on historical warranty rates and our assumptionsof future warranty claims. The warranty accrual is included as a currentliability on the consolidated balance sheets. Although our products undergoquality assurance and testing procedures throughout the production process, ourwarranty obligation is affected by product failure rates, material usage andservice delivery costs incurred in correcting a product failure. Although ouractual warranty costs have historically been consistent with expectations, tothe extent warranty claim activity or costs associated with servicing thoseclaims differ from our estimates, revisions to the warranty accrual may berequired.

 

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*Derivativefinancial instruments.* All derivative instruments are recorded asassets or liabilities at fair value, which is calculated as an estimate of thefuture cash flows, and subsequent changes in a derivative’s fair value arerecognized in income, unless specific hedge accounting criteria are met.Changes in the fair value of a derivative that is highly effective anddesignated as a cash flow hedge are recognized in accumulated othercomprehensive income until the forecasted transaction occurs or it becomesprobable that the forecasted transaction will not occur. We perform anassessment at the inception of the hedge and on a quarterly basis thereafter,to determine whether our derivatives are highly effective in offsetting changesin the value of the hedged items. Any changes in the fair value resulting fromhedge ineffectiveness are immediately recognized as income or expense.

 

**RESULTS OFOPERATIONS**

 

***Three Months Ended September 30, 2010 compared to the Three MonthsEnded September 30, 2009***

 

***Consolidated Results***

 

The following table presentsour results for the three months ended September 30, 2010 and 2009(dollars in millions, except per share data):

 
| ** **                                                                              | ** ** | **Three Months Ended** | ** ** |
|-----------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                              | ** ** | **September 30,**           | ** ** |
| ** **                                                                              | ** ** | **2010**                         | ** ** | **2009** | ** ** |
| Product revenue                                                                         |       | $                                | 269.7      |   | $ | 230.7 |   |
| Service revenue                                                                         |       | 39.1                             |       | 32.4 |   |
| Other revenue                                                                           |       | 1.4                              |       | 2.0 |   |
| Total revenue                                                                           |       | 310.2                            |       | 265.1 |   |
|                                                                                    |       |                             |       |   |   |
| Cost of product revenue                                                                 |       | 143.5                            |       | 127.9 |   |
| Cost of service revenue                                                                 |       | 19.8                             |       | 18.0 |   |
| Total cost of revenue                                                                   |       | 163.3                            |       | 145.9 |   |
| Gross profit                                                                            |       | 146.9                            |       | 119.2 |   |
|                                                                                    |       |                             |       |   |   |
| Operating expenses:                                                                     |       |                             |       |   |   |
| Selling, general and administrative                                                     |       | 72.2                             |       | 61.2 |   |
| Research and development                                                                |       | 32.5                             |       | 31.6 |   |
| Amortization of acquisition-related intangible  assets                                  |       | 1.0                              |       | 0.4 |   |
| Other charges                                                                           |       | 1.9                              |       | — |   |
| Total operating expenses                                                                |       | 107.6                            |       | 93.2 |   |
| Operating income                                                                        |       | 39.3                             |       | 26.0 |   |
|                                                                                    |       |                             |       |   |   |
| Interest and other income (expense), net                                                |       | (1.1                             | )          | (1.8 | ) |
| Income before income taxes and noncontrolling interest  in consolidated subsidiaries    |       | 38.2                             |       | 24.2 |   |
| Income tax provision                                                                    |       | 10.3                             |       | 8.1 |   |
| Consolidated net income                                                                 |       | 27.9                             |       | 16.1 |   |
| Net income (loss) attributable to noncontrolling interest  in consolidated subsidiaries |       | 0.5                              |       | (0.3 | ) |
| Net income attributable to Bruker Corporation                                           |       | $                                | 27.4       |   | $ | 16.4 |   |
|                                                                                    |       |                             |       |   |   |
| Net income per common share attributable to                                             |       |                             |       |   |   |
| Bruker Corporation shareholders:                                                        |       |                             |       |   |   |
| Basic and diluted                                                                       |       | $                                | 0.17       |   | $ | 0.10 |   |
|                                                                                    |       |                             |       |   |   |
| Weighted average common shares outstanding:                                             |       |                             |       |   |   |
| Basic                                                                                   |       | 164.5                            |       | 163.5 |   |
| Diluted                                                                                 |       | 165.7                            |       | 165.0 |   |

 

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***Revenue***

 

For the three months ended September 30,2010, our revenue increased by $45.1 million, or 17.0%, to $310.2 million,compared to $265.1 million for the comparable period in 2009. Included in thischange in revenue is a decrease of approximately $18.1 million from the impactof foreign exchange due to the strengthening of the U.S. Dollar versus the Euroand other foreign currencies and an increase of approximately $17.1 millionattributable to the acquisition of the chemical analysis business. Excludingthe effect of foreign exchange and the acquisition, revenue increased by $46.1million, or 17.4%. The increase in revenue on an adjusted basis is attributableto both the Scientific Instruments segment, which increased by $37.6 million,or 14.9%, and the Energy & Supercon Technologies segment, whichincreased by $10.5 million, or 73.9%. Revenue in the Scientific Instrumentssegment reflects an increase in sales from many of our core technologies,particularly in magnetic resonance, mass spectrometry and X-ray. Revenues inthe Energy & Supercon Technologies segment increased due to higherdemand for low temperature superconducting wire.

 

The mix of products sold inthe Scientific Instruments segment reflects increased demand from academic,government and industrial customers. We attribute the increase in sales ofmagnetic resonance and mass spectrometry products and spending by academic andgovernment customers to our new product introductions over the last twelve toeighteen months and to stimulus packages implemented by governments of variouscountries, including the U.S., Germany, Japan and China. The improvement 

 

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in revenues from ourindustrial customers reflects an ongoing economic improvement in these endmarkets. 

 

***Cost of Revenue***

 

Our cost of product andservice revenue for the three months ended September 30, 2010 was $163.3million, resulting in a gross profit margin of 47.4%, compared to cost ofproduct and service revenue of $145.9 million, resulting in a gross profitmargin of 45.0%, for the comparable period in 2009. Higher gross profit marginsresulted primarily from changes in product mix, specifically an increase inrevenues from high-end instrumentation, including our newly introduced productswhich were designed to carry higher gross margins than our previous generationsof products, and the weakening of the Euro, which favorably impacts our grossprofit margins as a majority of our production is performed in Europe. Theincrease in revenue also allowed us to better utilize our production facilitiesand leverage our fixed production costs. We also reduced production coststhrough various cost saving initiatives and strict cost control in ourmanufacturing facilities.

 

In the third quarter of2010, we delivered, installed and received customer acceptance on a 17.2 Teslamagnetic resonance imaging system. Because of nature of this project, themajority of costs incurred were charged to research and development expenserather than capitalized as inventory. As a result, the sale of the systemcarried a gross profit margin that was higher than that of our other magneticresonance imaging systems. Additionally, the costs of the labor and materials requiredfor the rework of certain specialty magnets that did not meet customerspecifications were recorded as a charge to cost of product revenue in thethird quarter of 2010. Although these items individually impacted our grossprofit margin in the third quarter of 2010, in the aggregate they did not havea material impact on gross profit margins in the quarter.

 

***Selling, General and Administrative***

 

Our selling, general andadministrative expense for the three months ended September 30, 2010increased to $72.2 million, or 23.3% of total revenue, from $61.2 million, or23.1% of total revenue, for the comparable period in 2009. The increase inselling, general and administrative expense is attributable to increases inheadcount in support of our revenue growth and as a result of acquisitions.Higher revenues resulted in an increase in commissions and related sellingexpenses which also contributed to the increase in selling, general andadministrative expense. Increases in selling, general and administrativeexpenses were offset, in part, by changes in foreign currency exchange rates,primarily the Euro.

 

***Research and Development***

 

Our research and developmentexpense for the three months ended September 30, 2010 increased to $32.5million, or 10.5% of total revenue, compared with research and developmentexpense of $31.6 million, or 11.9% of total revenue, for the comparable periodin 2009. Research and development expenses increased in the third quarter of2010 compared with the third quarter of 2009 as a result of increases inheadcount and materials costs in support of new product development and as aresult of acquisitions. However, these increases were offset by changes inforeign currency exchange rates, primarily the Euro, as the majority of ourresearch and development is performed in Europe.

 

***Amortization of Acquisition-Related Intangible Assets***

 

Our amortization expensefrom acquisition-related intangible assets was $1.0 million for the three monthsended September 30, 2010 compared with $0.4 million for the comparableperiod in 2009. The increase in amortization expense relates to intangibleassets acquired in connection with the purchase of the chemical analysisbusiness from Agilent.

 

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***Other Charges***

 

Other charges of $1.9million in the third quarter of 2010 relate entirely to the ScientificInstruments segment. Other charges consists of $1.0 million ofacquisition-related costs incurred in connection with our acquisitions of thechemical analysis business from Agilent and the nano surfaces business fromVeeco and $0.9 million incurred under transition services agreements withAgilent. We do not expect these transition costs to recur after the end of thetransition services agreements.

 

There were no similarcharges recorded in the third quarter of 2009.

 

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

 

Interest and other income(expense), net during the three months ended September 30, 2010 was $(1.1)million, compared to $(1.8) million for the comparable period of 2009.

 

During the three monthsended September 30, 2010, the major component within interest and otherincome (expense), net was net interest expense of $1.1 million. During thethree months ended September 30, 2009, the major components withininterest and other income (expense), net, were net interest expense of $1.4million and realized and unrealized losses on foreign currency transactions of$0.8 million.

 

The decrease in interestexpense is a function of lower outstanding debt, as we repaid approximately$16.3 million of debt in the first nine months of 2010.

 

***Income Tax Provision***

 

Our effective tax rategenerally reflects our tax provision for non-U.S. entities only. We maintain afull valuation allowance against all U.S. deferred tax assets, including ourU.S. net operating losses and tax credits, until evidence exists that it ismore likely than not that the loss carryforward and credit amounts will beutilized to offset U.S. taxable income. Our tax rate may change over time asthe amount and mix of income and taxes outside the U.S. changes. The effectivetax rate is calculated using our projected annual pre-tax income or loss and isaffected by 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.

 

The income tax provision forthe three months ended September 30, 2010 was $10.3 million compared to$8.1 million for the three months ended September 30, 2009, representingeffective tax rates of 27.0% and 33.5%, respectively. In the third quarter of2010, the Company completed a study of its research and development activitiesand identified additional U.S. Federal tax credits of approximately $2.8million. These credits reduced our effective tax rate by approximately 7.3% forthe third quarter of 2010. There were no discrete items of a material naturethat impacted the effective tax rate for the third quarter of 2009.

 

***Net Income (Loss) Attributable to Noncontrolling Interests***

 

Net income (loss)attributable to noncontrolling interests for the three months ended September 30,2010 was $0.5 million compared to $(0.3) million for the comparable period of2009. Net income (loss) attributable to noncontrolling interests represents theminority shareholders’ proportionate share of the net income (loss) recorded byour majority-owned indirect subsidiaries.

 

***Net Income Attributable to Bruker Corporation***

 

Our net income for the threemonths ended September 30, 2010 was $27.4 million, or $0.17 per dilutedshare, compared to $16.4 million, or $0.10 per diluted share for the comparableperiod in 2009.

 

***Segment Results***

 

***Revenue***

 

The following table presentsrevenue, change in revenue and revenue growth by reportable segment for thethree months ended September 30, 2010 and 2009 (dollars in millions):

 

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| ** **                              | ** ** | **Three Months Ended September 30,** | ** ** | **Dollar** | ** ** | **Percentage** | ** ** |
|-----------------------------------------|------------|----------------------------------------------------------|------------|------------|------------|----------------|------------|
| ** **                              | ** ** | **2010**                                                 | ** ** | **2009**   | ** ** | **Change**     | ** ** | **Change** | ** ** |
| Scientific Instruments                  |       | $                                                        | 290.5      |       | $          | 251.6          |       | $ | 38.9 |   | 15.5 | % |
| Energy & Supercon Technologies |       | 22.4                                                     |       | 14.2       |       | 8.2            |       | 57.7 | % |
| Eliminations (a)                        |       | (2.7                                                     | )          | (0.7       | )          | (2.0           | )          |   |   |
|                                    |       | $                                                        | 310.2      |       | $          | 265.1          |       | $ | 45.1 |   | 17.0 | % |

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(a) Represents product and service revenue between reportablesegments. 

 

***Scientific Instruments Segment Revenues***

 

Scientific Instrumentssegment revenue increased by $38.9 million, or 15.5%, to $290.5 million for thethree months ended September 30, 2010, compared to $251.6 million for thecomparable period in 2009. Included in this change in revenue is a decrease ofapproximately $15.8 million from the impact of foreign exchange due to thestrengthening of the U.S. Dollar versus the Euro and other foreign currenciesand an increase of approximately $17.1 million attributable to the acquisitionof the chemical analysis business. Excluding the effect of foreign exchange andthe acquisition, revenue increased by $37.6 million, or 14.9%. The increase inrevenue, excluding the effect of foreign exchange and acquisition, reflects anincrease in sales from many of our core technologies, particularly in magneticresonance, mass spectrometry and X-ray. The mix of products sold in theScientific Instruments segment reflects increased demand from academic,government and industrial customers. We attribute the increase in spending byacademic and government customers to our new product introductions over thelast twelve to eighteen months and stimulus packages implemented by governmentsof various countries, including the U.S., Germany, Japan and China. We havealso seen increased demand from our industrial customers as economic conditionshave shown signs of improvement.

 

System revenue andaftermarket revenue as a percentage of total Scientific Instruments segmentrevenue were as follows during the three months ended September 30, 2010and 2009 (dollars in millions):

 
| ** **          | ** ** | **Three Months Ended September 30,** | ** ** |
|---------------------|------------|----------------------------------------------------------|------------|
| ** **          | ** ** | **2010**                                                 | ** ** | **2009** | ** ** |
| ** **          | ** ** | **Revenue**                                              | ** ** | **Percentage of  Segment  Revenue** | ** ** | **Revenue** | ** ** | **Percentage of  Segment  Revenue** | ** ** |
| System revenue      |       | $                                                        | 234.5      |   | 80.7 | % | $ | 197.6 |   | 78.5 | % |
| Aftermarket revenue |       | 56.0                                                     |       | 19.3 | % | 54.0 |   | 21.5 | % |
| Total revenue       |       | $                                                        | 290.5      |   | 100.0 | % | $ | 251.6 |   | 100.0 | % |

 

System revenues in theScientific Instruments segment include X-ray systems, optical emissionspectroscopy systems, atomic force microscopy systems, nuclear magneticresonance systems, magnetic resonance imaging systems, electron paramagneticimaging systems, mass spectrometry systems, CBRNE detection systems andmolecular spectroscopy systems. Aftermarket revenues in the ScientificInstruments segment include accessory sales, consumables, training andservices.

 

***Energy & Supercon Technologies Segment Revenues***

 

Energy & SuperconTechnologies segment revenue increased by $8.2 million, or 57.7%, to $22.4million for the three months ended September 30, 2010, compared to $14.2million for the comparable period in 2009. Included in this change in revenueis a decrease of approximately $2.3 million from the impact of foreign exchangedue to the strengthening of the U.S. Dollar versus the Euro and other foreigncurrencies. Excluding the effect of foreign exchange, revenue increased by$10.5 million, or 73.9%. The increase in revenue was the result of higherdemand for low temperature superconducting wire.

 

System and wire revenue andaftermarket revenue as a percentage of total Energy & SuperconTechnologies segment revenue were as follows during the three months ended September 30,2010 and 2009 (dollars in millions):

 

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| ** **              | ** ** | **Three Months Ended September 30,** | ** ** |
|-------------------------|------------|----------------------------------------------------------|------------|
| ** **              | ** ** | **2010**                                                 | ** ** | **2009** | ** ** |
| ** **              | ** ** | **Revenue**                                              | ** ** | **Percentage of  Segment  Revenue** | ** ** | **Revenue** | ** ** | **Percentage of  Segment  Revenue** | ** ** |
| System and wire revenue |       | $                                                        | 20.9       |   | 93.3 | % | $ | 13.5 |   | 95.1 | % |
| Aftermarket revenue     |       | 1.5                                                      |       | 6.7 | % | 0.7 |   | 4.9 | % |
| Total revenue           |       | $                                                        | 22.4       |   | 100.0 | % | $ | 14.2 |   | 100.0 | % |

 

System and wire revenues inthe Energy & Supercon Technologies segment include low and hightemperature superconducting wire and superconducting devices, includingmagnets, linear accelerators and radio frequency cavities. Aftermarket revenuesin the Energy & Supercon Technologies segment include accessory sales.

 

***Income (Loss) from Operations***

 

The following table presentsincome (loss) from operations and operating margins on revenue by reportablesegment for the three months ended September 30, 2010 and 2009 (dollars inmillions):

 
| ** **                              | ** ** | **Three Months Ended September 30,** | ** ** |
|-----------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                              | ** ** | **2010**                                                 | ** ** | **2009** | ** ** |
| ** **                              | ** ** | **Operating  Income (Loss)**                        | ** ** | **Percentage of  Segment  Revenue** | ** ** | **Operating  Income (Loss)** | ** ** | **Percentage of  Segment  Revenue** | ** ** |
| Scientific Instruments                  |       | $                                                        | 40.4       |   | 13.9 | % | $ | 26.9 |   | 10.7 | % |
| Energy & Supercon Technologies |       | (0.8                                                     | )          | (3.6 | )% | (1.2 | ) | (8.5 | )% |
| Corporate, eliminations and other (a)   |       | (0.3                                                     | )          |   |   | 0.3 |   |   |   |
| Total operating income                  |       | $                                                        | 39.3       |   | 12.7 | % | $ | 26.0 |   | 9.8 | % |

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(a) Representscorporate costs and eliminations not allocated to the reportable segments. 

 

Scientific Instrumentssegment income from operations for the three months ended September 30,2010 was $40.4 million, resulting in an operating margin of 13.9%, compared toincome from operations of $26.9 million, resulting in an operating margin of10.7%, for the comparable period in 2009. Income from operations in theScientific Instruments segment improved as a result of the higher revenuesdescribed above and an improvement in gross profit margins.

 

In the third quarter of2010, gross profit margin as a percentage of revenue in the ScientificInstruments segment increased to 49.5% from 45.7% for the comparable period in2009. Higher gross profit margins resulted primarily from changes in productmix, specifically an increase in revenues from high-end instrumentation,including our newly introduced products which were designed to carry highergross margins than our previous generations of products, and the weakening ofthe Euro, which favorably impacts our gross profit margins as a majority of ourproduction is performed in Europe. The increase in revenue also allowed us tobetter utilize our production facilities and leverage our fixed productioncosts. We also reduced production costs through various cost savinginitiatives.

 

In the third quarter of2010, selling, general and administrative expenses and research and developmentexpenses in the Scientific Instruments segment increased to $100.7 million, or34.7% of segment revenue, from $87.7 million, or 34.9% of segment revenue forthe comparable period in 2009. This increase in cost is a function ofincremental investments in sales and marketing activities and research anddevelopment activities that we believe will generate future growth, as well asincreases in operating expenses related to acquisitions completed in 2010. Changesin foreign currency exchange rates partially offset the increase in operatingexpenses.

 

Energy & Supercon Technologiessegment loss from operations for the three months ended September 30, 2010was $0.8 million, resulting in an operating margin of (3.6)%, compared to aloss from operations of $1.2 million, resulting in an 

 

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operating margin of (8.5)%,for the comparable period in 2009. The improvement in operating loss is afunction of higher revenues.

 

***Nine Months Ended September 30, 2010 compared to the Nine MonthsEnded September 30, 2009***

 

***Consolidated Results***

 

The following table presentsour results for the nine months ended September 30, 2010 and 2009 (dollarsin millions, except per share data):

 
| ** **                                                                           | ** ** | **Nine Months Ended** | ** ** |
|--------------------------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                           | ** ** | **September 30,**          | ** ** |
| ** **                                                                           | ** ** | **2010**                        | ** ** | **2009** | ** ** |
| Product revenue                                                                      |       | $                               | 780.7      |   | $ | 655.8 |   |
| Service revenue                                                                      |       | 103.1                           |       | 87.6 |   |
| Other revenue                                                                        |       | 5.0                             |       | 4.7 |   |
| Total revenue                                                                        |       | 888.8                           |       | 748.1 |   |
|                                                                                 |       |                            |       |   |   |
| Cost of product revenue                                                              |       | 426.8                           |       | 364.8 |   |
| Cost of service revenue                                                              |       | 53.1                            |       | 50.2 |   |
| Total cost of revenue                                                                |       | 479.9                           |       | 415.0 |   |
| Gross profit                                                                         |       | 408.9                           |       | 333.1 |   |
|                                                                                 |       |                            |       |   |   |
| Operating expenses:                                                                  |       |                            |       | * * |   |
| Selling, general and administrative                                                  |       | 201.9                           |       | 180.1 |   |
| Research and development                                                             |       | 96.5                            |       | 91.8 |   |
| Amortization of acquisition-related intangible  assets                               |       | 2.1                             |       | 1.3 |   |
| Other charges (credits), net                                                         |       | 4.3                             |       | (0.6 | ) |
| Total operating expenses                                                             |       | 304.8                           |       | 272.6 |   |
| Operating income                                                                     |       | 104.1                           |       | 60.5 |   |
|                                                                                 |       |                            |       |   |   |
| Interest and other income (expense), net                                             |       | (5.6                            | )          | (4.6 | ) |
| Income before income taxes and noncontrolling interest  in consolidated subsidiaries |       | 98.5                            |       | 55.9 |   |
| Income tax provision                                                                 |       | 31.7                            |       | 18.5 |   |
| Consolidated net income                                                              |       | 66.8                            |       | 37.4 |   |
| Net income attributable to noncontrolling interest  in consolidated subsidiaries     |       | 0.7                             |       | (0.3 | ) |
| Net income attributable to Bruker Corporation                                        |       | $                               | 66.1       |   | $ | 37.7 |   |
|                                                                                 |       |                            |       |   |   |
| Net income per common share attributable to                                          |       |                            |       |   |   |
| Bruker Corporation shareholders:                                                     |       |                            |       |   |   |
| Basic and diluted                                                                    |       | $                               | 0.40       |   | $ | 0.23 |   |
|                                                                                 |       |                            |       |   |   |
| Weighted average common shares outstanding:                                          |       |                            |       |   |   |
| Basic                                                                                |       | 164.3                           |       | 163.4 |   |
| Diluted                                                                              |       | 165.6                           |       | 164.7 |   |

 

***Revenue***

 

For the nine months ended September 30,2010, our revenue increased by $140.7 million, or 18.8%, to $888.8 million,compared to $748.1 million for the comparable period in 2009. Included in thischange in revenue is a decrease of approximately $5.3 million from the impactof foreign exchange due to the strengthening of the U.S. Dollar versus the Euroand other foreign currencies and an increase of approximately $27.6 millionattributable to the acquisition of the chemical analysis business and theresearch instruments business. Excluding the effect of foreign exchange andthese acquisitions, revenue 

 

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increased by $118.4 million,or 15.8%. The increase in revenue on an adjusted basis is attributable to boththe Scientific Instruments segment, which increased by $101.3 million, or14.1%, and the Energy & Supercon Technologies segment, which increasedby $20.8 million, or 57.8%. Revenue in the Scientific Instruments segmentreflects an increase in sales of all our core technologies, particularly inmagnetic resonance, mass spectrometry and X-ray. Revenues in theEnergy & Supercon Technologies segment increased due to higher demandfor low temperature superconducting wire.

 

The mix of products sold inthe Scientific Instruments segment reflects increased demand from academic,government and industrial customers. We attribute the increase in sales ofmagnetic resonance and mass spectrometry products and spending by academic andgovernment customers to our new product introductions over the last twelve toeighteen months and to stimulus packages implemented by governments of variouscountries, including the U.S., Germany, Japan and China. The improvement inrevenues from our industrial customers reflects an ongoing economic improvementin these end markets. In general, the spending patterns of our industrialcustomers were negatively impacted by the global recession through the firsthalf of 2009. Over the last several quarters we have experienced an increase indemand from these customers and we remain optimistic that the industrialmarkets we serve will continue to improve. However, we will continue to monitorthe recovery of these markets given the current economic environment.Additionally, while many European governments have announced their intentionsto reduce overall spending, a number of our key European markets, includingGermany, France and the U.K., have announced that research spending will remainstable, or grow in some cases. Based on the recent announcements from thesegovernments and recent announcements from the European Union, we believe thatfunding for the majority of our products and markets will remain stable, or grow,in most of our key European markets.

 

***Cost of Revenue***

 

Our cost of product andservice revenue for the nine months ended September 30, 2010 was $479.9million, resulting in a gross profit margin of 46.0%, compared to cost ofproduct and service revenue of $415.0 million, resulting in a gross profitmargin of 44.5%, for the comparable period in 2009. Higher gross profit marginsresulted primarily from changes in product mix, specifically an increase inrevenues from high-end instrumentation, including our newly introduced productswhich were designed to carry higher gross margins than our previous generationsof products, and the weakening of the Euro, which favorably impacts our grossprofit margins as a majority of our production is performed in Europe. Theincrease in revenue also allowed us to better utilize our production facilitiesand leverage our fixed production costs. We also reduced production coststhrough various cost saving initiatives and strict cost control in ourmanufacturing facilities.

 

***Selling, General and Administrative***

 

Our selling, general andadministrative expense for the nine months ended September 30, 2010increased to $201.9 million, or 22.7% of revenue, from $180.1 million, or 24.1%of revenue, for the comparable period in 2009. The increase in selling, generaland administrative expense is attributable to increases in headcount in supportof our revenue growth and as a result of acquisitions. Higher revenues resultedin an increase in commissions and related selling expenses which alsocontributed to the increase in selling, general and administrative expense.Increases in selling, general and administrative expenses were offset, in part,by changes in foreign currency exchange rates, primarily the Euro.

 

***Research and Development***

 

Our research and developmentexpense for the nine months ended September 30, 2010 increased to $96.5million, or 10.9% of revenue, from $91.8 million, or 12.3% of product andservice revenue, for the comparable period in 2009. Research and developmentexpenses increased in the first nine months of 2010 compared with the firstnine months of 2009 as a result of increases in headcount and materials costsin support of new product development and as a result of acquisitions. However,these increases were offset by changes in foreign currency exchange rates,primarily the Euro, as the majority of our research and development isperformed in Europe.

 

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***Amortization of Acquisition-Related Intangible Assets***

 

Our amortization expensefrom acquisition-related intangible assets was $2.1 million for the nine monthsended September 30, 2010 compared with $1.3 million for the comparableperiod in 2009. The increase in amortization expense relates to intangibleassets acquired in connection with the purchase of the chemical analysisbusiness from Agilent.

 

***Other Charges (Credits), Net***

 

Other charges (credits), netof $4.3 million in the first nine months of 2010 related entirely to theScientific Instruments segment and include a loss of $1.0 million associatedwith the sale of our investment in Bruker Baltic Ltd., a manufacturing sitelocated in Riga, Latvia that was engaged in the production of certaincomponents used in our X-ray product lines. In addition, we incurred $0.2million of restructuring charges, which related primarily to severance incurredin connection with closing a production facility in Herzogenrath, Germany. Weincurred the loss on our investment and the restructuring charges as part ofour broader corporate strategy of reducing costs and consolidating criticalproduction and know-how in certain key production sites. In addition, othercharges (credits), net in the first nine months of 2010 includes $1.7 millionof acquisition-related costs incurred in connection with our acquisitions ofthe chemical analysis business from Agilent and the nano surfaces business fromVeeco and $1.4 million incurred under transition services agreements withAgilent. We do not expect these transition costs to recur after the end of thetransition services agreements.

 

Acquisition-related creditsof $(0.6) million in the first nine months of 2009 relate entirely to theEnergy & Supercon Technologies segment and include a bargain purchasegain of $2.1 million recorded in connection with the acquisition of theresearch instruments business from Varian Medical Systems, offset, in part, by$0.8 million of transaction costs incurred in connection with the acquisitionof the research instruments business and $0.7 million of impairment chargesassociated with certain fixed assets used in the production of certainsuperconducting wire.

 

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

 

Interest and other income(expense), net during the nine months ended September 30, 2010 was $(5.6)million, compared to $(4.6) million for the comparable period of 2009.

 

During the nine months endedSeptember 30, 2010, the major components within interest and other income(expense), net were net interest expense of $3.6 million and unrealized losseson foreign currency transactions of $2.0 million. During the nine months ended September 30,2009, the major component within interest and other income (expense), net wasnet interest expense of $5.0 million.

 

The decrease in interestexpense is a function of lower outstanding debt, as we repaid approximately $16.3million of debt in the first nine months of 2010.

 

***Income Tax Provision***

 

Our effective tax rategenerally reflects our tax provision for non-U.S. entities only. We maintain afull valuation allowance against all U.S. deferred tax assets, including ourU.S. net operating losses and tax credits, until evidence exists that it ismore likely than not that the loss carryforward and credit amounts will beutilized to offset U.S. taxable income. Our tax rate may change over time asthe amount and mix of income and taxes outside the U.S. changes. The effectivetax rate is calculated using our projected annual pre-tax income or loss and isaffected by 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.

 

The income tax provision forthe nine months ended September 30, 2010 was $31.7 million compared to$18.5 million for the nine months ended September 30, 2009, representingeffective tax rates of 32.2% and 33.1%, respectively. In the third quarter of2010, the Company completed a study of its research and development activitiesand identified additional U.S. Federal tax credits of approximately $2.8million. These credits reduced our effective tax rate by approximately 2.8% forthe nine months ended September 30, 2010. There were no discrete items ofa material nature that impacted the effective tax rate for the nine monthsended September 30, 2009.

 

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***Net Income Attributable to Noncontrolling Interests***

 

Net income attributable tononcontrolling interests for the nine months ended September 30, 2010 was $0.7million compared to $(0.3) million for the comparable period of 2009. Netincome (loss) attributable to noncontrolling interests represents the minorityshareholders’ proportionate share of the net income (loss) recorded by ourmajority-owned indirect subsidiaries.

 

***Net Income Attributable to Bruker Corporation***

 

Our net income for the ninemonths ended September 30, 2010 was $66.1 million, or $0.40 per dilutedshare, compared to $37.7 million, or $0.23 per diluted share for the comparableperiod in 2009.

 

***Segment Results***

 

***Revenue***

 

The following table presentsrevenue, change in revenue and revenue growth by reportable segment for thenine months ended September 30, 2010 and 2009 (dollars in millions): 

 
| ** **                              | ** ** | **Nine Months Ended September 30,** | ** ** | **Dollar** | ** ** | **Percentage** | ** ** |
|-----------------------------------------|------------|---------------------------------------------------------|------------|------------|------------|----------------|------------|
| ** **                              | ** ** | **2010**                                                | ** ** | **2009**   | ** ** | **Change**     | ** ** | **Change** | ** ** |
| Scientific Instruments                  |       | $                                                       | 835.7      |       | $          | 716.5          |       | $ | 119.2 |   | 16.6 | % |
| Energy & Supercon Technologies |       | 61.2                                                    |       | 36.0       |       | 25.2           |       | 70.0 | % |
| Eliminations (a)                        |       | (8.1                                                    | )          | (4.4       | )          | (3.7           | )          |   |   |
|                                    |       | $                                                       | 888.8      |       | $          | 748.1          |       | $ | 140.7 |   | 18.8 | % |

----

(a) Represents productand service revenue between reportable segments. 

*** ***

***Scientific Instruments Segment Revenues***

 

Scientific Instrumentssegment revenue increased by $119.2 million, or 16.6%, to $835.7 million forthe nine months ended September 30, 2010, compared to $716.5 million forthe comparable period in 2009. Included in this change in revenue is a decreaseof approximately $2.9 million from the impact of foreign exchange due to thestrengthening of the U.S. Dollar versus the Euro and other foreign currenciesand an increase of approximately $20.8 million attributable to the acquisitionof the chemical analysis business. Excluding the effect of foreign exchange andthe acquisition, revenue increased by $101.3 million, or 14.1%. The increase inrevenue, excluding the effect of foreign exchange and acquisition, reflects anincrease in sales of all of our core technologies, particularly in magneticresonance, mass spectrometry and X-ray. The mix of products sold in theScientific Instruments segment reflects increased demand from academic,government and industrial customers. We attribute the increase in spending byacademic and government customers to new product introductions over the lasttwelve to eighteen months and stimulus packages implemented by governments ofvarious countries, including the U.S., Germany, Japan and China. We have alsoseen increased demand from our industrial customers as economic conditions haveshown signs of improvement.

 

System revenue andaftermarket revenue as a percentage of total Scientific Instruments segmentrevenue were as follows during the nine months ended September 30, 2010and 2009 (dollars in millions):

 
| ** **          | ** ** | **Nine Months Ended September 30,** | ** ** |
|---------------------|------------|---------------------------------------------------------|------------|
| ** **          | ** ** | **2010**                                                | ** ** | **2009** | ** ** |
| ** **          | ** ** | **Revenue**                                             | ** ** | **Percentage of  Segment  Revenue** | ** ** | **Revenue** | ** ** | **Percentage of  Segment  Revenue** | ** ** |
| System revenue      |       | $                                                       | 672.4      |   | 80.5 | % | $ | 565.4 |   | 78.9 | % |
| Aftermarket revenue |       | 163.3                                                   |       | 19.5 | % | 151.1 |   | 21.1 | % |
| Total revenue       |       | $                                                       | 835.7      |   | 100.0 | % | $ | 716.5 |   | 100.0 | % |

 

System revenues in theScientific Instruments segment include X-ray systems, optical emissionspectroscopy systems, atomic force microscopy systems, nuclear magneticresonance systems, magnetic resonance imaging systems, electron 

 

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paramagnetic imaging systems,mass spectrometry systems, CBRNE detection systems and molecular spectroscopysystems. Aftermarket revenues in the Scientific Instruments segment includeaccessory sales, consumables, training and services.

 

***Energy & Supercon Technologies Segment Revenues***

 

Energy &Supercon Technologies segment revenue increased by $25.2 million, or 70.0%, to$61.2 million for the nine months ended September 30, 2010, compared to$36.0 million for the comparable period in 2009. Included in this change inrevenue $6.8 million attributable to the research instruments business weacquired from Varian Medical Systems and a decrease of approximately $2.4million from the impact of foreign exchange due to the strengthening of theU.S. Dollar versus the Euro and other foreign currencies. Excluding the effectof the acquisition and foreign exchange, revenue increased by $20.8 million, or57.8%. The increase in revenue was the result of higher demand for lowtemperature superconducting wire.

 

Systemand wire revenue and aftermarket revenue as a percentage of totalEnergy & Supercon Technologies segment revenue were as follows duringthe nine months ended September 30, 2010 and 2009 (dollars in millions):

 
| ** **              | ** ** | **Nine Months Ended September 30,** | ** ** |
|-------------------------|------------|---------------------------------------------------------|------------|
| ** **              | ** ** | **2010**                                                | ** ** | **2009** | ** ** |
| ** **              | ** ** | **Revenue**                                             | ** ** | **Percentage of  Segment  Revenue** | ** ** | **Revenue** | ** ** | **Percentage of  Segment  Revenue** | ** ** |
| System and wire revenue |       | $                                                       | 58.3       |   | 95.3 | % | $ | 34.4 |   | 95.6 | % |
| Aftermarket revenue     |       | 2.9                                                     |       | 4.7 | % | 1.6 |   | 4.4 | % |
| Total revenue           |       | $                                                       | 61.2       |   | 100.0 | % | $ | 36.0 |   | 100.0 | % |

 

System and wire revenues inthe Energy & Supercon Technologies segment include low and hightemperature superconducting wire and electron and ion linear accelerators,superconducting and normal conducting accelerator cavities, insertion devices,superconducting fault current limiters, other accelerator components andspecialty superconducting magnets for physics and energy research and a varietyof other scientific applications. Aftermarket revenues in the Energy &Supercon Technologies segment include services and accessory sales.

 

***Income (Loss) from Operations***

 

The following table presentsincome (loss) from operations and operating margins on revenue by reportablesegment for the nine months ended September 30, 2010 and 2009 (dollars inmillions):

 
| ** **                              | ** ** | **Nine Months Ended September 30,** | ** ** |
|-----------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                              | ** ** | **2010**                                                | ** ** | **2009** | ** ** |
| ** **                              | ** ** | **Operating  Income (Loss)**                       | ** ** | **Percentage of  Segment  Revenue** | ** ** | **Operating  Income (Loss)** | ** ** | **Percentage of  Segment  Revenue** | ** ** |
| Scientific Instruments                  |       | $                                                       | 108.5      |   | 13.0 | % | $ | 63.4 |   | 8.8 | % |
| Energy & Supercon Technologies |       | (3.0                                                    | )          | (4.9 | )% | (4.3 | ) | (11.9 | )% |
| Corporate, eliminations and other (a)   |       | (1.4                                                    | )          |   |   | 1.4 |   |   |   |
| Total operating income                  |       | $                                                       | 104.1      |   | 11.7 | % | $ | 60.5 |   | 8.1 | % |

----

(a) Representscorporate costs and eliminations not allocated to the reportable segments. 

 

Scientific Instrumentssegment income from operations for the nine months ended September 30,2010 was $108.5 million, resulting in an operating margin of 13.0%, compared toincome from operations of $63.4 million, resulting in an operating margin of8.8%, for the comparable period in 2009. Income from operations in the ScientificInstruments segment improved as a result of the higher revenues describedabove, an improvement in gross profit margins and a reduction in operatingexpenses as a percentage of revenue.

 

In the first nine months of2010, gross profit margin as a percentage of revenue in the ScientificInstruments segment increased to 47.8% from 45.5% for the comparable period in2009. Higher gross profit margins resulted primarily from changes in productmix, specifically an increase in revenues from high-end instrumentation,including our newly introduced products which were designed to carry highergross margins than our previous generations of products, and the weakening of 

 

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the Euro, which favorablyimpacts our gross profit margins as a majority of our production is performedin Europe. The increase in revenue also allowed us to better utilize ourproduction facilities and leverage our fixed production costs. We also reducedproduction costs through various cost saving initiatives.

 

In the first nine months of2010, selling, general and administrative expenses and research and developmentexpenses in the Scientific Instruments segment increased to $285.2 million, or34.1% of segment revenue, from $261.5 million, or 36.5% of segment revenue forthe comparable period in 2009. This increase is a function of incrementalinvestments in sales and marketing activities and research and developmentactivities that we believe will generate future growth, as well as increases inoperating expenses related to acquisitions completed in 2010. Changes inforeign currency exchange rates partially offset the increase in operatingexpenses.

 

Energy & SuperconTechnologies segment loss from operations for the nine months ended September 30,2010 was $3.0 million, resulting in an operating margin of (4.9)%, compared toa loss from operations of $4.3 million, resulting in an operating margin of(11.9)%, for the comparable period in 2009. The loss from operations in thefirst nine months of 2009 included a bargain purchase gain of $2.1 millionrecorded in connection with the acquisition of the research instrumentsbusiness from Varian Medical Systems, offset, in part, by $0.8 million oftransaction costs incurred in connection with the acquisition of the researchinstruments business and $0.7 million of impairment charges associated withcertain fixed assets used in the production of certain superconducting wire.Excluding the effects of these net credits, the loss from operations in thefirst nine months of 2009 was $4.9 million, resulting in an operating margin of(13.6)%. The improvement in operating loss, excluding the net credit describedabove is a function of higher revenues and the resulting improvement in grossmargins.

 

**LIQUIDITYAND CAPITAL RESOURCES**

 

We currently anticipate thatour existing cash and credit facilities will be sufficient to support ouroperating and investing needs for at least the next twelve months, but thisdepends on our profitability and our ability to manage working capitalrequirements. Our future cash requirements will also be affected byacquisitions that we may make in the future. Historically, we have financed ourgrowth through cash flow generation and a combination of debt financings andissuances of common stock. In the future, there are no assurances thatadditional financing alternatives will be available to us if required, or ifavailable, will be obtained on terms favorable to us.

 

During the nine months endedSeptember 30, 2010, net cash provided by operating activities was $62.7million, resulting primarily from $90.3 million of consolidated net incomeadjusted for non-cash items and $(27.6) million of net changes in workingcapital. During the nine months ended September 30, 2009, net cashprovided by operating activities was $67.3 million, resulting primarily from $54.7million of net income adjusted for non-cash items and $12.6 million of netchanges in working capital. The increase in profitability did not generateimprovements in cash flow because of an increase in working capital. Theincrease in working capital was primarily a function higher inventory balancesthat are required to support our anticipated fourth quarter revenues. Weanticipate an improvement in working capital in the fourth quarter, resultingprimarily from decreases in inventory balances.

 

During the nine months endedSeptember 30, 2010, net cash used by investing activities was$58.3 million, compared to net cash used by investing activities of$10.5 million during the nine months ended September 30, 2009. Cashused by investing activities during the nine months ended September 30,2010 was attributable to $37.8 million used for acquisitions and $20.5 millionof capital expenditures. Cash used by investing activities during the ninemonths ended September 30, 2009 was attributable primarily to$8.9 million of capital expenditures and $1.6 million used foracquisitions. Capital expenditures during the nine months ended September 30,2010 were at a level consistent with our planned capital spending of $20.0million to $30.0 million in 2010.

 

During the nine months endedSeptember 30, 2010, net cash used by financing activities was$14.5 million, compared to net cash used by financing activities of$71.7 million during the nine months ended September 30, 2009. Cashused by financing activities during the nine months ended September 30,2010 and September 30, 2009 was primarily attributable to$16.3 million and $71.6 million, respectively, of net debt repaymentsunder various long-term and short-term arrangements.

 

At September 30, 2010,we had outstanding debt totaling $121.4 million consisting of $116.3 millionoutstanding under the term loan component of the Credit Agreement and$5.1 million under capital lease obligations. At December 31, 2009,we 

 

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had outstanding debttotaling $137.7 million consisting of $131.3 million outstanding under the termloan component of the Credit Agreement, $0.3 million outstanding under otherlong-term debt arrangements, $0.1 million outstanding under other revolvinglines of credit and $6.0 million under capital lease obligations.

 

In February 2008, weentered into a credit agreement with a syndication of lenders, which we referto as the Credit Agreement. The Credit Agreement provides a revolving creditline with a maximum commitment of $230.0 million and a term loan facility of$150.0 million. The outstanding principal and interest under the term loan ispayable in quarterly installments through December 2012. Borrowings underthe Credit Agreement bear interest, at our option, at either (i) thehigher of the prime rate or the federal funds rate plus 0.50%, or (ii) adjustedLIBOR, plus margins ranging from 0.40% to 1.25% and a facility fee ranging from0.10% to 0.20%. As of September 30, 2010, the weighted average interestrate of borrowings under the term facility of the Credit Agreement wasapproximately 2.7%.

 

Borrowings under the CreditAgreement are secured by the pledge to the banks of 100% of the capital stockof each of our wholly-owned domestic subsidiaries and 65% of the capital stockof certain of our wholly-owned direct or indirect foreign subsidiaries. TheCredit Agreement also requires that we maintain certain financial ratiosrelated to maximum leverage and minimum interest coverage, as defined in theCredit Agreement. Specifically, our leverage ratio cannot exceed 3.0 and ourinterest coverage ratio cannot be less than 3.0. In addition to the financialratios, the Credit Agreement restricts, among other things, our ability to dothe following: make certain payments; incur additional debt; incur certainliens; make certain investments, including derivative agreements; merge,consolidate, sell or transfer all or substantially all of our assets; and enterinto certain transactions with affiliates. Our failure to comply with any ofthese restrictions or covenants may result in an event of default under theapplicable debt instrument, which could permit acceleration of the debt underthat instrument and require us to prepay that debt before its scheduled duedate. As of September 30, 2010, the latest measurement date, we were incompliance with the covenants of the Credit Agreement.

 

In addition to revolvingloans under the Credit Agreement, we have other revolving loans with variousfinancial institutions located primarily in Germany, Switzerland and France.The following is a summary of the maximum commitments and net amounts availableto the Company under revolving loans as of September 30, 2010 (inmillions):

 
| ** **            | ** ** | **Weighted  Average  Interest Rate** | ** ** | **Total Amount  Committed by  Lenders** | ** ** | **Outstanding  Borrowings** | ** ** | **Outstanding  Letters of  Credit** | ** ** | **Total Amount  Available** | ** ** |
|-----------------------|------------|-------------------------------------------|------------|---------------------------------------------------|------------|-----------------------------|------------|------------------------------------------|------------|----------------------------------|------------|
| Credit Agreement      |       | —                                    | %          | $                                                 | 230.0      |                        | $          | —                                   |       | $                                | 1.5        |   | $ | 228.5 |   |
| Other revolving loans |       | —                                    | %          | 112.6                                             |       | —                      |       | 90.9                                     |       | 21.7                             |       |
| Total revolving loans |       |                                      |       | $                                                 | 342.6      |                        | $          | —                                   |       | $                                | 92.4       |   | $ | 250.2 |   |

 

On October 1, 2010, weborrowed $170.0 million underthe revolving loan component of the Credit Agreement to finance our acquisitionand the working capital requirements of the nano surfaces business. Theborrowing under the Credit Agreement reduced the total amount available to usfrom our lenders. The Company is considering various long-term financing alternativesto replace the short-term borrowing under the Credit Agreement.

 

As of September 30,2010, we had approximately $3.5 million of net operating loss carryforwardsavailable to reduce future U.S. taxable income. However, these losses areseverely limited in terms of their use. The Company also has approximately$49.0 million of German Trade Tax net operating losses that are carried forwardindefinitely and U.S. tax credits of approximately $2.5 million available tooffset future tax liabilities that expire at various dates. U.S. tax credits,after the filing of the 2009 U.S. Federal tax return in September 2010,include foreign tax credits of $0.6 million expiring in various years through2020 and state research and development tax credits of $1.8 million expiring atvarious dates through 2024 and other credits of $0.1 million. These operatinglosses and tax credit carryforwards may be subject to limitations underprovisions of the Internal Revenue Code.

 

The following tablesummarizes maturities for our significant financial obligations as of September 30,2010 (in millions):

 

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| **Contractual Obligations**          | ** ** | **Total** | ** ** | **Less than 1  Year** | ** ** | **1-3 Years** | ** ** | **4-5 Years** | ** ** | **More than 5  Years** | ** ** |
|-------------------------------------------|------------|-----------|------------|---------------------------------|------------|--------------------|------------|--------------------|------------|----------------------------------|------------|
| Long-term debt, including current portion |       | $         | 121.4      |                            | $          | 27.1               |       | $                  | 92.3       |                             | $          | 1.3 |   | $ | 0.7 |   |
| Derivative liabilities                    |       | 7.0       |       | 5.5                             |       | 1.5                |       | —             |       | —                           |       |
| Uncertain tax contingencies               |       | 25.6      |       | —                          |       | 25.6               |       | —             |       | —                           |       |
|                                           |            |           |            |                                 |            |                    |            |                    |            |                                  |            |  |  |  |  |  |

 

As of October 1, 2010,the $170.0 million weborrowed under the Credit Agreement is due in less than one year but we havethe ability to extend the maturity through February 2013.

 

Uncertain tax contingenciesare positions taken or expected to be taken on an income tax return that mayresult in additional payments to tax authorities. The total amount of uncertaintax contingencies is included in the “1-3 Years” column as we are not able toreasonably estimate the timing of potential future payments. If a tax authorityagrees with the tax position taken or expected to be taken or the applicablestatute of limitations expires, then additional payments will not be necessary.

 

**RECENTACCOUNTING PRONOUNCEMENTS**

 

In September 2009, theEmerging Issues Task Force, or EITF, reached consensus on FASB AccountingStandards Update 2009-14,*Software (Topic985)—Certain Revenue Arrangements That Include Software Elements*.FASB Accounting Standards Updates 2009-14 changes the accounting model forrevenue arrangements that include both tangible products and software elements.Under this guidance, tangible products containing software components andnon-software components that function together to deliver the tangible product’sessential functionality are excluded from the software revenue guidance inSubtopic No. 985-605,*Software-RevenueRecognition.* In addition, hardware components of a tangible productcontaining software components are always excluded from the software revenueguidance. FASB Accounting Standards Updates 2009-14 is effective prospectivelyfor revenue arrangements entered into or materially modified in fiscal yearsbeginning on or after June 15, 2010. However, early adoption is permitted.We are currently assessing the impact that this update will have on our resultsof operations and financial position and when we will adopt these requirements.

 

In September 2009, theEITF reached consensus on FASB Accounting Standards Update 2009-13,*Revenue Recognition (Topic 605)—Multiple-DeliverableRevenue Arrangements*. FASB Accounting Standards Update 2009-13addresses the accounting for multiple-deliverable arrangements to enablevendors to account for products or services separately rather than as acombined unit. Specifically, this guidance amends the criteria in SubtopicNo. 605-25,*RevenueRecognition-Multiple-Element Arrangements,* for separatingconsideration in multiple-deliverable arrangements. This guidance establishes aselling price hierarchy for determining the selling price of a deliverable,which is based on: (a) vendor-specific objective evidence;(b) third-party evidence; or (c) estimates. This guidance alsoeliminates the residual method of allocation and requires that arrangementconsideration be allocated at the inception of the arrangement to alldeliverables using the relative selling price method. In addition, thisguidance significantly expands required disclosures related to a vendor’smultiple-deliverable revenue arrangements. FASB Accounting Standards Update2009-13 is effective prospectively for revenue arrangements entered into ormaterially modified in fiscal years beginning on or after June 15, 2010,however, early adoption is permitted. We are currently assessing the impactthat this update will have on our results of operations and financial positionand when we will adopt these requirements.

 

**ITEM 3.****                                               ****QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

We are exposed to marketrisks associated with changes in foreign exchange rates and interest rates. Weselectively use financial instruments to reduce these risks. All transactionsrelated to risk management techniques are authorized and executed pursuant toour policies and procedures. Analytical techniques used to manage and monitorforeign exchange and interest rate risk include market valuations andsensitivity analysis.

 

***Impact of Foreign Currencies***

 

We generate a substantialportion of our revenues in international markets, principally Europe and Japan,which exposes our operations to the risk of exchange rate fluctuations. Theimpact of currency exchange rate movement can be positive or negative in anyperiod. Our costs related to sales in foreign currencies are largelydenominated in the same respective currencies, limiting our transaction riskexposure. However, for sales not denominated in U.S. Dollars, if there is anincrease in the rate at which a foreign currency is exchanged for U.S. Dollars,it will require more of the foreign currency to equal a specified amount ofU.S. Dollars than before the rate increase. In such cases, if we price ourproducts in the foreign currency, we will receive less in U.S. Dollars than wedid before the rate increase went into effect. If we price our products in U.S.Dollars and competitors price their products in local currency, anincrease in the relative strength of the U.S. Dollar could result in our pricesnot being competitive in a market where business is transacted in the localcurrency.

 

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Our net foreign exchangelosses, net were $2.0 million and $0.2 million for the nine months ended September 30,2010 and 2009, respectively. From time to time, we enter into foreign currencycontracts in order to minimize the volatility that fluctuations in exchange rateshave on our cash flows related to purchases and sales denominated in foreigncurrencies. We will continue to evaluate our currency risks and in the futuremay utilize foreign currency contracts more frequently as part of atransactional hedging program.

 

***Impact of Interest Rates***

 

We may invest excess cash inshort-term investments that are subject to changes in interest rates. Webelieve that the market risk arising from holding these financial instrumentsis minimal.

 

Our exposure related toadverse movements in interest rates is derived primarily from outstandingfloating rate debt instruments that are indexed to short-term market rates. Ourobjective in managing our exposure to interest rates is to decrease thevolatility that changes in interest rates might have on our earnings and cashflows. To achieve this objective we have entered into interest rate swaps. InApril 2008, we entered into an interest rate swap arrangement to pay afixed rate of approximately 3.8% and receive a variable rate based on threemonth LIBOR through December 31, 2012. The initial notional amount of thisinterest swap was $90.0 million and amortizes in proportion to the termdebt component of our Credit Agreement. At September 30, 2010, theoutstanding notional amount of this swap was $69.8 million. We have determinedthat this swap is an effective hedge of the variability of cash flows of theinterest payments. At September 30, 2010, a 10% increase or decrease inthe average cost of our outstanding variable rate debt would not result in amaterial change in pre-tax interest expense.

 

***Inflation***

 

We do not believe inflationhad a material impact on our business or operating results during any of theperiods presented.

 

**ITEM 4.****                                               ****CONTROLSAND PROCEDURES**

 

We have established disclosurecontrols and procedures that are designed to ensure that material informationrelating to us, including our consolidated subsidiaries, is made known to ourChief Executive Officer (principal executive officer) and Chief FinancialOfficer (principal financial officer) by others within our organization. Underthe supervision and with the participation of our management, including ourChief Executive Officer and Chief Financial Officer, we conducted an evaluationof the effectiveness of our disclosure controls and procedures as of September 30,2010. Based on this evaluation, our Chief Executive Officer and Chief FinancialOfficer concluded that our disclosure controls and procedures were effective,as of September 30, 2010, to ensure that the information required to bedisclosed by us in the reports that we file or submit under the SecuritiesExchange Act of 1934 is recorded, processed, summarized and reported within thetime periods specified in the SEC’s rules and forms.

 

There were no changes in ourinternal control over financial reporting that occurred during the quarterended September 30, 2010 that materially affected, or are reasonablylikely to affect, our internal control over financial reporting.

 

**PART II****                                               ****OTHER INFORMATION**

 

**ITEM 1.****                                               ****LEGAL PROCEEDINGS**

 

Except as set forth belowthere have been no material changes to the legal proceedings disclosed inPart I, “Item 3. Legal Proceedings” in our Annual Report on Form 10-Kfor the year ended December 31, 2009 and our Quarterly Report on Form 10-Qfor the quarters ended March 31, 2010 and June 30, 2010.

 

As previously reported,Roenalytic GmbH, previously known as Roentgenanalytik Appartebau GmbH (“RAA”),filed a civil proceeding in Germany against a Bruker AXS subsidiary and oneemployee and raised criminal allegations against certain employees of the sameBruker AXS subsidiary in connection with alleged improper use of certainintellectual property of RAA and libel. RAA has filed for insolvency and apreliminary receiver was appointed by the German court in August 2010. Thecivil proceeding was adjourned by the German court in August 2010, pendingfurther actions by the court-appointed receiver. The criminal charges againstthe Bruker AXS employees were dismissed by the German court in August 2010and the criminal matter is now closed.

 

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In the third quarter of2010, the Company, on behalf of itself and its affiliates, entered intosettlement discussions with The Research Foundation of the State University ofNew York (“SUNY”) with respect to the previously reported patent infringementaction brought by SUNY against the Company, Bruker BioSpin GmbH, Bruker BioSpinCorporation and an unrelated third party. In October 2010, the Companyreached an agreement in principle to settle all claims and counterclaimsinvolving the Company and its affiliates asserted in the SUNY matter, withneither party admitting liability. The settlement is subject to the executionof definitive documentation. In connection with the anticipated settlement, theCompany recorded an accrual to recognize its expected loss exposure during thethird quarter of 2010.

 

As previously reported, inNovember 2008 a former employee of Bruker Corporation filed a complaintwith the Massachusetts Commission Against Discrimination (“MCAD”) alleging agediscrimination. Following a conciliation conference held on November 1,2010, the matter has been resolved.

 

**ITEM 1A.****                                      ****RISKFACTORS**

 

In addition to the otherinformation set forth in this report, you should carefully consider the factorsdiscussed in Part I, “Item 1A. Risk Factors” in our Annual Report onForm 10-K for the year ended December 31, 2009, which couldmaterially affect our business, financial condition or future results. Therisks described in this report and in our Annual Report on Form 10-K arenot the only risks facing our Company. Additional risks and uncertainties notcurrently known to us or that we currently deem to be immaterial also maymaterially adversely affect our business, financial condition and/or operatingresults.

 

Except as set forth below,there have been no material changes to the risk factors previously disclosed inour Annual Report on Form 10-K for the fiscal year ended December 31,2009.

 

***Our previously announcedproposed initial public offering of Bruker Energy & SuperconTechnologies, Inc. (“BEST”) common stock may not be completed and, if itis completed, may lead to additional volatility in our stock price.***

 

We have announced that weintend to sell a minority ownership position in our wholly-owned subsidiary,BEST, via an initial public offering, or IPO. BEST has filed an initialregistration statement to register such portion of its shares, as well asshares that we may include in the IPO as a selling stockholder. We may notcomplete the IPO, in which event we will have incurred significant expenses,which we will be unable to recover, and for which we will not receive anybenefit. Additionally, our strategic objectives for the IPO, includingimproving visibility into BEST’s performance and growth relative to the marketand strengthening BEST’s access to financing for its growth initiatives, arebased on the completion of the IPO. If we do not complete the IPO, we will needto pursue alternative means of accomplishing these strategic objectives.

 

If the IPO is completed,BEST would be a new public company in which we are the majority shareholder. Weare unable to predict what the market price of our common stock would be afterthe IPO. We cannot assure you that the IPO, if completed, will produce any increasefor our shareholders in the market value of their holdings in our company. Inaddition, the market price of our common stock could be volatile for severalmonths after the IPO and may continue to be more volatile than our common stockwould have been if a transaction had not occurred.

 

**ITEM 2.****                                               ****UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

 

None.

 

**ITEM 3.****                                               ****DEFAULTS UPON SENIOR SECURITIES**

 

None.

 

**ITEM 4.****                                               ****[REMOVED AND RESERVED]**

 

 

**ITEM 5.****                                               ****OTHER INFORMATION**

 

None.

 

**ITEM 6.****                                               ****EXHIBITS**

 

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| **Exhibit********No.** | ** ** | **Description**                                                                                                                                                                                                                                                                                            |
|------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  2.1              |       | Stock Purchase Agreement  among Veeco Instruments Inc., Veeco Metrology Inc. and Bruker Corporation,  dated as of August 15, 2010 (filed as Exhibit 2.1 to the Current  Report on Form 8-K of Bruker Corporation filed on October 7, 2010  and incorporated herein by reference). |
| 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)         Filed herewith.

(2)         Furnished herewith.

 

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**SIGNATURES**

 

Pursuant to the requirementsof the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto dulyauthorized.

 
|                         | BRUKER CORPORATION |
|------------------------------|--------------------|
|                         |               |   |
| Date: November 8,  2010 | By:                | /s/ FRANK H. LAUKIEN,  PH.D. |
|                         |               | Frank  H. Laukien, Ph.D. |
|                         |               | President, Chief Executive  Officer and Chairman |
|                         |               | (Principal Executive  Officer) |
|                         |               |   |
| Date: November 8,  2010 | By:                | /s/ BRIAN P. MONAHAN |
|                         |               | Brian P. Monahan |
|                         |               | Chief Financial Officer |
|                         |               | (Principal Financial  Officer) |

 

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