Bruker Corp (BRKR) 2009 Q2 法說會逐字稿

Good day ladies and gentlemen, and welcome to the Bruker Corporation Quarterly Earnings Conference Call. My name is John and I will be your coordinator for today.

At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions)

I would now like to turn the presentation over to your host for today's call, Miss Stacey Desrochers, Treasurer and Director of Investor Relations. Please proceed, ma'am.

Good morning and welcome to Bruker Corporation's Second Quarter 2009 Financial Results Conference Call. I'm Stacey Desrochers, Treasurer and Director of Investor Relations. With me on today's call are Frank Laukien, Bruker President and Chief Executive Officer; Bill Knight, Bruker Chief Financial Officer; Brian Monahan, Bruker Chief Accounting Officer and Tom Rosa, the CFO of our newly established Bruker Energy and Supercon Technologies segment.

Before we begin, I would like to read our Safe Harbor Statement. This discussion will include forward-looking statements. These statements are based on current expectations but are subject to risks and uncertainties that could cause actual results to differ materially from those projected including, but not limited to, risks and uncertainties relating to adverse changes and conditions in the global economy and volatility in the capital markets, the integration of businesses we have acquired or may acquire in the future, changing technologies, product development and market acceptance of our products, the cost and pricing of our products, manufacturing, competition, dependence on collaborative partners and key suppliers, capital spending and government funding policies, changes in governmental regulations, intellectual property rights, litigation, exposure to foreign currency fluctuations and other risk factors discussed from time to time in our filings with the Securities and Exchange Commission.

We expressly disclaim any intent or obligation to update any forward-looking statements other than as required by law.

Today, Frank will provide an overview of the business and some financial highlights. Tom will discuss our new Bruker Energy and Supercon Technologies division, Bill will follow up with a more detailed discussion of our financial results for the second quarter and first half of 2009 and then we will open up the line for questions.

I'll now turn the call over to our President and CEO, Frank Laukien.

Thank you, Stacey and good morning, everyone. We appreciate you joining us today. Starting with the financial highlights, I believe most of you have read our earnings press release issued earlier this morning and you are now familiar with the key numbers in the earnings release.

In summary, in the second quarter of 2009 our revenue was $252.5 million, representing a currency-adjusted revenue decrease of 11.1% compared to the second quarter of 2008.

Please recall that in the second quarter of 2008 we had an unusual revenue spike of $311 million when compared to $238 million of revenue in the first quarter of 2008 and $242 million of revenue in the third quarter of 2008.

As we have mentioned before, in 2009 and beyond it is our goal to have less quarter-to-quarter revenue variation in the first three quarters of the year, than in the year 2008; when after the acquisition of the Bruker BioSpin group, we experienced somewhat of a quarterly saw-tooth pattern in revenues.

Sequentially, our second quarter 2009 revenue increased by 9.5% over the first quarter of 2009. GAAP net income for the second quarter of 2009 was $12.9 million or $0.08 per diluted share, compared to GAAP net income of $21.7 million or $0.13 per diluted share in the second quarter of 2008.

For the half year, for the six months ended June 30, 2009, revenue was $483 million, compared to revenue of $549.8 million in the first half of 2008. Excluding the effects of foreign currency translation, revenue for the six months ended June 30, 2009 decreased by 4.4% year over year.

GAAP net income for the six months ended June 30, 2009 was $21.3 million or $0.13 per diluted share, compared to GAAP net income of $20.9 million or $0.13 per diluted share during the six months ended June 30, 2008.

Overall, we are reasonably pleased with our second quarter 2009 and first half of 2009 results, given the unprecedented economic environment. On the bottom line, our cost-cutting measures, the strength of our new product lines and the impact of our business initiatives had a positive impact on our second quarter 2009 results and contributed to our 54% sequential growth in net income.

A little bit more color on our markets; in the industrial market which in 2008 accounted for approximately 17% of our revenue, we continued to see relatively soft demand, but at least it appears that these industrial markets aren't declining any further and may already have bottomed out.

Due to the strength of our product line and the numerous Bruker AXS new product introductions, four industrial applications at PITCON 2009, we believe we are gaining market share in the industrial market during this recession.

At the same time, we see robust demand for our life sciences and research systems as well as for our emerging clinical solutions; from big pharma and applied markets, which together in 2008 accounted for approximately 15% of our revenue and particularly from academic, medical school, other non-profit and government customers which in 2008 together accounted for approximately 68% of our revenue.

We are pleased with healthy orders and demand for our NMR and pre-clinical MRI systems year to date, even though Bruker BioSpin division revenue in the second quarter of 2009 was lower than during the peak revenue second quarter of 2008.

For our high-performance mass spectrometry solutions, we continued to see healthy revenue and order growth year over year, as well as significant margin improvement in the second quarter of 2009.

In mass spectrometry at the American Society of Mass Spectrometry Conference in early June 2009, we launched three major highest-performance in their category mass spectrometry platforms; namely the ultrafleXtreme MALDI-TOF/TOF, the amaZon ion trap and the solariX FTMS.

We expect rapid ramp up of these new systems as the ultrafleXtreme and amaZon have been shipping since their introduction. And the solariX FTMS is expected to ship in the fourth quarter of 2009.

We also continue to push technology barriers and introduce truly innovative products. In June, we announced the AVANCE 1000, the world's first 1000 megahertz NMR spectrometer for structural biology, setting a world record.

Additionally, we also brought to market the world's highest frequency 263 Gigahertz commercial EPR system for fundamental research in solar energy conversion and other applications; which was incidentally purchased with German stimulus budget or "Konjunkturpaket" funds, as they are called in Germany.

As my last remark, going forward we expect the global government stimulus programs in the U.S., in Asia and in Europe to have a significant positive impact on our high-end life science and research systems business, as well as on our new Bruker Energy and Supercon Technologies division. We expect that this will start in the second half of 2009, that it will accelerate and have the biggest impact in 2010 and that it will continue well into 2011.

Finally, we have recently talked a lot about our exciting new Bruker Energy and Supercon Technologies division and now here is Tom Rosa, the Chief Financial Officer and Senior Vice President of this BEST technology segment, to discuss the new division.

Thanks Frank, and good morning. On the acquisition front, on April 1, 2009, we acquired the research instruments business of Varian Medical Systems ACCEL Instruments, a world leader in several advanced superconducting and other systems and sub units for physics and energy research. This acquisition opened an important new chapter in the history of our Bruker Advanced Supercon business, which will now be called Bruker Energy and Supercon Technologies or BEST division.

The BEST division is emerging as a global leader in superconductors and supercon devices, as well as in advanced technologies for energy research and next-generation grid infrastructure. The name change is just part of our overall strategy evolution to provide customers, collaborators and investors with more visibility into this business and its market potential.

The ACCEL acquisition positions us for additional revenue and margin growth in several exciting markets, including renewable energy research, the smarter, more stable and energy-efficient electricity grids of the future, as well as OEM sub units for novel medical devices. We plan to expand to this new business in growth markets such as HTS superconducting fault current limiters for energy grid stabilization, crystal growth magnets for semiconductors including those for photovoltaic applications, and superconducting devices for large-scale scientific and energy research facilities.

We also expect to continue to supply OEM products and services to Varian Medical Systems in support of Varian's proton therapy business.

In addition to the name change to Bruker Energy and Supercon Technologies, we are also breaking out the operating results of BEST as a separate segment for the first time this quarter in our financial results and in our 10-Q. This is a very different business from the scientific instrument side of Bruker, one that generally focuses on a different customer base and one that is also investing heavily in R&D in anticipation of potentially very large and rapidly-growing markets for superconducting products of the future.

Our BEST division is generating modest revenues now, approximately 4% to 5% of the total Bruker top line and our BEST division requires and it will continue to require for several more years, significant financial investments in R&D, capital equipment and marketing in order to capitalize on its potentially very large opportunities, including emerging alternative energy markets and other supercon device applications of the future.

Please note that historical financials on our BEST division are not pro forma numbers including the ACCEL acquisition, but they are actual historical numbers for our previous Bruker Advanced Supercon business prior to the ACCEL acquisition.

With that in mind, for the second quarter ended June 30, 2009, BEST had revenues of $13.7 million compared to $12.5 million a year ago and $8.1 million in the first quarter of 2009. This included $5 million of revenues from our newly-acquired ACCEL Research Instruments business. On a constant currency basis compared to a year ago, the second quarter 2009 revenues for BEST would have been $15.8 million.

The division's operating loss of $0.8 million in the second quarter of 2009 compares to an operating loss of $1.3 million in the second quarter of 2008. The results for the second quarter included a gain on the purchase of ACCEL, offset by an impairment charge of $0.7 million and $0.4 million of transaction cost.

Our BEST division R&D and scale-up focus going forward is on 2G or YBCO wire, as well as on HTS-related devices. We expect the ACCEL acquisition to help accelerate our BEST division growth, as well as our drive towards breakeven and future profitable growth in the BEST business.

Now, here's Bruker's CFO, Bill Knight, with a more in-depth look at our overall Bruker Corporation financial results for the second quarter and first half of 2009.

Thanks Tom, and good morning, everyone. As a quick recap, during the [second] quarter of 2009 our revenues were $252.5 million, compared to $311.5 million in the second quarter of 2008. Excluding the effects of foreign currency translation, the second quarter revenue decreased by 11.1% year over year.

We knew that our second quarter 2008 revenue numbers would be difficult to repeat, with year-over-year revenue growth of 31% in the second quarter of 2008 over the second quarter of 2007. However, we are pleased with our sequential revenue increase of 9.5% over the first quarter of 2009.

Gross profit margins were 44.0% in the second quarter of 2009, compared to 41.6% in the second quarter of 2008. The year-over-year increase in gross profit margin was due in part to the addition of newer high-margin products to our revenue mix. Our 2008 and first half 2009 product introduction, along with productivity improvement and our cost-cutting initiatives are expected to continue to improve our gross margins going forward.

Overall, operating expenses are down as we continue our cost-cutting and expense control initiatives. At the same time, we also increased selected investments in additional high-growth and higher margin markets in support of our goals of profitable, above-average organic growth and increasing shareholder value.

Our GAAP operating profit for the second quarter of 2009 was $20.2 million or 8.0% of revenue, compared to $28.4 million or 9.1% of revenue in the second quarter of 2008. Included in the second quarter of 2009 is a net gain of $1.0 million on the acquisition of ACCEL, while in the second quarter of 2008 we had $0.4 million of expenses associated with the acquisition of Bruker BioSpin.

During the second quarter of 2009, we had $0.7 million of net foreign currency losses, as compared to $3.6 million of currency gains in the second quarter of 2008.

In 2009, we are continuing to take additional steps to reduce our foreign currency exposures created by intercompany transactions, which will continue help reduce our foreign currency volatility. The net foreign exchange losses in the second quarter of 2009 were primarily driven by the continued weakness of the U.S. dollar against the euro and Swiss franc.

Our GAAP net income in the second quarter of 2009 was $12.9 million. Our GAAP EPS was $0.08 per diluted share, corresponding to a net income margin of 5.1%; compared to the second quarter of 2008 with GAAP net income of $21.7 million or GAAP EPS or $0.13 per diluted share, corresponding to a net income margin of 7.0%.

Included in GAAP EPS in the second quarter of 2009 was non-cash stock-based compensation expense of $0.01 per diluted share.

Operating cash flow in the second quarter of 2009 was $36.0 million, compared to a use of cash of $4.2 million in the second quarter of 2008. In the second quarter of 2009, free cash flow which is defined as cash flow from operations less capital expenditures, was $32.8 million; compared to a use of free cash of $17.8 million in the second quarter of 2008.

For the first six months of 2009, we generated free cash of $42.0 million, compared to a use of free cash of $8.9 million in the first six months of 2008. So despite the economic pressures, our business model allows us to generate a significant amount of cash.

During the second quarter of 2009, we repaid $34.1 million of debt and ended the quarter with cash of $154.3 million and net debt of $16.4 million. In the first two quarters of 2009 we have repaid $51.8 million of debt, reducing our interest expense by approximately $0.7 million for the remainder of 2009.

As Frank discussed earlier, with the acquisition of ACCEL Research Instruments on April 1, 2009; starting with the second quarter of 2009, Bruker established two new reportable segments. The Bruker Scientific Instruments, or BSI segment, consists of four divisions; Bruker AXS, Bruker BioSpin, Bruker Daltonics and Bruker Optics.

The new Bruker Energy and Supercon Technologies, or BEST segment is the result of the combination of the acquired ACCEL RI business and the superconductor and supercon device business that was previously called Bruker Advanced Supercon Inc.

Revenue in the BSI segment for the six months ended June 30 was $464.9 million, compared to BSI revenue of $533.5 million for the first six months ended June 30, 2008. Excluding the effects of foreign currency translation, first half 2009 BSI revenue decreased by 5.4% year over year.

BSI net income for the six months ended June 30, 2009 was $23.5 million, compared to $24.7 million for the six months ended June 30, 2008.

BSI earnings per diluted share for the six months ended June 30, 2009 was $0.14, compared to $0.15 for the six months ended June 30, 2008.

Revenue in the BEST segment for the six months ended June 30, 2009 was $21.8 million, compared to BEST revenue of $22.4 million for the six months ended June 30, 2008.

Excluding the effects of foreign currency translation, first half 2009 BEST revenue increased by 12.3% year over year.

BEST net loss for the six months ended June 30, 2009 was $3.4 million, compared to a net loss of $4.0 million for the six months ended June 30, 2008.

BEST loss per diluted share for the six months ended June 30, 2009 was $0.02, compared to a $0.02 loss for the six months ended June 30, 2008.

So with that, I will turn the call back over to the Operator for any questions you may have.

(Operator Instructions). And your first question comes from the line of Derik De Bruin with UBS. Please proceed.

Good morning.

Good morning, Derik.

Hey Bill, sorry I got cut off for a second. But I'm just wondering-- the tax rate was definitely lower this quarter. Was that due to (inaudible) business or your North American businesses being more profitable this quarter?

Hi Derik. This is Brian, actually. Yes, the North American businesses were a little bit more profitable this quarter than they have been in the prior quarter. In addition, what's helping the tax rate is that the gain on the ACCEL acquisition that was referred to earlier-- it's about $2.1 million-- we did not have a tax expense associated with that gain. So it's a combination of those two that resulted in the lower tax rate this quarter.

Okay. And so for the full year you're-- I guess for subsequent quarters-- you were about 40s-- mid 40s last quarter; are you still looking for something in the mid 30s as the full year number?

I would think that's a reasonable assumption.

Alright. And I guess as you kind of look at the way the stimulus funding is going, I guess can you have some sort of feel for how many grants are-- how many pending grants actually include Bruker products? I mean I'm just trying to get some idea on the potential magnitude from the impact on you guys. Do you have any gut feeling on what it could possibly be?

Derik, this is Frank. We have done a lot of the proposal writing and supported many, many different grants, both here in the U.S. as well as in Europe, in Japan as well and in some other countries. The magnitude of the effect is difficult to estimate because it will depend on the batting average of those grants of our customers, essentially.

So we believe it's going to be a significant number, but we're not prepared to give a-- let's say a revenue range or estimate quantitatively what the significant benefit will be. We believe it's going to be significant, but it's too early to tell what the batting average will be.

Okay. I guess when you look at the margins going for the rest of this year, I mean do you-- can you give us any idea where you think the operating margin will end up with?

I believe we're not prepared to give guidance on operating margin for the year, so I believe we cannot really give a quantitative answer on that.

Okay. And I guess, just going back to kind of the stimulus plays, since you do have a bigger footprint in some of the X-- some of the countries outside of the United States. I mean I know there is money that-- there's a new German research initiative. There are things in Australia like that. Can you just give us a review of some of the ex-U.S. programs that you're seeing?

Yes. Maybe starting briefly with the U.S.; we could see that between NIH and NIH may have a positive impact on maybe 45% of our revenue-- again what magnitude impact we cannot predict yet. Other U.S. funding through the National Science Foundation and National Institute of Standards and Technology, the Department of Energy where we already got an important contract write on July 1, that was ARRA-funded. Altogether probably equal to what comes out of NIH from our perspective, so U.S. stimulus may have a positive impact on 10% plus of our business.

And the rough estimated magnitude of all the special supplementary budgets in Japan, Chinese stimulus spending- if you want to call it that, the German Konjunkturpaket, which is the stimulus package, smaller initiatives in France-- and you mentioned some other countries. We estimate that that roughly will equal the overall U.S. stimulus spending; that's our best estimate at this time. So we believe that all global stimulus funding could have a positive effect on something like 20% or more of our revenue.

Oh, that's very helpful; thanks. And just some housekeeping; what was the after-tax EPS impact of the $1 million in acquisition-related charges?

I'm sorry, Derik. What is the tax impact of that $1 million?

Yes.

Okay, you've got three different pieces in that $1 million gain in the P&L, as Tom alluded to earlier. I can expand on those a little bit. The first one is an impairment charge for a discontinuation of a product line. That charge was $700,000 and we were able to tax benefit that at about a 30% tax rate. The next item is transaction cost. Under the new purchase accounting rules, those go through income statement instead of getting added to goodwill. That was $400,000 in both the first and second quarters of this year. Those charges were also tax benefitted at approximately 30%. And then the last one, the one I talked about earlier is basically under the new purchase accounting rules, any bargain purchase goes through the P&L as a gain. Historically you wrote down your fixed assets if you had a bargain purchase, but now it's a gain through the P&L. That was $2.1 million in the second quarter. There was no tax expense associated with that. So those are the three pieces.

Okay. Great, thanks.

Your next question comes from the line of Isaac Ro with Leerink Swann. Please proceed.

Hey guys, good morning. First question would be on-- just earnings guidance. I think last check it had been that you guys were hoping to do better than last year's $0.45; are you still comfortable with that kind of body language?

We are. We are not updating our forecast or confirming our forecast. We only do this at the beginning of the year, but not every quarter.

Okay. And then on the-- just a little bit more on the stimulus visibility that Derik was diving into here; can you maybe talk away from the revenue side, how you guys are planning from an inventory standpoint, particularly for some of the higher end NMRs? Do you feel like you're in a good position to deliver orders as they come through in the back half and into 2010 or are you still kind of wrestling with how to plan for that at this point?

Yes Isaac, this is Frank again. We've looked at that quite a bit and in some long lead-time items we have placed some additional orders for instance, superconducting wire, in anticipation of additional revenue. And overall, we've come to the assessment that we should be in good shape in delivering whatever incremental orders we may receive from various stimulus packages. We do not think we will be constrained by our capacity in any serious way.

Okay. And so could we see maybe for the shorter lead components, maybe a little bit more of a bump in inventories maybe next quarter?

You may; we haven't quantitated that but you may see in the next couple of quarters a little bit of an increase in inventory; I don't think it will be very significant but you may see some of that.

We are finding that sourcing material this year is probably a little easier than a year ago with some of the projects we have in place that are logistic flows with some of our vendors. Also as a reminder, that stimulus bookings, orders that we get this year, primarily will be more of a 2010 even 2011 revenue item versus any significant uplift in revenues for this year; bookings, yes; but revenue much more likely to be 2010 into 2011.

Alright, okay. And then just sort of bigger picture; wondering on two items here; one, it struck me the other day that the acquisition of Varian by Agilent could change the long-term competitive landscape for Bruker. And I'm wondering- do you feel any need to-- looking forward-- invest more aggressively perhaps in your service capabilities, given Agilent's reach? How do you look at that? And then how do you look at maybe the impact to the pricing environment and your margins as a result of their scale with the combined companies?

Well Isaac, this is Frank again. We do not believe that there is any significant effect of this announced acquisition of Varian by Agilent. We have numerous-- we compete with Varian in numerous fields of course in NMR and pre-clinical MRI, but also in some parts of the mass spec and x-ray and even infrared areas. So we have many areas of overlap in competition with Varian. We compete with Agilent in certain areas. So we don't think that the combination of the two, if it occurs, will have a very significant effect on the competitive landscape from Bruker's point of view.

Okay. And then just regarding the supercon business; I appreciate the fact that it's a new business with interesting growth characteristic that are perhaps different. But I'm wondering-- I think you've said in the past it was an EBIT loss type of a business last year and has made improvements. But I'm wondering-- can that eventually by accretive to the Company in house or does it ultimately have to be spun out to create more significant value for shareholders?

We believe it'll be dilutive for a number for years, but we think it makes great sense for all shareholders to continue to invest in this business. We have stated previously that we are-- and we continue to be interested in separate financing of the BEST division, potentially with a private financing round with strategic and private investors as early as 2010, market conditions permitting. And longer term, Bruker wishes to be and needs to be a significant owner of that BEST business, but doesn't need to own all of it. So this is a potential candidate for an IPO, somewhere maybe three or four years down the road. But for right now, we think we can create a lot of value by investing in these opportunities.

Okay and then just one last housekeeping; on the service gross margins, they've been kind of a little volatile here. And can just remind me why that's the case.

I think on a quarter-to-quarter basis, you do see volatility and it really depends upon the mix of that revenue, whether it's service contracts or upgrades or the sale of components or time, material-- all carry different margins. And depending upon the mix each quarter to quarter, there will be some variability.

Okay. Good enough; thank you very much.

(Operator Instructions). And you next question comes from the line of Tycho Peterson with JPMorgan. Please proceed.

Okay, good morning.

Good morning, Tycho.

Understanding it's still a relatively small business for you; can you talk a little bit about the clinical business, the MALDI BioTyper and tissue imager, and more broadly how you're viewing consumables in terms of the mix going forward? And I think also you provided an update of (inaudible) installations at ASMS and the MALDI BioTyper, so if you could just provide some additional color there, that would be helpful.

Sure, Tycho. This is Frank. The MALDI BioTyper continues to do well, particularly in Europe, but also beginning in other parts of the world. As you may recall, we obtained the IVD-CE mark in the middle of the second quarter and we had announced that. So that further strengthens that product in the European Union.

And that clearly has a stronger recurring revenue, percentage of revenue, over its lifetime. It's not going to be a razor-razorblade model. It's consumable and that's one of the attractions of the MALDI BioTyper-- are less expensive than traditional consumables used for clinical microbiology ID, but clearly there is some consumables business. There are also continued updates to the MALDI BioTyper, proprietary database. And labs like this very typically have their systems under a service contract because of course they are not, and do not wish to be, and shouldn't have to be mass spectrometry specialists, but they're clinicians or diagnostic lab technicians.

So maybe a very rough estimate, if that is helpful to you, could be that for a placement or a sale of a MALDI BioTyper, the aftermarket revenue over the next five to seven years of it's expected lifetime may roughly equal the original purchase price of such a system.

Okay, that's helpful. Can you talk--

Or perhaps to let's say [big] MRIs or CTs in radiology, from a business model and looking at aftermarket. I hope that's helpful.

That is. And then in terms of kind of the target customer base; can you talk a little bit about what the mix is in for the BioTyper? I mean has it been smaller reference labs or hospital settings or what are you really targeting?

Both of those, yes; and it differs from country to country because really as we penetrate these markets more, the clinical microbiology market in German is structured quite differently than say from the U.K. or France. There are very significant differences in the structure of the labs or the industry. But it tends to be the smaller and mid-sized laboratories as well as hospital laboratories, some of which have a research component. But it is really not a research system. It is primarily used now, in Europe at least, for routine clinical microbiology.

Outside of the European Union, it continues to be for research use only.

Okay, that's helpful. And then just lastly; can you talk about interest in the (inaudible) Edmass systems that you introduced at PITCON and what the mix has been between the micro and the other system-- the ultra?

Yes, I think not unexpectedly so far more of the initial interest is on the ultra and I think that has to do with the fact that these systems have very great capabilities, but we continue to work on making them even easier to use and even more automated. At this point, I think they're probably still best in the hands of customers who have some expertise in mass spectrometry and proteomics, and accordingly the initial interest is primarily for customers who would look at a ultrafleXtreme and who may also not only use it as a dedicated Edmass sequencer but also use it for typical bottoms up and top down proteomics and so on.

Over time, we think that will naturally change, especially as we also make this-- or bring this closer to a push-button system.

Okay. That's helpful. Thank you.

And your next question comes from the line Derik De Bruin with UBS.

Hey, I just wanted to ask a follow up. You alluded to-- you said that basically that mass spec was up double digits and that NMR was down. Could you just give us some more qualitative information on the segment, on what did x-ray and Optics do this quarter?

So to clarify-- NMR and pre-clinical MRI; that's really the business. We acquired that business, as you recall, in February of 2008. And in the second quarter of 2008, that Bruker BioSpin division, which includes NMR and pre-clinical MRI, EDR-- had a pretty significant revenue spike which is what makes the comparable somewhat unusual this quarter. However, order and backlog for NMR and pre-clinical MRI so far this year are really quite healthy.

In mass spectrometry, I think we've given you some thoughts here. The other part of the Bruker Daltonics business which is the Bruker detection business for chemical agents and biological explosive detection, etc; that has been weaker so far year to date. That simply has to do-- I don't think that has to do anything with market trend, but more the lumpiness of big government purchase orders from around the world. I think that business continues to-- or will be healthy. We're looking at what we believe will be good order trends in the second half and so that's more of the lumpiness of that particular business that's within the Bruker Daltonics division.

Bruker AXS and Bruker Optics are feeling the recession more, so they are down in terms of revenue relative to the prior year, year to date and in the second quarter. As we have stated, the trends appear to be that things have at least stabilized in the last four or five months, whereas obviously demand dropped for those businesses in-- last winter starting in November-December and so on.

So we believe that they're not dropping as much as some others that are primarily selling to the industrial markets and we believe that has to do with the fact that in the prior two or three years, we've actually invested tremendously into new businesses and new products. Many of them are now on the market, so even though these businesses may be down in the low double digits, they are actually probably doing better than their competitors and are probably-- we believe they're gaining market share even during this recession.

And I'd like to add Derik, that in the instrument business amongst the four divisions, they all showed improvements in their gross profit margins this quarter, even in a tough environment, these new products that we've introduced and some of the cost savings and new processes we've introduced are working.

Great. Thanks very much for the color.

And at this time, you have no further questions.

Okay. Thank you very much, ladies and gentlemen for joining us today. This concludes our second quarter earnings call. Good-bye and thank you very much, again.