U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

(Mark One)

x                              QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2007

 

o                                 TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE TRANSITION PERIOD FROM                      TO                    

 

Commission File Number  000-30833

 

Bruker BioSciences Corporation

(Exact name of registrant as specified in its charter)

 

 

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

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

Indicate by checkmark 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 x   No o

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act). 

Large accelerated filer   o

Accelerated filer   x

Non-accelerated filer   o

 

Indicate by checkmark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).   Yes o   No x

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

 

Bruker BioSciences Corporation
Form 10-Q
For the Quarter Ended June 30, 2007
Index

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

 

2

 

PART I   FINANCIAL INFORMATION

ITEM 1:  Financial Statements

Bruker BioSciences Corporation
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)

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

 

See the accompanying notes to financial statements.

3

---

 

Bruker BioSciences Corporation
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share data)

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

 

See the accompanying notes to financial statements.

4

---

 

Bruker BioSciences Corporation
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)

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

 

See the accompanying notes to financial statements.

5

 

Bruker BioSciences Corporation

Notes to Unaudited Condensed Consolidated Financial Statements

1. Description of Business and Basis of Presentation

Bruker BioSciences Corporation and its wholly-owned subsidiaries (the “Company”, “we,’’ “us,” or “our”) design, manufacture, service and market proprietary life science and materials research systems based on mass spectrometry core technology platforms, X-ray technologies, optical emission spectroscopy (OES) technology, and infrared and Raman molecular spectroscopy technology. The Company also sells a broad range of field analytical systems for chemical, biological, radiological and nuclear (CBRN) detection. The Company maintains major technical and manufacturing centers in Europe, North America and Japan and sales offices throughout the world. The Company’s diverse customer base includes pharmaceutical, biotechnology and proteomics companies, academic institutions, advanced materials and semiconductor industries and government agencies.

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

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

The Company reports financial results on the basis of the following three business segments:

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

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

3.                                       Bruker Optics is a leading developer and provider of research, analytical and process analysis instruments and solutions based on infrared and Raman molecular spectroscopy technologies.

2. Public Offering of Common Stock

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

3. Acquisitions

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

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

6

---

 

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

The Company engaged RSM McGladrey, Inc., a third party valuation firm, to assist management in appraising the fair value of certain assets acquired. The appraisal was completed in the second quarter of 2007. The following table summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition of the minority interest (in thousands):

 

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

The $2.3 million of goodwill acquired from Bruker Optics in connection with the acquisition was assigned to the Company’s Bruker Optics subsidiary, currently a reportable operating segment, and will not be deductible for tax purposes since the acquisition was a tax-free acquisition.

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

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

Pro forma financial information reflecting the Keca or AKAB acquisitions has not been presented as the impact on revenues and net income and net income per common share would not have been material.

4. Provision for Income Taxes

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

7

---

 

In July 2006, the Financial Accounting Standards Board issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement 109 (“FIN 48”). Among other things, FIN 48 provides guidance to address uncertainty in tax positions and clarifies the accounting for income taxes by prescribing a minimum recognition threshold which income tax positions must achieve before being recognized in the financial statements. In addition, FIN 48 requires expanded annual disclosures, including a rollforward of the beginning and ending aggregate unrecognized tax benefits as well as specific detail related to tax uncertainties for which it is reasonably possible the amount of unrecognized tax benefit will significantly increase or decrease within twelve months. The Company adopted FIN 48 on January 1, 2007, and recorded a reduction of retained earnings of $751,000 effective January 1, 2007. The Company has unrecognized tax benefits of approximately $2.0 million as of January 1, 2007, of which $2.0 million, if recognized, would result in a reduction of the Company’s effective tax rate. As of June 30, 2007, the Company does not expect any material changes to unrecognized tax positions within the next twelve months.

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

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

5. Equity-Based Compensation

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

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

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

As of June 30, 2007, the Company’s primary types of share-based compensation were stock options and restricted stock. The Company recorded stock-based compensation expense for the three and six months ended June 30, 2007 and 2006 as follows (in thousands):

		Three months ended June 30,						Six months ended June 30,
		2007			2006			2007			2006
Stock options		$	241		$	281		$	474		$	536
Restricted stock		162			37			323			74
Total stock-based compensation, pre-tax		403			318			797			610
Tax benefit		(113		)	(145		)	(223		)	(145		)
Total stock-based compensation, net of tax		$	290		$	173		$	574		$	465

 

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

8

---

 

 

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

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

 

All stock options granted had an exercise price equal to the market value of the underlying common stock on the date of grant. Stock option activity for the six months ended June 30, 2007 was as follows:

							Weighted
				Weighted			Average		Aggregate
		Shares		Average			Remaining		Intrinsic
		Subject to		Option			Contractual		Value
		Options		Price			Term (Yrs)		($’s in 000’s)
Outstanding at December 31, 2006		3,671,425		$	6.25
Granted		292,346		7.61
Exercised		(274,978	)	5.10
Forfeited		(30,500	)	11.20
Outstanding at June 30, 2007		3,658,293		$	6.40		4.8		$	12,116
Exercisable at June 30, 2007		2,622,660		$	6.72		4.5		$	8,578

 

The following table summarizes information about stock options outstanding and exercisable at June 30, 2007:

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

 

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

9

 

6.  Inventories

Inventories consisted of the following as of June 30, 2007 and December 31, 2006 (in thousands):

 

7.  Goodwill and Other Intangible Assets

The following is a summary of other intangible assets subject to amortization as of June 30, 2007 and December 31, 2006 (in thousands):

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

 

For the three months ended June 30, 2007 and 2006, the Company recorded amortization expense of approximately $0.4 million and $0.1 million, respectively, related to other amortizable intangible assets.  For the six months ended June 30, 2007 and 2006, the Company recorded amortization expense of approximately $0.8 million and $0.2 million, respectively, related to other amortizable intangible assets.

The estimated future amortization expense related to other amortizable intangible assets is as follows (in thousands):

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

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

8.  Warranty Costs

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

10

---

 

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

Changes in the Company’s accrued warranty liability during the six months ended June 30, 2007 were as follows (in thousands):

 

9.  Line of Credit

On July 5, 2006, the Company issued a demand promissory note for a $40 million line of credit in the United States. The Company initially borrowed $20 million to finance a portion of the Bruker Optics purchase price; on July 18, 2006 the Company borrowed an additional $10 million to finance the acquisition of KeyMaster. As of June 30, 2007, the Company had $40 million available on the line of credit. The note bears interest at the bank’s prime rate, LIBOR plus 1%, or a LIBOR advantage rate plus 1% at the request of the Company.  All of the Company’s obligations under the line of credit are secured by a pledge to the bank of 100% of the capital stock of each of the Company’s wholly-owned domestic subsidiaries, each of which also pledged a portion of the stock of certain of their foreign subsidiaries.

10.  Employee Benefit Plans

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

The net periodic pension benefit cost includes the following components during the three and six months ended June 30, 2007 and 2006 (in thousands):

		Three Months Ended June 30,						Six Months Ended June 30,
		2007			2006			2007			2006
Components of net periodic pension benefit cost
Service cost		$	279		$	180		$	558		$	345
Interest cost		127			100			254			192
Recognized actuarial loss		—			—			—			—
Amortization		(4		)	(5		)	(8		)	(8		)
Net periodic benefit cost		$	402		$	275		$	804		$	529

 

To date, the Company has not funded the defined benefit plan and is not required to make contributions during the remainder of 2007.

11.  Earnings Per Share

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

11

---

 

The following table sets forth the computation of basic and diluted average shares outstanding for the three and six months ended June 30, 2007 and 2006 (in thousands):

		Three Months Ended June 30,						Six Months Ended June 30,
		2007			2006			2007			2006
Net income, as reported		$	4,965		$	2,538		$	8,846		$	5,797
Weighted average shares outstanding:
Weighted average shares outstanding—basic		104,183			101,456			103,505			101,430
Effect of dilutive securities:
Stock options and restricted stock		2,615			413			2,681			349
Weighted average shares outstanding—diluted		106,798			101,869			106,186			101,779
Net income per share—basic		$	0.05		$	0.03		$	0.09		$	0.06
Net income per share—diluted		$	0.05		$	0.02		$	0.08		$	0.06

 

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

12. Interest and Other Income (Expense), Net

The components of interest and other income (expense), net, were as follows for the three and six months ended June 30, 2007 and 2006 (in thousands):

		Three Months Ended June 30,						Six Months Ended June 30,
		2007			2006			2007			2006
Interest income		$	386		$	924		$	674		$	1,645
Interest expense		(478		)	(500		)	(909		)	(794		)
Exchange losses on foreign currency transactions		(46		)	(701		)	(602		)	(1,097		)
Appreciation of the fair value of derivative financial instruments		347			2,315			580			3,775
Other		110			294			51			484
Interest and other income (expense), net		$	319		$	2,332		$	(206	)	$	4,013

 

13.  Comprehensive Income

Comprehensive income refers to revenues, expenses, gains and losses that under accounting principles generally accepted in the United States of America are included in other comprehensive income, but excluded from net income as these amounts are recorded directly as an adjustment to stockholders’ equity, net of tax.  The following is a summary of comprehensive income for the three and six months ended June 30, 2007 and 2006 (in thousands):

		Three Months Ended June 30,				Six Months Ended June 30,
		2007		2006		2007		2006
Net income		$4,965		$2,538		$8,846		$5,797
Foreign currency translation adjustments		1,066		5,860		2,698		8,514
Total comprehensive income		$6,031		$8,398		$11,544		$14,311

 

14.  Commitments and Contingencies

Lawsuits, claims and proceedings of a nature considered normal to its businesses may be pending from time to time against the Company. The Company believes the outcome of these proceedings, if any, will not have a material impact on the Company’s financial position or results of operations.

15.  Letters of Credit and Guarantees

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

12

---

 

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

16.  Business Segment Information

SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information (“SFAS 131”), establishes standards for reporting information about reportable segments in financial statements of public business enterprises. SFAS 131 also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company reports financial results on the basis of three reportable segments: Bruker AXS, Bruker Daltonics and Bruker Optics. Bruker AXS manufactures and distributes advanced X-ray instrumentation and spark-OES instrumentation used in non-destructive molecular and elemental analysis in academic, research and industrial applications.  Bruker Daltonics manufactures and distributes mass spectrometry instruments that can be integrated and used with other analytical instruments. Bruker Optics manufactures and distributes infrared and Raman molecular spectroscopy instruments and solutions that can be used in analytical and research applications. Bruker BioSciences Corporation, the parent company of Bruker AXS, Bruker Daltonics and Bruker Optics, is the corporate entity that principally incurs certain public company costs.

Selected reportable segment financial information for the three and six months ended June 30, 2007 and 2006 is presented below (in thousands):

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

(a)             represents transactions between segments which are eliminated in consolidation.

17.  Recent Accounting Pronouncements

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities, Including an amendment of FASB Statement No. 115 (“SFAS 159”). This Statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS 159 is effective as of the beginning of fiscal 2008. The Company has not yet assessed the effect, if any, that adoption of SFAS 159 will have on its results of operations and financial position.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. SFAS 157 provides a common fair value hierarchy for companies to follow in determining fair value measurements in the preparation of financial statements and expands disclosure requirements relating to how such fair value measurements were developed. SFAS 157 clarifies the principle that fair value should be based on the assumptions that the marketplace would use when pricing an asset or liability, rather than company specific data. The Company is currently assessing the impact that SFAS 157 will have on its results of operations and financial position.

13

 

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 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, 2006.

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

OVERVIEW

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

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

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

·                     Results of operations. This section provides our analysis of the significant line items in our consolidated statement of operations for the three and six months ended June 30, 2007 compared to the three and six months ended June 30, 2006.

·                     Liquidity and capital resources. This section provides an analysis of our liquidity and cash flow and a discussion of our outstanding debt and commitments.

EXECUTIVE OVERVIEW

Bruker BioSciences and its wholly-owned subsidiaries design, manufacture, market and service proprietary life science and materials research systems based on mass spectrometry core technology platforms, X-ray technologies, optical emission spectroscopy (OES) technologies, and molecular spectroscopy technologies. We also manufacture and distribute a broad range of field analytical systems for chemical, biological, radiological and nuclear, or CBRN, detection. We report financial results on the basis of three reportable segments: Bruker AXS, Bruker Daltonics and Bruker Optics.

Bruker AXS primarily engages in the business of manufacturing and distributing advanced instrumentation and automated solutions based on X-ray and spark-OES technologies with the purpose of addressing the needs of our customers in the discovery of new drugs, drug targets and advanced materials, as well as industrial QA/QC applications. Typical customers of Bruker AXS’ products and solutions include biotechnology and pharmaceutical companies, semiconductor industries, chemical, cement, metals and petroleum companies, raw material manufacturers, and academic and government research institutions.  Bruker Daltonics is a leading manufacturer of innovative mass spectrometry-based instruments and accessories used by pharmaceutical, biotechnology, proteomics and molecular diagnostics companies, academic institutions, and government agencies in their research that can also be integrated and used along with other analytical instruments. Bruker Daltonics also manufactures and distributes a broad range of field analytical systems for CBRN detection. Bruker Optics is a leading developer, manufacturer and provider of research, analytical and process analysis instruments and solutions based on infrared and Raman molecular spectroscopy technology. Typical customers of Bruker Optics’ products and solutions include pharmaceutical and biotechnology companies, cement and petroleum companies, food, beverage and agricultural industries, and academic and government research institutions.

We maintain major technical and manufacturing centers in Europe, North America and Japan, we have sales offices located throughout the world and our corporate headquarters is located in Billerica, Massachusetts. Our business strategy is to capitalize on our proven ability to innovate and generate rapid revenue growth, both organically and through acquisitions. Our revenue growth strategy, combined with improvements to our gross profit margins over time and increased leverage on our research and development, sales and marketing and distribution investments and general and administrative expenses, are expected to enhance our operating margins and improve our earnings in the future.

For the six months ended June 30, 2007, our revenues grew by 19% to $232.2 million, with acquisitions and foreign exchange rate changes each contributing approximately 5% of this growth. We continue to focus on improving our profitability and we have made progress with higher net income year-over-year.  We continue to invest in incremental sales and marketing

14

---

initiatives, primarily headcount increases, which has resulted in our sales and marketing expenses as a percentage of product and service revenue increasing year-over-year.  We expect these investments to result in increased revenues in future periods.  While our general and administrative expenses remained constant as a percentage of revenue, our increased revenues enabled us to leverage our research and development expenses as a percentage of product and service revenue during the first six months of 2007 compared to the first six months of 2006.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. 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, allowance for doubtful accounts, inventories, goodwill, long-lived assets, warranty costs and income taxes. We base our estimates and judgments on historical experience, current market and economic conditions, our observance of 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 to be both those most important to the portrayal of our financial condition and those that require the most subjective judgment.

·                     Revenue recognition. We recognize revenue from system sales when persuasive evidence of an arrangement exists, the price is fixed or determinable, title and risk of loss has been transferred to the customer and collectibility of the resulting receivable is reasonably assured. Title and risk of loss is generally transferred to the customer upon receipt of a signed customer acceptance form for a system that has been shipped, installed, and for which the customer has been trained. As a result, the timing of customer acceptance or readiness could cause our reported revenues to differ materially from expectations. When products are sold through an independent distributor, a strategic distribution partner or an unconsolidated affiliated distributor, which assumes responsibility for installation, we recognize the system sale when the product has been shipped and title and risk of loss have been transferred. Our distributors do not have price protection rights or rights to return; however, our products are generally warranted to be free from defect for a period of one year. Revenue is deferred until cash is received when a significant portion of the fee is due over one year after delivery, installation and acceptance of a system. For arrangements with multiple elements, we recognize revenue for each element based on the fair value of the element, provided all other criteria for revenue recognition have been met. The fair value for each element provided in multiple element arrangements is typically determined by referencing historical pricing policies when the element is sold separately. Changes in our ability to establish the fair value for each element in multiple element arrangements could affect the timing of revenue recognition. Revenue from accessories and parts is recognized upon shipment and service revenue is recognized as the services are performed. We record grant revenue from government contracts by deferring any up-front payments received and recording the revenue for research and development activities systematically over the life of the contract as the services are provided.

·                     Warranty costs. We normally provide a one-year parts and labor warranty with the purchase of equipment. The anticipated cost for this one-year warranty is accrued upon recognition of the sale and is included as a current liability on the balance sheet. Although our facilities undergo quality assurance and testing procedures throughout the production process, our warranty obligation is affected by product failure rates, material usage and service delivery costs incurred in correcting a product failure. Although our actual warranty costs have historically been consistent with expectations, to the extent warranty claim activity or costs associated with servicing those claims differ from our estimates, revisions to the warranty accrual may be required.

·                     Inventories. Inventories are stated at the lower of cost or market, with cost determined by the first-in, first-out method. We maintain an allowance for excess and obsolete inventory to reflect the expected un-saleable or un-refundable inventory based on an evaluation of slow moving products. If ultimate usage or demand varies significantly from expected usage or demand, additional write-downs may be required, resulting in a charge to operations.

·                    Goodwill, other intangible assets, and other long-lived assets. We perform an evaluation of whether goodwill is impaired annually or when events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Fair value is determined using market comparables for similar businesses or forecasts of discounted future cash flows. We also review other intangible assets and other long-lived assets when indication of potential impairment exists, such as a significant reduction in cash flows associated with the assets. Should the fair value of our long-lived assets decline because of reduced operating performance, market declines, or other indicators of impairment, a charge to operations for impairment may be necessary.

·                     Allowance for doubtful accounts. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to pay amounts due. If the financial condition of our customers were to deteriorate, reducing their ability to make payments, additional allowances would be required and would result in a charge to operations.

15

---

 

·                     Income taxes. We estimate the degree to which tax assets and loss carryforwards will result in a benefit based on expected profitability by tax jurisdiction, and provide a valuation allowance for tax assets and loss carryforwards that we believe will more likely than not go unused. If it becomes more likely than not that a tax asset or loss carryforward will be used for which a reserve has been provided, we reverse the related valuation allowance. If our actual future taxable income by tax jurisdiction differs from estimates, additional allowances or reversals of reserves may be necessary.

Results of Operations

Three months ended June 30, 2007 compared to the three months ended June 30, 2006

Revenue

The following table presents revenue, change in revenue and revenue growth by reportable segment for the three months ended June 30, 2007 and 2006 (dollars in thousands):

											Percentage
		2007			2006			$ Change			Change
Bruker AXS		$	53,300		$	39,113		$	14,187		36.3	%
Bruker Daltonics		40,628			39,830			798			2.0	%
Bruker Optics		30,275			23,558			6,717			28.5	%
Eliminations(a)		(2,520		)	(2,018		)	(502		)
Total Revenue		$	121,683		$	100,483		$	21,200		21.1	%

(a)             represents revenue recorded on transactions between segments which is eliminated in consolidation.

Bruker AXS’ revenue increased by $14.2 million, or 36.3%, to $53.3 million for the three months ended June 30, 2007 compared to $39.1 million for the comparable period in 2006. Included in this change in revenue is approximately $1.3 million from the impact of foreign exchange. Excluding the effect of foreign exchange, revenue increased by 33.0%. The increase in revenue is attributable to the businesses acquired in the second half of 2006, which represented approximately 14% of the revenue growth, and an increase in materials research system sales, other system revenue and aftermarket revenue. Other system revenue relates primarily to the distribution of products not manufactured by Bruker AXS. X-ray systems, other system and aftermarket revenue as a percentage of Bruker AXS’ product and service revenue were as follows during the three months ended June 30, 2007 and 2006 (dollars in thousands):

		2007					2006
					Percentage of					Percentage of
					Segment Product					Segment Product
		Revenue			and Service Revenue		Revenue			and Service Revenue
X-Ray Systems		$	35,467		66.6	%	$	25,587		65.5	%
Other System Revenue		4,869			9.1	%	1,931			4.9	%
Bruker AXS Aftermarket		12,964			24.3	%	11,595			29.6	%
Total Product and Service Revenue		$	53,300		100	%	$	39,113		100	%

 

Bruker Daltonics’ revenue increased by $0.8 million, or 2.0%, to $40.6 million for the three months ended June 30, 2007 compared to $39.8 million for the comparable period in 2006. Included in this change in revenue is approximately $1.7 million from the impact of foreign exchange. Excluding the effect of the foreign exchange benefit, revenue decreased by 2.4%. The decrease in revenue excluding the effect of foreign exchange is a result of reduced OEM sales for certain life science systems, decreased direct life science system sales and lower grant revenue, partially offset by increased sales of CBRN detection systems and aftermarket revenue year-over-year. Aftermarket revenues include accessory sales, consumables, training and services. Included in other revenue during the three months ended June 30, 2007 and 2006 are grant revenues from various projects for early-stage research and development projects funded by the German government. Life science systems, CBRN detection systems and aftermarket revenue as a percentage of Bruker Daltonics’ product and service revenue were as follows during the three months ended June 30, 2007 and 2006 (dollars in thousands):

16

---

 

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

 

Bruker Optics’ revenue increased by $6.7 million, or 28.5%, to $30.3 million for the three months ended June 30, 2007 compared to $23.6 million for the comparable period in 2006. Included in this change in revenue is approximately $1.0 million from the impact of foreign exchange. Excluding the effect of foreign exchange, revenue increased by 24.1%.  The increase in revenue excluding the effect of foreign exchange is primarily due to higher sales of molecular spectroscopy systems year-over-year. Sales increased, in part, as a result of several customer delayed installations and delays in production due to vendor supplied products which occurred in the first quarter and resulted in revenue being recognized in the second quarter.  For the three months ended June 30, 2007, we recognized $2.6 million in revenue from our order with the Chinese State Food and Drug Administration, compared to $3.6 million in revenue from this order in the same period in 2006. Aftermarket revenues include accessory sales, consumables, training and services. Other system revenue relates primarily to the distribution of products not manufactured by Bruker Optics. Molecular spectroscopy systems, other system and aftermarket revenue as a percentage of Bruker Optics’ product and service revenue were as follows during the three months ended June 30, 2007 and 2006 (dollars in thousands):

		2007					2006
					Percentage of					Percentage of
					Segment Product					Segment Product
		Revenue			and Service Revenue		Revenue			and Service Revenue
Molecular Spectroscopy Systems		$	23,905		79.0	%	$	18,312		77.7	%
Other System Revenue		2,054			6.8	%	1,400			6.0	%
Bruker Optics Aftermarket		4,316			14.2	%	3,846			16.3	%
Total Product and Service Revenue		$	30,275		100	%	$	23,558		100	%

 

Cost of Revenue

The following table presents cost of product and service revenue and gross profit margins on product and service revenue by reportable segment for the three months ended June 30, 2007 and 2006 (dollars in thousands):

		2007					2006
		Cost of			Gross Profit		Cost of			Gross Profit
		Revenue			Margin		Revenue			Margin
Bruker AXS		$	29,677		44.3	%	$	21,865		44.1	%
Bruker Daltonics		25,824			36.3	%	23,161			41.5	%
Bruker Optics		15,611			48.4	%	11,321			51.9	%
Eliminations(a)		(2,460		)			(2,087
Total Cost of Revenue		$	68,652		43.5	%	$	54,260		45.9	%

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

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

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

17

---

 

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

Sales and Marketing

The following table presents sales and marketing expense and sales and marketing expense as a percentage of product and service revenue by reportable segment for the three months ended June 30, 2007 and 2006 (dollars in thousands):

		2007					2006
					Percentage of					Percentage of
		Sales and			Segment Product		Sales and			Segment Product
		Marketing			and Service Revenue		Marketing			and Service Revenue
Bruker AXS		$	10,727		20.1	%	$	8,289		21.2	%
Bruker Daltonics		7,178			17.7	%	7,137			18.0	%
Bruker Optics		6,183			20.4	%	5,474			23.2	%
Total Sales and Marketing		$	24,088		19.8	%	$	20,900		20.8	%

 

Bruker AXS’ sales and marketing expense for the three months ended June 30, 2007 increased to $10.7 million, or 20.1% of product and service revenue, from $8.3 million, or 21.2% of product and service revenue for the comparable period in 2006. The increase in sales and marketing expense is primarily attributable to increased headcount related to the acquisitions completed during the second half of 2006 and higher commissions on increased revenues from our core business year-over-year.

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

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

General and Administrative

The following table presents general and administrative expense and general and administrative expense as a percentage of product and service revenue by reportable segment for the three months ended June 30, 2007 and 2006 (dollars in thousands):

		2007					2006
					Percentage of					Percentage of
		General and			Segment Product		General and			Segment Product
		Administrative			and Service Revenue		Administrative			and Service Revenue
Bruker AXS		$	3,612		6.8	%	$	3,181		8.1	%
Bruker Daltonics		2,153			5.3	%	1,620			4.1	%
Bruker Optics		1,429			4.7	%	941			4.0	%
Corporate		794					731
Total General and Administrative		$	7,988		6.6	%	$	6,473		6.5	%

 

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

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

18