UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
|
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT of 1934 |
For the quarterly period ended June 30, 2020
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT of 1934 |
For the transition period from to
Commission File Number 000-30833
BRUKER CORPORATION
(Exact name of registrant as specified in its charter)
|
|
|
|
Delaware |
04-3110160 |
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
40 Manning Road, Billerica, MA 01821
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (978) 663-3660
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbols(s) |
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Name of each exchange on which registered |
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Common Stock |
|
BRKR |
|
Nasdaq Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer |
☒ |
Accelerated filer |
☐ |
|
Non-accelerated filer |
☐ |
Smaller reporting company |
☐ |
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|
|
Emerging growth company |
☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
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Class |
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Outstanding at August 3, 2020 |
|
Common Stock, $0.01 par value per share |
153,085,243 shares |
BRUKER CORPORATION
Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 2020
Index
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Page |
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1 |
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1 |
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Unaudited Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019 |
1 |
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2 |
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3 |
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5 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
6 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
26 |
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39 |
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41 |
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42 |
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42 |
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43 |
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44 |
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44 |
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45 |
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46 |
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PART I |
FINANCIAL INFORMATION |
|
ITEM 1. |
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
BRUKER CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share data)
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June 30, |
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December 31, |
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2020 |
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2019 |
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ASSETS |
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Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
746.8 |
|
$ |
678.3 |
|
Short-term investments |
|
|
50.0 |
|
|
6.6 |
|
Accounts receivable, net |
|
|
324.5 |
|
|
362.2 |
|
Inventories |
|
|
665.4 |
|
|
577.2 |
|
Other current assets |
|
|
170.5 |
|
|
172.0 |
|
Total current assets |
|
|
1,957.2 |
|
|
1,796.3 |
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|
|
|
|
|
|
|
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Property, plant and equipment, net |
|
|
335.9 |
|
|
306.1 |
|
Goodwill |
|
|
295.0 |
|
|
293.0 |
|
Operating lease assets |
|
|
60.0 |
|
|
65.6 |
|
Intangibles, net and other long-term assets |
|
|
295.3 |
|
|
310.5 |
|
Total assets |
|
$ |
2,943.4 |
|
$ |
2,771.5 |
|
|
|
|
|
|
|
|
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
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Current liabilities: |
|
|
|
|
|
|
|
Current portion of long-term debt |
|
$ |
100.7 |
|
$ |
0.5 |
|
Accounts payable |
|
|
119.2 |
|
|
118.4 |
|
Customer advances |
|
|
149.9 |
|
|
137.9 |
|
Other current liabilities |
|
|
379.9 |
|
|
388.8 |
|
Total current liabilities |
|
|
749.7 |
|
|
645.6 |
|
|
|
|
|
|
|
|
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Long-term debt |
|
|
924.2 |
|
|
812.8 |
|
Operating lease liabilities |
|
|
42.4 |
|
|
47.0 |
|
Other long-term liabilities |
|
|
320.5 |
|
|
327.9 |
|
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|
|
|
|
|
|
|
Commitments and contingencies (Note 12) |
|
|
|
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|
|
|
|
|
|
|
|
|
|
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Redeemable noncontrolling interest |
|
|
— |
|
|
21.1 |
|
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|
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Shareholders' equity: |
|
|
|
|
|
|
|
Preferred stock, $0.01 par value 5,000,000 shares authorized, none issued or outstanding |
|
|
— |
|
|
— |
|
Common stock, $0.01 par value 260,000,000 shares authorized, 173,638,551 and 173,502,375 shares issued and 153,077,692 and 154,155,798 shares outstanding at June 30, 2020 and December 31, 2019, respectively |
|
|
1.7 |
|
|
1.7 |
|
Treasury stock, at cost, 20,560,859 and 19,346,577 shares at June 30, 2020 and December 31, 2019, respectively |
|
|
(593.8) |
|
|
(543.8) |
|
Accumulated other comprehensive loss |
|
|
(13.5) |
|
|
(25.5) |
|
Other shareholders' equity |
|
|
1,503.0 |
|
|
1,474.4 |
|
Total shareholders' equity attributable to Bruker Corporation |
|
|
897.4 |
|
|
906.8 |
|
Noncontrolling interest in consolidated subsidiaries |
|
|
9.2 |
|
|
10.3 |
|
Total shareholders' equity |
|
|
906.6 |
|
|
917.1 |
|
|
|
|
|
|
|
|
|
Total liabilities, redeemable noncontrolling interest and shareholders' equity |
|
$ |
2,943.4 |
|
$ |
2,771.5 |
The accompanying notes are an integral part of these financial statements
1
BRUKER CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in millions, except per share data)
|
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|
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|
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Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||
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2020 |
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2019 |
|
2020 |
|
2019 |
||||
|
Product revenue |
|
$ |
347.0 |
|
$ |
411.7 |
|
$ |
692.0 |
|
$ |
794.7 |
|
Service revenue |
|
|
76.1 |
|
|
78.5 |
|
|
154.3 |
|
|
155.9 |
|
Other revenue |
|
|
1.5 |
|
|
— |
|
|
2.3 |
|
|
1.0 |
|
Total revenue |
|
|
424.6 |
|
|
490.2 |
|
|
848.6 |
|
|
951.6 |
|
|
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|
|
|
|
|
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|
|
|
|
|
|
Cost of product revenue |
|
|
193.3 |
|
|
210.0 |
|
|
373.8 |
|
|
407.5 |
|
Cost of service revenue |
|
|
44.7 |
|
|
49.8 |
|
|
95.8 |
|
|
98.9 |
|
Cost of other revenue |
|
|
0.4 |
|
|
— |
|
|
0.5 |
|
|
0.1 |
|
Total cost of revenue |
|
|
238.4 |
|
|
259.8 |
|
|
470.1 |
|
|
506.5 |
|
Gross profit |
|
|
186.2 |
|
|
230.4 |
|
|
378.5 |
|
|
445.1 |
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Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
102.4 |
|
|
124.5 |
|
|
223.6 |
|
|
244.6 |
|
Research and development |
|
|
44.1 |
|
|
48.5 |
|
|
92.6 |
|
|
94.9 |
|
Other charges, net |
|
|
1.8 |
|
|
3.9 |
|
|
8.0 |
|
|
10.2 |
|
Total operating expenses |
|
|
148.3 |
|
|
176.9 |
|
|
324.2 |
|
|
349.7 |
|
Operating income |
|
|
37.9 |
|
|
53.5 |
|
|
54.3 |
|
|
95.4 |
|
|
|
|
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|
|
|
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|
|
|
|
|
|
Interest and other income (expense), net |
|
|
(6.6) |
|
|
(5.9) |
|
|
(9.5) |
|
|
(9.4) |
|
Income before income taxes and noncontrolling interest in consolidated subsidiaries |
|
|
31.3 |
|
|
47.6 |
|
|
44.8 |
|
|
86.0 |
|
Income tax provision |
|
|
7.1 |
|
|
10.6 |
|
|
10.0 |
|
|
18.3 |
|
Consolidated net income |
|
|
24.2 |
|
|
37.0 |
|
|
34.8 |
|
|
67.7 |
|
Net income (loss) attributable to noncontrolling interests in consolidated subsidiaries |
|
|
0.1 |
|
|
0.5 |
|
|
0.2 |
|
|
0.4 |
|
Net income attributable to Bruker Corporation |
|
$ |
24.1 |
|
$ |
36.5 |
|
$ |
34.6 |
|
$ |
67.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share attributable to Bruker Corporation shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.16 |
|
$ |
0.23 |
|
$ |
0.22 |
|
$ |
0.43 |
|
Diluted |
|
$ |
0.16 |
|
$ |
0.23 |
|
$ |
0.22 |
|
$ |
0.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
153.6 |
|
|
156.1 |
|
|
153.9 |
|
|
156.4 |
|
Diluted |
|
|
154.7 |
|
|
157.6 |
|
|
155.1 |
|
|
157.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
34.2 |
|
$ |
49.5 |
|
$ |
46.2 |
|
$ |
65.9 |
|
Less: Comprehensive income attributable to noncontrolling interests |
|
|
0.3 |
|
|
0.9 |
|
|
0.2 |
|
|
0.8 |
|
Less: Comprehensive income (loss) attributable to redeemable noncontrolling interest |
|
|
— |
|
|
— |
|
|
(0.5) |
|
|
(0.6) |
|
Comprehensive income attributable to Bruker Corporation |
|
$ |
33.9 |
|
$ |
48.6 |
|
$ |
46.5 |
|
$ |
65.7 |
The accompanying notes are an integral part of these financial statements.
2
BRUKER CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS’ EQUITY
(in millions, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
Equity |
|
Noncontrolling |
|
|
|
|||
|
|
|
Redeemable |
|
|
|
|
|
|
|
|
|
Treasury |
|
Additional |
|
|
|
|
Other |
|
Attributable to |
|
Interests in |
|
Total |
|||||||
|
|
|
Noncontrolling |
|
|
|
|
Common Stock |
|
Treasury |
|
Stock |
|
Paid-In |
|
Retained |
|
Comprehensive |
|
Bruker |
|
Consolidated |
|
Shareholders' |
|||||||||
|
|
|
Interest |
|
|
Common Shares |
|
Amount |
|
Shares |
|
Amount |
|
Capital |
|
Earnings |
|
Income (Loss) |
|
Corporation |
|
Subsidiaries |
|
Equity |
|||||||||
|
Balance at December 31, 2019 |
|
$ |
21.1 |
|
|
154,155,798 |
|
$ |
1.7 |
|
19,346,577 |
|
$ |
(543.8) |
|
$ |
199.7 |
|
$ |
1,274.7 |
|
$ |
(25.5) |
|
$ |
906.8 |
|
$ |
10.3 |
|
$ |
917.1 |
|
Stock options exercised |
|
|
— |
|
|
30,182 |
|
|
— |
|
— |
|
|
— |
|
|
0.7 |
|
|
— |
|
|
— |
|
|
0.7 |
|
|
— |
|
|
0.7 |
|
Restricted stock units vested |
|
|
— |
|
|
40,516 |
|
|
— |
|
— |
|
|
— |
|
|
(0.1) |
|
|
— |
|
|
— |
|
|
(0.1) |
|
|
— |
|
|
(0.1) |
|
Stock based compensation |
|
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
3.0 |
|
|
— |
|
|
— |
|
|
3.0 |
|
|
— |
|
|
3.0 |
|
Cash dividends paid to common stockholders ($0.04 per share) |
|
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(6.2) |
|
|
— |
|
|
(6.2) |
|
|
(1.2) |
|
|
(7.4) |
|
Acquisition of redeemable noncontrolling interest |
|
|
(20.6) |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(1.3) |
|
|
— |
|
|
(1.3) |
|
|
— |
|
|
(1.3) |
|
Consolidated net income |
|
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
10.5 |
|
|
— |
|
|
10.5 |
|
|
0.1 |
|
|
10.6 |
|
Other comprehensive income (loss) |
|
|
(0.5) |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2.2 |
|
|
2.2 |
|
|
(0.2) |
|
|
2.0 |
|
Balance at March 31, 2020 |
|
$ |
— |
|
|
154,226,496 |
|
$ |
1.7 |
|
19,346,577 |
|
$ |
(543.8) |
|
$ |
203.3 |
|
$ |
1,277.7 |
|
$ |
(23.3) |
|
$ |
915.6 |
|
$ |
9.0 |
|
$ |
924.6 |
|
Stock options exercised |
|
|
— |
|
|
61,968 |
|
|
— |
|
— |
|
|
— |
|
|
1.3 |
|
|
— |
|
|
— |
|
|
1.3 |
|
|
— |
|
|
1.3 |
|
Restricted stock units vested |
|
|
— |
|
|
3,510 |
|
|
— |
|
— |
|
|
— |
|
|
(0.1) |
|
|
— |
|
|
— |
|
|
(0.1) |
|
|
— |
|
|
(0.1) |
|
Stock based compensation |
|
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
2.8 |
|
|
— |
|
|
— |
|
|
2.8 |
|
|
— |
|
|
2.8 |
|
Shares Repurchased |
|
|
— |
|
|
(1,214,282) |
|
|
— |
|
1,214,282 |
|
|
(50.0) |
|
|
— |
|
|
— |
|
|
— |
|
|
(50.0) |
|
|
— |
|
|
(50.0) |
|
Cash dividends paid to common stockholders ($0.04 per share) |
|
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(6.1) |
|
|
— |
|
|
(6.1) |
|
|
— |
|
|
(6.1) |
|
Consolidated net income |
|
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
24.1 |
|
|
— |
|
|
24.1 |
|
|
0.1 |
|
|
24.2 |
|
Other comprehensive income |
|
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
9.8 |
|
|
9.8 |
|
|
0.1 |
|
|
9.9 |
|
Balance at June 30, 2020 |
|
$ |
— |
|
|
153,077,692 |
|
$ |
1.7 |
|
20,560,859 |
|
$ |
(593.8) |
|
$ |
207.3 |
|
$ |
1,295.7 |
|
$ |
(13.5) |
|
$ |
897.4 |
|
$ |
9.2 |
|
$ |
906.6 |
The accompanying notes are an integral part of these financial statements
3
BRUKER CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS’ EQUITY
(in millions, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
Equity |
|
Noncontrolling |
|
|
|
|||
|
|
|
Redeemable |
|
|
|
|
|
|
|
|
|
Treasury |
|
Additional |
|
|
|
|
Other |
|
Attributable to |
|
Interests in |
|
Total |
|||||||
|
|
|
Noncontrolling |
|
|
|
|
Common Stock |
|
Treasury |
|
Stock |
|
Paid-In |
|
Retained |
|
Comprehensive |
|
Bruker |
|
Consolidated |
|
Shareholders' |
|||||||||
|
|
|
Interest |
|
|
Common Shares |
|
Amount |
|
Shares |
|
Amount |
|
Capital |
|
Earnings |
|
Income (Loss) |
|
Corporation |
|
Subsidiaries |
|
Equity |
|||||||||
|
Balance at December 31, 2018 |
|
$ |
22.6 |
|
|
156,609,340 |
|
$ |
1.7 |
|
16,024,880 |
|
$ |
(401.5) |
|
$ |
176.9 |
|
$ |
1,102.5 |
|
$ |
17.0 |
|
$ |
896.6 |
|
$ |
8.5 |
|
$ |
905.1 |
|
Stock options exercised |
|
|
— |
|
|
167,177 |
|
|
— |
|
— |
|
|
— |
|
|
3.1 |
|
|
— |
|
|
— |
|
|
3.1 |
|
|
— |
|
|
3.1 |
|
Restricted stock units vested |
|
|
— |
|
|
35,072 |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Stock based compensation |
|
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
2.7 |
|
|
— |
|
|
— |
|
|
2.7 |
|
|
— |
|
|
2.7 |
|
Shares issued for acquisition |
|
|
— |
|
|
3,087 |
|
|
— |
|
(3,087) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Cash dividends paid to common stockholders ($0.04 per share) |
|
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(6.3) |
|
|
— |
|
|
(6.3) |
|
|
— |
|
|
(6.3) |
|
Consolidated net income (loss) |
|
|
(0.2) |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
30.8 |
|
|
— |
|
|
30.8 |
|
|
0.1 |
|
|
30.9 |
|
Other comprehensive loss |
|
|
(0.4) |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(13.7) |
|
|
(13.7) |
|
|
(0.2) |
|
|
(13.9) |
|
Balance at March 31, 2019 |
|
$ |
22.0 |
|
|
156,814,676 |
|
$ |
1.7 |
|
16,021,793 |
|
$ |
(401.5) |
|
$ |
182.7 |
|
$ |
1,127.0 |
|
$ |
3.3 |
|
$ |
913.2 |
|
$ |
8.4 |
|
$ |
921.6 |
|
Stock options exercised |
|
|
— |
|
|
145,606 |
|
|
— |
|
— |
|
|
— |
|
|
2.7 |
|
|
— |
|
|
— |
|
|
2.7 |
|
|
— |
|
|
2.7 |
|
Restricted stock units vested |
|
|
— |
|
|
2,344 |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Stock based compensation |
|
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
2.6 |
|
|
— |
|
|
— |
|
|
2.6 |
|
|
— |
|
|
2.6 |
|
Shares repurchased |
|
|
— |
|
|
(2,300,635) |
|
|
— |
|
2,300,635 |
|
|
(100.0) |
|
|
— |
|
|
— |
|
|
— |
|
|
(100.0) |
|
|
— |
|
|
(100.0) |
|
Cash dividends paid to common stockholders ($0.04 per share) |
|
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(6.3) |
|
|
— |
|
|
(6.3) |
|
|
— |
|
|
(6.3) |
|
Consolidated net income |
|
|
(0.3) |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
36.5 |
|
|
— |
|
|
36.5 |
|
|
0.8 |
|
|
37.3 |
|
Other comprehensive income |
|
|
0.3 |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
12.1 |
|
|
12.1 |
|
|
0.1 |
|
|
12.2 |
|
Balance at June 30, 2019 |
|
$ |
22.0 |
|
|
154,661,991 |
|
$ |
1.7 |
|
18,322,428 |
|
$ |
(501.5) |
|
$ |
188.0 |
|
$ |
1,157.2 |
|
$ |
15.4 |
|
$ |
860.8 |
|
$ |
9.3 |
|
$ |
870.1 |
The accompanying notes are an integral part of these financial statements
4
BRUKER CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
||||
|
|
|
2020 |
|
2019 |
||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
Consolidated net income |
|
$ |
34.8 |
|
$ |
67.7 |
|
Adjustments to reconcile consolidated net income to cash flows from operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
38.2 |
|
|
38.4 |
|
Stock-based compensation expense |
|
|
6.4 |
|
|
6.1 |
|
Deferred income taxes |
|
|
(1.1) |
|
|
(0.3) |
|
Other non-cash expenses, net |
|
|
19.2 |
|
|
6.1 |
|
Changes in operating assets and liabilities, net of acquisitions and divestitures: |
|
|
|
|
|
|
|
Accounts receivable |
|
|
34.3 |
|
|
10.6 |
|
Inventories |
|
|
(97.0) |
|
|
(69.8) |
|
Accounts payable and accrued expenses |
|
|
(16.1) |
|
|
2.8 |
|
Income taxes payable, net |
|
|
(3.1) |
|
|
(19.2) |
|
Deferred revenue |
|
|
19.6 |
|
|
9.2 |
|
Customer advances |
|
|
21.8 |
|
|
(0.9) |
|
Other changes in operating assets and liabilities, net |
|
|
(10.2) |
|
|
(25.9) |
|
Net cash provided by operating activities |
|
|
46.8 |
|
|
24.8 |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
Purchases of short-term investments |
|
|
(50.0) |
|
|
(6.4) |
|
Maturity of short-term investments |
|
|
6.1 |
|
|
— |
|
Cash paid for acquisitions, net of cash acquired |
|
|
(24.6) |
|
|
(71.9) |
|
Purchases of property, plant and equipment |
|
|
(50.8) |
|
|
(28.6) |
|
Proceeds from sales of property, plant and equipment |
|
|
0.1 |
|
|
0.3 |
|
Net proceeds from cross currency swap agreements |
|
|
3.5 |
|
|
— |
|
Net cash used in investing activities |
|
|
(115.7) |
|
|
(106.6) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
Repayments of 2012 Note Purchase Agreement |
|
|
— |
|
|
(15.0) |
|
Repayments of revolving lines of credit |
|
|
(96.6) |
|
|
(28.5) |
|
Proceeds from revolving lines of credit |
|
|
297.5 |
|
|
200.6 |
|
Repayment of other debt |
|
|
(0.3) |
|
|
(4.6) |
|
Proceeds from other debt |
|
|
0.5 |
|
|
0.5 |
|
Payment of deferred financing costs |
|
|
(0.1) |
|
|
— |
|
Proceeds from issuance of common stock, net |
|
|
1.9 |
|
|
5.8 |
|
Payment of contingent consideration |
|
|
(1.2) |
|
|
(4.6) |
|
Repurchase of common stock |
|
|
(50.0) |
|
|
(100.0) |
|
Payment of dividends |
|
|
(12.3) |
|
|
(12.6) |
|
Cash payments to noncontrolling interest |
|
|
(1.2) |
|
|
— |
|
Net cash provided by financing activities |
|
|
138.2 |
|
|
41.6 |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
|
(0.8) |
|
|
0.4 |
|
Net change in cash, cash equivalents and restricted cash |
|
|
68.5 |
|
|
(39.8) |
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
681.9 |
|
|
326.3 |
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
750.4 |
|
$ |
286.5 |
|
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
|
Restricted cash period beginning balance |
|
$ |
3.6 |
|
$ |
3.9 |
|
Restricted cash period ending balance |
|
$ |
3.6 |
|
$ |
4.0 |
The accompanying notes are an integral part of these financial statements
5
BRUKER CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
Bruker Corporation, together with its consolidated subsidiaries (Bruker or the Company), develops, manufactures and distributes high-performance scientific instruments and analytical and diagnostic solutions that enable its customers to explore life and materials at microscopic, molecular and cellular levels. Many of the Company’s products are used to detect, measure and visualize structural characteristics of chemical, biological and industrial material samples. The Company’s products address the rapidly evolving needs of a diverse array of customers in life science research, pharmaceuticals, biotechnology, applied markets, cell biology, clinical research, microbiology, in-vitro diagnostics, nanotechnology and materials science research.
The Company has four operating segments, Bruker BioSpin Group, Bruker CALID Group, Bruker Scientific Instruments (BSI) Nano Segment and Bruker Energy & Supercon Technologies (BEST). The Company has three reportable segments, BSI Life Science Segment, BSI NANO Segment and BEST.
For financial reporting purposes, the Bruker BioSpin Group and Bruker CALID Group operating segments are aggregated into the reportable BSI Life Science Segment because each has similar economic characteristics, production processes, service offerings, types and classes of customers, methods of distribution and regulatory environments.
Bruker BioSpin — The Bruker BioSpin Group designs, manufactures and distributes enabling life science tools based on magnetic resonance technology. Bruker BioSpin Group’s revenues are generated by academic and government research customers, pharmaceutical and biotechnology companies and nonprofit laboratories, as well as chemical, food and beverage, clinical and other industrial companies.
Bruker CALID (Chemicals, Applied Markets, Life Science, In-Vitro Diagnostics, Detection)- The Bruker CALID Group designs, manufactures and distributes life science mass spectrometry and ion mobility spectrometry solutions, analytical and process analysis instruments and solutions based on infrared and Raman molecular spectroscopy technologies and radiological/nuclear detectors for Chemical, Biological, Radiological, Nuclear and Explosive (CBRNE) detection. Customers of the Bruker CALID Group include: academic institutions and medical schools; pharmaceutical, biotechnology and diagnostics companies; contract research organizations; nonprofit and for-profit forensics laboratories; agriculture, food and beverage safety laboratories; environmental and clinical microbiology laboratories; hospitals and government departments and agencies.
The BSI NANO Segment designs, manufactures and distributes advanced X-ray instruments; atomic force microscopy instrumentation; advanced fluorescence optical microscopy instruments; analytical tools for electron microscopes and X-ray metrology; defect-detection equipment for semiconductor process control; handheld, portable and mobile X-ray fluorescence spectrometry instruments; and spark optical emission spectroscopy systems. Customers of the BSI NANO Segment include academic institutions, governmental customers, nanotechnology companies, semiconductor companies, raw material manufacturers, industrial companies, biotechnology and pharmaceutical companies and other businesses involved in materials analysis.
The BEST reportable segment develops and manufactures superconducting and non-superconducting materials and devices for use in renewable energy, energy infrastructure, healthcare and "big science" research. The segment focuses on metallic low temperature superconductors for use in magnetic resonance imaging, nuclear magnetic resonance, fusion energy research and other applications.
The unaudited condensed consolidated financial statements represent the consolidated accounts of the Company. All intercompany accounts and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements as of June 30, 2020 and December 31, 2019, and for the three and six months ended June 30, 2020 and 2019, have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, the financial information presented herein does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair statement have been included. The results for interim periods are not necessarily indicative of the results expected for any other interim period or the full year.
6
At June 30, 2020, the Company's significant accounting policies, which are detailed in the Company's Annual Report on Form 10-K for the year ended December 31, 2019, have not changed.
Risks & Uncertainties
The Company is subject to risks common to its industry including, but not limited to, global economic conditions, government and academic funding levels, the impact of the COVID-19 pandemic, rapid technological change, changes in commodity prices, spending patterns of its customers, protection of its intellectual property, availability of key raw materials and components, compliance with existing and future regulation by government agencies and fluctuations in foreign currency exchange rates and interest rates.
In December 2019, a novel strain of coronavirus, referred to as COVID-19, surfaced in Wuhan, China. In March 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. The virus has spread to over 200 countries and territories and continues to spread globally, including in the United States. The impact of this pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world.
Impacts to the Company's business include temporary closures of many of the Company’s government and university customers and suppliers, disruptions or restrictions on employees' and customers' ability to travel, and delays in product installations to and from affected countries. In an effort to halt the outbreak of COVID-19, a number of countries, including the United States, implemented significant restrictions on travel, shelter in place or stay at home orders, and business closures. Certain jurisdictions, including many within the United States, have begun implementing policies with the goal of re-opening these markets only to return to restrictions in the face of increases in new COVID-19 cases. For example, a number of states, including California, Massachusetts and New Jersey where the Company has significant operations, had issued shelter in place or stay-at-home orders. Although these states have begun implementing phased re-opening policies, many of the Company’s employees in these areas continue to work remotely, and any re-openings may be delayed or pulled back if the virus continues to spread. In addition, a number of the Company's production facilities had to either temporarily close or operate on a reduced capacity. Most commercial activity in sales and marketing, and customer demonstrations and applications training, are either being conducted remotely or postponed. Customer purchasing departments are operating at reduced capacity, and many customers could delay or cut capital expenditures and operating budgets. These travel restrictions, business closures and operating reductions at Bruker, customers, distributors, and/or suppliers have and will continue to adversely impact the Company's operations worldwide, including the ability to manufacture, sell or distribute products, as well as cause temporary closures of foreign distributors, or the facilities of suppliers or customers. This disruption of the Company's employees, distributors, suppliers and customers has and will continue to impact the Company’s global sales and future operating results.
The Company is continuing to monitor and assess the effects of the COVID-19 pandemic on commercial operations, including its continued impact on revenue for the remaining periods in 2020. However, the Company cannot at this time accurately predict what effects these conditions will ultimately have on its operations due to uncertainties relating to the severity of the disease, the duration of the outbreak, including the impact of any “second wave” of the virus, and the length or severity of the travel restrictions, business closures, and other safety and precautionary measures imposed by the governments of impacted countries. The pandemic has also adversely affected the economies and financial markets of many countries, which has affected and likely will continue to affect demand for the Company’s products and its operating results.
The preparation of the unaudited condensed consolidated financial statements requires the Company to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis the Company evaluates estimates, judgments and methodologies. Changes in estimates are recorded in the period in which they become known. The Company bases estimates on historical experience and on various other assumptions that they believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of revenues and expenses. The full extent to which the COVID-19 pandemic will directly or indirectly impact the business, results of operations and financial condition, including sales, expenses, reserves and allowances, manufacturing, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat it, as well as the economic impact on local, regional, national and international customers and markets. The Company has made estimates of the impact of COVID-19 within the financial statements and there may be changes to those estimates in future periods. Actual results may differ from management's estimates if these results differ from historical experience.
7
2. Revenue
The following table presents the Company’s revenues by Group and End Customer Geography (dollars in millions):
Revenue for the Company recognized at a point in time versus over time is as follows (dollars in millions):
Remaining Performance Obligations
Remaining performance obligations represent the aggregate transaction price allocated to a promise to transfer a good or service that is fully or partially unsatisfied at the end of the period. As of June 30, 2020, remaining performance obligations were approximately $1,886.2 million. The Company expects to recognize revenue on approximately 57.4% of the remaining performance obligations over the next twelve months and the remaining performance obligations primarily within one to three years.
Contract Balances
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets) and deferred revenue, customer deposits and billings in excess of revenue recognized (contract liabilities) on the Company’s unaudited condensed consolidated balance sheets.
Contract assets—Most of the Company’s long-term contracts are billed as work progresses in accordance with the contract terms and conditions, either at periodic intervals or upon achievement of certain milestones. Billing often occurs subsequent to revenue recognition, resulting in contract assets. Contract assets are generally classified as other current assets in the unaudited condensed consolidated balance sheets. The balance of contract assets as of June 30, 2020 and December 31, 2019 was $46.6 million and $43.9 million, respectively.
8
Contract liabilities—The Company often receives cash payments from customers in advance of the Company’s performance, resulting in contract liabilities. These contract liabilities are classified as either current or long-term in the unaudited condensed consolidated balance sheets based on the timing of when revenue recognition is expected. As of June 30, 2020 and December 31, 2019, the contract liabilities were $352.1 million and $312.5 million, respectively. The increase in the contract liability balance during the six month period ended June 30, 2020 is primarily the result of a delay in instrument installations due to the customer facility closures or reduced operations as a result of COVID-19. Approximately $119.2 million of the contract liability balance on December 31, 2019 was recognized as revenue during the six month period ended June 30, 2020.
3. Acquisitions
The impact of all acquisitions, individually and collectively, on revenues, net income and total assets was not material. Pro forma financial information reflecting all acquisitions has not been presented because the impact, individually and collectively, on revenues, net income and total assets is not material. Amounts allocated to goodwill that are attributable to expected synergies are not expected to be deductible for tax purposes.
2020
Hain
On October 15, 2018, Bruker acquired an 80% interest in Hain Lifescience GmbH (“Hain”) for a purchase price of Euro 66 million (approximately $76.4 million) with options to acquire the remaining 20%. Hain is an infectious disease specialist with a broad range of molecular diagnostics solutions for the detection of microbial and viral pathogens, as well as for molecular antibiotic resistance testing. Hain is located in Nehren, Germany and was integrated into the BSI Life Science Segment. On January 31, 2020, the Company acquired the remaining 20% interest in Hain for a purchase price of EUR 20 million (approximately $22.2 million). The carrying value of the noncontrolling interest was accreted to the redemption value of EUR 20 million through retained earnings and then reclassified to additional paid in capital.
In addition to the Hain acquisition noted above, in the six months ended June 30, 2020, the Company completed one acquisition that complemented the Company’s existing product offerings. The following table reflects the consideration transferred and the respective reportable segment for the acquisition (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Acquisition |
|
Date Acquired |
|
Segment |
|
Consideration |
|
Cash Consideration |
||
|
SmartTip B.V. |
|
April 1, 2020 |
|
BSI Nano |
|
$ |
3.1 |
|
$ |
2.4 |
|
|
|
|
|
|
|
$ |
3.1 |
|
$ |
2.4 |
9
2019
On April 2, 2019, the Company acquired Rave LLC (“Rave”), a privately held company, for a purchase price of $52.2 million with the potential for additional consideration of up to $5.0 million based on revenue and gross margin achievements in 2019 and 2020. Rave develops and manufactures nanomachining and laser photomask repair equipment. Rave will be integrated into the BSI NANO Segment. The acquisition of Rave was accounted for under the acquisition method. The components and fair value allocation of the consideration transferred in connection with the acquisition were as follows (dollars in millions):
The fair value allocation included contingent consideration in the amount of $4.4 million, which represented the estimated fair value of future payments to the former shareholders of Rave based on achieving revenue and gross margin percentage targets for the period ended April 30, 2020. The Company completed the fair value allocation during 2020. The amortization period for all intangible assets acquired in connection with Rave is ten years.
In addition to the Rave LLC acquisition noted above, in the six months ended June 30, 2019, the Company completed various other acquisitions that collectively complemented the Company's existing product offerings or added aftermarket and software capabilities to the Company's existing businesses. The following table reflects the consideration transferred and the respective reportable segment for each of these acquisitions (in millions):
4. Stock-Based Compensation
The Company recorded stock-based compensation expense as follows in the unaudited condensed consolidated statements of income and comprehensive income (dollars in millions):
10
In addition to the awards above, the Company recorded stock-based compensation expense within other charges, net of $0.3 million and $0.6 million in the three and six months ended June 30, 2020, respectively, and $0.4 million and $0.8 million in the three and six months ended June 30, 2019, respectively, related to the 2018 acquisition of Mestrelab Research, S.L. (Mestrelab).
Stock-based compensation expense is recognized on a straight-line basis over the underlying requisite service period of the stock-based award.
Stock options to purchase the Company's common stock are periodically awarded to executive officers and other employees of the Company subject to a vesting period of three to four years. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. There were no stock options awarded during the six months ended June 30, 2020 and 2019.
Stock option activity for the six months ended June 30, 2020 was as follows:
| (a) | In addition to the options that are vested at June 30, 2020, the Company expects a portion of the unvested options to vest in the future. Options expected to vest in the future are determined by applying an estimated forfeiture rate to the options that are unvested as of June 30, 2020. |
| (b) | The aggregate intrinsic value is based on the positive difference between the fair value of the Company’s common stock price of $40.68 on June 30, 2020 and the exercise price of the underlying stock options. |
The total intrinsic value of options exercised was $0.5 million and $6.9 million for the six months ended June 30, 2020 and 2019, respectively.
Restricted stock unit activity for the six months ended June 30, 2020 was as follows:
The total fair value of restricted stock units vested was $1.4 million for each of the six months ended June 30, 2020 and 2019.
11
At June 30, 2020, the Company expects to recognize pre-tax stock-based compensation expense of $1.9 million associated with outstanding stock option awards granted under the Company's stock plans over the weighted average remaining service period of 1.0 years. The Company also expects to recognize additional pre-tax stock-based compensation expense of $18.1 million associated with outstanding restricted stock units granted under the 2016 Plan over the weighted average remaining service period of 2.1 years.
5. Earnings Per Share
Net income per common share attributable to Bruker Corporation shareholders is calculated by dividing net income attributable to Bruker Corporation, adjusted to reflect changes in the redemption value of the redeemable noncontrolling interest, by the weighted-average number of shares outstanding during the period. The diluted net income per share computation includes the effect of shares which would be issuable upon the exercise of outstanding stock options and the vesting of restricted stock, reduced by the number of shares which are assumed to be purchased by the Company under the treasury stock method. In January 2020, the Company acquired the remaining interest in our redeemable noncontrolling interest. There was no redemption value adjustment of the redeemable noncontrolling interest for the six months ended June 30, 2020 or 2019.
The following table sets forth the computation of basic and diluted weighted average shares outstanding and net income per common share attributable to Bruker shareholders (dollars in millions, except per share amounts):
Stock options to purchase approximately 0.1 million shares were excluded from the computation of diluted earnings per share in each of the three months ended June 30, 2020 and 2019, as their effect would have been anti-dilutive. Approximately 0.1 million shares were excluded from the computation of diluted earnings per share in each of the six months ended June 30, 2020 and 2019, as their effect would have been anti-dilutive.
6. Fair Value of Financial Instruments
The Company applies the following hierarchy to determine the fair value of financial instruments, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. The levels in the hierarchy are defined as follows:
12
The valuation techniques that may be used by the Company to determine the fair value of Level 2 and Level 3 financial instruments are the market approach, the income approach and the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value based on current market expectations about those future amounts, including present value techniques, option-pricing models and the excess earnings method. The cost approach is based on the amount that would be required to replace the service capacity of an asset (replacement cost).
The following tables set forth the Company's financial instruments measured at fair value on a recurring basis and present them within the fair value hierarchy using the lowest level of input that is significant to the fair value measurement at June 30, 2020 and December 31, 2019 (dollars in millions):
13
The Company's financial instruments consist primarily of cash equivalents, short-term investments, restricted cash, derivative instruments consisting of forward foreign exchange contracts, cross-currency interest rate swap agreements, commodity contracts, derivatives embedded in certain purchase and sale contracts, derivatives embedded within noncontrolling interests, accounts receivable, accounts payable, contingent consideration and long-term debt. The carrying amounts of the Company's cash equivalents, short-term investments and restricted cash, accounts receivable, borrowings under a revolving credit agreement and accounts payable approximate fair value because of their short-term nature. The Company's long-term debt consists principally of a note purchase agreement entered into in 2012 and a revolving credit agreement, long term loan agreement and note purchase agreement entered into in 2019.
The Company has evaluated the estimated fair value of financial instruments using available market information and management’s estimates. The use of different market assumptions and/or estimation methodologies could have a significant effect on the estimated fair value amounts.
The Company measures certain assets and liabilities at fair value with changes in fair value recognized in earnings. Fair value treatment may be elected either upon initial recognition of an eligible asset or liability or, for an existing asset or liability, if an event triggers a new basis of accounting. The Company did not elect to remeasure any of its existing financial assets or liabilities and did not elect the fair value option for any financial assets or liabilities which originated during the six months ended June 30, 2020 or 2019.
The fair value of the long-term fixed interest rate debt, which has been classified as Level 2, was $510.7 million and $517.4 million at June 30, 2020 and December 31, 2019, respectively, based on market and observable sources with similar maturity dates.
Excluded from the table above are restricted cash, cash equivalents and short-term investments related to time and call deposits. The Company has a program to enter into money markets and time deposits with varying maturity dates ranging from one to twelve months, as well as call deposits for which the Company has the ability to redeem the invested amounts generally over a period of 95 days. The Company has classified these investments within cash and cash equivalents or short-term investments within the consolidated balance sheets based on call and maturity dates and these are not subject to fair value measurement. The following tables set forth the balances of restricted cash, cash equivalents and short-term investments as of June 30, 2020 and December 31, 2019 (dollars in millions):
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|
|
|
|
|
|
June 30, |
|
December 31, |
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|
|
2020 |
|
2019 |
||
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Restricted cash |
|
$ |
3.6 |
|
$ |
3.6 |
|
Cash equivalents |
|
|
202.3 |
|
|
9.0 |
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Short-term investments |
|
|
50.0 |
|
|
6.6 |
On a quarterly basis, the Company reviews its short-term investments to determine if there have been any events that could create an impairment. None were noted for the six month periods ended June 30, 2020 or 2019.
Contingent consideration recorded within other current liabilities represents the estimated fair value of future payments to the former shareholders as part of certain acquisitions. These contingent considerations are primarily based on the applicable acquired company achieving annual revenue and gross margin targets in certain years as specified in the relevant purchase and sale agreement. The Company initially values the contingent consideration on acquisition date by using a Monte Carlo simulation or an income approach method. The Monte Carlo method models future revenue and costs of goods sold projections and discounts the average results to present value. The income approach method involves calculating the earnout payment based on the forecasted cash flows, adjusting the future earnout payment for the risk of reaching the projected financials, and then discounting the future payments to present value by the counterparty risk. The counterparty risk considers the risk of the buyer having the cash to make the earnout payments and is commensurate with a cost of debt over an appropriate term.
14
The following table sets forth the changes in contingent consideration liabilities for the six months ended June 30, 2020 (dollars in millions):
As part of the Mestrelab acquisition, the Company entered into an agreement with the noncontrolling interest holders that provides the Company with the right to purchase, and the noncontrolling interest holders with the right to sell, the remaining 49% of Mestrelab for cash at a contractually defined redemption value. These rights (an embedded derivative) are exercisable beginning in 2022 and can be accelerated, at a discounted redemption value, upon certain events related to post combination services. As the option is tied to continued employment, the Company classified the hybrid instrument (noncontrolling interest with an embedded derivative) as a long-term liability on the consolidated balance sheets. Subsequent to the acquisition, the carrying value of the hybrid instrument is remeasured to fair value with changes recorded to stock-based compensation expense in proportion to the requisite service period vested. The hybrid instrument is classified as Level 3 in the fair value hierarchy.
The following table sets forth the changes in hybrid instrument liability for the six months ended June 30, 2020 (dollars in millions):
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|
|
|
|
|
Balance at December 31, 2019 |
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$ |
10.6 |
|
Current period adjustments |
|
|
0.6 |
|
Balance at June 30, 2020 |
|
$ |
11.2 |
7. Inventories
Inventories consisted of the following (dollars in millions):
Finished goods include in-transit systems that have been shipped to the Company's customers for which control has not passed to the customers as the systems were not installed and accepted by the customer. As of June 30, 2020, and December 31, 2019, the value of inventory-in-transit was $39.4 million and $36.0 million, respectively.
8. Goodwill and Intangible Assets
The following table sets forth the changes in the carrying amount of goodwill for the six months ended June 30, 2020 (dollars in millions):
15
As a result of the impact of the COVID-19 pandemic, the Company performed an interim impairment assessment of the goodwill balance as of March 31, 2020 using a combination of both quantitative and qualitative approaches. Based on this interim assessment, the Company concluded the fair values of each of the reporting units were significantly greater than their carrying amounts, and therefore, no impairment is required. The Company performed an assessment as of June 30, 2020 and no triggering event was identified. The goodwill assessment was based on management's estimates and assumptions, certain of which are dependent on external factors. To the extent actual results differ materially from these estimates, and the risks presented by COVID-19 and the current economic environment persists to negatively affect the Company’s operations in subsequent periods, further interim impairment assessments could be required, which could result in an impairment of goodwill.
The following is a summary of intangible assets, excluding goodwill (dollars in millions):
For the three months ended June 30, 2020 and 2019, the Company recorded amortization expense of $9.0 million and $9.9 million, respectively, related to intangible assets subject to amortization. For the six months ended June 30, 2020 and 2019, the Company recorded amortization expense of $17.7 million and $20.0 million, respectively, related to intangible assets subject to amortization.
9. Debt
The Company’s debt obligations as of June 30, 2020 and December 31, 2019 consisted of the following (dollars in millions):
The following is a summary of the maximum commitments and the net amounts available to the Company under its credit agreements and other lines of credit with various financial institutions located primarily in Germany and Switzerland that are unsecured and typically due upon demand with interest payable monthly, at June 30, 2020 (in millions):
As of June 30, 2020, the Company was in compliance with the financial covenants of all debt agreements.
16
As of June 30, 2020, the Company has entered into several cross-currency and interest rate swap agreements with a notional value of $150.0 million of U.S. to Swiss Franc and a notional value of $355.0 million of U.S. to Euro to hedge the variability in the movement of foreign currency exchange rates on portions of our Euro and Swiss Franc denominated net asset investments. These agreements qualify for hedge accounting and accordingly the change in fair value of the derivative are recorded in other comprehensive income as part of foreign currency translation adjustments and remain in accumulated comprehensive income (loss) attributable to Bruker Corporation in shareholders' equity until the sale or substantial liquidation of the foreign operation. The difference between the interest rate received and paid under the interest rate and cross-currency swap agreements is recorded in interest and other income (expenses) in the consolidated statements of income and comprehensive income. As a result of entering into these agreements, the Company has lowered net interest expense by $1.8 million and $4.4 million during the three and six months ended June 30, 2020, respectively. The gains (losses) related to hedges of net asset investments in international operations that were recorded within the cumulative translational adjustment section of other comprehensive income were $(11.2) million and $(0.3) million during the three and six months ended June 30, 2020, respectively. The Company did not have any cross-currency and interest rate swap agreements for the six months ended June 30, 2019. The Company presents the cross-currency swap periodic settlements in investing activities and the interest rate swap periodic settlements in operating activities in the statement of cash flows.
10. Derivative Instruments and Hedging Activities
Interest Rate Risks
The Company’s exposure to interest rate risk relates primarily to outstanding variable rate debt and adverse movements in the related market rates. Typically, the most significant component of the Company’s interest rate risk relates to amounts outstanding under the 2019 Credit Agreement and the 2019 Term Loan.
Commodity Price Risk Management
The Company has arrangements with certain customers under which it has a firm commitment to deliver copper based superconductor wire at a fixed price. In order to minimize the volatility that fluctuations in the price of copper have on the Company’s sales of these commodities, the Company enters into commodity hedge contracts. At June 30, 2020 and December 31, 2019, the Company had fixed price commodity contracts with notional amounts aggregating $11.6 million and $5.6 million, respectively. The changes in the fair value of these commodity contracts are recorded within interest and other income (expense), net in the unaudited condensed consolidated statements of income and comprehensive income (loss).
Foreign Exchange Rate Risk Management
The Company generates a substantial portion of its revenues and expenses in international markets, principally Germany, other countries in the European Union and Switzerland, which subjects its operations to the exposure of exchange rate fluctuations. The impact of currency exchange rate movement can be positive or negative in any period. The Company periodically enters into forward currency contracts in order to minimize the volatility that fluctuations in currency translation have on its monetary transactions. Under these arrangements, the Company typically agrees to purchase a fixed amount of a foreign currency in exchange for a fixed amount of U.S. Dollars or other currencies on specified dates with maturities of less than twelve months, with some agreements extending to longer periods. These transactions do not qualify for hedge accounting and, accordingly, the instrument is recorded at fair value with the corresponding gains and losses recorded in the consolidated statements of income and comprehensive income. The Company had notional amounts outstanding under forward currency contracts and cross-currency interest rate swap agreements as of (dollars in millions):
| (1) | Derivatives not designated as accounting hedges. |
| (2) | Derivatives designated as accounting hedges. |
17
In addition, the Company periodically enters into purchase and sales contracts denominated in currencies other than the functional currency of the parties to the transaction. The Company accounts for these transactions separately valuing the “embedded derivative” component of these contracts. The contracts, denominated in currencies other than the functional currency of the transacting parties, amounted to $11.7 million for the delivery of products and $5.8 million for the purchase of products at June 30, 2020 and $12.3 million for the delivery of products and $6.1 million for the purchase of products at December 31, 2019. The changes in the fair value of these embedded derivatives are recorded in interest and other income (expense), net in the consolidated statements of income and comprehensive income (loss).
The derivative instruments described above are recorded in the unaudited condensed consolidated balance sheets for the periods ended as follows (dollars in millions):
18
The following is a summary of the activity included in the unaudited condensed consolidated statements of income and comprehensive income related to the above described derivative instruments (in millions):
11. Provision for Income Taxes
The Company accounts for income taxes using the asset and liability approach by recognizing deferred tax assets and liabilities for the expected future tax consequences of differences between the financial statement basis and the tax basis of assets and liabilities, calculated using enacted tax rates in effect for the year in which the differences are expected to be reflected in the tax return. The Company records a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. In addition, the Company accounts for uncertain tax positions that have reached a minimum recognition threshold.
The income tax provision for the three months ended June 30, 2020 and 2019 was $7.1 million and $10.6 million, respectively, representing effective tax rates of 22.7% and 22.3%, respectively. The income tax provision for the six months ended June 30, 2020 and 2019 was $10.0 million and $18.3 million, respectively, representing effective tax rates of 22.3% and 21.3%, respectively. The Company's effective tax rate may change over time as the amount or mix of income and tax changes among the jurisdictions in which the Company is subject to tax.
As of June 30, 2020 and December 31, 2019, the Company had gross unrecognized tax benefits, excluding penalties and interest, of approximately $18.0 million and $15.9 million, respectively, of which, if recognized, would result in a reduction of the Company’s effective tax rate. The Company recognizes penalties and interest related to unrecognized tax benefits in the provision for income taxes. As of June 30, 2020 and December 31, 2019, approximately $1.0 million and $0.4 million, respectively, of accrued interest and penalties related to uncertain tax positions was included in other long-term liabilities on the Company’s unaudited condensed consolidated balance sheets. Penalties and interest of $0.1 million were recorded in the provision for income taxes for unrecognized tax benefits during both the three months ended June 30, 2020 and 2019. Penalties and interest of $0.3 million and $0.1 million were recorded in the provision for income taxes for unrecognized tax benefits during the six months ended June 30, 2020 and 2019, respectively.
19
The Company files tax returns in the United States, which includes federal, state and local jurisdictions, and many foreign jurisdictions with varying statutes of limitations. The Company considers Germany, the United States and Switzerland to be its significant tax jurisdictions. The majority of the Company’s earnings are derived in Germany and Switzerland. Accounting for the various federal and local taxing authorities, the statutory rates for 2019 are approximately 30.0% and 15.0% for Germany and Switzerland, respectively. The mix of earnings in those two jurisdictions resulted in an increase of 2.3% from the U.S. statutory rate of 21.0% in the six months ended June 30, 2020. The Company has not been a party to any material tax holiday agreements. The tax years 2013 to 2019 are open to examination in Germany and Switzerland. Tax years 2013 to 2019 remain open for examination in the United States.
On March 27, 2020 the House passed the Coronavirus Aid, Relief, and Economic Security Act (The CARES Act), also known as the Third COVID-19 Supplemental Relief bill, and the president of the United States signed the legislation into law. The Company does not expect the provisions of the legislation to have a significant impact on the effective tax rate or the income tax payable and deferred income tax positions of the Company.
12. Commitments and Contingencies
In accordance with ASC Topic 450, Contingencies, the Company accrues anticipated costs of settlement, damages or other costs to the extent specific losses are probable and estimable.
Letters of Credit and Guarantees
At June 30, 2020 and December 31, 2019, the Company had bank guarantees of $132.3 million and $143.2 million, respectively, related primarily to customer advances. These arrangements guarantee the refund of advance payments received from customers in the event that the merchandise is not delivered or warranty obligations are not fulfilled in compliance with the terms of the contract. These guarantees affect the availability of the Company’s lines of credit.
Litigation and Related Contingencies
Lawsuits, claims and proceedings of a nature considered normal to its businesses may be pending from time to time against the Company. Third parties might allege that the Company or its collaborators are infringing their patent rights or that the Company is otherwise violating their intellectual property rights. Loss contingency provisions are recorded if the potential loss from any claim, asserted or unasserted, or legal proceeding is considered probable and the amount can be reasonably estimated or a range of loss can be determined. These accruals represent management's best estimate of probable loss. Disclosure is also provided when it is reasonably possible that a loss will be incurred or when it is reasonably possible that the amount of a loss will exceed the recorded provision. The Company believes the outcome of pending proceedings, individually and in the aggregate, will not have a material impact on the Company's financial statements.
On September 25, 2019, in a complaint filed in the Düsseldorf, Germany, District Court, Carl Zeiss Microscopy GmbH, a subsidiary of Carl Zeiss AG (Zeiss), sued Luxendo GmbH (Luxendo), a subsidiary of Bruker Corporation, for infringement of a recently registered German utility model patent licensed to Zeiss pertaining to one specific Luxendo product category. The Company intends to vigorously defend against this claim.
On September 23, 2019, in a complaint filed in the Düsseldorf, Germany, District Court, Micromass UK Limited (Micromass), a subsidiary of Waters Corporation, sued Bruker Corporation, as well as its affiliate, Bruker Daltonik GmbH, for infringement of a European patent pertaining to our timsTOF product line. On March 6, 2020, Bruker was notified that Micromass has expanded its complaint in Düsseldorf and now asserts another recently granted European patent in Germany. The Company intends to vigorously defend against these claims.
As of June 30, 2020 and December 31, 2019, no material accruals have been recorded for potential contingencies.
20
Governmental Investigations
The Company is subject to regulation by national, state and local government agencies in the United States and other countries in which it operates. From time to time, the Company is the subject of governmental investigations often involving regulatory, marketing and other business practices. These governmental investigations may result in the commencement of civil and criminal proceedings, fines, penalties and administrative remedies which could have a material adverse effect on the Company’s financial position, results of operations and/or liquidity.
In August 2018, the Korea Fair Trade Commission (KFTC) informed the Company that it was conducting an investigation into the public tender bidding activities of a number of life science instrument companies operating in Korea, including Bruker Korea Co., Ltd (Bruker Korea). The Company cooperated fully with the KFTC and on June 16, 2019, the KFTC announced its decision to impose a fine of approximately $20,000 on Bruker Korea and declined to impose any criminal liability against Bruker Korea in connection with this matter. As a result of the KFTC’s decision, the Korea Public Procurement Service (PPS) imposed a three month suspension on Bruker Korea’s ability to bid for or conduct sales to Korean government entities which ended on March 27, 2020. Sales to Korean government entities were less than 3% of the Company’s revenue for the year ended December 31, 2019.
In late August 2019, the KFTC informed the Company that it was conducting a separate investigation into the public tender bidding activities of a number of life science instrument companies operating in Korea, including five public tenders involving Bruker Korea during 2015. The Company cooperated fully with the KFTC and on July 8, 2020, the KFTC announced its decision to impose a fine of approximately $11,000 on Bruker Korea and declined to impose any criminal liability against Bruker Korea in connection with this matter.
As of June 30, 2020 and December 31, 2019, no material accruals have been recorded for potential contingencies related to these matters.
13. Shareholders’ Equity
Share Repurchase Program
In May 2019, the Company’s Board of Directors approved a stock repurchase plan (the Repurchase Program) authorizing repurchases of common stock in the amount of up to $300.0 million from time to time, in amounts, at prices, and at such times as management deems appropriate, subject to market conditions, legal requirements and other considerations. The Company has repurchased a total of 4,537,386 shares at an aggregate cost of $192.3 million under the Repurchase Program. The Company repurchased a total of 1,214,282 shares at an aggregate cost of $50.0 million in the three and six months ended June 30, 2020. The Company repurchased a total of 2,300,635 shares at an aggregate cost of $100.0 million in the three and six months ended June 30, 2019. Any future repurchases will be funded from cash on hand, future cash flows from operations and available borrowings under the revolving credit facility. The remaining authorization as of August 3, 2020 is $107.7 million and this Repurchase Program expires on May 13, 2021.
Cash Dividends on Shares of Common Stock
On February 22, 2016, the Company announced the establishment of a dividend policy and the declaration by its Board of Directors of an initial quarterly cash dividend in the amount of $0.04 per share of the Company's issued and outstanding common stock. Under the dividend policy, the Company will target a cash dividend to the Company's shareholders in the amount of $0.16 per share per annum, payable in equal quarterly installments.
Subsequent dividend declarations and the establishment of record and payment dates for such future dividend payments, if any, are subject to the Board of Directors' continuing determination that the dividend policy is in the best interests of the Company's shareholders. The dividend policy may be suspended or cancelled at the discretion of the Board of Directors at any time.
21
Accumulated Other Comprehensive Income (Loss)
Comprehensive income refers to revenues, expenses, gains and losses that under U.S. GAAP are included in other comprehensive income (loss), but excluded from net income as these amounts are recorded directly as an adjustment to shareholders’ equity, net of tax. The Company’s other comprehensive income (loss) is composed primarily of foreign currency translation adjustments and changes in the funded status of defined benefit pension plans. The following is a summary of comprehensive income (dollars in millions):
The following is a summary of the components of accumulated other comprehensive income, net of tax, at June 30, 2020 (dollars in millions):
14. Other Charges, Net
The components of other charges, net were as follows (dollars in millions):
22
Restructuring Initiatives
Restructuring charges include charges for various programs that were recorded in the accompanying unaudited condensed consolidated statements of income and comprehensive income. The following table sets forth the restructuring charges (dollars in millions):
The following table sets forth the changes in restructuring reserves for the six months ended June 30, 2020 (dollars in millions):
15. Business Segment Information
The Company has three reportable segments, BSI Life Science, BSI NANO and BEST, as discussed in Note 1 to the unaudited condensed consolidated financial statements.
Revenue and operating income by reportable segment are presented below (dollars in millions):
| (a) | Represents product and service revenue between reportable segments. |
| (b) | Represents corporate costs and eliminations not allocated to the reportable segments. |
23
Total assets by reportable segment are as follows (dollars in millions):
| (a) | Assets not allocated to the reportable segments and eliminations of intercompany transactions. |
The Company is unable, without unreasonable effort or expense to disclose the amount of total assets by BSI Life Science and BSI NANO Segments as well as the Corporate function and further, the Company’s chief operating decision maker does not receive any asset information by operating segment.
16. Recent Accounting Pronouncements
In March 2020, the FASB issued Accounting Standards Updates (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"), which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles to transactions affected by reference rate reform if certain criteria are met. These transactions include: contract modifications, hedging relationships, and sale or transfer of debt securities classified as held-to-maturity. Entities may apply the provisions of the new standard as of the beginning of the reporting period when the election is made (i.e. as early as the first quarter 2020). Unlike other topics, the provisions of this update are only available until December 31, 2022, when the reference rate replacement activity is expected to have completed. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures and has yet to elect an adoption date.
In January 2020, the FASB issued ASU 2020-01- Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the Emerging Issues Task Force), which clarifies the interaction of the accounting for certain equity securities, equity method investments, and certain forward contracts and purchased options. The guidance clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying measurement principles for certain equity securities immediately before applying or discontinuing the equity method. The Company adopted this guidance using a prospective method. The assessment of the adoption of this ASU is in process and is not expected to have a material impact on the Company’s consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The guidance simplifies the accounting for income taxes by removing certain exceptions within the current guidance including the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. The amendment also improves consistent application by clarifying and amending existing guidance related to aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step up in the tax basis of goodwill. This guidance is effective for annual and interim periods beginning after December 15, 2020 and early adoption is permitted. The assessment of the adoption of this ASU is in process and is not expected to have a material impact on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements of fair value measurements, including the consideration of costs and benefits. This ASU is effective for the Company in fiscal years beginning after December 15, 2019. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The new standard simplifies the subsequent measurement of goodwill by eliminating the second step of the goodwill impairment test. This ASU will be applied prospectively and is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.
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In June 2016, the FASB issued ASU 2016-13 - Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The guidance modifies the recognition of credit losses related to financial assets, such as debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, and other financial assets that have the contractual right to receive cash. Current guidance requires the recognition of a credit loss when it is considered probable that a loss event has occurred. The new guidance requires the measurement of expected credit losses to be based upon relevant information, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the asset. As such, expected credit losses may be recognized sooner under the new guidance due to the broader range of information that will be required to determine credit loss estimates. The new guidance also amends the current other- than-temporary impairment model used for debt securities classified as available-for-sale. When the fair value of an available- for-sale debt security is below its amortized cost, the new guidance requires the total unrealized loss to be bifurcated into its credit and non-credit components. Any expected credit losses or subsequent recoveries will be recognized in earnings and any changes not considered credit related will continue to be recognized within other comprehensive income (loss). This guidance is effective for annual and interim periods beginning after December 15, 2019. The Company adopted this new standard on January 1, 2020 using a modified retrospective method for all financial assets measured at amortized cost. The new standard impacts the Company's accounts receivables and off balance sheet credit exposures. The new standard did not have an impact on the Company’s results of operations and cash flows.
17. Subsequent Event
Due to the impact of the novel coronavirus, COVID-19, on Bruker’s business and the global economy, the Company continues to maintain certain temporary cost control and cost reduction measures. These temporary measures include short-time work for certain of the Company’s European operations, a hiring freeze and curtailment of non-strategic discretionary spending. The Company plans to continue certain cost control and cost reduction measures in the third quarter of 2020, which we expect to result in continued cost savings in the third quarter of 2020, though not at the same level as we achieved for the three months ended June 30, 2020.
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ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion of our financial condition and results of operations should be read in conjunction with our interim unaudited condensed consolidated financial statements and the notes to those statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q, and in conjunction with the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2019.
Statements contained in Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Quarterly Report on Form 10-Q, which express that we “believe", "anticipate", "plan", "expect", "seek”, “may”, “will”, “intend”, “estimate”, “should” and similar expressions are intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Any forward-looking statements contained herein are based on current expectations but are subject to a number of risks and uncertainties. Forward looking statements include, but are not limited to, statements regarding the impact of the novel coronavirus, COVID-19, on our business and operations, the global economy, our cost cutting measures and their impact, our intentions regarding our intellectual property, the impact of government contracts and government regulation, the impact of our material weaknesses in internal controls and the timing to remedy them, our working capital requirements and sufficiency of cash, our competition, the seasonality of our business, the sufficiency of our facilities, our employee relations, the impact of legal or intellectual property proceedings, the impact of changes to tax and accounting rules and changes in law, our anticipated tax rate, our expectations regarding cash dividends, share repurchases, interest expense, interest rate swap agreements, expenses and capital expenditures, the impact of foreign currency exchange rates and changes in commodity prices, the impact of our restructuring initiatives, our expectations regarding backlog and revenue and other risk factors discussed from time to time in our filings with the Securities and Exchange Commission, or SEC. These and other factors are identified and described in more detail in our filings with the SEC, including, without limitation, our annual report on Form 10-K for the year ended December 31, 2019 and subsequent filings. We expressly disclaim any intent or obligation to update these forward-looking statements other than as required by law.
Although our unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP), we believe describing revenue and expenses, excluding the effects of foreign currency, acquisitions and divestitures, as well as certain other charges, net, provides meaningful supplemental information regarding our performance. Specifically, management believes that organic revenue and free cash flow, both non-GAAP financial measures, as well as non-GAAP gross profit margin and non-GAAP operating margin, provide relevant and useful information that is widely used by equity analysts, investors and competitors in our industry, as well as by our management, in assessing both consolidated and business unit performance. We define the term organic revenue as GAAP revenue excluding the effect of foreign currency translation changes and the effect of acquisitions and divestitures. We define the term non-GAAP gross profit margin as GAAP gross profit margin with certain GAAP measures excluded and non-GAAP operating margin as GAAP operating margin with certain GAAP measures excluded. These non-GAAP measures exclude costs related to restructuring actions, acquisition and related integration expenses, amortization of acquired intangible assets, costs associated with our global information technology transition initiative, and other non-operational costs that are infrequent or non-recurring in nature and we believe these are useful measures to evaluate our continuing business.
We define free cash flow as net cash provided by operating activities less additions to property, plant, and equipment. We believe free cash flow is a useful measure to evaluate our business as it indicates the amount of cash generated after additions to property, plant, and equipment which is available for, among other things, investments in our business, acquisitions, share repurchases, dividends and repayment of debt. We use these non-GAAP financial measures to evaluate our period-over-period operating performance because our management believes they provide more comparable measures of our continuing business because they adjust for certain items that are not reflective of the underlying performance of our business. These measures may also be useful to investors in evaluating the underlying operating performance of our business. We regularly use these non- GAAP financial measures internally to understand, manage, and evaluate our business results and make operating decisions. We also measure our employees and compensate them, in part, based on such non-GAAP measures and use this information for our planning and forecasting activities. The presentation of these non-GAAP financial measures is not intended to be a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP and may be different from non-GAAP financial measures used by other companies, and therefore, may not be comparable among companies.
26
OVERVIEW
We are a developer, manufacturer and distributor of high-performance scientific instruments and analytical and diagnostic solutions that enable our customers to explore life and materials at microscopic, molecular and cellular levels. Our corporate headquarters are located in Billerica, Massachusetts. We maintain major technical and manufacturing centers in Europe, North America and Southeast Asia, and we have sales offices located throughout the world. Bruker is organized into three reportable segments: the BSI Life Science Segment (comprised of the Bruker BioSpin Group and the Bruker CALID Group), the BSI NANO Segment and the Bruker Energy & Supercon Technologies (BEST) Segment.
Revenue for the three months ended June 30, 2020 decreased by $65.6 million, or 13.4%, to $424.6 million, compared to $490.2 million for the comparable period in 2019. Included in revenue was an increase of approximately $1.7 million from acquisitions and a decrease of $5.1 million from foreign currency translation. Excluding the effects of foreign currency translation and our recent acquisitions, our organic revenue, a non-GAAP measure, decreased by $62.2 million, or 12.7%. The decline in revenue was primarily related to the impact of the COVID-19 pandemic on our customers’ as well as certain of our operations and lower global instrumentation demand due to the ongoing pandemic.
Revenue for the six months ended June 30, 2020 decreased by $103.0 million, or 10.8%, to $848.6 million, compared to $951.6 million for the comparable period in 2019. Included in revenue was an increase of approximately $6.0 million from acquisitions and a decrease of $10.6 million from foreign currency translation. Excluding the effects of foreign currency translation and our recent acquisitions, our organic revenue, a non-GAAP measure, decreased by $98.4 million, or 10.3%. The decline in revenue was primarily related to the impact of the COVID-19 pandemic on our customers’ as well as certain of our operations and lower global instrumentation demand due to the ongoing pandemic.
Our gross profit margin decreased to 43.9% during the three months ended June 30, 2020 compared to 47.0% for the three months ended June 30, 2019. The decrease in gross margin was a result of lower volume, factory and operating inefficiencies due to disruptions from the COVID-19 pandemic, partially offset by cost control and cost reduction measures.
Our gross profit margin decreased to 44.6% during the six months ended June 30, 2020 compared to 46.8% for the six months ended June 30, 2019. The decrease in gross margin was a result of lower volume, unfavorable mix, factory and operating inefficiencies due to disruptions from the COVID-19 pandemic, partially offset by cost control and cost reduction measures.
Our operating income for the three months ended June 30, 2020 was $37.9 million, resulting in an operating margin of 8.9%, compared to operating income of $53.5 million, and an operating margin of 10.9%, for the three months ended June 30, 2019. Included in operating income were various charges for amortization of acquisition-related intangible assets and other acquisition-related costs and restructuring costs totaling $11.1 million and $20.2 million for the three months ended June 30, 2020 and 2019, respectively. Excluding these charges, our non-GAAP operating margin for the three months ended June 30, 2020 and 2019 was 11.5% and 15.0%, respectively. The decrease in GAAP and non-GAAP operating margin was due to lower revenue and gross margins due to COVID-19 related disruptions to our customers’ and our own operations, partially offset by cost control and cost reduction measures.
Our operating income for the six months ended June 30, 2020 was $54.3 million, resulting in an operating margin of 6.4%, compared to operating income of $95.4 million, and an operating margin of 10.0%, for the six months ended June 30, 2019. Included in operating income were various charges for amortization of acquisition-related intangible assets and other acquisition-related costs and restructuring costs totaling $26.9 million and $40.6 million for the three months ended June 30, 2020 and 2019, respectively. Excluding these charges, our non-GAAP operating margin for the six months ended June 30, 2020 and 2019 was 9.6% and 14.3%, respectively. The decrease in GAAP and non-GAAP operating margin was due to lower revenue and gross margins due to COVID-19 related disruptions to our customers and our own operations, partially offset by cost control and cost reduction measures.
Our income tax provision in the three month periods ended June 30, 2020 and 2019 was $7.1 million and $10.6 million, respectively, representing effective tax rates of 22.7% and 22.3%, respectively. The increase in our effective tax rate was primarily due to the jurisdictional profit mix and impact of discrete items in the period.
Our income tax provision in the six month periods ended June 30, 2020 and 2019 was $10.0 million and $18.3 million, respectively, representing effective tax rates of 22.3% and 21.3%, respectively. The increase in our effective tax rate was primarily due to the jurisdictional profit mix and impact of an unfavorable discrete item in the period.
27
Diluted earnings per share for the three month period ended June 30, 2020 were $0.16, a decrease of $0.07 compared to $0.23 per share in the three month period ended June 30, 2019. Diluted earnings per share for the six month period ended June 30, 2020 were $0.22, a decrease of $0.21 compared to $0.43 per share in the six month period ended June 30, 2019. The decrease in net income and earnings per diluted share was primarily driven by lower revenues associated with COVID-19 disruptions and lower academic and industrial demand, partially offset by our cost cutting and cost reduction measures.
Operating cash flow for the six month period ended June 30, 2020 was a source of cash of $46.8 million. Our free cash flow, a non-GAAP measure, was ($4.0) million, calculated as follows (dollars in millions):
Purchases of property, plant and equipment included an increase of approximately $22.0 million related to production facilities for productivity gains and expansion.
On December 11, 2019, we entered into (1) a new revolving credit agreement to establish a new revolving credit facility in the aggregate principal amount of $600 million; (2) a term loan agreement to establish a new term loan facility in the aggregate principal amount of $300 million; and (3) a note purchase agreement to issue and sell CHF 297 million aggregate principal amount of 1.01% senior notes due December 11, 2029. Floating interest rates under the term loan were simultaneously fixed through cross-currency and interest rate swap agreements into Euro ($150 million) and Swiss Franc ($150 million) rates carrying average effective interest rates of 0.94% and hedge our net investment in our Euro and Swiss Franc denominated net assets. The new revolving credit agreement replaced our $500 million five-year revolving credit agreement established on October 27, 2015, that was terminated on December 11, 2019. In addition, we designated our CHF 297 million senior notes as a hedge in our net investment in our Swiss Franc denominated net assets. Proceeds from this financing were used to repay the outstanding borrowings under our prior 2015 revolving credit facility and we intend to use the remaining proceeds for general corporate purposes and to support corporate strategic objectives. During December 2019, we entered into U.S. Dollar to Euro cross-currency swaps on our existing 2012 private placement notes of $105 million 4.31% Series 2012A Senior Notes, Tranche C, due January 18, 2022, and the existing $100 million 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024, resulting in an average effective interest rate of 2.25% on these instruments. The cross-currency swaps hedge our net investment in our Euro denominated net assets. As a result of entering into these interest rate and cross currency swap agreements, we reduced our interest expense by $1.8 million and $4.4 million for the three and six month periods ended June 30, 2020, respectively. We anticipate these swap agreements will lower net interest expense in future years.
We can experience quarter-to-quarter fluctuations in our operating results as a result of various factors, some of which are outside our control, such as:
| ● | the impact of the COVID-19 global pandemic on our customers, supply chain or manufacturing capabilities; |
| ● | the timing of governmental stimulus programs and academic research budgets; |
| ● | the time it takes between the date customer orders and deposits are received, systems are shipped and accepted by our customers and full payment is received; |
| ● | foreign currency exchange rates; |
| ● | the time it takes for us to receive critical materials to manufacture our products; |
| ● | general economic conditions; including the impact of COVID-19 on the global economy; |
| ● | the time it takes to satisfy local customs requirements and other export/import requirements; |
| ● | the time it takes for customers to construct or prepare their facilities for our products; and |
| ● | the time required to obtain governmental licenses. |
Several of these factors have in the past affected the amount and timing of revenue recognized on sales of our products and receipt of related payments and will continue to do so in the future. Accordingly, our operating results in any particular quarter may not necessarily be an indication of any future quarter’s operating performance
28
The COVID-19 pandemic continues to present a challenging operating environment and we are focused on four key priorities: the health and safety of our employees, customers and partners; maintaining business continuity and service levels for our customers; executing prudent temporary cost reductions; and delivering enabling research and diagnostic products to help fight the pandemic, and to support other essential priorities of our society.
Health and safety of our valued employees, customers and partners
While Bruker's businesses are essential, we have proceeded to implement strict social distancing, enhanced cleaning protocols and other preventative measures throughout our major facilities. While many of our office colleagues are working remotely, we are placing enhanced focus on our service organization and factory employees for whom work from home is not feasible. Where customer sites are accessible and open, our field service organizations operate under social distancing protocols to ensure the safety of customer sites, when our employees need to be on site.
We may experience decreased work efficiency and productivity as a result of the increased number of employees working from home. In addition, with this remote working model where employees are increasingly accessing our systems through VPN or internet connections, we may be subject to increased security risks, including the risks of cyberattacks or data breaches. Additionally, if any of our key leaders contract the virus and are unable to perform their duties for a period of time as the result of illness, our business, results of operations or financial condition could be adversely affected.
Maintaining business continuity and service levels to our customers
Ensuring our ability to supply our enabling technologies and solutions and maintain high service levels for our customers is another top priority for Bruker. In late March and during parts of April, several of our manufacturing sites underwent temporary controlled shutdowns or were operating at reduced capacity to implement new safety protocols, comply with local rules, and manage cost and inventory levels. These sites have ramped back up with expanding capacity and productivity levels. However, with concerns over a “second wave” of the virus, we may need to consider further temporary controlled shut downs or reduced capacity measures. In addition, we are continuing capital investments in production facilities for efficiencies and expansion and our supply chain remains resilient. We do not currently anticipate being supply or capacity limited in the second half of 2020, provided that the current gradual re-opening trends continue in our key geographies without further disruptions or experiencing a second COVID-19 wave.
Executing prudent temporary cost reductions
Due to the impact of COVID-19, on our business and the global economy, we implemented temporary cost control and cost reduction measures. These temporary measures included short-time work for many of our European operations, temporary tiered salary reductions for our global leadership team and workforce, one to two week closures of select manufacturing locations, selective product manufacturing reductions, a hiring freeze, and curtailment of non-strategic discretionary spending. At the same time, we looked to minimize the disruption for our employees and preserve our ability to ramp up again with our highly trained and loyal work force. While pursuing cost savings throughout the business, we intend to maintain our important investments in key strategic initiatives. While some of these measures are being relaxed, we expect to continue to maintain certain temporary cost savings measures and expect these cost control and cost reduction measures to have an impact on the three month period ended September 30, 2020.
Delivering enabling research and diagnostic products to help fight the pandemic and to support other essential priorities of our society
Bruker is providing critical technologies and solutions to help combat the COVID-19 crisis, most notably our Microbiology and infectious disease diagnostics portfolio, to which we have added a SARS-COV-2 PCR test, and our nuclear magnetic resonance and mass spectrometry systems which are used in critical disease, therapeutic and vaccine research.
The COVID-19 global pandemic has driven volatility and uncertainty in global markets and has affected our operations significantly. We are actively working to manage the impact of COVID-19 on our operations; however, the full extent to which the COVID-19 pandemic will impact our business, directly or indirectly, cannot accurately be predicted at this time. To date, the COVID-19 pandemic has affected productivity at our manufacturing facilities and has caused disruptions and delays in certain of our shipments to customers who have closed facilities during the pandemic. We are continuing to monitor the impact of these delays on our business and respond accordingly. For additional information on the various risks posed by the COVID-19 pandemic, refer to Item 1A. Risk Factors included in this report.
29
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
This discussion and analysis of our financial condition and results of operations is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to: revenue recognition; stock-based compensation expense; restructuring and other related charges; income taxes, including the recoverability of deferred tax assets; allowances for doubtful accounts; inventory reductions for excess and obsolete inventories; estimated fair values of long-lived assets used to measure the recoverability of long-lived assets; intangible assets and goodwill; expected future cash flows used to measure the recoverability of intangible assets and long-lived assets; warranty costs; derivative financial instruments; and contingent liabilities. We base our estimates and judgments on our historical experience, current market and economic conditions, industry trends, and other assumptions that we believe are reasonable and form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.
We believe the following critical accounting policies and estimates to be both those most important to the portrayal of our financial position and results of operations and those that require the most estimation and subjective judgment:
| ● | Revenue recognition; |
| ● | Income taxes; |
| ● | Inventories; |
| ● | Goodwill, other intangible assets and other long-lived assets; and |
| ● | Business combinations. |
For a further discussion of our critical accounting policies, please refer to our Annual Report on Form 10-K for the year ended December 31, 2019.
RESULTS OF OPERATIONS
Three Months Ended June 30, 2020 compared to the Three Months Ended June 30, 2019
30
Consolidated Results
The following table presents our results (dollars in millions, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
||
|
|
|
2020 |
|
2019 |
|
Dollar Change |
|
Change |
|
||||
|
Product revenue |
|
$ |
347.0 |
|
$ |
411.7 |
|
$ |
(64.7) |
|
|
(15.7) |
% |
|
Service revenue |
|
|
76.1 |
|
|
78.5 |
|
|
(2.4) |
|
|
(3.1) |
% |
|
Other revenue |
|
|
1.5 |
|
|
— |
|
|
1.5 |
|
|
— |
|
|
Total revenue |
|
|
424.6 |
|
|
490.2 |
|
|
(65.6) |
|
|
(13.4) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product revenue |
|
|
193.3 |
|
|
210.0 |
|
|
(16.7) |
|
|
(8.0) |
% |
|
Cost of service revenue |
|
|
44.7 |
|
|
49.8 |
|
|
(5.1) |
|
|
(10.2) |
% |
|
Cost of other revenue |
|
|
0.4 |
|
|
— |
|
|
0.4 |
|
|
— |
|
|
Total cost of revenue |
|
|
238.4 |
|
|
259.8 |
|
|
(21.4) |
|
|
(8.2) |
% |
|
Gross profit |
|
|
186.2 |
|
|
230.4 |
|
|
(44.2) |
|
|
(19.2) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
102.4 |
|
|
124.5 |
|
|
(22.1) |
|
|
(17.8) |
% |
|
Research and development |
|
|
44.1 |
|
|
48.5 |
|
|
(4.4) |
|
|
(9.1) |
% |
|
Other charges, net |
|
|
1.8 |
|
|
3.9 |
|
|
(2.1) |
|
|
(53.8) |
% |
|
Total operating expenses |
|
|
148.3 |
|
|
176.9 |
|
|
(28.6) |
|
|
(16.2) |
% |
|
Operating income |
|
|
37.9 |
|
|
53.5 |
|
|
(15.6) |
|
|
(29.2) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income (expense), net |
|
|
(6.6) |
|
|
(5.9) |
|
|
(0.7) |
|
|
11.9 |
% |
|
Income before income taxes and noncontrolling interest in consolidated subsidiaries |
|
|
31.3 |
|
|
47.6 |
|
|
(16.3) |
|
|
(34.2) |
% |
|
Income tax provision |
|
|
7.1 |
|
|
10.6 |
|
|
(3.5) |
|
|
(33.0) |
% |
|
Consolidated net income |
|
|
24.2 |
|
|
37.0 |
|
|
(12.8) |
|
|
(34.6) |
% |
|
Net income (loss) attributable to noncontrolling interests in consolidated subsidiaries |
|
|
0.1 |
|
|
0.5 |
|
|
(0.4) |
|
|
(80.0) |
% |
|
Net income attributable to Bruker Corporation |
|
$ |
24.1 |
|
$ |
36.5 |
|
$ |
(12.4) |
|
|
(34.0) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share attributable to Bruker Corporation shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.16 |
|
$ |
0.23 |
|
$ |
(0.07) |
|
|
(30.4) |
% |
|
Diluted |
|
$ |
0.16 |
|
$ |
0.23 |
|
$ |
(0.07) |
|
|
(30.4) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
153.6 |
|
|
156.1 |
|
|
|
|
|
|
|
|
Diluted |
|
|
154.7 |
|
|
157.6 |
|
|
|
|
|
|
|
Revenue
The decline in revenue was primarily related to the impact of the COVID-19 pandemic on our customers and certain of our operations as well as lower global instrumentation demand due to the pandemic.
Gross Profit
The decrease in gross profit was a result of lower volume and factory inefficiencies due to the disruptions from the COVID-19 pandemic, partially offset by cost control and cost reduction measures.
31
Selling, General and Administrative
Our selling, general and administrative expenses for the three months ended June 30, 2020 decreased to 24.1% of total revenue, from 25.4% of total revenue, for the comparable period in 2019. The decrease in expenses and as a percentage of total revenue are a result of the cost control and cost reduction measures due to the impact of the COVID-19 pandemic in the three months ended June 30, 2020.
Research and Development
Our research and development expenses for the three months ended June 30, 2020 increased to 10.4% of total revenue, from 9.9% of total revenue, for the comparable period in 2019. The decrease in expenses and increase as a percentage of revenue are a result of cost control and cost reduction measures in comparison to lower revenue in the three months ended June 30, 2020.
Other Charges, Net
Other charges, net for the three months ended June 30, 2020 consisted primarily of $1.2 million of restructuring costs related to closing facilities and implementing outsourcing and other restructuring initiatives, $1.1 million of professional fees incurred in connection with investigation matters and $0.4 million of costs associated with our global information technology (IT) transformation initiative offset by $(0.8) million of acquisition-related benefit related to previous acquisitions. The IT transformation initiative is a multi-year project aimed at updating and integrating our global enterprise resource planning and human resource information systems.
Other charges, net for the three months ended June 30, 2019 consisted of $0.8 million of restructuring costs related to closing facilities and implementing outsourcing and other restructuring initiatives, $0.8 million related to other fees, $1.1 million of costs associated with our global IT transformation initiative and $1.2 million of acquisition-related charges related to acquisitions completed in 2019 and 2018.
Operating Income
The decrease in operating margin was due to lower revenue and gross profit due to COVID-19 related disruptions to our customers’ and our own operations, partially offset by cost control and cost reduction measures.
Interest and Other Income (Expense), Net
During the three months ended June 30, 2020, the primary components within interest and other income (expense), net were net interest expense of $2.7 million, realized and unrealized losses on foreign currency denominated transactions of $3.2 million and $0.8 million related to pension plan expenses. During the three months ended June 30, 2019, the primary components within interest and other income (expense), net were net interest expense of $3.7 million, realized and unrealized losses on foreign currency denominated transactions of $1.5 million and $0.6 million related to pension plan expenses. As a result of entering into interest rate and cross-currency swap agreements related to our new debt agreements, we reduced our interest expense by $1.8 million for the three month period ended June 30, 2020.
Income Tax Provision
The 2020 and 2019 effective tax rates were estimated using projected annual pre-tax income on a jurisdictional basis. Expected tax benefits, including tax credits and incentives, the impact of changes to valuation allowances and the effect of jurisdictional differences in statutory tax rates were also considered in the calculation.
The effective tax rates for the three months ended June 30, 2020 and 2019 were 22.7% and 22.3%, respectively. The increase in our effective tax rate was primarily due to the jurisdictional profit mix and the impact of discrete items in the period.
Net Income (Loss) Attributable to Noncontrolling Interests
The net income attributable to noncontrolling interests represented the minority shareholders' proportionate share of the net income recorded by our majority-owned subsidiaries. In January 2020, we acquired the remaining interest in our redeemable noncontrolling interest.
32
Net Income Attributable to Bruker Corporation
The decrease in net income and earnings per diluted share was primarily driven by lower revenues associated with COVID-19 disruptions and lower academic and industrial demand and, reduced gross and operating margins, partially offset by our cost control and cost reduction measures.
Reportable Segment Revenue
The following table presents revenue, change in revenue and revenue growth by reportable segment (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
|
Percentage |
|
||||
|
|
|
2020 |
|
2019 |
|
Dollar Change |
|
Change |
|
|||
|
BSI Life Science |
|
$ |
257.8 |
|
$ |
291.4 |
|
$ |
(33.6) |
|
(11.5) |
% |
|
BSI NANO |
|
|
125.5 |
|
|
151.0 |
|
|
(25.5) |
|
(16.9) |
% |
|
BEST |
|
|
44.8 |
|
|
51.9 |
|
|
(7.1) |
|
(13.7) |
% |
|
Eliminations (a) |
|
|
(3.5) |
|
|
(4.1) |
|
|
0.6 |
|
|
|
|
|
|
$ |
424.6 |
|
$ |
490.2 |
|
$ |
(65.6) |
|
(13.4) |
% |
| (a) | Represents product and service revenue between reportable segments. |
For financial reporting purposes, we aggregate the Bruker BioSpin Group and Bruker CALID Group as the BSI Life Science Segment. This aggregation reflects the similar economic characteristics, production processes, customer services provided, types and classes of customers, methods of distribution and regulatory environments.
The decline in revenue for the BSI Life Science Segment was due to disruptions to our customers’ and certain Bruker operations from the COVID-19 pandemic, lower demand in our academic, industrial and applied markets during the pandemic and delays in certain instrument deliveries and installations due to pandemic related customer lab closures. The decline in revenues for the BSI NANO Segment was due primarily to worldwide COVID-19 related academic customer lab closures, weaker industrial demand and certain temporary BSI NANO facility closures. The decline in revenue for the BEST Segment was primarily due to weaker superconductor demand during the end of the period ending June 30, 2020.
Operating Income
The following table presents operating income and operating margins on revenue by reportable segment (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
||||||||
|
|
|
2020 |
|
2019 |
|
||||||
|
|
|
|
|
|
Percentage of |
|
|
|
|
Percentage of |
|
|
|
|
Operating |
|
Segment |
|
Operating |
|
Segment |
|
||
|
|
|
Income |
|
Revenue |
|
Income |
|
Revenue |
|
||
|
BSI Life Science |
|
$ |
38.6 |
|
15.0 |
% |
$ |
56.3 |
|
19.3 |
% |
|
BSI NANO |
|
|
5.0 |
|
4.0 |
% |
|
5.6 |
|
3.7 |
% |
|
BEST |
|
|
2.3 |
|
5.1 |
% |
|
3.1 |
|
6.0 |
% |
|
Corporate, eliminations and other (a) |
|
|
(8.0) |
|
|
|
|
(11.5) |
|
|
|
|
Total operating income |
|
$ |
37.9 |
|
8.9 |
% |
$ |
53.5 |
|
10.9 |
% |
| (a) | Represents corporate costs and eliminations not allocated to the reportable segments. |
The operating margin declines in the BSI Life Science and BSI Nano were due to lower revenue and gross profit due to COVID-19 related disruptions to our customers’ and our own operations, partially offset by cost control and cost reduction measures. The decline in the operating margin for the BEST segment was primarily due to lower revenue, unfavorable mix and ineffieciencies related to COVID-19, partially offset by cost control and cost reduction measures.
33
Consolidated Results
Six Months Ended June 30, 2020 compared to the Six Months Ended June 30, 2019
The following table presents our results (dollars in millions, except per share data):
Revenue
The decline in revenue was primarily related to the impact of the COVID-19 pandemic on our customers and certain of our operations as well as lower global instrumentation demand due to the pandemic.
Gross Profit
The decrease in gross profit was a result of lower volume, factory inefficiencies and unfavorable mix due to the disruptions from the COVID-19 pandemic, partially offset by cost control and cost reduction measures.
34
Selling, General and Administrative
Our selling, general and administrative expenses for the six months ended June 30, 2020 increased to 26.3% of total revenue, from 25.7% of total revenue, for the comparable period in 2019. The decrease in expenses and increase as a percentage of total revenue are a result of the cost control and cost reduction measures due to the impact of the COVID-19 pandemic in the six months ended June 30, 2020.
Research and Development
Our research and development expenses for the six months ended June 30, 2020 increased to 10.9% of total revenue, from 10.0% of total revenue, for the comparable period in 2019. The increase as a percentage of revenue is a result of cost control and cost reduction measures in comparison to lower revenue due to the impact of the COVID-19 pandemic in the six months ended June 30, 2020.
Other Charges, Net
Other charges, net recorded for the six months ended June 30, 2020 consisted primarily of $4.5 million of professional fees incurred in connection with investigation matters, $2.7 million of restructuring costs related to closing facilities and implementing outsourcing and other restructuring initiatives, $1.2 million related to long-lived asset impairments, and $1.3 million of costs associated with our global information technology (IT) transformation initiative offset by $(1.9) million of acquisition-related charges related to previous acquisitions. The IT transformation initiative is a multi-year project aimed at updating and integrating our global enterprise resource planning and human resource information systems.
Other charges, net recorded for the six months ended June 30, 2019 consisted of $1.9 million of restructuring costs related to closing facilities and implementing outsourcing and other restructuring initiatives, $1.3 million related to other fees, $2.0 million of costs associated with our global IT transformation initiative and $5.0 million of acquisition-related charges related to acquisitions completed in 2019 and 2018.
Operating Income
The decrease in operating margin was due to lower revenue and operating inefficiencies due to COVID-19 related disruptions to Bruker’s customers and some of our own operations, partially offset by cost control and cost reduction measures.
Interest and Other Income (Expense), Net
During the six months ended June 30, 2020, the primary components within interest and other income (expense), net were net interest expense of $4.7 million, realized and unrealized losses on foreign currency denominated transactions of $3.2 million and $1.8 million related to pension plan expenses. During the six months ended June 30, 2019, the primary components within interest and other income (expense), net were net interest expense of $6.8 million, realized and unrealized losses on foreign currency denominated transactions of $1.4 million and $1.2 million related to pension plan expenses. As a result of entering into interest rate and cross-currency swap agreements related to our new debt agreements, we reduced our interest expense by $4.4 million for the six month period ended June 30, 2020.
Income Tax Provision
The 2020 and 2019 effective tax rates were estimated using projected annual pre-tax income on a jurisdictional basis. Expected tax benefits, including tax credits and incentives, the impact of changes to valuation allowances and the effect of jurisdictional differences in statutory tax rates were also considered in the calculation.
The effective tax rates for the six months ended June 30, 2020 and 2019 were 22.3% and 21.3%, respectively. The increase in our effective tax rate was primarily due to the jurisdictional profit mix and unfavorable discrete impact.
35
Net Income (Loss) Attributable to Noncontrolling Interests
The net income attributable to noncontrolling interests represented the minority shareholders' proportionate share of the net income recorded by our majority-owned subsidiaries. In January 2020, we acquired the remaining interest in our redeemable noncontrolling interest.
Net Income Attributable to Bruker Corporation
The decrease in net income and earnings per diluted share was primarily driven by the decline in revenue, gross profit and operating profit as a result of disruptions from the COVID-19 pandemic.
Reportable Segment Revenue
The following table presents revenue, change in revenue and revenue growth by reportable segment (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
Percentage |
|
||||
|
|
|
2020 |
|
2019 |
|
Dollar Change |
|
Change |
|
|||
|
BSI Life Science |
|
$ |
519.2 |
|
$ |
567.4 |
|
$ |
(48.2) |
|
(8.5) |
% |
|
BSI NANO |
|
|
245.6 |
|
|
291.8 |
|
|
(46.2) |
|
(15.8) |
% |
|
BEST |
|
|
91.0 |
|
|
99.7 |
|
|
(8.7) |
|
(8.7) |
% |
|
Eliminations (a) |
|
|
(7.2) |
|
|
(7.3) |
|
|
0.1 |
|
|
|
|
|
|
$ |
848.6 |
|
$ |
951.6 |
|
$ |
(103.0) |
|
(10.8) |
% |
| (a) | Represents product and service revenue between reportable segments. |
For financial reporting purposes, we aggregate the Bruker BioSpin Group and Bruker CALID Group as the BSI Life Science Segment. This aggregation reflects the similar economic characteristics, production processes, customer services provided, types and classes of customers, methods of distribution and regulatory environments.
The decline in revenue for the BSI Life Science Segment was due to disruptions to our customers’ and certain Bruker operations from the COVID-19 pandemic, lower demand in our academic, industrial and applied markets during the pandemic and delays in certain instrument deliveries and installations due to pandemic related lab closures. The decline in revenues for the BSI NANO Segment was due primarily to worldwide COVID-19 academic customer lab closures, weaker industrial demand certain temporary BSI NANO facility closures. The decline in revenue for the BEST Segment was due to lower superconductor demand and government research lab disruptions during the six months ended June 30, 2020.
Operating Income
The following table presents operating income and operating margins on revenue by reportable segment (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
||||||||
|
|
|
2020 |
|
2019 |
|
||||||
|
|
|
Percentage of |
|
Percentage of |
|
|
|
|
|
|
|
|
|
|
Operating |
|
Segment |
|
Operating |
|
Segment |
|
||
|
|
|
Income |
|
Revenue |
|
Income |
|
Revenue |
|
||
|
BSI Life Science |
|
$ |
78.1 |
|
15.0 |
% |
$ |
103.2 |
|
18.2 |
% |
|
BSI NANO |
|
|
(3.0) |
|
(1.2) |
% |
|
8.8 |
|
3.0 |
% |
|
BEST |
|
|
4.0 |
|
4.4 |
% |
|
6.2 |
|
6.2 |
% |
|
Corporate, eliminations and other (a) |
|
|
(24.8) |
|
|
|
|
(22.8) |
|
|
|
|
Total operating income |
|
$ |
54.3 |
|
6.4 |
% |
$ |
95.4 |
|
10.0 |
% |
| (a) | Represents corporate costs and eliminations not allocated to the reportable segments. |
36
The operating margin declines in the BSI Life Science and BSI NANO segments were due to lower revenue and gross profit from COVID-19 related disruptions to our customers’ and own operations, partially offset by cost control and cost reduction measures. The decline in the operating margin for the BEST segment was due to lower revenue, unfavorable mix and charges related to planned restructuring actions, partially offset by reduced operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
We anticipate that our existing cash and credit facilities will be sufficient to support our operating and investing needs for at least the next twelve months. Our future cash requirements could be affected by acquisitions that we may complete, repurchases of our common stock or the payment of dividends in the future. In addition, our ability to access capital and maintain liquidity may be impacted by the volatile market conditions caused by the COVID-19 pandemic. Historically, we have financed our growth and liquidity needs through cash flow generation and a combination of debt financings and issuances of common stock. In the future, there are no assurances that we will continue to generate cash flow from operations or that additional financing alternatives will be available to us, if required, or if available, will be obtained on terms favorable to us.
During the six months ended June 30, 2020, net cash provided by operating activities was $46.8 million, resulting from consolidated net income adjusted for non-cash items of $97.5 million, partially offset by a change in operating assets and liabilities, net of acquisitions and divestitures of $50.7 million. The increase in operating assets and liabilities, net of acquisitions and divestitures for the six months ended June 30, 2020 was primarily caused by an increase in cash received from customers offset by purchases of inventory for orders in 2020. During the six months ended June 30, 2019, net cash provided by operating activities was $24.8 million, resulting from consolidated net income adjusted for non-cash items of $118.0 million, partially offset by an increase in operating assets and liabilities, net of acquisitions and divestitures of $93.2 million. The increase in operating assets and liabilities, net of acquisitions and divestitures for the six months ended June 30, 2019 was primarily caused by an increase in inventory for orders in 2019.
During the six months ended June 30, 2020, net cash used in investing activities was $115.7 million, compared to net cash used in investing activities of $106.6 million during the six months ended June 30, 2019. Cash used in investing activities during the six months ended June 30, 2020 was primarily attributed to cash paid for purchases of property, of plant and equipment of $50.8 million, purchases of short-term investments of $50.0 million and acquisitions of $24.6 million offset by $6.1 million of maturities in short-term investments. Cash used in investing activities during the six months ended June 30, 2019 was attributed to cash paid for acquisitions of $71.9 million and purchases of property, plant and equipment of $28.6 million.
During the six months ended June 30, 2020, net cash provided by financing activities was $138.2 million, compared to net cash provided by financing activities of $41.6 million during the six months ended June 30, 2019. Net cash provided by financing activities during the six months ended June 30, 2020 was primarily attributable to $200.9 million in net proceeds from borrowings under the 2019 Revolving Credit Agreement offset in part by $12.3 million for the payment of dividends and $50.0 million of repurchases of common stock under our repurchase program. Net cash provided by financing activities during the six months ended June 30, 2019 was primarily attributable to $172.1 million in net proceeds from borrowings under the 2015 Credit Agreement and $5.8 million of proceeds from the issuance of common stock, net. This was offset by $100.0 million of repurchases of common stock under our repurchase program, a $15.0 million repayment under the Note Purchase Agreement, $12.6 million used for the payment of dividends and a $4.6 million repayment of other debt.
On December 11, 2019, we entered into (1) a new revolving credit agreement to establish a new revolving credit facility in the aggregate principal amount of $600 million; (2) a term loan agreement to establish a new term loan facility in the aggregate principal amount of $300 million; and (3) a note purchase agreement to issue and sell CHF 297 million aggregate principal amount of 1.01% senior notes due December 11, 2029. Floating interest rates under the term loan were simultaneously fixed through cross-currency and interest rate swap agreements into Euro ($150 million) and Swiss Franc ($150 million) rates carrying average effective interest rates of 0.94% and hedge our net investment in our Euro and Swiss Franc denominated net assets. The new revolving credit agreement replaced our $500 million five-year revolving credit agreement established on October 27, 2015, that was terminated on December 11, 2019. In addition, we designated our CHF 297 million senior notes as a hedge in our net investment in our Swiss Franc denominated net assets. Proceeds from this financing were used to repay the outstanding borrowings under our prior 2015 revolving credit facility and we intend to use the remaining proceeds for general corporate purposes and to support corporate strategic objectives. During December 2019, we entered into U.S. Dollar to Euro cross-currency swaps on our existing 2012 private placement notes of $105 million 4.31% Series 2012A Senior Notes, Tranche C, due January 18, 2022, and the existing $100 million 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024, resulting in an average effective interest rate of 2.25% on these instruments. The cross-currency swaps hedge our net investment in our Euro denominated net assets.
37
As of June 30, 2020, we have entered into several cross-currency and interest rate swap agreements with a notional value of $150.0 million of U.S. Dollar to Swiss Franc and a notional value of $355.0 million of U.S. Dollar to Euro to hedge the variability in the movement of foreign currency exchange rates on portions of our Euro and Swiss Franc denominated net asset investments. As a result of entering into these interest rate and cross currency swap agreements, we reduced our interest expense by $1.8 million and $4.4 million for the three and six month periods ended June 30, 2020, respectively. We anticipate these swap agreements will lower net interest expense by approximately $8.8 million in 2020 and $8.8 million in 2021.
In May 2019, our Board of Directors approved a Stock Repurchase Program under which repurchases of our common stock in the amount of up to $300.0 million were authorized to occur from time to time, in amounts, at prices, and at such times as we deem appropriate, subject to market conditions, legal requirements and other considerations. We repurchased a total of 1,214,282 shares at an aggregate cost of $50.0 million in the three and six months ended June 30, 2020.We repurchased a total of 2,300,635 share at an aggregate cost of $100.0 million in the three and six months ended June 30, 2019. The remaining authorization as of August 3, 2020 is $107.7 million. We intend to fund any additional repurchases from cash on hand, future cash flows from operations and available borrowings under our revolving credit facility. The repurchased shares are reflected within Treasury stock in the accompanying unaudited condensed consolidated balance sheet at June 30, 2020.
Cash, cash equivalents and short-term investments at June 30, 2020 and December 31, 2019 totaled $796.8 million and $684.9 million, respectively, of which $394.1 million and $301.1 million, respectively, related to cash, cash equivalents and short-term investments held outside of the U.S. in our foreign subsidiaries, most significantly in the Netherlands and Switzerland.
At December 31, 2019 and in accordance with the 2017 Tax Cuts and Jobs Act (the “2017 Tax Act”), we recorded state and foreign withholding taxes, as well as subsequent foreign currency translations on these withholding taxes as they are an obligation of the parent company, on the cash and liquid assets portion of the unremitted earnings and profits (E&P) of foreign subsidiaries expected to be repatriated from our foreign subsidiaries to the United States. We continue to be indefinitely reinvested in the amount of $477 million of non-cash E&P that is subject to the 2017 Tax Act deemed repatriation. If this E&P is ultimately distributed to the United States in the form of dividends or otherwise we would likely be subject to additional withholding tax. We will continue to evaluate our assertions on the cumulative historical outside basis differences in our foreign subsidiaries as of December 31, 2019. The amount of unrecognized deferred withholding taxes on the undistributed E&P was $58 million at December 31, 2019.
As of June 30, 2020, we had approximately $38.8 million of net operating loss carryforwards available to reduce state taxable income that are expected to expire at various times beginning in 2020; approximately $88.8 million of net operating losses available to reduce German federal income and trade taxes that are carried forward indefinitely and $29.7 million of other foreign net operating losses that are expected to expire at various times beginning in 2021. We also had U.S. state research and development tax credits of $7.7 million. Utilization of these credits and state net operating losses may be subject to annual limitations due to the ownership percentage change limitations provided by the Internal Revenue Code Section 382 and similar state provisions. In the event of a deemed change in control under Internal Revenue Code Section 382, an annual limitation on the utilization of net operating losses and credits may result in the expiration of all or a portion of the net operating loss and credit carryforwards.
Uncertain tax contingencies are positions taken or expected to be taken on an income tax return that may result in additional payments to tax authorities. If a tax authority agrees with the tax position taken or expected to be taken or the applicable statute of limitations expires, then additional payments will not be necessary.
38
At June 30, 2020 and December 31, 2019, we had the following debt outstanding (dollars in millions):
The following is a summary of the maximum commitments and the net amounts available to us under the 2019 Credit Agreement and other lines of credit with various financial institutions located primarily in Germany and Switzerland that are unsecured and typically due upon demand with interest payable monthly, at June 30, 2020 (dollars in millions):
As of June 30, 2020, we had no off-balance sheet arrangements and we were in compliance with the financial covenants of these debt agreements.
As of June 30, 2020, there are no material changes to our contractual obligations from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
RECENT ACCOUNTING PRONOUNCEMENTS
Information regarding recent accounting standard changes and developments is incorporated by reference from Part I, Item 1, Unaudited Condensed Consolidated Financial Statements, of this document and should be considered an integral part of this Item 2. See Note 16 in the Notes to the Unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for recently adopted and issued accounting standards.
|
ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
We are potentially exposed to market risks associated with changes in foreign currency translation rates, interest rates and commodity prices. We selectively use financial instruments to reduce these risks. All transactions related to risk management techniques are authorized and executed pursuant to our policies and procedures. Analytical techniques used to manage and monitor foreign currency translation and interest rate risk include market valuations and sensitivity analysis.
Impact of Foreign Currencies
We generate a substantial portion of our revenues in international markets, principally Germany and other countries in the European Union, Switzerland and Japan, which exposes our operations to the risk of exchange rate fluctuations. The impact of currency exchange rate movement can be positive or negative in any period. Our costs related to sales in foreign currencies are largely denominated in the same respective currencies, reducing our transaction risk exposure. However, for foreign currency denominated sales in certain regions, such as Japan, where we do not incur significant costs denominated in that foreign currency, we are more exposed to the impact of foreign currency fluctuations.
39
For sales not denominated in U.S. Dollars, if there is an increase in the rate at which a foreign currency is exchanged for U.S. Dollars, it will require more of the foreign currency to equal a specified amount of U.S. Dollars than before the rate increase. In such cases, if we price our products in the foreign currency, we will receive less in U.S. Dollars than we would have received before the rate increase went into effect. If we price our products in U.S. Dollars and competitors price their products in local currency, an increase in the relative strength of the U.S. Dollar could result in our prices not being competitive in a market where business is transacted in the local currency. For example, if the U.S. Dollar strengthened against the Japanese Yen, our Japanese-based competitors would have a greater pricing advantage over us.
Changes in foreign currency translation rates decreased our revenue by 1.1% and 3.8% for the six months ended June 30, 2020 and 2019, respectively.
Assets and liabilities of our foreign subsidiaries, where the functional currency is the local currency, are translated into U.S. dollars using period-end exchange rates. Revenues and expenses of foreign subsidiaries are translated at the average exchange rates in effect during the year. Adjustments resulting from financial statement translations are included as a separate component of shareholders’ equity. For the six months ended June 30, 2020 and 2019, we recorded net losses (gains) from currency translation adjustments of $(3.4) million and $(2.4) million, respectively. Gains and losses resulting from foreign currency transactions are reported in interest and other income (expense), net in the unaudited condensed consolidated statements of income and comprehensive income. Our foreign currency translation gains, net were $(3.2) million and $(1.4) million for the six months ended June 30, 2020 and 2019, respectively.
The impact of currency exchange rate movement can be positive or negative in any period. We periodically enter into forward currency contracts in order to minimize the volatility that fluctuations in currency translation have on our monetary transactions. Under these arrangements, we typically agree to purchase a fixed amount of a foreign currency in exchange for a fixed amount of U.S. Dollars or other currencies on specified dates with maturities of less than twelve months, with some agreements extending to longer periods. These transactions do not qualify for hedge accounting and, accordingly, the instrument is recorded at fair value with the corresponding gains and losses recorded in the unaudited condensed consolidated statements of income and comprehensive income.
As of June 30, 2020, we have entered into several cross-currency and interest rate swap agreements with a notional value of $150.0 million of U.S. Dollar to Swiss Franc and a notional value of $355.0 million of U.S. Dollar to Euro to hedge the variability in the movement of foreign currency exchange rates on portions of our Euro and Swiss Franc denominated net asset investments. Under the GAAP hedge accounting guidance, changes in fair value of the derivative that relates to changes in the foreign currency spot rate are recorded in the currency translation adjustment in comprehensive income (loss) and remain in accumulated comprehensive income (loss) in shareholders’ equity until the sale or substantial liquidation of the foreign operation. The difference between the interest rate received and paid under the interest rate cross-currency swap derivative agreement is recorded in interest income in the unaudited condensed consolidated statements of income and comprehensive income.
From time to time, we have entered into forward exchange contracts designed to minimize the volatility that fluctuations in foreign currency have on our cash flows related to purchases and sales denominated in foreign currencies. Under these arrangements, we agree to purchase a fixed amount of a foreign currency in exchange for a fixed amount of U.S. Dollars or other currencies on specified dates typically with maturities of less than twelve months with some agreements extending to longer periods. These transactions are recorded at fair value with the corresponding gains and losses recorded in interest and other income (expense), net in the unaudited condensed consolidated statements of income and comprehensive income. At June 30, 2020 and December 31, 2019, we had foreign exchange contracts with notional amounts aggregating $91.6 million and $74.4 million, respectively. We will continue to evaluate our currency risks and in the future may utilize foreign currency contracts more frequently.
Impact of Interest Rates
We regularly invest excess cash in short-term investments that are subject to changes in interest rates. We believe that the market risk arising from holding these financial instruments is minimal because of our policy of investing in short-term financial instruments issued by highly rated financial institutions.
Our exposure related to adverse movements in interest rates is derived primarily from outstanding floating rate debt instruments that are indexed to short-term market rates. We currently have a higher level of fixed rate debt than variable rate debt, which limits the exposure to adverse movements in interest rates.
40
Impact of Commodity Prices
We are exposed to certain commodity risks associated with prices for various raw materials. The prices of copper and certain other raw materials, particularly niobium-tin, used to manufacture superconductors have increased significantly over the last decade. Copper and niobium-tin are the main components of low temperature superconductors and continued commodity price increases for copper and niobium, as well as other raw materials, may negatively affect our profitability. Periodically, we enter into commodity forward purchase contracts to minimize the volatility that fluctuations in the price of copper have on our sales of these products. At June 30, 2020 and December 31, 2019, we had fixed price commodity contracts with notional amounts aggregating $11.6 million and $5.6 million, respectively. The fair value of the fixed price commodity contracts at June 30, 2020 and December 31, 2019 was $1.1 million and $0.3 million, respectively. We will continue to evaluate our commodity risks and may utilize commodity forward purchase contracts more frequently in the future.
Inflation
We do not believe inflation had a material impact on our business or operating results during any of the periods presented.
ITEM 4. CONTROLS AND PROCEDURES
We have established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act) that are designed to ensure that material information relating to us, including our consolidated subsidiaries, is made known to our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer and principal accounting officer) by others within our organization. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2020. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective at a reasonable assurance level as of June 30, 2020 due to a material weakness in internal control over financial reporting, as described below and in Part II, Item 9A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
Notwithstanding this material weakness, management concluded that the unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America
Changes in Internal Controls over Financial Reporting
Other than as discussed below under the heading "Remediation Plans", there has been no change in our internal control over financial reporting during the three months ended June 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Material Weaknesses
During the audit of our consolidated financial statements as of and for the year ended December 31, 2019, we identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses identified were as follows:
We did not design and maintain an effective control environment commensurate with our financial reporting requirements. Specifically, we lacked a sufficient complement of personnel in our corporate tax department and a U.S. subsidiary with an appropriate level of tax and accounting knowledge, training and experience to appropriately analyze, record and disclose tax and accounting matters timely and accurately. This material weakness contributed to the following additional material weaknesses:
| ● | We did not maintain effective internal controls with respect to accounting for income taxes. Specifically, our controls over income taxes did not operate effectively as designed. This control deficiency resulted in immaterial misstatements to the income tax provision, income taxes payable and uncertain tax position reserves accounts in our consolidated financial statements for the year ended December 31, 2019. |
41
| ● | We did not maintain effective internal controls with respect to accounting for revenue transactions at a U.S. subsidiary. Specifically, our controls over revenue recognition at a U.S. subsidiary did not operate effectively as designed. This control deficiency resulted in immaterial errors to revenue, accounts receivable and deferred revenue accounts in our consolidated financial statements for the year ended December 31, 2019. |
These control deficiencies could result in a misstatement of the interim or annual financial statements that would result in a material misstatement to our annual or interim consolidated financial statements that would not be prevented or detected. Accordingly, our management determined that these control deficiencies constitute material weaknesses.
Remediation Plans
As part of our routine efforts to maintain adequate and effective internal control over financial reporting, we initiated and implemented measures designed to improve our financial statement closing process and enhance certain internal controls processes and procedures. As indicated below, a number of these initiatives relate directly to strengthening our control over accounting for income taxes and revenue transactions and address specific control deficiencies which contributed to the material weaknesses. As a result of these efforts, as of the date of this filing we believe we have made progress toward remediating the underlying causes of the material weaknesses. Specifically, we have undertaken the following steps in 2020 to remediate the deficiencies underlying this material weakness:
| ● | We optimized our tax accounting resources to obtain the right balance with specific international tax expertise to strengthen tax accounting review procedures in significant jurisdictions; |
| ● | We plan to implement accelerated annual close procedures and controls during the fourth quarter of 2020 to allow for more timely issue identification and increase the frequency of review procedures and controls performed around the calculation and reporting of certain tax balances; |
| ● | We identified areas to leverage the functionality of our tax provision software to automate tasks and control various workflows; |
| ● | We expanded our revenue recognition resources to strengthen revenue transaction review procedures; and |
| ● | We implemented additional revenue transaction review procedures within the U.S. subsidiary to assist in identification and review of more significant revenue transactions. |
We are committed to maintaining a strong internal control environment and believe that these remediation efforts represent significant improvements in our control environment. The identified material weakness in internal control will not be considered fully remediated until the internal controls over these areas have been in operation for a sufficient period of time for our management to conclude that the material weaknesses have been fully remediated. We will continue our efforts to test the new controls in order to make this final determination.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are involved in lawsuits, claims, and proceedings, including, but not limited to, patent and commercial matters, which arise in the ordinary course of business. There are no such matters pending that we currently believe are reasonably likely to have a material impact on our business or to our consolidated financial statements.
On September 25, 2019, in a complaint filed in the Düsseldorf, Germany, District Court, Carl Zeiss Microscopy GmbH, a subsidiary of Carl Zeiss AG (Zeiss), sued Luxendo GmbH (Luxendo), a subsidiary of Bruker Corporation, for infringement of a recently registered German utility model patent licensed to Zeiss pertaining to one specific Luxendo product category. We intend to vigorously defend against this claim.
On September 23, 2019, in a complaint filed in the Düsseldorf, Germany, District Court, Micromass UK Limited (Micromass), a subsidiary of Waters Corporation, sued Bruker Corporation, as well as its affiliate, Bruker Daltonik GmbH, for infringement of a European patent pertaining to our timsTOF product line. On March 6, 2020, we were notified that Micromass has expanded its complaint in Düsseldorf and now asserts another recently granted European patent in Germany. We intend to vigorously defend against these claims.
42
In addition, we are subject to regulation by national, state and local government agencies in the United States and other countries in which we operate. From time to time, we are the subject of governmental investigations often involving regulatory, marketing and other business practices. These governmental investigations may result in the commencement of civil and criminal proceedings, fines, penalties and administrative remedies which could have a material adverse effect on our financial position, results of operations and/or liquidity.
In August 2018, the Korea Fair Trade Commission (KFTC) informed the Company that it was conducting an investigation into the public tender bidding activities of a number of life science instrument companies operating in Korea, including Bruker Korea Co., Ltd (Bruker Korea). The Company cooperated fully with the KFTC and on June 16, 2019, the KFTC announced its decision to impose a fine of approximately $20,000 on Bruker Korea and declined to impose any criminal liability against Bruker Korea in connection with this matter. As a result of the KFTC’s decision, the Korea Public Procurement Service (PPS) imposed a three month suspension on Bruker Korea’s ability to bid for or conduct sales to Korean government entities which ended on March 27, 2020. Sales to Korean government entities were less than 3% of the Company’s revenue for the year ended December 31, 2019.
In late August 2019, the KFTC informed us that it was conducting a separate investigation into the public tender bidding activities of a number of life science instrument companies operating in Korea, including five public tenders involving Bruker Korea during 2015. We cooperated fully with the KFTC and on July 8, 2020, the KFTC announced its decision to impose a fine of approximately $11,000 on Bruker Korea and declined to impose any criminal liability against Bruker Korea in connection with this matter.
ITEM IA. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, which could materially affect our business, financial condition or future results. The risks described in this report and in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Our financial condition and results of operations for fiscal 2020 have been and will continue to be adversely affected by the ongoing novel coronavirus disease-2019, or COVID-19, outbreak.
In December 2019, a novel strain of coronavirus, referred to as COVID-19, surfaced in Wuhan, China. In March 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. The virus has spread to over 200 countries and territories and continues to spread globally, including in the United States. The impact of this pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world.
Impacts to our business include temporary closures of many of our government and university customers and our suppliers, disruptions or restrictions on our employees’ and customers’ ability to travel, and delays in product installations or shipments to and from affected countries. In an effort to halt the outbreak of COVID-19, a number of countries, including the United States, have implemented and continue to implement significant restrictions on travel, shelter in place or stay at home orders, and business closures. Certain jurisdictions, including many within the United States, have also begun implementing policies with the goal of re-opening these markets only to return to restrictions in the face of increases in new COVID-19 cases. For example, a number of states, including California, Massachusetts and New Jersey where we have significant operations, had issued shelter in place or stay-at-home orders. Although these states have begun implementing phased re-opening policies, many of our employees in these areas continue to work remotely and any re-openings may be delayed or pulled back if the virus continues to spread. In addition, a number of our production facilities have either temporarily closed or are operating on a reduced capacity. Most commercial activity in sales and marketing, and customer demonstrations and applications training, are either being conducted remotely or postponed. Customer purchasing departments are operating at reduced capacity, and many customers have delayed or cut capital expenditures and operating budgets. These travel restrictions, business closures and operating reductions at Bruker, our customers, our distributors, and/or our suppliers have and will continue to adversely impact our operations worldwide, including our ability to manufacture, sell or distribute our products, as well as cause temporary closures of our foreign distributors, or the facilities of suppliers or customers. This disruption of our employees, distributors, suppliers or customers has and will continue to impact our global sales and operating results. During the six months ended June 30, 2020, our revenue declined 10.8% compared to the six months ended June 30, 2019, primarily due to COVID-19 related disruptions. We anticipate that the COVID-19 pandemic and challenges to our customers’ and our own operations will continue to have a significant negative impact on our 2020 financial results.
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We have experienced decreased work efficiency and productivity as a result of the increased number of employees working from home. In addition, with this remote working model where employees are increasingly accessing our systems through VPN or internet connections, we may be subject to increased security risks, including the risks of cyberattacks or data breaches. Additionally, if any of our key leaders contract the virus and are unable to perform their duties for a period of time as the result of illness, our business, results of operations or financial condition could be adversely affected.
We continue to monitor and assess the effects of the COVID-19 pandemic on our commercial operations, including its continued impact on our revenue in 2020. However, we cannot at this time accurately predict what effects these conditions will ultimately have on our operations due to uncertainties relating to the severity of the disease, the duration of the outbreak, and the length or severity of the travel restrictions, business closures, and other safety and precautionary measures imposed by the governments of impacted countries. The pandemic has also adversely affected the economies and financial markets of many countries, which has and likely will continue to affect demand for our products and our operating results.
There have been no other material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In May 2019, our Board of Directors approved and we announced a share repurchase program under which repurchases of our common stock of up to $300.0 million may occur from time to time, in amounts, at prices, and at such times as we deem appropriate, subject to market conditions, legal requirements and other considerations (the “2019 Repurchase Program”). We repurchased a total of 1,214,282 shares at an aggregate cost of $50.0 million in the three and six months ended June 30, 2020.We repurchased a total of 2,300,635 shares at an aggregate cost of $100.0 million in the three and six months ended June 30, 2019. The remaining authorization as of August 3, 2020 is $107.7 million. We intend to fund any additional repurchases from cash on hand, future cash flows from operations and available borrowings under our revolving credit facility. The repurchased shares are reflected within Treasury stock in the accompanying unaudited condensed consolidated balance sheet at June 30, 2020.
The following table sets forth all purchases made by or on behalf of the Company or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) under the Exchange Act, of shares of our common stock during each month in the second quarter of 2020.
| (1) | Includes (i) shares repurchased under the 2019 Repurchase Program, and (ii) 2,500 shares purchased by Frank H. Laukien, the Company's Chief Executive Officer and Chairman of the Board of Directors, in open market transactions, which purchases were previously disclosed on Form 4 filed with the SEC on May 13, 2020. |
ITEM 5. OTHER INFORMATION
On August 6, 2020, the Board of Directors of the Company approved amendments to and the restatement of the Company’s bylaws (as amended and restated, the “By-laws”). The amendments to the By-laws fall into the following two categories:
Enhancements to Advance Notices of Stockholder Proposals and Director Nominations
| ● | Specify the procedures that stockholders need to follow in submitting stockholder proposals and director nominations for consideration at a meeting of stockholders. (Sections 2.3(a), (b), and (c) of the By-laws.) |
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| ● | Enhance the information that the Board of Directors has access to regarding business proposed by stockholders for consideration at stockholder meetings and/or proposed director nominations, and the proponents thereof, so as to facilitate the ability of the Board to make informed voting recommendations to stockholders on any matter that will come before the meeting. (Sections 2.3(b) and (c) of the By-laws.) |
| ● | Provide procedural safeguards to ensure that only stockholder proposals and director nominations that comply with the language and intent of the advance notice provisions will be considered at meetings of stockholders. (Sections 2.3(b) and (c) of the By-laws.) |
| ● | Update the advance notice provisions to require director nominees to submit to the Company a completed director questionnaire. (Section 2.3(d) of the By-laws.) |
Enhancements to Provisions Relating to Stockholder Actions by Written Consent
| ● | Clarify that stockholders may take corporate action, without a meeting, with the written consent of the same number of holders of outstanding stock that would be necessary to take such action at a meeting, consistent with Section 228 of the Delaware General Corporation Law. (Section 2.10(a) of the By-laws). |
| ● | Provide customary procedures for stockholders to request that the Board of Directors set a record date for determining the stockholders entitled to consent to corporate actions in writing without a meeting. (Sections 2.10(b) and 2.12 of the By-laws.) |
| ● | Provide that the Company shall engage independent inspectors of elections for the purpose of promptly reviewing the validity of written consents of stockholders (and any revocations) delivered to the Company prior to the effectiveness of any such corporate actions by written consent. (Section 2.10(c) of the By-laws.) |
In addition to the foregoing, there were other immaterial changes to the By-laws including, but not limited to, typographical corrections and the definition of certain terms.
The foregoing description of the various amendments to the By-laws does not purport to be complete and is qualified in its entirety by reference to the complete text of the By-laws that were adopted by the Board on August 6, 2020, a copy of which is attached to this Quarterly Report on Form 10-Q as Exhibit 3.1 and incorporated herein by reference.
ITEM 6.EXHIBITS
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Exhibit
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Description |
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3.1* |
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10.1* |
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First Amendment Dated April 17, 2020 to the Note Purchase Agreement Dated January 18, 2012 |
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10.2* |
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First Amendment Dated April 17, 2020 to the Note Purchase Agreement Dated December 11, 2019 |
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31.1* |
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Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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31.2* |
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Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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32.1* |
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101.INS* |
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Inline XBRL Instance Document |
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101.SCH* |
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Inline XBRL Taxonomy Extension Schema Document |
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101.CAL* |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF* |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB* |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE* |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104* |
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The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 has been formatted in Inline XBRL (included in Exhibit 101) |
* Filed or furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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BRUKER CORPORATION |
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Date: August 7, 2020 |
By: |
/s/ FRANK H. LAUKIEN, PH.D. |
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Frank H. Laukien, Ph.D. |
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President, Chief Executive Officer and Chairman |
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(Principal Executive Officer) |
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Date: August 7, 2020 |
By: |
/s/ GERALD N. HERMAN |
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Gerald N. Herman |
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Chief Financial Officer and Vice President |
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(Principal Financial Officer and Principal Accounting Officer) |
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TABLE OF CONTENTS |
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Page |
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ARTICLE 1 CERTIFICATE OF INCORPORATION |
1 |
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Section 1.1 |
Contents |
1 |
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Section 1.2 |
Certificate in Effect |
1 |
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ARTICLE 2 MEETINGS OF STOCKHOLDERS |
1 |
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Section 2.1 |
Place |
1 |
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Section 2.2 |
Annual Meeting |
1 |
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Section 2.3 |
Notice of Stockholder Business |
1 |
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Section 2.4 |
Special Meetings |
13 |
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Section 2.5 |
Notice of Meetings |
14 |
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Section 2.6 |
Affidavit of Notice |
14 |
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Section 2.7 |
Quorum |
14 |
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Section 2.8 |
Voting Requirements |
14 |
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Section 2.9 |
Proxies And Voting |
14 |
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Section 2.10 |
Action Without Meeting |
15 |
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Section 2.11 |
Stockholder List |
16 |
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Section 2.12 |
Record Date |
16 |
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ARTICLE 3 DIRECTORS |
17 |
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Section 3.1 |
Number; Election and Term of Office |
17 |
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Section 3.2 |
Duties |
17 |
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Section 3.3 |
Compensation |
17 |
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Section 3.4 |
Reliance on Books |
17 |
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ARTICLE 4 MEETINGS OF THE BOARD OF DIRECTORS |
17 |
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Section 4.1 |
Place |
17 |
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Section 4.2 |
Annual Meeting |
17 |
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Section 4.3 |
Regular Meetings |
18 |
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Section 4.4 |
Special Meetings |
18 |
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Section 4.5 |
Quorum |
18 |
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Section 4.6 |
Action Without Meeting |
18 |
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Section 4.7 |
Telephone Meetings |
18 |
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ARTICLE 5 COMMITTEES OF DIRECTORS |
18 |
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Section 5.1 |
Designation |
18 |
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Section 5.2 |
Records of Meetings |
19 |
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ARTICLE 6 NOTICES |
19 |
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Section 6.1 |
Method of Giving Notice |
19 |
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Section 6.2 |
Waiver |
19 |
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ARTICLE 7 OFFICERS |
20 |
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Section 7.1 |
In General |
20 |
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Section 7.2 |
Election of President, Secretary and Treasurer |
20 |
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Section 7.3 |
Election of Other Officers |
20 |
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Section 7.4 |
Salaries |
20 |
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Section 7.5 |
Term of Office |
20 |
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Section 7.6 |
Duties of President and Chairman of the Board |
20 |
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Section 7.7 |
Duties of Vice President |
20 |
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Section 7.8 |
Duties of Secretary |
21 |
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Section 7.9 |
Duties of Assistant Secretary |
21 |
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Section 7.10 |
Duties of Treasurer |
21 |
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Section 7.11 |
Duties of Assistant Treasurer |
21 |
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ARTICLE 8 RESIGNATIONS, REMOVALS AND VACANCIES |
22 |
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Section 8.1 |
Directors |
22 |
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Section 8.2 |
Officers |
22 |
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ARTICLE 9 CERTIFICATE OF STOCK |
22 |
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Section 9.1 |
Issuance of Stock |
22 |
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Section 9.2 |
Right to Certificate; Form |
23 |
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Section 9.3 |
Facsimile Signature |
23 |
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Section 9.4 |
Lost Certificates |
23 |
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Section 9.5 |
Transfer of Stock |
23 |
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Section 9.6 |
Registered Stockholders |
23 |
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ARTICLE 10 INDEMNIFICATION |
24 |
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Section 10.1 |
Third Party Actions |
24 |
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Section 10.2 |
Derivative Actions |
24 |
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Section 10.3 |
Expenses |
24 |
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Section 10.4 |
Authorization |
24 |
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Section 10.5 |
Advance Payment Of Expenses |
25 |
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Section 10.6 |
Non-Exclusiveness |
25 |
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Section 10.7 |
Insurance |
25 |
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Section 10.8 |
Constituent Corporations |
25 |
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Section 10.9 |
Additional Indemnification |
25 |
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ARTICLE 11 EXECUTION OF PAPERS |
26 |
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ARTICLE 12 FISCAL YEAR |
26 |
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ARTICLE 13 SEAL |
26 |
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ARTICLE 14 OFFICES |
26 |
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ARTICLE 15 AMENDMENTS |
26 |
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ii
BRUKER CORPORATION
AMENDED AND RESTATED BY-LAWS
ARTICLE 1
CERTIFICATE OF INCORPORATION
Section 1.1 Contents. The name, location of principal office and purposes of the Corporation shall be as set forth in its Certificate of Incorporation. These Amended and Restated By-laws (these “By-laws”), the powers of the Corporation and of its Directors and stockholders, and all matters concerning the conduct and regulation of the business of the Corporation shall be subject to such provisions in regard thereto, if any, as are set forth in said Certificate of Incorporation. The Certificate of Incorporation is hereby made a part of these By-laws.
Section 1.2 Certificate in Effect. All references in these By-laws to the Certificate of Incorporation shall be construed to mean the Certificate of Incorporation of the Corporation as from time to time amended and/or restated, including (unless the context shall otherwise require) all certificates and any agreement of consolidation or merger filed pursuant to the Delaware General Corporation Law, as amended (the “DGCL”).
ARTICLE 2
MEETINGS OF STOCKHOLDERS
Section 2.1 Place. All meetings of the stockholders may be held at such place either within or without the State of Delaware as shall be designated from time to time by Bruker Corporation’s Board of Directors (the “Board of Directors” or “Board”), the Chairman of the Board of Directors or the President and stated in the notice of the meeting or in any duly executed waiver of notice thereof.
Section 2.2 Annual Meeting. Annual meetings of stockholders, shall be held on the second Tuesday of April in each year, if not a legal holiday, and if a legal holiday, then on the next secular day following, at 10:00 A.M., or at such other date and time as shall be designated from time to time by the Board of Directors, the Chairman of the Board of Directors or the President and stated in the notice of the meeting. If such annual meeting has not been held on the day herein provided therefor, a special meeting of the stockholders in lieu of the annual meeting may be held, and any business transacted or elections held at such special meeting shall have the same effect as if transacted or held at the annual meeting, and in such case all references in these By-laws, except in this Section 2.2, to the annual meeting of the stockholders shall be deemed to refer to such special meeting.
Section 2.3 Notice of Stockholder Business.
(a) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting in accordance with these By-laws, the Certificate of Incorporation, the DGCL, and other applicable law.
(b) To be properly brought before an annual meeting of stockholders, business must be of a nature that is appropriate for consideration at an annual meeting and must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, or (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (iii) otherwise properly brought before the meeting by a stockholder Present in Person at the meeting who (A) is a record owner of shares of the Corporation’s capital stock at the time of giving the notice provided for in this paragraph (b), (B) is a record owner of shares of the Corporation’s capital stock as of the record date for the determination of stockholders entitled to notice of and to vote at the meeting in question, (C) is a record owner of shares of the Corporation’s capital stock at the time of the meeting, (D) is entitled to vote at the meeting, and (E) complies with the requirements set forth in this paragraph (b) in all applicable respects. Except with respect to proposed nominations of persons for election to the Board, which must be made in compliance with the provisions of Section 2.3, paragraph (c) of these By-laws and except for stockholder proposals submitted for inclusion in the Corporation’s proxy statement pursuant to, and in compliance with, Rule 14a-8 (and the interpretations thereunder) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which proposals are not excludable under Rule 14a-8 of the Exchange Act, whether pursuant to a no-action letter from the Staff of the Division of Corporation Finance of the Securities and Exchange Commission (“SEC”) or a determination of a federal court of competent jurisdiction, and which are included in the notice of meeting given by or at the direction of the Board and the Corporation’s proxy statement pursuant to Rule 14a-8 of the Exchange Act, the foregoing clause (iii) shall be the exclusive means for a stockholder to propose business to be brought before an annual meeting of stockholders. In addition to the other requirements set forth in this paragraph (b), for any proposal of business to be considered at an annual meeting of stockholders, it (i) must be a proper subject for action by stockholders of the Corporation under these By-laws, the Certificate of Incorporation, the DGCL and other applicable law, and (ii) must not relate to a matter that is expressly reserved for action by the Board under these By-laws, the Certificate of Incorporation, the DGCL or other applicable law. For business to be properly brought before an annual meeting by a stockholder pursuant to this paragraph (b), the stockholder must have given (i) timely and proper notice thereof in writing to the Secretary of the Corporation (the “Proposal Notice”) and (ii) provided any updates or supplements to the Proposal Notice at the times and in the forms required by this paragraph (b). To be timely, the Proposal Notice must be delivered to, or mailed and received by, the Secretary of the Corporation at the principal executive offices of the Corporation not earlier than the close of business on the one hundred and twentieth calendar day and not later than the close of business on the ninetieth calendar day prior to the one-year anniversary date of the immediately preceding year’s annual meeting of stockholders or special meeting in lieu thereof (the “Anniversary Date”); provided, however, that in the event that the date of the annual meeting of stockholders is more than thirty calendar days before or more than sixty calendar days after the Anniversary Date, or if the Corporation did not hold an annual meeting of stockholders or special meeting in lieu thereof in the preceding fiscal year, notice by the stockholder to be timely must be so delivered to, or mailed and received by, the Secretary of the Corporation not later than the later of (i) the close of business on the ninetieth calendar day prior to such annual meeting or (ii) the close of business on the tenth calendar day following the day on which Public Announcement of the date of such annual meeting was first made by the Corporation. In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period (or extend any time period) for the giving of a Proposal Notice as described above. For purposes of these By-laws, “Notice
2
Deadline” shall mean the last date for a stockholder to deliver a Proposal Notice or a Nominating Notice (as defined below) in accordance with the provisions of this paragraph (b). To be in proper written form, a Proposal Notice shall set forth: (i) the name and address, as they appear on the Corporation’s books, of the stockholder proposing to bring business before the Corporation’s annual meeting of stockholders (each such stockholder, a “Proponent”) and any Stockholder Associated Person; (ii) (A) the class or series and number of shares of capital stock of the Corporation which are owned, directly or indirectly, beneficially (within the meaning of Rule 13d-3 under the Exchange Act) and/or of record, by such Proponent or any Stockholder Associated Person, provided that such Proponent or Stockholder Associated Person shall in all events be deemed to beneficially own any shares of any class or series of the Corporation’s equity securities as to which such Proponent or Stockholder Associated Person has a right to acquire beneficial ownership at any time in the future, whether such right is exercisable immediately, only after the passage of time or only upon the satisfaction of certain conditions precedent, (B) any derivative positions held or beneficially held by the Proponent and any Stockholder Associated Person and whether and a description in reasonable detail of the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other proxy, agreement, arrangement or understanding has been made or relationship exists, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or provide a right to vote or increase or decrease the voting power of, such Proponent or any Stockholder Associated Person with respect to the Corporation’s securities, and (C) a representation that the Proponent is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to be Present in Person at the meeting to propose such business; (iii) as to each matter the Proponent proposes to bring before the meeting, (A) a reasonably detailed description of the business desired to be brought before the meeting, (B) the text of the proposed business (including the text of any resolutions proposed for consideration and in the event such business includes a proposal to amend these By-laws, the Certificate of Incorporation or any policy of the Corporation, the text of the proposed amendment), and (C) a reasonably detailed description of the reasons for conducting such business at the meeting; (iv) a reasonably detailed description of any interest, direct or indirect, monetary or non-monetary, of the Proponent or any Stockholder Associated Person in the proposed business described in the Proposal Notice, including any anticipated benefit therefrom to be received by the Proponent or any Stockholder Associated Person; (v) a description in reasonable detail of any pending, or to the knowledge of the Proponent or any Stockholder Associated Person, threatened, legal proceeding in which any Proponent or Stockholder Associated Person is a party or participant involving the Corporation or any officer, Director, affiliate, associate, or employee of the Corporation; (vi) a description in reasonable detail of any relationship (including any direct or indirect interest in any agreement, arrangement or understanding, whether written or oral and whether formal or informal) between the Proponent or any Stockholder Associated Person and the Corporation or any Director, officer, affiliate, associate, or employee of the Corporation (naming such Director, officer, affiliate, associate, or employee); (vii) a description in reasonable detail of any contacts and discussions between the Proponent or any Stockholder Associated Person and any officer, Director, or employee of the Corporation (naming such officer, Director, or employee and listing the dates and describing the nature of such contacts and discussions); (viii) a reasonably detailed description of any relationship, agreement, arrangement or understanding, written or oral, direct or indirect, with respect to the business proposed to be brought before the annual meeting by the Proponent, between or among any Proponent or any Stockholder Associated Person and any other person or
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entity (naming each such person or entity), including without limitation any agreements, arrangements and understandings that would be required to be disclosed pursuant to Item 5 or Item 6 of Schedule 13D if a Schedule 13D relating to the Corporation was filed with the SEC by such Proponent or Stockholder Associated Person pursuant to the Exchange Act (regardless of whether the requirement to file a Schedule 13D is applicable to such Proponent or Stockholder Associated Person); (ix) a description in reasonable detail of any plans or proposals of the Proponent or any Stockholder Associated Person relating to the Corporation that would be required to be disclosed by such Proponent or Stockholder Associated Person pursuant to Item 4 of Schedule 13D if a Schedule 13D relating to the Corporation was filed with the SEC by such Proponent or Stockholder Associated Person pursuant to the Exchange Act (regardless of whether the requirement to file a Schedule 13D with the SEC is applicable to such Proponent or Stockholder Associated Person) together with a description of any agreements, arrangements or understandings (whether written or oral and whether formal or informal) that relate to such plans or proposals and naming all the parties to any such agreements, arrangements or understandings; (x) all other information relating to (A) the proposed business described in the Proposal Notice, (B) the Proponent, or (C) any Stockholder Associated Person that would be required to be disclosed in a proxy statement or other filing required to be filed with the SEC in connection with a contested solicitation of proxies in which the Proponent or any Stockholder Associated Persons are participants in a solicitation subject to Section 14 of the Exchange Act; and (xi) a representation whether the Proponent or any Stockholder Associated Person intends or is part of a group which intends to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding shares required to approve or adopt the proposed business or otherwise to solicit proxies from stockholders in support of such proposed business.
(i) A Proponent shall update and supplement its Proposal Notice as necessary, from time to time, so that the information provided or required to be provided in such Proposal Notice pursuant to this paragraph (b) shall be true, correct and complete in all respects not only prior to the Notice Deadline but also at all times thereafter and prior to the meeting, and such update and supplement shall be received by the Secretary of the Corporation not later than the earlier of (i) five business days following the occurrence of any event, development or occurrence that would cause the information provided in the Proposal Notice to be not true, correct and complete in all respects, or (ii) ten business days prior to the publicly disclosed date of the meeting at which such proposed business contained therein are to be considered; provided, however, that should any such event, development or occurrence take place within ten business days prior to such meeting, such update and supplement shall be received by the Secretary of the Corporation not later than one business day following any such event, development or occurrence. For the avoidance of doubt, the updates required pursuant to this paragraph (b) do not cause a Proposal Notice that was not true, correct and complete in all respects and in compliance with this paragraph (b) when first delivered to the Corporation prior to the Notice Deadline to thereafter be in proper form in accordance with this paragraph (b).
(ii) Upon written request by the Secretary of the Corporation, the Board or any duly authorized committee thereof, any Proponent who has submitted a Proposal Notice to the Corporation shall provide, within five business days of delivery of such request (or such other period as may be specified in such request), written verification, in a form and manner, including, if requested, an executed and notarized affidavit, satisfactory in the reasonable discretion of the Board or any duly authorized committee thereof to demonstrate the accuracy of
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any information submitted by such Proponent in the Proposal Notice delivered pursuant to this paragraph (b). If a Proponent fails to provide such written verification within such period and in the form requested, the information as to which written verification was requested shall be deemed not to have been provided in accordance with this paragraph (b).
(iii) Notwithstanding anything in these By-laws to the contrary, no business (other than the election of Directors, the nomination of whom shall be governed by Section 2.3, paragraph (c) of these By-laws) shall be conducted at any annual stockholders’ meeting except in accordance with the requirements set forth in this paragraph (b). The chairman of the meeting shall, if the facts warrant, determine, in consultation with counsel (who may be the Corporation’s internal counsel), and declare to the meeting that business was not properly brought before the meeting in accordance with the requirements set forth in these By-laws, and if he or she should so determine, he or she shall so declare to the meeting and any such proposed business not properly brought before the meeting shall not be transacted.
(iv) Notwithstanding the foregoing provisions of this paragraph (b), the disclosures required by this paragraph (b) shall not include any disclosures with respect to the ordinary course of business activities of any broker, dealer, commercial bank, or trust company who is deemed a Proponent or Stockholder Associated Person solely as a result of being the stockholder directed to prepare and submit a Proposal Notice required by these By-laws on behalf of a beneficial owner of the shares held of record by such broker, dealer, commercial bank, or trust company and who is not otherwise affiliated or associated with such beneficial owner.
(v) Notwithstanding the foregoing provisions of this paragraph (b), a Proponent shall also comply with any and all applicable requirements of the Exchange Act, the SEC, the DGCL and other applicable law with respect to the matters set forth in this paragraph (b), any solicitation of proxies contemplated by the Proponent in connection with its submission of a Proposal Notice to the Corporation, and any filings made with the SEC in connection therewith.
(vi) Nothing in these By-laws shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to, and subject to the limitations and requirements of, Rule 14a-8 under the Exchange Act and the SEC’s and the SEC Staff’s interpretations, guidance and no-action letter determinations relating thereto.
(vii) For a Proposal Notice to comply with the requirements of this paragraph (b), each of the requirements of this paragraph (b) shall be directly and expressly responded to and the Proposal Notice must clearly indicate and expressly reference which provisions of this paragraph (b) the information disclosed is intended to be responsive to. Any global cross-references shall be disregarded and information disclosed in the Proposal Notice in response to any provision of this paragraph (b) shall not be deemed responsive to any other provision hereof unless it is expressly cross-referenced to such other provision and it is clearly apparent how such information is responsive to such other provision.
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(viii) For a Proposal Notice to comply with the requirements of this paragraph (b), it must set forth in writing directly within the body of the Proposal Notice, rather than being incorporated by reference from any pre-existing document or writing, including, but not limited to, any documents publicly filed with the SEC, all the information required to be included therein as set forth in this paragraph (b), and each of the requirements of this paragraph (b) shall be directly responded to in a manner that makes it clearly apparent how the information provided is specifically responsive to any requirements of this paragraph (b).
(ix) A Proponent submitting a Proposal Notice, by its delivery to the Corporation, represents and warrants that all information contained therein, as of the Notice Deadline, is true, accurate and complete in all respects and contains no false or misleading statements, and such Proponent acknowledges that it intends for the Corporation and the Board to rely on such information as (i) being true, accurate and complete in all respects and (ii) not containing any false or misleading statements. If the information submitted pursuant to this paragraph (b) by such Proponent shall not be true, correct and complete in all respects prior to the Notice Deadline, such information shall be deemed not to have been provided in accordance with this paragraph (b).
(x) Notwithstanding the foregoing provisions of this paragraph (b), unless otherwise required by applicable law, if the Proponent is not Present in Person at the annual meeting of stockholders to present the proposed business, such proposed business shall be disregarded, notwithstanding that proxies in respect of such vote may have been received by the Corporation. In addition, business proposed to be brought before an annual meeting by a Proponent may not be brought before an annual meeting if such Proponent takes action contrary to the representations made in the Proposal Notice applicable to such business or if (i) when submitted to the Corporation prior to the Notice Deadline, the Proposal Notice applicable to such business contained an untrue statement of a fact or omitted to state a fact necessary to make the statements therein not misleading, or (ii) after being submitted to the Corporation, the Proposal Notice applicable to such business was not updated or supplemented by the Proponent in accordance with these By-laws to cause the information provided in the Proposal Notice to be true, correct and complete in all respects.
(xi) A Proponent submitting a Proposal Notice pursuant to this paragraph (b), by its delivery to the Corporation, acknowledges that it understands that nothing contained therein shall be considered confidential or proprietary information and that neither the Corporation, the Board, nor any agents or representatives thereof shall be restricted, in any manner, from publicly disclosing or using any of the information contained in a Proposal Notice.
(xii) Nothing in this paragraph (b) shall be deemed to give any stockholder the right to have any proposal included in any proxy statement prepared by the Corporation, and, to the extent any such right exists under the Exchange Act or other applicable law or governmental regulation, such right shall be limited to the right expressly provided under such applicable law or governmental regulation. Notwithstanding any notice of the meeting or proxy statement sent to stockholders on behalf of the Corporation, a stockholder must separately comply with this paragraph (b) to propose business at any annual meeting. If a stockholder’s proposed business is the same or relates to business brought by the Corporation and included in the Corporation’s meeting notice, proxy statement or any supplement thereto, such stockholder is nevertheless still
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required to comply with this paragraph (b) and deliver its own separate and timely Proposal Notice to the Secretary of the Corporation that complies in all respects with the requirements of this paragraph (b).
(c) Nominations of persons for election to the Board of the Corporation may be made at a meeting of stockholders only (i) by or at the direction of the Board or (ii) by any stockholder of the Corporation (a “Nominating Stockholder”) Present in Person at the meeting who (A) is a record owner of shares of the Corporation’s capital stock at the time of giving the notice provided for in this paragraph (c), (B) is a record owner of shares of the Corporation’s capital stock as of the record date for the determination of stockholders entitled to notice of and to vote at the meeting in question, (C) is a record owner of shares of the Corporation’s capital stock at the time of the meeting, (D) is entitled to vote at the meeting, and (E) complies with the notice procedures set forth in this paragraph (c) in all applicable respects. The foregoing clause (ii) shall be the exclusive means for a stockholder to propose any nomination of a person or persons for election to the Board at a stockholders’ meeting. Without qualification, for a stockholder to propose a nomination of a person or persons for election to the Board at a stockholders’ meeting, the stockholder must (i) provide timely notice thereof in writing and in proper form to the Secretary of the Corporation containing the information with respect to such stockholder and its proposed candidates for nomination for election to the Board as required to be set forth by this paragraph (c) (collectively, the “Nominating Notice”) and (ii) provide any updates or supplements to such Nominating Notice at the times and in the forms required by this paragraph (c). To be timely, a Nominating Notice must be delivered to the Secretary of the Corporation within the time periods specified by paragraph (b) of this Section 2.3 for timely delivery of a Proposal Notice and must be delivered no later than the Notice Deadline. To be in proper written form, a Nominating Notice shall set forth: (i) the name and address, as they appear on the Corporation’s books, of the Nominating Stockholder and any Stockholder Associated Person; (ii) all information as to the Nominating Stockholder, each person whom the Nominating Stockholder proposes to nominate for election or re-election as a Director (each, a “Stockholder Nominee”), and each Stockholder Associated Person that would be required to be disclosed in a proxy statement or other filing required to be filed by the Nominating Stockholder with the SEC in connection with a contested solicitation of proxies for the election of Directors pursuant to Regulation 14A under the Exchange Act, including such person’s written consent to being named in the proxy statement of the Nominating Stockholder as a nominee of the Nominating Stockholder and to serving as a Director of the Corporation if elected; (iii) (A) the class or series and number of shares of capital stock of the Corporation which are owned, directly or indirectly, beneficially (within the meaning of Rule 13d-3 under the Exchange Act) and/or of record, by the Nominating Stockholder or any Stockholder Associated Person, provided that such Nominating Stockholder or Stockholder Associated Person shall in all events be deemed to beneficially own any shares of any class or series of the Corporation’s equity securities as to which such Nominating Stockholder or Stockholder Associated Person has a right to acquire beneficial ownership at any time in the future, whether such right is exercisable immediately, only after the passage of time or only upon the satisfaction of certain conditions precedent, (B) any derivative positions held or beneficially held by such Nominating Stockholder or any Stockholder Associated Person and whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other proxy, agreement, arrangement or understanding has been made or relationship exists, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or provide a right to vote or increase or decrease the voting power of, such
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Nominating Stockholder or any Stockholder Associated Person with respect to the Corporation’s securities, and (C) a representation that such Nominating Stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to be Present in Person at the meeting to propose such nomination; (iv) a reasonably detailed description of any agreement, arrangement or understanding, written or oral, or any direct or indirect relationship the Nominating Stockholder or any Stockholder Associated Person may have with any Stockholder Nominee, including but not limited to, those pursuant to which the nomination is proposed to be made, or with any other person or persons (naming such person or persons) with respect to such nomination; (v) a description in reasonable detail of any relationship (including any direct or indirect interest in any agreement, arrangement or understanding, whether written or oral and whether formal or informal) between the Nominating Stockholder or any Stockholder Associated Person and the Corporation or any Director, officer, or other employee of the Corporation (naming such Director, officer, or other employee); (vi) a description in reasonable detail of any contacts and discussions between the Nominating Stockholder or any Stockholder Associated Person and any officer, Director, or employee of the Corporation (naming such officer, Director, or employee and listing the dates and describing the nature of such contacts and discussions); (vii) a description in reasonable detail of any interest, direct or indirect, monetary or non-monetary, of the Nominating Stockholder or any Stockholder Associated Person in having any Stockholder Nominee elected to the Board, including any anticipated benefit therefrom to be received by the Nominating Stockholder or any Stockholder Associated Person; (viii) a description in reasonable detail of any pending, or to the knowledge of the Nominating Stockholder or any Stockholder Associated Person, threatened, legal proceeding in which any Nominating Stockholder or Stockholder Associated Person is a party or participant involving the Corporation or any officer, Director, affiliate, associate, or employee of the Corporation; (ix) as to each Stockholder Nominee, (A) all information that would be required to be set forth in a Nominating Notice pursuant to this paragraph (c) if such Stockholder Nominee was a Nominating Stockholder, (B) a list of all other publicly-traded companies, whether or not currently publicly-traded or currently in existence, where such Stockholder Nominee had been proposed as a candidate for election to a board of directors (or similar governing body) by the Nominating Stockholder, (C) a description in reasonable detail of any and all agreements, arrangements and/or understandings (whether written or oral and formal or informal) between such Stockholder Nominee and any person or entity (naming such person or entity) in connection with such Stockholder Nominee’s service or action as a proposed candidate and, if elected, as a member of the Board, (D) to the extent that such Stockholder Nominee has been convicted of any past criminal offenses involving a felony, fraud, dishonesty or a breach of trust or duty, a description in reasonable detail of such offense and all legal proceedings relating thereto, (E) to the extent that such Stockholder Nominee has been determined by any governmental authority or self-regulatory organization to have violated any federal or state securities or commodities laws, including but not limited to, the Securities Act of 1933, as amended, the Exchange Act or the Commodity Exchange Act of 1936, as amended, a description in reasonable detail of such violation and all legal proceedings relating thereto, (F) to the extent that such Stockholder Nominee has ever been suspended or barred by any governmental authority or self-regulatory organization from engaging in any profession or participating in any industry, or has otherwise been subject to a disciplinary action by a governmental authority or self-regulatory organization that provides oversight over the Stockholder Nominee’s current or past profession or an industry that the Stockholder Nominee has participated in, a description in reasonable detail of such action and the reasons therefor, (G) a description in reasonable detail of
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any and all litigation, whether or not judicially resolved, settled or dismissed, relating to the Stockholder Nominee’s past or current service on the board of directors (or similar governing body) of any corporation, limited liability company, partnership, trust or any other entity where a legal complaint filed in any state or federal court located within the United States alleges that the Stockholder Nominee committed any act constituting (a) a breach of fiduciary duties, (b) misconduct, (c) fraud, (d) breaches of confidentiality obligations, and/or (e) a breach of the entity’s code of conduct applicable to directors, and (H) the amount of any equity securities beneficially owned by such Stockholder Nominee in any company that is a direct competitor of the Corporation or its operating subsidiaries if such beneficial ownership by such nominee, when aggregated with that of all other Stockholder Nominees, the Nominating Stockholder and all Stockholder Associated Persons, is five percent or more of the class of equity securities of such company; (x) a reasonably detailed description of any agreement, arrangement or understanding, written or oral, or any direct or indirect relationship, with respect to the nomination proposed to be brought before the meeting by the Nominating Stockholder, between or among any Nominating Stockholder or any Stockholder Associated Person and any other person or entity (naming each such person or entity), including without limitation any agreements, arrangements and understandings that would be required to be disclosed pursuant to Item 5 or Item 6 of Schedule 13D if a Schedule 13D relating to the Corporation was filed with the SEC by such Nominating Stockholder or Stockholder Associated Person pursuant to the Exchange Act (regardless of whether the requirement to file a Schedule 13D is applicable to such Nominating Stockholder or Stockholder Associated Person); (xi) a description in reasonable detail of any plans or proposals of the Nominating Stockholder, any Stockholder Associated Person or any Stockholder Nominee relating to the Corporation that would be required to be disclosed by such Nominating Stockholder, Stockholder Associated Person or Stockholder Nominee pursuant to Item 4 of Schedule 13D if a Schedule 13D relating to the Corporation was filed with the SEC by such Nominating Stockholder, Stockholder Associated Person or Stockholder Nominee pursuant to the Exchange Act (regardless of whether the requirement to file a Schedule 13D with the SEC is applicable to such Nominating Stockholder, Stockholder Associated Person or Stockholder Nominee) together with a description of any agreements, arrangements or understandings (whether written or oral and whether formal or informal) that relate to such plans or proposals and naming all the parties to any such agreements, arrangements or understandings; (xii) a description in reasonable detail of all direct and indirect compensation, reimbursement, indemnification, benefits and other agreements, arrangements and understandings (whether written or oral, formal or informal and monetary or non-monetary) during the past three years, and any other relationships, between or among a Nominating Stockholder, a Stockholder Associated Person, if any, and a Stockholder Nominee, including all information that would be required to be disclosed pursuant to Items 403 and 404 promulgated under Regulation S-K (or any such successor rule) if such Nominating Stockholder or Stockholder Associated Person was the “registrant” for purposes of such Items and the Stockholder Nominee was a director or executive of such registrant; and (xiii) a representation as to whether the Nominating Stockholder and/or the Stockholder Associated Person, if any, intends or is part of a group which intends to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to elect the Stockholder Nominee or otherwise to solicit proxies from stockholders in support of such nomination.
(i) With respect to each Stockholder Nominee whom a Nominating Stockholder proposes to nominate for election or re-election to the Board, the Nominating Notice
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must, in addition to the matters set forth above, also include the completed and signed questionnaire required by paragraph (d) of this Section 2.3.
(ii) A Nominating Stockholder shall update and supplement its Nominating Notice as necessary, from time to time, so that the information provided or required to be provided in such notice pursuant to this paragraph (c) shall be true, correct and complete in all respects not only prior to the Notice Deadline but also at all times thereafter and prior to the meeting, and such update and supplement shall be received by the Secretary of the Corporation not later than the earlier of (i) five business days following the occurrence of any event, development or occurrence that would cause the information provided in the Nominating Notice to be not true, correct and complete in all respects, or (ii) ten business days prior to the publicly disclosed date of the meeting at which such nominations contained therein are to be considered; provided, however, that should any such event, development or occurrence take place within ten business days prior to such meeting, such update and supplement shall be received by the Secretary of the Corporation not later than one business day following any such event, development or occurrence. For the avoidance of doubt, the updates required pursuant to this paragraph (c) do not cause a Nominating Notice that was not true, correct and complete in all respects and in compliance with this paragraph (c) when first delivered to the Corporation prior to the Notice Deadline to thereafter be in proper form in accordance with this paragraph (c).
(iii) Upon written request by the Secretary of the Corporation, the Board or any duly authorized committee thereof, any Nominating Stockholder who has submitted a Nominating Notice to the Corporation shall provide, within five business days of delivery of such request (or such other period as may be specified in such request), written verification, in a form and manner, including, if requested, an executed and notarized affidavit, satisfactory in the reasonable discretion of the Board or any duly authorized committee thereof to demonstrate the accuracy of any information submitted by such stockholder in the Nominating Notice delivered pursuant to this paragraph (c). If a Nominating Stockholder fails to provide such written verification within such period and in the form requested, the information as to which written verification was requested shall be deemed not to have been provided in accordance with this paragraph (c).
(iv) No person shall be eligible to serve as a Director of the Corporation unless nominated in accordance with the procedures set forth in this paragraph (c). The chairman of the meeting shall, if the facts warrant, determine, in consultation with counsel (who may be the Corporation’s internal counsel), and declare to the meeting that the proposed nomination was not made in accordance with the requirements set forth in these By-laws, and if he or she should so determine, he or she shall so declare to the meeting and the defective nomination shall be disregarded.
(v) Notwithstanding the foregoing provisions of this paragraph (c), the disclosures required by this paragraph (c) shall not include any disclosures with respect to the ordinary course of business activities of any broker, dealer, commercial bank, or trust company who is deemed a Nominating Stockholder or Stockholder Associated Person solely as a result of being the stockholder directed to prepare and submit a Nominating Notice required by these By-laws on behalf of a beneficial owner of the shares held of record by such broker, dealer,
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commercial bank, or trust company and who is not otherwise affiliated or associated with such beneficial owner.
(vi) Notwithstanding the foregoing provisions of this paragraph (c), a Nominating Stockholder shall also comply with any and all applicable requirements of the Exchange Act, the SEC, the DGCL and other applicable law with respect to the matters set forth in this paragraph (c), any solicitation of proxies contemplated by the Nominating Stockholder in connection with its submission of a Nominating Notice to the Corporation, and any filings made with the SEC in connection therewith.
(vii) For a Nominating Notice to comply with the requirements of this paragraph (c), each of the requirements of this paragraph (c) shall be directly and expressly responded to and the Nominating Notice must clearly indicate and expressly reference which provisions of this paragraph (c) the information disclosed is intended to be responsive to. Any global cross-references shall be disregarded and information disclosed in the Nominating Notice in response to any provision of this paragraph (c) shall not be deemed responsive to any other provision hereof unless it is expressly cross-referenced to such other provision and it is clearly apparent how such information is responsive to such other provision.
(viii) For a Nominating Notice to comply with the requirements of this paragraph (c), it must set forth in writing directly within the body of the Nominating Notice, rather than being incorporated by reference from any pre-existing document or writing, including, but not limited to, any documents publicly filed with the SEC, all the information required to be included therein as set forth in this paragraph (c), and each of the requirements of this paragraph (c) shall be directly responded to in a manner that makes it clearly apparent how the information provided is specifically responsive to any requirements of this paragraph (c).
(ix) A Nominating Stockholder submitting a Nominating Notice, by its delivery to the Corporation, represents and warrants that all information contained therein, as of the Notice Deadline, is true, accurate and complete in all respects and contains no false or misleading statements, and such Nominating Stockholder acknowledges that it intends for the Corporation and the Board to rely on such information as (i) being true, accurate and complete in all respects and (ii) not containing any false or misleading statements. If the information submitted pursuant to this paragraph (c) by such Nominating Stockholder shall not be true, correct and complete in all respects prior to the Notice Deadline, such information shall be deemed not to have been provided in accordance with this paragraph (c).
(x) Notwithstanding the foregoing provisions of this paragraph (c), unless otherwise required by applicable law, if the Nominating Stockholder is not Present in Person at the stockholders’ meeting to present a nomination, such nomination shall be disregarded, notwithstanding that proxies in respect of such vote may have been received by the Corporation. In addition, nominations proposed to be brought before a stockholders’ meeting by a Nominating Stockholder may not be brought before a meeting if such Nominating Stockholder takes action contrary to the representations made in the Nominating Notice applicable to such nominations or if (i) when submitted to the Corporation prior to the Notice Deadline, the Nominating Notice applicable to such nominations contained an untrue statement of a fact or omitted to state a fact necessary to make the statements therein not misleading, or (ii) after being submitted to the
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Corporation, the Nominating Notice applicable to such nominations was not updated or supplemented by the Nominating Stockholder in accordance with these By-laws to cause the information provided in the Nominating Notice to be true, correct and complete in all respects.
(xi) A Nominating Stockholder submitting a Nominating Notice pursuant to this paragraph (c), by its delivery to the Corporation, acknowledges that it understands that nothing contained therein shall be considered confidential or proprietary information and that neither the Corporation, the Board, nor any agents or representatives thereof shall be restricted, in any manner, from publicly disclosing or using any of the information contained in a Nominating Notice.
(xii) Nothing in this paragraph (c) shall be deemed to give any stockholder the right to have any nominations included in any proxy statement prepared by the Corporation. Notwithstanding any notice of the meeting, proxy statement or supplement thereto sent to stockholders on behalf of the Corporation, a stockholder must separately comply with this paragraph (c) to propose any nominations at any stockholders’ meeting, including delivering its own separate and timely Nominating Notice to the Secretary of the Corporation that complies in all respects with the requirements of this paragraph (c).
(d) To be eligible to be a nominee for election or re-election as a Director of the Corporation, a Stockholder Nominee must deliver (in accordance with the time periods prescribed for delivery of notice specified by paragraph (b) of this Section 2.3 for timely delivery of a Proposal Notice, and no later than the Notice Deadline) to the Secretary of the Corporation at the principal executive offices of the Corporation a written questionnaire with respect to the background and qualifications of such Stockholder Nominee (which questionnaire shall be provided by the Secretary of the Corporation upon written request).
(e) Certain Definitions.
(i) A person shall be deemed to be “Acting in Concert” with another person if such person knowingly acts (whether or not pursuant to an express agreement, arrangement or understanding) in concert with, or towards a common goal relating to the leadership, management, governance, Board composition, strategic direction, value enhancement plans, or control of the Corporation in parallel with, such other person where (i) each person is conscious of the other person’s conduct or intent and this awareness is an element in their decision-making processes and (ii) at least two additional factors suggest that such persons knowingly intend to act in concert or in parallel towards a common goal relating to the management, governance or control of the Corporation, which such additional factors may include, without limitation, exchanging information (whether publicly or privately), attending meetings, conducting discussions, or making or soliciting invitations to act in concert or in parallel; provided, that a person shall not be deemed to be Acting in Concert with any other person solely as a result of the solicitation or receipt of revocable proxies or consents from such other person in response to a solicitation made pursuant to, and in accordance with, Section 14(a) of the Exchange Act by way of a proxy or consent solicitation statement filed with the SEC on Schedule 14A. A person Acting in Concert with another person shall be deemed to be Acting in Concert with any third party who is also Acting in Concert with such other person.
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(ii) “close of business” shall mean 5:00 p.m., local time, at the principal executive offices of the Corporation on any calendar day, whether or not such day is a business day.
(iii) “control” (including the terms “controlling,” “controlled by” and “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise.
(iv) “Present in Person” shall mean that the Proponent or the Nominating Stockholder, as the case may be, or, if such person is not an individual, a qualified representative of such person, appears in person at such stockholders’ meeting.
(v) “Public Announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the SEC pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(vi) A “qualified representative” of any stockholder means a person who is a duly authorized officer, manager or partner of such stockholder (including, as applicable, a Proponent or a Nominating Stockholder) or has been authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy with respect to the specific matter to be considered at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction (to the reasonable satisfaction of the chairman of the meeting) of the writing or electronic transmission, at the meeting of stockholders prior to the taking of action by such person on behalf of the stockholder.
(vii) “Stockholder Associated Person” means with respect to any Proponent or Nominating Stockholder, (i) any other beneficial owner of stock of the Corporation owned of record or beneficially by such Proponent or Nominating Stockholder, (ii) any Affiliate or Associate (within the meaning of Rule 12b-2 under the Exchange Act) of such Proponent or Nominating Stockholder or beneficial owner, (iii) any participant (as defined in paragraphs (a)(ii)-(vi) of Instruction 3 to Item 4 of Schedule 14A) with such Proponent or Nominating Stockholder in any solicitation contemplated by the Proposal Notice or the Nominating Notice, (iv) each person who may be deemed to be a member of a “group” (as such term is used in Rule 13d-5 under the Exchange Act) with any such Proponent or Nominating Stockholder or beneficial owner (or their respective Affiliates and Associates) relating to the equity securities of the Corporation, regardless of whether such person is disclosed as a member of a “group” in a Schedule 13D or an amendment thereto filed with the SEC relating to the Corporation, and (v) any person that directly, or indirectly through one or more intermediaries, controls, is controlled by, is under common control with, or is Acting in Concert with such Proponent or Nominating Stockholder or beneficial owner or a Stockholder Associated Person of such Proponent or Nominating Stockholder or beneficial owner.
Section 2.4 Special Meetings. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be
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called by the President, the Chairman of the Board, or by the Board of Directors and shall be called by the President or Secretary at the request in writing of a majority of the Directors then in office. Such request shall state the purpose or purposes of the proposed meeting, which need not be the exclusive purposes for which the meeting is called. The stockholder shall not have the right, in their capacity as stockholders, to call a special meeting of the stockholders.
Section 2.5 Notice of Meetings. A written notice of all meetings of stockholders stating the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the special meeting is called, shall be given to each stockholder entitled to vote at such meeting. Except as otherwise provided by law, such notice shall be given not less than ten nor more than sixty days before the date of the meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.
Section 2.6 Affidavit of Notice. An affidavit of the Secretary or an Assistant Secretary or the transfer agent of the Corporation that notice of a stockholders meeting has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
Section 2.7 Quorum. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented by proxy at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, except as hereinafter provided, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
Section 2.8 Voting Requirements. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of any applicable statute or of the Certificate of Incorporation, a different vote is required in which case such express provision shall govern and control the decision of such question.
Section 2.9 Proxies And Voting. Unless otherwise provided in the Certificate of Incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period. Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held, and persons whose stock is pledged shall be entitled to vote the pledged shares, unless in the transfer by the pledgor on the books of the Corporation he shall have expressly empowered the Pledgee to vote said shares, in which case only the pledgee, or his proxy, may represent and vote such shares. Shares of the capital stock of the Corporation owned by the Corporation shall not be voted, directly or indirectly.
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Section 2.10 Action Without Meeting.
(a) Unless otherwise provided in the Certificate of Incorporation, any action which may be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed, in person or by proxy, by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting at which all shares entitled to vote thereon were present and voted in person or by proxy. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing, but who were entitled to vote on the matter.
(b) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request that the Board fix a record date. The Board shall promptly, but in all events within ten calendar days after the date on which such written notice is received, adopt a resolution fixing the record date (unless a record date has previously been fixed by the Board pursuant to the first sentence of this Section 2.10(b)). If no record date has been fixed by the Board pursuant to the first sentence of this Section 2.10(b) or otherwise within ten calendar days after the date on which such written notice is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board is required by applicable law, shall be the first date after the expiration of such ten day time period on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business, or to any officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. If no record date has been fixed by the Board pursuant to the first sentence of this Section 2.10(b), the record date for determining stockholders entitled to consent to corporate action in writing without a meeting if prior action by the Board is required by applicable law shall be at the close of business on the date on which the Board adopts the resolution taking such prior action.
(c) In the event of the delivery, in the manner provided by this Section 2.10 and applicable law, to the Corporation of a written consent or consents to take corporate action and/or any related revocation or revocations, the Corporation shall engage independent inspectors of elections for the purpose of performing promptly a ministerial review of the validity of the consents and revocations. For the purpose of permitting the inspectors to perform such review, no action by written consent and without a meeting shall be effective until such inspectors have completed their review, determined that the requisite number of valid and unrevoked consents delivered to the Corporation in accordance with this Section 2.10 and applicable law have been obtained to authorize or take the action specified in the consents, and certified such determination for entry in the records of the Corporation kept for the purpose of recording the proceedings of meetings of stockholders. Nothing contained in this Section 2.10(c) shall in any way be construed to suggest or imply that the Board or any stockholder shall not be entitled to contest the validity of any consent
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or revocation thereof, whether before or after such certification by the independent inspectors, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).
Section 2.11 Stockholder List. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The original or duplicate stock ledger shall be the only evidence as to who are the stockholders entitled to examine such list, the stock ledger or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders.
Section 2.12 Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
If no record date is fixed by the Board of Directors:
(a) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.
(b) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed.
(c) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
Notwithstanding anything in this Section 2.12 to the contrary, a record date for determining stockholders entitled to take action by written consent shall be fixed in accordance with Section 2.10(b) of Article 2 of these By-laws.
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ARTICLE 3
DIRECTORS
Section 3.1 Number; Election and Term of Office. There shall be a Board of Directors of the Corporation consisting of not less than one member, the number of members to be determined by resolution of the Board of Directors, unless the Certificate of Incorporation fixes the number of Directors, in which case a change in the number of Directors shall be made only by amendment of the Certificate. The Board of Directors shall be divided into such classes for such terms as are provided for in the Certificate of Incorporation. Subject to any limitation which may be contained within the Certificate of Incorporation, the number of the Board of Directors may be increased at any time by vote of a majority of the Directors then in office. The Directors shall be elected at the annual meeting of the stockholders at which the term of office of the class to which they have been elected expires, except as provided in paragraph (c) of Section 8.1, and each Director elected shall hold office until his successor is elected and qualified or until his earlier resignation or removal. Directors need not be stockholders.
Section 3.2 Duties. The business of the Corporation shall be managed by or under the direction of its Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-laws directed or required to be exercised or done by the stockholders.
Section 3.3 Compensation. Unless otherwise restricted by the Certificate of Incorporation or these By-laws, the Board of Directors shall have the authority to fix the compensation of Directors. The Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as Directors. No such payment shall preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.
Section 3.4 Reliance on Books. A member of the Board of Directors or a member of any committee designated by the Board of Directors shall, in the performance of his duties, be fully protected in relying in good faith upon the books of account or reports made to the Corporation by any of its officers, or by an independent certified public accountant, or by an appraiser selected with reasonable care by the Board of Directors or by any committee, or in relying in good faith upon other records of the Corporation.
ARTICLE 4
MEETINGS OF THE BOARD OF DIRECTORS
Section 4.1 Place. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware.
Section 4.2 Annual Meeting. The first meeting of each newly elected Board of Directors shall be held immediately following the annual meeting of stockholders or any special meeting
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held in lieu thereof, and no notice of such meeting shall be necessary to the newly elected Directors in order legally to constitute the meeting.
Section 4.3 Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board.
Section 4.4 Special Meetings. Special meetings of the Board may be called by the President on two days’ notice to each Director either personally or by mail or by email; special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of two Directors unless the Board consists of only one Director, in which case special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of the sole Director.
Section 4.5 Quorum. At all meetings of the Board a majority of the Directors then in office shall constitute a quorum for the transaction of business and the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation. If a quorum shall not be Present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
Section 4.6 Action Without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these By-laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee.
Section 4.7 Telephone Meetings. Unless otherwise restricted by the Certificate of Incorporation or these By-laws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.
ARTICLE 5
COMMITTEES OF DIRECTORS
Section 5.1 Designation.
(a) The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, including, if the Board of Directors deems appropriate, an audit committee and a compensation committee, each committee to consist of one or more of the Directors of the Corporation. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.
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(b) In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.
(c) Any such committee, to the extent provided in the resolution of the Board of Directors designating the committee, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the By-laws of the Corporation; and, unless the resolution or the Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors.
Section 5.2 Records of Meetings. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.
ARTICLE 6
NOTICES
Section 6.1 Method of Giving Notice. Whenever, under any provision of the law or of the Certificate of Incorporation or of these By-laws, notice is required to be given to any Director or stockholder, such notice shall be given in writing by the Secretary or the person or persons calling the meeting by leaving such notice with such Director or stockholder at his residence or usual place of business or by mailing it addressed to such Director or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to Directors may also be given by email.
Section 6.2 Waiver. Whenever any notice is required to be given under any provision of law or of the Certificate of Incorporation or of these By-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends the meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened.
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ARTICLE 7
OFFICERS
Section 7.1 In General. The officers of the Corporation shall be chosen by the Board of Directors and shall include a President, a Secretary and a Treasurer. The Board of Directors may also choose a Chairman of the Board, one or more Vice Presidents, Assistant Secretaries and Assistant Treasurers. Any number of offices may be held by the same person, unless the Certificate of Incorporation or these By-laws otherwise provide.
Section 7.2 Election of President, Secretary and Treasurer. The Board of Directors at its first meeting after each annual meeting of stockholders shall choose a President, a Secretary and a Treasurer.
Section 7.3 Election of Other Officers. The Board of Directors may appoint such other officers and agents as it shall deem appropriate who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board.
Section 7.4 Salaries. The salaries of all officers and agents of the Corporation may be fixed by the Board of Directors.
Section 7.5 Term of Office. The officers of the Corporation shall hold office until their successors are chosen and qualify or until their earlier resignation or removal. Any officer elected or appointed by the Board of Directors may be removed at any time in the manner specified in Section 8.2.
Section 7.6 Duties of President and Chairman of the Board. The Chairman of the Board shall be the Chief Executive Officer of the Corporation. The President shall report to the Chairman of the Board and the Chief Executive Officer and shall preside at all meetings of the stockholders and, if he is a Director, at all meetings of the Board of Directors. Subject to the control and direction of the Directors, the President shall have general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. The President shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. The Chairman of the Board, if any, shall make his counsel available to the other officers of the Corporation, shall be authorized to sign stock certificates on behalf of the Corporation, shall preside at all meetings of the Directors at which he is present, and, in the absence of the President at all meetings of the stockholders, and shall have such other duties and powers as may from time to time be conferred upon him by the Directors.
Section 7.7 Duties of Vice President. In the absence of the President or in the event of his inability or refusal to act, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the Directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the President not otherwise conferred
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upon the Chairman of the Board, if any, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. The Vice Presidents shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.
Section 7.8 Duties of Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of the meetings of the Corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, except as otherwise provided in these By-laws, and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he shall be. He shall have charge of the stock ledger (which may, however, be kept by any transfer agent or agents of the Corporation under his direction) and of the corporate seal of the Corporation.
Section 7.9 Duties of Assistant Secretary. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the Secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.
Section 7.10 Duties of Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all of his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, he shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of this office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation.
Section 7.11 Duties of Assistant Treasurer. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.
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ARTICLE 8
RESIGNATIONS, REMOVALS AND VACANCIES
Section 8.1 Directors.
(a) Resignations. Any Director may resign at any time by giving written notice to the Board of Directors or the President or the Secretary. Such resignation shall take effect at the time specified therein; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
(b) Removals. Subject to any provisions of the Certificate of Incorporation, any Director or the entire Board of Directors may be removed with or without cause, at any meeting called for the purpose, by vote of the holders of a majority of the shares entitled to vote for the election of Directors, or a majority vote of the Board of Directors. This Section 8.1(b) may not be altered, amended or repealed except by the holders of a majority of the shares of stock issued and outstanding and entitled to vote for the election of the Directors.
(c) Vacancies. Vacancies occurring in the office of Director and newly created Directorships resulting from any increase in the authorized number of Directors shall be filled by a majority of the Directors then in office, though less than a quorum, unless previously filled by the stockholders entitled to vote for the election of Directors, and the Directors so chosen shall hold office subject to the By-laws until the next annual meeting of Stockholders at which the term of office of the class to which they have been elected expires and until their successors are duly elected and qualify or until their earlier resignation or removal. If there are no Directors in office, then an election of Directors may be held in the manner provided by statute.
Section 8.2 Officers. Any officer may resign at any time by giving written notice to the Board of Directors or the President or the Secretary. Such resignation shall take effect at the time specified therein; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. The Board of Directors may, at any meeting called for the purpose, by vote of a majority of their entire number, remove from office any officer of the Corporation or any member of a committee, with or without cause. Any vacancy occurring in the office of President, Secretary or Treasurer shall be filled by the Board of Directors and the officers so chosen shall hold office subject to the By-laws for the unexpired term in respect of which the vacancy occurred and until their successors shall be elected and qualify or until their earlier resignation or removal.
ARTICLE 9
CERTIFICATE OF STOCK
Section 9.1 Issuance of Stock. The Directors may, at any time and from time to time, if all of the shares of capital stock which the Corporation is authorized by its Certificate of Incorporation to issue have not been issued, subscribed for, or otherwise committed to be issued, issue or take subscriptions for additional shares of its capital stock up to the amount authorized in
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its Certificate of Incorporation. Such stock shall be issued and the consideration paid therefor in the manner prescribed by law.
Section 9.2 Right to Certificate; Form. Every holder of stock in the Corporation shall be entitled to have a certificate, signed by, or in the name of the Corporation by, the Chairman of the Board, the President or a Vice President and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by him in the Corporation; provided that the Directors may provide by one or more resolutions that some or all of any or all classes or series of the Corporation’s stock shall be uncertified shares. Certificates may be issued for partly paid shares and in such case upon the face or back of the certificates issued to represent any such partly paid shares, the total amount of the consideration to be paid therefor, and the amount paid thereon shall be specified.
Section 9.3 Facsimile Signature. Any of or all the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.
Section 9.4 Lost Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 9.5 Transfer of Stock. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.
Section 9.6 Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.
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ARTICLE 10
INDEMNIFICATION
Section 10.1 Third Party Actions. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 10.2 Derivative Actions. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
Section 10.3 Expenses. To the extent that a Director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 10.1 and 10.2, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection therewith.
Section 10.4 Authorization. Any indemnification under Sections 10.1 and 10.2 (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the Director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 10.1 and
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10.2. Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested Directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders.
Section 10.5 Advance Payment Of Expenses. Expenses incurred by an officer or Director in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or on behalf of such officer or Director to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation as authorized in this Article 10. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate.
Section 10.6 Non-Exclusiveness. The indemnification provided by this Article 10 shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any by-law, agreement, vote of stockholders or disinterested Directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
Section 10.7 Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article 10.
Section 10.8 Constituent Corporations. The Corporation shall have power to indemnify any person who is or was a director, officer, employee or agent of a constituent corporation absorbed in a consolidation or merger with this Corporation or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, in the same manner as hereinabove provided for any person who is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise.
Section 10.9 Additional Indemnification. In addition to the foregoing provisions of this Article 10, the Corporation shall have the power, to the full extent provided by law, to indemnify any person for any act or omission of such person against all loss, cost, damage and expense (including attorney’s fees) if such person is determined (in the manner prescribed in Section 10.4 hereof) to have acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interest of the Corporation.
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ARTICLE 11
EXECUTION OF PAPERS
Except as otherwise provided in these By-laws or as the Board of Directors may generally or in particular cases otherwise determine, all deeds, leases, transfers, contracts, bonds, notes, checks, drafts and other instruments authorized to be executed on behalf of the Corporation shall be executed by the President or the Treasurer.
ARTICLE 12
FISCAL YEAR
The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors.
ARTICLE 13
SEAL
The Corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the word “Delaware”. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE 14
OFFICES
In addition to its principal office, the Corporation may have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require.
ARTICLE 15
AMENDMENTS
Except as otherwise provided herein, these By-laws may be altered, amended or repealed or new By-laws may be adopted by the stockholders or by the Board of Directors, when such power is conferred upon the Board of Directors by the Certificate of Incorporation, at any regular meeting of the stockholders or of the Board of Directors, or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new By-laws is contained in the notice of such special meeting, or by the written consent of a majority in interest of the outstanding voting stock of the Corporation or by the unanimous written consent of the Directors. If the power to adopt, amend or repeal by-laws is conferred upon the Board of Directors by the Certificate of Incorporation, it shall not divest or limit the power of the stockholders to adopt, amend or repeal by-laws.
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Exhibit 10.1
EXECUTION VERSION
BRUKER CORPORATION
FIRST AMENDMENT
Dated as of April 17, 2020
to the
NOTE PURCHASE AGREEMENT
Dated as of January 18, 2012
RE: $105,000,000 4.31% Series 2012A Senior Notes, Tranche C, due January 18, 2022
$100,000,000 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024
FIRST AMENDMENT TO THE NOTE PURCHASE AGREEMENT
THIS FIRST AMENDMENT dated as of April 17, 2020 and effective as of March 25, 2020 (the or this “First Amendment”) to the Note Purchase Agreement dated as of January 18, 2012 is between Bruker Corporation, a Delaware corporation (the “Company”) and each of the institutions which is a signatory to this First Amendment (collectively, the “Noteholders”).
RECITALS:
A. The Company and each of the Noteholders have heretofore entered into the Note Purchase Agreement dated as of January 18, 2012 (the “Note Purchase Agreement”). The Company has heretofore issued (i) $20,000,000 aggregate principal amount of its 3.16% Series 2012A Senior Notes, Tranche A, due January 18, 2017 (the “Series A Notes”), (ii) $15,000,000 aggregate principal amount of its 3.74% Series 2012A Senior Notes, Tranche B, due January 18, 2019 (the “Series B Notes”), (iii) $105,000,000 aggregate principal amount of its 4.31% Series 2012A Senior Notes, Tranche C, due January 17, 2022 (the “Series C Notes”) and (iv) $100,000,000 aggregate principal amount of its 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024 (the “Series D Notes”), collectively with the Series C Notes, the “Notes”). The Series A Notes and Series B Notes are no longer outstanding.
B. The Company and the Noteholders now desire to amend the Note Purchase Agreement in the respects, but only in the respects, hereinafter set forth.
C. Capitalized terms used herein shall have the respective meanings ascribed thereto in the Note Purchase Agreement unless herein defined or the context shall otherwise require.
D. All requirements of law have been fully complied with and all other acts and things necessary to make this First Amendment a valid, legal and binding instrument according to its terms for the purposes herein expressed have been done or performed.
NOW, THEREFORE, upon the full and complete satisfaction of the conditions precedent to the effectiveness of this First Amendment set forth in Section 3.1 hereof, and in consideration of good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the Company and the Noteholders do hereby agree as follows:
SECTION 1. AMENDMENTS.
Section 1.1. Section 22.6 of the Note Purchase Agreement shall be amended by adding the following language to the end of such Section:
“The parties agree to electronic contracting and signatures with respect to this Agreement and the other Note Documents (other than the Notes). Delivery of an electronic signature to, or a signed copy of, this Agreement and such other Note Documents (other than the Notes) by facsimile, email or other electronic transmission shall be fully binding on the parties to the same extent as the delivery of the signed
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originals and shall be admissible into evidence for all purposes. The words “execution,” “execute”, “signed,” “signature,” and words of like import in or related to any document to be signed in connection with this Agreement and the other Note Documents (other than the Notes) shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Company, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.”
Section 1.2. The first sentence of the definition “Indebtedness” in Schedule A to the Note Purchase Agreement shall be and is hereby amended by deleting the following proviso from the first sentence therein:
“provided, however, ‘Indebtedness’ shall not include any deposits received by any customer in connection with any sales orders” in the first sentence of the definition.”
Section 1.3. The following definitions in Schedule A to the Note Purchase Agreement are hereby amended and restated to read as follows:
“Bank Credit Agreement” means that certain Credit Agreement dated as of December 11, 2019 by and between the Company, Bruker Invest AG, incorporated in Switzerland as a corporation limited by shares, Bruker Finance B.V., a besloten vennootschap met beperkte aansprakelijkheid incorporated under the laws of the Netherlands having its corporate seat (statutaire zetel) in Amsterdam, the Netherlands, Bank of America, N.A., as administrative agent, and the other financial institutions party thereto and any renewals, extensions or replacements thereof, which constitute the primary bank credit facility or facilities of the Company and its Subsidiaries.
“Consolidated Total Indebtedness” means at any time the sum, without duplication, of (a) the aggregate Indebtedness of the Company and its Subsidiaries calculated on a consolidated basis as of such time in accordance with GAAP (excluding the aggregate amount of Indebtedness of the Company and its Subsidiaries relating to the undrawn letters of credit outstanding) and (b) Indebtedness of the type referred to in clause (a) hereof of another Person guaranteed by the Company or any of its Subsidiaries.
“Priority Debt” means (without duplication), as of the date of any determination thereof, the sum of (i) all unsecured Indebtedness of Subsidiaries (including all Guarantees of Indebtedness but excluding (w) the aggregate amount of Indebtedness of Subsidiaries related to letters of credit or similar instruments outstanding that evidence obligations related to customer deposits received in the ordinary course of business, in each case, to the extent such instruments remain undrawn and are for the benefit of such customers in respect of such customer deposits, (x) Indebtedness owing to the Company
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or any other Subsidiary, (y) Indebtedness outstanding at the time such Person became a Subsidiary, provided that such Indebtedness shall have not been incurred in contemplation of such person becoming a Subsidiary, and (z) Indebtedness of any Subsidiary Guarantor, and (ii) all Indebtedness of the Company and its Subsidiaries secured by Liens other than Indebtedness secured by Liens permitted by subparagraphs (a) through (j), inclusive, of Section 10.4. For the avoidance of doubt, except as set forth in the preceding sentence, all Indebtedness of Affected Foreign Subsidiaries shall constitute “Priority Debt” for purposes of this Agreement.
Section 1.4. The following shall be added as new definition in alphabetical order to Schedule A of the Note Purchase Agreement:
“Note Documents” means this Agreement, the Notes, any Subsidiary Guaranty and all other documents, certificates, instruments or agreements executed and delivered by the Company or any Subsidiary Guarantor for the benefit of a holder of a Note in connection herewith on or after the date hereof.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Section 2.1. To induce the Noteholders to execute and deliver this First Amendment (which representations shall survive the execution and delivery of this First Amendment), the Company represents and warrants to the Noteholders that:
(a) this First Amendment has been duly authorized, executed and delivered by the Company and this First Amendment constitutes the legal, valid and binding obligation, contract and agreement of the Company enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors’ rights generally;
(b) the Note Purchase Agreement, as amended by this First Amendment, constitutes the legal, valid and binding obligation, contract and agreement of the Company enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors’ rights generally;
(c) the execution, delivery and performance by the Company of this First Amendment (i) has been duly authorized by all requisite corporate action and, if required, shareholder action, (ii) does not require the consent or approval of any governmental or regulatory body or agency and (iii) will not (A) violate (1) any provision of law, statute, rule or regulation or the Company’s certificate of incorporation or bylaws, (2) any order of any court or any rule, regulation or order of any other agency or government binding upon the Company or (3) any provision of any material indenture, agreement or other instrument to which the Company is a party or by which its properties or assets are or may be bound, including, without limitation, the Bank Credit Agreement (as defined in the Note Purchase Agreement (as amended by this First Amendment)), or (B) result in a
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breach or constitute (alone or with due notice or lapse of time or both) a default under any material indenture, agreement or other instrument referred to in clause (iii)(A)(3) of this Section 2.1(c);
(d) as of the date hereof and after giving effect to this First Amendment, no Default or Event of Default has occurred which is continuing;
(e) neither the Company nor any of its Affiliates has paid or agreed to pay any fees or other consideration, or given any additional security or collateral, or shortened the maturity or average life of any Indebtedness or permanently reduced any borrowing capacity, in each case, in favor of or for the benefit of any creditor of the Company, any Subsidiary or any Affiliate, in connection with the changes contemplated by or similar in nature to the changes in this First Amendment; and
(f) all the representations and warranties contained in Section 5 of the Note Purchase Agreement are true and correct in all material respects with the same force and effect as if made by the Company on and as of the date hereof.
SECTION 3. CONDITIONS TO EFFECTIVENESS OF THIS FIRST AMENDMENT.
Section 3.1. This First Amendment shall not become effective until, and shall become effective when, each and every one of the following conditions shall have been satisfied:
(a) executed counterparts of this First Amendment, duly executed by the Company, the Subsidiary Guarantors and the holders of at least 51% of the outstanding principal of the Notes, shall have been delivered to the Noteholders;
(b) [Reserved];
(c) the Noteholders shall have received evidence satisfactory to them that the Note Purchase Agreement dated as of December 11, 2019 has been amended substantially as proposed in the form annexed hereto as Exhibit A ;
(d) the Noteholders shall have received a copy of the resolutions of the Board of Directors of the Company authorizing the execution, delivery and performance by the Company of this First Amendment, certified by its Secretary or an Assistant Secretary;
(e) the representations and warranties of the Company set forth in Section 2 hereof are true and correct in all material respects on and as of the date hereof; and
(f) the reasonable and documented fees and expenses of Chapman and Cutler, LLP, counsel to the Noteholders, in connection with the negotiation, preparation, approval, execution and delivery of this First Amendment, to the extent invoiced, shall have been paid by the Company.
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SECTION 4. MISCELLANEOUS.
Section 4.1. This First Amendment shall be construed in connection with and as part of the Note Purchase Agreement, and except as modified and expressly amended by this First Amendment, all terms, conditions and covenants contained in the Note Purchase Agreement and the Notes are hereby ratified and shall be and remain in full force and effect.
Section 4.2. Any and all notices, requests, certificates and other instruments executed and delivered after the execution and delivery of this First Amendment may refer to the Note Purchase Agreement without making specific reference to this First Amendment but nevertheless all such references shall include this First Amendment unless the context otherwise requires.
Section 4.3. The descriptive headings of the various Sections or parts of this First Amendment are for convenience only and shall not affect the meaning or construction of any of the provisions hereof.
Section 4.4. This First Amendment shall be governed by and construed in accordance with New York law.
Section 4.5. Each Subsidiary Guarantor acknowledges that its consent to this First Amendment is not required, but each Subsidiary Guarantor nevertheless hereby agrees and consents to this First Amendment and to the documents and agreements referred to herein. Each Subsidiary Guarantor agrees and acknowledges that (i) notwithstanding the effectiveness of this First Amendment, each Subsidiary Guaranty (as the same may be amended, amended and restated, supplemented or otherwise modified from time to time) shall remain in full force and effect without modification thereto, and (ii) nothing herein shall in any way limit any of the terms or provisions of each Subsidiary Guaranty executed by any Subsidiary Guarantor, all of which are hereby ratified, confirmed and affirmed in all respects. Each Subsidiary Guarantor hereby agrees and acknowledges that no other agreement, instrument, consent or document shall be required to give effect to this section. Each Subsidiary Guarantor hereby further acknowledges that the Company may from time to time enter into any further amendments, modifications, terminations and/or waivers of any provisions of the Note Purchase Agreement without notice to or consent from any Subsidiary Guarantor and without affecting the validity or enforceability of any Subsidiary Guaranty giving rise to any reduction, limitation, impairment, discharge or termination of any Subsidiary Guaranty.
Section 4.6. This First Amendment may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. The execution hereof by the Company shall constitute a contract between the Company and the Noteholders for the uses and purposes hereinabove set forth, and this First Amendment may be executed in any number of counterparts, each executed counterpart constituting an original, but all together only one agreement. Delivery of this First Amendment by facsimile, electronic mail or other electronic transmission shall be effective as delivery of a manually executed counterpart hereof. The parties agree to electronic contracting and signatures with respect to this First Amendment. Delivery of an electronic signature to, or a signed copy of, this First Amendment by facsimile, email or other electronic transmission shall be fully binding
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on the parties to the same extent as the delivery of the signed originals and shall be admissible into evidence for all purposes. The words “execution,” “execute”, “signed,” “signature,” and words of like import in or related to any document to be signed in connection with this First Amendment shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Company, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.
[Remainder of Page Left Intentionally Blank]
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The foregoing First Amendment is hereby acknowledged and agreed as of the date first above written
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BRUKER CORPORATION |
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[2012 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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ACKNOWLEDGED: |
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BRUKER BIOSPIN CORPORATION |
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BRUKER AXS HOLDINGS, INC. F/K/A BRUKER AXS LLC |
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BRUKER SCIENTIFIC LLC |
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BRUKER NANO, INC. |
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[2012 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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Accepted as of the date first written above. |
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY |
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Its Authorized Representative |
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We acknowledge that we hold $37,000,000 4.31% Series 2012A Senior Notes, Tranche C, due January 18, 2022. |
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We acknowledge that we hold $33,000,000 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024. |
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[2012 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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Accepted as of the date first written above. |
NEW YORK LIFE INSURANCE COMPANY |
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We acknowledge that we hold $8,700,000 4.31% Series 2012A Senior Notes, Tranche C, due January 18, 2022. |
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We acknowledge that we hold $8,700,000 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024. |
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NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION |
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By: NYL Investors LLC, its Investment Manager |
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We acknowledge that we hold $7,100,000 4.31% Series 2012A Senior Notes, Tranche C, due January 18, 2022. |
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We acknowledge that we hold $7,100,000 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024. |
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NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION INSTITUTIONALLY OWNED LIFE INSURANCE SEPARATE ACCOUNT (BOLI 30C) |
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By: NYL Investors LLC, its Investment Manager |
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By |
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We acknowledge that we hold $1,000,000 4.31% Series 2012A Senior Notes, Tranche C, due January 18, 2022. |
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We acknowledge that we hold $1,000,000 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024. |
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[2012 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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Accepted as of the date first written above. |
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION INSTITUTIONALLY OWNED LIFE INSURANCE SEPARATE ACCOUNT (BOLI 3-2) |
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By: NYL Investors LLC, its Investment Manager |
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By |
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We acknowledge that we hold $200,000 4.31% Series 2012A Senior Notes, Tranche C, due January 18, 2022. |
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We acknowledge that we hold $200,000 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024. |
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[2012 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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Accepted as of the date first written above. |
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA |
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We acknowledge that we hold $25,000,000 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024. |
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[2012 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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Accepted as of the date first written above. |
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY |
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By: Barings LLC as Investment Adviser |
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By |
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We acknowledge that we hold $11,100,000 4.31% Series 2012A Senior Notes, Tranche C, due January 18, 2022. |
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We acknowledge that we hold $11,300,000 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024. |
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C.M. LIFE INSURANCE COMPANY |
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By: Barings LLC as Investment Adviser |
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We acknowledge that we hold $900,000 4.31% Series 2012A Senior Notes, Tranche C, due January 18, 2022. |
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We acknowledge that we hold $1,200,000 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024. |
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YF LIFE INSURANCE INTERNATIONAL LIMITED |
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By: Barings LLC as Investment Adviser |
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By |
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We acknowledge that we hold $500,000 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024. |
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[2012 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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Accepted as of the date first written above. |
PACIFIC LIFE INSURANCE COMPANY
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We acknowledge that we hold $17,000,000 4.31% Series 2012A Senior Notes, Tranche C, due January 18, 2022. |
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[2012 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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Accepted as of the date first written above. |
GENWORTH LIFE AND ANNUITY INSURANCE COMPANY |
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We acknowledge that we hold $6,000,000 4.31% Series 2012A Senior Notes, Tranche C, due January 18, 2022. |
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[2012 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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Accepted as of the date first written above. |
MODERN WOODMEN OF AMERICA |
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By |
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Name: |
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Title: |
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We acknowledge that we hold $15,000,000 4.31% Series 2012A Senior Notes, Tranche C, due January 18, 2022. |
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[2012 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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Accepted as of the date first written above. |
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PIONEER SECURITY LIFE INSURANCE COMPANY |
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INDUSTRIAL ALLIANCE INSURANCE AND FINANCIAL SERVICES, INC. |
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FARM BUREAU LIFE INSURANCE COMPANY OF MICHIGAN |
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AMERICAN REPUBLIC INSURANCE COMPANY |
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FARM BUREAU GENERAL INSURANCE COMPANY OF MICHIGAN |
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AMERICAN-AMICABLE LIFE INSURANCE COMPANY OF TEXAS |
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FARM BUREAU MUTUAL INSURANCE COMPANY OF MICHIGAN |
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TRUSTMARK INSURANCE COMPANY |
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OCCIDENTAL LIFE INSURANCE COMPANY OF NORTH CAROLINA |
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BLUE CROSS AND BLUE SHIELD OF FLORIDA, INC. |
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IA AMERICAN LIFE INSURANCE COMPANY |
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CATHOLIC UNITED FINANCIAL |
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By: Securian Asset Management, Inc. |
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By |
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Name: |
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Title: |
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We acknowledge that Pioneer Security Life Insurance Company holds $200,000 4.31% Series 2012A Senior Notes, Tranche C, due January 18, 2022. |
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We acknowledge that Industrial Alliance Insurance and Financial Services, Inc. holds $800,000 4.31% Series 2012A Senior Notes, Tranche C, due January 18, 2022. |
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We acknowledge that Farm Bureau Life Insurance Company of Michigan holds $2,275,000 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024. |
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We acknowledge that American Republic Insurance Company holds $1,520,000 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024. |
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We acknowledge that Farm Bureau General Insurance Company of Michigan holds $760,000 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024. |
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We acknowledge that American-Amicable Life Insurance Company of Texas holds $760,000 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024. |
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We acknowledge that Farm Bureau Mutual Insurance Company of Michigan holds $760,000 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024. |
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[2012 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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We acknowledge that Trustmark Insurance Company holds $760,000 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024. |
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We acknowledge that Occidental Life Insurance Company of North Carolina holds $380,000 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024. |
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We acknowledge that Blue Cross and Blue Shield of Florida, Inc. holds $760,000 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024. |
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We acknowledge that IA American Life Insurance Company holds $225,000 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024. |
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We acknowledge that Catholic United Financial holds $760,000 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024. |
[2012 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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Accepted as of the date first written above. |
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VANTIS LIFE INSURANCE COMPANY |
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By |
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Name: |
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Title: |
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We acknowledge that we hold $1,520,000 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024. |
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[2012 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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Accepted as of the date first written above. |
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MTL INSURANCE COMPANY |
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By |
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Name: |
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Title: |
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We acknowledge that we hold $1,140,000 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024. |
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[2012 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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Accepted as of the date first written above. |
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EQUITABLE LIFE & CASUALTY INSURANCE COMPANY |
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By |
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Name: |
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Title: |
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We acknowledge that we hold $380,000 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024. |
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[2012 Amendment]
EXHIBIT A
[See Attached]
Exhibit 10.2
EXECUTION VERSION
BRUKER CORPORATION
FIRST AMENDMENT
Dated as of April 17, 2020
to the
NOTE PURCHASE AGREEMENT
Dated as of December 11, 2019
RE: CHF 297,000,000 1.01% Senior Notes, due December 11, 2029
FIRST AMENDMENT TO THE NOTE PURCHASE AGREEMENT
THIS FIRST AMENDMENT dated as of April 17, 2020 and effective as of March 25, 2020 (the or this “First Amendment”) to the Note Purchase Agreement dated as of December 11, 2019 is between Bruker Corporation, a Delaware corporation (the “Company”) and each of the institutions which is a signatory to this First Amendment (collectively, the “Noteholders”).
RECITALS:
A. The Company and each of the Noteholders have heretofore entered into the Note Purchase Agreement dated as of December 11, 2019 (the “Note Purchase Agreement”). The Company has heretofore issued CHF 297,000,000 aggregate principal amount of its 1.01% Senior Notes, due December 11, 2029 (the “Notes”) pursuant to the Note Purchase Agreement.
B. The Company and the Noteholders now desire to amend the Note Purchase Agreement in the respects, but only in the respects, hereinafter set forth.
C. Capitalized terms used herein shall have the respective meanings ascribed thereto in the Note Purchase Agreement unless herein defined or the context shall otherwise require.
D. All requirements of law have been fully complied with and all other acts and things necessary to make this First Amendment a valid, legal and binding instrument according to its terms for the purposes herein expressed have been done or performed.
NOW, THEREFORE, upon the full and complete satisfaction of the conditions precedent to the effectiveness of this First Amendment set forth in Section 3.1 hereof, and in consideration of good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the Company and the Noteholders do hereby agree as follows:
SECTION 1. AMENDMENTS.
Section 1.1. Section 22.5 of the Note Purchase Agreement shall be amended by adding the following language to the end of such Section:
“The parties agree to electronic contracting and signatures with respect to this Agreement and the other Note Documents (other than the Notes). Delivery of an electronic signature to, or a signed copy of, this Agreement and such other Note Documents (other than the Notes) by facsimile, email or other electronic transmission shall be fully binding on the parties to the same extent as the delivery of the signed originals and shall be admissible into evidence for all purposes. The words “execution,” “execute”, “signed,” “signature,” and words of like import in or related to any document to be signed in connection with this Agreement and the other Note Documents (other than the Notes) shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Company, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping
system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.”
Section 1.2. The following definitions in Schedule A to the Note Purchase Agreement are hereby amended and restated to read as follows:
“Consolidated Total Indebtedness” means at any time the result of (a) the sum, without duplication, of (i) the aggregate Indebtedness of the Company and its Subsidiaries calculated on a consolidated basis as of such time in accordance with GAAP (excluding the aggregate amount of Indebtedness of the Company and its Subsidiaries relating to the undrawn letters of credit outstanding) and (ii) Indebtedness of the type referred to in clause (i) hereof of another Person guaranteed by the Company or any of its Subsidiaries, minus (b) the Unrestricted Cash Amount.
“Priority Debt” means (without duplication), as of the date of any determination thereof, the sum of (i) all unsecured Indebtedness of Subsidiaries (including all Guarantees of Indebtedness but excluding (w) the aggregate amount of Indebtedness of Subsidiaries related to letters of credit or similar instruments outstanding that evidence obligations related to customer deposits received in the ordinary course of business, in each case, to the extent such instruments remain undrawn and are for the benefit of such customers in respect of such customer deposits, (x) Indebtedness owing to the Company or any other Subsidiary, (y) Indebtedness outstanding at the time such Person became a Subsidiary, provided that such Indebtedness shall have not been incurred in contemplation of such person becoming a Subsidiary, and (z) Indebtedness of any Subsidiary Guarantor, and (ii) all Indebtedness of the Company and its Subsidiaries secured by Liens other than Indebtedness secured by Liens permitted by subparagraphs (a) through (w), inclusive, of Section 10.4. For the avoidance of doubt, except as set forth in the preceding sentence, all Indebtedness of any Foreign Subsidiary that does not become a Subsidiary Guarantor under the terms of this Agreement will constitute Priority Debt for all purposes of this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Section 2.1. To induce the Noteholders to execute and deliver this First Amendment (which representations shall survive the execution and delivery of this First Amendment), the Company represents and warrants to the Noteholders that:
(a) this First Amendment has been duly authorized, executed and delivered by the Company and this First Amendment constitutes the legal, valid and binding obligation, contract and agreement of the Company enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors’ rights generally;
-2-
(b) the Note Purchase Agreement, as amended by this First Amendment, constitutes the legal, valid and binding obligation, contract and agreement of the Company enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors’ rights generally;
(c) the execution, delivery and performance by the Company of this First Amendment (i) has been duly authorized by all requisite corporate action and, if required, shareholder action, (ii) does not require the consent or approval of any governmental or regulatory body or agency and (iii) will not (A) violate (1) any provision of law, statute, rule or regulation or the Company’s certificate of incorporation or bylaws, (2) any order of any court or any rule, regulation or order of any other agency or government binding upon the Company or (3) any provision of any material indenture, agreement or other instrument to which the Company is a party or by which its properties or assets are or may be bound, including, without limitation, the Credit Agreement, or (B) result in a breach or constitute (alone or with due notice or lapse of time or both) a default under any indenture, agreement or other instrument referred to in clause (iii)(A)(3) of this Section 2.1(c);
(d) as of the date hereof and after giving effect to this First Amendment, no Default or Event of Default has occurred which is continuing;
(e) neither the Company nor any of its Affiliates has paid or agreed to pay any fees or other consideration, or given any additional security or collateral, or shortened the maturity or average life of any Indebtedness or permanently reduced any borrowing capacity, in each case, in favor of or for the benefit of any creditor of the Company, any Subsidiary or any Affiliate, in connection with the changes contemplated by or similar in nature to the changes in this First Amendment; and
(f) all the representations and warranties contained in Section 5 of the Note Purchase Agreement are true and correct in all material respects with the same force and effect as if made by the Company on and as of the date hereof.
SECTION 3. CONDITIONS TO EFFECTIVENESS OF THIS FIRST AMENDMENT.
Section 3.1. This First Amendment shall not become effective until, and shall become effective when, each and every one of the following conditions shall have been satisfied:
(a) executed counterparts of this First Amendment, duly executed by the Company, the Subsidiary Guarantors and the holders of at least 51% of the outstanding principal of the Notes, shall have been delivered to the Noteholders;
(b) [Reserved];
-3-
(c) the Noteholders shall have received evidence satisfactory to them that the Note Purchase Agreement dated as of January 18, 2012 has been amended substantially as proposed in the form annexed hereto as Exhibit A;
(d) the Noteholders shall have received a copy of the resolutions of the Board of Directors of the Company authorizing the execution, delivery and performance by the Company of this First Amendment, certified by its Secretary or an Assistant Secretary;
(e) the representations and warranties of the Company set forth in Section 2 hereof are true and correct in all material respects on and as of the date hereof; and
(f) the reasonable and documented fees and expenses of Chapman and Cutler, LLP, counsel to the Noteholders, in connection with the negotiation, preparation, approval, execution and delivery of this First Amendment, to the extent invoiced, shall have been paid by the Company.
SECTION 4. MISCELLANEOUS.
Section 4.1. This First Amendment shall be construed in connection with and as part of the Note Purchase Agreement, and except as modified and expressly amended by this First Amendment, all terms, conditions and covenants contained in the Note Purchase Agreement and the Notes are hereby ratified and shall be and remain in full force and effect.
Section 4.2. Any and all notices, requests, certificates and other instruments executed and delivered after the execution and delivery of this First Amendment may refer to the Note Purchase Agreement without making specific reference to this First Amendment but nevertheless all such references shall include this First Amendment unless the context otherwise requires.
Section 4.3. The descriptive headings of the various Sections or parts of this First Amendment are for convenience only and shall not affect the meaning or construction of any of the provisions hereof.
Section 4.4. This First Amendment shall be governed by and construed in accordance with New York law.
Section 4.5. Each Subsidiary Guarantor acknowledges that its consent to this First Amendment is not required, but each Subsidiary Guarantor nevertheless hereby agrees and consents to this First Amendment and to the documents and agreements referred to herein. Each Subsidiary Guarantor agrees and acknowledges that (i) notwithstanding the effectiveness of this First Amendment, each Subsidiary Guaranty (as the same may be amended, amended and restated, supplemented or otherwise modified from time to time) shall remain in full force and effect without modification thereto, and (ii) nothing herein shall in any way limit any of the terms or provisions of each Subsidiary Guaranty executed by any Subsidiary Guarantor, all of which are hereby ratified, confirmed and affirmed in all respects. Each Subsidiary Guarantor hereby agrees and acknowledges that no other agreement, instrument, consent or document shall be required to give effect to this section. Each Subsidiary Guarantor hereby further
-4-
acknowledges that the Company may from time to time enter into any further amendments, modifications, terminations and/or waivers of any provisions of the Note Purchase Agreement without notice to or consent from any Subsidiary Guarantor and without affecting the validity or enforceability of any Subsidiary Guaranty giving rise to any reduction, limitation, impairment, discharge or termination of any Subsidiary Guaranty.
Section 4.6. This First Amendment may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. The execution hereof by the Company shall constitute a contract between the Company and the Noteholders for the uses and purposes hereinabove set forth, and this First Amendment may be executed in any number of counterparts, each executed counterpart constituting an original, but all together only one agreement. Delivery of this First Amendment by facsimile, electronic mail or other electronic transmission shall be effective as delivery of a manually executed counterpart hereof. The parties agree to electronic contracting and signatures with respect to this First Amendment. Delivery of an electronic signature to, or a signed copy of, this First Amendment by facsimile, email or other electronic transmission shall be fully binding on the parties to the same extent as the delivery of the signed originals and shall be admissible into evidence for all purposes. The words “execution,” “execute”, “signed,” “signature,” and words of like import in or related to any document to be signed in connection with this First Amendment shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Company, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.
[Remainder of Page Left Intentionally Blank]
-5-
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FIRST AMENDMENT |
BRUKER CORPORATION |
The foregoing First Amendment is hereby acknowledged and agreed as of the date first above written
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BRUKER CORPORATION |
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By |
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Its |
[2019 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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ACKNOWLEDGED: |
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BRUKER BIOSPIN CORPORATION |
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By: |
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Name: |
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Title: |
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BRUKER AXS HOLDINGS, INC. F/K/A BRUKER AXS LLC |
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By: |
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Name: |
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Title: |
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BRUKER SCIENTIFIC LLC |
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By: |
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Name: |
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Title: |
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BRUKER NANO, INC. |
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By: |
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Name: |
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Title: |
[2019 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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Accepted and Agreed to on the date first written above: |
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Accepted as of the date first written above. |
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NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION |
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By: NYL Investors LLC, its Investment Manager |
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By |
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Name: |
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Title: |
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We acknowledge that we hold 47,000,000 CHF 1.01% Senior Notes due December 11, 2029. |
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[2019 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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Accepted as of the date first written above. |
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METROPOLITAN LIFE INSURANCE COMPANY |
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By: MetLife Investment Management, LLC, Its Investment Manager |
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By |
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Name: |
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Title: |
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We acknowledge that we hold 17,000,000 CHF 1.01% Senior Notes due December 11, 2029. |
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METLIFE INSURANCE K.K. |
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By: MetLife Investment Management, LLC, its investment manager |
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By |
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Name: |
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Title: Authorized Signatory |
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We acknowledge that we hold 17,000,000 CHF 1.01% Senior Notes due December 11, 2029. |
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[2019 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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Accepted as of the date first written above. |
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THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY |
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By: Northwestern Mutual Investment Management Company, LLC, its investment advisor |
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By: |
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Name: |
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Title: Managing Director |
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We acknowledge that we hold 34,000,000 CHF 1.01% Senior Notes due December 11, 2029. |
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[2019 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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Accepted as of the date first written above. |
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THE PRUDENTIAL INSURANCE COMPANY OF AMERICA |
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By |
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Vice President |
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We acknowledge that we hold 12,991,000 CHF 1.01% Senior Notes due December 11, 2029. |
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PRUDENTIAL ANNUITIES LIFE ASSURANCE CORPORATION |
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By: PGIM, Inc., as investment manager |
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By |
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Vice President |
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We acknowledge that we hold 18,919,000 CHF 1.01% Senior Notes due December 11, 2029. |
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PRUDENTIAL RETIREMENT INSURANCE AND ANNUITY COMPANY |
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By: PGIM, Inc., as investment manager |
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By |
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Vice President |
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We acknowledge that we hold 2,090,000 CHF 1.01% Senior Notes due December 11, 2029. |
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[2019 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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Accepted as of the date first written above. |
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AMERICAN GENERAL LIFE INSURANCE COMPANY |
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By: AIG Asset Management (U.S.), LLC, as Investment Adviser |
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By |
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Name: |
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Title: |
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We acknowledge that we hold 34,000,000 CHF 1.01% Senior Notes due December 11, 2029. |
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[2019 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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Accepted as of the date first written above. |
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MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY |
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By: Barings LLC as Investment Adviser |
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By |
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Name: |
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Title: |
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We acknowledge that we hold 34,000,000 CHF 1.01% Senior Notes due December 11, 2029. |
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[2019 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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Accepted as of the date first written above. |
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UNUM LIFE INSURANCE COMPANY OF AMERICA |
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By |
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Name: |
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Title: |
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We acknowledge that we hold 30,000,000 CHF 1.01% Senior Notes due December 11, 2029. |
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[2019 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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Accepted as of the date first written above. |
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HARTFORD LIFE AND ACCIDENT INSURANCE COMPANY |
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HARTFORD FIRE INSURANCE COMPANY |
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By: Hartford Investment Management Company, their investment manager |
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By |
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Name: |
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Title: |
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We acknowledge that Hartford Life and Accident Insurance Company holds 5,000,000 CHF 1.01% Senior Notes due December 11, 2029. |
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We acknowledge that Hartford Fire Insurance Company holds 14,000,000 CHF 1.01% Senior Notes due December 11, 2029. |
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[2019 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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Accepted as of the date first written above. |
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PACIFIC LIFE INSURANCE COMPANY |
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We acknowledge that we hold 19,000,000 CHF 1.01% Senior Notes due December 11, 2029. |
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[2019 Amendment]
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FIRST AMENDMENT |
BRUKER CORPORATION |
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Accepted as of the date first written above. |
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THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA |
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By |
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We acknowledge that we hold 12,000,000 CHF 1.01% Senior Notes due December 11, 2029 |
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[2019 Amendment]
EXHIBIT A
[See Attached]
EXHIBIT 31.1
CERTIFICATION
I, Frank H. Laukien, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Bruker Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: August 7, 2020 |
By: |
/s/ FRANK H. LAUKIEN, PH.D. |
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Frank H. Laukien, Ph.D. |
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President, Chief Executive Officer and Chairman |
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(Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION
I, Gerald N. Herman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Bruker Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: August 7, 2020 |
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/s/ GERALD N. HERMAN |
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Gerald N. Herman |
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Chief Financial Officer and Vice President |
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(Principal Financial Officer and Principal Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Bruker Corporation (Company) on Form 10-Q for the three and six months ended June 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (Report), each of the undersigned, Frank H. Laukien, President, Chief Executive Officer and Chairman of the Board of Directors of the Company, and Gerald N. Herman, Chief Financial Officer and Vice President of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: August 7, 2020 |
By: |
/s/ FRANK H. LAUKIEN, PH.D. |
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Frank H. Laukien, Ph.D. |
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President, Chief Executive Officer and Chairman |
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(Principal Executive Officer) |
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Date: August 7, 2020 |
By: |
/s/ GERALD N. HERMAN |
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Gerald N. Herman |
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Chief Financial Officer and Vice President |
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(Principal Financial Officer and Principal Accounting Officer) |