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Bruker Posts 35 Percent Q3 Revenue Growth, Misses EPS Estimate

NEW YORK (GenomeWeb News) – Bruker today reported a 35 percent increase in third-quarter revenues but fell short of analyst EPS estimates by a penny.

For the three months ended Sept. 30, the firm said it had $418.4 million in revenues, up from $310.2 million a year ago and ahead of Wall Street expectations of $393.2 million. Organically revenues were up 11 percent year over year.

The Bruker Scientific Instruments segment revenues rose 36 percent year over year to $394.6 million from $290.5 million. Organically, revenues in the segment grew 11 percent year over year, though EPS slipped to $.15 from $.18 a year ago. On an adjusted basis, BSI EPS grew to $.23 from $.22.

By end markets, Bruker President and CEO Frank Laukien said on a conference call following the release of the company's earnings results that the applied and industrial markets company-wide were "generally strong" during the quarter.

In the academic/government market, he said, "Clearly there is weakness in US academic spending," with National Institutes of Health-related spending "slightly down" during the quarter but not as badly as feared.

Europe continues to be strong, though growth was patchy from country to country. Eastern and Central Europe was "astoundingly strong," while Turkey and Russia were "extremely strong," and in spite of the dire headlines about the macroeconomy, there was "higher business out of Greece this year than in any previous year," Laukien said.

He also pointed to signs of potential continued growth in Europe, saying that the EU Commission is expected to increase its scientific research budget by 13 percent, or €1.2 billion ($1.7 billion), in 2012, while Germany is anticipated to increase its scientific research budget 10 percent, or €1.6 billion. Together, the two increases will "more than offset" expected declines in funding in France and Spain, and flat spending in the UK.

His comments mirror similar remarks made earlier this month by investment bank Jefferies about the European funding picture.

In May 2010, following the purchase of certain businesses from Varian, Bruker created the Chemical & Applied Markets division, housed in BSI, and Laukien said today that the division is expected to grow in sales to the $250 million to $300 million range, though that will take several years. On an annualized basis, CAM currently has a revenue run rate of about $90 million.

The company has spent the past year revamping and developing new products in the division and investing in its direct and indirect distribution channels. As a result BSI's adjusted operating margins declined to 12.9 percent in the third quarter from 14.9 percent a year ago.

"For CAM our financial goal is to leverage these start-up investments and reduce the CAM division loss by more than half in 2012 and to be about break-even in 2013," Laukien said.

CFO William Knight added on the call that to reduce CAM-related SG&A spending, Bruker has in place a hiring moratorium, has implemented selected staff reductions, and has reduced discretionary spending.

During the quarter Bruker spent $43.5 million on R&D, a 34 percent increase over $32.5 million a year ago. Its SG&A costs shot up 40 percent to $101.3 million from $72.2 million.

Bruker's net income declined to $19.8 million, or $.12 per share, from $27.4 million, or $.17 per share. EPS on an adjusted basis came in at $.22, missing analyst estimates of $.23.

The company exited the quarter with $198.8 million in cash, cash equivalents, and restricted cash.

Bruker raised its full-year revenue forecast to a range of between $1.62 billion and $1.64 billion, which would represent growth over 2010 levels of 24 percent and 26 percent. The firm had previously forecast full-year revenues to be between $1.60 billion and $1.62 billion.

Revenues in the Bruker Energy & Supercon Technologies segment climbed 24 percent to $27.7 million from $22.4 million. Organic growth came in at 13 percent. Loss per share in the segment was $.03, compared to a loss per share of $.01 a year ago. On a non-GAAP basis, loss per share was unchanged from a year ago at $.01.

In September 2010, Bruker filed with the US Securities and Exchange Commission to spin out BEST as its own company in an initial public offering. The offering remains in registration, but BEST CFO Tom Rosa said on the conference call that the timing of the IPO "is uncertain, particularly under the current financial market conditions."

During the second quarter, Bruker said that its Bruker Optics subsidiary was being investigated for possible bribes made to employees or agents of government-owned enterprises in China. Laukien said today the investigation continues and "has not impeded in any significant way our ability to do business in China," but he declined further comment.

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