What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-01 compared with 2020-03-27 · 632 added, 663 removed, 991 unchanged (57% of the section changed)

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In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because the following material weaknesses in internal control over financial reporting existed as of that date.

The Company (i) did not design and maintain an effective control environment commensurate with its financial reporting requirements due to an insufficient complement of personnel in the Company’s corporate tax department and a US subsidiary.

This material weakness contributed to additional material weaknesses, as the Company did not maintain effective internal control (ii) over the accounting for income taxes, and (iii) over the accounting for revenue at a US subsidiary of the Company.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

The material weaknesses referred to above are described in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A.

We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2019 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

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Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in management’s report referred to above.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits.

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We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Arxspan, LLC, Rave, LLC, PMOD Technologies GmbH, and Magnettech GmbH from its assessment of internal control over financial reporting as of December 31, 2019 because they were acquired by the Company in purchase business combinations during 2019.

We have also excluded Arxspan, LLC, Rave, LLC, PMOD Technologies GmbH and Magnettech GmbH from our audit of internal control over financial reporting.

Arxspan, LLC, Rave, LLC, PMOD Technologies GmbH, and Magnettech GmbH are wholly-owned subsidiaries whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting collectively represent 1.1% and 1.9%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2019.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Canopy Biosciences, LLC and SmartTip B.V.

from its assessment of internal control over financial

reporting as of December 31, 2020 because they were acquired by the Company in purchase business combinations during 2020.

We have also excluded Canopy Biosciences, LLC and SmartTip B.V.

from our audit of internal control over financial reporting.

Canopy Biosciences, LLC and SmartTip B.V.

are wholly-owned subsidiaries whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting collectively represent 0.2% and 0.1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2020.

Definition and Limitations of Internal Control over Financial Reporting

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Assessment – Reporting Unit in BSI NANO Segment

Goodwill Impairment Assessment – Reporting Unit in Bruker Scientific Instruments(BSI) NANO Segment

As described in Notes 2 and 9 to the consolidated financial statements, the Company’s consolidated goodwill balance was $320.4 million as of December 31, 2020, $228.0 million of which relates to the BSI NANO segment.

Management evaluates goodwill for impairment on an annual basis, or on an interim basis when events or

changes in circumstances indicate that the carrying value may not be recoverable.

Management evaluates goodwill for impairment on an annual basis, or on an interim basis when events or changes in circumstances indicate that the carrying value may not be recoverable.

Management tests goodwill for impairment at the reporting unit level, which is the operating segment or one level below an operating segment.

Management determines fair value of reporting units using a weighting of both the market and the income methodologies.

In assessing the recoverability of goodwill, management must make assumptions regarding the estimated future cash flows, including the forecasted revenue growth, projected gross margin and the discount rate to determine the fair value.

If the carrying amount of a reporting unit exceeds the fair value of the reporting unit, management performs the second step of the goodwill impairment test to measure the amount of the impairment.

In the second step of the goodwill impairment test management compares the implied fair value of the reporting unit’s goodwill with the carrying value of that goodwill.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of a reporting unit in the BSI NANO segment is a critical audit matter are there was significant judgment by management when developing the fair value measurement of the reporting unit.

This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate audit evidence related to management’s estimated future cash flows, including the forecasted revenue growth, projected gross margin and the discount rate.

The audit effort also involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.

In assessing the recoverability of goodwill, management must make assumptions regarding the estimated future cash flows, including the forecasted revenue growth and the discount rate to determine the fair value.

If the carrying amount of a reporting unit exceeds the fair value of the reporting unit, management recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value up to the total amount of goodwill allocated to the reporting unit.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of a reporting unit in the BSI NANO segment is a critical audit matter are the significant judgment by management when developing the fair value measurement of the reporting unit.

This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s

siginificant assumptions related to the forecasted revenue growth and the discount rate.

The audit effort also involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s annual goodwill impairment assessment, including controls over the valuation of the Company’s reporting units.

These procedures also included, among others, testing management’s process for developing the fair value estimate;

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the Company’s reporting unit.

These procedures also included, among others, testing management’s process for developing the fair value estimate of the reporting unit;

evaluating the appropriateness of using a weighting of both the market and income methodologies;

testing the completeness, accuracy, and relevance of underlying data used in the methodologies;

and evaluating the significant assumptions used by management, including the forecasted revenue growth, projected gross margin and the discount rate.

Evaluating management’s assumptions related to the forecasted revenue growth, projected gross margin and the discount rate involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s methodology and certain significant assumptions, including the discount rate.

and evaluating the significant assumptions used by management related to the forecasted revenue growth and the discount rate.

Evaluating management’s assumptions related to the forecasted revenue growth and the discount rate involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s methodologies and discount rate assumption.

/s/ PricewaterhouseCoopers LLP

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CONSOLIDATED BALANCE SHEETS

(Dollars in millions, except share and per share data)

(in millions, except share and per share data)

Current assets:

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CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Dollars in millions, except per share data)

(in millions, except per share data)

Year Ended December 31,

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Comprehensive income attributable to noncontrolling interests

Comprehensive income attributable to redeemable noncontrolling interest

Comprehensive loss attributable to redeemable noncontrolling interest

Comprehensive income attributable to Bruker Corporation

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CONSOLIDATED STATEMENTS OF REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS’ EQUITY

(Dollars in millions, except share data)

(in millions, except share data)

Shareholders’

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Stock-based compensation

Excess tax benefit related to exercise of stock awards

Shares issued for acquisition

Shares repurchased

( 5,318,063 )

Shares returned from 2017 acquisition

Treasury stock acquired

Acquired 80 % interest in Hain LifeScience GmbH

Distributions to noncontrolling interests

Cash dividends paid to common stockholders ($ 0.16 per share)

Adoption impact from new revenue standard

Consolidated net income

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Balance at December 31, 2018

Restricted shares terminated

Stock options exercised

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Stock-based compensation

Shares returned from 2017 acquisition

Shares issued from 2017 acquisition

Shares repurchased

( 3,323,104 )

Treasury stock acquired

Acquired 80 % interest in Hain LifeScience GmbH

Distributions to noncontrolling interests

Cash dividends paid to common stockholders ($ 0.16 per share)

Adoption impact from new revenue standard

Consolidated net income

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Stock-based compensation

Shares issued from 2017 acquisition

Shares repurchased

( 2,711,952 )

Treasury stock acquired

Cash dividends paid to common stockholders ($0.16 per share)

Distributions to noncontrolling interests

Acquired remaining 20 % interest in Hain LifeScience GmbH

Dividends declared ($ 0.16 per share)

Consolidated net income

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CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in millions)

(in millions)

Year Ended December 31,

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Maturity of short-term investments

Purchase of available for sale debt securities

Cash paid for acquisitions, net of cash acquired

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Proceeds from sales of property, plant and equipment

Net proceeds from cross-currency swap agreements

Net cash used in investing activities

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Cash payments to noncontrolling interests

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities

Effect of exchange rate changes on cash, cash equivalents and restricted cash

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Cash paid for taxes

Restricted cash period beginning balance

Restricted cash period ending balance

The accompanying notes are an integral part of these consolidated financial statements.

BRUKER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Description of Business

Description of Business

Bruker Corporation, together with its consolidated subsidiaries (Bruker or the Company), develops, manufactures and distributes high-performance scientific instruments and analytical and diagnostic solutions that enable its customers to explore life and materials at microscopic, molecular and cellular levels.

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Bruker CALID (Chemicals, Applied Markets, Life Science, In-Vitro Diagnostics, Detection) - The Bruker CALID Group designs, manufactures and distributes life science mass spectrometry and ion mobility spectrometry solutions, analytical and process analysis instruments and solutions based on infrared and Raman molecular spectroscopy technologies and radiological/nuclear detectors for Chemical, Biological, Radiological, Nuclear and Explosive (CBRNE) detection.

Customers of the Bruker CALID Group include:

academic institutions and medical schools;

Customers of the Bruker CALID Group include academic institutions and medical schools;

pharmaceutical, biotechnology and diagnostics companies;

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Customers of the BSI NANO Segment include academic institutions, governmental customers, nanotechnology companies, semiconductor companies, raw material manufacturers, industrial companies, biotechnology and pharmaceutical companies and other businesses involved in materials analysis.

The Company’s BEST reportable segment develops and manufactures superconducting and non-superconducting materials and devices for use in renewable energy, energy infrastructure, healthcare and “big science” research.

The BEST reportable segment develops and manufactures superconducting and non-superconducting materials and devices for use in renewable energy, energy infrastructure, healthcare and “big science” research.

The segment focuses on metallic low temperature superconductors for use in magnetic resonance imaging, nuclear magnetic resonance, fusion energy research and other applications.

Note 2—Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Principles of Consolidation

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Redeemable Noncontrolling Interests

The Company has an agreement with noncontrolling interest holders that provides the Company with the right to purchase, and the noncontrolling interest holders with the right to sell, their remaining minority interest at a contractually defined redemption value.

These rights are accelerated in certain events.

As the redemption is contingently redeemable at the option of the noncontrolling interest shareholders, the Company classifies the carrying amount of the redeemable noncontrolling interest in the mezzanine section on the consolidated balance sheet, which is presented above the equity section and below liabilities.

The Company had an agreement with noncontrolling interest holders that provided the Company with the right to purchase, and the noncontrolling interest holders with the right to sell, their remaining minority interest at a contractually defined redemption value.

These rights were accelerated in certain events.

As the redemption is contingently redeemable at the option of the noncontrolling interest shareholders, the Company classified the carrying amount of the redeemable noncontrolling interest in the mezzanine section on the consolidated balance sheet, which is presented above the equity section and below liabilities.

Subsequent to the acquisition, the redeemable noncontrolling interest is measured at the greater of the amount that would be paid if settlement occurred as of the balance sheet date based on the contractually defined redemption value and its carrying amount adjusted for net income (loss) attributable to the noncontrolling interest.

Adjustments to the carrying value of the redeemable noncontrolling interest are recorded through retained earnings.

Adjustments to the carrying value of the redeemable noncontrolling interest were recorded through retained earnings.

The Company exercised its option to purchase the remainder of the entity during 2020.

The carrying value of the noncontrolling interest was accreted to the redemption value through retained earnings and then reclassified to additional paid in capital.

At December 31, 2020, there were no redeemable noncontrolling interests.

Business Combinations

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Accordingly, at the date of each acquisition, the Company measures the fair value of all identifiable assets acquired (including intangible assets), liabilities assumed and any remaining noncontrolling interests and allocates the amounts paid to all items measured.

The fair value of identifiable intangible assets acquired are based on valuations that use information and assumptions determined by management and which consider management’s best estimates of inputs and assumptions that a market participant would use.

Subsequent Events

The Company has evaluated all subsequent events and determined that there are no material recognized or unrecognized subsequent events, other than as described in Note 24, or any subsequent events required to be mentioned in the footnotes to the consolidated financial statements.

The fair value of identifiable intangible assets acquired is based on valuations that use information and assumptions determined by management and which consider management’s best estimates of inputs and assumptions that a market participant would use.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period.

Significant estimates and judgments made by management in preparing these financial statements include revenue recognition, allowances for doubtful accounts, write-downs for excess and obsolete inventory, estimated fair values used to record impairment charges related to intangible assets, goodwill, and other long-lived assets, amortization periods, expected future cash flows used to evaluate the recoverability of long-lived assets and to record intangible assets in business combinations, stock-based compensation expense, warranty allowances, restructuring and other related charges, contingent liabilities and the recoverability of the Company’s net deferred tax assets.

Changes in estimates are recorded in the period in which they become known.

The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances.

Actual results may differ from management’s estimates if these results differ from historical experience or other assumptions prove not to be substantially accurate, even if such assumptions were reasonable when made.

Subsequent Events Considerations

The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide additional evidence for certain estimates or to identify matters that require additional disclosure.

Subsequent events have been evaluated as required.

The Company has evaluated all subsequent events and determined that, other than as reported herein, there are no material recognized or unrecognized subsequent events.

Cash and Cash Equivalents

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The current and non-current portion of restricted cash is recorded within other current assets and other long-term assets , respectively, in the accompanying consolidated balance sheets.

The inclusion of restricted cash increased the balances of the consolidated statement of cash flows as follows (dollars in millions):

Beginning Balance

Ending Balance

Accounts Receivable, net

Accounts receivable have been reduced by an allowance for doubtful accounts.

The allowance for doubtful accounts represents the Company’s best estimate of the amount of probable credit losses in our accounts receivable.

The Company’s allowance is based on a number of factors, including an evaluation of customer credit worthiness, the age of the outstanding receivable, economic trends and historical experience.

Provisions for doubtful accounts are recorded in selling, general and administrative expenses in the accompanying consolidated statements of income and comprehensive income.

Derivative Financial Instruments and Hedging Activities

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Derivatives that are not designated as hedges are recorded at fair value through earnings.

The Company presents the cross-currency swap periodic settlements in investing activities and the interest rate swap periodic settlements in operating activities in the statement of cash flows.

Fair Value of Financial Instruments

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The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

The income approach uses valuation techniques to convert future amounts to a single present value based on current market expectations about those future amounts, including present value

techniques, option-pricing models and the excess earnings method.

The income approach uses valuation techniques to convert future amounts to a single present value based on current market expectations about those future amounts, including present value techniques, option-pricing models and the excess earnings method.

The cost approach is based on the amount that would be required to replace the service capacity of an asset (replacement cost).

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The Company performs periodic credit evaluations of its customers’ financial condition and generally requires an advanced deposit for a portion of the purchase price.

Credit losses have been within management’s expectations and the allowance for doubtful accounts totaled $ 3.4 million and $ 3.8 million as of December 31, 2019 and 2018, respectively.

As of December 31, 2019 and 2018, no single customer represented 10 % or more of the Company’s accounts receivable.

Credit losses have been within management’s expectations and the allowance for doubtful accounts totaled $ 3.0 million and $ 3.4 million at December 31, 2020 and 2019, respectively.

At December 31, 2020 and 2019, no single customer represented 10 % or more of the Company’s accounts receivable.

For the years ended December 31, 2020, 2019 and 2018, no single customer represented 10 % or more of the Company’s total revenue.

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Major improvements that extend the useful lives are capitalized while expenditures for maintenance, repairs and minor improvements are charged to expense as incurred.

When assets are retired or otherwise disposed of, the assets and

related accumulated depreciation and amortization are eliminated from the accounts and any resulting gain or loss is reflected in the consolidated statements of income and comprehensive income.

When assets are retired or otherwise disposed of, the assets and related accumulated depreciation and amortization are eliminated from the accounts and any resulting gain or loss is reflected in the consolidated statements of income and comprehensive income.

Depreciation and amortization are calculated on a straight-line basis over the estimated useful lives of the assets as follows:

Estimated Useful Life

25 to 40 years

Machinery and equipment

3 to 10 years

Computer equipment and software

Furniture and fixtures

3 to 10 years

Leasehold improvements

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Goodwill and indefinite-lived intangible assets are not amortized, but are evaluated for impairment on an annual basis, or on an interim basis when events or changes in circumstances indicate that the carrying value may not be recoverable.

In assessing the recoverability of goodwill and indefinite-lived intangible assets, the Company must make assumptions regarding the estimated future cash flows, including forecasted revenue growth, projected gross margin and the discount rate to determine the fair value of these assets.

In assessing the recoverability of goodwill and indefinite-lived intangible assets, the Company must make assumptions regarding the estimated future cash flows, including forecasted revenue growth and the discount rate to determine the fair value of these assets.

If these estimates or their related assumptions change in the future, the Company may be required to record impairment charges against these assets in the reporting period in which the impairment is determined.

In January 2017, the FASB issued ASU No.

2017-04, Intangibles-Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment .

The new standard simplifies the subsequent measurement of goodwill by eliminating the second step of the goodwill impairment test.

The adoption of this ASU on January 1, 2020 did not have a material impact on the Company's consolidated financial statements.

The Company tests goodwill for impairment at the reporting unit level, which is the operating segment or one level below an operating segment.

The Company has the option of performing a qualitative assessment to determine whether further impairment testing is necessary before performing the two-step quantitative assessment.

The Company has the option of performing a qualitative assessment to determine whether further impairment testing is necessary before performing the quantitative assessment.

If as a result of the qualitative assessment, it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, a quantitative impairment test will be required.

Otherwise, no further testing will be required.

If a quantitative impairment test is performed, the first step involves comparing the fair values of the applicable reporting units with their aggregate carrying values, including goodwill.

If a quantitative impairment test is performed, the Company compares the fair values of the applicable reporting

units with their aggregate carrying values, including goodwill.

The Company determines fair value of reporting units using a weighting of both the market and the income methodologies.

Estimating the fair value of the reporting units requires significant judgment by management.

If the carrying amount of a reporting unit exceeds the fair value of the reporting unit, the Company performs the second step of the goodwill impairment test to measure the amount of the impairment.

In the second step of the goodwill impairment test the Company compares the implied fair value of the reporting unit’s goodwill with the carrying value of that goodwill.

If the carrying amount of a reporting unit exceeds the fair value of the reporting unit, an impairment charge is recognized for the amount by which the carrying value amount exceeds the reporting unit’s fair value up to the total amount of goodwill allocated to the reporting unit.

In process research and development, or IPR&D, acquired as part of business combinations under the acquisition method represents ongoing development work associated with enhancements to existing products, as well as the development of next generation products.

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If an IPR&D project is abandoned before completion or is otherwise determined to be impaired, the value of the asset or the amount of the impairment is charged to the consolidated statements of income and comprehensive income in the period the project is abandoned or impaired.

At December 31, 2020 and 2019, the Company did not have any IPR&D.

Intangible assets with a finite useful life are amortized on a straight-line basis over their estimated useful lives as follows:

Estimated Useful Life

Existing technology and related patents

3 to 15 years

Customer and distributor relationships

5 to 15 years

Impairment of Long-Lived Assets

Impairment losses are recorded on long-lived assets used in operations when indicators of impairment are present and the quoted market price, if available or the estimated fair value of those assets are less than the assets’

carrying value and are not recoverable.

Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition.

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Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the income tax basis of assets and liabilities.

A valuation allowance is applied against any net deferred tax asset if, based on the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

valuation allowance is applied against any net deferred tax asset if, based on the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company records liabilities related to uncertain tax positions in accordance with the guidance that clarifies the accounting for uncertainty in income taxes recognized in a Company’s financial statements.

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Revenue Recognition

2019 & 2018 Policy under ASC 606:

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2014-09, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements under Accounting Standards Codification (ASC) Topic 605.

The new guidance was the result of a joint project between the FASB and the International Accounting Standards Board to clarify the principles for recognizing revenue and to develop common revenue standards for U.S.

GAAP and International Financial Reporting Standards.

The core principle of the new guidance is that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The new guidance was effective as of January 1, 2018 and was applied on a modified retrospective basis.

The Company elected the practical expedient and only evaluated contracts for which substantially all revenue had not been recognized under ASC 605 with the cumulative effect of the new guidance recorded as of the date of initial application.

The impact of adoption was an increase to beginning retained earnings of $ 6.1 million, net of $ 2.1 million related to taxes.

The adoption impact was primarily due to the change in license revenue being recognized at a point in time under ASC 606 rather than over time as it was recognized under ASC 605.

The difference between ASC 606 and ASC 605 was not material to the year ended December 31, 2018.

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers .

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A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

Some of the Company’s contracts have multiple performance obligations, most commonly due to providing additional goods or services along with a system, such as

installation, accessories, parts and services.

Some of the Company’s contracts have multiple performance obligations, most commonly due to providing additional goods or services along with a system, such as installation, accessories, parts and services.

For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service being provided to the customer.

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Certain performance obligations, such as maintenance contracts and extended warranty, are recognized over time based on the contractual obligation period.

In addition, certain arrangements to provide more customized deliverables may be satisfied over time based on the extent of progress towards completion.

In addition, certain arrangements

to provide more customized deliverables may be satisfied over time based on the extent of progress towards completion.

For performance obligations recognized over time, revenue is measured by progress toward completion of the performance obligation that reflects the transfer of control.

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Contract liabilities consist of customer advances, deferred revenue and billings in excess of revenue from contracts recognized on a cost-to-cost or cost-plus-fixed-fee basis.

Contract liabilities are classified as current or long-term based on the timing of when the Company expects to recognize revenue.

Contract liabilities are classified as current or

long-term based on the timing of when the Company expects to recognize revenue.

Contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period.

2017 Policy under ASC 605:

The Company recognized revenue from systems sales when persuasive evidence of an arrangement exists, the price is fixed or determinable, title and risk of loss has been transferred to the customer and collectability of the resulting receivable is reasonably assured.

Title and risk of loss generally transfers upon shipment, or for certain systems, based upon customer acceptance for a system that has been delivered and installed at a customer facility.

For systems that include customer-specific acceptance criteria, the Company is required to assess when it can demonstrate the acceptance criteria has been met, which generally is upon successful factory acceptance testing or customer acceptance and evidence of installation.

When products are sold through an independent distributor or a strategic distribution partner who assumes responsibility for installation, the Company recognizes the system sale when the product has been shipped and title and risk of loss have been transferred to the distributor.

The Company’s distributors do not have price protection rights or rights of return;

however, the Company’s products are typically warranted to be free from defect for a period of one year.

Revenue is deferred until cash is received when collectability is not reasonably assured or when the price is not fixed or determinable.

For transactions that include multiple elements, arrangement consideration was allocated to each element using the fair value hierarchy as required by ASU No.

The Company limits the amount of revenue recognized for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations, or subject to customer-specific return or refund privileges.

The Company determines the fair value of its products and services based upon vendor specific objective evidence (VSOE).

The Company determines VSOE based on its normal selling pricing and discounting practices for the specific product or service when sold on a stand-alone basis.

In determining VSOE, the Company’s policy requires a substantial majority of selling prices for a product or service to be within a reasonably narrow range.

The Company also considers the class of customer, method of distribution and the geographies into which products and services are being sold when determining VSOE.

If VSOE cannot be established, the Company attempts to establish the selling price based on third-party evidence (TPE).

VSOE cannot be established in instances where a product or service has not been sold separately, stand-alone sales are too infrequent or product pricing is not within a sufficiently narrow range.

TPE is determined based on competitor prices for similar deliverables when sold separately.

When the Company cannot determine VSOE or TPE, it uses estimated selling price (ESP) in its allocation of arrangement consideration.

The objective of ESP is to determine the price at which the Company would typically transact a stand-alone sale of the product or service.

ESP is determined by considering a number of factors including the Company’s pricing policies, internal costs and gross profit objectives, method of distribution, market research and information, recent technological trends, competitive landscape and geographies.

The Company analyzes the selling prices used in its allocation of arrangement consideration, at a minimum, on an annual basis.

Selling prices will be analyzed more frequently if a significant change in the Company’s business or

other factors necessitate more frequent analysis or if the Company experiences significant variances in its selling prices.

Revenue from accessories and parts is generally recognized based on shipping terms.

Service revenue is recognized as the services are performed or ratably over the contractual obligation and includes maintenance contracts, extended warranty, training, application support and on-demand services.

The Company also has contracts for which it applies the percentage-of-completion model and completed contract model of revenue recognition.

Application of the percentage-of-completion method requires the Company to make reasonable estimates of the extent of progress toward completion of the contract and the total costs the Company will incur under the contract and losses are recorded immediately when we estimate that contracts will ultimately result in a loss.

Changes in the estimates could affect the timing of revenue recognition.

Other revenues are primarily comprised of development arrangements recognized on a cost-plus-fixed-fee basis and licensing arrangements recognized ratably over the term of the related contracts.

In February 2016, the FASB issued ASU No.

2016-02, Leases, which provides guidance on the recognition, measurement, presentation and disclosure of leases.

The new standard, effective as of January 1, 2019, superseded previous U.S.

GAAP guidance on leases and requires all leases with terms longer than 12 months to be reported on the balance sheet as right-of-use (ROU) assets and lease liabilities, as well additional disclosures pertaining to those leases.

The lease liability represents the lessee’s obligation to make lease payments arising from a lease and will be measured as the present value of the lease payments.

The right-of-use asset represents the lessee’s right to use a specified asset for the lease term, and will be measured at the lease liability amount, adjusted for lease prepayment, lease incentives received and the lessee’s initial direct costs.

Under ASU No.

2016-02, companies are required to transition to the new standard in the period of adoption at the beginning of the earliest period presented in the financial statements (January 1, 2017 for the Company).

In July 2018, the FASB issued ASU No.

2018-11 as an update to ASU No.

2016-02, which in part provided companies the option of transitioning to the new standard as of the adoption date and recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

The Company adopted the new standard as of January 1, 2019 using the alternative transition method under ASU No.

2018-11 and recognized a cumulative-effect adjustment to the opening balance sheet.

The Company’s prior period financial statements were not adjusted due to adopting the new standard based on the alternative transition method.

The Company elected the available package of practical expedients for leases that commenced prior to the effective date that allows it to not reassess:

1) whether any expired or existing contracts are or contain leases;

2) the lease classification for any expired or existing leases;

and 3) the accounting treatment of initial direct costs for any expired or existing leases.

The Company also elected the practical expedient that allows lessees to treat lease and non-lease components of leases as a single lease component for all asset classes.

The adoption of the new standard resulted in recording $ 75.5 million and $ 77.9 million of ROU assets and lease liabilities, respectively, as of January 1, 2019 on the Company’s balance sheet.

The adoption of the new standard did not significantly affect the Company’s results of operations.

Starting in the first quarter of 2019, the Company accounts for leases in accordance with ASC 842, Leases.

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present.

Leases with a term greater than 12 months are recognized on the balance sheet as ROU assets with a corresponding lease liability.

The Company has elected not to recognize on the balance sheet leases with an initial term of 12 months or less.

Leases with an initial term of 12 months or less are directly expensed as incurred.

Leases are classified as either operating or finance depending on the specific terms of the arrangement.

The Company’s leases mainly consist of facilities, office equipment, and vehicles.

The majority of leases are classified as operating.

The remaining lease term ranges from 2021 to 2034, with some leases including an option to extend the lease for varying periods of time or to terminate prior to the end of the lease term.

Certain lease agreements contain provisions for future rent increases.

Lease payments included in the measurement of the lease liability comprise fixed payments, future rent increases tied to an index or rate, and the exercise price of a Company option to purchase the underlying asset if the Company is reasonably certain to exercise the option.

Future rent increases dependent on an index or rate are initially measured at the index or rate at the commencement date.

The Company’s leases typically do not contain residual value guarantees.

At the commencement date, operating and finance lease liabilities, and their corresponding ROU assets, are recorded based on the present value of lease payments over the expected lease term.

The lease term includes the non-cancellable period of the lease, plus any additional periods covered by either a Company option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor.

The interest rate implicit in lease contracts is typically not readily determinable, therefore an incremental borrowing rate is used to calculate the lease liability.

The incremental

borrowing rate is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

Certain adjustments to the ROU asset may be required for items such as prepayments, lease incentives received or initial direct costs paid.

Shipping and Handling Costs

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Research and Development

The Company commits substantial capital and resources to internal and collaborative research and development projects in order to provide innovative products and solutions to their customers.

The Company commits substantial capital and resources to internal and collaborative research and development projects in order to provide innovative products and solutions to its customers.

The Company conducts research primarily to enhance system performance and improve the reliability of existing products, and to develop revolutionary new products and solutions.

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The Company’s primary types of share-based compensation are stock options, restricted stock awards and restricted stock units.

The Company recorded stock-based compensation expense for the years ended December 31, 2019, 2018 and 2017, as follows (dollars in millions):

Stock options

Restricted stock awards

Restricted stock units

Total stock-based compensation

Costs of product revenue

Selling, general and administrative

Research and development

Total stock-based compensation

In addition to the awards above, the Company recorded stock-based compensation related benefit of $ 2.3 million in the year ended December 31, 2019 and additional expense of $ 0.5 million in the year ended December 31, 2018 related to the 2018 acquisition of Mestrelab Research, S.L.

Compensation expense is amortized on a straight-line basis over the underlying vesting terms of the share-based award.

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The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model.

Assumptions regarding volatility, expected term, dividend yield and risk-free interest rates are required for the Black-Scholes model and are presented in the table below:

Risk-free interest rates

Expected life

Expected dividend yield

The determination of the fair value of stock-based payment awards using the Black-Scholes model are affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rates and expected dividends.

Risk-free interest rates are based on the yield on zero-coupon U.S.

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Expected volatility is based the Company’s historical volatility results.

The expected dividend yield was included in the option pricing formula beginning in February 2016 as the Company adopted a dividend policy.

The Company utilizes an estimated forfeiture rate derived from an analysis of historical data of 8.3 %, 7.5 % and 6.7 % for the years ended December 31, 2019, 2018 and 2017, respectively.

Expected dividend yield is based on the estimated annualized dividend yield on our stock based on our history of paying dividends.

The Company utilizes an estimated forfeiture rate derived from an analysis of historical data.

Assumptions regarding volatility, expected term, dividend yield and risk-free interest rates are required for the Black-Scholes model and are presented in the table below:

Risk-free interest rates

Expected life

Expected dividend yield

Weighted-average fair value per share

Stock-based compensation for restricted stock awards and restricted stock units is expensed ratably over the vesting period based on the grant date fair value.

Earnings Per Share

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The diluted net income per share computation includes the effect of shares which would be issuable upon the exercise of outstanding stock options and the vesting of restricted stock, reduced by the number of shares which are assumed to be purchased by the Company under the treasury stock method.

There was no redemption value adjustment of the redeemable noncontrolling interest for the year ended December 31, 2019 or 2018.

The following table sets forth the computation of basic and diluted weighted average shares outstanding for the years ended December 31, (dollars in millions, except per share data):

Net income attributable to Bruker Corporation, as reported

Weighted average shares outstanding:

Weighted average shares outstanding-basic

Effect of dilutive securities:

Stock options, restricted stock awards and restricted stock units

Net income per common share attributable to Bruker Corporation shareholders:

Stock options and restricted stock units to purchase approximately 0.2 million shares, 0.2 million shares and 0.3 million shares were excluded from the computation of diluted earnings per share for the years ended December 31, 2019, 2018 and 2017, respectively, because their effect would have been anti-dilutive.

There was no redemption value adjustment of the redeemable noncontrolling interest for the years ended December 31, 2020 and 2019.

Post Retirement Benefit Plans

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Risks and Uncertainties

The Company is subject to risks common to its industry including, but not limited to, global economic conditions, rapid technological change, government and academic funding levels, the impact of the COVID-19 coronavirus, changes in commodity prices, spending patterns of its customers, protection of its intellectual property, availability of key raw materials and components, compliance with existing and future regulation by government agencies and fluctuations in foreign currency exchange rates.

In December 2019, a novel strain of coronavirus, now referred to as COVID-19, surfaced in Wuhan, China.

The virus continues to spread globally, has been declared a pandemic by the World Health Organization and has spread to over 100 countries, including the United States.

The impact of this pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world.

The Company is subject to risks common to its industry including, but not limited to, global economic conditions, government and academic funding levels, the impact of the COVID-19 pandemic, rapid technological change, changes in commodity prices, spending patterns of its customers, protection of its intellectual property,

availability of key raw materials and components, compliance with existing and future regulation by government agencies and fluctuations in foreign currency exchange rates.

In December 2019, a novel strain of coronavirus, referred to as COVID-19, surfaced in Wuhan, China.

In March 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization.

The virus has spread globally.

The impact of this pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in disruptions to the global economy, as well as businesses and capital markets around the world.

Impacts to the Company’s business include temporary closures of many of its government and university customers and suppliers, disruptions or restrictions on its employees’ and customers’ ability to travel, and delays in product installations or shipments to and from affected countries.

In an effort to halt the outbreak of COVID-19, a number of countries, including the United States, have placed significant restrictions on travel and many businesses have announced extended closures.

For example, a number of states, including California, Massachusetts and New Jersey where the Company has significant operations, have issued shelter in place or stay-at-home orders which required the Company’s employees in that area to work from home and avoid unnecessary travel.

In addition, a number of the Company’s production facilities have either temporarily closed, plan to temporarily close or are operating on a reduced capacity.

In an effort to halt the outbreak of COVID-19, a number of countries, including the United States, have implemented and continue to implement significant restrictions on travel, shelter in place or stay at home orders, and business closures.

Certain jurisdictions, including many within the United States, implemented policies with the goal of re-opening these markets only to return to restrictions in the face of increases in new COVID-19 cases.

For example, a number of states, including California, Massachusetts and New Jersey where the Company has significant operations, had issued shelter in place or stay-at-home orders.

Although these states have begun implementing phased re-opening policies, many of the Company’s employees in these areas continue to work remotely, and any re-openings may be delayed or pulled back if the virus continues to spread or as new strains of the virus emerge.

In addition, a number of the Company’s production facilities had to either temporarily close or operate on a reduced capacity.

Most commercial activity in sales and marketing, and customer demonstrations and applications training, are either being conducted remotely or postponed.

Customer purchasing departments are operating at reduced capacity, and many customers could delay or cut capital expenditures and operating budgets.

These travel restrictions, business closures and operating reductions at the Company, its customers, its distributors, and or its suppliers will adversely impact the Company’s operations locally and worldwide, including its ability to manufacture, sell or distribute products, as well as cause temporary closures of its foreign distributors, or the facilities of suppliers or customers.

Any prolonged material disruption of the Company’s employees, distributors, suppliers or customers will impact its global sales and operating results that could lead to impairments.

Even where customers have re-opened their sites, many still operate at productivity levels that are below pre-pandemic levels in an effort to accommodate safety protocols.

Any resurgence of the virus or the emergence of new strains of the virus may require the Company or its customers to close or partially close operations once again.

These travel restrictions, business closures and reduction in operations at Bruker, customers, distributors, and/or suppliers have and will continue to adversely impact the Company’s operations worldwide, including the ability to manufacture, sell or distribute products, as well as cause temporary closures of foreign distributors, or the facilities of suppliers or customers.

This disruption of the Company’s employees, distributors, suppliers and customers has and will continue to impact the Company’s global sales and future operating results.

The Company is continuing to monitor and assess the effects of the COVID-19 pandemic on commercial operations, including its impact on revenue in 2021.

However, the Company cannot at this time accurately predict what effects these conditions will ultimately have on its operations due to uncertainties relating to the severity of the disease, the duration of the outbreak, including the impact of any resurgence of the virus or the emergence of new strains of the virus, and the length or severity of the travel restrictions, business closures, and other safety and precautionary measures imposed by the governments of impacted countries.

The pandemic has also adversely affected the economies and financial markets of many countries, which has affected and likely will continue to affect demand for the Company’s products and its operating results.

The preparation of the consolidated financial statements requires the Company to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities.

On an ongoing basis the Company evaluates estimates, judgments and methodologies.

Changes in estimates are recorded in the period in which they become known.

The Company bases estimates on historical experience and on various other assumptions that they believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of revenues and expenses.

The full extent to which the COVID-19 pandemic will directly or indirectly impact the business, results of operations and financial condition, including sales, expenses, reserves and allowances, manufacturing, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19, the effectiveness of any COVID-19 vaccines and the actions taken to contain or treat it, as well as the economic impact on local, regional, national and international customers and markets.

The Company has made estimates of the impact of COVID-19 within the financial statements and there may be changes to those estimates in future periods.

Actual results may differ from management's estimates if these results differ from historical experience.

Loss Contingencies

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Disclosure is provided when it is reasonably possible that a loss will be incurred or when it is reasonably possible that the amount of a loss will exceed the recorded provision.

Use of Estimates

Changes in estimates are recorded in the period in which they become known.

The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances.

Note 3—Revenue

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2014-09, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements under Accounting Standards Codification (ASC) Topic 605.

GAAP and International Financial Reporting Standards.

The new guidance was effective as of January 1, 2018 and was applied on a modified retrospective basis.

The impact of adoption was an increase to beginning retained earnings of $ 6.1 million, net of $ 2.1 million related to taxes.

The adoption impact was primarily due to the change in license revenue being recognized at a point in time under ASC 606 rather than over time as it was recognized under ASC 605.

The difference between ASC 606 and ASC 605 was not material to the year ended December 31, 2018.

The following table presents the Company’s revenues by Group for the years ended December 31, 2019 and 2018 (dollars in millions):

Recent Accounting Pronouncements

In March 2020, the FASB issued Accounting Standards Updates (“ASU”) No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform.

The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles to transactions affected by reference rate reform if certain criteria are met.

These transactions include:

contract modifications, hedging relationships, and sale or transfer of debt securities classified as held-to-maturity.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848) :

Scope, to clarify that certain optional expedients and exceptions under the reference rate reform guidance for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

Specifically, certain provisions in the reference rate reform guidance, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform.

This temporary guidance is effective for all entities as of March 12, 2020 through December 31, 2022.

The Company may elect to apply this guidance for all contract modifications or eligible hedging relationships during that time period subject to certain criteria.

The Company is still evaluating the impact of reference rate reform and whether this guidance will be adopted.

In January 2020, the FASB issued ASU 2020-01 - Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the Emerging Issues Task Force) , which clarifies the interaction of the accounting for certain equity securities, equity method investments, and certain forward contracts and purchased options.

The guidance clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying measurement principles for certain equity securities immediately before applying or discontinuing the equity method.

The Company adopted this guidance using a prospective method.

The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12 - Income Taxes (Topic 740):

Simplifying the Accounting

for Income Taxes .

The guidance simplifies the accounting for income taxes by removing certain exceptions within the current guidance;

including the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences.

The amendment also improves consistent application by clarifying and amending existing guidance related to aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step up in the tax basis of goodwill.

This guidance is effective for annual and interim periods beginning after December 15, 2020 and early adoption is permitted.

The assessment of the adoption of this ASU is in process and is not expected to have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement , which modifies the disclosure requirements of fair value measurements, including the consideration of costs and benefits.

This ASU is effective for the Company in fiscal years beginning after December 15, 2019.

The Company adopted this guidance on January 1, 2020 and the adoption did not have a material impact on it’s consolidated financial statements.

In January 2017, the FASB issued ASU No.

2017-04, Intangibles-Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment .

The new standard simplifies the subsequent measurement of goodwill by eliminating the second step of the goodwill impairment test.

This ASU will be applied prospectively and is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019.

The Company adopted this ASU on January 1, 2020 and the adoption did not have a material impact on it’s consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13 - Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

The guidance modifies the recognition of credit losses related to financial assets, such as debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, and other financial assets that have the contractual right to receive cash.

Current guidance requires the recognition of a credit loss when it is considered probable that a loss event has occurred.

The new guidance requires the measurement of expected credit losses to be based upon relevant information, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the asset.

As such, expected credit losses may be recognized sooner under the new guidance due to the broader range of information that will be required to determine credit loss estimates.

The new guidance also amends the current other-than-temporary impairment model used for debt securities classified as available-for-sale.

When the fair value of an available-for-sale debt security is below its amortized cost, the new guidance requires the total unrealized loss to be bifurcated into its credit and non-credit components.

Any expected credit losses or subsequent recoveries will be recognized in earnings and any changes not considered credit related will continue to be recognized within other comprehensive income (loss).

This guidance is effective for annual and interim periods beginning after December 15, 2019.

The Company adopted this new standard on January 1, 2020 using a modified retrospective method for all financial assets measured at amortized cost.

The new standard impacts the Company's accounts receivables and off-balance sheet credit exposures.

The new standard did not have an impact on the Company’s results of operations and cash flows.

The following table presents the Company’s revenues by Group (in millions):

Revenue by Group:

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Total revenue

Revenue for the Company recognized at a point in time versus over time is as follows for the years ended December 31, 2019 and 2018 (dollars in millions):

Revenue for the Company recognized at a point in time versus over time is as follows (dollars in millions):

Revenue recognized at a point in time

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The balance of contract assets as of December 31, 2020 and December 31, 2019 was $ 41.8 million and $ 43.9 million, respectively.

The increase in the contract asset balance during the year ended December 31, 2019 is primarily a result of foreign currency translation and an increase in contracts that have been recognized as revenue during the year for which billing cannot contractually occur as of December 31, 2019.

Contract liabilities— The Company often receives cash payments from customers in advance of the Company’s performance, resulting in contract liabilities.

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As of December 31, 2020 and December 31, 2019, the contract liabilities were $ 399.4 million and $ 312.5 million, respectively.

The increase in the contract liability balance during the year ended December 31, 2019 is primarily a result of new performance obligations entered into during the year.

The increase in the contract liability balance during the year ended December 31, 2020 is primarily a result of a delay in instrument installation due to customer facility closures or reduced operations as a result of COVID-19.

Approximately $ 184.8 million of the contract liability balance on December 31, 2019 was recognized as revenue during the year ended December 31, 2020.

Approximately $ 171.0 million of the contract liability balance on January 1, 2018, the date of adoption of ASC 606, was recognized as revenue during the twelve-month period ended December 31, 2018.

Note 4—Acquisitions

The impact of all acquisitions, individually and collectively, on revenues, net income and total assets was not material.

Pro forma financial information reflecting all acquisitions has not been presented because the impact, individually and collectively, on revenues, net income and total assets is not material.

Pro forma financial information reflecting all acquisitions has not been presented because the impact,

individually and collectively, on revenues, net income and total assets is not material.

Amounts allocated to goodwill that are attributable to expected synergies are not expected to be deductible for tax purposes.

Canopy Biosciences

On September 10, 2020, Bruker acquired Canopy Biosciences, LLC (“Canopy”) for a purchase price of $ 24.2 million with the potential for additional consideration of up to $ 5.0 million based on achieving revenue targets in calendar years 2021 and 2022.

Canopy is a leader in high multiplex biomarker imaging for immunology, immune-oncology and cell therapy.

Canopy will be integrated into the BSI Nano Segment.

The acquisition is being accounted for under the acquisition method.

The components and fair value allocation of the consideration transferred in connection with the acquisition are as follows (in millions):

Consideration Transferred:

Contingent consideration

Cash acquired

Working capital adjustment

Total consideration transferred

Allocation of Consideration Transferred:

Accounts receivable

Other current and non-current assets

Property, plant and equipment

Operating lease assets

Intangible assets:

Customer relationships

Deferred taxes, net

Liabilities assumed

Total consideration allocated

The preliminary fair value allocation included contingent consideration in the amount of $ 0.5 million, which represented the estimated fair value of future payments to the former shareholders of Canopy based on achieving revenue targets for calendar years 2021 and 2022.

The Company expects to complete the fair value allocation during the measurement period.

The amortization period for the intangible assets acquired is ten years for the customer relationships and technology, eight years for the trade name and one year for the backlog intangible asset.

On October 15, 2018, Bruker acquired an 80 % interest in Hain LifeScience GmbH (“Hain”) for a purchase price of Euro 66 million (approximately $ 76.4 million) with options to acquire the remaining 20 %.

Hain is an infectious disease specialist with a broad range of molecular diagnostics solutions for the detection of microbial and viral pathogens, as well as for molecular antibiotic resistance testing.

Hain is located in Nehren, Germany and was integrated into the BSI Life Science Segment.

On January 31, 2020, the Company acquired the

remaining 20 % interest in Hain for a purchase price of EUR 20 million (approximately $ 22.2 million).

The carrying value of the noncontrolling interest was accreted to the redemption value of EUR 20 million through retained earnings and then reclassified to additional paid in capital.

In addition to the acquisitions noted above, in 2020 the Company completed acquisitions that complemented the Company’s existing product offerings.

The following table reflects the consideration transferred and the respective reportable segment for the acquisitions (in millions):

Name of Acquisition

Date Acquired

Consideration

SmartTip B.V.

April 1, 2020

Integrated Proteomics Applications, Inc.

August 7, 2020

BSI Life Science

On April 2, 2019, the Company acquired Rave LLC (Rave), a privately held company, for a purchase price of $ 52.2 million with the potential for additional consideration of up to $ 5.0 million based on revenue and gross margin achievements in 2019 and 2020.

Rave develops and manufactures nanomachining and laser photomask repair equipment.

Rave will be integrated into the BSI NANO Segment.

The acquisition of Rave was accounted

for under the acquisition method.

The components and fair value allocation of the consideration transferred in connection with the acquisition were as follows (dollars in millions):

Rave was integrated into the BSI NANO Segment.

The acquisition of Rave was accounted for under the acquisition method.

The components and fair value allocation of the consideration transferred in connection with the acquisition were as follows (in millions):

Consideration Transferred:

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Total consideration transferred

The preliminary fair value allocation included contingent consideration in the amount of $ 4.4 million, which represented the estimated fair value of future payments to the former shareholders of Rave based on achieving revenue and gross margin percentage targets for the period ended April 30, 2020.

The Company expects to complete the fair value allocation during 2020.

The fair value allocation included contingent consideration in the amount of $ 4.4 million, which represented the estimated fair value of future payments to the former shareholders of Rave based on achieving revenue and gross margin percentage targets for the period ended April 30, 2020.

The Company completed the fair value allocation during 2020.

The amortization period for all intangible assets acquired in connection with Rave is ten years.

In addition to the Rave LLC acquisition noted above, in the year ended December 31, 2019, the Company completed various other acquisitions that collectively complemented the Company’s existing product offerings or added aftermarket and software capabilities to the Company’s existing businesses.

The following table reflects the consideration transferred and the respective reportable segment for each of these acquisitions:

In addition to the Rave acquisition noted above, in the year ended December 31, 2019, the Company completed various other acquisitions that collectively complemented the Company’s existing product offerings or

added aftermarket and software capabilities to the Company’s existing businesses.

The following table reflects the consideration transferred and the respective reportable segment for each of these acquisitions (in millions):

Name of Acquisition

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BSI Life Science

In the years ended December 31, 2018 and 2017, the Company completed various acquisitions that collectively complemented the Company’s existing product offerings or added aftermarket and software capabilities to the Company’s existing businesses.

The following tables reflect the consideration transferred and the respective reportable segment for each of the 2018 acquisitions:

In the year ended December 31, 2018, the Company completed various acquisitions that collectively complemented the its existing product offerings or added aftermarket and software capabilities to the Company’s existing businesses.

The following tables reflect the consideration transferred and the respective reportable segment for each of the 2018 acquisitions (in millions):

Consideration Transferred:

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On April 8, 2018, the Company acquired a 100 % interest in Anasys Instruments Corp.

(Anasys), a privately held company, for a purchase price of $ 27.0 million with the potential for additional consideration based on revenue achievements in 2019 and 2020.

(Anasys), a privately held company, for a purchase price of $ 27.0 million with the potential for additional consideration based on

achieving revenue targets in 2019 and 2020.

Anasys develops and manufactures nanoscale infrared spectroscopy and thermal measurement instruments.

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The Company completed the fair value allocation in the second quarter of 2019 .

The amortization period for all intangible assets acquired in connection with JPK is eight years , except for backlog which will be amortized over one year .

The amortization period for all intangible assets acquired in connection with JPK is eight years , except for backlog which was amortized over one year .

On October 1, 2018, Bruker acquired a 24.9 % interest in Mestrelab Research, S.L.

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During the year ended December 31, 2019, the fair value remeasurement resulted in a $ 2.3 million stock compensation benefit.

On October 15, 2018, Bruker acquired an 80 % interest in Hain Lifescience GmbH (Hain) for a purchase price of Euro 66 million (approximately $ 76.4 million) and has options to acquire the remaining 20 % exercisable after 2022.

On October 15, 2018, Bruker acquired an 80 % interest in Hain Lifescience GmbH (Hain) for a purchase price of Euro 66 million (approximately $ 76.4 million) and had options to acquire the remaining 20 % exercisable after 2022.

Hain is an infectious disease specialist with a broad range of molecular diagnostics solutions for the

detection of microbial and viral pathogens, as well as for molecular antibiotic resistance testing.

Hain is located in Nehren, Germany and was integrated into the BSI Life Science Segment.

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Beginning in 2022, the redemption price is capped at Euro 46 million and increases by Euro 6 million each year thereafter if unexercised by either party.

Adjustments to the carrying value of the redeemable noncontrolling interest are recorded through retained earnings.

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The total consideration transferred for the additional acquisitions was $ 12.7 million.

The following tables reflect the consideration transferred and the respective reportable segment for each of the 2017 acquisitions:

Name of Acquisition

Date Acquired

Consideration

Cash Consideration

InVivo Biotech Svs GmbH.

January 2, 2017

BSI Life Science

Hysitron, Incorporated

January 23, 2017

August 1, 2017

BSI Life Science

On May 5, 2017, the Company acquired 100 % of the shares of Luxendo GmbH (Luxendo), a privately held spin-off of the European Molecular Biology Laboratory, for a purchase price of Euro 17 million (approximately $ 18.8 million), with the potential for additional consideration based on revenue achievements in 2018 through 2021.

Luxendo is a developer and manufacturer of proprietary light-sheet fluorescence microscopy instruments.

Luxendo is located in Heidelberg, Germany and was integrated into the BSI NANO Segment.

The fair value allocation included contingent consideration in the amount of $ 3.1 million, which represented the estimated fair value of future payments to the former shareholders of Luxendo based on achieving annual revenue targets for the years 2018 through 2021.

The Company completed the fair value allocation in the third quarter of 2017.

The amortization period for intangible assets acquired in connection with the acquisition of Luxendo is 10 years for trade names and 7 years for technology.

On January 23, 2017, the Company acquired 100 % of the shares of Hysitron, Incorporated (Hysitron).

The acquisition adds Hysitron’s nanomechanical testing instruments to the Company’s existing portfolio of atomic force microscopes, surface profilometers, and tribology and mechanical testing systems.

Hysitron is included in BSI NANO Segment.

The fair value allocation included contingent consideration in the amount of $ 1.6 million, which represented the estimated fair value of future payments to the former shareholders of Hysitron based on achieving annual revenue targets for the years 2017 through 2018.

The Company paid $ 1.1 million in contingent payments related to this acquisition.

The Company completed the fair value allocation in the second quarter of 2017.

The maximum potential future payments related to the contingent consideration is $ 10 million.

The amortization period for intangible assets acquired in connection with Hysitron is 7 years for customer relationships, trademarks and other intangibles and 5 years for existing technology.

Note 5—Fair Value of Financial Instruments

The Company measures the following financial assets and liabilities at fair value on a recurring basis.

The following tables set forth the Company’s financial instruments and presents them within the fair value hierarchy using the lowest level of input that is significant to the fair value measurement at December 31, 2019 and 2018 (dollars in millions):

Quoted Prices

December 31, 2019

Interest rate and cross currency swap agreements

Foreign exchange contracts

Embedded derivatives in purchase and delivery contracts

Fixed price commodity contracts

Total assets recorded at fair value

Contingent consideration

Hybrid instrument liability

Interest rate and cross currency swap agreements

Foreign exchange contracts

Embedded derivatives in purchase and delivery contracts

Total liabilities recorded at fair value

Quoted Prices

December 31, 2018

Foreign exchange contracts

Embedded derivatives in purchase and delivery contracts

Fixed price commodity contracts

Total assets recorded at fair value

Contingent consideration

Hybrid instrument liability

Foreign exchange contracts

Embedded derivatives in purchase and delivery contracts

Fixed price commodity contracts

Total liabilities recorded at fair value

Derivative financial instruments are classified within level 2 because there is not an active market for each derivative contract.

However, the inputs used to calculate the value of the instruments are obtained from active markets.

The fair value of the long-term fixed interest rate debt, which has been classified as Level 2, was $ 517.4 million and $ 228.8 million at December 31, 2019 and 2018, respectively, based on market and observable sources with similar maturity dates.

The Company measures certain assets and liabilities at fair value with changes in fair value recognized in earnings.

Excluded from the table above are restricted cash and short-term investments related to time and call deposits.

The Company has a program to enter into time deposits with varying maturity dates ranging from one to twelve months , as well as call deposits for which the Company has the ability to redeem the invested amounts over a period of 95 days .

The Company has classified these investments within cash and cash equivalents or short-term investments within the consolidated balance sheets based on call and maturity dates and these are not subject to fair value measurement.

The following tables set forth the balances of restricted cash and short-term investments as of December 31, 2019 and 2018 (dollars in millions):

Restricted Cash

Cash Equivalents

Short-term Investments

On a quarterly basis, the Company reviews its short-term investments to determine if there have been any events that could create an impairment.

None were noted for the years ended December 31, 2019 and 2018.

As part of certain acquisitions, the Company recorded contingent consideration liabilities that have been classified as Level 3 in the fair value hierarchy.

The contingent consideration represents the estimated fair value of future payments to the former shareholders of certain acquired companies based on the applicable acquired company achieving annual revenue and gross margin targets in certain years as specified in the relevant purchase and sale agreement.

The Company initially values the contingent considerations by using a Monte Carlo simulation or an income approach method.

The Monte Carlo method models future revenue and costs of goods

sold projections and discounts the average results to present value.

The income approach method involves calculating the earnout payment based on the forecasted cash flows, adjusting the future earnout payment for the risk of reaching the projected financials, and then discounting the future payments to present value by the counterparty risk.

The counterparty risk considers the risk of the buyer having the cash to make the earnout payments and is commensurate with a cost of debt over an appropriate term.

The following table sets forth the changes in contingent consideration liabilities for the years ended December 31, 2019 and 2018 (dollars in millions):

Balance at December 31, 2017

Current period additions

Current period adjustments

Current period settlements

Foreign currency effect

Balance at December 31, 2018

Current period additions

Current period adjustments

Current period settlements

Foreign currency effect

Allowance for Doubtful Accounts

The following is a summary of the components for allowance for doubtful accounts (in millions):

Balance at December 31, 2017

As part of the Mestrelab acquisition, the Company entered into an agreement with the noncontrolling interest holders that provides the Company with the right to purchase, and the noncontrolling interest holders with the right to sell, the remaining 49 % of Mestrelab for cash at a contractually defined redemption value.

These rights (an embedded derivative) are exercisable beginning in 2022 and can be accelerated, at a discounted redemption value, upon certain events related to post combination services.

As the option is tied to continued employment, the Company classified the hybrid instrument (noncontrolling interest with an embedded derivative) as a long-term liability on the consolidated balance sheet.

Subsequent to the acquisition, the carrying value of the hybrid instrument is remeasured to fair value with changes recorded to stock-based compensation expense in proportion to the requisite service period vested.

The hybrid instrument is classified as Level 3 in the fair value hierarchy.

The following table sets forth the changes in hybrid instrument liability for the year ended December 31, 2019 and 2018 (dollars in millions):

Balance at December 31, 2018

Current period additions

Balance at December 31, 2019

Current period additions

Balance at December 31, 2020

Note 6—Accounts Receivable

The following is a summary of accounts receivable, net at December 31, (dollars in millions):

Gross accounts receivable

Allowance for doubtful accounts

Accounts receivable, net

The allowance for doubtful accounts is based on a number of factors, including an evaluation of customer credit worthiness, the age of the outstanding receivable, economic trends and historical experience.

Provisions for

doubtful accounts are recorded in selling, general and administrative expenses in the accompanying consolidated statements of income and comprehensive income.

The following is a summary of the activity in the Company’s allowance for doubtful accounts at December 31, (dollars in millions):

End of Period

Note 7—Inventories

Inventories consisted of the following at December 31, (dollars in millions):

Inventories consisted of the following (in millions):

Raw materials

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Finished goods include in-transit systems that have been shipped to the Company’s customers but not yet installed and accepted by the customer.

As of December 31, 2019 and 2018, inventory-in-transit was $ 36.0 million and $ 38.3 million, respectively.

Note 8—Property, Plant and Equipment, Net

The following is a summary of property, plant and equipment, net by major asset class at December 31, (dollars in millions):

At December 31, 2020 and 2019, inventory-in-transit was $ 67.8 million and $ 36.0 million, respectively.

Property, Plant and Equipment, Net

The following is a summary of property, plant and equipment, net by major asset class (in millions):

Building and leasehold improvements

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Depreciation expense, which includes the amortization of leasehold improvements, for the years ended December 31, 2020, 2019 and 2018 was $ 44.7 million, $ 37.3 million and $ 36.0 million, respectively.

During the years ended December 31, 2019 and 2017, the Company recorded impairment charges of $ 0.5 million and $ 1.1 million, respectively, representing the write down to fair value of certain property, plant and equipment, net related to restructuring and outsourcing activities undertaken during the respective years.

These impairment charges are recorded within other charges, net in the accompanying consolidated statements of income and comprehensive income.

Please see Note 19 - other charges, net, for additional details on the restructuring activities.

There were no impairment charges in the year ended December 31, 2018.

Note 9—Goodwill and Intangible Assets

The following table sets forth the changes in the carrying amount of goodwill by segment for the years ended December 31, 2019, 2018 and 2017 (dollars in millions):

Goodwill and Intangible Assets

The following table sets forth the changes in the carrying amount of goodwill by segment (in millions):

Balance at December 31, 2017

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Balance at December 31, 2020

The Company performed its annual impairment evaluation using both a quantitative and qualitative approach at December 31, 2019, a quantitative approach at December 31, 2018 and a qualitative approach at December 31, 2017 and concluded it was more likely than not that goodwill has not been impaired.

As a result of the impact of the COVID-19 pandemic, the Company performed an interim impairment assessment of the goodwill balance as of March 31, 2020 using a combination of both quantitative and qualitative approaches.

Based on this interim assessment, the Company concluded the fair values of each of the reporting

units were significantly greater than their carrying amounts, and therefore, no impairment is required.

The goodwill assessment was based on management's estimates and assumptions, certain of which are dependent on external factors.

No further triggering events were identified subsequent to March 31, 2020.

To the extent actual results differ materially from these estimates, and the risks presented by COVID-19 and the current economic environment persist to negatively affect the Company’s operations in subsequent periods, further interim impairment assessments could be required, which could result in an impairment of goodwill.

The Company performed its annual impairment evaluation using both a quantitative and qualitative approach at December 31, 2020 and 2019, and a quantitative approach at December 31, 2018 and concluded it was more likely than not that goodwill has not been impaired.

Based on the most recent quantitative analysis the fair values of each of the Company’s reporting units was greater than their carrying amounts and, therefore, no impairment was required.

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Intangible Assets

The following is a summary of intangible assets at December 31, 2019 and 2018 (dollars in millions):

The following is a summary of intangible assets (in millions):

Existing technology and related patents

Customer relationships

Non compete conracts

Non-compete contracts

Intangible assets

For the years ended December 31, 2020, 2019 and 2018, the Company recorded amortization expense of approximately $ 35.8 million, $ 38.3 million and $ 28.9 million, respectively, in the consolidated statements of income and comprehensive income.

During the year ended December 31, 2019, the Company recorded an impairment charge of $ 1.2 million representing the impairment of the technology within the BSI Life Science Segment.

During the year ended December 31, 2018, the Company recorded an impairment charge of $ 0.6 million representing the impairment of the in-process research and development within the BSI Life Science Segment.

The estimated future amortization expense related to amortizable intangible assets at December 31, 2019 is as follows (dollars in millions):

Note 10—Other Current Liabilities

The following is a summary of other current liabilities at December 31, 2019 and 2018 (dollars in millions):

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

Other Current Liabilities

The following is a summary of other current liabilities (in millions):

Deferred revenue

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Operating leases

Legal and professional fees

Other accrued expenses

Other current liabilities

The following table sets forth the changes in accrued warranty for the years ended December 31, 2019, 2018 and 2017 (dollars in millions):

The following table sets forth the changes in accrued warranty (in millions):

Balance at December 31, 2017

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Balance at December 31, 2020

The Company’s debt obligations consist of the following as of December 31, 2019 and 2018 (dollars in millions):

US Dollar revolving loan under the 2015 Credit Agreement

The Company’s debt obligations consist of the following (in millions):

US Dollar notes under the 2012 Note Purchase Agreement

CHF Dollar notes under the 2019 Note Purchase Agreement

CHF notes (in dollars) under the 2019 Note Purchase Agreement

US Dollar notes under the 2019 Term Loan

Unamortized debt issuance costs

Other revolving loans

Capital lease obligations and other loans

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Total long-term debt, less current portion

There was no amount outstanding under the 2019 Revolving Credit Agreement as of December 31, 2019.

On December 11, 2019, the Company entered into (1) a new revolving credit agreement to establish a new revolving credit facility in the aggregate principal amount of $ 600 million;

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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.

The new revolving credit agreement replaces the Company’s $ 500 million five-year revolving credit agreement established on October 27, 2015, which was terminated on December 11, 2019.

The new revolving credit agreement replaced the Company’s $ 500 million five-year revolving credit agreement established on October 27, 2015, which was terminated on December 11, 2019.

The existing $ 105 million 4.31 % Series 2012A Senior Notes, Tranche C, due January 18, 2022, and the existing $ 100 million 4.46 % Series 2012A Senior Notes, Tranche D, due January 18, 2024, which the Company issued pursuant to a note purchase agreement dated January 18, 2012, remain in full force and effect.

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Borrowings under the 2019 Revolving Credit Agreement bear interest at a rate equal to, at the Company’s option, (a) the London Interbank Offered Rate ( LIBOR ) applicable to the relevant currency, plus a margin ranging from 1.000 % to 1.500 %, based on the Company’s leverage ratio, or (b) the highest of (i) the federal funds effective rate plus ½ of 1%, (ii) the prime rate announced by Bank of America, N.A., and (iii) LIBOR, as adjusted , plus 1 %, plus, in each case, a margin rate ranging from 0.100 % to 0.500 %, based on the Company’s leverage ratio.

The Company has also agreed to pay a quarterly facility fee based on the aggregate unused amount

available under the 2019 Revolving Credit Agreement ranging from 0.100 % to 0.200 %, based on the Company’s leverage ratio.

The Company has also agreed to pay a quarterly facility fee based on the aggregate unused amount available under the 2019 Revolving Credit Agreement ranging from 0.100 % to 0.200 %, based on the Company’s leverage ratio.

The 2019 Revolving Credit Agreement includes affirmative, negative and financial covenants and events of default customary for financings of this type.

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The events of default include, among others, payment defaults, defaults in the performance of affirmative and negative covenants, the inaccuracy of representations and warranties, bankruptcy and insolvency related events, certain ERISA events, material judgments, and the occurrence of a change of control.

The following is a summary of the maximum commitments and the net amounts available to the Company under the 2019 Revolving Credit Agreement and other lines of credit with various financial institutions located primarily in Germany and Switzerland that are unsecured and typically due upon demand with interest payable monthly, at December 31, 2019 (in millions):

primarily in Germany and Switzerland that are unsecured and typically due upon demand with interest payable monthly (dollars in millions):

Committed and

Uncommitted by

Interest Rate

2019 Credit Agreement

Other lines of credit

Total revolving loans

2015 Revolving Credit Agreement

On October 27, 2015, the Company entered into a revolving credit agreement, referred to as the 2015 Credit Agreement.

The 2015 Credit Agreement provided a maximum commitment on the Company’s revolving credit line of $ 500 million and a maturity date of October 2020.

The 2015 Revolving Credit Agreement was terminated in December 2019.

Borrowings under the revolving credit line of the 2015 Credit Agreement accrued interest, at the Company’s option, at either (a) the greatest of (i) the prime rate , (ii) the federal funds rate plus 0.50 % and (iii) adjusted LIBOR plus 1.00 %, plus margins ranging from 0.00 % to 0.30 % or (b) LIBOR , plus margins ranging from 0.90 % to 1.30 %.

There was also a facility fee ranging from 0.10 % to 0.20 %.

Borrowings under the 2015 Credit Agreement were guaranteed by certain of the Company’s material subsidiaries.

The 2015 Credit Agreement also required the Company to maintain certain financial ratios related to maximum leverage and minimum interest coverage.

In addition to the financial ratios, the 2015 Credit Agreement contained negative covenants, including among others, restrictions on liens, indebtedness of the Company and its subsidiaries, asset sales, dividends and transactions with affiliates.

Bank guarantees and working capital line

Total revolving lines of credit

2019 Term Loan Agreement

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The obligations under the Term Loan Agreement are unsecured and are fully and unconditionally guaranteed by certain of the Company’s subsidiaries.

1% , (ii) the prime rate announced by Bank of America, N.A., and (iii) USD LIBOR , as adjusted, plus 1 %, plus a margin ranging from 0.100 % to 0.500 %, based on the Company’s leverage ratio.

Amounts outstanding under the Term Loan Agreement bear interest at a rate equal to, at the Company’s option, (a) the US Dollar London Interbank Offered Rate ( USD LIBOR ), plus a margin ranging from 1.000 % to 1.500 %, based on the Company’s leverage ratio, or (b) the highest of (i) the federal funds effective rate plus ½ of 1% , (ii) the prime rate announced by Bank of America, N.A., and (iii) USD LIBOR , as adjusted, plus 1 %, plus a margin ranging from 0.100 % to 0.500 %, based on the Company’s leverage ratio.

The other terms of the Term Loan Agreement are substantially similar to the terms of the 2019 Revolving Credit Agreement, including representations and warranties, affirmative, negative and financial covenants, and events of default.

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In the event of a change in control (as defined in the 2019 Note Purchase Agreement) of the Company, the Company may be required to prepay the 2019 Senior Notes at a price equal to 100 % of the principal amount thereof, plus accrued and unpaid interest and certain other fees and expenses.

The 2019 Note Purchase Agreement contains customary affirmative and negative covenants, including, among others, restrictions on the Company’s ability to incur liens, transfer or sell equity or assets, engage in certain mergers and consolidations, enter into transactions with affiliates, and engage or permit any subsidiary to engage in certain lines of business.

certain mergers and consolidations, enter into transactions with affiliates, and engage or permit any subsidiary to engage in certain lines of business.

The 2019 Note Purchase Agreement also includes customary representations and warranties and events of default.

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On January 18, 2017, the outstanding $ 20.0 million principal amount of Tranche A of the 2012 Senior Notes was repaid in accordance with the terms of the 2012 Note Purchase Agreement.

On January 18, 2019, the

outstanding $ 15.0 million principal amount of Tranche B of the 2012 Senior Notes was repaid in accordance with the terms of the 2012 Note Purchase Agreement.

On January 18, 2019, the outstanding $ 15.0 million principal amount of Tranche B of the 2012 Senior Notes was repaid in accordance with the terms of the 2012 Note Purchase Agreement.

Under the terms of the 2012 Note Purchase Agreement, interest is payable semi-annually on January 18 and July 18 of each year.

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In the case of any other event of default, a majority of the holders of the 2012 Senior Notes may declare all the 2012 Senior Notes to be due and payable immediately.

Pursuant to the 2012 Note Purchase Agreement, so long as any 2012 Senior Notes are outstanding the Company will not permit (i) its leverage ratio, as determined pursuant to the 2012 Note Purchase Agreement, as of the end of any fiscal quarter to exceed 3.50 to 1.00, (ii) its interest coverage ratio as determined pursuant to the 2012 Note Purchase Agreement as of the end of any fiscal quarter for any period of four consecutive fiscal quarters to be less than 2.50 to 1 or (iii) priority debt at any time to exceed 25 % of consolidated net worth, as determined pursuant to the 2012 Note Purchase Agreement.

As of December 31, 2019, the Company was in compliance with the financial covenants of all debt agreements.

Annual maturities of debt outstanding, less deferred financing cost amortization, at December 31, 2019 are as follows (dollars in millions):

As of December 31, 2019, the Company has entered into several cross-currency and interest rate swap agreements with a notional value of $ 150.0 million of U.S.

Pursuant to the 2012 Note Purchase Agreement, so long as any 2012 Senior Notes are outstanding, the Company will not permit (i) its leverage ratio, as determined pursuant to the 2012 Note Purchase Agreement, as of the end of any

fiscal quarter to exceed 3.50 to 1.00, (ii) its interest coverage ratio as determined pursuant to the 2012 Note Purchase Agreement as of the end of any fiscal quarter for any period of four consecutive fiscal quarters to be less than 2.50 to 1 or (iii) priority debt at any time to exceed 25 % of consolidated net worth, as determined pursuant to the 2012 Note Purchase Agreement.

As of December 31, 2020, the Company was in compliance with the covenants of all debt agreements.

Annual maturities of debt outstanding, less deferred financing cost amortization are as follows (in millions):

As of December 31, 2020 and 2019, the Company has entered into several cross-currency and interest rate swap agreements with a notional value of $ 150.0 million of U.S.

to Swiss Franc and a notional value of $ 355.0 million of U.S.

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These agreements qualify for hedge accounting and accordingly the change in fair value of the derivative are recorded in other comprehensive income as part of foreign currency translation adjustments and remain in accumulated comprehensive income (loss) attributable to Bruker Corporation in shareholders’ equity until the sale or substantial liquidation of the foreign operation.

difference between the interest rate received and paid under the interest rate and cross-currency swap agreements is recorded in interest and other income (expenses) in the consolidated statements of income and comprehensive income.

As a result of entering into these agreements, the Company has lowered net interest expense by $ 0.6 million during 2019.

The gains (losses) related to hedges of net asset investments in international operations that were recorded within the cumulative translational adjustment section of other comprehensive income were $6.8 million for the year ended December 31, 2019.

The difference between the interest rate received and paid under the interest rate and cross-currency swap agreements is recorded in interest and other income (expenses) in the consolidated statements of income and comprehensive income.

As a result of entering into these agreements, the Company has lowered net interest expense by $ 7.2 million and $ 0.6 million during 2020 and 2019, respectively.

The losses related to hedges of net asset investments in international operations that were recorded within the cumulative translational adjustment section of other comprehensive income were $ 47.1 million and $ 6.8 million for the years ended December 31, 2020 and 2019, respectively.

Interest expense for the years ended December 31, 2020, 2019 and 2018 was $ 14.4 million, $ 16.0 million and $ 12.6 million, respectively.

Note 12—Derivative Instruments and Hedging Activities

Interest Rate Risks

Fair Value of Financial Instruments

The Company measures the following financial assets and liabilities at fair value on a recurring basis.

Quoted Prices

December 31, 2020

Time deposits and money market funds

Short-term investments

Interest rate and cross currency swap agreements

Foreign exchange contracts

Embedded derivatives in purchase and delivery contracts

Fixed price commodity contracts

Debt securities available for sale

Total assets recorded at fair value

Contingent consideration

Hybrid instrument liability

Interest rate and cross currency swap agreements

Foreign exchange contracts

Total liabilities recorded at fair value

Quoted Prices

December 31, 2019

Time deposits and money market funds

Short-term investments

Interest rate and cross currency swap agreements

Foreign exchange contracts

Embedded derivatives in purchase and delivery contracts

Fixed price commodity contracts

Total assets recorded at fair value

Contingent consideration

Hybrid instrument liability

Interest rate and cross currency swap agreements

Foreign exchange contracts

Embedded derivatives in purchase and delivery contracts

Total liabilities recorded at fair value

Derivative financial instruments are classified within level 2 because there is not an active market for each derivative contract.

However, the inputs used to calculate the value of the instruments are obtained from active markets.

The Company measures certain assets and liabilities at fair value with changes in fair value recognized in earnings.

Fair value treatment may be elected either upon initial recognition of an eligible asset or liability or, for an existing asset or liability, if an event triggers a new basis of accounting.

The Company did not elect to remeasure any of its existing financial assets or liabilities and did not elect the fair value option for any financial assets or liabilities which originated during the year ended December 31, 2020 or 2019.

The fair value of the long-term fixed interest rate debt, which has been classified as Level 2, was $ 549.8 million and $ 517.4 million at December 31, 2020 and 2019, respectively, based on market and observable sources with similar maturity dates.The remaining long-term debt has variable interest rates and the cost approximates fair value accordingly.

On a quarterly basis, the Company reviews its short-term investments to determine if there have been any events that could create an impairment.

None were noted for the years ended December 31, 2020, 2019 and 2018.

Debt securities consist of investments in redeemable preferred stock.

Debt securities are classified as either current or long-term investments based on their contractual maturities unless the Company intends to sell an investment within the next twelve months, in which case it is classified as current on the consolidated balance sheets.

Debt securities are classified as available for sale and are carried at fair value.

Contingent consideration recorded within other current liabilities represents the estimated fair value of future payments to the former shareholders as part of certain acquisitions.

These contingent considerations are primarily based on the applicable acquired company achieving annual revenue and gross margin targets in certain years as specified in the relevant purchase and sale agreement.

The Company initially values the contingent consideration on acquisition date by using a Monte Carlo simulation or an income approach method.

The Monte Carlo method models future revenue and costs of goods sold projections and discounts the average results to present value.

The income approach method involves calculating the earnout payment based on the forecasted

cash flows, adjusting the future earnout payment for the risk of reaching the projected financials, and then discounting the future payments to present value by the counterparty risk.

The counterparty risk considers the risk of the buyer having the cash to make the earnout payments and is commensurate with a cost of debt over an appropriate term.

The following table sets forth the changes in contingent consideration liabilities (in millions):

Balance at December 31, 2018

Current period additions

Current period adjustments

Current period settlements

Foreign currency effect

Balance at December 31, 2019

Current period additions

Current period adjustments

Current period settlements

Foreign currency effect

Balance at December 31, 2020

These rights (an embedded derivative) are exercisable beginning in 2022 and can be accelerated, at a discounted redemption value, upon certain events related to post combination services.

The hybrid instrument is classified as Level 3 in the fair value hierarchy.

The following table sets forth the changes in hybrid instrument liability (in millions):

Balance at December 31, 2018

Current period additions

Balance at December 31, 2019

Current period additions

Foreign currency effect

Balance at December 31, 2020

Derivative Instruments and Hedging Activities

Interest Rate Risk

The Company’s exposure to interest rate risk relates primarily to outstanding variable rate debt and adverse movements in the related market rates.

Typically, the most significant component of the Company’s interest rate risk relates to amounts outstanding under the 2019 Credit Agreement and the 2019 Term Loan.

Commodity Price Risk Management

The Company has arrangements with certain customers under which it has a firm commitment to deliver copper based superconductors at a fixed price.

In order to minimize the volatility that fluctuations in the price of copper have on the Company’s sales of these commodities, the Company enters into commodity hedge contracts.

At December 31, 2020 and 2019, the Company has fixed price commodity contracts with notional amounts aggregating $ 8.8 million and $ 5.6 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.

Foreign Exchange Rate Risk Management

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Dollars or other currencies on specified dates with maturities of less than twelve months, with some agreements extending to longer periods.

These transactions do not qualify for hedge accounting and, accordingly, the instrument is recorded at fair value with the corresponding gains and losses recorded in the consolidated

statements of income and comprehensive income.

The Company had the following notional amounts outstanding under foreign exchange contracts and cross-currency interest rate swap agreements at December 31, (in millions):

Amount in Buy

Fair Value of

December 31, 2019:

Forward Currency Contracts (1):

Swedish Krona

Singapore Dollar

Great Britain Pound

February 2020 to January 2021

Cross-Currency and Interest Rate Swap Agreements (2):

December 2024

These transactions do not qualify for hedge accounting and, accordingly, the instrument is recorded at fair value with the corresponding gains and losses recorded in the consolidated statements of income and comprehensive income.

The Company had the following notional amounts outstanding under foreign exchange contracts and cross-currency interest rate swap agreements (in millions):

December 31, 2020

December 31, 2019

Notional Amount

Forward Currency Contracts (1):

Canadian Dollars

Singapore Dollar

Chinese Renminbi

Great Britain Pound

May 2019 to October 2020

Cross-Currency and Interest Rate Swap Agreements (2):

Derivatives not designated as accounting hedges.

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The contracts, denominated in currencies other than the functional currency of the transacting parties, amounted to $ 7.5 million for the delivery of products and $ 4.8 million for the purchase of products at December 31, 2020 and $ 12.3 million for the delivery of products and $ 6.1 million for the purchase of products at December 31, 2019.

These purchase and sale contracts are not designated as accounting hedges.

The changes in the fair value of these embedded derivatives are recorded in interest and other income (expense), net in the consolidated statements of income and comprehensive income.

Commodity Price Risk Management

The Company has an arrangement with a customer under which it has a firm commitment to deliver copper based superconductors at a fixed price.

In order to minimize the volatility that fluctuations in the price of copper have on the Company’s sales of these commodities, the Company enters into commodity hedge contracts.

These commodity contracts are not designated as accounting hedges.

At December 31, 2019 and 2018, the Company has fixed price commodity contracts with notional amounts aggregating $ 5.6 million and $ 6.8 million, respectively.

The changes in the fair value of these commodity contracts are recorded in interest and other income (expense), net in the consolidated statements of income and comprehensive income.

The fair value of the derivative instruments described above were recorded in the consolidated balance sheets for the years ended December 31, 2019 and 2018 as follows (dollars in millions):

Balance Sheet Location

Derivative assets:

Interest rate and cross currency swap agreements

Other current assets

Foreign exchange contracts

Other current assets

Embedded derivatives in purchase and delivery contracts

The fair value of the derivative instruments described above were recorded in the consolidated balance sheets as follows (in millions):

Derivatives designated as hedging instruments

Interest rate cross-currency swap agreements

Other current assets

Fixed price commodity contracts

Other current liabilities

Other long-term liabilities

Total derivatives designated as hedging instruments

Derivatives not designated as hedging instruments

Forward currency contracts

Other current assets

Embedded derivatives in purchase and delivery contracts

Other long-term assets

Derivative liabilities:

Foreign exchange contracts

Other current liabilities

Embedded derivatives in purchase and delivery contracts

Other current assets

Other current liabilities

Fixed price commodity contracts

Other current liabilities

Interest rate and cross currency swap agreements

Other long-term liabilities

The impact on net income of unrealized gains and losses resulting from changes in the fair value of derivative instruments for the years ending December 31 are as follows (dollars in millions) and are recorded within interest and other income (expense), net in the consolidated statements of income and comprehensive income:

Foreign exchange contracts

Other current assets

Total derivatives not designated as hedging instruments

Total derivatives

The following is a summary of the activity included in the consolidated statements of income and comprehensive income related to the derivative instruments described above (in millions):

Financial Statement Classification

Derivatives not designated as hedging instruments

Forward currency contracts

Interest and other income (expense), net

Embedded derivatives in purchase and delivery contracts

Fixed price commodity contracts

Cross-currency interest rate swap agreements

Income (expense), net

Note 13—Income Taxes

The domestic and foreign components of income before taxes are as follows for the years ended December 31, (dollars in millions):

The components of the income tax provision are as follows for the years ended December 31, (dollars in millions):

Interest and other income (expense), net

Derivatives designated as Cash Flow hedging instruments

Interest rate cross-currency swap agreements

Interest incurred

Interest and other income (expense), net

Unrealized gains (losses) on contracts

Accumulated other comprehensive income

Derivatives designated as Net Investment hedging instruments

Interest rate cross-currency swap agreements

Interest earned

Interest and other income (expense), net

Unrealized losses on contracts

Accumulated other comprehensive income

The domestic and foreign components of income before taxes are as follows (in millions):

Total income before provision for income taxes

The components of the income tax provision are as follows (in millions):

Current income tax expense:

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The income tax provision differs from the tax provision computed at the U.S.

federal statutory rate due to the following significant components for the years ended December 31:

federal statutory rate due to the following significant components:

Statutory tax rate

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Withholding taxes

Permanent reinvestment assertion accrual

Repatriation of foreign earnings

State income taxes, net of federal benefits

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Effective tax rate

The tax effect of temporary items that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2019 and 2018 are as follows (dollars in millions):

The tax effect of temporary items that give rise to significant portions of the deferred tax assets and liabilities are as follows (in millions):

Deferred tax assets:

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Deferred revenue

Disallowed interest carryforward

Net operating loss carryforwards

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Accounts receivable

Deferred revenue

Foreign statutory reserves

Foreign patent reserves

Accrued expenses

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The Company can only recognize a deferred tax asset to the extent this it is “more likely than not” that these assets will be realized.

Judgments around realizability depend on the availability and weight of both positive and

negative evidence.

Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2019, 2018 and 2017 were as follows:

Balance at December 31, 2016

Decreases recorded as a benefit to income tax provision

Judgments around realizability depend on the availability and weight of both positive and negative evidence.

Changes in the valuation allowance for deferred tax assets were as follows (in millions):

Balance at December 31, 2017

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Balance at December 31, 2019

Increases recorded as part of acquisition purchase accounting

Balance at December 31, 2020

As of December 31, 2020, the Company has approximately $ 65.2 million net operating loss carryforwards available to reduce state taxable income that are expected to expire at various times beginning in 2021.

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Additionally, the Company has $ 18.5 million of other foreign net operating losses that are expected to expire at various times beginning in 2021.

The Company also has state research and development tax credits of $ 7.7 million.

Utilization of these credits and state net operating losses may be subject to annual limitations due to the ownership percentage change limitations provided by the Internal Revenue Code Section 382 and similar state provisions.

In the event of a deemed change in control under Internal Revenue Code Section 382, an annual limitation on the utilization of net operating losses and credits may result in the expiration of all or a portion of the net operating loss and credit carryforwards.

The Company also has state research and development tax credit carryforwards of $ 7.1 million.

Utilization of these credits and state net operating losses may be subject to annual limitations due to the ownership percentage change limitations provided by the Code Section 382 and similar state provisions.

In the event of a deemed change in control under Code Section 382, an annual limitation on the utilization of net operating losses and credits may result in the expiration of all or a portion of the net operating loss and credit carryforwards.

At December 31, 2020 the Company recorded state income and foreign withholding taxes on the cash and liquid assets portion of the unremitted earnings and profits (E&P) of foreign subsidiaries expected to be repatriated from its foreign subsidiaries to the United States, except for amounts from certain subsidiaries, which the Company has asserted to be indefinitely reinvested.

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In the next twelve months it is reasonably possible that the Company will reduce its unrecognized tax benefits by an immaterial amount due to the expiration of statutes of limitations.

A tabular reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (dollars in millions):

A tabular reconciliation of the Company’s gross unrecognized tax benefits is as follows (in millions):

Gross unrecognized tax benefits at December 31, 2017

Gross increases - tax positions in prior periods

Lapse of statutes

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Gross increases - tax positions in prior periods

Gross increases - current period tax positions

Lapse of statutes

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Gross increases - current period tax positions

Lapse of statutes

Gross unrecognized tax benefits at December 31, 2020

The Company’s policy is to include accrued interest and penalties related to unrecognized tax benefits and income tax liabilities, when applicable, in income tax expense.

As of December 31, 2019 and 2018, the Company

had approximately $ 0.4 million and $ 0.2 million, respectively, of accrued interest and penalties related to uncertain tax positions included in other long-term liabilities in the consolidated balance sheets.

The Company recorded a benefit of $ 0.2 million for penalties and interest related to unrecognized tax benefits in the provision for income taxes during the year ended December 31, 2018.

At December 31, 2020 and 2019, the Company had approximately $ 1.8 million and $ 0.7 million, respectively, of accrued interest and penalties related to uncertain tax positions included in other long-term liabilities in the consolidated balance sheets.

The Company recorded an expense of $ 1.1 million for penalties and interest related to unrecognized tax benefits in the provision for income taxes during the year ended December 31, 2020.

There was no benefit recognized during the year ended December 31, 2020.

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statutory rate of 21 % in 2020.

The Company has not been a party to any tax holiday agreements.

The tax years 2013 to 2016 are open to examination in Germany and Switzerland.

In 2016, the Company settled tax audits in Germany and Switzerland.

years 2013 through present are open to examination in Germany and Switzerland.

During the 2020 fiscal year, the Company settled tax audits in some of the entities located in Germany for tax years 2013 and 2014.

The settlements were immaterial to the consolidated financial statements.

Tax years 2013 to 2018 remain open for examination in the United States.

On December 22, 2017 (Enactment Date), the President of the United States signed tax reform legislation (2017 Tax Act), which enacted a wide range of changes to the U.S.

corporate income tax system, many of which differ significantly from the provisions of the previous U.S.

The 2017 Tax Act contains several key provisions including, among other things:

● A reduction in the corporate tax rate from 35.0 % to 21.0 % for the tax years beginning after December 31, 2017;

● The introduction of a territorial tax system beginning in 2018 by providing a 100 % dividends received deduction on certain qualified dividends from foreign subsidiaries;

● To fund the territorial tax system, a one-time tax on the mandatory deemed repatriation of post-1986 untaxed foreign earnings and profits (E&P), referred to as the “toll charge”, and;

● The introduction of a new U.S.

tax on certain off-shore earnings associated with so-called “Global Intangible Low-Taxed Income” (GILTI).

This tax is imposed at an effective tax rate of 10.5 % for tax years beginning after December 31, 2017 (increasing to 13.125 % for tax years beginning after December 31, 2025) with a partial offset by foreign tax credits.

Also on December 22, 2017, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No.

118, which provides companies with additional guidance on how to implement the provisions of the 2017 Tax Act in their financial statements.

The guidance provides for a measurement period, up to one year from the Enactment Date, in which provisional amounts may be adjusted when additional information is obtained, prepared or analyzed about facts and circumstances that existed as of the Enactment Date, if known, which would have impacted the amounts that were initially recorded by the Company.

During the fourth quarter of 2017, the Company recognized within its provision for income taxes an incremental income tax provision of $ 68.9 million, which is primarily comprised of the following:

● An estimated income tax provision of $ 55.0 million for the federal and state impacts of the one-time deemed repatriation of pre-2018 E&P.

In accordance with the 2017 Tax Act, the federal portion of the toll charge liability may be paid over eight years .

Such liability can be reduced by certain credits.

Accordingly, we have recorded $ 30.6 million and $ 2.7 million in long-term income tax liabilities and accrued income taxes (current), respectively, as of December 31, 2017

● An estimated net income tax benefit of $ 1.4 million, for the remeasurement of our deferred tax assets and liabilities at the newly enacted tax rate of 21 %;

● As a result of the 2017 Tax Act and our expectations about distributing certain cash balances from its foreign subsidiaries to the United States, we also recorded estimated income tax provisions for estimated state income taxes and foreign withholding taxes of $ 12.5 million.

Tax years 2013 through present remain open for examination in the United States.

In 2020, the Company was granted an income tax holiday for our manufacturing facility in Malaysia.

The tax holiday allows for tax-free operations through February 28, 2023, with the option to apply for a 5 year extension if certain conditions are met, Malaysia tax holiday has an immaterial impact to earnings per share for the year ended December 31, 2020.

In connection with the Tax Act, the SEC issued Staff Accounting Bulletin No.

118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), to provide guidance to companies that had not completed their accounting for the income tax effects of the Tax Act.

Under SAB 118, companies were permitted to record provisional amounts to the extent reasonable estimates could be made.

Additionally, upon obtaining, preparing, or analyzing additional information (including computations), companies were permitted to record additional tax effects and adjustments to previously recorded provisional amounts within one year from the enactment date of the Tax Act.

During the fourth quarter of 2018, the Company completed its accounting for the elements of U.S.

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federal statutory tax rate from 35 % to 21 %.

During 2019, the Company recorded a tax adjustment equal to a net benefit of $ 1.6 million related to the recalculation of the toll charge liability.

The Company expects to reflect this change on a 2017 amended tax return.

During 2020, the Company recorded a tax expense of $ 1.1 million related to the recalculation of the toll charge liability as reflected on a 2017 amended tax return.

The total toll charge liability as of December 31, 2020 was $ 35.4 million.

Of that amount, approximately $ 8.5 million has already been paid.

The Company recorded tax expense associated with the GILTI provisions of the 2017 Tax Act as of December 31, 2019.

Companies are allowed to adopt an accounting policy to either recognize deferred taxes for GILTI or treat such as a tax cost in the year incurred.

The Company has determined to treat such as a tax cost in the year incurred.

As such, the Company did not record a deferred income tax expense or benefit related to the GILTI provisions of the 2017 Tax Act in the consolidated statement of income for the year ended December 31, 2019.

Note 14—Post Retirement Benefit Plans

In 2020, the U.S.

Treasury Department issued final regulations regarding Foreign Derived Intangible Income (“FDII”) and Global Intangible Low-Taxed Income (“GILTI”).

We have determined we will elect the GILTI high tax exception as allowed by the final regulations and we will be assessing the impact to our 2018 and 2019 US Federal consolidated income tax returns.

Operating lease cost is recognized over the lease term on a straight-line basis, while finance lease cost is amortized over the expected term on a straight-line basis.

Variable lease cost not dependent on an index or rate is recognized when incurred and typically consists of amounts owed by the Company to a lessor that are not fixed, such as reimbursement for common area maintenance and utilities cost.

The components of lease expense were as follows (in millions):

Amortization of right-of-use assets

Interest on lease liabilities

Total finance lease cost

Operating lease cost

Short term lease cost

Variable lease cost

Sublease income

Total lease cost

Prior to the adoption of the new lease standard, total rental expense under operating leases was $ 25.1 million during the year ended December 31, 2018.

Supplemental balance sheet information related to leases was as follows (dollars in millions):

Operating leases

Operating lease assets, net

Other current liabilities

Operating lease liability - long term

Weighted average remaining lease term

Weighted average discount rate

Finance leases

Property, plant and equipment, net

Current portion of long-term debt

Long-term debt

Weighted average remaining lease term

Weighted average discount rate

Supplemental cash flow information related to leases was as follows (in millions):

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from finance leases

Operating cash flows from operating leases

Financing cash flows from finance leases

Right-of-use assets obtained in exchange for lease liabilities

Operating leases

Finance leases

Future lease payments under operating leases and finance leases as follows (in millions):

Operating Leases

Finance Leases

Twelve months ending December 31:

Total undiscounted lease payments

imputed interest

Total lease liabilities

Post Retirement Benefit Plans

Defined Contribution Plans

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The Company records pension service cost within cost of sales, selling, general and administrative, and research and development expenses while non-service related pension costs are recorded within interest and other income (expense), net in the consolidated statements of income and comprehensive income.

The components of

net periodic benefit costs for the years ended December 31, 2019, 2018 and 2017 were as follows (dollars in millions):

The components of net periodic benefit costs included in the accompanying consolidated statements of income were as follows (in millions):

Components of net periodic benefit costs:

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The Company measures its benefit obligation and the fair value of plan assets as of December 31st each year.

The changes in benefit obligations and plan assets under the defined benefit pension plans, projected benefit obligation and funded status of the plans were as follows at December 31, (dollars in millions):

The changes in benefit obligations and plan assets under the defined benefit pension plans, projected benefit obligation and funded status of the plans were as follows (in millions):

Change in benefit obligation:

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Net under-funded status

Plan amendments relate to a reduction in the conversion rate for the pension plan in Switzerland that will be effective in 2022.

The accumulated benefit obligation for the defined benefit pension plans is $ 260.4 million and $ 243.6 million at December 31, 2020 and 2019, respectively.

All defined benefit pension plans have an accumulated benefit obligation and projected benefit obligation in excess of plan assets at December 31, 2020 and 2019.

The following amounts were recognized in the accompanying consolidated balance sheets for the Company’s defined benefit plans at December 31, (dollars in millions):

The following amounts were recognized in the accompanying consolidated balance sheets for the Company’s defined benefit plans (in millions):

Current liabilities

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Net benefit obligation

The following pre-tax amounts were recognized in accumulated other comprehensive income for the Company’s defined benefit plans at December 31, (dollars in millions):

The following pre-tax amounts were recognized in accumulated other comprehensive income for the Company’s defined benefit plans (in millions):

Reconciliation of amounts recognized in the consolidated balance sheets:

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The range of assumptions used for defined benefit pension plans reflects the different economic environments within the various countries.

The range of assumptions used to determine the net periodic benefit costs and the projected benefit obligations for the years ended December 31 , are as follows:

The range of assumptions used to determine the net periodic benefit costs and the projected benefit obligations are as follows:

Discount rates

0.1 % - 1.3 %

0.3 % - 2.3 %

0.2 % - 2.3 %

Expected return on plan assets

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Asset Allocations by Asset Category

The fair value of the Company’s pension plan assets at December 31, 2019 and 2018, by asset category and by level in the fair value hierarchy, is as follows (dollars in millions):

The fair value of the Company’s pension plan assets by asset category and by level in the fair value hierarchy, is as follows (in millions):

Quoted Prices in

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(b) The Company’s pension plan in Switzerland is outsourced to Swiss Life AG, an outside insurance provider.

Under the insurance contract, the plan assets are invested in Swiss Life Collective BVG Foundation (the Foundation), which is an umbrella fund for which the retirement savings and interest rates are guaranteed a minimum of 1.0 % for the years ended December 31, 2019 and 2018 on the mandatory withdrawal portion, as defined by Swiss law, and 0.25 % for the years ended December 31, 2019 and 2018 on the non-mandatory portion.

Under the insurance contract, the plan assets are invested in Swiss Life Collective BVG Foundation (the Foundation), which is an umbrella fund for which the retirement savings and interest rates are guaranteed a minimum of 1.0 % on the mandatory withdrawal portion, as defined by Swiss law, and 0.125 % on the non-mandatory portion starting 2021.

The Foundation utilizes plan administrators and investment managers to oversee the investment allocation process, set long-term strategic targets and monitor asset allocations.

The target allocations are 75 % bonds, including cash, 5 % equity investments and 20 % real estate and mortgages.

The target allocations are 65 % bonds, 2.5 % cash, 7.5 % equity investments and 25 % real estate and mortgages.

Should the Foundation yield a return greater than the guaranteed amounts, the Company, according to Swiss law, shall receive 90 % of the additional return with Swiss Life AG retaining 10 % .

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The estimated future benefit payments are based on the same assumptions used to measure the Company’s benefit obligation at December 31, 2020.

The following benefit payments reflect future employee service as appropriate (dollars in millions):

Note 15—Leases

In February 2016, the FASB issued ASU No.

2016-02, Leases, which provides guidance on the recognition, measurement, presentation and disclosure of leases.

The new standard, effective as of January 1, 2019, superseded previous U.S.

GAAP guidance on leases and requires all leases with terms longer than 12 months to be reported on the balance sheet as right-of-use (ROU) assets and lease liabilities, as well as provide additional disclosures.