BRUKER CORP 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of our financial condition and results of operations should be read in conjunction with our interim unaudited condensed consolidated financial statements and the notes to those statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q, and in conjunction with the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2020. Statements contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Quarterly Report on Form 10-Q, which express that we “believe,” “anticipate,” “plan,” “expect,” “seek,” “may,” “will,” “intend,” “estimate,” “should” and similar expressions are intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Any forward-looking statements contained herein are based on current expectations but are subject to a number of risks and uncertainties. Forward looking statements include, but are not limited to, statements regarding the impact of COVID-19 on our business, operations, and supply chain, including our implementation of certain cost cutting measures and their impact, expectations regarding the global economy, our intentions regarding our intellectual property, the impact of government contracts and government regulation, our working capital requirements and sufficiency of cash, our competition, the seasonality of our business, the sufficiency of our facilities, our employee relations, the impact of legal or intellectual property proceedings, the impact of changes to tax and accounting rules and changes in law, our anticipated tax rate, our expectations regarding cash dividends, share repurchases, interest expense, interest rate swap agreements, expenses and capital expenditures, the impact of foreign currency exchange rates and changes in commodity prices, the impact of our restructuring initiatives, our expectations regarding backlog and revenue and other risk factors discussed herein and from time to time in our other filings with the Securities and Exchange Commission, or SEC. These and other factors are identified and described in more detail in our filings with the SEC, including, without limitation, our annual report on Form 10-K for the year ended December 31, 2020 and subsequent filings. We expressly disclaim any intent or obligation to update these forward-looking statements other than as required by law. Non-GAAP Measures Although our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP), we believe describing revenue and expenses, excluding the effects of foreign currency, acquisitions and divestitures, as well as certain other charges, net, provides meaningful supplemental information regarding our performance. We rely internally on certain measures that are not calculated according to GAAP. These measures are organic revenue, free cash flow, non-GAAP gross profit margin and non-GAAP operating margin. Our management believes that these financial measures provide relevant and useful information that is widely used by equity analysts, investors and competitors in our industry, as well as by our management, in assessing both consolidated and business unit performance. We define the term organic revenue as GAAP revenue excluding the effect of foreign currency translation changes and the effect of acquisitions and divestitures. We define the term non-GAAP gross profit margin as GAAP gross profit margin with certain non-GAAP measures excluded and non-GAAP operating margin as GAAP operating margin with certain non-GAAP measures excluded. These non-GAAP measures exclude costs related to restructuring actions, acquisition and related integration expenses, amortization of acquired intangible assets, costs associated with our global information technology transition initiative, and other non-operational costs and we believe these are useful measures to evaluate our continuing business. We define free cash flow as net cash provided by operating activities less additions to property, plant, and equipment. We believe free cash flow is a useful measure to evaluate our business as it indicates the amount of cash generated after additions to property, plant, and equipment which is available for, among other things, investments in our business, acquisitions, share repurchases, dividends and repayment of debt. We regularly use these non-GAAP financial measures internally to understand, manage, and evaluate our business results and make operating decisions. We also measure our employees and compensate them, in part, based on such non-GAAP measures and use this information for our planning and forecasting activities. These measures may also be useful to investors in evaluating the underlying operating performance of our business. The presentation of these non-GAAP financial measures is not intended to be a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP and may be different from non-GAAP financial measures used by other companies, and therefore, may not be comparable among companies. OVERVIEW We are a developer, manufacturer and distributor of high-performance scientific instruments and analytical and diagnostic solutions that enable our customers to explore life and materials at microscopic, molecular and cellular levels. Our corporate headquarters are located in Billerica, Massachusetts. We maintain major technical and manufacturing centers in Europe, Asia and North America and we have sales offices located throughout the world. Bruker is organized into three reportable segments: the BSI Life Science Segment (comprised of the Bruker BioSpin Group and the Bruker CALID Group), the BSI NANO Segment and the Bruker Energy & Supercon Technologies (BEST) Segment. 19 Table of Contents Revenue for the three months ended March 31, 2021 increased by $130.7 million, or 30.8%, to $554.7 million, compared to $424.0 million for the comparable period in 2020. Included in revenue was an increase of approximately $26.8 million from foreign currency translation and an increase of $3.2 million from acquisitions. Excluding the effects of foreign currency translation and our recent acquisitions, our organic revenue, a non-GAAP measure, increased $100.7 million. Revenue increases were driven by strong demand for our high performance life science tools, scientific instruments and diagnostic solutions. Our gross profit margin increased to 50.2% during the three months ended March 31, 2021 compared to 45.4% for the three months ended March 31, 2020. Our operating margin increased to 16.1% for the three months ended March 31, 2021 compared to 3.9% during the three months ended March 31, 2020. The increase in gross and operating margin was a result of higher revenue, volume, operating leverage and contributions from higher margin products. Our income tax provision in the three months ended March 31, 2021 and 2020 was $27.5 million and $2.9 million, respectively, representing effective tax rates of 32.2% and 21.5%, respectively. The increase in our effective tax rate was primarily due to the jurisdictional mix and the impact of unfavorable discrete items in the period. Diluted earnings per share for the three months ended March 31, 2021 were $0.37, an increase of $0.30 compared to $0.07 per share in the three months ended March 31, 2020. The increase in net income and earnings per diluted share was primarily driven by higher revenue, gross profit and operating profit in the three months ended March 31, 2021. The following table presents a reconciliation from net cash provided by operating activities, which is the most directly comparable GAAP operating financial measure, to free cash flow as used by management (in millions): Three Months Ended March 31, 2021 2020 Net cash provided by operating activities $ 98.0 $ 35.0 Less: purchases of property, plant and equipment (24.7 ) (30.5 ) Free Cash Flow $ 73.3 $ 4.5 The following table presents a reconciliation from gross profit, which is the most directly comparable GAAP operating performance measure, to non-GAAP gross profit margin as used by management (in millions): Three Months Ended March 31, 2021 2020 Gross profit $ 278.7 $ 192.3 Restructuring costs 1.1 0.8 Purchased intangible amortization 4.5 4.9 Other costs — 0.1 Non-GAAP gross profit $ 284.3 $ 198.1 Our non-GAAP gross profit was 51.3% and 46.7% in the three months ended March 31, 2021 and 2020, respectively. Our non-GAAP gross profit margin increased due to volume leverage and contributions from higher margin products in 2021, as compared to 2020 which was negatively impacted by the COVID-19 pandemic. 20 Table of Content s The following table presents a reconciliation from operating income, which is the most directly comparable GAAP operating performance measure, to non-GAAP operating income as used by management (in millions): Three Months Ended March 31, 2021 2020 Operating income $ 89.1 $ 16.4 Restructuring costs 2.4 2.3 Acquisition-related costs 0.9 (1.1 ) Purchased intangible amortization 9.0 8.7 Other costs 0.8 5.9 Non-GAAP operating income $ 102.2 $ 32.2 Our non-GAAP operating margin was 18.4% and 7.6% in the three months ended March 31, 2021 and 2020, respectively. Our non-GAAP operating margin increased in 2021, as compared to 2020 due to higher revenue, gross margins and operating leverage in 2021, as compared to 2020 which was negatively impacted by the COVID-19 pandemic. We can experience quarter-to-quarter fluctuations in our operating results as a result of various factors, some of which are outside our control, such as: • the impact of the COVID-19 global pandemic on our customers, supply chain or manufacturing capabilities; • the timing of governmental stimulus programs and academic research budgets; • the time it takes between the date customer orders and deposits are received, systems are shipped and accepted by our customers and full payment is received; • foreign currency exchange rates; • the time it takes for us to receive critical materials to manufacture our products; • general economic conditions, including the impact of COVID-19 on the global economy; • the time it takes to satisfy local customs requirements and other export/import requirements; • the time it takes for customers to construct or prepare their facilities for our products; and • the time required to obtain governmental licenses. Several of these factors have in the past affected the amount and timing of revenue recognized on sales of our products and receipt of related payments and will likely continue to do so in the future. Accordingly, our operating results in any particular quarter may not necessarily be an indication of any future quarter’s operating performance. The COVID-19 pandemic continues to present a challenging operating environment and we remain focused on four key priorities: the health and safety of our employees, customers and partners; maintaining business continuity and service levels for our customers; executing prudent temporary cost reductions; and delivering enabling research and diagnostic products to help fight the pandemic, and to support other essential priorities of our society. Health and safety of our valued employees, customers and partners We have implemented strict social distancing, enhanced cleaning protocols and other preventative measures, such as temperature scanners and company-issued face coverings, in our major facilities. While many of our office colleagues are working remotely, we are placing enhanced focus on our service organization and factory employees for whom work from home is not feasible. Where customer sites are accessible and open, our field service organizations operate under social distancing protocols with proper face coverings to ensure the safety of customer sites, when our employees need to be on site. Many of our facilities have begun to plan for employees who have been working remotely during the pandemic to gradually return to the office. Employee and visitor health and safety will remain our paramount concern. 21 Table of Contents Maintaining business continuity and service levels to our customers Ensuring our ability to supply our enabling technologies and solutions and maintaining high service levels for our customers is another top priority for Bruker. In late March and during parts of April 2020, several of our manufacturing sites underwent temporary controlled shutdowns or were operating at reduced capacity to implement new safety protocols, comply with local rules, and manage cost and inventory levels. These sites thereafter ramped back up with expanding capacity and productivity levels. However, with any resurgence of the virus or the emergence of additional strains of the virus, particularly any new strains of the virus that are more resistant to existing vaccines, we may need to consider further temporary controlled shutdowns or reduced capacity measures. In addition, we are continuing capital investments in production facilities for efficiencies and expansion. We continue to manage supply chain risks, more recently associated with the economic recovery from the pandemic, like the worldwide shortage of semiconductor chips and components. Executing prudent temporary cost reductions In an effort to mitigate the negative impacts on our business of COVID-19 and the related slowdown in the global economy, we implemented temporary cost control and cost reduction measures in 2020. These temporary measures included short-time work for many of our European operations, temporary tiered salary reductions for our board of directors, global leadership team and workforce, one-to two-week closures of select manufacturing locations, selective product manufacturing reductions, a hiring freeze, and curtailment of non-strategic discretionary spending. At the same time, we looked to minimize the disruption for our employees and preserve our ability to ramp up again with our highly trained and loyal work force. While pursuing cost savings throughout the business, we have maintained our important investments in key strategic initiatives. Many of these cost reduction measures have now been relaxed and our revenue is experiencing a recovery. Delivering enabling research and diagnostic products to help fight the pandemic and to support other essential priorities of our society Bruker is providing critical technologies and solutions to help combat the COVID-19 crisis, most notably our Microbiology and infectious disease diagnostics portfolio, to which we have added SARS-COV-2 PCR tests, and our nuclear magnetic resonance and mass spectrometry systems which are used in critical disease, therapeutic and vaccine research. The COVID-19 global pandemic has driven volatility and uncertainty in global markets and has in the past affected our operations significantly. We continue to work to manage the impact of COVID-19 on our operations; however, the full extent to which any resurgence of the virus, the emergence of any new strains of the virus, or the availability and effectiveness of COVID-19 vaccines will impact our business, directly or indirectly, cannot accurately be predicted at this time. In 2020, the COVID-19 pandemic affected productivity at our manufacturing facilities and caused disruptions and delays in certain of our shipments to customers who closed facilities during the pandemic. We continue to monitor the impact of COVID-19 on our business and our supply chain and respond accordingly. For additional information on the various risks posed by the COVID-19 pandemic, refer to Item 1A. Risk Factors included in this report. CRITICAL ACCOUNTING POLICIES AND ESTIMATES This discussion and analysis of our financial condition and results of operations is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to: revenue recognition; stock-based compensation expense; restructuring and other related charges; income taxes, including the recoverability of deferred tax assets; allowances for doubtful accounts; inventory reductions for excess and obsolete inventories; estimated fair values of long-lived assets used to measure the recoverability of long-lived assets; intangible assets and goodwill; expected future cash flows used to measure the recoverability of intangible assets and long-lived assets; warranty costs; derivative financial instruments; and contingent liabilities. We base our estimates and judgments on our historical experience, current market and economic conditions, industry trends, and other assumptions that we believe are reasonable and form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates. We believe the following critical accounting policies and estimates to be both those most important to the portrayal of our financial position and results of operations and those that require the most estimation and subjective judgment. • Revenue recognition; • Income taxes; • Inventories; • Goodwill, other intangible assets and other long-lived assets; and • Business combinations. 22 Table of Contents For a further discussion of our critical accounting policies, please refer to our Annual Report on Form 10-K for the year ended December 31, 2020. RESULTS OF OPERATIONS Three Months Ended March 31, 2021 compared to the Three Months Ended March 31, 2020 Consolidated Results The following table presents our results (dollars in millions, except per share data): Three Months Ended March 31, 2021 2020 Dollar Change Percentage Change Product revenue $ 458.6 $ 345.0 $ 113.6 32.9 % Service revenue 94.1 78.2 15.9 20.3 % Other revenue 2.0 0.8 1.2 150.0 % Total revenue 554.7 424.0 130.7 30.8 % Cost of product revenue 220.9 180.5 40.4 22.4 % Cost of service revenue 54.8 51.1 3.7 7.2 % Cost of other revenue 0.3 0.1 0.2 200.0 % Total cost of revenue 276.0 231.7 44.3 19.1 % Gross profit 278.7 192.3 86.4 44.9 % Operating expenses: Selling, general and administrative 131.8 121.2 10.6 8.7 % Research and development 54.8 48.5 6.3 13.0 % Other charges, net 3.0 6.2 (3.2 ) (51.6 )% Total operating expenses 189.6 175.9 13.7 7.8 % Operating income 89.1 16.4 72.7 443.3 % Interest and other income (expense), net (3.8 ) (2.9 ) (0.9 ) 31.0 % Income before income taxes and noncontrolling interest in consolidated subsidiaries 85.3 13.5 71.8 531.9 % Income tax provision 27.5 2.9 24.6 848.3 % Consolidated net income 57.8 10.6 47.2 445.3 % Net income (loss) attributable to noncontrolling interests in consolidated subsidiaries 1.1 0.1 1.0 1,000.0 % Net income attributable to Bruker Corporation $ 56.7 $ 10.5 $ 46.2 440.0 % Net income per common share attributable to Bruker Corporation shareholders: Basic $ 0.37 $ 0.07 $ 0.30 428.6 % Diluted $ 0.37 $ 0.07 $ 0.30 428.6 % Weighted average common shares outstanding: Basic 151.8 154.2 Diluted 153.2 155.4 Revenue Revenue increases were driven by strong demand for our high performance life science tools, scientific instruments and diagnostic solutions. Gross Profit The increase in gross profit in the three months ended March 31, 2021, as compared to the same period in 2020, was a result of higher revenue, volume, operating leverage and contributions from higher margin products. 23 Table of Contents Selling, General and Administrative Our selling, general and administrative expenses for the three months ended March 31, 2021 decreased to 23.8% of total revenue, from 28.6% of total revenue for the comparable period in 2020. The decrease as a percentage of revenue was a result of the increase in revenue period over period. Research and Development Our research and development expenses for the three months ended March 31, 2021 decreased to 9.9% of total revenue from 11.4% of total revenue for the comparable period in 2020. The decrease as a percentage of revenue was a result of the increase in revenue period over period. Other Charges, Net Other charges, net was $3.0 million for the three months ended March 31, 2021. The charges consisted primarily of $1.3 million in restructuring costs, $0.9 million in acquisition-related charges related to acquisitions completed in 2021 and 2020, $0.7 million of costs associated with our global information technology (IT) transformation initiative and $0.1 million of professional fees incurred in connection with investigation matters. The IT transformation initiative is a multi-year project aimed at updating and integrating our global enterprise resource planning and human resource information systems. Other charges, net was $6.2 million for the three months ended March 31, 2020. The charges consisted primarily of $3.4 million of professional fees incurred in connection with investigation matters, $1.5 million of restructuring costs related to closing facilities and implementing outsourcing and other restructuring initiatives, $1.2 million related to long-lived asset impairments, $0.9 million of costs associated with our global information technology transformation initiative and a benefit of $1.1 million of acquisition-related charges related to acquisitions completed in 2020 and 2019. Operating Income The increase in operating income was due to higher revenue and gross profit in the three months ended March 31, 2021 as our business and end markets began to rebound, as compared to the same period in 2020 which was negatively impacted by the COVID-19 pandemic and related economic slowdown. Interest and Other Income (Expense), Net The increase in net interest expense in the three months ended March 31, 2021, as compared to the same period in 2020, was primarily attributable to an increase in realized losses on foreign currency denominated transactions of $2.0 million. Income Tax Provision In the three months ended March 31, 2021 and 2020 effective tax rates were estimated using projected annual pre-tax income on a jurisdictional basis. Expected tax benefits, including tax credits and incentives, the impact of changes to valuation allowances and the effect of jurisdictional differences in statutory tax rates were also considered in the calculation. The income tax provision for the three months ended March 31, 2021 and 2020 was $27.5 million and $2.9 million, respectively, representing effective tax rates of 32.2% and 21.5%, respectively. The increase in our effective tax rate was primarily due to the jurisdictional mix and the impact of unfavorable discrete items in the period. Net Income (Loss) Attributable to Noncontrolling Interests The net income attributable to noncontrolling interests represented the minority shareholders’ proportionate share of the net income recorded by our majority-owned subsidiaries. Net Income Attributable to Bruker Corporation The increase in net income and earnings per diluted share in the three months ended March 31, 2021, as compared to the same period in 2020, was primarily driven by the increase in revenue, gross profit and operating profit as a result of the rebounding in our business and end markets. 24 Table of Contents Segment Results Revenue The following table presents revenue, change in revenue and revenue growth by reportable segment (dollars in millions): Three Months Ended March 31, Percentage 2021 2020 Dollar Change Change BSI Life Science $ 351.8 $ 261.4 $ 90.4 34.6 % BSI NANO 154.4 120.1 34.3 28.6 % BEST 52.4 46.2 6.2 13.4 % Eliminations (a) (3.9 ) (3.7 ) (0.2 ) $ 554.7 $ 424.0 $ 130.7 30.8 % (a) Represents product and service revenue between reportable segments. For financial reporting purposes, we aggregate the Bruker BioSpin Group and Bruker CALID Group as the BSI Life Science Segment. This aggregation reflects the similar economic characteristics, production processes, customer services provided, types and classes of customers, methods of distribution and regulatory environments. The increase in revenue for the BSI Life Science Segment in the three months ended March 31, 2021 was due to strong demand for mass spectrometry, infrared and Raman products, a recovery in customer demand and deliveries for Nuclear Magnetic Resonance (NMR) systems and included customer acceptance of two GHz-class NMR systems. The increase in revenue for the BSI NANO segment was driven by a recovery in industrial research and academic market demand and continued strong demand from semiconductor and microelectronics customers. BEST segment revenue was higher resulting from certain project completions in the three months ended March 31, 2021. Operating Income The following table presents operating income and operating margins on revenue by reportable segment (dollars in millions): Three Months Ended March 31, 2021 2020 Percentage of Percentage of Operating Segment Operating Segment Income Revenue Income Revenue BSI Life Science $ 88.9 25.3 % $ 39.5 15.1 % BSI NANO 12.3 8.0 % (8.0 ) (6.7 %) BEST 4.1 7.8 % 1.7 3.7 % Corporate, eliminations and other (a) (16.2 ) (16.8 ) Total operating income $ 89.1 16.1 % $ 16.4 3.9 % (a) Represents corporate costs and eliminations not allocated to the reportable segments. The operating margin increases in the BSI Life Science and BSI NANO Segments resulted from higher revenue, volume and operating leverage, and contributions from higher margin products. The operating margin increase in the BEST segment resulted from higher revenue, favorable mix. LIQUIDITY AND CAPITAL RESOURCES We anticipate that our existing cash and credit facilities will be sufficient to support our operating and investing needs for at least the next twelve months. Our future cash requirements could be affected by acquisitions that we may complete, repurchases of our common stock, or the payment of dividends in the future. Historically, we have financed our growth and liquidity needs through cash flow generation and a combination of debt financings and issuances of common stock. In the future, there are no assurances that we will continue to generate cash flow from operations or that additional financing alternatives will be available to us, if required, or if available, will be obtained on terms favorable to us. Cash, cash equivalents and short-term investments at March 31, 2021 and December 31, 2020 totaled $746.8 million and $731.8 million, respectively, of which $570.0 million and $514.9 million, respectively, related to cash, cash equivalents and short-term investments held outside of the U.S. in our foreign subsidiaries, most significantly in the Netherlands, Switzerland and Hong Kong. 25 Table of Contents The following table presents our cash flows from operating activities, investing activities and financing activities for the periods presented (in millions): Three Months Ended March 31, 2021 2020 Net cash provided by operating activities $ 98.0 $ 35.0 Net cash used in investing activities (24.0 ) (100.6 ) Net cash (used in) provided by financing activities (38.1 ) 191.3 Effect of exchange rates on cash and cash equivalents (21.0 ) (8.7 ) Total increase (decrease) in cash and cash equivalents $ 14.9 $ 117.0 Cash provided by operating activities during the first quarter of 2021 resulted primarily from consolidated net income adjusted for non-cash items of $93.7 million, in addition to a change in operating assets and liabilities, net of acquisitions and divestitures of $4.3 million. The increase in operating assets and liabilities, net of acquisitions and divestitures for the three months ended March 31, 2021 was primarily due to higher payables and accrued liabilities as well as timing of income tax payables offset by improved inventory turnover within the same period of the prior year. During the three months ended March 31, 2020, net cash provided by operating activities resulted primarily from consolidated net income adjusted for non-cash items of $45.7 million, partially offset by a change in operating assets and liabilities, net of acquisitions and divestitures of $10.7 million. During the three months ended March 31, 2021, cash used in investing activities was primarily for net purchases of property, plant and equipment of $24.7 million, cash paid for acquisitions, net of cash acquired of $4.0 million, offset by $3.5 million from proceeds of cross currency swap agreements. Cash used in investing activities during the three months ended March 31, 2020 was primarily attributed to cash paid for purchases of short-term investments of $50.0 million, purchases of property, plant and equipment of $30.5 million and acquisitions of $22.0 million. Cash used in financing activities during the first quarter of 2021 was primarily due to the $32.6 million in purchases of common stock associated with our ongoing Repurchase Program (as defined below), $6.1 million for the payment of dividends, partially offset by proceeds of $1.1 million from the exercise of stock options. Net cash provided by financing activities during the three months ended March 31, 2020 was primarily attributable to $197.5 million in proceeds from borrowings under the 2019 Revolving Credit Agreement offset in part by $6.2 million for the payment of dividends. Share Repurchase Program In May 2019, our Board of Directors approved our share repurchase program (the “Repurchase Program”) under which repurchases of common stock in the amount of up to $300.0 million were authorized to occur from time to time, in amounts, at prices, and at such times as we deem appropriate, subject to market conditions, legal requirements and other considerations. During the three months ended March 31, 2021, we purchased 530,729 shares of common stock with an aggregate cost of approximately $32.8 million under the Repurchase Program. There were no purchases under the Repurchase Program in the three months ended March 31, 2020. At March 31, 2021, $1.7 million remained for future purchase under the share repurchase plan. We completed the Repurchase Program in April 2021, after reaching the maximum cumulative spend. The Repurchase Program would have expired on May 13, 2021. The purchased shares are reflected within Treasury stock in the accompanying unaudited condensed consolidated balance sheet at March 31, 2021. Income Taxes At December 31, 2020 and in accordance with the tax reform legislation signed by the president of the United States on December 22, 2017, or the 2017 Tax Act, we recorded state and foreign withholding taxes, as well as subsequent foreign currency translations on these withholding taxes as they are an obligation of the parent company, on the cash and liquid assets portion of the unremitted earnings and profits (E&P) of foreign subsidiaries expected to be repatriated from our foreign subsidiaries to the United States. We continue to be indefinitely reinvested in the amount of $435.6 million of non-cash E&P that is subject to the 2017 Tax Act deemed repatriation. If this E&P is ultimately distributed to the United States in the form of dividends or otherwise we would likely be subject to additional withholding tax. We will continue to evaluate our assertions on the cumulative historical outside basis differences in our foreign subsidiaries as of December 31, 2020. The amount of unrecognized deferred withholding taxes on the undistributed E&P was $62.9 million at December 31, 2020. 26 Table of Contents As of March 31, 2021, we had approximately $65.2 million of net operating loss carryforwards available to reduce state taxable income that are expected to expire at various times beginning in 2021; approximately $104.0 million of net operating losses available to reduce German federal income and trade taxes that are carried forward indefinitely and $13.1 million of other foreign net operating losses that are expected to expire at various times beginning in 2021. We also had U.S. state research and development tax credits 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 Internal Revenue Code Section 382 of 1986, as amended (the “Code”), 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. Uncertain tax contingencies are positions taken or expected to be taken on an income tax return that may result in additional payments to tax authorities. If a tax authority agrees with the tax position taken or expected to be taken or the applicable statute of limitations expires, then additional payments will not be necessary. Credit Facilities On December 11, 2019, we entered into (1) a new revolving credit agreement to establish a new revolving credit facility in the aggregate principal amount of $600 million; (2) a term loan agreement to establish a new term loan facility in the aggregate principal amount of $300 million; and (3) a note purchase agreement to issue and sell CHF 297 million aggregate principal amount of 1.01% senior notes due December 11, 2029. Floating interest rates under the term loan were simultaneously fixed through cross-currency and interest rate swap agreements into Euro ($150 million) and Swiss Franc ($150 million) rates carrying average effective interest rates of 0.94% and hedge our net investment in our Euro and Swiss Franc denominated net assets. The new revolving credit agreement replaced our $500 million five-year revolving credit agreement established on October 27, 2015, that was terminated on December 11, 2019. In addition, we designated our CHF 297 million senior notes as a hedge in our net investment in our Swiss Franc denominated net assets. Proceeds from this financing were used to repay the outstanding borrowings under our prior 2015 revolving credit facility and we intend to use the remaining proceeds for general corporate purposes and to support corporate strategic objectives. During December 2019, we entered into U.S. Dollar to Euro cross-currency swaps on our existing 2012 private placement notes of $105 million of 4.31% Series 2012A Senior Notes, Tranche C, due January 18, 2022, and the existing $100 million of 4.46% Series 2012A Senior Notes, Tranche D, due January 18, 2024, resulting in an average effective interest rate of 2.25% on these instruments. The cross-currency swaps hedge our net investment in our Euro denominated net assets. As a result of entering into these interest rate and cross currency swap agreements, we reduced our interest expense by $1.4 million during the three months ended March 31, 2021. We anticipate these swap agreements will lower net interest expense in future years. We had the following debt outstanding (dollars in millions): March 31, 2021 December 31, 2020 US Dollar notes under the 2012 Note Purchase Agreement $ 205.0 $ 205.0 CHF notes (in dollars) under the 2019 Note Purchase Agreement 314.8 335.5 US Dollar notes under the 2019 Term Loan 300.0 300.0 Unamortized debt issuance costs (2.3 ) (2.4 ) Capital lease obligations and other loans 6.7 6.4 Total debt 824.2 844.5 Current portion of long-term debt (108.4 ) (2.2 ) Total long-term debt, less current portion $ 715.8 $ 842.3 As of March 31, 2021, there are no material changes to our contractual obligations from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. As of March 31, 2021, we had no off-balance sheet arrangements. 27 Table of Contents The following is a summary of the maximum commitments and the net amounts available to us under the 2019 Credit Agreement and other banking working capital lines and guarantees of credit with various financial institutions located primarily in Germany and Switzerland that are unsecured and typically due upon demand at March 31, 2021 (dollars in millions): Weighted Average Interest Rate Total Amount Committed by Lenders Outstanding Borrowings Outstanding Letters of Credit Total Committed Amounts Available 2019 Credit Agreement 1.3 % $ 600.0 $ — $ 0.2 $ 599.8 Bank guarantees and working capital line 0.0 % 120.2 — 120.2 — Total revolving lines of credit $ 720.2 $ — $ 120.4 $ 599.8 As of March 31, 2021, we were in compliance with the financial covenants of these debt agreements. RECENT ACCOUNTING PRONOUNCEMENTS Information regarding recent accounting standard changes and developments is incorporated by reference from Part I, Item 1, Unaudited Condensed Consolidated Financial Statements, of this document and should be considered an integral part of this Item 2. See Note 2 in the Notes to the Unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for recently adopted and issued accounting standards.