Bruker Corp (BRKR) 2013 Q3 法說會逐字稿

Good morning, everyone, and welcome to today's Bruker third-quarter 2013 earnings conference call. (Operator Instructions) Please note today's event is being recorded.

At this time I would like to turn the conference call over to Mr. Joshua Young. Sir, please go ahead.

Thank you very much, Jamie. Good morning. I would like to welcome everyone to Bruker's third-quarter 2013 earnings conference call.

My name is Joshua Young and I'm Vice President of Investor Relations for Bruker. Joining me on today's call our Frank Laukien, our President and CEO, and Charlie Wagner, Bruker's Executive Vice President and Chief Financial Officer.

In addition to the earnings release we issued this morning, we will also be referencing a slide presentation as part of today's call. The PDF of this presentation can be downloaded by clicking on Bruker's Investor Relations website or by accessing the file through the audio webcast player.

During today's call we will be highlighting non-GAAP financial information. A reconciliation of our GAAP to our non-GAAP financial statements is included in our earnings release and in our webcast presentation.

Before we begin, I would like to reference Bruker's safe harbor statement which I show on slide two. During the course of this conference call we will be making forward-looking statements regarding future events or the financial performance of the Company that involve risks and uncertainties. The Company's actual results may differ materially from the projections described in such statements.

Factors that might cause such differences include, but are not limited to, those discussed in today's earnings release and in our Form 10-K as well as other subsequent SEC filings. Also note that the following information is related to current business conditions and our outlook as of today November 1, 2013. Consistent with our prior practice, we do not intend to update our projections based on new information, future events, or other reasons prior to the release of our fourth-quarter and full-year 2013 results.

We will begin today's call with Frank providing a business summary of our Q3 2013 year-to-date performance. Charlie will then cover our financials for the third quarter and talk in more detail about our updated guidance for the full year. Now I would like to turn the call over to Frank Laukien.

Thanks, Joshua. Good morning and thank you for joining us on the call today. I will begin the presentation on slide four.

Q3 was a challenging quarter for Bruker as both our top-line performance and operating profitability were well below last year's results and fell short of our own expectations in the quarter. We reported revenues in the third quarter of 2013 of $439 million, which represented a 2% decline from Q3 2012. Organically our revenues declined 2.4% in Q3.

Our performance was driven by three key factors. First, our BMAT group revenues declined in the low single digits year over year due to continued weakness in industrial markets, particularly in the Asia-Pacific region. Second, our BioSpin revenues declined in the mid-single digits year over year as flat NMR revenue was offset by a double-digit decline in our Preclinical Imaging Division.

Finally, our BEST segment revenue was down by 23% in Q3 year over year due to the impact of the Rosatom license which increased revenue and associated operating income by approximately $16 million in Q3 of 2012. As a result, the majority of our year-over-year decline in our Q3 2013 non-GAAP operating margin was related to the impact of the Rosatom license.

Finally, our non-GAAP EPS of $0.20 in Q3 2013 was $0.08 below our non-GAAP EPS of $0.28 in Q3 2012. Adjusted for Rosatom, our non-GAAP EPS was roughly flat in the quarter.

So to summarize our performance in Q3, heading into the quarter we were already experiencing weakness in our BMAT group due to soft industrial markets. We expected that we would be able to offset this weakness with strength from our other businesses, in particular our BioSpin group.

However, this strength did not materialize in Q3 and it became clear that improvement in demand from our industrial customers would be much slower than anticipated in the second half of 2013. This has led to both softer-than-expected Q3 performance and a downward revision of our guidance for the full year.

On slide five I show our year-to-date performance after the first nine months of 2013. Given the variability we have seen through the first three quarters of 2013, it is important to view Bruker's business on a year-to-date basis in order to smooth out the volatility of the results.

Through the first nine months of the year we have reported 2.0% organic revenue growth. If we adjust for the Rosatom transaction, our year-to-date organic revenue growth would have been approximately 3%. Year-to-date our CALID and BioSpin groups have generated mid-single-digit revenue growth while our BMAT revenues have declined in the mid-single digits due to weaker spending from industrial customers, particularly in Asia.

Our BEST business reported approximately 2% revenue growth during this nine months' time, despite the difficult year-over-year comparisons created by the Rosatom license.

Turning to our operating profitability, our non-GAAP operating margin of 9.6% is approximately 190 basis points below the 11.5% we generated in the first nine months of 2012. Approximately 70 basis points of this decline is related to Rosatom. The remainder of the decline was related primarily to the impact of a weaker Japanese yen.

Our non-GAAP EPS was $0.46 through the first nine months of 2013 and was down by $0.08 compared to $0.54 in the first nine months of 2012. Approximately $0.04 of this decline was related to the Rosatom license.

So while we are clearly disappointed with our results in Q3, our revenue growth on a year-to-date basis is generally in line with a broader market. 2013 has been a challenging year due to slow growth in academic funding, the rapid decline of the yen, and soft industrial markets. Bruker's growth rate has been disproportionately affected due to our higher level of relative exposure to industrial markets compared to most of our peers.

Finally, while we may be through the trough, the recovery in microelectronics market including semiconductor, data storage, displays, etc., is still rather slow and the migration to 450 millimeter wafers, for which our BMAT group has done a lot of product development and validation, has been delayed by the big semicon players for nine to 12 months.

I now turn to slide six and seven to make a few comments on the three BSI segment groups and our BEST segment. I will provide commentary both on a quarterly and a year-to-date basis. I will start with the Bruker CALID group which generated double-digit revenue growth in Q3.

CALID's performance continues to be led by our Optics division which generated double-digit revenue growth in the quarter and is seeing good revenue and order growth across nearly all geographies and end markets. This performance follows up on a very good Q2 so the Optics division is poised to post a good year and has been one of the best performing businesses in the Bruker portfolio.

Our Daltonics, Life Science, and Clinical divisions posted modest growth in the quarter after a slow start to the year. The key driver of our performance continues to be the MALDI Biotyper, which once again posted double-digit growth in the quarter.

During Q3 we made some important changes to the management team of the Life Science Clinical division. We established a new senior VP role for global sales and service and we substantially revamped our logistics, supply chain, and operations teams with the addition of very talented and experienced operations managers. I am confident that these changes will help to improve Life Science Clinicals' distribution and operational performance over time.

In September, this division introduced our very high-end Ultra-High Resolution QTOF system, the maXis HD, at the HUPO conference with capabilities and specifications that are just unmatched in research mass spectrometry.

Continuing with our Chemical and Applied Markets division, or CAM, this CAM division narrowed its operating loss in the third quarter, but still has significant work left to do to deliver on its restructuring milestones for the full year. The CAM business generated double-digit revenue growth in the quarter, but has not yet shown the improvement in its supply chain performance that we need to generate in order to deliver on our longer-term expectations for this business.

Our gas chromatography, or GC, R&D side and factory will be fully closed in Q4 of 2013 and all GC R&D and manufacturing has been transferred to the CAM single site in Fremont, California, or outsourced. In Q3 CAM also outsourced much of the production and assembly of non-core subunits and systems of its Quadrupole mass spec business and we believe CAM will operationally be much better positioned in Q4 and going into 2014.

Finally, our CALID Detection division generates good results in Q3 and has grown in the high-single digits on a year-to-date basis. This Detection business is also driven by large orders and the trends for spending by global governments on security and [CBRNE] detection have been solid during 2013.

I would like to now turn to our Bruker BioSpin group. BioSpin had a disappointing Q3 with revenues declining mid-single digits in the quarter. While our magnetic resonance spectroscopy division was flat in the quarter, the primary challenge we faced was a steep decline in our Preclinical Imaging division revenue.

A double-digit decline of our preclinical MRI, or magnetic resonance imaging, revenue was the primary driver of the weakness we experienced in the Preclinical Imaging division during the third quarter of 2013. Our MRI business actually booked solid orders this year, but several installations got pushed out of Q3 into the fourth quarter or into 2014 which hurt our Q3 revenue.

Additionally, our Bruker molecular imaging business, which we acquired in Q4 of 2012, has been facing weak market conditions for most of the year. As a result, the Preclinical Imaging division's double-digit revenue decline was the primary driver of BioSpin's disappointing third quarter.

On a positive note, our PCI division in September introduced the world's first preclinical MPI, or magnetic particle imaging, system, and we have already received orders for 2014 deliveries for this unique, new, preclinical imaging modality with particular promise for fast cardio imaging in animal models.

One of the key developments this quarter was that I hired Thomas Bachmann as the new President of the BioSpin Group. Thomas was previously the CEO of the Tecan Group in Switzerland and I am confident that his managerial, marketing and sales, and operational experience will be a key asset in helping us drive improved overall performance at BioSpin.

The last item that I want to mention about BioSpin is that the business continues to see healthy demand and has posted high single-digit order bookings growth throughout the first nine months of 2013. This strength in BioSpin has come from both ultra high-field NMR products and from a recovery in EPR demand.

We are also excited about our recently launched product, the FOURIER 60, a new permanent magnet-based benchtop FT-NMR spectrometer. This new product will bring the power of Bruker's NMR technologies to the academic teaching or routine chemistry labs, enabling Bruker to cover both the high end and entry levels of the NMR market.

Now on slide seven you will see the Bruker MAT, or BMAT, group's revenues decline in the low single digits during Q3 2013. All four of our divisions within BMAT are experiencing weak overall demand from industrial customers and no significant recovery yet from the microelectronics industries. While we saw some signs of stabilization in our new order bookings, we expect that we will not see much of a recovery in BMAT's revenues during the remainder of 2013.

One of the bright spots in the quarter was that our AXS division reported modest growth in the quarter led by strength in our x-ray fluorescence products. A fair amount of this strength occurred in China, which grew nicely overall for AXS in Q3.

Not surprisingly, our Bruker Nano Surfaces, or BNS, division reported a year-over-year decline in revenues during the third quarter and year-to-date. Some of the orders from microelectronics customers that we hoped would close in the second half of 2013 have been pushed out until next year, particularly anything related to the 450 millimeter industry transition.

A key milestone for the BMAT group in the quarter was the acquisition of Prairie Technologies near Madison, Wisconsin. This acquisition will strengthen BMAT's position in the life sciences market by establishing capabilities in the fluorescence microscopy market. Longer term we believe that we can exploit synergies between our life sciences atomic force microscopy systems and Prairie's multiphoton fluorescence microscopy product to allow cell biologists and neuroscientists to better visualize and analyze cellular samples and processes.

Prairie has approximately 30 employees and generated nearly $11 million in revenue in 2012.

Now I would like to turn to our Bruker Energy and Supercon Technologies, or BEST, segment. As we have stated already the Rosatom license transaction impacted the comparability of BEST's performance in the third quarter. On a reported basis, BEST's revenues declined 23% in Q3 2013 year over year but grew 2% through the first nine months of the year.

If we adjust for the Rosatom license in both years, BEST's revenue growth on a year-to-date basis would have been 16% as underlying demand for low temperature superconducting wire and other high-energy physics products remains healthy. Excluding Rosatom, BEST's operating profit increased by $4 million for the first nine months of 2013 compared to the first nine months of 2012. This is evidence that we are making progress in raising the profitability profile of BEST.

Now I would like to turn to slide eight. On this slide I show the previous restructuring actions that we have announced during the course of the year. In February, we committed to close facilities, outsource non-core manufacturing processes, and divest some non-core products.

We are on track to close three plants within our CAM, BEST, and Preclinical Imaging businesses by the end of the fourth quarter of 2013. We completed the divestiture of our power electronics business in March. We outsourced most of our Swiss electronics production to Zollner in March, and we are on track to outsource more non-core BioSpin manufacturing processes to third-party contract manufacturers in Q4 of this year and throughout 2014.

We committed that these actions would save Bruker about $10 million annually in 2014 and we are largely on track to deliver those savings, albeit with some delays within the year 2013.

Given our soft Q3 and our weaker outlook for the fourth quarter, we have decided to take additional actions to further reduce our expense base. We are already in the process of reducing headcount in our BMAT group by approximately 150. All four of the divisions within BMAT -- Bruker Nano Surfaces, Bruker AXS, Bruker Elemental, and the Bruker Nano Analytics -- will be affected.

We are focusing on consolidating manufacturing sites and processes, as well as reducing our fixed costs and right-sizing our cost base for sustainable profitability. The financial impact of these additional actions that we expect to save an incremental $5 million to $10 million in 2014, which would increase our overall targeted cost savings to $15 million to $20 million in 2014.

Near term, our focus is going to be on ensuring that we execute the programs we have already announced on a timely basis. At the same time, we are analyzing our business as part of our annual strategy and budgeting processes to determine additional outsourcing and restructuring initiatives for 2014 that will help our profitability in the second half of 2014 and in 2015 and beyond.

We are currently developing specific actions or plans, and we expect to be able to communicate additional streamlining actions in 2014.

I would like to make a few closing comments on slide nine. While 2013 is going to be a difficult year for Bruker, we believe that we have made significant progress and we are strengthening the Company's foundation to drive profitable growth and sustainable cash flow in the future.

We have made major organizational and managerial changes that are beginning to pay dividends. We are reducing our cost structure and have established better operating expense discipline throughout the organization, and this is evidenced by the much better control of SG&A and R&D spending that we have reported over the past few quarters.

Finally, I continue to be excited by the new products that we are bringing to the market and the new market segments that we have been entering. While academic and industrial markets have been difficult in 2013, Bruker can continue to drive attractive growth in the future. I am confident that the new products that we are bringing to the market will bring features that differentiate Bruker and create value for our customers.

With that I would like to turn the call over to our CFO, Charlie Wagner.

Thanks, Frank. I will now provide some additional details on Q3 and our 2013 year-to-date performance before providing our financial outlook for the remainder of the year.

On slide 11 I show a snapshot of our Q3 2013 non-GAAP results. Total revenues declined by 2% from the third quarter of 2012 totaling $439 million in Q3 of 2013. Our non-GAAP operating income declined 32% in the quarter with a substantial portion of this decline coming from the year-over-year differences in the timing of Rosatom revenue and a weaker Japanese yen in 2013.

Our non-GAAP EPS was $0.20 in Q3 2013, representing a 29% decline from our EPS in the year-ago third quarter. Finally we had a positive free cash flow of $28.3 million in the third quarter, $47 million better than our free cash flow in Q3 2012.

Turning to slide 12, I show the revenue bridge for the third quarter. Our organic revenues declined by 2.4% in the third quarter, but excluding the impact of the 2012 Rosatom license revenues, year-over-year organic revenue growth would have been approximately 1% in Q3 2013.

For the first time in the past six quarters we saw positive impact from changes in foreign exchange rates, which had a positive 0.5% contribution to revenue growth during the quarter. A strengthening euro was the primary driver of this impact.

On slide 13 I show our Q3 2013 non-GAAP operating results in more detail. Our Q3 2013 non-GAAP gross margin of 45.1% is a decrease of 310 basis points on a year-over-year basis. Approximately 200 basis points of this decline is related to the year-over-year difference in Rosatom license revenue and approximately 80 basis points of the decline is related to the weaker Japanese yen.

Our SG&A and R&D spending continue to be reasonably well controlled but represent a higher percentage of revenue compared to Q3 2012, due to our weaker revenue performance in the third quarter of 2013. Our non-GAAP EPS of $0.20 declined by $0.08 compared to Q3 2012 with most of this decline coming from the effect of Rosatom.

During the quarter, our non-GAAP tax rate of 20% was lower than the year-ago period. This was primarily due to the mix of jurisdictional profits and the reversal of a tax reserve.

On slide 14 I show a reconciliation of our GAAP to non-GAAP financial results for the third quarter. In Q3 2013 we excluded $15.8 million of operating costs from our non-GAAP results compared to $9.1 million in Q3 2012. The increase is primarily related to $8.6 million of restructuring costs we recorded in Q3 2013.

The higher restructuring costs are the result of hitting our previously announced restructuring milestones and incurring costs for employee separation and closure of facilities. As we make further progress with these programs and the additional actions mentioned by Frank, I expect that our restructuring costs in Q4 will be modestly higher than what we reported this quarter.

On slide 15 I show our results for the first nine months of 2013. Frank has already commented on our year-to-date revenue growth, so I won't add any further comments on that.

Our year-to-date gross margin of 45.4% is a decline of 210 basis points compared to the prior year. Approximately half of the year-over-year decline comes from the negative Rosatom comparison and the weaker Japanese yen. The remainder of the decline is related to product mix and cost, as well as lower pricing for certain products.

Our year-to-date operating spending is roughly flat with the first nine months of 2012. Our non-GAAP operating margin is down 190 basis points on a year-to-date basis with the impact of the yen and the effect of the Rosatom license explaining substantially all of the year-over-year change.

On slide 16 I show our non-GAAP reconciliation for our results through the first nine months of 2013. Within our non-GAAP adjustment substantially higher restructuring costs have been partially offset by reduced spending on our investigation of the Company's past business practices in China. We expect that we will be at the mid to high end of our guidance range for the full-year restructuring costs of $20 million to $25 million.

The other point I would make on this page is that our year-to-date non-GAAP tax rate of 25.9% represents a decline of 390 basis points compared to the prior year, primarily due to a change in our geographic mix of profits.

On slide 17 I show our balance sheet as of September 30, 2013. Our cash balances of $307 million are modestly down compared to the beginning of the year. Inventory grew by 3% compared to year-end. And our days of inventory outstanding improved by 5 days totaling 242 days at the end of Q3 2013 compared to 247 days in Q3 2012.

Accounts Receivable totaled $289 million at the end of Q3. And our days sales outstanding, or DSO, was 62 days compared to 59 days at Q3 2012. We are beginning to see improvement in inventory management, but overall we still have significant room for improvement in working capital efficiency.

On slide 18 I show our free cash flow in the third quarter of 2013. We recorded free cash flow $28.3 million in Q3 2013, an increase of roughly $47 million from the third quarter of 2012. Despite lower net income compared to the prior year, working capital improved in the quarter and capital spending was lower than in the prior year.

In 2011 and 2012 capital spending increased due to a number of building projects, but with fewer such projects currently ongoing, capital spending is declining in the second half of this year. Year-to-date 2013 free cash flow is negative $28 million compared to negative $8 million for year-to-date 2012. The year-over-year difference is primarily due to lower net income in 2013 with other changes essentially netting out.

Now I will turn to our financial guidance for 2013 which I show on slide 20. Based on our Q3 results and our reduced expectations for the fourth quarter, we now expect full-year 2013 reported revenues to be roughly flat to down 1% when compared with 2012. The revised outlook primarily relates to an expected double-digit decline in BMAT fourth-quarter revenues when compared to Q4 2012. The revised full-year outlook assumes organic revenue growth between zero and 1% for Bruker for the year.

On the bottom line we expect to generate non-GAAP earnings per share of $0.72 to $0.76 in 2013. This guidance assumes a non-GAAP tax rate of 25% to 27% for the year. We continue to expect that we will incur restructuring charges of between $20 million and $25 million in 2013.

Our currency assumptions have changed modestly based on exchange rate movements in the third quarter and our guidance assumes a US dollar to yen rate of 98 and a US dollar to euro rate of 1.35.

With that I will turn the call over to Joshua to begin the Q&A session.

Thank you. Jamie, please assemble the Q&A roster.

(Operator Instructions) Isaac Ro, Goldman Sachs.

Good morning, guys. Thanks for taking the question. Lots of detail in the presentation, appreciate that.

Was wondering, Charlie, if you could maybe talk a little bit more through how you are looking at the operating expense structure of the Company. It looks like this year, if we put all of the various updates here and the guidance into context, that you guys will finish OpEx pretty close to flat year on year.

And I am wondering if we consider the inflationary pressures in the business is it fair to say that given the cost restructuring you are doing that next year could be similarly flat or is it too early to talk a little bit about the 2014 OpEx? Because it just seems like you guys have really made a lot of changes that are not yet really fully manifested in the P&L. Thanks.

Isaac, I would say the last part of your statement there is right and it relates to what Frank mentioned -- we are making a lot of changes this year. Management changes, but also just significant changes in the way we measure and manage the Company. That has translated into, I would say, much better accountability and control for OpEx and I think that does show in the numbers right now.

That will continue to have a benefit as we move into 2014. It is too early for us to be commenting on 2014 at this point.

Obviously, we are counting on this year's restructuring actions to have a clear and measurable benefit in next year's results and we will be looking for additional actions to take next year that will benefit future years. But at this point it is a little too early for us to call that.

We need to obviously get through the fourth quarter here. We have been struggling with a little bit of -- struggling with visibility a little bit this year obviously, so we are going to hold off on talking about 2014 until we get to our Q4 earnings release in February.

Sure, that is understandable. If I could follow up with a question on guidance. As you pointed out, you are struggling a little bit with visibility. There has been a pretty material reduction from your initial 2013 guidance at the end of last year.

And I am wondering if you could talk a little bit philosophically about how -- your vision to the way you guys talk about guidance. What is the biggest thing that has changed? How are you guys trying to handicap the visibility differently now versus maybe nine months ago? Thanks.

Isaac, this is Frank. I think one general item that will occur also going forward, even as we have better systems, is that due to the large ticket items that we do sell in a number of our divisions there is inherently a certain degree of variability in our revenue. And, of course, that falls through to the bottom line.

Not as much as what we have experienced this year. I think we can improve on that with better systems.

The second point I would like to make is that really it is primarily driven by our BMAT group. While we are seeing some gradual improvement in second half anticipated orders in the BMAT group over the first half, it is not a strong rebound in industrial demand.

And with a particularly noticeable delay in the microelectronics, semiconductor, data storage; clear delays by several quarters of the pickup, as well as a declared delay by the industry leaders of the 450 millimeter transition. So those are -- some inherent variability, which we have experienced this year. We think we can reduce that, but it will still be higher than probably for some other peer companies with lower average selling prices. And then primarily looking at the BMAT group in Q4 that is what has modified our outlook.

Isaac, what I would add is obviously we have reduced our guidance this year, so that is clear. If you go back earlier in the year and think about the color commentary we gave, clearly we gave our guidance. We gave hard numbers, but then we give some color commentary around that.

And what we said throughout the year was that we were counting on a strong Q4 to help us deliver that guidance and within that we were counting on an upturn in the industrial markets served by the BMAT group. So we, I think, were thoughtful enough when we gave the guidance; we were counting on that happening. Clearly, we are a little bit off in our expectation of that happening and that really is the explanation for why we have a different outlook now with only 90 days to go in the year.

Understood, that is helpful. Thanks, guys.

Brandon Couillard, Jefferies.

Thanks, good morning. Frank, in the BMAT division clearly demand was weaker than expected, but could you elaborate on your visibility there? It sounds like orders in the industrial category did improve sequentially year over year, but how should we think about that segment going into next year?

Brandon, we have reasonably good quarterly visibility in that group. Actually, they have done a good job organizationally in giving us improved visibility. We don't like necessarily the visibility they have given us for Q4, because it implies a double-digit revenue decline year over year.

Now that group, the BMAT group, and particularly the AXS and BNS divisions, the two large divisions in that group, also had very, very strong Q4s last year so it is a bit of a tough comparison. But, overall, the outlook for that for next year I would prefer to comment when we update you in mid-February or so on our Q4 results. There is indeed a slight improvement; second-half bookings that we anticipate for the second half of this year are up sequentially so there is -- but it is too early to declare, okay, there is a turnaround in full swing.

We were a little bit encouraged by AXS was a little bit more positive in Q3 in terms of bookings and outlook than we had seen in Q2, but it is just too early to say that it is a trend.

Thanks. Then, Charlie, on the free cash flow front glad to see working capital continues to come down. Pretty nice job on the conversion in the third quarter. But how should we think about free cash flow conversion going into next year? Do you think you will be able to approach something like 90% to 100% of net income?

And then just to clarify, the $15 million to $20 million of savings is incremental on top of 2013, correct?

Yes, so the $15 million to $20 million of savings, right, is incremental to 2013. I think we started the year with an estimate of $10 million exiting this year. We have now bumped that to $15 million to $20 million total heading into 2014.

On working capital, again too early to comment on 2014 guidance, but we are starting to see some improvement. I am certainly starting to see some improvement in the way management of our various businesses approaches the inventory subject. We are starting to see some reduction in the transit inventories and demo inventories and now starting to make changes to supply chain organizations, which should have an impact on production planning, WIP, and raw materials.

So this stuff takes a little while to materialize, because you have to have the right organization in place to drive it. Then you need to bleed down, work down your excess inventories, and we are doing that, but I would say we are starting to turn a corner there.

As you head into next year relative to this year then we should be seeing some inventory improvement. As I mentioned in my prepared comments, CapEx is coming down, so overall we are setting up for better cash flow going forward. But at this point I can't comment on the order of magnitude of that.

Great, thank you.

Tycho Peterson, JPMorgan.

Thanks. Maybe just starting off with one of these pressure points you called out in the quarter. The molecular imaging business; you had just acquired this at the end of 2012. Maybe just talk about what went wrong in the pre-deal analysis and now that you own it where do you see that business bottoming out I guess?

Tycho, this is Frank. We are actually seeing some year-over-year growth in that business compared to the revenue that it had under its previous ownership. But transitioning that business from Connecticut to Massachusetts and eliminating that site, which has occurred now, and ramping up the global distribution for that business is taking us somewhat longer.

So I think it is more the rate -- it is not so much the overall analysis of where we can take this business, but it is certainly taking us longer, in particular in view of this business is one of the businesses that clearly is and has been seeing weaknesses in its US demand, presumably from sequestration. Some of our other bigger ticket items in NMR have not seen that much and have had good bookings actually in the US this year. But the molecular imaging business has seen weakness in demand throughout the year, including, and in particular, the United States.

We have now made the transition. We have now moved the team and have set it up here in our main facility in Billerica and I think we can see -- we will be seeing a gradual ramp up. But I think the initial projections also by the team that we had acquired were somewhat too optimistic, at least in the rate of change and the rate of improvement.

Okay. Then, Charlie, in your comments you talked about lower pricing for certain products. Can you maybe just talk about the overall price effect on revenues and margins for the Company?

We have commented all year, I would say, on some price erosion in the BioSpin business and that is really all I was intending to reference there. I can't give you a precise number on the pricing impact. I think it is mixed, right?

Where we are innovating and introducing new products obviously we were seeing some improved pricing associated with better value in those products, but we had commented throughout the year about pricing in the BioSpin backlog not being as solid as in past years given competitive pressures over the last 18 to 24 months. So we still got some of that coming through.

But, overall, I would say pricing has been mixed across the businesses. Really the only reference point there is the BioSpin business.

And maybe the addition on that is that, of course, some of our pricing tends to be in local currencies so clearly in Japan we quote and sell in yen. It is well-known that the yen came down very rapidly last winter basically. But of course, we have also seen some reduction in the Australian and the Brazilian and the Indian currencies throughout the year, which are also affecting pricing to some extent in those markets.

Okay. Then, Frank, lastly, you talked about a muted industrial recovery and a nine- to 12-month delay in the semiconductor demand. Should we be thinking about a return to more normalized growth rates coming for the second half next year? Just trying to gauge where you think things start to kind of turn.

I would not necessarily say that, but I am also not giving you the alternative answer yet. When we give 2014 outlook and guidance in February I think we will give you a better answer, but I am not necessarily saying that any recovery is delayed to the second half of 2014. So we prefer to update you on that in February when we give our Q4 results and our 2014 guidance.

Okay, thank you.

Jon Groberg, Macquarie.

Thanks, good morning. Charlie, I have got a number of questions just on the additional cost saves, so I just want to clarify where we are at and what that means for 2014.

So it sounds like you feel like you have achieved most of the $10 million initially for 2013, so are we kind of at that run rate in this quarter? And then it would be an additional $5 million to $10 million in 2014, right?

Yes, mostly right. In the initial $10 million we have completed most things and/or are on track to have them completed, say, by the beginning of the year. As Frank pointed out, we have had a little bit of slippage within the year with some of the outsourcing programs but it's nothing exceptional. So the run rate, I would say, for 2014 is $10 million. Those actions are in pretty good shape.

And then in addition, associated with the right-sizing in the BMAT group, we intend to drive another $5 million to $10 million. Again, those actions are already underway and should be mostly implemented in Q4.

Just given the timing of some of the headcount reductions being in Europe it takes us a little bit longer to work through that. Some of that might move into Q1 or even the early part of next year, hence the range of sort of $5 million to $10 million on that one.

So I guess when would you be expecting to be at kind of your run rate savings of all those initiatives in 2014? Is that by Q2?

Certainly by Q2, yes.

Okay. And then can you just maybe -- I think you talked a little bit about visibility. But how far away are you and what kind of investments still need to be made where you can start to know, if not on a daily, on a weekly basis where you stand from a sales standpoint and kind of how the quarter is shaping up?

Jon, daily to weekly we are a long way from that, honestly. To have that kind of visibility requires a pretty tightly integrated global ERP system. We would be a long way from that.

And, honestly, for our business, given the heavy focus on instrumentation and capital equipment sales, daily to weekly isn't necessarily how the business is run. I was certainly used to that kind of visibility at Millipore, in a more consumables-oriented business where you could look at daily run rates and trending, and that does make sense. Not that I wouldn't like the capability, but we don't necessarily manage day to day, week to week here.

But nonetheless, the general point around visibility, it is a function -- certainly systems play a role in that, but I would say another big part of that is the way that the global sales and service organizations are managed. And that is obviously something that we are going through a transition on this year.

Seeing strengthening in commercial capabilities around the Company, strengthening of management processes around the Company, and that, even in the absence of systems, should lead to more reliable forecasting and better visibility going forward. But obviously we are just in the early stages of driving that change in behavior.

So if it is not even weekly or so, what would be an optimal outcome for you over the next year or so from a visibility standpoint? I think you are still, if I'm not mistaken, I think it is still -- it's kind of a month after or so the quarter ends before you really know what the revenues are going to be.

I mean if it is not to the degree that it was at Millipore, is there an optimal outcome that we should be kind of expecting over the next year from a visibility standpoint?

It is not quite accurate that it takes us a month to figure out what our revenues are. We know what the revenues are relatively soon after the quarter closes or after a month ends. But I would say that monthly cadence, getting on a better monthly cadence and starting to make operational improvements so our revenues aren't so loaded to the end of the quarter. Again, that is always going to happen a little bit in a capital equipment business like this one.

But we are working hard to push installations earlier in the quarter and kind of smooth out that revenue profile so that in month one and month two we have more of the quarter completed and we are not waiting for the last two weeks. And when you get to the last two weeks, if you have one or two surprises it can be material.

As Frank commented, we won't be able to completely eliminate variability. I think it is, to some extent, inherent in a business like this, but if we could get on a healthier monthly operating cadence with good sales and order visibility on a monthly basis I think that would be a really good improvement.

Ross Muken, ISI Group.

This is Vijay for Ross Muken. Thanks for taking my question. I guess my first one was a big picture, Frank.

I guess you have touched on this in your prepared remarks, talking about sort of divesting non-core assets. Do you feel like, just given the underperformance in some of the smaller business units, is there a reason to believe that maybe you could take further actions, divesture of non-core business segments? And if that is the case, if you do feel like asset complexity needs to be reduced, what areas would those be?

It is actually some of the larger divisions in the BMAT group, the BNS and the Bruker AXS divisions, that particularly saw the demand picture o being weak in 2013 and not picking up much in the second half of 2013. So right-sizing the OpEx structure and fixed costs in those businesses is the answer. There is no thought whatsoever in divesting any of that or anything like that.

There is room for further outsourcing in those businesses as well as all of our businesses. There is room elsewhere for further fixed costs and OpEx reductions as well, not only in the BMAT group. I think those are the things that we will be talking about and that we are analyzing at this point.

Great, thanks for the color. Maybe just a follow-up to that, Frank. As you sort of embark on these organizational changes and restructuring, do you feel like, just given that revenues have been stressed in the near term, taking these restructuring actions at this period could that stress the Company at this point? Or do you feel like you are in a good place even with the revenue sort of being a little unclear at this point?

I think it is a secondary effect. Of course, when the management team is looking a lot at restructuring and outsourcing, it absorbs some management and organizational bandwidth, granted. And, yes, a few things in Q3 simply in the last couple of weeks, some things that -- revenue we were hoping for the sites weren't quite ready or the installation couldn't get fully done.

So those are -- I agree those effects are there, but I don't think they are the big drivers. It is really clearly the year-over-year comparison at BEST, the particular circumstances in the Preclinical Imaging division that we explained, and the weaker recovery or very gradual recovery in industrial markets and some push out in semiconductor and microelectronics.

Derik De Bruin, Bank of America Merrill Lynch.

Good morning, it is Rafael in for Derek and thanks for the questions. Frank, in your prepared remarks you mentioned that BioSpin bookings were up in the high single digits. Also mentioned that some booking transferred to other businesses, such as the detection and microelectronics business.

But perhaps can you just make broader comments regarding the backlog in booking levels for the -- as well as the anticipated duration for the three main Bruker groups, just to get a better sense of the trends and how you see these bookings unfolding in the near term?

Yes, high level, our backlog is still around $1 billion so healthy backlog, continued healthy backlog. The book-to-bill ratio in Q3 was just below 1 and so we -- yes, you are right; in the BioSpin business and both in the MRI, which had the revenue weakness in Q3 but year-to-date the bookings have really been excellent. It is just not a lot of big systems that -- some will go into Q4 and some will simply go into 2014, because customer sites are not ready. We just can't deliver and get revenue recognition.

Indeed, also in the NMR business and in the EPR business, which is a smaller business that the Street probably has less focus on, there have been nice bookings year-to-date and growth in the mid to high single digits. So that bodes well, but it is offset by weaknesses elsewhere.

I mean if you look even the Bruker BEST had its own comparability issues because of the license, but underneath that comparability issue it had pretty good growth year-to-date. The more life science and more academically-oriented CALID and bio groups had mid-single digit growth year-to-date in the first nine months. Any particular quarter it's more simply variability sometimes, but year-to-date it's meaningful.

Whereas our BMAT group has more of an industrial focus; it also has some academic customers, of course, but more of an industrial focus and they are down mid single digits year-to-date. They are also, because of the very strong Q4 of last year and because of the gradual recovery in the industrial markets, predicting -- being very cautious and conservative, and correctly so for Q4.

So that is an average picture for Bruker, but it really is a fairly different picture if you look at [vbio], CALID, and BMAT. And BEST just had comparability issues, but underneath it is actually growing and it is also growing its bottom line. It now has emerging profitability besides Rosatom.

Steve Willoughby, Cleveland Research.

Thanks for taking my question. I was just wondering; the incremental restructuring that you announced today is that stuff that you already had planned for 2014 and you are just pulling ahead, or is that new things that you are just implementing right now?

We had planned to implement a lot of that already in 2013 to have it effective as early as possible in 2014. Because some of it up also occurs in Europe, it won't all be effective January 1. Some of it, as Charlie had said earlier, will come in in Q4; some of it will come in in Q1.

So those are things that we had been looking for basically in our strategy process. It is somewhat coincidental timing, and of course, gets accelerated a little bit, but these things had been in the planning stages already. Then, clearly, we -- so it is not directly a result of this weaker Q3. It is something that we had been planning for already and, of course, if anything we have accelerated that based on Q3 and our Q4 outlook.

Just secondly, the progress that you are making in the CAM business, how would you evaluate that versus your expectations at this point in the year?

Not quite to expectations in CAM. Bookings and revenue are growing, so that is good. At the beginning of the year we underestimated a little bit how quickly we could get the restructuring done and move the factory, and then either to outsourcing partners in Asia or the US and/or to our now one site, one CAM site in Fremont.

So, for instance, in Q3 it turned out we had the Fremont GC factory ramping up, and we still had the European Dutch GC factory running at the same time. So in some ways, not only were some of the savings delayed, we actually doubled up in some of the expenses for a few months in order to manage the transition.

So having said that, we are encouraged by the competitive and growth outlook of this business. The applied markets also are recovering a little bit. But we are not going to fully reach our goal of cutting the losses in half in the CAM business.

We are making significant improvements in profitability, but we are making -- the improvements are coming a little bit more slowly than what we had expected at the beginning of the year.

Doug Schenkel, Cowen and Company.

Good morning. So quarter-to-quarter revenue volatility is not really anything new for you guys. And while the revenue performance is disappointing, I don't think most on the line would view this as being all that shocking. And to be fair, given your high capital mix, this isn't necessarily a unique dynamic or a dynamic that is unique to you guys.

That said, the focus moving forward for many investors is really going to be on the pace of operating improvement. And clearly you have got a lot of questions about this already, so I apologize if I'm going to ask a couple more.

So over the course of today, many of us on this call, we are going to be updating our forecasts for next year. And my guess is most of us are going to end up forecasting revenue growth that is somewhere in the low-single digit to mid-single digit growth range. So on what will be expectation for a slightly higher revenue number off of the 2013 base, you are going to have about $20 million in operating savings via restructuring versus 2012.

As you talked about on this call, working capital is improving. You are not going to have the tough Rosatom comp next year. FX presumably is not going to be as much of a headwind as it has been this year, keeping in mind what you talked about just with the yen. And you are going to be really well into year two of your organizational and operational change initiatives, and not to mention CAM continues to improve slowly but surely.

So with all of that in mind, my questions are why wouldn't gross margins get back at least to 2011 if not 2012 levels? And why won't operating margin expand at a pretty good rate? And this isn't really a 2014 guidance question. It is a question intended to assess where you are in turning this business around operationally as we stand today.

Because it does seem like these initiatives should start to materialize at the operating line next year in a potentially pretty robust way, and that is really the only way for us on the outside to assess your progress and success. So any thoughts you have on these dynamics and questions would be appreciated. And if you could also talk about your plans and progress you are making with the ERP. Thank you.

So I think there's a lot to agree with in what you said. We are not counting on another $30 million headwind from the yen next year. The Rosatom comp gets easier. We are hoping that the BMAT comp gets easier. So I think there are quite a few headwinds we are dealing with this year that we wouldn't expect to repeat next year. But, of course, we don't know that and may not know that for some time.

The restructuring activities will absolutely have a positive impact next year. Obviously, it is way too early for us to comment. We are clearly driving for operating margin expansion next year, and we've been setting a foundation for that this year; would have hoped that some of that benefit could have come through, but the year is just not working out that way. So that is going to continue to be the focus going forward.

I think we've taken enough actions to start to drive us in that direction. That said, our profitability is going to be the function of a number of different factors next year. Clearly, the savings factor in, but as we've pointed out we are making investments in other places, building our supply-chain capabilities, building our commercial capabilities. And I think the last part of your question there was around IT.

So there are I think investments to make sure that our profitable growth is sustainable going forward as well. I'm just not ready to sort of net that all out, but clearly we are looking for a stronger 2014 than we are having in 2013.

As in regards IT, we have been working hard all year on implementing a new financial system. We will expect to go live with that early next year. And then, as relates to more fundamental ERP changes, we do have a team that has been launched now looking essentially at kind of a gap analysis around what are the capabilities we need out of our ERP platform. What do we have; how do we close those gaps in segments of the business over a multiyear period of time.

So we are not yet actually making changes to the ERP, but we are preparing to make changes to the ERP beginning next year. And I think that is something we will be able to guide on in February as well, just generally speaking how many years we think it will take and some sense of what we think it will cost. But clearly that is going to be a key part of our 2014 initiatives as well.

Dan Leonard, Leerink Swann.

Thank you. I have a follow-up to an earlier question on CAM. I guess for the CAM business do you need further volume growth to get to breakeven, or with all of the restructuring you have taken and the closure by year-end, does that get you to breakeven in that business even on flat volume?

That is a good question. We are modeling modest further volume growth. We are not modeling something -- if we get more, that is great. But I think the way the distribution organization and service organization is set up, even though we cut costs there quite a bit where it seemed prudent, we are counting on modest volume improvements along with restructuring and outsourcing steps that we have taken to bring it to breakeven and then eventually to profitability.

Got it, thank you. Then my follow-up question. Does your new guidance, you think, adequately incorporate any impact of the US government shutdown? Then I also Perkin-Elmer talked about some issues with export licenses in [ICTMS] as a result of that shutdown. You guys offer those products, but I'm not sure if it is a big part of your business. So do you think you have all these factors incorporated?

We did indeed export license with ICTMS we couldn't get any; nobody responded, so that shutdown. But I think the duration of the shutdown was such that we can catch up in Q4, even though there were a couple of weeks when we just couldn't move anything.

But I think that is adequately reflected in our guidance for the fourth quarter. As well as I don't think there were any other material effects. There was a big concern about the liquid helium situation, but that got resolved in the last minute or actually after the last minute by our government, as you probably all realize, in early October.

Dan Arias, UBS.

Good morning. Frank, just to go back to preclinical, anything notable for you in terms of the competitive dynamic or your geographic mix? It sounds like the state of the market there is maybe a little bit different than what we've heard already.

Yes. So I will give you a little bit more color. As I said, even though there was revenue weakness in Q3, our core preclinical MRI business and the new MPI, magnetic particle imaging, business that comes out of that core development had good orders in the first nine months of the year. It is likely to have a decent Q4, but quite a bit of it, of these big systems simply are not -- they cannot be installed this year. The customer sites aren't ready, so we carry some backlog into 2014.

Our micro CT business, the SkyScan acquisition, if you recall, in Q1 of 2012, solid performance for most of the years so really nothing remarkable there. They are doing well and indeed the molecular imaging business, which is PET-SPECT-CT, there is a lot of confusion in that market.

At the recent World Molecular Imaging Conference the previous market leader in preclinical PET-SPECT-CT has announced that within a year or a year-and-a-half they intend to stop that production. So right now I think customers are just really basically reassessing that market.

Our interpretation is that has led to a little bit of a -- maybe not complete freeze, but a little bit of, wow, let's reassess what is going on. How do we do preclinical PET-SPECT-CT in the future? I think we may benefit from that going forward as when the market leader drops out. A) it is a declining market, but B) it is also the market leader drops out eventually and so there is more room for us. But it hasn't immediately yielded Q3 orders or revenue.

In optical molecular imaging there we really have seen funding pressure, plus moreover we have our internal issues of having to relocate that group which has now happened. We are now re-established and re-staffed that group here in Massachusetts, so one factory less in that preclinical imaging business. But there it has really been a demand -- demand has been weak for us in molecular imaging throughout the year and we don't expect a pickup till really next year.

So three different stories all within Preclinical Imaging, and I apologize, but that is actually the real color.

No, that is good detail, thank you. Then I guess, Charlie, given what has been talked about here, can I ask you to just sort of crystallize for us how far away you believe you are at this point from having solidified your outsourcing plans? Not necessarily executing on it, but more just in terms of knowing what it is that you want to be internally versus external.

We have made good progress on that, the Bruker BioSpin group. They have made some further decisions and finalized some further contracts with certain contract manufacturers in Q4 for more outsourcing. Early in the year, in the Q1 we had already outsourced most of our Swiss electronics business to Zollner.

We actually did that as a divestiture that happened all on one cut-off date, whereas now we're going into more traditional outsourcing contracts where a lot of our electronics then get transferred over the next four to six quarters to the chosen outsourcing partners.

We've also made very good progress at the CAM division actually in outsourcing more of our GC production, so we didn't transfer everything from the Netherlands to Fremont, California, one-to-one, but quite a bit of that also went to our outsourcing partner in Asia in this particular case. And at the same time we started outsourcing the basic assembly and subunits and enclosure assembly of our Quadrupole mass specs to an outsourcing partner in California. So a lot has happened on that.

There is more ideas that are coming out of our strategy process in the various divisions, and we will probably give you an update on that when we discuss Q4 results and 2014 outlook. So a lot of progress, a lot in motion; not only in motion, but now also signed and ready to go. But when you sign one of these outsourcing contracts and you have many, many different electronics modules, it is literally 12 to 18 months until that profit is then all at your outsourcing partner.

And there is more to be done in the other divisions.

Amanda Murphy, William Blair.

I had another question on the operational side of things. I appreciate all the color that you have given on expectations for cost savings next year. I guess I am curious, what is there left in terms of low-hanging fruit? So in other words, should we assume that anything you do kind of from this point on from a cost savings perspective, other than what you have outlined, is really going to flow through the P&L in 2015 at this point or is there still opportunity in 2014?

Amanda, as I have described this I think throughout the year, this is going to be a gradual, continuous improvement. Part of the strength but part of the challenge of Bruker is that we have got a very diversified portfolio, a number of businesses, a number of locations. And so, by definition, that means we can't pull one lever and make things improve.

Again, obviously the benefit of that is we have got some portfolio spread where we also don't have concentrated risk. So what we are doing right now is -- or what we did heading into 2013 is establish a set of initiatives to complete in 2013 that would benefit 2014. We are now looking at a set of initiatives for 2014 that would benefit 2015.

There is always some chance that things we will accomplish next year will benefit next year. It is not simply that we are always doing things that only pay off one year ahead. Clearly, the right-sizing that we are doing in the BMAT business right now is a decision that we accelerated in the second half of this year and it is going to have a benefit into next year that wasn't fully contemplated at the start of this year.

So think of it as kind of waves of improvement. I guess to some extent I suppose it is fair to say that some of the earlier improvements are lower-hanging fruit, but we are making fundamental changes to the way we manage our salesforce, fundamental changes to our supply chain practices, fundamental changes around our locations. And so we do feel that for a number of years we are going to be able to deliver improvements and we need to start to show that in 2014.

Sung Ji Nam, Cantor.

Thanks for the questions. So, Frank, you talked about further diversifying your end market exposure. Was wondering if you could maybe comment on kind of what are some near-term targets there and whether or not you guys can do that organically or do you see more opportunities for partnerships or leveraging maybe acquisitions there as well? Thanks.

Really no news here other than the acquisition of the Prairie Technologies, which gets our BNS division into cellular analysis, into cellular fluorescence microscopy, which that gets us into a new market with an acquisition. The two acquisitions we did last year in Preclinical Imaging were very deliberately focusing on having a broader and, in fact, the broadest portfolio of instrumentation in Preclinical Imaging to go beyond the MRI, preclinical MRI market where we were strong already.

I think the other stories are not new, but they are ongoing with our CAM division obviously a big push into the applied markets, with some clinical opportunities there as well for our triple quad business. Primarily a push into the LC triple quad markets with our detection business.

We have spent a lot of recent years developing the tools to not only do chemical and radiological detection, but also explosive detection, which is obviously a very big market with some new challenges which have led to new technological opportunities. So explosive detection.

And last, but not least, a big push into -- although somewhat delayed right now, a big push into microelectronics and semiconductor by our BMAT group where we had a lot of important strategic early wins and validations, but the industry transition to 450 millimeter and the recovery of the industry in general, including also data storage, has been delayed a little bit. So those are not new stories; that was more of a recap of some of the adjacent markets that we are getting into.

Bryan Brokmeier, Maxim Group.

Thanks for taking the question. Frank, you mentioned -- you again mentioned the strong growth for the Biotyper, but are you seeing any negative impact on orders or on revenue for the Biotyper due to the FDA approval for one of your competitors products? And is there any update on your FDA approval?

We haven't seen any significant effect on that in Q3. If you recall, we also filed a little bit later than our competitor who has now received the first claim. Now that we have seen their regulatory strategy; once they got the claim approved we also noticed that our regulatory approach and the way the claims we are pursuing is really different from the way they are doing it.

But nonetheless, congratulations. They already have the FDA clearance for that.

We hope to get that within months. We are having very good, constructive discussions with the FDA, but of course, we cannot predict what their final reply and/or approach will be or if they have further questions for us. So it is a good constructive process. It is moving at a crisp pace, but it is difficult to predict timing and outcomes.

Peter Lawson, Mizuho.

Is there any ability to break down that miss on a revenue basis from, say, between microelectronics, semiconductor, data storage, and then the Preclinical Imaging?

Peter, you're talking about the quarter?

Yes. And then I guess for the guidance as well, if there is any way of breaking it down, quantifying it, or qualifying it in any sense.

If you look at the quarter, I suppose it is probably 75% BMAT, 25% other. If you look at the guidance adjustment, I would tell you that it is largely based on the BMAT weakness in Q4 that we see.

Again, as Frank commented, we were hoping that some of our other businesses could perform above expectations to offset that a little bit. Right now we don't think that is going to be the case. So, yes, I think it is largely the change in our view or the timing of any improvement in semiconductor and microelectronics and industrial markets.

So the industrial is not only semicon and microelectronics. It also includes metals, metals processing, foundries, all the way to natural resources -- minerals and mining all the way to cement quality control. All of these areas have an anemic recovery. None of them are very strong at this point.

Tim Evans, Wells Fargo Securities.

Frank, from a geographical perspective I believe you called out APac as being a particularly weak area. Can you just talk about what some of your customers over there are telling you and what it looks like on the ground over there right now?

Well, a lot of the industrial base, manufacturing base of the world is over there so the industrial weakness, of course, not surprisingly is a little bit more pronounced in APac. Also, even more so in the microelectronics. The concentration of that industry is very strongly in Asia-Pacific and so when there are delays in semicon or data storage sometimes it is big US companies, but often their production sides are in Asia-Pacific.

Otherwise the geographic trends -- I mean Europe is a little bit better than what most people had expected. We have always been a little bit more optimistic on Europe and that seems to be panning out. US sequestration does have an effect, even more so on the smaller $50,000 to $250,000 research items that academic customers would like to buy and then have a tougher time getting funding. And, yes, industrial weakness invariably relates to having a stronger geographic component from Asia-Pacific.

Paul Knight, Janney.

Frank, you talk about outsourcing, but is there any long-term plans to manufacture in emerging markets, therefore, getting that tax rate lower and other benefits?

In emerging markets there is a lot of manufacturing for Bruker, but we don't necessarily own those factories. And so, no, there is no near-term plan to get a Singapore manufacturing and tax rate, as an example. Our finance team is obviously looking at gradual improvements in our tax rate, but it is not due to a wholesale transfer of manufacturing to emerging markets.

Okay, thank you.

Chris Sassouni, Eagle Asset Management.

I was just wondering -- during this whole restructuring process I was wondering if you could speak a little bit about what changes you have made to the planning process or whether there really haven't been many changes made.

Sure. Actually I would say we have made quite a few improvements this year. This year I would say we greatly formalized the strategic planning process. Obviously planning has always occurred, but we put it on a common timetable this year and really drove, I would say, a higher quality of planning from the spring through the early fall. And that has led to a series of discussions across our entire portfolio about actions and initiatives for next year and beyond.

So I think that that is a good improvement. That is kind of tougher to see probably from the outside, but I think it is resulting in better discussions around how to manage our businesses more tactically and short term. We have strengthened kind of the quarterly management processes around business reviews and forecasting.

Again, the discipline now is starting to become more routine. Obviously, we are struggling with visibility, which means kind of the quality of some of the forecast information we are looking at, at least when you break it down into 90-day increments, isn't where we would like it to be. But I would have to say that from my perspective I am seeing better quality discussions.

And now with the changes in management that Frank has talked about, I see an intense focus on getting better control over the business and more reliable forward visibility. Obviously that is not just for the benefit of us giving guidance. Better forward visibility gives us better chance to plan our resource allocation to plan our production so that it matches up with our sales forecast.

There is a lot of operational benefit that comes from better visibility, aside from just managing guidance. It is in the best interest of all our businesses to continue driving in that direction and I see good steps being taken this year.

I will chime in with one more sentence. I can see a hugely -- I'm very pleased; it is a hugely improved process. The entire strategy, process -- strategy, planning, the budgeting process, all the way to the incentives and compensation is now far more integrated and an aligned process than what we have ever had. So there is very significant process improvements. I am very pleased with that.

Okay. Then if you could just quantify this for me in terms of visibility. If you were to just use a scale of 1% to 100%, 100% being optimal visibility as you could get with the business that you have, where are you at right now in visibility? Is it 50%, 70%, 80%, where are you?

Somewhere in the middle.

It is a tough question to answer. Obviously, I think that our 12-month visibility is clearly better than our 90-day visibility. Even though we have adjusted guidance this year, the order of magnitude of the adjustment is not quite the same as the order of magnitude of variability we would see from quarter to quarter.

So we are more positive about kind of a rolling 12-month view and still have a lot of room for improvement around a shorter-term view. That probably seems a little counterintuitive. You think you should have better visibility over things that are near term, but given the nature of our business, the size of some of the revenue events that is not necessarily the case.

Ladies and gentlemen, we have reached our allotted time limit for questions for today's conference. I would like to turn the conference call back over to Mr. Joshua Young for any closing remarks.

Thank you for joining us this morning. For those of you interested in meeting with Bruker, we will be presenting at the Credit Suisse Healthcare Conference and the Goldman Sachs Mid-Cap Conference in November and the JPMorgan SMID Cap and ISI Med Tools Conferences in December. We also invite you to visit us at our offices in Billerica, Mass.

Thank you for your attention and have a nice day.

Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending. You may now disconnect your telephone lines.