What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-05 compared with 2021-05-10 · 183 added, 84 removed, 235 unchanged (53% of the section changed)

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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.

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.

Revenue for the three months ended June 30, 2021 increased by $146.2 million, or 34.4%, to $570.8 million, compared to $424.6 million for the comparable period in 2020.

Included in revenue was an increase of approximately $28.7 million from foreign currency translation and an increase of $1.8 million from acquisitions.

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measure, increased $115.7 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.

Revenue increases were driven by strong demand for our products and solutions, as well as a strong business and end market recovery compared to the same period in 2020.

Revenue for the six months ended June 30, 2021 increased by $276.9 million, or 32.6%, to $1,125.5 million, compared to $848.6 million for the comparable period in 2020.

Included in revenue was an increase of approximately $55.5 million from foreign currency translation and an increase of $5.0 million from acquisitions.

Excluding the effects of foreign currency translation and our recent acquisitions, our organic revenue, a non-GAAP

measure, increased $216.4 million.

Revenue increases were driven by strong demand for our products and solutions, and the business and end market recovery compared to the six months ended June 30, 2020.

Our gross profit margin increased to 49.2% during the three months ended June 30, 2021, as compared to 43.9% in the same period in 2020, the result of higher revenue and volume leverage.

Our gross profit margin increased to 49.7% during the six months ended June 30, 2021, as compared to 44.6% in the same period in 2020, the result of higher revenue, volume leverage and favorable mix.

Our income tax provision in the three months ended June 30, 2021 and 2020 was $21.3 million and $7.1 million, respectively, representing effective tax rates of 26.6% and 22.7%, respectively.

The increase in our effective tax rate was primarily due to the overall increase in profit before income tax and the jurisdictional profit mix.

Our income tax provision in the six months ended June 30, 2021 and 2020 was $48.8 million and $10.0 million, respectively, representing effective tax rates of 29.5% and 22.3%, respectively.

The increase in our effective tax rate was primarily due to the overall increase in profit before income tax and the jurisdictional profit mix, as well as the impact of unfavorable discrete items in the period.

Diluted earnings per share for the three months ended June 30, 2021 was $0.38, an increase of $0.22 compared to $0.16 per share in the same period in 2020.

Diluted earnings per share for the six months ended June 30, 2021 was $0.75, an increase of $0.53 compared to $0.22 per share in the same period in 2020.

The increase in net income and earnings per diluted share in both the three months and six months ended June 30, 2021 was primarily driven by higher revenue, gross profit and operating profit.

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,

Six Months Ended June 30,

Net cash provided by operating activities

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Free cash flow

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

The following table presents reconciliations from gross profit and gross profit margin, which are the most directly comparable GAAP operating performance measures, to non-GAAP

gross profit and non-GAAP gross profit margin as used by management (dollars in millions):

Three Months Ended June 30,

Six Months Ended June 30,

Restructuring costs

Purchased intangible amortization

gross profit was 51.3% and 46.7% in the three months ended March 31, 2021 and 2020, respectively.

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

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

gross profit margin was 50.0% and 45.1% in the three months ended June 30, 2021 and 2020, respectively.

gross profit margin was 50.6% and 45.9% in the six months ended June 30, 2021 and 2020, respectively.

The increases in our non-GAAP

gross profit margins in both the three and six months ended June 30, 2021 were driven by higher revenue and volume leverage, compared to 2020 which was negatively impacted by the COVID-19

Contributions from higher margin products also favorably impacted our gross profit margin in the six months ended June 30, 2021.

The following table presents reconciliations from operating income and operating margin, which are the most directly comparable GAAP operating performance measures, to non-GAAP

operating income and non-GAAP operating margin as used by management (dollars in millions):

Three Months Ended June 30,

Six Months Ended June 30,

Operating income

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operating income

operating margin was 18.4% and 7.6% in the three months ended March 31, 2021 and 2020, respectively.

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

operating margin was 17.3% and 11.5% in the three months ended June 30, 2021 and 2020, respectively.

operating margin was 17.9% and 9.6% in the six months ended June 30, 2021 and 2020, respectively.

operating margin increased in 2021 due to higher revenue, volume and operating leverage in 2021, as compared to 2020.

We can experience quarter-to-quarter

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global pandemic on our customers, supply chain or manufacturing capabilities;

the impact of certain weather-related disruptions, such as the recent flooding in Germany and other parts of Europe;

the timing of governmental stimulus programs and academic research budgets;

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general economic conditions, including the impact of COVID-19

on the global economy;

or other factors on the global economy;

the time it takes to satisfy local customs requirements and other export/import requirements;

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Accordingly, our operating results in any particular quarter may not necessarily be an indication of any future quarter’s operating performance.

pandemic continues to present a challenging operating environment and we remain focused on four key priorities:

pandemic continues to present a challenging operating environment.

During the COVID-19

pandemic, we have been focused on and continue to focus 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;

executing prudent temporary cost reductions during periods of reduced demand in 2020;

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.

We have implemented strict social distancing, enhanced cleaning protocols and other preventative measures, such as company-issued face coverings and mandatory mask protocols for unvaccinated employees, 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.

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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.

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 again need to consider 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.

We continue to manage supply chain risks, more recently associated with the economic recovery from the pandemic, like the worldwide shortage of semiconductor chips, components and raw materials, such as copper.

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.

During a period of reduced demand due to COVID-19 in 2020, we implemented temporary cost reduction measures in an effort to mitigate the negative impacts on our business of COVID-19

and the related slowdown in the global economy.

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

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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.

These cost reduction measures have since been relaxed, as our revenue has recovered.

We could in fact experience increased compensation expenses associated with employee recruiting and employee retention to the extent employment opportunities start multiplying post-pandemic, causing the search for and retention of talent to become more competitive.

Delivering enabling research and diagnostic products to help fight the pandemic and to support other essential priorities of our society

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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

As we begin to emerge from the pandemic, we continue to monitor the impact of COVID-19

on our business and our supply chain and respond accordingly.

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RESULTS OF OPERATIONS

Three Months Ended March 31, 2021 compared to the Three Months Ended March 31, 2020

Three Months Ended June 30, 2021 compared to the Three Months Ended June 30, 2020

Consolidated Results

The following table presents our results (dollars in millions, except per share data):

Three Months Ended March 31,

Three Months Ended June 30,

Product revenue

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Net income per common share attributable to Bruker Corporation shareholders:

Basic and diluted

Weighted average common shares outstanding:

Revenue increases were driven by strong demand for our high performance life science tools, scientific instruments and diagnostic solutions.

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.

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Revenue increases were driven by strong demand for our products and solutions, as well as a strong business and end market recovery as compared to the same period in 2020.

The increase in gross profit in the three months ended June 30, 2021, as compared to the same period in 2020, was a result of higher revenue and volume leverage.

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.

Our selling, general and administrative expenses for the three months ended June 30, 2021 decreased to 23.6% of total revenue, from 24.1% 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.

Our research and development expenses for the three months ended June 30, 2021 decreased to 9.8% of total revenue from 10.4% 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.

Other charges, net recorded for the three months ended June 30, 2021 consisted of $2.3 million of acquisition-related charges related to acquisitions completed in 2021 and 2020, $1.4 million of restructuring costs, $0.8 million of costs associated with our global information technology (IT) transformation activities offset by a $0.1 million adjustment regarding professional fees incurred in connection with investigation matters.

Other charges, net for the three months ended June 30, 2020 consisted primarily of $1.2 million of restructuring costs related to closing facilities and implementing outsourcing and other restructuring initiatives, $1.1 million of professional fees incurred in connection with investigation matters and $0.4 million of costs associated with our global IT transformation initiative offset by a benefit of $0.8 million related to previous acquisitions.

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

The increase in operating income was due to higher revenue, gross profit and favorable operating leverage in the three months ended June 30, 2021 as our business and end markets rebounded, 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.

The decline in net interest and other expense in the three months ended June 30, 2021, as compared to the same period in 2020 was mainly due to a smaller loss on foreign currency denominated transactions, partially offset by an increase in interest expense on our debt obligations.

Income Tax Provision

In the three months ended March 31, 2021 and 2020 effective tax rates were estimated using projected annual pre-tax

The 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.

The effective tax rates for the three months ended June 30, 2021 and 2020 were 26.6% and 22.7%, respectively.

The increase in our effective tax rate was primarily due to the overall increase in profit before income tax and the jurisdictional profit mix.

Net Income (Loss) Attributable to Noncontrolling Interests

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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.

Segment Results

The increase in net income and earnings per diluted share in the three months ended June 30, 2021, as compared to the same period in 2020, was primarily driven by higher revenue, gross profit and operating profit as a result of the strengthened demand and recovery in our business and end markets.

Reportable Segment Revenue

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

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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.

The increase in revenue for the BSI Life Science Segment in the three months ended June 30, 2021 was due to strong demand, business and end market recovery, and was led by growth in mass spectrometry, infrared and Raman, microbiology and preclinical imaging products.

The increase in revenue for the BSI NANO segment was driven by a rebound in industrial research and academic market demand and continued strong demand from semiconductor and microelectronics customers.

The increase in revenue for the BEST segment resulted from higher “big science” project revenue in the three months ended June 30, 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,

Three Months Ended June 30,

Income (Loss)

Percentage of

Income (Loss)

Percentage of

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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.

The operating margin increases in the BSI Life Science and BSI NANO Segments resulted from higher revenue, volume and operating leverage.

The operating margin increase in the BEST segment resulted from higher revenue and favorable mix.

Consolidated Results

Six Months Ended June 30, 2021 compared to the Six Months Ended June 30, 2020

The following table presents our results (dollars in millions, except per share data):

Six Months Ended June 30,

Product revenue

Service revenue

Other revenue

Total revenue

Cost of product revenue

Cost of service revenue

Cost of other revenue

Total cost of revenue

Operating expenses:

Selling, general and administrative

Research and development

Other charges, net

Total operating expenses

Operating income

Interest and other income (expense), net

Income before income taxes and noncontrolling interest in consolidated subsidiaries

Income tax provision

Consolidated net income

Net income (loss) attributable to noncontrolling interests in consolidated subsidiaries

Net income attributable to Bruker Corporation

Net income per common share attributable to Bruker Corporation shareholders:

Basic and diluted

Weighted average common shares outstanding:

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Revenue increases were driven by strong demand for our products and solutions, and the business and end market recovery as compared to the same period in 2020.

The increase in gross profit in the six months ended June 30, 2021, as compared to the same period in 2020, was a result of higher revenue, volume leverage and favorable mix.

Selling, General and Administrative

Our selling, general and administrative expenses for the six months ended June 30, 2021 decreased to 23.7% of total revenue, from 26.3% 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 six months ended June 30, 2021 decreased to 9.8% of total revenue from 10.9% 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 recorded for the six months ended June 30, 2021 consisted of $3.2 million of acquisition-related charges related to acquisitions completed in 2021 and 2020, $2.7 million of restructuring costs and $1.5 million of costs associated with our global IT transformation activities.

Other charges, net recorded for the six months ended June 30, 2020 consisted primarily of $4.5 million of professional fees incurred in connection with investigation matters, $2.7 million of restructuring costs related to closing facilities and implementing outsourcing and other restructuring initiatives, $1.2 million related to long-lived asset impairments, and $1.3 million of costs associated with our global IT transformation initiative offset by a benefit of $1.9 million related to previous acquisitions.

Operating Income

The increase in operating income was due to higher revenue, volume and operating leverage in the six months ended June 30, 2021 as our business and end markets rebounded, 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

Net interest expense was consistent in the six months ended June 30, 2021, as compared to the same period in 2020 and primarily includes interest expense on our debt obligations.

Income Tax Provision

The 2021 and 2020 effective tax rates were estimated using projected annual pre-tax

income on a jurisdictional basis.

The effective tax rates for the six months ended June 30, 2021 and 2020 were 29.5% and 22.3%, respectively.

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 six months ended June 30, 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 strengthened demand and recovery in our business and end markets.

Reportable Segment Revenue

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

Six Months Ended

Dollar Change

BSI Life Science

Eliminations (a)

Represents product and service revenue between reportable segments.

The increase in revenue for the BSI Life Science Segment in the six months ended June 30, 2021 was due to strong demand and business and end market recovery across the segment’s major product lines, including mass spectrometry, infrared, Raman, miobiology and Nuclear Magnetic Resonance (NMR) products, and included customer acceptance of two GHz-class NMR systems.

The increase in BEST segment resulted from higher “big science” project revenue in the six months ended June 30, 2021.

Operating Income

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

Six Months Ended June 30,

Income (Loss)

Percentage of

Income (Loss)

Percentage of

BSI Life Science

Corporate, eliminations and other (a)

Total operating income

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.

The operating margin increase in the BEST segment resulted from higher revenue and 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.

Our future cash requirements could be affected by acquisitions that we may complete, purchases of our common stock or the payment of dividends in the future.

Historically, we have financed our growth and liquidity needs through cash flow generation 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.

Cash, cash equivalents and short-term investments at June 30, 2021 and December 31, 2020 totaled $706.0 million and $731.8 million, respectively, of which $583.2 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.

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

Three Months Ended

Six Months Ended

Net cash provided by operating activities

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Effect of exchange rates on cash and cash equivalents

Total increase (decrease) in cash and cash equivalents

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

Total (decrease) increase in cash and cash equivalents

Cash provided by operating activities during the six months ended June 30, 2021 resulted from consolidated net income adjusted for non-cash

items of $185.1 million, partially offset by a change in operating assets and liabilities, net of acquisitions and divestitures of $65.2 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.

The primary increase is a result of increased net income driven by the increase in revenue, gross profit and operating profit as a result of the rebounding in our business and end markets.

The decrease in operating assets and liabilities, net of acquisitions and divestitures for the six months ended June 30, 2021 was primarily due to improved inventory management, higher payables and accrued liabilities partially offset by a decrease in cash received from customers due to timing of payments as compared to the same period in the prior year.

During the six months ended June 30, 2020, net cash provided by operating activities resulted from consolidated net income adjusted for non-cash

items of $97.5 million, partially offset by a change in operating assets and liabilities, net of acquisitions and divestitures of $50.7 million.

The increase in operating assets and liabilities, net of acquisitions and divestitures for the six months ended June 30, 2020 was primarily caused by an increase in cash received from customers offset by purchases of inventory for orders in 2020.

Cash used in investing activities during the six months ended June 30, 2021 resulted mainly purchases of property, plant and equipment of $47.3 million, purchases of short-term investments of $48.0 million and acquisitions of $4.0 million.

Cash used in investing activities during the six months ended June 30, 2020 was primarily attributed to cash paid for purchases of property, of plant and equipment of $50.8 million, purchases of short-term investments of $50.0 million and acquisitions of $24.6 million offset by $6.1 million of maturities in short-term investments.

Net cash used in financing activities during the six months ended June 30, 2021 was primarily from cash paid for purchases of common stock under our repurchase program of $71.1 million and $12.1 million for the payment of dividends.

Net cash provided by financing activities during the six months ended June 30, 2020 was primarily attributable to $200.9 million in net proceeds from borrowings under the 2019 Revolving Credit Agreement offset in part by $12.3 million for the payment of dividends and $50.0 million of repurchases of common stock under our repurchase program.

Share Repurchase Program

In May 2019, our Board of Directors approved our share repurchase program (the “2019 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.

During the three months ended June 30, 2021, we purchased 24,873 shares of common stock with an aggregate cost of approximately $1.7 million under the 2019 Repurchase Program.

During the six months ended June 30, 2021, we repurchased a total of 555,602 shares at an aggregate cost of $34.5 million under the 2019 Repurchase Program.

We completed the 2019 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.

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.

In May 2021, our Board of Directors approved a share repurchase program (the “2021 Repurchase Program”) authorizing the purchase of up to $500.0 million of our common stock over a two-year

period 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 June 30, 2021, we purchased 530,703 shares of common stock with an aggregate cost of approximately $36.6 million under the 2021 Repurchase Program.

At June 30, 2021, $463.4 million remained for future purchase under the 2021 Repurchase Program.

We intend to fund any additional repurchases from cash on hand, future cash flows from operations and available borrowings under our revolving credit facility.

The purchased shares are reflected within Treasury stock in the accompanying unaudited condensed consolidated balance sheets.

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 $436 million of non-cash

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The amount of unrecognized deferred withholding taxes on the undistributed E&P was $63 million at December 31, 2020.

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;

As of June 30, 2021, we had approximately $66.0 million of net operating loss carryforwards available to reduce state taxable income that are expected to expire at various times beginning in 2021;

approximately $108.0 million of net operating losses available to reduce German federal income and trade taxes that are carried forward indefinitely and $12.5 million of other foreign net operating losses that are expected to expire at various times beginning in 2021.

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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.

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.

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.

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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.

As a result of entering into these interest rate and cross currency swap agreements, we reduced our interest expense by $1.3 million and $1.8 million for the three months ended June 30, 2021 and 2020, respectively and by $2.7 million and $4.4 million for the six months ended June 30, 2021 and 2020, respectively.

We anticipate these swap agreements will lower net interest expense in future years.

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Unamortized debt issuance costs

Capital lease obligations and other loans

Finance lease obligations and other loans

Current portion of long-term debt

Total long-term debt, less current portion

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

As of June 30, 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

As of June 30, 2021, we had no off-balance

sheet arrangements.

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):

The following is a summary of the maximum commitments and the net amounts available to us under the 2019 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 June 30, 2021 (dollars in millions):

Interest Rate

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Total revolving lines of credit

As of March 31, 2021, we were in compliance with the financial covenants of these debt agreements.

As of June 30, 2021, we

were in compliance with the financial covenants of these debt agreements.

RECENT ACCOUNTING PRONOUNCEMENTS

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis