Bruker Corporation
Q4 2011 Earnings Call Transcript

Published: 22 Feb 2012

[Operator:]

Good day, ladies and gentleman, and welcome to the Bruker Corporation’s quarterly earnings call. My name is Pam and I’ll be your operator for today. At this time, all participants are in a listen-only model. Later, we will have a question-and-answer session. (Operator Instructions) I would now like to turn the conference over to Ms. Stacey Desrochers, Treasurer and Director of Investor Relations. Please proceed.

[Stacey Desrochers:]

Thank you. Good morning and welcome to Bruker Corporation’s fourth quarter and full year 2011 financial results conference call. With me on today’s call are Frank Laukien, Bruker’s President and Chief Executive Officer; Bill Knight, Bruker’s Chief Financial Officer; Tom Rosa, the Chief Financial Officer of our Bruker Energy & Supercon Technologies Inc. subsidiary, or BEST; and Brian Monahan, Bruker’s Vice President of Strategic and Financial Planning. Before we begin let me briefly cover our Safe Harbor statements. Various remarks that we may make about the company’s future expectations, plans, and prospects constitute forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those described in the company’s filings with the Securities and Exchange Commission. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change and therefore you should not rely upon these forward-looking statements as representing our views as of any date subsequent to today. In addition to the financial measures prepared in accordance with Generally Accepted Accounting Principles, or GAAP, we will discuss certain non-GAAP financial measures, including adjusted EPS, adjusted operating income, and adjusted operating margins which are non-GAAP measures that excludes certain items. We exclude these items because they are outside of our normal operations and/or in certain cases are difficult to forecast accurately for future periods. We believe that the use of non-GAAP measures helps investors gain a better understanding of our core operating results and future prospects, consistent with how we measure and forecast the company’s performance, especially when comparing such results to previous periods or forecasts. A reconciliation of our GAAP to adjusted numbers can be found in our press release issued earlier today and is located in the Investor Relations section of our bruker.com website. Today, Frank will provide an overview of our results, some financial highlights and our financial goals for 2012. Tom will describe the financial results of our BEST segment and then Bill will discuss the financial results of our Bruker Scientific Instruments, or BSI segment and some additional details on Bruker Corporation. I will now turn the call over to our President and CEO, Frank Laukien.

[Frank Laukien:]

Thank you Stacy and good morning everyone. We appreciate you joining us today. In the fourth quarter of 2011 for Bruker overall, our revenue reached a new record high of $475.1 million corresponding to a GAAP increase of 14.2% or an increase of 12.2% excluding acquisitions and currency effects compared to the fourth quarter of 2010. On the bottom line, Bruker’s GAAP EPS in the fourth quarter of 2011 was $0.23 per diluted share compared to GAAP EPS of $0.18 per diluted share in 2010. Adjusted Bruker EPS in the fourth quarter of 2011 was $0.31 per diluted share compared to $0.28 per diluted share in the fourth quarter of 2010. For the full year 2011, Bruker’s overall revenue was $1.652 billion, which exceeds both the high-end of our guidance given in late October 2011 and our preliminary estimates given at the JPM conference in early January 2012. Our full year 2011 revenue is up 26.6% on a GAAP basis, 20.5% on a currency adjusted basis, or 9.2% organically from $1.305 billion in fiscal 2010. Bruker GAAP EPS for the full year 2011 was $0.55 per diluted share compared to GAAP EPS of $0.58 per diluted share in 2010. Adjusted Bruker EPS for the full year 2011 was $0.86 per diluted share compared to $0.77 per diluted share in 2010. Let me now provide some additional color on our full year 2011 financial performance. For our Bruker Scientific Instruments segment, or BSI, revenues in 2011 increased by 26.9% over 2010 to $1.554 billion with 20.8% currency adjusted growth representing solid performance across the board from our four BSI operating groups. Adjusted 2011 EPS for BSI was $0.91 compared to 2010 adjusted BSI EPS of $0.81, again slightly exceeding the high-end of our adjusted BSI EPS guidance from late October 2011. Excluding our chemical and applied markets division, or CAM, and our investments in the CAM division, BSI adjusted EPS would have been $1 exactly in fiscal 2011, which would have corresponded to a 23% year-over-year growth. For our Bruker Energy and Supercon Technologies segment, or BEST, full year 2011 GAAP revenue grew 25.3% to $113.4 million and currency adjusted all organic revenue growth was 19.8%. For the year 2011, BEST reached adjusted operating breakeven. I am very pleased that despite two sizeable acquisitions in 2010, our balance sheet remained very solid with an intangible asset ratio at an industry leading low-level of 14% and our debt leverage ratio at a conservative 1.2x as of December 31, 2011. Finally, as you may know, Bruker’s very return on invested capital, or RoIC focused, and despite the two significant acquisitions in 2010, our BSI segment achieved RoIC of 22% in fiscal 2011, or 25% including our CAM investments. Speaking about CAM, as you may recall during 2011, our new CAM division moved all three of its manufacturing locations out of former Varian, Inc. locations to new Bruker facilities and our ICP-MS factory was moved from Melbourne, Australia to Fremont, California. Our CAM division also invested in direct and indirect distribution channels and made very significant investments in R&D in order to develop new products specifically the new aurora M90, our new ICP-MS system plus our breakthrough new SCION triple-quadruple and single-quadruple mass spectrometers for gas chromatography detection. Due to these very significant investments in CAM, our BSI segment’s full year adjusted operating margin declined from 15.6% in 2010 to 13.4% in 2011. Excluding the CAM division investments, our adjusted operating margin for the remainder of our BSI segment was 15.5% for the full year 2011. In 2011, our BSI segment launched 40 new products which addressed an expanding array of life science, pharma biotech, clinical, food, petrochem, environmental, homeland security, materials and nano-science, as well as academic research and educational markets. The new systems introduced are focused on bringing robust easy-to-use affordable yet best-in-class performance solutions to routine analysis as well as on opening new scientific horizons for research customers. With the breadth of our products we now serve approximately $8 billion in addressable markets, allowing our divisions to significantly increase revenue and backlog in 2011. In the fourth quarter of 2011 we again had excellent bookings and we ended the year 2011 with record backlogs well over $1 billion. We believe the R&D initiatives, products and distribution networks are in place to continue our fast revenue growth and to expand our margins. Assuming current market and currency conditions, our full-year 2012 financial goals are, currency adjusted revenue growth of 7% to 10% to reach revenue of $1.76 to $1.81 billion. BSI adjusted operating income of $230 to $240 million, an increase of 15% to 18%. BSI adjusted operating margin improvement of 120 to 140 BPS (basis points). BSI segment adjusted EPS of $0.94 to $0.98 compared to pro forma 2011, BSI adjusted EPS of $0.87. Please recall that both of these numbers now include $0.04 of non-cash stock-based compensation expense, in both 2011 and in our 2012 goals. We intend to improve our BSI segment, working capital per revenue ratio from 0.47 in fiscal 2011 to 0.45 in fiscal 2012. We intend to increase our BSI, return on invested capital, or RoIC, to the range of 23% to 25%. Last but not least, we intend to generate for Bruker overall, Bruker operating cash flow of $130 to $160 million and we expect free cash flow of $80 to $120 million. With that, I will now turn the call over to Tom Rosa, the CFO of our BEST Segment.

[Tom Rosa:]

Thanks Frank. 2011 was a good year for BEST with revenue growth of 25.3%, currency adjusted organic revenue growth of 19.8% and breakeven adjusted operating performance. During 2011, we received long-term low temperature super conductor where LTS contracts, totaling, more than $110 million from several leading manufacturers of clinical magnetic resonance imaging of MRI systems, significantly increasing BEST backlog. These new multi-year contracts give us significant additional visibility into future demand as we continue to move forward with our planned LTS capacity expansion in support of our major customers with long term commitments. These orders contributed to BEST, external multi-year backlog, which increased by 51% in the last 12 months from $152.2 million as of December 31, 2010 to now $229.8 million as of December 31, 2011. These external backlog figures exclude Bruker Intercompany orders. Some of this backlog will take several years to convert into revenue, with deliveries scheduled through the end of 2014. In 2011, we invested in BEST infrastructure and R&D in order to further develop our broad technology platform, in superconducting materials and devices, including $9.3 million in capital equipment, designed to increase our production capacity. We also continue to make progress on the commercialization efforts of new products. During the year, BEST announced an order for three super conducting crystal growth magnets from a European customer. BEST also announced that it passed factory acceptance test and shipped a Super Conducting Crystal Growth Magnet system. A follow on order for two more CGM systems was received from the same customer in Asia in the third quarter of 2011. Super Conducting Crystal Growth Magnet systems are used in the semiconductor industry, especially for larger diameter ingots in order to improve the quality of mono-crystalline silicon. BEST is also making good progress on demonstrating the positive effect, of Super Conducting Crystal Growth Magnets on photovoltaic conversion efficiency in manufacturing yield of single crystal silicon, thus potentially increasing the overall efficiency and cost effectiveness of solar power. On the financial side, revenues for the BEST segment during the fourth quarter of 2011, increased by 14.7% to $33.6 million, exceeding $30 million in one quarter for the first time ever, compared to $29.3 million in the fourth quarter of 2010. Excluding the effects of the foreign currency, fourth quarter revenue increased by 15.6% year-over-year. For the full year, BEST revenue increased by 25.3% to $113.4 million from $90.5 million in 2010, or by 19.8% in terms of currency adjusted organic growth. BEST adjusted operating loss in the fourth quarter of 2011 was $0.4 million compared to an operating profit of $0.5 million in the fourth quarter of 2010. The BEST adjusted operating income for the full year of 2011 was $0.1 million, which excludes $3.4 million of S-1 offering costs, which were expensed in the third quarter 2011 due to the uncertainty surrounding the potential initial public offering of BEST. This compared to an adjusted BEST operating loss of $1.9 million for the year 2010. It should be noted here that BEST has an S-1 registration statement on file with the SEC and is therefore not in a position to provide standalone forecast or forward-looking projections for the year 2012 at this time. I will now turn the call over to the CFO of Bruker Corporation, Bill Knight.

[Bill Knight:]

Thanks Tom and good morning everyone. As a quick recap on the top line for Bruker Corporation during the fourth quarter of 2011, revenues increased by 14.2% to $475.1 million, compared to $416.1 million in the fourth quarter of 2010. For the full year, revenue increased by 26.5% to just over $1.652 billion from $1.305 billion in 2010. Excluding the effects of foreign currency translation, revenue increased by 12.5% in the fourth quarter of 2011 and by 20.5% for the full year. Please note that in the fourth quarter of 2010 due to a change in revenue recognition policy for the then newly acquired Bruker Nano Surfaces, or BNS division, our revenue was lower by approximately $13 million. As Frank mentioned earlier, the top line growth in 2011 was a result of solid performance across all of our operating divisions and as we do annually, I will provide some color on our 2011 revenues. As a percentage of total BSI segment revenue in 2011, the contributions from each of the four operating groups within BSI were 38% of the revenue came from the Bruker Bio Spin Group; 32% from the Bruker Materials, or BMAT group, which includes the new BNS division; 21% of the revenue came from the Bruker Daltonics Group, which includes the new CAM division and 9% from the Bruker Optics Group. Geographically by location of end customers BSI’s breakdown of revenues for the year 2011 was as follows

[Operator:]

(Operator Instructions) And your first question comes from the line of Peter Lawson with Mizuho Securities, please proceed.

[Peter Lawson:]

Bill, just a couple of things could you clarify, what happened between the pre-announcement of this $465 million number and now, just trying to understand the differences over a month-and-a-half?

[Bill Knight:]

Of the Q4 revenue?

[Peter Lawson:]

Yes.

[Bill Knight:]

All our revenue forecast are based upon what we predict, customer installations and acceptances will occur. We try and be a little bit conservative, but we were successful in getting that equipment installed and accepted and the customer signed off and that’s what was reported for our revenue.

[Frank Laukien:]

Peter, this is Frank. We didn’t regard this as a pre-announcement. We just tried to give some color on the fourth quarter at the JPM conference and that was the best estimate that we had at that time, obviously very early in January.

[Peter Lawson:]

Where was the biggest surprises, was it on the BEST business or the BSI business?

[Frank Laukien:]

Nothing stands out, it really was across the broad, there is no particular segment or division that made the difference.

[Peter Lawson:]

And then Bill, just on the low tax rate, I may have missed this, what drove that kind of 16%, 17% tax rate?

[Bill Knight:]

In the fourth quarter we had in the US income that we were able to benefit with previous quarters and years losses. So that was somewhat of -- I will say, a onetime event. We expect in 2012, as I said earlier, to have an overall effective tax rate of around 32% which will vary slightly from quarter to quarter.

[Peter Lawson:]

And then just a final question, just on the SG&A, what were the moving parts that bounced up considerably between 3Q and 4Q? Are we missing something or is that going to continue through to 1Q?

[Frank Laukien:]

I think the two investment, well, the BEST keeps making investments and growing rapidly as you have seen. Obviously we are investing in our CAM division across the board and all functions of that new division from manufacturing, operations, to R&D and distribution. But we are also continuing to invest in the distribution of all divisions to really remain a fast growth company and of course also to pull along the organic margin growth that we are seeking. So there is a lot of new markets and market segments and opportunities that we are entering. As you have seen for some time, not from SG&A, but marketing and selling there is a continued investment across all divisions, whereas G&A and R&D tends to be more constant or constant corrected for inflationers.

[Peter Lawson:]

Great. Thank you so much.

[Operator:]

And your next question comes from the line of Ross Muken with Deutsche Bank, please proceed.

[Vijay:]

Hi, thank you for taking my question. This is Vijay in for Ross. Frank, could you talk about what the potential impact would be if the EU were to enter into a mild to moderate kind of recessionary scenario. How do you see Europe growing in ’12?

[Frank Laukien:]

Yes, Europe for us remain strong and has been strong in Q3, Q4 and we expect it to be strong going forward. Of course, there are significant differences within Europe, but with our depth and breadth in Europe, we see Europe continuing strongly. So I think Europe has entered technically, I am not exactly sure, but I think it has recently entered into negative growth, so I guess there would be a slight recession. But the demand drivers that we see in our bottom up forecast from the various countries look generally solid, again with regional differences of course. And even in some of the countries that you would expect from the headlines to be weak, I am not talking about Greece right now, but other countries that seem to have. Our concern even they have some special programs for funding that have been approved sometime ago. So we expect European demands for our products to be also again solid in 2012.

[Vijay:]

Sure. Maybe a follow-up, turning to guidance, your 7% to 10% currency adjusted growth, what portion of that is market growth versus share gains, just given your new product momentum?

[Frank Laukien:]

The honest answer is I don’t know exactly. I believe this includes market share growth but I am not prepared to give you a quantitative numbers because I don’t know exactly. We feel we are growing, we are gaining momentum and growing our market share in most of our product lines, almost across the board, but I cannot really dissect it quantitatively.

[Vijay:]

Thanks. I’ll step back into queue.

[Operator:]

And your next question comes from the line of Amanda Murphy with William Blair, please proceed.

[Amanda Murphy:]

Hi, thanks. I just had some follow ups on the margin side. So, in terms of the guidance for BSI operating margin improvement, I am just curious, can you help us understand the swing factor between sort of the low end and the high end range there and then also just a progression through the year from the first half to the back half?

[Bill Knight:]

Sure. Obviously margin growth comes from revenue growth. As we explained it, we are looking for 7% to 10% that helps us leverage our operating expenses, but we do expect the second half of the year to be stronger on the revenue growth in the first half. We also expect continued improvements on our gross profit margins on our products. Again, each generation of product that’s introduced and I think we discussed about the 40 new products that we had in 2011, we typically will see the significant impact of those products in 2012, 2013 as they gain footholds in the marketplace. As far as the range of operating margin improvement it certainly will fall in that range. It really is kind of depend on again the revenue growth and products improvements, the new products that hit the marketplace.

[Amanda Murphy:]

What about the offshoring initiative that you have talked about in the past. Is that something that could have a meaningful impact in ’12?

[Bill Knight:]

That’s continuously ongoing. Certainly at this point I don’t want to call that – use a baseball term a grand slam every month or every quarter, it’s steady improvement, tenth of a percent here, half a percent there, but those are ongoing continuous efforts. So that certainly is part of the process. We continue to run more products through our existing factories which spreads that fix factory overhead amongst many more products which help us leverage. And again, the new product designs that come out typically have fewer parts, faster assembly times, quicker install times, in addition to better specs and customer ease of use. But everything that we design these days and for the last couple of years is really not only focused on the historical scientific capabilities that Bruker had on its products, but improved cost, designed for offshoring, everything that’s involved with margin improvement.

[Frank Laukien:]

And Amanda, this is Frank. You may have seen our announcement of the appointment of Stephan Westermann this morning. BEST cost sourcing rather than offshoring is a big part of his mission. Obviously taking that over from Bill and he has made some very good progress on that. Again, you see that trickle in really but you see that trickle in steadily. We have made progress in 2011, you will see more progress in ’12 and ’13. And the BEST cost sourcing sometimes is with the US or European vendors rather than with Southeast Asian vendors. It really depends that we are doing it very meticulously and carefully and thoughtfully, product line by product line but it’s a major initiative, a multiyear initiative.

[Bill Knight:]

I would also like to add. These efforts and other efforts are also continuing to help with inventory turn improvements, working capital improvements, which again remains, as Frank mentioned, Stephan Westermann, his real two focus items are gross profit, margin improvements and pulling cost out of that area and then improving our working capital metrics. We did see improvement in 2011 and we expect these trends to continue not only 2012 but certainly beyond.

[Amanda Murphy:]

Okay, thanks very much.

[Operator:]

And your next question comes from the line of Tycho Peterson with JP Morgan, please proceed.

[Tycho Peterson:]

Hi, thanks for taking my question. Maybe just a follow-up on the last one, on the working capital assumptions. Are you able to give us any quantitative thoughts on what we should be thinking about for working capital improvements for 2012? Can you maybe just touch on inventory turns and receivables as well?

[Bill Knight:]

At least at the working capital ratio level we are expecting to take our BSI division from 0.47 times. So working capital per revenue dollars from 0.47 in 2011, which was an improvement over 2010 to 0.45. I think drilling deeper, a lot of that comes from inventory turns, some of them also comes from DSO improvements, but the majority comes from inventory turns.

[Tycho Peterson:]

Okay. And then (inaudible) operating loss in the quarter, I think you had two small profits the prior two quarters, obviously you are investing there as well. I mean, how do we think about profitability for that business?

[Bill Knight:]

Well, on an actual basis our Q4 profitability, we had a small loss that reflects several things, higher depreciation, higher R&D expenses in one of our primary business units. And also the fact that compared to last year we had a very high margin project that completed in the Q4 2010. So we are continuing to invest in the business, unfortunately not at liberty to discuss any kind of forward looking details at this point.

[Frank Laukien:]

Tycho, if I may, at BEST I would almost look at more of an annual basis, I mean the quarters do fluctuate and the margins fluctuate given the small revenue base, or not so small anymore, around $30 million run rate. But if you look at the full year you will see that they actually just eked [ph] out an adjusted operating income of $0.1 million, okay, let’s call it breakeven, but nonetheless that’s obviously a significant improvement over historical adjusted operating losses. So, last year – the year before that 2010 they reached EBITDA breakeven. In 2011, BEST reached adjusted operating income breakeven. We have plans for profitable growth for BEST but due to the S-1 we cannot go into more details.

[Tycho Peterson:]

And then you have talked about investing in CAM and rejuvenating the Varian portfolio there. Are you able to talk it all about the level of R&D investment you need to make for CAM specifically and when do we start to see the benefits of some of those investments in terms of new product flow?

[Frank Laukien:]

Well, it’s a very considerable R&D investment. We have begun to see that on the ICP-MS and on the GC-MS side. These products are well-received and our order books and our backlog on these are really quite considerable. So they are making an impact. Really the new factories, until they are really humming along, especially the Fremont factory, it’s getting there but moving a factory is one thing and then getting it to run really smoothly with high volume and therefore good margins, I believe you will see that in the second quarter of this year. You are beginning to see the difference already in the first quarter of the year but it’s certainly not at a steady state yet. As to R&D, we are not done with new product introductions, you will see product introductions from CAM this year 2012 and in 2013, I believe some pretty significant product introductions. So, you have seen the beginning but you ain’t seeing nothing yet so to speak.

[Tycho Peterson:]

Alright. And last one, did you give tax rate guidance for 2012, if you did I may have missed it?

[Bill Knight:]

Yes, we said 32%, expect a 32% tax rate.

[Tycho Peterson:]

Perfect, thank you.

[Operator:]

And your next question comes from the line of John Wood with Jefferies, please proceed.

[Brandon Couillard:]

Hi, good morning, this is Brandon Couillard here for John. Frank or Bill, with respect to the BSI margins next year, can you quantify what you just pay for CAM dilution. Should we assume somewhere between the midpoint of the $0.09 drag in 2011 and the breakeven expectation in ’13?

[Bill Knight:]

For CAM we are looking at this year 2012 at an adjusted operating loss of about $10 million, Brandon. So cutting the loss roughly in half -- so midpoint is not a bad estimate, yes.

[Brandon Couillard:]

Okay. And then Bill, did I hear you correctly with respect to the first quarter revenue guidance that was $380 or $390 million in total revenue, or constant FX revenue?

[Bill Knight:]

It was in $380 to $390 million total revenue.

[Brandon Couillard:]

Roger. And then, any chance you can give us a breakdown on how do you see the Veeco and CAM where the news is trending in ’12?

[Frank Laukien:]

That directionally, CAM, I am sorry the Veeco, of course we prefer to call it Bruker Nano Surfaces. So the BNS division had very fast growth last year and we will have slower growth this year. In some years they get a lot of business from data storage and SEMICON which is sort the gravy, in the gravy years which they had last year. This year they will have less of that. The rest of the business is growing very nicely, particularly the research AFM with their fast scan on their high end AFMs, they will have some very unique capabilities in making AFM much faster, quantitative and easier to use. So, you have different growth drives within that former Veeco, a BNS division but they will be in the single-digit or low single-digit growth. We expect well above 10% growth for our CAM division in 2012. In fact, Bill has said, we expect to have that greater than $100 million in 2012. So for the first time then actually exceeding the highest historical Varian, Inc. revenue levels for these types of businesses, which actually occurred pre-recession in 2008 when they were just below $100 million, I believe we expect that to exceed that this year. I think the growth for CAM is actually higher than 20% of what’s scheduled this year, or planned for this year.

[Brandon Couillard:]

Okay, that’s helpful. Thanks. And then lastly, could you give us an update on the traction you are seeing for the MALDI Biotyper, any update on the install base and then where you stand on the FDA approval time line?

[Bill Knight:]

Okay, let me just interject to make sure I am clear on the question you asked, that is currency adjusted revenue of $380 to $390 million and we did also state that we expect a 1% foreign currency headwind in 2012. And then I will let Frank talk about your question.

[Frank Laukien:]

So, Brandon, on the MALDI Biotyper that continued uptick around the world has been very routed, so again growth for that high margin business has been very rapid, more of the order of 50%. Last year we expect that growth to continue, not necessarily at that rate but we expect continued solid growth in MBT. We are working with the FDA and maybe able to have FDA approval in the second half of this year, but that obviously is difficult to predict.

[Brandon Couillard:]

Great, thank you.

[Operator:]

And your next question comes from the line of Dan Leonard with Leerink Swann, please proceed.

[Dan Leonard:]

Thank you. Two questions. Frank, how would you characterize the visibility you have on your revenue growth for 2012?

[Frank Laukien:]

Dan, I would think it’s excellent for the first half of the year because we have a very strong backlog and then of course the backlog doesn’t carry us through the entire year. So, inevitably the visibility is it becomes less for the second half. But I think, our divisions in their bottom up analysis I think are seeing – there are some known areas of weakness, we all know about them, you all know about them, but there are many areas and secular trends or local trends, local budgets that give us a pretty good visibility. In short, it’s really just about like every year. I think we have better visibility than in other years for the first half because of our very high backlog. And for the second half of the year I think we have decent visibility. This isn’t like 2009 where nobody knew what was going to happen and I think things have already in some of the industrial markets as far as I can tell, on the last couple of months or so, three months, things have already stabilized and are a little bit more upbeat and that’s the case I see that in the US, in Europe, elsewhere. So I think we have decent visibility for the year and very good visibility for the first half of the year.

[Dan Leonard:]

Okay, thank you. And my follow ups for Bill, Bill why is the tax rate increasing so much in 2012? And do you still have plans in place to march that downwards over time?

[Bill Knight:]

We are working on realigning some of our historical legal entity structure throughout the world to get a more effective tax rate and to allow us to make it easier to move some of our cash around. But we do expect to be in that 32% range in 2012 overall for Bruker Corporation, which is an improvement from 2011.

[Brian Monahan:]

Dan, this is Brian. I would add that the 32% excludes the $10 million of CAM losses, which are mostly US-based which we can’t benefit, so excluding that would be in the high 20s for our tax rate, so more comparable to 2011, probably slight improvements over 2011.

[Frank Laukien:]

We are not giving specific guidance but they suggest by about ’13, ’14 our tax rate should be – we should be able to improve that further as CAM reaches breakeven and then profitability.

[Dan Leonard:]

Okay, thank you.

[Operator:]

And your next question comes from the line of Dan Arias with UBS, please proceed.

[Dan Arias:]

Hi, thanks for the questions. Bill, am I doing the math right in saying that the BSI op margins if you exclude CAM we are right around 16.7% or so for the fourth quarter? And if so, what was that up sequentially, I know you said it was 15.1% for the first nine months, but are you able to give us a 3Q to 4Q improvement?

[Bill Knight:]

It was a 15.5% for the full year if you exclude CAM. Of course, the way we reported 2011 which was excluding stock compensation, you will notice that in our forecast for 2012 we are changing that to include that in our adjusted numbers.

[Dan Arias:]

Okay. But if I look at the 4Q number, excluding CAM, are you able to give us the sequential basis point improvement just going to the 15.5% overall for the year?

[Brian Monahan:]

Yes, sequentially, this is Brian, between Q3 and Q4 CAMs results were pretty comparable, so it had about the same impact in both Q3 and Q4. And as Frank described earlier, we certainly expect improved profitability lower losses throughout the course of 2012. So, Q3 and Q4 the CAM results, the impact on the overall business in BSI was comparable.

[Dan Arias:]

Okay. Thanks and I guess just on a followup to the BNS question. Does that segment, do you see the operating margins expanding meaningfully for that business or is the 20% plus up number now expected to be similar to the 20% plus number that we’re looking for a few years down the road.

[Frank Laukien:]

We expect that to be roughly similar as in this year and resume growth in the margin numbers and in the revenue for that business in ‘13 and ‘14.

[Dan Arias:]

Right. Thanks Frank. Can I just lastly, can you comment on the purchase of the MICROcaliX products, what does that do for you? And maybe, if you could quantify the sales gain there, that would be great? Thanks a lot.

[Frank Laukien:]

Yeah, that is not a huge acquisition and the effect of that might be of the order of 1.5 to 2 million of revenue for 2012. So, it is a very interesting technology that we also will use in other parts of our product line and so I expect some steady growth, but it is in niche product. It is an important niche product that closed the gap that we had quite candidly. So, it is financially not enormous, but I think it was again a very good RoIC acquisition that filled the small technology gap and then interesting and expanding market particularly where SAXS and NMR come together in structural biology.

[Dan Arias:]

Okay. Thank you.

[Operator:]

And your next question comes from the line of Derick De Bruin with Bank of America, please proceed.

[Derick De Bruin:]

Hi. Good morning.

[Frank Laukien:]

Good morning Derick.

[Derick De Bruin:]

Can you just, dispense some changes in some of the share implementation grant programs at NIH and stuff? Can you just talk about what your order activity, as required activity is from the US labs right now, are they still aggressively – are people still looking at big ticket items for (inaudible), may be you could just talk, quantify little bit about the US market.

[Frank Laukien:]

Well in 2011 where we have real data the US market has generally been quite strong for us. Now, it really depends more on what product lines, what applications, what new research fields they are focusing on. That is always the issues for us. The total size of the budget is less important for us and whether that goes up or down, then what do they allocate it to? That is really the game for us and generally there the trends have been favorable. So, I don’t know that I have any great insight into how that is going to come out in Q1 or Q2, but I don’t have anything very remarkable to report. So, we expect general academic funding in the US to be one of the weaker areas in 2012 and we have expected that for some time. But, I have to say, we expected that already in the second half or throughout 2011 and that actually didn’t come through because it was stronger than what we had anticipated. But again that may not be the overall budgets, that maybe more the allocation and the scientific priorities of the customers and of the funding agencies.

[Derick De Bruin:]

Great. So, is there anything the nuclear, chemical, biological, radiological detection business has been relatively flattish from what your commentary has been in the past. I guess there are, you expecting anything unusual in that are there any tenders that are out there right now?

[Frank Laukien:]

Yeah, we were disappointed with our CBRNE detection. We actually thought we would get and could deliver some larger orders and we could not get the orders/export permit/letter of credit, all the things that you need to lineup by the end of the year. We hope to be able to do that this year. So, we think it will have a much healthier year this year. But, it was indeed a bottom line. It was disappointing last year, not because of total demand of our products, really simply because of the complicated timing in that field of order and user certificate expert permit and letters of credit. I don’t want to bore you with all the details, but it didn’t all line up for us to deliver it. So, we actually had some things in the inventory that we will be able to ship sooner. This year will be the big year for that division to really enter the explosive detection, the explosive straight detection. There is some very interesting trends, because, as we may have all read in the news paper, bad guys are getting creative with new explosives types, therefore the analytical requirement for explosive detection have really changed after being about the same for 20 years, have changed pretty dramatically and we think, even though we are entering that field late, we can comply with a lot of the new requirements, analytical requirements. And so, we are actually pretty bullish on getting a strong start in explosives detection with some Novel Technologies.

[Derick De Bruin:]

Is that business higher or lower margin, if I remember correctly just based upon some of the money that’s into the MOD[ph] orders in the past, those were not exactly between high margin business. Has the pricing got better and then has margins gone better or that is in still very cut throat.

[Frank Laukien:]

That tends to be one of our higher margin businesses.

[Derick De Bruin:]

Alright and I guess is there any desire to do potential share buybacks or anything like that or it is still mostly your big focus is in terms of doing capital deployment for small bolt-ons?

[Frank Laukien:]

I think the focus is on the ladder. I wouldn’t completely rule it out, but it is not a priority to do share buybacks. So, I think our repayment of debt and small bolt-ons is our priority for capital deployment.

[Derick De Bruin:]

And, M&A contribution for 2012 seems to be right around 1%?

[Bill Knight:]

It is probably just under 1%, it is not –

[Derick De Bruin:]

Not under 1%, okay. Great. Thanks.

[Operator:]

And your last question comes from the line of Isaac Ro with Goldman Sachs. Please proceed.

[Isaac Ro:]

Good morning. Thanks for squeezing me in this morning. First, I wanted to ask about your growth assumptions for BNS, just to revisit that topic. I think in the past you guys have guided to a 20% plus CAGR till 2015 for that area and you also mentioned that this year that is going to be a slightly slower growth area. So just, sort of implies that 2013 and beyond will be in excess to 20% and I wanted to square that up with your previous comments, just given the importance for that, that business unit to be growth profile of your overall business in the out years?

[Frank Laukien:]

Yes, I would like that business has a, -- most of it is no cyclical but it has a cyclical component of may be 15% to 20% of its business. And so, I think – I don’t have all the numbers in front of me, but I think your assumption is essentially correct that they are looking for slower growth this year or that’s the reality that they are facing likely. This is in the first half of the year and they are looking for very fast growth from a reversing cycle, but also from their new product lines and products that they still have in the pipeline for ’13, ’14.

[Isaac Ro:]

Okay, so a 20% long-term is still the fair CAGR, you know kind 12 to 15 is overall kind of growth rate, is that right?

[Frank Laukien:]

I believe so.

[Isaac Ro:]

Okay, and then just sort of secondly more qualitatively, can you may be comment on the success you have had in expanding the NMR at the low end. I know you had some new product launches there in the last year or so? And then sort of, what are your expectations for that market over the next one to two years, is the competition there sort of re-bounced probably some more aggressively?

[Frank Laukien:]

Yeah there is sort of a steady multi-year effort to come out with, -- not to not only focus only on the high-end research capabilities and the ultra-high field magnets, but also on routine ease of use of applications driven NMR systems. I think those are in the early seat days to some extent. So that market is growing, but from a relatively small base. Of course the routine 300, 400 megahertz, you know chemistry, clinical chemistry market that that’s always been there and that’s healthy. As to competitive positioning, I think in 2011, we are very satisfied with our competitive position with NMR. It hasn’t changed dramatically one way or the other and we continue to invest in new products and solutions at both the high-end research and if you like, and also in the routine NMR space. So, we are cautious, we are optimistic that we will hold our own in NMR.

[Isaac Ro:]

Got it, thanks so much.

[Operator:]

And you do a follow-up question from the line of Peter Lawson from Mizuho Securities, please proceed.

[Peter Lawson:]

Frank, just on PITTCON and ASMS, what are the expectations for some new products coming through will do the key products, would it be highlighted and do you think it is a better than last year PITTCON?

[Frank Laukien:]

Definitely not, because in this year we will have a very minims PITTCON participation, we essentially don’t exhibit in even years, because we are focused on ANALYTICA, which is a month later and Munich. So, we kind of go back and forth now every other year, ANALYTICA in even and PITTCON in odd years. So, PITTCON for us will not be a priority this year. ASMS, of course is always very important and if I may simply substitute ANALYTICA for PITTCON in your question, at ANALYTICA and ASMS, as well as you know the specialty conferences, The Microscopy Conference in August or the ENC NMR Conference’s in April and August. We expect a strong new product flow as in prior years. However, sorry to disappoint, we just don’t go into a lot details about what type products we may bring for competitive reasons.

[Peter Lawson:]

You think the highlight[ph] is ready ANALYTICA, this year?

[Frank Laukien:]

Yes and no, all the generalist conferences like PITTCON and ANALYTICA, overall are of diminishing importance, where as the specialty conferences like in ASMS or the ENC NMR Conference or specialty preclinical MRI conferences, really are more of our focus rather than bringing things out for a generalist conference like a PITTCON or ANALYTICA, as the case may be. So, I think it is going to be much more spread out throughout the year and more likely to see significant introductions that, -- the SION[ph] came out at a Pesticide Symposium in Florida last July and that’s really more relevant than a PITTCON for example, just as an example. So, don’t, -- I would expect more at the specialty conferences and still, you know, healthy product flows at the generalist ANALYTICA and PITTCON. But, they are not as important to us as the sum of all the specialist conferences would, that we really focused on markets and where they are many more budgeted customers.

[Peter Lawson:]

Got you, and then Bill what is the expectations for total interest income for 2012, you said there was a $8 million delta[ph] on interest expense.

[Frank Laukien:]

Stacey, do you want to take that one?

[Stacey Desrochers:]

An 11, I think, it is a $11 million, what we have for total.

[Peter Lawson:]

Got you, thank you.

[Operator:]

And there are no further questions at this time.

[Frank Laukien:]

Okay, we would like to thank you for participating today and we look forward to seeing you at, some of you, at some of our press conferences at PITTCON, ANALYTICA or ASMS later. And of course to speaking to you at future conferences on our future earnings calls. Thank you very much and have a good day.

[Operator:]

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect and have a great day.