# Bruker Corp: Form 10-Q for the period ended Sep 30, 2023

- Company: [Bruker Corp](/companies/brkr.md) (CIK 1109354)
- Form: 10-Q
- Filed: 2023-11-09
- Accepted by EDGAR: Nov 9, 2023, 16:54 ET
- Period: 2023-09-30
- Accession: 0000950170-23-062192
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1109354/000095017023062192/brkr-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1109354/000095017023062192/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $742.8m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $2.11bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $360.0m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $1.03bn | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2023-07-01 to 2023-09-30 | $382.8m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2023-01-01 to 2023-09-30 | $1.08bn | us-gaap:GrossProfit |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $71.3m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-01-01 to 2023-09-30 | $211.3m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2023-07-01 to 2023-09-30 | $177.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $518.2m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | $124.5m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | $333.4m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $3.9m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $12.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $30.8m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $80.6m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $88.1m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $221.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.60 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $1.50 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.60 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $1.51 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 147 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 148 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $144.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $75.4m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2023-01-01 to 2023-09-30 | $22.1m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $101.9m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-09-30 | $363.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $2.03bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $3.82bn | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $1.07bn | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2023-09-30 | $1.10bn | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2023-09-30 | $1.21bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 48,034 characters.

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 unaudited condensed consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2022.

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, the impact of supply chain challenges, expectations regarding the global economy, inflation, banking industry volatility, the potential for recession, increasing geopolitical tensions, our intentions regarding our intellectual property, our compliance with government regulations, sufficiency of cash, our competition, 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, the level and impact of our M&A activity and our ability to integrate acquired companies, our expectations regarding revenue and other risk factors discussed herein and from time to time in our other filings with the 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, 2022, and subsequent filings. We expressly disclaim any intent or obligation to update these forward-looking statements other than as required by law.

### Non-GAAP Measures

Although our unaudited condensed consolidated financial statements have been prepared in accordance with GAAP, we believe that 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. We rely internally on certain measures that are not calculated according to GAAP. These measures are organic revenue, free cash flow, non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP operating income and non-GAAP operating margin. Our management believes that these financial measures 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 as GAAP gross profit with certain non-GAAP measures excluded and non-GAAP gross profit margin as GAAP gross profit margin with certain non-GAAP measures excluded. We define the term non-GAAP operating income as GAAP operating income with certain non-GAAP measures excluded and non-GAAP operating margin as GAAP operating margin with certain non-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 initiatives, and other non-operational costs, and we believe these are useful measures to evaluate our continuing business.

We define free cash flow as GAAP 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 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. These measures may also be useful to investors in evaluating the underlying operating performance of our business. 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 it may be different from non-GAAP financial measures used by other companies, and therefore, may not be comparable among companies.

### 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, Asia and North America and we have sales offices located throughout the world. Bruker is organized into four reportable segments: the Bruker Scientific Instruments (BSI) BioSpin Segment, the BSI CALID Segment, the BSI NANO Segment and the Bruker Energy & Supercon Technologies (BEST) Segment.

Revenue for the three months ended September 30, 2023, increased by $103.9 million, or 16.3%, to $742.8 million, compared to $638.9 million for the comparable period in 2022. Included in revenue was an increase of approximately $20.9 million from favorable foreign exchange rate movements, and an increase of $13.5 million from acquisitions. Excluding the favorable effects of foreign exchange rate movements and our recent acquisitions, our organic revenue, a non-GAAP measure, increased $69.5 million. Revenue increases were driven by strong demand for our differentiated high-value scientific instruments and life science solutions compared to the same period in 2022.

Revenue for the nine months ended September 30, 2023, increased by $287.7 million, or 15.8%, to $2,110.0 million, compared to $1,822.3 million for the comparable period in 2022. Included in revenue was an increase of $37.2 million from acquisitions offset by a decrease of approximately $(3.4) million from unfavorable foreign exchange rate movements. Excluding the unfavorable effects of foreign exchange rate movements and our recent acquisitions, our organic revenue, a non-GAAP measure, increased $253.9 million. Revenue increases were driven by strong demand for our differentiated high-value scientific instruments and life science solutions compared to the same period in 2022.

Our gross profit margin decreased to 51.5% during the three months ended September 30, 2023, as compared to 52.5% in the same period in 2022, the result of favorable price and volume leverage more than offset by net unfavorable impact of foreign exchange rate movements compared to 2022.

Our gross profit margin decreased to 51.3% during the nine months ended September 30, 2023, as compared to 51.6% in the same period in 2022, the result of favorable pricing and volume leverage more than offset by unfavorable impact of foreign exchange rate movements and inflation, compared to 2022.

Our income tax provision in the three months ended September 30, 2023, and 2022 was $30.8 million and $41.2 million, respectively, representing effective tax rates of 25.8% and 31.9%, respectively. Our income tax provision in the nine months ended September 30, 2023, and 2022 was $80.6 million and $93.0 million, respectively, representing effective tax rates of 26.6% and 31.8%, respectively. The decrease in our effective tax rate was primarily due to the impact of U.S. tax legislation that became effective in the fourth quarter of 2022 allowing a larger benefit relating to foreign tax credits, the resolution of tax controversies, and change in jurisdictional mix. The Company also recorded discrete tax impacts during the nine months ended September 30, 2023.

Diluted earnings per share for the three months ended September 30, 2023, was $0.60, an increase of $0.01 compared to $0.59 per share in the same period in 2022. Diluted earnings per share for the nine months ended September 30, 2023, was $1.50, an increase of $0.17 compared to $1.33 per share in the same period in 2022. The increase in diluted earnings per share in both the three and nine months ended September 30, 2023, was driven by higher net income and lower weighted average shares outstanding as compared to the three and nine months ended September 30, 2022, due to share repurchases under our repurchase program.

The following table presents a reconciliation from net cash provided by operating activities, which is the most directly comparable GAAP operating financial measure, to free cash flow, a non-GAAP measure, as used by management (in millions):

|  | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| GAAP net cash provided by operating activities | $144.6 | $102.9 |
| Less: purchases of property, plant and equipment | (75.4) | (94.6) |
| Free cash flow | $69.2 | $8.3 |

27

The following table presents reconciliations from gross profit and gross profit margin, which are the most directly comparable GAAP operating performance measures, to non-GAAP gross profit and non-GAAP gross profit margin as used by management (in millions):

|  | Three Months Ended September 30, 2023 |  | 2022 |  | Nine Months Ended September 30, 2023 |  | 2022 |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Gross profit | $382.8 | 51.5% | $335.3 | 52.5% | $1,083.0 | 51.3% | $939.8 | 51.6% |
| Non-GAAP adjustments: |  |  |  |  |  |  |  |  |
| Restructuring costs | 1.1 | 0.1% | (0.3) | — | 1.4 | 0.1% | 1.1 | 0.1% |
| Acquisition-related costs | — | — | 0.1 | — | 0.5 | 0.1% | 0.3 | — |
| Purchased intangible amortization | 5.9 | 0.8% | 4.5 | 0.7% | 16.9 | 0.8% | 13.5 | 0.7% |
| Other costs | 1.8 | 0.2% | 0.2 | — | 3.0 | 0.1% | 3.1 | 0.2% |
| Non-GAAP gross profit | $391.6 | 52.6% | $339.8 | 53.2% | $1,104.8 | 52.4% | $957.8 | 52.6% |

Our non-GAAP gross profit margin decreased in the three months ended September 30, 2023, as compared to the same period in 2022, due to the impact of foreign exchange rate movements, partially offset by favorable pricing and volume leverage. Our non-GAAP gross profit margin remained fairly consistent in both the nine months ended September 30, 2023, and 2022.

The following table presents reconciliations from operating income and operating margin, which are the most directly comparable GAAP operating performance measures, to non-GAAP operating income and non-GAAP operating margin as used by management (in millions):

|  | Three Months Ended September 30, 2023 |  | 2022 |  | Nine Months Ended September 30, 2023 |  | 2022 |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Operating income | $124.5 | 16.8% | $131.3 | 20.6% | $333.4 | 15.8% | $301.7 | 16.6% |
| Non-GAAP adjustments: |  |  |  |  |  |  |  |  |
| Restructuring costs | 4.8 | 0.6% | 0.2 | — | 5.7 | 0.3% | 4.4 | 0.2% |
| Acquisition-related costs | 1.6 | 0.2% | 1.8 | 0.3% | 7.9 | 0.3% | 15.4 | 0.9% |
| Purchased intangible amortization | 11.5 | 1.5% | 8.9 | 1.4% | 33.4 | 1.6% | 27.5 | 1.5% |
| Other costs | 5.9 | 0.9% | 1.0 | 0.2% | 11.4 | 0.5% | 7.7 | 0.4% |
| Non-GAAP operating income | $148.3 | 20.0% | $143.2 | 22.5% | $391.8 | 18.5% | $356.7 | 19.6% |

Our non-GAAP operating margin decreased in both the three and nine months ended September 30, 2023, as compared to the same period in 2022, due to impact of foreign exchange rate movements, contributions from acquisitions and inflation headwinds. We also increased planned increases in sales and marketing activities and investments in our research and development capabilities, as compared to 2022.

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:

- general economic conditions, including inflation, uncertainties caused by the recent banking industry volatility, the threat of recession, financial liquidity, and currency volatility or devaluation, supply chain or manufacturing capabilities;
- geopolitical tensions, including those on our customers, such as the Russia-Ukraine conflict, the conflict in Israel, Palestine and surrounding areas, the possible expansion of such conflicts and potential geopolitical consequences, the ongoing tensions between the United States and China, tariff and trade policy changes, and increasing potential of conflict involving countries in Asia that are critical to our supply chain operations;
- potential energy shortages in Europe where we have significant operations and overall higher energy and transportation costs;
- the impact of certain weather-related disruptions;
- 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;
- changes in raw material, component and logistics costs;
- the time it takes for us to receive critical materials to manufacture our products;
- 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;
- the time required to obtain governmental licenses;
- our ability to identify suitable acquisition targets and successfully integrate and manage acquired business and our overall M&A activity generally; and
- costs related to acquisitions of technology or businesses.

Several of these factors have in the past affected and continue to affect the amount and timing of revenue recognized on sales of our products and receipt of related payments and will likely 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.

### Maintaining business continuity and service levels to our customers

Ensuring our ability to supply our enabling technologies and solutions and maintaining high service levels for our customers is a top priority for Bruker. We are continuing capital investments in production facilities for efficiencies and expansion. We continue to encounter supply chain risks associated with the global economy and increasing geopolitical tensions, including inflation, banking industry volatility, the threat of recession, financial liquidity, currency volatility or devaluation, and the worldwide shortage of semiconductor chips, components, and raw materials such as copper.

### 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; allowance 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 and historical experience.

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, 2022.

### RESULTS OF OPERATIONS

#### Three Months Ended September 30, 2023, compared to the Three Months Ended September 30, 2022

### Consolidated Results

The following table presents our results (in millions):

|  | Three Months Ended September 30, 2023 | 2022 | Dollar Change | Percentage Change |
| --- | ---: | ---: | ---: | ---: |
| Product revenue | $615.1 | $536.6 | $78.5 | 14.6% |
| Service and other revenue | 127.7 | 102.3 | 25.4 | 24.8% |
| Total revenue | 742.8 | 638.9 | 103.9 | 16.3% |
| Cost of product revenue | 293.0 | 240.5 | 52.5 | 21.8% |
| Cost of service and other revenue | 67.0 | 63.1 | 3.9 | 6.2% |
| Total cost of revenue | 360.0 | 303.6 | 56.4 | 18.6% |
| Gross profit | 382.8 | 335.3 | 47.5 | 14.2% |
| Operating expenses: |  |  |  |  |
| Selling, general and administrative | 177.6 | 144.8 | 32.8 | 22.7% |
| Research and development | 71.3 | 56.2 | 15.1 | 26.9% |
| Other charges, net | 9.4 | 3.0 | 6.4 | 213.3% |
| Total operating expenses | 258.3 | 204.0 | 54.3 | 26.6% |
| Operating income | 124.5 | 131.3 | (6.8) | (5.2)% |
| Interest and other income (expense), net | (5.3) | (2.0) | (3.3) | 165.0% |
| Income before income taxes, equity in income of unconsolidated investees, net of tax, and noncontrolling interests in consolidated subsidiaries | 119.2 | 129.3 | (10.1) | (7.8)% |
| Income tax provision | 30.8 | 41.2 | (10.4) | (25.2)% |
| Equity in income of unconsolidated investees, net of tax | 0.3 | 0.3 | — | — |
| Consolidated net income | 88.7 | 88.4 | 0.3 | 0.3% |
| Net income attributable to noncontrolling interests in consolidated subsidiaries | 0.6 | 0.3 | 0.3 | 100.0% |
| Net income attributable to Bruker Corporation | $88.1 | $88.1 | $— | — |

### Revenue

The following table presents revenue, change in revenue and revenue growth by reportable segment (in millions):

|  | Three Months Ended September 30, 2023 | 2022 | Dollar Change | Percentage Change |
| --- | ---: | ---: | ---: | ---: |
| BSI BioSpin | $198.3 | $175.7 | $22.6 | 12.9% |
| BSI CALID | 239.3 | 207.5 | 31.8 | 15.3% |
| BSI NANO | 238.7 | 199.1 | 39.6 | 19.9% |
| BEST | 70.6 | 59.3 | 11.3 | 19.1% |
| Eliminations (a) | (4.1) | (2.7) | (1.4) |  |
| Total revenue | $742.8 | $638.9 | $103.9 | 16.3% |

(a) Represents product and service revenue between reportable segments.

Revenue increases were driven by strong demand for our differentiated instruments and solutions as well as pricing improvements. The BSI BioSpin Segment revenue increase was related primarily to the strong demand for our instruments, especially in Nuclear Magnetic Resonance (NMR) and software businesses. The BSI CALID Segment revenue increase was a direct result of strong demand for our differentiated instruments. Primarily, strong demand in our life science mass spectrometry proteomics solutions, as well as our optics spectroscopy and microscopy instruments. The BSI NANO Segment revenue increase was driven by strong demand in its academic, government, industrial and biopharma markets. The BEST revenue increase was driven by strong superconductor demand from our magnetic resonance imaging original equipment manufacturer customers.

Geographically in the three months ended September 30, 2023, our North American revenue grew 8.4%, Asia Pacific revenue increased by 16.6%, and European revenue increased by 23.8% compared to the same period in 2022.

### Gross Profit

While gross profit increased in the three months ended September 30, 2023, as compared to the same period in 2022, the gross profit margin decreased as a result of unfavorable foreign exchange rate movements compared to 2022.

### Selling, General and Administrative

Our selling, general and administrative expenses for the three months ended September 30, 2023, increased to 23.9% of total revenue, from 22.7% of total revenue for the comparable period in 2022. The increase as a percentage of revenue was a result of inflation and increased planned investments in sales and marketing compared to 2022. Primary investments are related to additional headcount and personnel expenses as well as increased consulting and professional fees related to acquisitions, tax, audit and audit-related fees.

### Research and Development

Our research and development expenses for the three months ended September 30, 2023 increased to 9.6% of total revenue from 8.8% of total revenue for the comparable period in 2022. The increase as a percentage of revenue is a result of our increased investment in research and development capabilities, especially in our key *Project Accelerate 2.0* initiatives. Investments are primarily related to additional headcount and personnel expenses as well as increased consulting and professional fees related to research and development activities.

### Other Charges, Net

Other charges, net for the three months ended September 30, 2023, consisted of $1.6 million of acquisition-related charges related to acquisitions completed in 2023 and 2022, $2.2 million of costs associated with our global information technology (IT) transformation activities, $1.9 million of other charges and $3.7 million of restructuring costs. Acquisition-related charges relate primarily to integration cost of newly acquired entities and the cost of post-combination employment services in the period acquired. 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 September 30, 2022, consisted of $1.7 million of acquisition-related charges related to acquisitions completed in 2022 and 2021, $0.5 million of restructuring costs, $(0.4) million of costs associated with our global information technology (IT) transformations activities, and $1.2 million of other charges.

### Operating Income

The following table presents operating income and operating margins on revenue by reportable segment (in millions):

|  | Three Months Ended September 30, 2023 Operating Income (Loss) | Percentage of Segment Revenue | 2022 Operating Income (Loss) | Percentage of Segment Revenue |
| --- | ---: | ---: | ---: | ---: |
| BSI BioSpin | $52.5 | 26.5% | $47.9 | 27.3% |
| BSI CALID | 50.0 | 20.9% | 56.3 | 27.1% |
| BSI NANO | 39.0 | 16.3% | 35.3 | 17.7% |
| BEST | 9.0 | 12.7% | 8.2 | 13.8% |
| Corporate, eliminations and other (a) | (26.0) |  | (16.4) |  |
| Total operating income | $124.5 | 16.8% | $131.3 | 20.6% |

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

The overall decrease in operating income was due to higher selling, general and administrative expenses and research and development costs offset by an increase in gross profit. BSI CALID operating income was lower due to unfavorable foreign currency exchange rates and increased personnel costs.

The operating margin decreases in the BSI BioSpin, BSI CALID, BSI NANO and BEST Segments were primarily due to unfavorable product mix, impact of foreign exchange rate movements and inflation offset by favorable pricing and volume leverage.

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

The increase in interest and other income (expense), net in the three months ended September 30, 2023, as compared to the same period in 2022 was primarily due to higher foreign currency exchange losses of $3.3 million driven by weakening of the U.S. dollar against other currencies.

### Income Tax Provision

The 2023 and 2022 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 September 30, 2023, and 2022 were 25.8% and 31.9%, respectively. The decrease in our effective tax rate was primarily due to the impact of U.S. tax legislation that became effective in the fourth quarter of 2022 allowing a larger benefit relating to foreign tax credits and change in jurisdictional mix. The Company also recorded discrete tax impacts during the three months ended September 30, 2023.

### Equity in Income of Unconsolidated Investees, net of tax

Equity in Income of Unconsolidated Investees, net of tax represents the Company's proportional share of the earnings or losses as reported by equity-method investees.

### Net Income 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.

### Consolidated Results

#### Nine Months Ended September 30, 2023, compared to the Nine Months Ended September 30, 2022

The following table presents our results (in millions):

|  | Nine Months Ended September 30, 2023 | 2022 | Dollar Change | Percentage Change |
| --- | ---: | ---: | ---: | ---: |
| Product revenue | $1,741.8 | $1,512.8 | $229.0 | 15.1% |
| Service and other revenue | 368.2 | 309.5 | 58.7 | 19.0% |
| Total revenue | 2,110.0 | 1,822.3 | 287.7 | 15.8% |
| Cost of product revenue | 823.0 | 699.6 | 123.4 | 17.6% |
| Cost of service and other revenue | 204.0 | 182.9 | 21.1 | 11.5% |
| Total cost of revenue | 1,027.0 | 882.5 | 144.5 | 16.4% |
| Gross profit | 1,083.0 | 939.8 | 143.2 | 15.2% |
| Operating expenses: |  |  |  |  |
| Selling, general and administrative | 518.2 | 442.7 | 75.5 | 17.1% |
| Research and development | 211.3 | 172.4 | 38.9 | 22.6% |
| Other charges, net | 20.1 | 23.0 | (2.9) | (12.6)% |
| Total operating expenses | 749.6 | 638.1 | 111.5 | 17.5% |
| Operating income | 333.4 | 301.7 | 31.7 | 10.5% |
| Interest and other income (expense), net | (30.1) | (8.8) | (21.3) | 242.0% |
| Income before income taxes, equity in income of unconsolidated investees, net of tax, and noncontrolling interests in consolidated subsidiaries | 303.3 | 292.9 | 10.4 | 3.6% |
| Income tax provision | 80.6 | 93.0 | (12.4) | (13.3)% |
| Equity in income of unconsolidated investees, net of tax | 1.2 | 0.3 | 0.9 | 300.0% |
| Consolidated net income | 223.9 | 200.2 | 23.7 | 11.8% |
| Net income attributable to noncontrolling interests in consolidated subsidiaries | 2.2 | 1.0 | 1.2 | 120.0% |
| Net income attributable to Bruker Corporation | $221.7 | $199.2 | $22.5 | 11.3% |

### Revenue

The following table presents revenue, change in revenue and revenue growth by reportable segment (in millions):

|  | Nine Months Ended September 30, 2023 | 2022 | Dollar Change | Percentage Change |
| --- | ---: | ---: | ---: | ---: |
| BSI BioSpin | $540.6 | $493.3 | $47.3 | 9.6% |
| BSI CALID | 703.2 | 601.0 | 102.2 | 17.0% |
| BSI NANO | 673.4 | 559.8 | 113.6 | 20.3% |
| BEST | 205.5 | 178.2 | 27.3 | 15.3% |
| Eliminations (a) | (12.7) | (10.0) | (2.7) |  |
| Total revenue | $2,110.0 | $1,822.3 | $287.7 | 15.8% |

(a) Represents product and service revenue between reportable segments.

Revenue increases were driven by strong demand for our differentiated instruments and solutions as well as pricing improvements offset by the negative impact of foreign currency translation. The BSI BioSpin Segment revenue increase related primarily to the strong demand for our instruments, especially in the NMR and software businesses. The BSI CALID Segment increase in revenues was a direct result of strong demand for our differentiated instruments. Primarily, strong demand in our life science mass spectrometry proteomics solutions, as well as our optics spectroscopy and microscopy instruments. BSI NANO Segment increase in revenue was driven by strong demand in its academic, government, industrial and semiconductor metrology markets. The BEST revenue increase was driven by strong superconductor demand from our magnetic resonance imaging original equipment manufacturer customers.

Geographically in the nine months ended September 30, 2023, our North American revenue grew 8.4%, Asia Pacific revenue increased by 23.3%, and European revenue increased by 15.6% compared to the same period in 2022.

### Gross Profit

The increase in gross profit in the nine months ended September 30, 2023, as compared to the same period in 2022, was a result of pricing and volume leverage, partially offset by net unfavorable impact of foreign exchange rate movements compared to 2022.

### Selling, General and Administrative

Our selling, general and administrative expenses for the nine months ended September 30, 2023, increased to 24.6% of total revenue, from 24.3% of total revenue for the comparable period in 2022. The increase as a percentage of revenue was a result of inflation and increased planned investments in sales and marketing capabilities compared to 2022. Primary investments are related to additional headcount and personnel expenses as well as increased consulting and professional fees related to acquisitions, tax, audit and audit-related fees.

### Research and Development

Our research and development expenses for the nine months ended September 30, 2023, increased to 10.0% of total revenue from 9.5% of total revenue for the comparable period in 2022. The increase as a percentage of revenue is a result of our increased investment in research and development capabilities, especially in our key *Project Accelerate 2.0* initiatives. Investments are primarily related to additional headcount and personnel expenses as well as increased consulting and professional fees related to research and development activities.

### Other Charges, Net

Other charges, net for the nine months ended September 30, 2023, consisted of $7.4 million of acquisition-related charges related to acquisitions completed in 2023 and 2022, $3.3 million of costs associated with our global information technology (IT) transformation activities, $5.1 million of other charges and $4.3 million of restructuring costs. Acquisition-related charges relate primarily to integration cost of newly acquired entities and the cost of post-combination employment services in the period acquired. 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 nine months ended September 30, 2022, consisted of $15.1 million of acquisition-related charges related to acquisitions completed in 2022 and 2021, $3.3 million of restructuring costs, $2.1 million of costs associated with our global information technology (IT) transformations activities, $1.8 million of other charges, and $0.7 million related to suspension of operations in Russia.

### Operating Income

The following table presents operating income and operating margins on revenue by reportable segment (in millions):

|  | Nine Months Ended September 30, 2023 Operating Income (Loss) | Percentage of Segment Revenue | 2022 Operating Income (Loss) | Percentage of Segment Revenue |
| --- | ---: | ---: | ---: | ---: |
| BSI BioSpin | $123.7 | 22.9% | $113.7 | 23.0% |
| BSI CALID | 151.6 | 21.6% | 146.6 | 24.4% |
| BSI NANO | 99.7 | 14.8% | 72.2 | 12.9% |
| BEST | 28.1 | 13.7% | 21.4 | 12.0% |
| Corporate, eliminations and other (a) | (69.7) |  | (52.2) |  |
| Total operating income | $333.4 | 15.8% | $301.7 | 16.6% |

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

The overall increase in operating income was due to higher gross profit offset by an increase in selling, general and administrative expenses and research and development.

While the BSI BioSpin and BSI CALID operating income increased, the operating margin decreased due to acquisition costs and unfavorable foreign exchange rate movements as well as planned marketing and research and development investments, and impact of inflation costs on margin in 2023 as compared to 2022. The operating income increase in the BSI NANO Segments was primarily due to higher gross margin resulting from favorable product mix, pricing, and volume leverage more than offsetting inflation. The operating margin increase in the BEST Segment was primarily driven by volume leverage, operating efficiency, and favorable product mix.

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

The increase in interest and other income (expense), net in the nine months ended September 30, 2023, as compared to the same period in 2022 was primarily due to impairment charges recognized of $18.3 million on certain strategic investments and higher foreign currency exchange losses of $8.8 million driven by weakening of the U.S. dollar against other currencies.

### Income Tax Provision

The 2023 and 2022 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 nine months ended September 30, 2023, and 2022 were 26.6% and 31.8%, respectively. The decrease in our effective tax rate was primarily due to the impact of U.S. tax legislation that became effective in the fourth quarter of 2022 allowing a larger benefit relating to foreign tax credits, resolution of tax controversies, and change in jurisdictional mix. The Company also recorded discrete tax impacts during the nine months ended September 30, 2023.

### Equity in Income of Unconsolidated Investees, net of tax

Equity in Income of Unconsolidated Investees, net of tax represents the Company's proportional share of the earnings or losses as reported by equity-method investees.

### Net Income 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.

### 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, purchases of our common stock or the payment of dividends in the future. Historically, we have financed our growth and liquidity needs through cash flow generation from operations 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.

Cash, cash equivalents and short-term investments at September 30, 2023 and December 31, 2022 totaled $363.6 million and $645.5 million, respectively, of which $269.2 million and $593.8 million, respectively, related to cash, cash equivalents and short-term investments held outside of the United States in our foreign subsidiaries, most significantly in the Netherlands, Switzerland, China and Japan.

The following table presents our cash flows from operating activities, investing activities and financing activities for the periods presented (in millions):

|  | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $144.6 | $102.9 |
| Net cash used in investing activities | (289.2) | (102.3) |
| Net cash used in financing activities | (133.5) | (379.2) |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (3.7) | (63.8) |
| Net change in cash, cash equivalents and restricted cash | $(281.8) | $(442.4) |

Cash provided by operating activities during the nine months ended September 30, 2023, resulted primarily from consolidated net income adjusted for non-cash items of $353.7 million, partially offset by a change in operating assets and liabilities, net of acquisitions and divestitures of $209.1 million. The increase in net income adjusted for non-cash items was mainly due to higher revenue, gross profit, and operating income. The increase in operating cash flows due to changes in operating assets and liabilities was primarily due to increase in receivables due to increased revenue and timing of tax payment payables. Cash provided by operating activities during the nine months ended September 30, 2022, resulted primarily from consolidated net income adjusted for non-cash items of $273.6 million, partially offset by a change in operating assets and liabilities, net of acquisitions and divestitures of $170.7 million. The decrease was primarily due to strategic inventory management to handle supply chain challenges, timing of tax payments partially offset by customer advances received during the period related to new orders and deferral of revenue due to supply chain challenges.

Cash used in investing activities during the nine months ended September 30, 2023, resulted primarily from acquisitions and advances of $222.3 million, purchases of property, plant and equipment of $75.4 million, and strategic investments of $19.3 million, offset by $11.8 million of proceeds from sale of strategic investment and $10.9 million of net proceeds from sales of property, plant and equipment. Cash used in investing activities during the nine months ended September 30, 2022, resulted primarily from acquisitions of $85.5 million, purchases of property, plant and equipment of $94.6 million, and strategic investments of $40.8 million, offset by maturity of short-term investments of $100.0 million and $13.8 million of net proceeds from sale of property, plant and equipment.

Net cash used in financing activities during the nine months ended September 30, 2023, was primarily from cash paid for purchases of common stock under our repurchase program of $101.9 million and $22.1 million for the payment of dividends. Net cash used in financing activities during the nine months ended September 30, 2022, was primarily from cash paid for purchases of common stock under our repurchase program of $236.8 million, repayment of our 2012 Note Purchase Agreement of $105.0 million and $22.4 million for the payment of dividends.

### Share Repurchase Program

In May 2021, our Board of Directors approved the “2021 Repurchase Program” authorizing the purchase of up to $500.0 million of our common stock over a two-year period, in amounts, at prices, and at such times as we deem appropriate, subject to market conditions, legal requirements and other considerations. Authorization for the remaining $94.4 million on the 2021 Repurchase Program expired in May 2023.

In May 2023, our Board of Directors approved the “2023 Repurchase Program” authorizing the purchase of up to $500.0 million of our common stock over a two-year period, in amounts, at prices, and at such times as we deem appropriate, subject to market conditions, legal requirements and other consideration. At September 30, 2023, $420.3 million remains available for future purchase under the 2023 Repurchase Program.

During the three months ended September 30, 2023, the Company purchased a total of 1,243,461 shares at an aggregate cost of $79.7 million under the 2023 Repurchase Program. During the nine months ended September 30, 2023, we purchased a total of 315,318 shares at an aggregate cost of $22.2 million under the 2021 Repurchase Program.

During the three months ended September 30, 2022, we purchased a total of 1,192,898 shares at an aggregate cost of $72.4 million under the 2021 Repurchase Program. During the nine months ended September 30, 2022, we purchased a total of 3,779,694 shares at an aggregate cost of $238.3 million under the 2021 Repurchase Program.

In August 2022, the Inflation Reduction Act (“IRA”) was signed into law in the United States. The IRA introduced new tax provisions, including a 1.0% excise tax on stock repurchases. We expect additional guidance and regulations to be issued in future periods and will continue to assess its potential impact on our business as further information becomes available. The estimated excise tax on stock repurchases was not material and was recorded in other current liabilities and additional paid in capital for the three and nine months ended September 30, 2023.

### Shelf Registration

On June 2, 2023, we filed a Form S-3ASR with the SEC (“2023 Shelf Registration”) for the issuance of common stock, preferred stock, debt securities, warrants, units, subscription rights and purchase contracts, which became effective immediately upon filing. At the time any of the securities covered by the 2023 Shelf Registration Statement are offered for sale, a prospectus supplement will be prepared and filed with the SEC containing specific information about the terms of any such offering.

### Credit Facilities

On December 7, 2021, we entered into a note purchase agreement to issue and sell CHF 300 million aggregate principal amount of 0.88% series A senior notes and EUR 150 million aggregate principal amount of 1.03% series B senior notes due December 8, 2031. We designated our CHF 300 million series A senior notes as a hedge in our net investment in our Swiss Franc denominated net assets. We designated our EUR 150 million series B senior notes as a hedge in our net investment in our EUR denominated net assets. Proceeds of the notes will be used for general corporate purposes.

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 hedging our net investment in our Euro and Swiss Franc denominated net assets.

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, repaid in January 2022, and the existing $100 million of 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 of September 30, 2023, we have several cross-currency and interest rate swap agreements with a notional value of $141.0 million of U.S. dollar to Swiss Franc and a notional value of $241.0 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 agreements, the Company lowered net interest expense by $4.7 million and $2.5 million during the three months ended September 30, 2023, and 2022, respectively, and $13.6 million and $5.2 million during the nine months ended September 30, 2023 and 2022, respectively. We anticipate these swap agreements will lower net interest expense in future years.

On September 30, 2022, we entered into the Second Amendment to the 2019 Term Loan Agreement and the Second Amendment to the 2019 Credit Agreement (collectively, the “Amendments”), to modify certain aspects of the 2019 Term Loan Agreement and 2019 Credit Agreement, respectively. The Amendments modify the reference rate thereunder from London Interbank Offered Rate (“LIBOR”) to Secured Overnight Financing Rate (“SOFR”). There were no other changes to the 2019 Term Loan Agreement or 2019 Credit Agreement as a result of the Amendments. We did not record any gains or losses on the conversion of the reference rate for borrowings under the Term Loan Agreement from LIBOR to SOFR.

On June 16, 2022, we entered into the First Amendment to the 2019 Credit Agreement to modify certain contract definitions within the agreement. Primarily, the current LIBOR rates were changed to new alternative base rates for the respective currencies. As part of the change any related items, such as fall-back rates and day conventions were also changed. No other material terms were modified with this agreement. During 2022, we adopted the practical expedient for Reference Rate Reform related to its debt arrangements and as such, this amendment is treated as a continuation of the existing debt agreements and no gain or loss on the modification was recorded.

For a summary of the fair and carrying values of our outstanding debt as of September 30, 2023, and December 31, 2022, please read *Note 8, Debt and Note 9, Fair Value of Financial Instruments*, to our unaudited condensed consolidated financial statements included in this report. For additional information on our outstanding debt and credit facility please read, *Note 11, Debt*, to our consolidated financial statements included in our 2022 Form 10-K.

As of September 30, 2023, we had no off-balance sheet arrangements.

As of September 30, 2023, we were compliant with the financial covenants of these debt agreements.

### 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 2 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.

## Market risk

As filed, 11,819 characters.

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.

### Foreign Currency Risk

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 movements 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 Japanese Yen, we are more exposed to the impact of foreign currency fluctuations.

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 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 increased our revenue by 3.3% and decreased our revenue by 9.0% for the three months ended September 30, 2023, and 2022, respectively. Changes in foreign currency translation rates decreased our revenue by 0.1% and by 6.9% for the nine months ended September 30, 2023, and 2022, 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 three months ended September 30, 2023, and 2022, we recorded net gains (losses) from currency translation adjustments of $(52.2) million and $(88.3) million, respectively. For the nine months ended September 30, 2023, and 2022, we recorded net gains (losses) from currency translation adjustments of $(16.1) million and $(195.7) 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. Amounts reported in interest and other income (expense), net, include a cumulative currency translation adjustment loss of $2.7 million recognized from substantially liquidating our Russian operations during the three and nine months ended September 30, 2023.

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 12 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 September 30, 2023, we have several cross-currency and interest rate swap agreements with a notional value of $141.0 million of U.S. dollar to Swiss Franc and a notional value of $241.0 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. For the three months ended September 30, 2023, and 2022, we recorded net gains (losses) from the changes in fair value of the derivatives of $6.0 million and $19.9 million, respectively. For the nine months ended September 30, 2023, and 2022, we recorded net gains (losses) from the changes in fair value of the derivatives of $(2.7) million and $50.0 million, respectively.

On December 7, 2021, we entered into a note purchase agreement, referred to as the 2021 Note Purchase Agreement, with a group of institutional accredited investors. Pursuant to the 2021 Note Purchase Agreement, we issued and sold CHF 300 million aggregate principal amount of 0.88% series A senior notes and EUR 150 million aggregate principal amount of 1.03% series B senior notes due December 8, 2031. We designated our CHF 300 million series A senior notes as a hedge in our net investment in our Swiss Franc denominated net assets. We designated our EUR 150 million series B senior notes as a hedge in our net investment in our Euro denominated net assets. Accordingly, the change in fair value of the 2021 Note Purchase Agreement is recorded in other comprehensive income within derivatives designated as hedging instruments, net of tax.

On December 11, 2019, we entered into a note purchase agreement, referred to as the 2019 Note Purchase Agreement, with a group of institutional accredited investors. Pursuant to the 2019 Note Purchase Agreement, we issued and sold CHF 297 million aggregate principal amount of 1.01% senior notes due December 11, 2029. We designated our CHF 297 million senior notes as a hedge in our net investment in our Swiss Franc denominated net assets. Accordingly, the change in fair value of the 2019 Note Purchase Agreement is recorded in other comprehensive income within derivatives designated as hedging instruments, net of tax.

For the three months ended September 30, 2023, and 2022, we recorded net gains (losses) from the changes in fair value, net of tax, of the 2021 Note Purchase Agreement and the 2019 Note Purchase Agreement of $15.5 million and $23.0 million, respectively. For the nine months ended September 30, 2023, and 2022, we recorded net gains (losses) from the changes in fair value, net of tax, of the 2021 Note Purchase Agreement and the 2019 Note Purchase Agreement of $(2.4) million and $55.5 million, respectively.

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 12 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 September 30, 2023 and December 31, 2022, we had foreign exchange contracts with notional amounts aggregating $352.9 million and $187.2 million, respectively. We will continue to evaluate our currency risks and, in the future, may utilize foreign currency contracts more frequently.

### Interest Rate Risk

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.

### Commodity Price Risk

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 September 30, 2023 and December 31, 2022, we had fixed price commodity contracts with notional amounts aggregating $0.9 million and $8.9 million, respectively. The fair value of the fixed price commodity contracts at September 30, 2023 and December 31, 2022 was $(0.2) million and $0.6 million, respectively. As commodity contracts settle, gains (losses) as a result of changes in fair values are adjusted to the contracts with the customers through revenues. We will continue to evaluate our commodity risks and may utilize commodity forward purchase contracts more frequently in the future.

### Inflation Risk

We are subject to inflationary cost pressures across global supply chain networks. Certain components, parts, or materials are experiencing significant cost pressures that have impacted or may impact our cost of operations in future periods. Further, inflation has increased our general and administrative expenses and may vary between countries in which we operate. We continue to evaluate these cost increases in relation to our new orders and may continue to see a negative impact on our financial results for a period of time.

### Credit Risk

Economic conditions remain volatile and continue to be affected by inflation, high interest rates, supply chain disruptions and recent bank failures. We have cash and investments with certain banking institutions and money market funds in the United States and Europe where we have operations that have been the subject of concern regarding their financial conditions. Cash and investments held in these accounts exceed the Federal Deposit Insurance Corporation insurance limits. In the event of failure of any of the banking institutions where we maintain our cash and investments, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. We have a risk assessment process to evaluate the Company’s credit counterparties and we continue to closely monitor the developments in the financial markets and take steps to minimize potential impact to our business.

## Controls and procedures

As filed, 1,509 characters.

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 September 30, 2023. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2023.

Management concluded that the unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q fairly state, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with GAAP.

### Changes in Internal Controls over Financial Reporting

There have been no changes in our internal control over financial reporting during the three months ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Filed Nov 9, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-062192. Last ingested by Listed: Oct 29, 2026, 16:07 ET. No prices; not investment advice.