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** **

 

** **

**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 March 31, 2010**                                                 |
| ** ** | ** ** | ** **                                                                                              |
| **o**      | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT of 1934** |

 

**Forthe transition period from                to**

 

**CommissionFile Number 000-30833**

 

**BRUKERCORPORATION**

(Exact name ofregistrant as specified in its charter)

 
| **Delaware**                                                     | ** ** | **04-3110160**                        |
|------------------------------------------------------------------|------------|---------------------------------------|
| (State or other  jurisdiction of  incorporation or organization) |       | (I.R.S. Employer  Identification No.) |

 

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

 (Address of principal executive offices) (ZipCode)

 

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

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirementsfor the past 90 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 companyo |
| (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 May 3, 2010** |
|-----------------------------------------|------------|--------------------------------------|
| Common Stock, $0.01 par value per share |       | 164,685,449 shares                   |

 

 

 

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**BRUKERCORPORATION**

 

**QuarterlyReport on Form 10-Q**

**Forthe Quarter Ended March 31, 2010**

 

**Index**

 
| ** **       | ** ** | ** **                                                                                                          | ** ** | **Page** |
|------------------|------------|---------------------------------------------------------------------------------------------------------------------|------------|----------|
| **Part I**  | ** ** | **FINANCIAL INFORMATION**                                                                                           |       | 1        |
| Item 1:          |       | Unaudited Condensed  Consolidated Financial Statements                                                              |       | 1        |
|             |       | Unaudited Condensed  Consolidated Balance Sheets as of March 31, 2010 and December 31,  2009              |       | 1        |
|             |       | Unaudited Condensed  Consolidated Statements of Operations for the three months ended  March 31, 2010 and 2009 |       | 2        |
|             |       | Unaudited Condensed  Consolidated Statements of Cash Flows for the three months ended  March 31, 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                         |       | 16       |
| Item 3:          |       | Quantitative  and Qualitative Disclosures About Market Risk                                                         |       | 28       |
| Item 4:          |       | Controls and Procedures                                                                                             |       | 29       |
| **Part II** | ** ** | **OTHER INFORMATION**                                                                                               |       | 29       |
| Item 1:          |       | Legal Proceedings                                                                                                   |       | 29       |
| Item 1A:         |       | Risk Factors                                                                                                        |       | 29       |
| Item 2:          |       | Unregistered  Sales of Equity Securities and Use of Proceeds                                                        |       | 30       |
| Item 3:          |       | Defaults Upon Senior  Securities                                                                                    |       | 30       |
| Item 4:          |       | [Removed and Reserved]                                                                                              |       | 30       |
| Item 5:          |       | Other Information                                                                                                   |       | 30       |
| Item 6:          |       | Exhibits                                                                                                            |       | 30       |
|             |       | Signatures                                                                                                          |       | 31       |

 

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| **PART I** | **FINANCIAL  INFORMATION** |
|-----------------|----------------------------|

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

 

**BRUKERCORPORATION**

**UNAUDITED CONDENSED CONSOLIDATEDBALANCE SHEETS**

**(inmillions, except share data)**

** **
| ** **                                                                                                                                                                                                            | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                                            | ** ** | **2010**           | ** ** | **2009**              | ** ** |
| **ASSETS**                                                                                                                                                                                                            |       |               |       |                  |       |
| Current  assets:                                                                                                                                                                                                      |       |               |       |                  |       |
| Cash  and cash equivalents                                                                                                                                                                                            |       | $                  | 203.1      |                  | $          | 207.1 |   |
| Restricted  cash                                                                                                                                                                                                      |       | 3.5                |       | 2.0                   |       |
| Accounts  receivable, net                                                                                                                                                                                             |       | 174.9              |       | 184.1                 |       |
| Inventories                                                                                                                                                                                                           |       | 431.2              |       | 422.8                 |       |
| Other  current assets                                                                                                                                                                                                 |       | 61.6               |       | 57.5                  |       |
| Total  current assets                                                                                                                                                                                                 |       | 874.3              |       | 873.5                 |       |
|                                                                                                                                                                                                                  |       |               |       |                  |       |
| Property,  plant and equipment, net                                                                                                                                                                                   |       | 212.0              |       | 223.4                 |       |
| Intangibles  and other long-term assets                                                                                                                                                                               |       | 73.3               |       | 75.1                  |       |
| Total  assets                                                                                                                                                                                                         |       | $                  | 1,159.6    |                  | $          | 1,172.0 |   |
|                                                                                                                                                                                                                  |       |               |       |                  |       |
| **LIABILITIES AND SHAREHOLDERS’  EQUITY**                                                                                                                                                                        |       |               |       |                  |       |
| Current  liabilities:                                                                                                                                                                                                 |       |               |       |                  |       |
| Short-term  borrowings                                                                                                                                                                                                |       | $                  | 0.1        |                  | $          | 0.1 |   |
| Current  portion of long-term debt                                                                                                                                                                                    |       | 23.5               |       | 21.9                  |       |
| Accounts  payable                                                                                                                                                                                                     |       | 53.7               |       | 49.8                  |       |
| Customer  advances                                                                                                                                                                                                    |       | 218.3              |       | 219.2                 |       |
| Other  current liabilities                                                                                                                                                                                            |       | 248.4              |       | 249.2                 |       |
| Total  current liabilities                                                                                                                                                                                            |       | 544.0              |       | 540.2                 |       |
|                                                                                                                                                                                                                  |       |               |       |                  |       |
| Long-term  debt                                                                                                                                                                                                       |       | 109.6              |       | 115.7                 |       |
| Other  long-term liabilities                                                                                                                                                                                          |       | 88.1               |       | 97.3                  |       |
| Commitments  and contingencies (Note 16)                                                                                                                                                                              |       | —             |       | —                |       |
|                                                                                                                                                                                                                  |       |               |       |                  |       |
| Shareholders’  equity:                                                                                                                                                                                           |       |               |       |                  |       |
| Preferred  stock, $0.01 par value 5,000,000 shares authorized, none issued or  outstanding at March 31, 2010 and December 31, 2009                                                                          |       | —             |       | —                |       |
| Common  stock, $0.01 par value 260,000,000 shares authorized, 164,677,306 and  164,384,679 shares issued and 164,659,850 and 164,371,384 outstanding at  March 31, 2010 and December 31, 2009, respectively |       | 1.6                |       | 1.6                   |       |
| Treasury  stock at cost, 17,456 at March 31, 2010 and 13,295 at December 31,  2009                                                                                                                          |       | (0.2               | )          | (0.1                  | )          |
| Other  shareholders’ equity                                                                                                                                                                                      |       | 414.9              |       | 415.7                 |       |
| Total  shareholders’ equity attributable to Bruker Corporation                                                                                                                                                   |       | 416.3              |       | 417.2                 |       |
| Noncontrolling  interest in consolidated subsidiaries                                                                                                                                                                 |       | 1.6                |       | 1.6                   |       |
| Total  shareholders’ equity                                                                                                                                                                                      |       | 417.9              |       | 418.8                 |       |
|                                                                                                                                                                                                                  |       |               |       |                  |       |
| Total  liabilities and shareholders’ equity                                                                                                                                                                      |       | $                  | 1,159.6    |                  | $          | 1,172.0 |   |

 

*Theaccompanying notes are an integral part of these statements.*

 

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**BRUKERCORPORATION**

**UNAUDITED CONDENSED CONSOLIDATEDSTATEMENTS OF OPERATIONS**

**(inmillions, except per share data)**

** **
| ** **                                                                               | ** ** | **Three  Months Ended  March 31,** | ** ** |
|------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                                               | ** ** | **2010**                                | ** ** | **2009** | ** ** |
| Product  revenue                                                                         |       | $                                       | 244.0      |   | $ | 202.2 |   |
| Service  revenue                                                                         |       | 31.5                                    |       | 26.9 |   |
| Other  revenue                                                                           |       | 2.2                                     |       | 1.4 |   |
| Total  revenue                                                                           |       | 277.7                                   |       | 230.5 |   |
|                                                                                     |       |                                    |       |   |   |
| Cost  of product revenue                                                                 |       | 134.2                                   |       | 111.7 |   |
| Cost  of service revenue                                                                 |       | 17.2                                    |       | 16.1 |   |
| Total  cost of revenue                                                                   |       | 151.4                                   |       | 127.8 |   |
| Gross  profit                                                                            |       | 126.3                                   |       | 102.7 |   |
|                                                                                     |       |                                    |       |   |   |
| Operating  expenses:                                                                     |       |                                    |       |   |   |
| Sales  and marketing                                                                     |       | 49.1                                    |       | 42.6 |   |
| General  and administrative                                                              |       | 17.0                                    |       | 16.3 |   |
| Research  and development                                                                |       | 32.8                                    |       | 29.1 |   |
| Restructuring  charges                                                                   |       | 0.2                                     |       | — |   |
| Acquisition-related  charges                                                             |       | 0.3                                     |       | 0.4 |   |
| Total  operating expenses                                                                |       | 99.4                                    |       | 88.4 |   |
| Operating  income                                                                        |       | 26.9                                    |       | 14.3 |   |
|                                                                                     |       |                                    |       |   |   |
| Interest  and other income (expense), net                                                |       | (0.3                                    | )          | 0.1 |   |
| Income  before income taxes and noncontrolling interest in consolidated subsidiaries     |       | 26.6                                    |       | 14.4 |   |
| Income  tax provision                                                                    |       | 10.6                                    |       | 5.8 |   |
| Consolidated  net income                                                                 |       | 16.0                                    |       | 8.6 |   |
| Net  income (loss) attributable to noncontrolling interest in consolidated  subsidiaries |       | (0.1                                    | )          | 0.2 |   |
| Net  income attributable to Bruker Corporation                                           |       | $                                       | 16.1       |   | $ | 8.4 |   |
|                                                                                     |       |                                    |       |   |   |
| Net  income per common share attributable to                                             |       |                                    |       |   |   |
| Bruker  Corporation shareholders:                                                        |       |                                    |       |   |   |
| Basic  and diluted                                                                       |       | $                                       | 0.10       |   | $ | 0.05 |   |
|                                                                                     |       |                                    |       |   |   |
| Weighted  average common shares outstanding:                                             |       |                                    |       |   |   |
| Basic                                                                                    |       | 164.1                                   |       | 163.3 |   |
| Diluted                                                                                  |       | 165.6                                   |       | 164.3 |   |

 

*Theaccompanying notes are an integral part of these statements.*

 

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**BRUKERCORPORATION**

**UNAUDITED CONDENSED CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**(inmillions)**

** **
| ** **                                                                    | ** ** | **Three Months Ended  March 31,** | ** ** |
|-------------------------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                                    | ** ** | **2010**                               | ** ** | **2009** | ** ** |
| Cash  flows from operating activities:                                        |       |                                   |       |   |   |
| Consolidated  net income                                                      |       | $                                      | 16.0       |   | $ | 8.6 |   |
| Adjustments  to reconcile net income to cash flows from operating activities: |       |                                   |       |   |   |
| Depreciation  and amortization                                                |       | 7.5                                    |       | 6.6 |   |
| Amortization  of deferred financing costs                                     |       | 0.2                                    |       | 0.2 |   |
| Stock-based  compensation                                                     |       | 1.6                                    |       | 1.8 |   |
| Deferred  income taxes                                                        |       | (9.9                                   | )          | (1.7 | ) |
| Other  non-cash income                                                        |       | —                                 |       | (1.9 | ) |
| Changes  in operating assets and liabilities:                                 |       |                                   |       |   |   |
| Accounts  receivable                                                          |       | 4.5                                    |       | 20.6 |   |
| Inventories                                                                   |       | (26.0                                  | )          | (16.9 | ) |
| Accounts  payable                                                             |       | 5.9                                    |       | 6.6 |   |
| Customer  deposits                                                            |       | 6.1                                    |       | 5.9 |   |
| Other  changes in operating assets and liabilities, net                       |       | (0.4                                   | )          | (16.7 | ) |
| Net  cash provided by operating activities                                    |       | 5.5                                    |       | 13.1 |   |
|                                                                          |       |                                   |       |   |   |
| Cash  flows from investing activities:                                        |       |                                   |       |   |   |
| Purchases  of property, plant and equipment                                   |       | (5.4                                   | )          | (3.9 | ) |
| Acquisitions,  net of cash acquired                                           |       | —                                 |       | (0.7 | ) |
| Net  cash used in investing activities                                        |       | (5.4                                   | )          | (4.6 | ) |
|                                                                          |       |                                   |       |   |   |
| Cash  flows from financing activities:                                        |       |                                   |       |   |   |
| Repayments  of revolving lines of credit, net                                 |       | (0.1                                   | )          | (15.6 | ) |
| Repayment  of term debt                                                       |       | (4.1                                   | )          | (2.0 | ) |
| Changes  in restricted cash                                                   |       | (1.7                                   | )          | (0.2 | ) |
| Issuance  of common stock under stock plans                                   |       | 1.6                                    |       | — |   |
| Net  cash used in financing activities                                        |       | (4.3                                   | )          | (17.8 | ) |
| Effect  of exchange rate changes on cash and cash equivalents                 |       | 0.2                                    |       | (8.5 | ) |
| Net  change in cash and cash equivalents                                      |       | (4.0                                   | )          | (17.8 | ) |
| Cash  and cash equivalents at beginning of period                             |       | 207.1                                  |       | 166.2 |   |
| Cash  and cash equivalents at end of period                                   |       | $                                      | 203.1      |   | $ | 148.4 |   |

 

*Theaccompanying notes are an integral part of these statements.*

 

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**BRUKERCORPORATION**

**NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**

 

**1.****             ****Description of Business**

 

Bruker Corporation andits wholly-owned subsidiaries (the “Company”) is a designer and manufacturer ofproprietary life science and materials research systems and associated productsthat address the rapidly evolving needs of a diverse array of customers in lifescience, pharmaceutical, biotechnology and molecular diagnostics research, aswell as in materials and chemical analysis in various industries and governmentapplications. The Company’s core technology platforms include X-raytechnologies, magnetic resonance technologies, mass spectrometry technologies,optical emission spectroscopy and infrared and Raman molecular spectroscopytechnologies. The Company also manufactures and distributes a broad range offield analytical systems for chemical, biological, radiological, nuclear andexplosives, or CBRNE, detection. The Company also develops and manufactures lowtemperature and high temperature superconducting wire and superconductingdevices for use in advanced magnet technology, physics research and energyapplications. The Company maintains major technical and manufacturing centersin Europe, North America and Japan, and has sales offices located throughoutthe world. The Company’s diverse customer base includes life science,pharmaceutical, biotechnology and molecular diagnostic research companies, academicinstitutions, advanced materials and semiconductor industries and governmentagencies.

 

Management reportsresults on the basis of the following two segments:

 

·                  *Scientific Instruments.* The operations of this segment includethe design, manufacture and distribution of advanced instrumentation andautomated solutions based on X-ray technology, spark-optical emissionspectroscopy technology, atomic force microscopy technology, magnetic resonancetechnology, mass spectrometry technology and infrared and Raman molecularspectroscopy technology. Typical customers of the Scientific Instrumentssegment include pharmaceutical, biotechnology, molecular diagnostic companies;academic institutions; medical schools; other non-profit organizations;clinical microbiology laboratories; government departments and agencies;nanotechnology, semiconductor, chemical, cement, metals and petroleumcompanies; and food, beverage and agricultural analysis companies andlaboratories.

 

·                  *Energy &Supercon Technologies.* The operations of this segment include development and production oflow temperature superconducting and high temperature superconducting wires foruse in advanced magnet technology and energy applications as well as electronand ion linear accelerators, superconducting and normal conducting acceleratorcavities, other accelerator components, insertion devices, prototypesuperconducting fault current limiters, prototype crystal growth magnets, andhighly specialized manufacturing services for physics and energy research and avariety of other scientific applications. Typical customers of the Energy &Supercon Technologies segment include companies in the medical, power andenergy, and processing industries, private and public research and developmentlaboratories in the fields of fundamental and applied sciences and energyresearch, and academic institutions and government agencies.

 

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 months ended March 31, 2010 and 2009 have been prepared inaccordance with accounting principles generally accepted in the United States (“GAAP”)for interim financial information and pursuant to the rules andregulations of the Securities and Exchange Commission for Quarterly Reports on Form 10-Qand Article 10 of Regulation S-X. Accordingly, the financial informationpresented herein does not include all of the information and footnotes requiredby GAAP for complete financial statements. In the opinion of management, alladjustments, consisting only of normal recurring adjustments, considerednecessary for a fair presentation have been included. The results for interimperiods are not necessarily indicative of the results expected for the fullyear. Certain prior year amounts have been reclassified to conform to thecurrent year presentation. These reclassifications had no effect on previously reportednet income or shareholders’ equity.

 

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

 

In March 2010,the Company announced it entered into a definitive asset purchase agreement toacquire certain product lines of Varian, Inc. (“Varian”), which AgilentTechnologies, Inc. (“Agilent”) committed to divest in connection withobtaining regulatory approval for Agilent’s previously announced acquisition ofVarian. The Company will acquire certain assets and assume certain liabilitiesin Varian’s inductively coupled plasma mass spectrometry instruments business,laboratory gas chromatography instruments business, and gas chromatographytriple-quadrupole mass spectrometry instruments business, for cashconsideration of $37.5 million. The Company is evaluating the allocation of thepurchase price. The acquisition is subject to customary closing conditions andregulatory approvals and the Company expects it to close in the second quarterof 2010.

 

In April 2009,the Company acquired substantially all of the assets of the researchinstruments portion of ACCEL Instruments GmbH (the “RI business”) from VarianMedical Systems, Inc. The acquisition of the RI business was accounted forunder the 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 consolidated statements of operations. Again of $2.1 million was initially recorded in the second quarter of 2009 basedon a preliminary purchase price allocation, but was subsequently reduced by$0.8 million in the fourth quarter of 2009 based on the final allocation. Theresults of the RI business have been included in the Energy & SuperconTechnologies 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-Based Compensation**

 

As of March 31,2010, the Company’s primary types of share-based compensation were in the formof stock options and restricted stock. The Company recorded stock-basedcompensation expense for the three months ended March 31, 2010 and 2009 asfollows (in millions):

** **
| ** **                                  | ** ** | **2010** | ** ** | **2009** | ** ** |
|---------------------------------------------|------------|----------|------------|----------|------------|
| Stock  options                              |       | $        | 1.3        |     | $          | 1.3 |   |
| Restricted  stock                           |       | 0.3      |       | 0.5      |       |
| Total  stock-based compensation, pre-tax    |       | 1.6      |       | 1.8      |       |
| Tax  benefit                                |       | 0.3      |       | 0.4      |       |
| Total  stock-based compensation, net of tax |       | $        | 1.3        |     | $          | 1.4 |   |

 

Compensation expense isamortized on a straight-line basis over the underlying vesting terms. Stockoptions to purchase the Company’s common stock are periodically awarded toexecutive officers and other employees of the Company subject to a vestingperiod of three to five years. The fair value of each option award is estimatedon the date of grant using the Black-Scholes option-pricing model. Assumptionsregarding volatility, expected life, dividend yield and risk-free interest rateare required for the Black-Scholes model and are presented in the table below:

 
| ** **               | ** ** | **2010**        | ** ** | ** 2009**   | ** ** |
|--------------------------|------------|-----------------|------------|------------------|------------|
| Risk-free  interest rate |       | 3.00%-3.37      | %          |  1.71%-3.60 | %          |
| Expected  life           |       |  6.5 years |       |  6.5 years  |       |
| Volatility               |       | 62.0            | %          | 64.0             | %          |
| Expected  dividend yield |       | 0.0             | %          | 0.0              | %          |

 

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The risk-free interestrate is 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 Securities and ExchangeCommission Staff Accounting Bulletin No. 110. The Company believes thatthis is the best estimate of the expected life of a new option. Expectedvolatility can be based on a number of factors but the Company currentlybelieves that the exclusive use of historical volatility results in the bestestimate of the grant-date fair value of employee stock options because itreflects the market’s current expectations of future volatility. Expecteddividend yield was not considered in the option pricing formula since theCompany does not pay dividends and has no current plans to do so in the future.The terms of some of the Company’s indebtedness also currently restricts itsability to pay dividends to its shareholders.

 

***BrukerCorporation Stock Plan***

 

In February 2008,the Company’s shareholders approved an amendment to increase the number ofshares available under the Bruker BioSciences Corporation Amended and Restated2000 Stock Option Plan (the “Plan”) by 2,000,000 shares, up to a total of10,000,000 shares. The Plan allows a committee of the Board of Directors (the “Committee”)to grant incentive stock options, non-qualified stock options, stock appreciationrights and stock awards (including the use of restricted stock and phantomshares). 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. The Plan, as approved and subsequently amended by theshareholders, had a term of ten years and expired in February 2010. On March 9,2010, the Company’s Board of Directors unanimously approved and adopted theBruker Corporation 2010 Incentive Compensation Plan (the “2010 Plan”). If the2010 Plan is approved by the stockholders at the Company’s annual meeting in May 2010,it will become effective and provide for the issuance of up to 8,000,000 sharesof the Company’s common stock.

 

At March 31, 2010,the Company expects to recognize pre-tax stock-based compensation expense of$13.1 million associated with outstanding stock option awards granted under thePlan over the weighted average remaining service period of 2.0 years. Inaddition, the Company expects to recognize additional pre-tax stock-basedcompensation expense of $2.2 million associated with outstanding restrictedstock awards granted under the Plan over the weighted average remaining serviceperiod of 1.2 years.

 

***BrukerEnergy & Supercon Technologies Stock Plan***

 

In October 2009, theBoard of Directors of Bruker Energy & Supercon Technologies, Inc.(“BEST”), a wholly-owned direct subsidiary of the Company, adopted the BrukerEnergy & Supercon Technologies, Inc. 2009 Stock Option Plan (the “BESTPlan”). The BEST Plan provides for the issuance of up to 1,600,000 shares ofBEST common stock in connection with awards under the Plan. The Plan allows acommittee of the BEST Board of Directors to grant incentive stock options andnon-qualified stock options.

 

At March 31, 2010,the Company expects to recognize pre-tax stock-based compensation expense of$1.6 million associated with outstanding stock option awards granted under theBEST Plan over the weighted average remaining service period of 4.3 years.

 

**4.****             ****Earnings Per 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 shares,which are assumed to be purchased by the Company from the resulting proceeds atthe average market price during the period.

 

The following table setsforth the computation of basic and diluted average shares outstanding for thethree months ended March 31, 2010 and 2009 (in millions, except per shareamounts):

 

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| ** **                                                                    | ** ** | **2010** | ** ** | **2009**   | ** ** |
|-------------------------------------------------------------------------------|------------|----------|------------|------------|------------|
| Net  income attributable to Bruker Corporation, as reported                   | ** ** | $        | 16.1       | ** ** | $          |   8.4 | ** ** |
|                                                                          |       |     |       |       |       |
| Weighted  average shares outstanding:                                         |       |     |       |       |       |
| Weighted  average shares outstanding-basic                                    |       | 164.1    |       | 163.3      |       |
| Effect  of dilutive securities:                                               |       |     |       |       |       |
| Stock  options and restricted stock                                           |       | 1.5      |       | 1.0        |       |
|                                                                          |       | 165.6    |       | 164.3      |       |
|                                                                          |       |     |       |       |       |
| Net  income per common share attributable to Bruker Corporation shareholders: |       |     |       |       |       |
| Basic  and diluted                                                            |       | $        | 0.10       |       | $          | 0.05 |   |

 

Stock options to purchaseapproximately 0.4 million shares and 4.6 million shares were excluded from thecomputation of diluted earnings per share in the three months ended March 31,2010 and 2009, respectively, because the exercise price of the stock optionsexceeded the average market price of the Company’s common stock and, as aresult, would have had an anti-dilutive effect.

 

**5.****             ****Fair Value of 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 aredefined as follows:

 

*Level 1:*           Inputsto the valuation methodology are quoted prices (unadjusted) for identicalassets or liabilities in active markets.

 

*Level 2:*           Inputsto the valuation methodology include quoted prices for similar assets andliabilities in active markets, and inputs that are observable for the asset orliability, either directly or indirectly, for substantially the full term ofthe financial instrument.

 

*Level 3:*           Inputsto the valuation methodology are unobservable and significant to the fair valuemeasurement.

 

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 March 31, 2010 (in millions):

 
| ** **                                               | ** ** | **Total** | ** ** | **Quoted Prices in  Active Markets  Available (Level 1)** | ** ** | **Significant Other  Observable Inputs  (Level 2)** | ** ** | **Significant  Unobservable Inputs  (Level 3)** | ** ** |
|----------------------------------------------------------|------------|-----------|------------|-----------------------------------------------------------|------------|-----------------------------------------------------|------------|-------------------------------------------------|------------|
| Assets:                                                  |       |      |       |                                                      |       |                                                |       |                                            |       |
| Cash  equivalents                                        |       | $         | 96.8       |                                                      | $          | 96.8                                                |       | $                                               | —     |   | $ | — |   |
| Restricted  cash                                         |       | 3.5       |       | 3.5                                                       |       | —                                              |       | —                                          |       |
| Long-term  restricted cash                               |       | 2.9       |       | 2.9                                                       |       | —                                              |       | —                                          |       |
| Foreign  exchange contracts                              |       | 0.1       |       | —                                                    |       | 0.1                                                 |       | —                                          |       |
| Total  assets recorded at fair value                     |       | $         | 103.3      |                                                      | $          | 103.2                                               |       | $                                               | 0.1        |   | $ | — |   |
|                                                     |       |      |       |                                                      |       |                                                |       |                                            |       |
| Liabilities:                                             |       |      |       |                                                      |       |                                                |       |                                            |       |
| Interest  rate swap                                      |       | $         | 3.7        |                                                      | $          | —                                              |       | $                                               | 3.7        |   | $ | — |   |
| Embedded  derivatives in purchase and delivery contracts |       | 2.2       |       | —                                                    |       | 2.2                                                 |       | —                                          |       |
| Foreign  exchange contracts                              |       | 0.3       |       | —                                                    |       | 0.3                                                 |       | —                                          |       |
| Total  liabilities recorded at fair value                |       | $         | 6.2        |                                                      | $          | —                                              |       | $                                               | 6.2        |   | $ | — |   |

 

The Company’s financialinstruments consist primarily of cash equivalents, restricted cash, derivativeinstruments consisting of forward contracts, options and an interest rate swap,accounts receivable, short-term borrowings, accounts payable and long-termdebt. The carrying amounts of the Company’s cash equivalents, restricted cash,accounts receivable,

 

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short-term borrowings andaccounts payable approximate fair value due to their short-term nature.Derivative assets and liabilities are measured at fair value on a recurringbasis.  The fair value of derivativeinstruments is based 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 ofthe following as of March 31, 2010 and December 31, 2009 (inmillions):

 
| ** **           | ** ** | **March 31,  2010** | ** ** | **December 31,  2009** | ** ** |
|----------------------|------------|---------------------|------------|------------------------|------------|
| Raw materials        |       | $                   | 110.3      |                   | $          | 108.8 |   |
| Work-in-process      |       | 148.7               |       | 134.6                  |       |
| Demonstration  units |       | 37.7                |       | 41.3                   |       |
| Finished goods       |       | 134.5               |       | 138.1                  |       |
| Inventories          |       | $                   | 431.2      |                   | $          | 422.8 |   |

 

The Company reduces thecarrying value of its demonstration inventories for differences between itscost and estimated net realizable value through a charge to cost of 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 $5.6 million and $5.8 millionfor the three months ended March 31, 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 March 31, 2010and December 31, 2009, inventory-in-transit was $67.5 million and $80.8million, respectively.

 

**7.****             ****Goodwill and Other Intangible Assets**

 

The following table setsforth the changes in the carrying amount of goodwill for the three months endedMarch 31, 2010 (in millions):

 
| Balance  at December 31, 2009   |   | $      | 47.5   |   |
|--------------------------------------|--------|--------|--------|--------|
| Goodwill  acquired during the period |   | — |   |
| Foreign  currency impact             |   | (1.3   | )      |
| Balance  at March 31, 2010      |   | $      | 46.2   |   |

 

Goodwill is notamortized, instead, goodwill is tested for impairment on a reporting unit basisannually, or on an interim basis when events or changes in circumstanceswarrant. The Company performed its annual test for impairment as of December 31,2009 and determined that goodwill and other intangible assets were not impairedat that time. The Company did not identify any indicators of impairment duringthe three month period ended March 31, 2010.

 

The following is asummary of other intangible assets subject to amortization at March 31,2010 and December 31, 2009 (in millions):

 

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| ** **                                      | ** ** | **March 31,  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        |       | $                           | 14.1       |                          | $          | (10.9 | ) | $ | 3.2 |   | $ | 14.4 |   | $ | (10.7 | ) | $ | 3.7 |   |
| Customer  relationships                         |       | 2.0                         |       | (1.0                          | )          | 1.0 |   | 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 |       | $                           | 16.5       |                          | $          | (12.1 | ) | $ | 4.4 |   | $ | 16.8 |   | $ | (11.9 | ) | $ | 4.9 |   |

 

For the three monthsended March 31, 2010 and 2009, the Company recorded amortization expenseof $0.5 million and $0.4 million, respectively, related to intangible assetssubject to amortization.

 

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

 

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

 
| ** **                                                                                                                                                                                       | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                       | ** ** | **2010**           | ** ** | **2009**              | ** ** |
| term loan under the Credit Agreement                                                                                                                                                             |       | $                  | 127.5      |                  | $          | 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 |       | 0.1                |       | 0.3                   |       |
|                                                                                                                                                                                             |       |               |       |                  |       |
| Capital  lease obligations                                                                                                                                                                       |       | 5.5                |       | 6.0                   |       |
| Total  long-term debt                                                                                                                                                                            |       | 133.1              |       | 137.6                 |       |
| Current  portion of long-term debt                                                                                                                                                               |       | (23.5              | )          | (21.9                 | )          |
| Total  long-term debt, less current portion                                                                                                                                                      |       | $                  | 109.6      |                  | $          | 115.7 |   |

 

In 2008, the Companyentered into a credit agreement with a syndication of lenders (the “CreditAgreement”) which provides for a revolving credit line with a maximumcommitment of $230.0 million and a term facility of $150.0 million. Theoutstanding principal and interest under the term loan is payable in quarterlyinstallments through December 2012. Borrowings under the Credit Agreementbear interest, at the Company’s option, at either (i) the higher of theprime rate or the federal funds rate plus 0.50%, or (ii) adjusted LIBOR,plus margins ranging from 0.40% to 1.25% and a facility fee ranging from 0.10%to 0.20%. As of March 31, 2010, the weighted average interest rate ofborrowings under the term facility of the Credit Agreement was approximately2.6%.

 

Borrowings under theCredit Agreement are secured by the pledge to the banks of 100% of the capitalstock of each of the Company’s wholly-owned domestic subsidiaries and 65% ofthe capital 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 March 31, 2010, the latest measurement date, the Company was incompliance with the covenants under the Credit Agreement.

 

In addition to itslong-term arrangements, the Company had the following amounts outstanding underrevolving loan arrangements:

 

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

 

The following is asummary of the maximum commitments and net amounts available to the Companyunder revolving loans as of March 31, 2010 (in millions):

 
| ** **             | ** ** | **Weighted  Average  Interest Rate** | ** ** | **Total Amount  Committed by  Lenders** | ** ** | **Outstanding  Borrowings** | ** ** | **Outstanding  Letters of  Credit** | ** ** | **Total Amount  Available** | ** ** |
|------------------------|------------|--------------------------------------|------------|-----------------------------------------|------------|-----------------------------|------------|-------------------------------------|------------|-----------------------------|------------|
| Credit  Agreement      |       | 0.0                                  | %          | $                                       | 230.0      |                        | $          | —                              |       | $                           | 2.5        |   | $ | 227.5 |   |
| Other  revolving loans |       | 2.9                                  | %          | 122.0                                   |       | 0.1                         |       | 88.2                                |       | 33.7                        |       |
| Total  revolving loans |       | 2.9                                  | %          | $                                       | 352.0      |                        | $          | 0.1                                 |       | $                           | 90.7       |   | $ | 261.2 |   |

 

Other revolving loans arewith various financial institutions located primarily in Germany, Switzerlandand France. The Company’s other revolving lines of credit are typically dueupon demand with interest payable monthly. Certain of these lines of credit areunsecured while others are secured by the accounts receivable and inventory of therelated subsidiary.

 

**9.****             ****Derivative Instruments and HedgingActivities**

 

**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 through December 2012.At March 31, 2010, the notional amount of this interest rate swap was$76.5 million. The Company concluded that this swap met the criteria to qualifyas an effective hedge of the variability of cash flows of the interest paymentsand accounts for the interest rate swap as a cash flow hedge. Accordingly, theCompany reflects changes in the fair value of the effective portion of thisinterest rate swap in accumulated other comprehensive income, a component ofshareholders’ equity. As of March 31, 2010 and December 31, 2009, theCompany recorded a liability of $3.7 million and $3.5 million, respectively,related to the fair value of the interest rate swap that is recorded in othercurrent liabilities in the consolidated balance sheets. Amounts recorded inaccumulated other comprehensive income (loss) are reclassified to interest andother income (expense), net in the consolidated statement of operations wheneither the forecasted transaction occurs or it becomes probable that theforecasted transaction will not occur. The Company expects $2.4 million of theaccumulated loss to be reclassified into earnings over the next twelve months.

 

**Foreign Exchange Rate Risk Management**

 

The Company generates asubstantial portion of its revenues and expenses in international markets,principally Europe and Japan, which subjects its operations to the exposure ofexchange rate fluctuations. The impact of currency exchange rate movement canbe positive or negative in any period. The Company, from time to time, hasentered into foreign currency contracts in order to minimize the volatilitythat fluctuations in currency exchange rates have on the Company’s cash flowsrelated to purchases and sales denominated in foreign currencies. In addition,the Company periodically enters into purchase and sales contracts denominatedin currencies other than the functional currency of the parties to thetransaction. The Company accounts for these transactions separately valuing the“embedded derivative” component of these contracts.

 

The Company periodicallyenters into foreign currency contracts, primarily forward and option contracts,to minimize 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

 

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value with thecorresponding gains and losses recorded in interest and other income (expense),net in the consolidated statements of operations. At March 31, 2010, and December 31,2009, the following foreign currency contracts were outstanding:

 
| ** **    | ** ** | ** **   | ** ** | **Notional Amount at**  | ** ** | **Notional Amount at**     | ** ** |
|---------------|------------|--------------|------------|-------------------------|------------|----------------------------|------------|
| **Buy**       | ** ** | **Sell**     | ** ** | **March 31, 2010** | ** ** | **December 31, 2009** | ** ** |
| Swiss  Francs |       | U.S. Dollars |       | $                       |  12.8 |                       | $          |  13.1 |   |
| U.S.  Dollars |       | Euro         |       | ––            |       | 6.7                        |       |
| Euro          |       | U.S. Dollars |       | 13.2                    |       | 5.5                        |       |
|          |       |         |       | $                       |  26.0 |                       | $          |  25.3 |   |

 

The Company also hasvarious unsettled contracts related to the purchase and delivery of certainproducts. The contracts, denominated in currencies other than the functionalcurrency of the transacting parties, amounted to $32.3 million for the deliveryof products and $0.2 million for the purchase of products at March 31,2010 and $30.4 million for the delivery of products and $0.2 million for thepurchase of products at December 31, 2009. The changes in the fair valueof these embedded derivatives are recorded in interest and other income(expense), net in the consolidated statements of operations.

 

The fair value of thederivative instruments described above is recorded in our consolidated balancesheets for the periods ended March 31, 2010 and December 31, 2009 asfollows (in millions):

 
| ** **                   | ** ** | ** **                 | ** ** | **Fair Value**           | ** ** |
|------------------------------|------------|----------------------------|------------|--------------------------|------------|
| ** **                   | ** ** | **Balance Sheet Location** | ** ** | **March 31,  2010** | ** ** | **December 31,  2009** | ** ** |
| Derivative  assets:          | ** ** | ** **                 | ** ** | ** **               | ** ** | ** ** | ** ** |
| Foreign  exchange contracts  |       | Other current assets       |       | $                        | 0.1        |   | $ | — |   |
| ** **                   | ** ** | ** **                 | ** ** | ** **               | ** ** | ** ** | ** ** |
| Derivative  liabilities:     |       |                       |       |                     |       |   |   |
| Interest  rate swap contract |       | Other current  liabilities |       | $                        | 3.7        |   | $ | 3.5 |   |
| Embedded  derivatives        |       | Other current  liabilities |       | 2.2                      |       | 1.5 |   |
| Foreign  exchange contracts  |       | Other current  liabilities |       | 0.3                      |       | — |   |

 

The losses recognized inother comprehensive income related to the effective portion of the interestrate swap designated as a hedging instrument for the periods ended March 31,2010 and 2009 are as follows (in millions):

 
| ** **                   | ** ** | **2010** | ** ** | **2009** | ** ** |
|------------------------------|------------|----------|------------|----------|------------|
| Interest  rate swap contract |       | $        | (0.9       | )        | $          | (0.4 | ) |
|                              |            |          |            |          |            |  |  |

 

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 periods ended March 31, 2010 and 2009 are as follows (inmillions):

 
| ** **                   | ** ** | **2010** | ** ** | **2009** | ** ** |
|------------------------------|------------|----------|------------|----------|------------|
| Interest  rate swap contract |       | $        | (0.7       | )        | $          | (0.5 | ) |
|                              |            |          |            |          |            |  |  |

 

The Company did notrecognize any amounts related to ineffectiveness in the results of operationsfor the periods ended March 31, 2010 and 2009.

 

  The impact on net income of changes in thefair value of derivative instruments not designated as hedging instruments forthe periods ended March 31, 2010 and 2009 are as follows (in millions):

 

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| ** **                  | ** ** | **March 31,** | ** ** |
|-----------------------------|------------|--------------------|------------|
| ** **                  | ** ** | **2010**           | ** ** | **2009** | ** ** |
| Foreign  exchange contracts |       | $                  | (0.2       | ) | $ | 0.3 |   |
| Embedded  derivatives       |       | (0.7               | )          | 1.5 |   |
| Income  (expense), net      |       | $                  | (0.9       | ) | $ | 1.8 |   |

 

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

 

**10.****                 ****Restructuring Activities**

 

In the first quarter of2010, the Company recorded restructuring charges of $0.2 million, which relatedprimarily to severance incurred in connection with the closing of a productionfacility in Herzogenrath, Germany and relocating the associated operations.These charges were recorded in the Scientific Instruments segment. The Companydoes not expect to incur any additional costs related to this move and expectsto have made all of the severance payments by the end of the 2010. Theliability for restructuring charges is recorded in other current liabilities inthe unaudited condensed consolidated balance sheets. The charges related tothis restructuring reserve are as follows (in millions):

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

 

**11.****      ****Employee Benefit 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 benefits andterms of vesting varies among plans.

 

The net periodic pensioncost consists of the following components for the three months ended March 31,2010 and 2009 (in millions):

 
| ** **                                 | ** ** | **2010** | ** ** | **2009** | ** ** |
|--------------------------------------------|------------|----------|------------|----------|------------|
| Components  of net periodic benefit costs: |       |     |       |     |       |
| Service  cost                              |       | $        | 0.9        |     | $          | 0.9 |   |
| Interest  cost                             |       | 1.2      |       | 1.0      |       |
| Expected  return on plan assets            |       | (0.9     | )          | (0.9     | )          |
| Amortization  of prior service costs       |       | 0.3      |       | —   |       |
| Net  periodic benefit costs                |       | $        | 1.5        |     | $          | 1.0 |   |

 

The Company madecontributions of $0.6 million to its defined benefit plans during the threemonths ended March 31, 2010 and estimates contributions of $1.9 millionwill be made during the remainder of 2010.

 

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

 

The components ofinterest and other income (expense), net, were as follows for the three monthsended March 31, 2010 and 2009 (in millions):

 

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| ** **                                       | ** ** | **2010** | ** ** | **2009** | ** ** |
|--------------------------------------------------|------------|----------|------------|----------|------------|
| Interest  income                                 |       | $        | 0.1        |     | $          | 0.4 |   |
| Interest  expense                                |       | (1.5     | )          | (2.3     | )          |
| Exchange  gains on foreign currency transactions |       | 0.5      |       | 1.3      |       |
| Other                                            |       | 0.6      |       | 0.7      |       |
| Interest  and other income (expense), net        |       | $        | (0.3       | )        | $          | 0.1 |   |

 

**13.****      ****Provision for 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 also accounts foruncertain tax positions that have reached a minimum recognition threshold.

 

The income tax provisionfor the three months ended March 31, 2010 was $10.6 million compared to$5.8 million for the three months ended March 31, 2009, representingeffective tax rates of 39.8% and 40.3%, respectively.  The Company’s effective tax rate generallyreflects the tax provision (benefit) for non-U.S. entities only, since nobenefit was recognized for cumulative losses incurred in the U.S. A fullvaluation allowance will be maintained against all U.S. deferred tax assets,including U.S. net operating losses and tax credits, until evidence exists thatit is more likely than not that the loss carryforward and credit amounts willbe utilized to offset U.S. taxable income. The Company’s tax rate may changeover 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-tax income orloss and is affected by research and development tax credits, the expectedlevel of other tax benefits, the impact of changes to the valuation allowance,and changes in the mix of the Company’s pre-tax income and losses amongjurisdictions with varying statutory tax rates and credits.

 

The Company hasunrecognized tax benefits of approximately $24.0 million as of March 31,2010, of which $14.8 million, if recognized, would result in a reduction of theCompany’s effective tax rate. The Company recognizes penalties and interestrelated to unrecognized tax benefits in the provision for income taxes. As of March 31,2010 and December 31, 2009, approximately $4.1 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 and $0.1 millionwere recorded during the three months ended March 31, 2010 and 2009,respectively.

 

The Company files returnsin many foreign and state jurisdictions with varying statutes of limitations,but considers its significant tax jurisdictions to include the United States,Germany and Switzerland. The tax years 2003 to 2008 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 and the audit is expected tobe completed during 2010. In addition, all of the Company’s German subsidiariesare under tax audit for the years 2003 through 2008. The Company cannotreasonably predict the timing or outcome of these audits.

 

**14.****      ****Accumulated Other ComprehensiveIncome (Loss)**

 

Comprehensive income(loss) refers to revenues, expenses, gains and losses that under GAAP areincluded in other comprehensive income, but excluded from net income as theseamounts are recorded directly as an adjustment to shareholders’ equity, net oftax. The following is a summary of comprehensive loss for the three monthsended March 31, 2010 and 2009 (in millions):

 

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| ** **                                                                                     | ** ** | **2010** | ** ** | **2009** | ** ** |
|------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Consolidated  net income                                                                       |       | $        | 16.0       |     | $          | 8.6 |   |
| Foreign  currency translation adjustments                                                      |       | (20.0    | )          | (26.4    | )          |
| Unrealized  losses on interest rate swap:                                                      |       |     |       |     |       |
| Unrealized  holding losses arising during the period                                           |       | (0.9     | )          | (0.4     | )          |
| Less:  reclassification adjustments for settlements included in the determination of  net loss |       | 0.7      |       | 0.5      |       |
| Pension  liability adjustments                                                                 |       | 0.1      |       | 1.0      |       |
| Total  comprehensive loss                                                                      |       | (4.1     | )          | (16.7    | )          |
| Less:  Comprehensive income attributable to noncontrolling interests                           |       | (0.1     | )          | 0.2      |       |
| Comprehensive  loss attributable to Bruker Corporation                                         |       | $        | (4.0       | )        | $          | (16.9 | ) |

 

**15.****     ****Noncontrolling Interests**

 

Net income (loss)attributable to noncontrolling interests for the three months ended March 31,2010 and 2009 was $(0.1) million and $0.2 million, respectively.  The net loss attributable to noncontrollinginterests for the March 31, 2010 period represents the minorityshareholders’ proportionate share of the net loss recorded by fivemajority-owned indirect subsidiaries, Bruker Baltic Ltd., Bruker Labmate Pvt.Ltd., InCoaTec GmbH and Perch Solutions OY, which are included in theScientific Instruments segment, and RI Research Instruments GmbH, which isincluded in the Energy & Supercon Technologies segment. The net incomeattributable to noncontrolling interests for the March 31, 2009 periodrelates to the minority shareholders’ proportionate share of the net incomerecorded by three majority-owned indirect subsidiaries, Bruker Baltic Ltd.,InCoaTec GmbH and Perch Solutions OY. There were no transfers to or from thenoncontrolling interests during the three months ended March 31, 2010 or2009.

 

**16.****      ****Commitments and 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 March 31, 2010 and December 31,2009, no accruals have been recorded for such potential contingencies.

 

***Letters of Credit and Guarantees***

 

At March 31, 2010and December 31, 2009, the Company had bank guarantees of $90.7 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.

 

**17.****      ****Business Segment 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.

 

Management evaluatessegment operating performance and allocates resources based on operating income(loss). The Company uses this measure because it helps provide an understandingof our core operating results. Selected business segment information ispresented below for the three months ended March 31, 2010 and 2009 (inmillions):

 

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| ** **                               | ** ** | **2010**   | ** ** | **2009**   | ** ** |
|------------------------------------------|------------|------------|------------|------------|------------|
| Revenue:                                 | ** ** | ** ** | ** ** | ** ** | ** ** |
| Scientific  Instruments                  |       | $          | 260.3      |       | $          | 223.6 |   |
| Energy &  Supercon Technologies |       | 20.7       |       | 8.1        |       |
| Eliminations  (a)                        |       | (3.3       | )          | (1.2       | )          |
| Total  revenue                           |       | $          | 277.7      |       | $          | 230.5 |   |
|                                     |       |       |       |       |       |
| Operating  Income (Loss):                | ** ** | ** ** | ** ** | ** ** | ** ** |
| Scientific  Instruments                  |       | $          | 27.7       |       | $          | 16.1 |   |
| Energy &  Supercon Technologies |       | (0.5       | )          | (2.4       | )          |
| Corporate,  eliminations and other (b)   |       | (0.3       | )          | 0.6        |       |
| Total  operating income                  |       | $          | 26.9       |       | $          | 14.3 |   |

 

----

(a) Representsproduct and service revenue between reportable segments.

(b) Representscosts and eliminations not allocated to the reportable segments.

 

Total assets by segmentas of March 31, 2010 and December 31, 2009 are as follows (inmillions):

 
| ** **                               | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                               | ** ** | **2010**           | ** ** | **2009**              | ** ** |
| Assets:                                  | ** ** | ** **         | ** ** | ** **            | ** ** |
| Scientific  Instruments                  |       | $                  | 1,132.2    |                  | $          | 1,139.7 |   |
| Energy &  Supercon Technologies |       | 66.6               |       | 70.3                  |       |
| Eliminations  and other (a)              |       | (39.2              | )          | (38.0                 | )          |
| Total  assets                            |       | $                  | 1,159.6    |                  | $          | 1,172.0 |   |

 

----

(a) Representsassets not allocated to the reportable segments and eliminations of intercompanytransactions.

 

**18.****      ****Recent Accounting Pronouncements**

 

In June 2009, theFASB issued Codification Topic No. 105, *GenerallyAccepted Accounting Principles*. Codification Topic No. 105 iseffective for fiscal years and interim periods, ending after September 15,2009. Codification Topic No. 105 is intended to improve financialreporting by identifying the FASB Accounting Standards Codification and rules andinterpretive releases of the SEC under authority of federal securities laws asthe sole sources of authoritative accounting principles to be used in preparingfinancial statements that are presented in conformity with GAAP for SECregistrants. The adoption of Codification Topic No. 105 did not have amaterial impact on the Company’s results of operations, financial position orcash flows.

 

In January 2010, theFASB issued Accounting Standards Update 2010-06, *Fair ValueMeasurements and Disclosures (Topic 820)—Improving Disclosures about Fair ValueMeasurements*. Accounting Standards Update 2010-06 will require newdisclosures about transfers in and out of Levels 1 and 2 of the fair valuehierarchy and activity, including purchases, sales, issuances and settlements,in Level 3 fair value measurements. The requirements of Accounting StandardsUpdate 2010-06 will be effective for interim and annual periods beginning afterDecember 15, 2009, except for the disclosures about purchases, sales,issuances and settlements in Level 3 fair value measurements which will beeffective for interim and annual periods beginning after December 15,2010. The Company is currently assessing the impact that the additionaldisclosure requirements will have on its results of operations and financialposition.

 

In September 2009,the Emerging Issues Task Force reached consensus on FASB Accounting StandardsUpdate 2009-14, *Software (Topic 985)—Certain RevenueArrangements 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*. Inaddition, hardware components of a tangible product containing softwarecomponents are

 

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always excluded from thesoftware revenue guidance. FASB Accounting Standards Updates 2009-14 iseffective prospectively for revenue arrangements entered into or materiallymodified 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,the Emerging 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-partyevidence; or (c) estimates. This guidance also eliminates the residualmethod of allocation and requires that arrangement consideration be allocatedat the inception of the arrangement to all deliverables using the relativeselling price method. In addition, this guidance significantly expands requireddisclosures related to a vendor’s multiple-deliverable revenue arrangements.FASB Accounting Standards Update 2009-13 is effective prospectively for revenuearrangements entered into or materially modified in fiscal years beginning onor after June 15, 2010, however, early adoption is permitted. The Companyis currently assessing the impact that this update will have on its results ofoperations and financial position and when the Company will adopt theserequirements.

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

 

The following discussionof our financial condition and results of operations should be read inconjunction with our interim unaudited condensed consolidated financialstatements and the notes to those statements included in Part 1, Item 1 ofthis Quarterly Report on Form 10-Q, and in conjunction with theconsolidated financial statements contained in our Annual Report on Form 10-Kfor the year 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.

 

**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:

 

·                  *Executive overview*. This section provides a generaldescription and history of our business, a brief discussion of our reportablesegments, significant recent developments in our business and otheropportunities, challenges we face and risks that may impact our business in thefuture.

 

·                  *Critical accountingpolicies*. Thissection discusses the accounting estimates that are considered important to ourfinancial position and results of operations and that require us to exercisesubjective or complex judgments in their application.

 

·                  *Results of operations*. This section provides our analysis ofthe significant line items on our unaudited condensed consolidated statement ofoperations for the three months ended March 31, 2010 compared to the threemonths ended March 31, 2009.

 

·                  *Liquidity and capitalresources*. Thissection provides an analysis of our liquidity and cash flow and discussions ofour outstanding debt and commitments and matters relating to our common stock.

 

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·                  *Recent accountingpronouncements*.This section provides information about new accounting standards that have beenissued but for which adoption is not yet required.

 

**EXECUTIVEOVERVIEW**

 

**BusinessOverview**

 

Bruker Corporationand its wholly-owned subsidiaries design, manufacture, service and marketproprietary life science and materials research systems based on its coretechnology platforms, including X-ray technologies, magnetic resonancetechnologies, mass spectrometry technologies, optical emission spectroscopy andinfrared and Raman molecular spectroscopy technologies. We sell a broad rangeof field analytical systems for chemical, biological, radiological, nuclear andexplosive, or CBRNE, detection. We also develop and manufacture low temperatureand high temperature 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.

 

Ourbusiness strategy is to capitalize on our ability to innovate and generaterapid revenue performance, both organically and through acquisitions. Ourrevenue growth strategy, combined with anticipated improvements to our grossprofit margins and increased leverage on our research and development, salesand marketing and distribution investments and general and administrativeexpenses, is expected to enhance our operating margins and improve our earningsin the future.

 

We are organizedinto five operating segments, representing each of our five divisions: BrukerAXS, Bruker BioSpin, Bruker Daltonics, Bruker Optics and Bruker Energy &Supercon Technologies. Bruker AXS is in the business of manufacturing anddistributing advanced X-ray, spark-optical emission spectroscopy and atomicforce microscopy instrumentation used in non-destructive molecular andelemental analysis. Bruker BioSpin is in the business of manufacturing anddistributing enabling life science tools based on magnetic resonancetechnology. Bruker Daltonics is in the business of manufacturing anddistributing mass spectrometry instruments that can be integrated and usedalong with other analytical instruments, as well as our CBRNE detectionproducts. Bruker Optics is in the business of manufacturing and distributingresearch, analytical and process analysis instruments and solutions based oninfrared and Raman molecular spectroscopy technologies. Bruker Energy &Supercon Technologies is in the business of developing and producing lowtemperature superconducting and high temperature superconducting wires for usein advanced magnet technology and energy applications as well as linearaccelerators, accelerator cavities, insertion devices, superconducting faultcurrent limiters, other accelerator components and specialty superconductingmagnets for physics and energy research and a variety of other scientificapplications.

 

We have combinedthe Bruker AXS, Bruker BioSpin, Bruker Daltonics and Bruker Optics operatingsegments into the Scientific Instruments reporting segment because each hassimilar economic characteristics, product processes and services, types andclasses of customers, methods of distribution and regulatory environments. Assuch, management reports its results based on the following segments:

 

·                  *Scientific Instruments.*  The operations of thissegment 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 diagnosticcompanies; academic institutions; medical schools; other non-profitorganizations; clinical microbiology laboratories; government departments andagencies; nanotechnology, semiconductor, chemical, cement, metals and petroleumcompanies; and food, beverage and agricultural analysis companies andlaboratories.

 

·                  *Energy & SuperconTechnologies.*  Theoperations of this segment include development and production of lowtemperature superconducting and high temperature superconducting wires for usein advanced magnet technology and energy applications as well as electron andion linear accelerators, superconducting and normal conducting acceleratorcavities, other accelerator components, insertion devices, prototypesuperconducting fault current

 

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limiters, prototype crystal growth magnets, and highlyspecialized manufacturing services for physics and energy research and avariety of other scientific applications. Typical customers of the Energy &Supercon Technologies segment include companies in the medical, power andenergy, and processing industries; private and public research and developmentlaboratories in the fields of fundamental and applied sciences and energyresearch; and academic institutions and government agencies.

 

**FinancialOverview**

 

For the three monthsended March 31, 2010, our revenue increased by $47.2 million, or 20.5%, to$277.7 million, compared to $230.5 million for the comparable period in 2009.Included in this change in revenue is an increase of approximately $18.7million from the impact of foreign exchange due to the weakening of the U.S.Dollar versus the Euro and other foreign currencies. Excluding the effect offoreign exchange, revenue increased by $28.5 million, or 12.4%. The increase inrevenue on a currency adjusted basis is attributable to both the ScientificInstruments segment, which increased by $19.2 million, or 8.6%, and the Energy &Supercon Technologies segment, which increased by $11.4 million, or140.7%.  Revenue in the ScientificInstruments segment reflects an increase in sales of all of our coretechnologies, particularly in magnetic resonance and mass spectrometry. The mixof products sold in the Scientific Instruments segment reflects increaseddemand from academic and government customers and industrial customers. Weattribute the increase in sales of magnetic resonance and mass spectrometryproducts and spending by academic and government customers to our new productintroductions over the last twelve to eighteen months and to stimulus packagesimplemented by governments of various countries, including the U.S., Germany,Japan and China. The improvement in revenues from our industrial customersquarter-over-quarter continues to reflect a gradual turnaround for thesemarkets. We remain cautiously optimistic that the industrial markets we servewill continue to improve through 2010 but we will continue to closely monitorthe apparent recovery in these markets. The Energy & Supercon Technologiessegment revenue increased due to strong demand for low temperaturesuperconducting wire and the acquisition of the RI business from Varian MedicalSystems, Inc., which was completed at the beginning of the second quarterof 2009.

 

Income from operationsfor the three months ended March 31, 2010 was $26.9 million, resulting inan operating margin of 9.7%, compared to income from operations of $14.3million, resulting in an operating margin of 6.2%, for the comparable period in2009. The increase in operating margin is primarily the result of the higherrevenue described above and the corresponding improvement in our gross profitmargins. Our gross profit margin for the first quarter of 2010 was 45.5%,compared with 44.6% for the comparable period in 2009. Higher gross profitmargins resulted primarily from changes in product mix, specifically anincrease in revenues from high-end instrumentation, including our newlyintroduced products which were designed to carry higher gross margins than ourprevious generations of products. 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 saving initiatives.

 

We incurred approximately$1.5 million of interest expense during the three months ended March 31,2010 compared to $2.3 million for the comparable period in 2009. Of the totalinterest expense incurred during the three months ended March 31, 2010,approximately $1.3 million related to a credit facility that we entered intoduring the first quarter of 2008. We initially borrowed $351.0 million underthis credit facility in order to finance the acquisition of Bruker BioSpin. Inthe first three months of 2010, we repaid approximately $3.8 million of theamounts outstanding under this credit agreement and, from the inception of thisagreement, we have reduced the net amount outstanding by approximately $223.5million.

 

Our effective tax ratefor the three months ended March 31, 2010 was 39.8%, compared to 40.3% forthe comparable period in 2009. The change in our effective tax rate relatesprimarily to the amount and mix of income and taxes outside the U.S. because weare not able to record a tax benefit on losses incurred in the U.S.

 

Our net incomeattributable to the shareholders of Bruker Corporation for the three monthsended March 31, 2010 was $16.1 million, or $0.10 per diluted share,compared to $8.4 million, or $0.05 per diluted share, for the comparable periodin 2009.

 

**CRITICALACCOUNTING POLICIES**

 

This discussion andanalysis of 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

 

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financial statements andreported amounts of revenues and expenses during the reporting period. On anongoing basis, management evaluates its estimates and judgments, includingthose related to revenue recognition, income taxes, allowance for doubtfulaccounts, inventories, goodwill, other intangible assets and long-lived assets,warranty costs and derivative financial instruments. We base our estimates andjudgments on historical experience, current market and economic conditions,industry trends and other assumptions that we believe are reasonable and formthe basis for making judgments about the carrying value of assets andliabilities that are not readily apparent from other sources. Actual resultscould 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 or determinable,title and risk of loss has been transferred to the customer and collectabilityof the resulting receivable is reasonably assured. Title and risk of lossgenerally are transferred to the customer upon receipt of a signed customeracceptance form for a system that has been shipped, installed, and for whichthe customer has been trained. As a result, the timing of customer acceptanceor readiness could cause our reported revenues to differ materially fromexpectations. When products are sold through an independent distributor or astrategic distribution partner who assumes responsibility for installation, werecognize the system sale when the product has been shipped and title and riskof loss have been transferred to the distributor. Our distributors do not haveprice 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 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.*Thedetermination of income tax expense requires us to make certain estimates andjudgments concerning the calculation of deferred tax assets and liabilities, aswell as the deductions, carryforwards and credits that are available to reducetaxable income. Deferred tax assets and liabilities arise from differences inthe timing of the recognition of revenue and expenses for financial statementand tax purposes. Deferred tax assets and liabilities are measured using thetax rates in effect for the year in which these temporary differences areexpected to be settled. We estimate the degree to which tax assets and losscarryforwards will result in a benefit based on expected profitability by taxjurisdiction, and we provide a valuation allowance for tax assets and losscarryforwards that we believe will more likely than not go unused. If itbecomes more likely than not that a tax asset or loss carryforward will be usedfor which a reserve has been provided, we reverse the related valuationallowance. If our actual future taxable income by tax jurisdiction differs fromestimates, additional allowances or reversals of reserves may be necessary. Inaddition, we only recognize benefits for tax positions that we believe are morelikely than not of being sustained upon review by a taxing authority withknowledge of all relevant information. We reevaluate our uncertain taxpositions on a quarterly basis and any changes to these positions as a resultof tax audits, tax laws or other facts and circumstances could result inadditional charges to operations.

 

*Allowancefor doubtful accounts.* We maintain allowances for doubtful accounts for estimated lossesresulting from the inability of our customers to pay amounts due. If thefinancial condition of our customers were to deteriorate, reducing theirability to make payments, additional allowances would be required, resulting ina charge to operations.

 

*Inventories.* Inventories are stated at the lower ofcost or market, with costs determined by the first-in, first-out method for amajority of subsidiaries and by average cost for certain international subsidiaries.We record provisions to account for excess and obsolete inventory to reflectthe expected non-saleable or non-refundable inventory based on an evaluation ofslow moving products. Inventories also include demonstration units located inour demonstration laboratories or installed at the sites of potentialcustomers. We consider our demonstration units to be available for sale. Wereduce the carrying value of demonstration inventories for differences betweencost and estimated net realizable value, taking into consideration usage in thepreceding twelve months, expected demand, technological obsolescence and otherinformation including the physical

 

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condition of the unit. Ifultimate usage or demand varies significantly from expected usage or demand,additional write-downs may be required, resulting in additional charges tooperations.

 

*Goodwill,other intangible assets and other long-lived assets.* We evaluate whether goodwill is impairedannually and when events occur or circumstances change. We test goodwill forimpairment at the reporting unit level (the operating segment or one levelbelow an operating segment). The performance of the test involves a two-stepprocess. The first step of the impairment test involves comparing the fairvalues of the applicable reporting units with their aggregate carrying values,including goodwill. We generally determine the fair value of our reportingunits using an income approach methodology of valuation that includes thediscounted cash flow method. Estimating the fair value of the reporting unitsrequires significant judgments by management about the future cash flows. If thecarrying amount of a reporting unit exceeds the fair value of the reportingunit, we perform the second step of the goodwill impairment test to measure theamount of the impairment. In the second step of the goodwill impairment test wecompare the implied fair value of the reporting unit’s goodwill with thecarrying value of that goodwill. We also review finite-lived intangible assetsand other long-lived assets when indication of potential impairment exists,such as a significant reduction in undiscounted cash flows associated with theassets. Should the fair value of our long-lived assets decline because ofreduced operating performance, market declines, or other indicators ofimpairment, a charge to operations for impairment may be necessary.

 

*Warrantycosts.* Wenormally provide a one year parts and labor warranty with the purchase ofequipment. The anticipated cost for this warranty is accrued upon recognitionof the sale based on historical warranty rates and our assumptions of futurewarranty claims. The warranty accrual is included as a current liability on theconsolidated balance sheets. Although our products undergo quality assuranceand testing procedures throughout the production process, our warrantyobligation is affected by product failure rates, material usage and servicedelivery costs incurred in correcting a product failure. Although our actualwarranty costs have historically been consistent with expectations, to theextent warranty claim activity or costs associated with servicing those claimsdiffer from our estimates, revisions to the warranty accrual may be required.

 

*Derivativefinancial instruments.* All derivative instruments are recorded as assets or liabilities atfair value, which is calculated as an estimate of the future cash flows, andsubsequent changes in a derivative’s fair value are recognized in income,unless specific hedge accounting criteria are met. Changes in the fair value ofa derivative that is highly effective and designated as a cash flow hedge arerecognized in accumulated other comprehensive income until the forecastedtransaction occurs or it becomes probable that the forecasted transaction willnot occur. We perform an assessment at the inception of the hedge and on aquarterly basis thereafter, to determine whether our derivatives are highlyeffective in offsetting changes in the value of the hedged items. Any changesin the fair value resulting from hedge ineffectiveness are immediatelyrecognized as income or expense.

 

**RESULTSOF OPERATIONS**

 

***Three Months Ended March 31, 2010 compared to the ThreeMonths Ended March 31, 2009***

 

***Consolidated Results***

 

The following tablepresents our results for the three months ended March 31, 2010 and 2009(dollars in millions, except per share data):

 

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| ** **                                                                               | ** ** | **Three Months Ended  March 31,** | ** ** |
|------------------------------------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                                               | ** ** | **2010**                               | ** ** | **2009** | ** ** |
| Product  revenue                                                                         |       | $                                      | 244.0      |   | $ | 202.2 |   |
| Service  revenue                                                                         |       | 31.5                                   |       | 26.9 |   |
| Other  revenue                                                                           |       | 2.2                                    |       | 1.4 |   |
| Total  revenue                                                                           |       | 277.7                                  |       | 230.5 |   |
|                                                                                     |       |                                   |       |   |   |
| Cost  of product revenue                                                                 |       | 134.2                                  |       | 111.7 |   |
| Cost  of service revenue                                                                 |       | 17.2                                   |       | 16.1 |   |
| Total  cost of revenue                                                                   |       | 151.4                                  |       | 127.8 |   |
| Gross  profit                                                                            |       | 126.3                                  |       | 102.7 |   |
|                                                                                     |       |                                   |       |   |   |
| Operating  expenses:                                                                     | * *   | * *                               | * *   | * * | * * |
| Sales  and marketing                                                                     |       | 49.1                                   |       | 42.6 |   |
| General  and administrative                                                              |       | 17.0                                   |       | 16.3 |   |
| Research  and development                                                                |       | 32.8                                   |       | 29.1 |   |
| Restructuring  charges                                                                   |       | 0.2                                    |       | — |   |
| Acquisition-related  charges                                                             |       | 0.3                                    |       | 0.4 |   |
| Total  operating expenses                                                                |       | 99.4                                   |       | 88.4 |   |
| Operating  income                                                                        |       | 26.9                                   |       | 14.3 |   |
|                                                                                     |       |                                   |       |   |   |
| Interest  and other income (expense), net                                                |       | (0.3                                   | )          | 0.1 |   |
| Income  before income taxes and noncontrolling interest in consolidated subsidiaries     |       | 26.6                                   |       | 14.4 |   |
| Income  tax provision                                                                    |       | 10.6                                   |       | 5.8 |   |
| Consolidated  net income                                                                 |       | 16.0                                   |       | 8.6 |   |
| Net  income (loss) attributable to noncontrolling interest in consolidated  subsidiaries |       | (0.1                                   | )          | 0.2 |   |
| Net  income attributable to Bruker Corporation                                           |       | $                                      | 16.1       |   | $ | 8.4 |   |
|                                                                                     |       |                                   |       |   |   |
| Net  income per common share attributable to                                             |       |                                   |       |   |   |
| Bruker  Corporation shareholders:                                                        |       |                                   |       |   |   |
| Basic  and diluted                                                                       |       | $                                      | 0.10       |   | $ | 0.05 |   |
|                                                                                     |       |                                   |       |   |   |
| Weighted  average common shares outstanding:                                             |       |                                   |       |   |   |
| Basic                                                                                    |       | 164.1                                  |       | 163.3 |   |
| Diluted                                                                                  |       | 165.6                                  |       | 164.3 |   |

 

***Revenue***

 

Our revenue increased by$47.2 million, or 20.5%, to $277.7 million for the three months ended March 31,2010, compared to $230.5 million for the comparable period in 2009. Included inthis change in revenue is an increase of approximately $18.7 million from theimpact of foreign exchange due to the weakening of the U.S. Dollar versus theEuro and other foreign currencies. Excluding the effect of foreign exchange,revenue increased by 12.4%. Revenues from the Scientific Instruments segmentincreased, on a currency adjusted basis, by $19.2 million, or 8.6%. Revenue inthe Scientific Instruments segment reflects an increase in sales of all ourcore technologies, particularly in magnetic resonance and mass spectrometry.The mix of products sold in the Scientific Instruments segment reflectsincreased demand from academic and government customers and industrialcustomers. We attribute the increase in spending by academic and governmentcustomers to our new product introductions over the last twelve to eighteenmonths and to stimulus packages implemented by governments of variouscountries, including the U.S., Germany, Japan and China. We continued tobenefit from a gradual improvement in the industrial markets that we serve andremain cautiously optimistic that the apparent recovery in these

 

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markets will continue.Revenues from the Energy & Supercon Technologies segment increased, ona currency adjusted basis, by $11.4 million, or 140.7%. The increase in revenuewas the result of strong demand for low temperature superconducting wire andthe acquisition of the RI business, which was completed at the beginning of thesecond quarter of 2009.

 

***Cost of Revenue***

 

Our cost of product andservice revenue for the three months ended March 31, 2010, was $151.4million, resulting in a gross profit margin of 45.5%, compared to cost ofproduct and service revenue of $127.8 million, resulting in a gross profitmargin of 44.6%, for the comparable period in 2009. Gross profits increasedbecause of the increase in revenues described above and changes in product mix.The change in product mix reflects an increase in revenues from high-endinstrumentation, including our newly introduced products which were designed tocarry higher gross margins than previous generations of our products. 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.

 

***Sales and Marketing***

 

Our sales and marketingexpense for the three months ended March 31, 2010 increased to $49.1million, or 17.8% of product and service revenue, from $42.6 million, or 18.6%of product and service revenue, for the comparable period in 2009. The increasein sales and marketing expense is attributable to increases in headcount in supportof planned revenue growth and changes in foreign currency exchange rates,primarily the Euro.

 

***General and Administrative***

 

Our general andadministrative expense for the three months ended March 31, 2010 increasedto $17.0 million, or 6.2% of product and service revenue, from $16.3 million,or 7.1% of product and service revenue, for the comparable period in 2009.  The increase in general and administrativeexpense is attributable mainly to changes in foreign currency exchange rates,primarily the Euro.

 

***Research and Development***

 

Our research anddevelopment expense for the three months ended March 31, 2010 increased to$32.8 million, or 11.9% of product and service revenue, from $29.1 million, or12.7% of product and service revenue, for the comparable period in 2009. Wecontinue to make incremental investments in research and development projects thatwe believe will generate future growth. The increase in research anddevelopment expense is also partly attributable to changes in foreign currencyexchange rates, primarily the Euro, as a majority of our research anddevelopment is performed in Europe.

 

***Restructuring Charges***

 

In the first quarter of2010, we recorded restructuring charges of $0.2 million, which relatedprimarily to severance incurred in connection with the closing of a productionfacility in Herzogenrath, Germany and relocating the associatedoperations.  We do not expect to incurany additional costs related to this move and expect to have made all of theseverance payments by the end of 2010.

 

***Acquisition-Related Charges***

 

Acquisition-relatedcharges of $0.3 million recorded in the first quarter of 2010 relate entirelyto the Scientific Instruments segment. In the first quarter of 2010, weannounced that we entered into a definitive asset purchase agreement to acquirecertain product lines of Varian, Inc., or Varian, which AgilentTechnologies, Inc., or Agilent, committed to divest in connection withobtaining regulatory approval for Agilent’s previously announced acquisition ofVarian. We will acquire certain assets and assume certain liabilities in Varian’sinductively coupled plasma mass spectrometry instruments business, laboratorygas chromatography instruments business, and gas chromatographytriple-quadrupole mass spectrometry instruments business. This acquisition issubject to customary closing conditions and regulatory approvals and we expectit to close in the second quarter of 2010. We currently expect that we willincur an additional $0.5 million of acquisition-related charges in connectionwith this acquisition in the second quarter of 2010.

 

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Acquisition-relatedcharges of $0.4 million recorded in the first quarter of 2009 relate entirelyto the Energy & Supercon Technologies segment. Theseacquisition-related costs were incurred in connection with the April 2009acquisition of the RI business from Varian Medical Systems, Inc.

 

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

 

Interest and other income(expense), net during the three months ended March 31, 2010 was $(0.3)million, compared to $0.1 million for the comparable period of 2009.

 

During the three monthsended March 31, 2010, the major components within interest and otherincome (expense), net were net interest expense of $1.4 million, offset,in part, by other income of $0.6 million and realized and unrealized gains onforeign currency transactions of $0.5 million. Other income recorded inthe first quarter of 2010 includes an insurance settlement that we received ofapproximately $0.8 million. During the three months ended March 31, 2009,the major component within interest and other income (expense), net, wererealized and unrealized gains on foreign currency transactions of$1.3 million and other income of $0.7 million offset, in part, by netinterest expense of $1.9 million.

 

***Income Tax Provision***

 

Our effective tax rategenerally reflects our tax provision for non-U.S. entities only since nobenefit was recognized for losses incurred in the U.S. We will maintain a fullvaluation allowance against all U.S. deferred tax assets, including our U.S.net operating losses and tax credits, until evidence exists that it is morelikely than not that the loss carryforward and credit amounts will be utilizedto offset U.S. taxable income. Our tax rate may change over time as the amountand mix of income and taxes outside the U.S. changes. The effective tax rate iscalculated using our projected annual pre-tax income or loss and is affected bytax credits, the expected level of other tax benefits, and the impact ofchanges to the valuation allowance, as well as changes in the mix of ourpre-tax income and losses among jurisdictions with varying statutory tax ratesand credits.

 

The income tax provisionfor the three months ended March 31, 2010, was $10.6 million compared to$5.8 million for the three months ended March 31, 2009, representingeffective tax rates of 39.8% and 40.3%, respectively. This change in oureffective tax rate relates primarily to the amount and mix of income and taxesoutside of the U.S.

 

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

 

Net income (loss)attributable to noncontrolling interests for the three months ended March 31,2010 was $(0.1) million compared to $0.2 million for the comparable period of2009. Net income (loss) attributable to noncontrolling interests represents theminority shareholders’ proportionate share of the net income (loss) recorded byfive majority-owned indirect subsidiaries, Bruker Baltic Ltd., Bruker LabmatePvt. Ltd., InCoaTec GmbH and Perch Solutions OY, which are included in theScientific Instruments segment, and RI Research Instruments GmbH, which isincluded in the Energy & Supercon Technologies segment.

 

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

 

Our net income for thethree months ended March 31, 2010, was $16.1 million, or $0.10 per dilutedshare, compared to $8.4 million, or $0.05 per diluted share for the comparableperiod in 2009.

 

***Segment Results***

 

***Revenue***

 

The following tablepresents revenue, change in revenue and revenue growth by reportable segmentfor the three months ended March 31, 2010 and 2009 (dollars in millions):

 

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| ** **                               | ** ** | **Three Months Ended** | ** ** | **Dollar** | ** ** | **Percentage** | ** ** |
|------------------------------------------|------------|------------------------|------------|------------|------------|----------------|------------|
| ** **                               | ** ** | **2010**               | ** ** | **2009**   | ** ** | **Change**     | ** ** | **Change** | ** ** |
| Scientific  Instruments                  |       | $                      | 260.3      |       | $          | 223.6          |       | $ |   36.7 |   | 16.4 | % |
| Energy &  Supercon Technologies |       | 20.7                   |       | 8.1        |       | 12.6           |       | 155.6 | % |
| Eliminations  (a)                   |       | (3.3                   | )          | (1.2       | )          | (2.1           | )          |   |   |
|                                     |       | $                      | 277.7      |       | $          | 230.5          |       | $ | 47.2 |   | 20.5 | % |

 

----

(a) Representsproduct and service revenue between reportable segments.

 

***Scientific Instruments Segment Revenues***

 

Scientific Instrumentssegment revenue increased by $36.7 million, or 16.4%, to$260.3 million for the three months ended March 31, 2010, compared to$223.6 million for the comparable period in 2009. Included in this changein revenue is an increase of approximately $17.5 million from the impact offoreign exchange due to the weakening of the U.S. Dollar versus the Euro andother foreign currencies. Excluding the effect of foreign exchange, revenueincreased by 8.6%. The increase in revenue, excluding the effect of foreignexchange, reflects an increase in sales of all of our core technologies,particularly in magnetic resonance and mass spectrometry. The mix of productssold in the Scientific Instruments segment reflects increased demand fromacademic and government customers and industrial customers. We attribute theincrease in spending by academic and government customers to new productintroductions over the last twelve to eighteen months and stimulus packagesimplemented by governments of various countries, including the U.S., Germany,Japan and China. We continued to benefit from a gradual improvement in theindustrial markets that we serve.

 

System revenue andaftermarket revenue as a percentage of total Scientific Instruments segmentrevenue were as follows during the three months ended March 31, 2010 and2009 (dollars in millions):

 
| ** **           | ** ** | **2010**    | ** ** | **2009**                             | ** ** |
|----------------------|------------|-------------|------------|--------------------------------------|------------|
| ** **           | ** ** | **Revenue** | ** ** | **Percentage of  Segment   Revenue** | ** ** | **Revenue** | ** ** | **Percentage of  Segment  Revenue** | ** ** |
| System  revenue      |       | $           | 206.4      |                                 | 79.3       | % | $ | 176.6 |   | 79.0 | % |
| Aftermarket  revenue |       | 53.9        |       | 20.7                                 | %          | 47.0 |   | 21.0 | % |
| Total  revenue       |       | $           | 260.3      |                                 | 100.0      | % | $ | 223.6 |   | 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 &Supercon Technologies segment revenue increased by $12.6 million, or155.6%, to $20.7 million for the three months ended March 31, 2010,compared to $8.1 million for the comparable period in 2009. Included inthis change in revenue is an increase of approximately $1.2 million fromthe impact of foreign exchange. Excluding the effect of foreign exchange,revenue increased by 140.7%. The increase in revenue was the result of strongdemand for low temperature superconducting wire and the acquisition of the RI businessfrom Varian Medical Systems, Inc., which was completed at the beginning ofthe second quarter of 2009.

 

System and wire revenueand aftermarket revenue as a percentage of total Energy & SuperconTechnologies segment revenue were as follows during the three months ended March 31,2010 and 2009 (dollars in millions):

 

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| ** **               | ** ** | **2010**    | ** ** | **2009**                            | ** ** |
|--------------------------|------------|-------------|------------|-------------------------------------|------------|
| ** **               | ** ** | **Revenue** | ** ** | **Percentage of  Segment  Revenue** | ** ** | **Revenue** | ** ** | **Percentage of  Segment  Revenue** | ** ** |
| System  and wire revenue |       | $           | 19.9       |                                | 96.1       | % | $ | 7.6 |   | 93.8 | % |
| Aftermarket  revenue     |       | 0.8         |       | 3.9                                 | %          | 0.5 |   | 6.2 | % |
| Total  revenue           |       | $           | 20.7       |                                | 100.0      | % | $ | 8.1 |   | 100.0 | % |

 

System and wire revenuesin the 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 tablepresents income (loss) from operations and operating margins on revenue byreportable segment for the three months ended March 31, 2010 and 2009(dollars in millions):

 
| ** **                               | ** ** | **2010**                     | ** ** | **2009**                            | ** ** |
|------------------------------------------|------------|------------------------------|------------|-------------------------------------|------------|
| ** **                               | ** ** | **Operating  Income (Loss)** | ** ** | **Percentage of  Segment  Revenue** | ** ** | **Operating  Income (Loss)** | ** ** | **Percentage of  Segment  Revenue** | ** ** |
| Scientific  Instruments                  |       | $                            | 27.7       |                                | 10.6       | % | $ | 16.1 |   | 7.2 | % |
| Energy &  Supercon Technologies |       | (0.5                         | )          | (2.4                                | )%         | (2.4 | ) | (29.6 | )% |
| Corporate,  eliminations and other (a)   |       | (0.3                         | )          |                                |       | 0.6 |   |   |   |
| Total  operating income                  |       | $                            | 26.9       |                                | 9.7        | % | $ | 14.3 |   | 6.2 | % |

 

----

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

 

Scientific Instrumentssegment income from operations for the three months ended March 31, 2010was $27.7 million, resulting in an operating margin of 10.6%, compared toincome from operations of $16.1 million, resulting in an operating margin of7.2%, 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 first quarter of2010, gross profit margin as a percentage of revenue in the ScientificInstruments increased to 47.1% from 45.3% for the comparable period in 2009.The improvement in gross profit margin reflects a change in product mix. In thefirst quarter of 2010, revenues reflected an increase in high-endinstrumentation, including our newly introduced products which were designed tocarry higher gross margins than our previous generations of products. 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.

 

In the first quarter of2010, operating expenses, excluding acquisition-related and restructuringcharges, in the Scientific Instruments increased to $94.3 million, or 36.2% ofsegment product and service revenue, from $85.4 million, or 38.2% of segmentproduct and service revenue for the comparable period in 2009. This increase isa function of incremental investments in sales and marketing activities andresearch and development activities that we believe will generate future growthand changes in foreign currency exchange rates.

 

Energy &Supercon Technologies segment loss from operations for the three months ended March 31,2010 was $(0.5) million, resulting in an operating margin of (2.4)%,compared to a loss from operations of $(2.4) million, resulting in an operatingmargin of (29.6)%, for the comparable period in 2009. Loss from operations inthe Energy & Supercon Technologies segment decreased as a result ofthe higher revenues described above.

 

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**LIQUIDITYAND CAPITAL RESOURCES**

 

We currently anticipatethat our 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 by acquisitionsthat we may make in the future. Historically, we have financed our growththrough cash flow generation and a combination of debt financings and issuancesof common stock. In the future, there are no assurances that additionalfinancing alternatives will be available to us if required, or if available,will be obtained on terms favorable to us.

 

During the three monthsended March 31, 2010, net cash provided by operating activities was $5.5million, resulting primarily from $15.4 million of consolidated net incomeadjusted for non-cash items offset, in part, by $9.9 million of net changes inworking capital. During the three months ended March 31, 2009, net cashprovided by operating activities was $13.1 million, resulting primarily from$13.6 million of consolidated net income adjusted for non-cash items.

 

During the three monthsended March 31, 2010, net cash used by investing activities was$5.4 million, compared to net cash used by investing activities of$4.6 million during the three months ended March 31, 2009. Cash usedby investing activities during the three months ended March 31, 2010 wasattributable to capital expenditures. Cash used by investing activities duringthe three months ended March 31, 2009 was attributable primarily to$3.9 million of capital expenditures and $0.7 million used foracquisitions. Capital expenditures during the three months ended March 31,2010 were at a level consistent with our planned capital spending of $20.0million to $30.0 million in 2010.

 

During the three monthsended March 31, 2010, net cash used by financing activities was$4.3 million, compared to net cash used by financing activities of$17.8 million during the three months ended March 31, 2009. Cash usedby financing activities during the three months ended March 31, 2010 and March 31,2009 was primarily attributable to $4.2 million and $17.6 million,respectively, of net debt repayments under various long-term and short-termarrangements.

 

At March 31, 2010,we had outstanding debt totaling $133.2 million consisting of $127.5 millionoutstanding under the Credit Agreement, $0.1 million outstanding under otherlong-term debt arrangements, $0.1 million outstanding under other revolvinglines of credit and $5.5 million under capital lease obligations. At December 31,2009, we had outstanding debt totaling $137.7 million consisting of $131.3million outstanding under the term loan component of the Credit Agreement, $0.3million outstanding under other long-term debt arrangements, $0.1 millionoutstanding under other revolving lines of credit and $6.0 million undercapital lease obligations.

 

In February 2008, we entered into a credit agreement with asyndication of lenders, which we refer to as the Credit Agreement. The CreditAgreement provides a revolving credit line with a maximum commitment of $230.0million and a term loan facility of $150.0 million. The outstanding principaland interest under the term loan is payable in quarterly installments through December 2012.Borrowings under the 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 March 31, 2010, the weighted average interest rateof borrowings under the term facility of the Credit Agreement was approximately2.6%.

 

Borrowings under the Credit Agreement are secured by the pledge to thebanks of 100% of the capital stock of each of our wholly-owned domestic subsidiariesand 65% of the capital stock of certain of our wholly-owned direct or indirectforeign subsidiaries. The Credit Agreement also requires that we maintaincertain financial ratios related to maximum leverage and minimum interestcoverage, as defined in the Credit Agreement. Specifically, our leverage ratiocannot exceed 3.0 and our interest coverage ratio cannot be less than 3.0. Inaddition to the financial ratios, the Credit Agreement restricts, among otherthings, our ability to do the following: make certain payments; incuradditional debt; incur certain liens; make certain investments, includingderivative agreements; merge, consolidate, sell or transfer all orsubstantially all of our assets; and enter into certain transactions withaffiliates. Our failure to comply with any of these restrictions or covenantsmay result in an event of default under the applicable debt instrument, whichcould permit acceleration of the debt under that instrument and require us toprepay that debt before its scheduled due date. As of March 31, 2010, thelatest measurement date, we were in compliance with the covenants of the CreditAgreement.

 

Other long-term debt at March 31, 2010 consists of acollateralized arrangement with a financial institution in Germany and is at afixed interest rate of 2.95%. The term of this arrangement is through June 2010.

 

Other revolving loans are with various financial institutions locatedprimarily in Germany, Switzerland and France. The following is a summary of themaximum commitments and net amounts available to the Company under revolvingloans as of March 31, 2010 (in millions):

 

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| ** **             | ** ** | **Weighted  Average  Interest Rate** | ** ** | **Total Amount  Committed by  Lenders** | ** ** | **Outstanding  Borrowings** | ** ** | **Outstanding  Letters of  Credit** | ** ** | **Total Amount  Available** | ** ** |
|------------------------|------------|--------------------------------------|------------|-----------------------------------------|------------|-----------------------------|------------|-------------------------------------|------------|-----------------------------|------------|
| Credit  Agreement      |       | 0.0                                  | %          | $                                       | 230.0      |                        | $          | —                              |       | $                           | 2.5        |   | $ | 227.5 |   |
| Other  revolving loans |       | 2.9                                  | %          | 122.0                                   |       | 0.1                         |       | 88.2                                |       | 33.7                        |       |
| Total  revolving loans |       | 2.9                                  | %          | $                                       | 352.0      |                        | $          | 0.1                                 |       | $                           | 90.7       |   | $ | 261.2 |   |

 

As of March 31, 2010, we had approximately $4.1 million of netoperating loss carryforwards available to reduce future U.S. taxableincome.  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 $4.4 million available tooffset future tax liabilities that expire at various dates. U.S. tax credits,after the filing of the 2008 U.S. Federal tax return in September 2009,include foreign tax credits of $2.5 million expiring in various years through2019 and research and development tax credits of $1.8 million expiring atvarious dates through 2025 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 table summarizes maturities for our significant financialobligations as of March 31, 2010 (in millions):

 
| **Contractual Obligations**                | ** ** | **Total** | ** ** | **Less than 1  Year** | ** ** | **1-3 Years** | ** ** | **4-5 Years** | ** ** | **More than 5  Years** | ** ** |
|--------------------------------------------|------------|-----------|------------|-----------------------|------------|---------------|------------|---------------|------------|------------------------|------------|
| Revolving  lines of credit                 |       | $         | 0.1        |                  | $          | 0.1           |       | $             | —     |                   | $          | — |   | $ | — |   |
| Long-term  debt, including current portion |       | 133.1     |       | 23.5                  |       | 107.0         |       | 2.6           |       | —                 |       |
| Derivative  liabilities                    |       | 6.1       |       | 4.5                   |       | 1.6           |       | —        |       | —                 |       |
| Uncertain  tax contingencies               |       | 24.0      |       | —                |       | 24.0          |       | —        |       | —                 |       |
|                                            |            |           |            |                       |            |               |            |               |            |                        |            |  |  |  |  |  |

 

Uncertain tax contingencies are positions taken or expected to be takenon an income tax return that may result in additional payments to taxauthorities. The total amount of uncertain tax contingencies is included in the“1-3 Years” column as we are not able to reasonably estimate the timing of potentialfuture payments. If a tax authority agrees with the tax position taken orexpected to be taken or the applicable statute of limitations expires, thenadditional payments will not be necessary.

 

***Nasdaq Compliance***

 

CollinJ. D’Silva, a former independent member of our Board and the Board’s AuditCommittee, voluntarily resigned from service on the Audit Committee, effective March 9,2010, and from service on the Board, effective March 31, 2010, inconnection with joining the Company as President of the newly-formed ChemicalAnalysis Division of Bruker Daltonics. OnMarch 24, 2010, we notified Nasdaq that due to the vacancy on ourAudit Committee created by Mr. D’Silva’sresignation from the Audit Committee, we are no longer in compliance withNasdaq Listing Rule 5605 (Rule 5605), which requires that the AuditCommittee be comprised of at least three members, each of whom are independent. On March 25, 2010, we received noticefrom Nasdaq advising that, as result of Mr. D’Silva’s resignation from theAudit Committee, we are not in compliance with Rule 5605 and confirmingthat we are provided a cure period until September 7, 2010 toregain compliance. Additionally, on April 1, 2010, we received notice fromNasdaq that, due to the resignation of Mr. D’Silva from our Board, we arenot in compliance with the majority independent director requirements set forthin Rule 5605. Nasdaq has provided a cure period until September 27,2010 to regain compliance with the majority independence requirements. OurBoard is actively seeking a replacement for Mr. D’Silva to serve on ourBoard and Audit Committee and we intend to regain compliance with the corporategovernance requirements of the Nasdaq Listing Rules as expeditiously aspossible prior to the expiration of the cure periods provided under theserules.

 

**RECENTACCOUNTING PRONOUNCEMENTS**

 

In June 2009, theFinancial Accounting Standards Board, or FASB, issued Accounting StandardsCodification (“Codification”) Topic No. 105, *GenerallyAccepted Accounting Principles*. Codification Topic No. 105 iseffective for fiscal years, and interim periods, ending after September 15,2009. Codification Topic No. 105 is intended to improve financialreporting by identifying the FASB Accounting Standards Codification and rules andinterpretive releases of the Securities and Exchange Commission, or SEC, underauthority of federal securities laws as the sole sources of authoritativeaccounting principles to be used in preparing financial statements that arepresented in conformity with accounting principles generally accepted in theUnited States of America for SEC registrants. The adoption of CodificationTopic No. 105 did not have a material impact on our results of operations,financial position or cash flows.

 

In January 2010, theFASB issued Accounting Standards Update 2010-06, *Fair ValueMeasurements and Disclosures (Topic 820)—Improving Disclosures about Fair ValueMeasurements*. Accounting Standards Update 2010-06 will require newdisclosures about transfers in and out of Levels 1 and 2 of the fair valuehierarchy and activity, including purchases, sales, issuances and settlements,in Level 3 fair value measurements. The requirements of Accounting StandardsUpdate 2010-06 will be effective for interim and annual periods beginning afterDecember 15, 2009, except for the disclosures about purchases, sales,issuances and settlements in Level 3 fair value measurements which will beeffective for interim and annual periods beginning after December 15,2010. We are currently assessing the impact that the additional disclosurerequirements will have on our results of operations and financial position.

 

In September 2009,the Emerging Issues Task Force reached consensus on FASB Accounting StandardsUpdate 2009-14, *Software (Topic 985)—Certain RevenueArrangements 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 Subtopic No. 985-

 

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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,the Emerging 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 No. 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-partyevidence; or (c) estimates. This guidance also eliminates the residualmethod of allocation and requires that arrangement consideration be allocatedat the inception of the arrangement to all deliverables using the relativeselling price method. In addition, this guidance significantly expands requireddisclosures related to a vendor’s multiple-deliverable revenue arrangements. FASBAccounting Standards Update 2009-13 is effective prospectively for revenuearrangements entered into or materially modified in fiscal years beginning onor after June 15, 2010, however, early adoption is permitted. We arecurrently assessing the impact that this update will have on our results ofoperations and financial position and when we will adopt these requirements.

 
| **ITEM  3.** | **QUANTITATIVE  AND 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 subjects our operations to the exposure of exchange rate fluctuations.The impact of currency exchange rate movement can be positive or negative inany period. 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.

 

Our net foreign exchangegains were $0.5 million and $1.3 million for the three months ended March 31,2010 and 2009, respectively. From time to time, we enter into foreign currencycontracts in order to minimize the volatility that fluctuations in exchangerates have on our cash flows related to purchases and sales denominated inforeign currencies. We will continue to evaluate our currency risks and in thefuture may utilize foreign currency contracts more frequently as part of atransactional hedging program.

 

***Impact of Interest Rates***

 

We regularly investexcess cash in short-term investments that are subject to changes in interestrates. We believe that the market risk arising from holding these financialinstruments is 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 entered into interest rate swaps and crosscurrency rate swaps in order to minimize the volatility that changes ininterest rates might have on earnings and cash flows. A 10% increase ordecrease in the average cost of our variable rate debt would not result in amaterial

 

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change in pre-taxinterest expense.

 

In April 2008, weentered into an interest rate swap arrangement to pay a fixed rate ofapproximately 3.8% and receive a variable rate based on three month LIBORthrough December 31, 2012. The initial notional amount of this interestswap was $90.0 million and amortizes in proportion to the term debtcomponent of our Credit Agreement. At March 31, 2010, the outstandingnotional amount of this swap was $76.5 million. We have determined that thisswap is an effective hedge of the variability of cash flows of the interestpayments.

 

***Inflation***

 

We do not believeinflation had a material impact on our business or operating results during anyof the periods presented.

 
| **ITEM  4.** | **CONTROLS  AND PROCEDURES** |
|--------------|------------------------------|

 

We have establisheddisclosure controls and procedures that are designed to ensure that materialinformation relating to us, including our consolidated subsidiaries, is madeknown to our Chief Executive Officer (principal executive officer) and ChiefFinancial Officer (principal financial officer) by others within ourorganization. Under the supervision and with the participation of ourmanagement, including our Chief Executive Officer and Chief Financial Officer,we conducted an evaluation of the effectiveness of our disclosure controls andprocedures as of March 31, 2010. Based on this evaluation, our ChiefExecutive Officer and Chief Financial Officer concluded that our disclosurecontrols and procedures were effective, as of March 31, 2010, to ensurethat the information required to be disclosed by us in the reports that we fileor submit under the Securities Exchange Act of 1934 is recorded, processed,summarized and reported within the time periods specified in the SEC’s rules andforms.

 

There were no changes inour internal control over financial reporting that occurred during the quarterended March 31, 2010 that materially affected, or are reasonably likely toaffect, our internal control over financial reporting.

 
| **PART II** | **OTHER  INFORMATION** |
|------------------|------------------------|

 
| **ITEM  1.** | **LEGAL  PROCEEDINGS** |
|--------------|------------------------|

 

Except as set forthbelow, there have been no material changes to the legal proceedings disclosedin Part I, “Item 3. Legal Proceedings” in our Annual Report on Form 10-Kfor the year ended December 31, 2009.

 

As previously reported,in November 2008 a former employee of Bruker Corporation filed a complaintwith the Massachusetts Commission Against Discrimination alleging agediscrimination. The Massachusetts Commission Against Discrimination recentlycommenced its investigation and the Company responded to a request forinformation on April 23, 2010. The Company believes the complaint made bythe former employee to be without merit and intends to cooperate fully in theinvestigation.

 
| **ITEM  1A.** | **RISK  FACTORS** |
|---------------|-------------------|

 

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 on Form 10-Kfor the year ended December 31, 2009, which could materially affect ourbusiness, financial condition or future results. The risks described in thisreport and in our Annual Report on Form 10-K are not the only risks facingour Company. Additional risks and uncertainties not currently known to us orthat we currently deem to be immaterial also may materially adversely affectour business, financial condition and/or operating results.

 

There have been nomaterial changes to the risk factors previously disclosed in our Annual Reporton Form 10-K for the fiscal year ended December 31, 2009.

 

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

 

The following table setsforth all purchases made by or on behalf of the Company or any “affiliatedpurchaser,” as defined in Rule 10b-18(a)(3) under the Exchange Act,of shares of our common stock during each month in the first quarter of 2010.

 
| **Period**                                | ** ** | **Total Number of  Shares  Purchased** | ** ** | **Average Price  Paid per Share** | ** ** | **Total Number of  Shares  Purchased as  Part of Publicly  Announced Plans  or Programs** | ** ** | **Maximum  Number of  Shares that May  Yet Be Purchased  Under the Plans  or Programs** | ** ** |
|-------------------------------------------|------------|----------------------------------------|------------|-----------------------------------|------------|------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------|------------|
| January 1  - January 31, 2010   |       | —                                 |       | $                                 | —     |                                                                                           | —     |                                                                                    | —     |   |
| February 1  - February 28, 2010 |       | —                                 |       | —                            |       | —                                                                                         |       | —                                                                                  |       |
| March 1  - March 31, 2010       |       | 200,000                                |       | 14.18                             |       | —                                                                                         |       | —                                                                                  |       |
|                                      |       | 200,000                                |       | $                                 | 14.18      |                                                                                           | —     |                                                                                    | —     |   |

 

All purchases were madeby the Company’s Chief Executive Officer, Frank H. Laukien. Shares werepurchased in open market purchases effected in accordance with the safe harborprovisions of Rule 10b-18 of the Exchange Act and in a private transaction.These purchases were previously disclosed on Forms 4 filed with the U.S.Securities and Exchange Commission.

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

 

None.

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

 

 
| **ITEM  5.** | **OTHER  INFORMATION** |
|--------------|------------------------|

 

None.

 
| **ITEM  6.** | **EXHIBITS** |
|--------------|--------------|

 

 
| **Exhibit********No.** | ** ** | **Description**                                                                                                                                                                               |
|------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1                   |       | Certification by Chief  Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of  2002(1)                                                                                  |
| 31.2                   |       | Certification by Chief  Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of  2002(1)                                                                                  |
| 32.1                   |       | Certification by Chief  Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002(2) |

 

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(1) Filedherewith.

(2) Furnishedherewith.

 

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**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 

 
|                    | BRUKER CORPORATION |
|-------------------------|--------------------|
|                    |               |   |   |
| Date: May 10, 2010 | By:                | /s/ FRANK H. LAUKIEN,  PH.D. |
|                    |               | Frank H. Laukien, Ph.D.President, Chief  Executive Officer and Chairman (Principal Executive Officer) |
|                    |               |   |   |
| Date: May 10, 2010 | By:                | /s/ BRIAN P. MONAHAN |
|                    |               | Brian P. Monahan  Chief Financial Officer  (Principal Financial Officer) |

 

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