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Bruker Corporation (NASDAQ:BRKR)

Q2 2012 Earnings Call

July 31, 2012 9:00 am ET

Executives

Stacey Desrochers – Treasurer and Director, Investor Relations

Frank H. Laukien – Chairman, President and Chief Executive Officer

Charles Wagner – Executive Vice President and Chief Financial Officer

Analysts

Jon Wood – Jefferies & Co.

Tim Evans – Wells Fargo Securities LLC

Dan Leonard – Leerink Swann LLC

Ross Muken – ISI Group

Peter Lawson – Mizuho Securities USA

Amanda Murphy – William Blair & Company, LLC

Tycho Peterson – JPMorgan

Daniel Arias – UBS Equities

Isaac Ro – Goldman Sachs

Jon Groberg – Macquarie Research Equities

Derik De Bruin – Bank of America/Merrill Lynch

Operator

Good day, ladies and gentlemen. And welcome to the Bruker Corporation Quarterly Earnings Conference Call. My name is Jodie, and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Ms. Stacey Desrochers, Treasurer and Director of Investor Relations. Please proceed.

Stacey Desrochers

Thank you. Good morning. And welcome to Bruker Corporation’s second quarter and first half 2012 financial results conference call. With me on today’s call are Frank Laukien, Bruker’s President and Chief Executive Officer; and Charlie Wagner, Bruker's EVP and Chief Financial Officer.

Before we begin today, let me briefly cover our Safe Harbor statements. Various remarks that we may make about the company’s future expectations, plans and prospects constitute forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those described in the company’s filings with the Securities and Exchange Commission.

While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our estimates change, and therefore, you should not rely upon these forward-looking statements as representing our views as of any date subsequent to today.

In addition to the financial measures prepared in accordance with Generally Accepted Accounting Principles or GAAP, we will discuss certain non-GAAP financial measures, including adjusted EPS, adjusted operating income, adjusted operating margins, which are non-GAAP measures that exclude certain items.

We exclude these items because they are outside of our normal operations and/or in certain cases are difficult to forecast accurately for future periods. We believe that the use of non-GAAP measures helps investors gain a better understanding of our core operating results and future prospects, consistent with how we measure and forecast the company’s performance, especially when comparing such results to previous periods or forecasts.

A reconciliation of our GAAP to adjusted numbers can be found in our press release issued earlier today and is located in the Investor Relations section of our bruker.com website.

Today, Frank will provide an update on the business and certain overall Bruker Corporation financial highlights. Charlie will discuss the financial results of our Bruker Scientific Instruments or BSI segment and our Bruker Energy and Supercon Technologies or BEST segment.

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

Frank H. Laukien

Thank you, Stacey, and good morning, everyone. We appreciate you joining us today. Before I provide the business update and discuss the financial highlights for the second quarter of 2012, I would like to welcome our new sell-side analyst Sung Ji Nam from Cantor Fitzgerald and Ross Muken from ISI Group, welcome.

I also would like to introduce all of you to Bruker’s new Executive Vice President and Chief Financial Officer, Mr. Charles Wagner. Charlie brings over 20 years of financial and management experience to his role, including experience as the CFO of two publicly traded companies and expertise in financial analysis, strategic planning and corporate development. We are very happy to have Charlie with us and look forward to his contribution.

So here are the financial highlights for Bruker Corporation. Our revenue in the second quarter of 2012 was $420.7 million, representing growth of 4.9% over second 2011 revenue of $401.2 million. Without the impact of changes in foreign currency and acquisitions, our organic growth rate was 10.4% in the second quarter.

Revenue growth was broad-based with almost all Bruker businesses and markets contributing to the growth. The one exception was Bruker Optics were revenues declined in the second quarter. For the first half of 2012, revenue was $826.3 million corresponding to reported growth of 9.0% and organic growth of 12% over the first half of 2011.

The growth in the first half was supported by over 20 new product introductions, which address an expanding array of life science, pharma, biotech, clinical, food and food safety, petrochem, environmental, homeland security, materials and nanoscience, as well as academic research and educational markets. Our product and innovation leadership are the company’s primary growth engine and our competitive positioning remains fundamentally very sound.

While our organic growth rate was solid in the first half of 2012, we did see weakening demand towards the end of the second quarter. Throughout 2011 and even through April of this year, Bruker appears to be somewhat immune to the apparent European malaise. However, at the end of the May and into June of 2012, we began to see softening demand particularly in Europe and even in strong Bruker countries like Germany.

Around the same time, we observed a weakening in global industrial and applied markets, including also a sequential slowdown in the semiconductor and data storage metrology markets, which had been quite robust for Bruker at the beginning of this year.

Now moving on to profitability, adjusted operating income in the second quarter of 2012 was $33.0 million compared to $50.3 million in the second quarter of 2011. For the first half of 2012, adjusted operating income was $76.6 million, compared to $86.1 million in the first half of 2011. In the second quarter of 2012, our adjusted EPS was $0.12, compared to second quarter 2011 adjusted EPS of $0.19. Adjusted EPS for the first half of 2012 was $0.26, compared to $0.32 in the first half of 2011.

We entered 2012 with a target for improving our profitability, so the decline in second quarter margins and earnings was particularly disappointing. Gross margins were lower year-over-year due to a variety of factors. Mix was certainly a factor as we saw lower revenues from the high margin business like Bruker Optics and higher revenues from a low margin business like CAM. Some businesses experienced higher materials costs associated with production issues and higher unabsorbed labor cost associated with delays in converting our backlog to revenue.

Finally, lower pricing impacted margins in some businesses. Moreover, some of our investments in marketing and sales, field installations and service have increased our expenses but have not yet resulted in the hope for reduction and faster conversion of our high backlog.

In prior quarters, we’ve commented on the impact of the acquired CAM or Chemical & Applied Markets division and that business continues to present financial challenges. It is now apparent that the CAM business requires more significant investment than anticipated even earlier this year as we ramp to volume new products released in the past year, invest in research and development of further new CAM products, and strengthen the division’s global distribution.

As a result, our CAM division posted an $8 million operating loss in the second quarter of 2012, far higher than what we had anticipated. We are evaluating potential streamlining and cost reduction steps at CAM, while we are also looking forward to launching important additional CAM products over the next 12 months.

Overall, as a result of our Q2 profitability decline, we are reviewing Bruker’s cost structure for areas of improvement and potential expense savings. As we continue to benefit from a high backlog, we will also look to strengthen our global integrated order execution processes and accelerate order conversion in coming quarters. While some acceleration will come from greater focus on our order execution process, additional lasting improvements will only come from further ERP and IT investments that will give better visibility into our order execution.

On a more positive note, in the first half of 2012, our working capital ratio improved as we achieved $0.02 per revenue dollar working capital reduction, compared to year-end 2011. Similarly, our operating and free cash flow picture has improved dramatically compared to the first half of 2011.

Charlie Wagner and I are determined to develop and implement credible plan for margin improvement, which remains our number one priority. While we will take steps to improve our margins in the second half of 2012, we are now no longer in a position to meet our original full-year 2012 margin and EPS goals. Bruker’s updated financial goals for 2012, which replaced previously announced goals are revenue in the range of $1.70 billion to $1.75 billion and adjusted EPS in the range of $0.65 to $0.70.

I will now turn the call over to the CFO of Bruker Corporation, Charlie Wagner.

Charles Wagner

Thanks, Frank, and good morning, everyone. Since Frank already commented on the overall Bruker financial highlights, I’ll provide a summary of our BSI and BEST segments.

During the second quarter of 2012, BSI’s segment revenue increased by 5.1% to $397 million compared to $377.9 million in the second quarter of 2011. Excluding the effects of acquisitions and changes in foreign currency, BSI revenue increased organically by 10.2% in the second quarter of 2012. For the first half of 2012, BSI revenues increased by 8.6% to $775.1 million compared to $713.7 million in the first half of 2011. Again, excluding the effects of acquisitions and changes in foreign currency, BSI revenues increased by 11.2% in the first half of the year.

Now moving further down the income statement, adjusted gross profit margin for BSI in the second quarter was 47.5% compared to 49.4% in the second quarter of 2011, and first half adjusted gross profit margin for BSI was 48.7% compared to 49.4% for the first half of 2011. Adjusted BSI operating margin in the second quarter of 2012 was 8.4% compared to 13.2% in the second quarter of 2011. for the first half of 2012, adjusted operating margin for BSI was 9.9%, compared to 12.3% for the first half of 2011.

GAAP net income for the BSI segment in the second quarter of 2012 was $10.1 million or $0.06 per diluted share, compared to net income of $22.4 million or $0.13 per diluted share in the second quarter of 2011. GAAP net income for the BSI segment during the first half of 2012 was $27.2 million or $0.16 per diluted share, compared to net income of $36.5 million of $0.22 per diluted share in the first half of 2011.

Adjusted net income for the BSI segment in the second quarter of 2012 was $20 million or $0.12 per diluted share, compared to adjusted net income of $32.4 million or $0.19 per diluted share in the second quarter of 2011. Adjusted net income for the BSI segment during the first half of 2012 was $45.1 million or $0.26 per diluted share, compared to adjusted net income of $56.1 million or $0.34 per diluted share in the first half of 2011.

Now let me just spend a couple of minutes on the BEST segment. Revenue for the BEST segment during the second of quarter of 2012 was $26 million, a decrease of 7.5% compared to $28.1 million in the second quarter of 2011. excluding the effects of foreign currency translation, second quarter 2012 revenue increased by 3.2%. Revenue for the BEST segment during the second half of 2012 increased by 7.5% to $56 million compared to $52.1 million in the first half of 2011 or by 15.7% excluding the effects of foreign currency translation.

Adjusted operating income for BEST in the second quarter of 2012 was zero, compared to adjusted operating income of $0.5 million in the second quarter of 2011. For the first half of 2012, adjusted operating income for BEST was $0.3 million compared to an adjusted operating loss of $0.1 million in the first half of 2011. Adjusted net income per share for the second quarter of 2012 for the BEST segment was zero compared to adjusted net income per share of zero in the second quarter of 2011. Adjusted net income per share for the first half of 2012 for BEST was also zero compared to an adjusted net loss per share of $0.01 in the first half of 2011.

The BEST external backlog of $247.6 million as of June 30, 2012 increased by approximately $76 million or 44% from June 30 of 2011, and the increase was primarily driven by several multi-year orders for LTS conductors as well as an HTS license agreement signed this past quarter.

In May, BEST announced the largest scale technology transfer contract to license and transfer know-how for second generation YBCO ceramic tape high temperature superconductors to a subsidiary of the Russian state atomic energy corporation, Rosatom. The total contract value exceeds $25 million, and BEST will begin to recognize revenue in the third quarter of 2012 through the end of 2013 or the early part of 2014.

Next, I’ll spend a minute to briefly discuss certain cash flow and balance sheet metrics that relate to overall Bruker Corporation. Our GAAP effective tax rate was 45.9% during the first half of 2012, which was negatively impacted by our unbenefited losses in the U.S. resulting from higher corporate costs and from operating losses at our CAM division. Our adjusted tax rate was approximately 33% for the first half of the year 2012.

Cash flow from operations in the first half of 2012 was a source of $41.9 million compared to a use of cash $25.6 million in the first half of 2011. Increasing customer deposits, decreases in accounts receivable were significant source of cash while inventory increases were large portion of the use of the cash in the first half of 2012. Our capital expenditures were $28.7 million in the first half of 2012 compared to $31.2 million in the first half of 2011.

Free cash flow defined as cash flow from operations less capital expenditures was a source of cash of $13.2 million in the first half of 2012 compared to a use of cash of $56.8 million in the first half of 2011. We ended the second quarter of 2012 with cash, cash equivalents and restricted cash of $243.6 million, and net debt of $77.3 million.

So before I open the call up for Q&A, I wanted to talk briefly about my reasons for joining Bruker. During my time as CFO of Millipore Corporation, I got to know many of the investors and the analysts on this call, so I’m glad to be back in an operating role, it allows me to reconnect with all of you.

Shortly after leaving Millipore in 2010, I joined the Board and the Audit Committee of Bruker and have come to know the company quite well over the last couple of years. Quite simply, I’ve stepped into the operating role and to the CFO role at Bruker, because I see a great opportunity to create value in an industry and in a business I really enjoy. Bruker has a strong reputation for producing quality instrumentation in life science tools and the company is number one in many of the markets it serves.

The company’s strong brand and product innovation have resulted in consistently high organic growth over several years, that’s not different this past quarter. However, increases in profitability and cash flow have been consistent over the years. Those of you that have followed the company for sometime know that Bruker has a decentralized structure with considerable economy in the operating divisions.

This decentralization contributes greatly to Bruker’s innovation, entrepreneurial thinking and customer intimacy at the divisional level. However, the centralization also results in complexity, limits visibility into business drivers and limits the company’s ability to benefit from economies of scale. Some of these issues were obvious and apparent in our Q2 results.

The company has grown rapidly over the past 10 years, but as we approach $2 billion in revenue, it is clearly time to make adjustments to how the company is operated. In the last year, the one Bruker initiative was launched with the intention of achieving a higher level of integration and coordination across the Bruker portfolio without sacrificing the innovation and entrepreneurial spirit to power the company.

Initially the focus has been on improving ERP systems and beginning to capture economies of scale and procurement and order execution. In 2012 and in planning for 2013, we're going to look for further ways to expand this initiative to make more significant organizational and structural changes to the company.

These changes might include reorganization, manufacturing consolidation, and further systems’ implementation. For the very near term, we’ll continue with the one Bruker initiatives that are underway, but we do need some time for more comprehensive evaluation of our strategic and operational plans for the next few years. In future quarters, we’ll communicate more broadly about our plan to make Bruker a more profitable and more valuable company.

Changing the company will take some time, no doubt, lots of oversight and monitoring, but Frank and I are confident that we can make Bruker stronger and more profitable company. And I’m personally excited about these opportunities and look forward to helping make Bruker an even better company than it is today.

So with that, let me turn the call back over to the operator for Q&A.

Question-and-Answer Session

Operator

(Operator Instructions) And our first question comes from Jon Wood from Jefferies. Please proceed.

Jon Wood – Jefferies & Co.

Hi, morning. Can you hear me?

Frank H. Laukien

Yeah. We hear you, John.

Jon Wood – Jefferies & Co.

Hey, morning, Frank. Morning, Charlie.

Charles Wagner

Good morning.

Jon Wood – Jefferies & Co.

We’d love to hear, at what point do you guys feel like you’ll be in a position to talk about the structural issues that you’re going to pursue going forward, whether it’d be IT investments or kind of fixed asset reductions. When do you expect to be in a position to communicate kind of empirically what that is going to cost, and what that’s going to benefit you guys going forward?

Charles Wagner

Yes. so, John, works are already underway, and as you might expect, we’re not pleased with the Q2 results. So we got to look at this in stages. first half, we're looking at immediate short-term kind of more tactical changes to the business plan in the second half of the year to ensure that we can deliver on our guidance for the balance of the year.

As I mentioned in my comments, the one Bruker initiative has been underway for some time with a focus on ERP systems and order execution, and we’ve got other plans that are being contemplated right now. I think what you can expect is, we’ll probably start to make some announcements over the next quarter or two, but that won't necessarily represent a comprehensive plan.

we really need to go through a planning cycle, which is really the second half of this year as we head into 2013 to layout a more traditional, more comprehensive multi-year view on the actions we hope to undertake. But we’re not going to be sitting still until that point. we’re continuing with the initiatives we have and as I mentioned, expect to make other announcements in the near-term as well.

Jon Wood – Jefferies & Co.

Okay, that's great color. Thanks, Charlie. and then, for Frank. Frank, if I look at the organic growth rate, I mean obviously, it's still double-digit from the quarter, with the FX hit a lot bigger than we thought. But if you look at the back half of the year, can you just kind of discuss what your updated outlook contemplates in terms of organic growth? And if you're willing to quantify the backlog situation in BSI, we’d love to hear that as well. Thank you.

Frank H. Laukien

So, John, I think with the new guidance of $1.70 million to $1.75 million for revenue, that would result in reported growth of about 3% to 6%, and if currency estimated its organic growth of about 7% to 10%, that’s simply the implication mathematically of the guidance that we've given. so organic growth estimate 7% to 10% is implied in the guidance that we're giving, these are full numbers rather than second half or the Q3 numbers. And I'm sorry, John, what was your second part of your question?

Jon Wood – Jefferies & Co.

Yes. I’d love to hear the backlog; I mean you’ve alluded to in the prepared remarks. but the BSI business obviously has a ton of backlog, and would love to hear any comments on if you built or burned in the second quarter. And then how you see that situation unfolding over the next two quarters?

Frank H. Laukien

Yeah. Our backlog is still very high and it may have come down, it’s a little bit since the end of Q1. but that was primarily driven by currency. So, without going into specific numbers, we are not satisfied with our backlog conversion and quite honestly we would have like to do even more. But that’s not the only driver in the midst of Q2, but it is certainly one of the contributors.

And in a number of our divisions have done well, a much better on order execution, and a number of them have invested, but haven’t really seen the benefits and results yet. Some of that ironically has led to some incremental expense, but not some incremental OpEx, but not the benefit that you’d expect in even in faster backlog conversion.

So, while there is a number of things going on for us in the second half, one of them will be also improving within our operational excellence initiative, implementing and really getting the benefits out of the integrated order execution, which we’ve implemented now almost everywhere. But in a many of the divisions, it’s still in the infancy and has not yielded the results yet that we were hoping for.

Jon Wood – Jefferies & Co.

Thanks a lot, Frank.

Frank H. Laukien

You’re welcome Jon.

Operator

Your next question comes from Tim Evans from Wells Fargo Securities. Please proceed.

Tim Evans – Wells Fargo Securities LLC

Hi, thanks. Charlie, welcome and thanks for the color there on the ERP investment. I was curious if you could talk a little bit about the $25 million BEST, how that revenue will be recognized in 2012 and what kind of profitability you expect on that?

Charles Wagner

Yeah, we’re working through that right now. This contract is large and unique, and so we are obviously making sure we get the revenue recognition correct. It looks like we’ll begin to record revenue in the third quarter. It’s a combination of a technology license and then other tangible deliverables. So it means revenue will be having multiple element accounting.

We’d expect to record it – start to recorded in Q3, and as likely that the first revenue recognize will be license revenue, assuming that we hit our deliverables. So, as you might expect that comes through at very high margins. Overall, our contract is very high margin technology transfer license. And again if as anticipated, it comes through in the third quarter – meaningful impact on Q3, obviously we’re expecting a good chunk of that to come in the second half of the year, and that’s incorporated in the guidance that was given.

Tim Evans – Wells Fargo Securities LLC

Okay. So, are you willing to kind of quantify what the profitabilites for the BEST segment might be in the back half?

Charles Wagner

No, I’m not. But obviously that would have a significant uplift on the results of the business. (Inaudible) it’s not something that we expect to occur over and over again.

Tim Evans – Wells Fargo Securities LLC

Okay, all right, great. And then maybe just if you comment on what changed between your Analyst Day and today as far as SG&A costs and R&D costs in particular? Did you have visibility on those things at that point, and just didn’t want to comment because of the policy of that changing guidance or was it just more of – are those things kind of things that are (inaudible) little bit?

Frank H. Laukien

Yeah, this is Frank. And Charlie may – he have some further comments on that as well. I’ll give you some directional indication here. Some of that incremental growth in marketing, selling in SG&A primarily was also intended to leads to even more backlog conversion, which somewhat disappointingly didn’t all occur in Q2 and in the first half. I would have like to see more of that.

I know our organic growth rate wasn’t bad at all in the second quarter and first half, but we quite honestly would have like to see more, in which case many of these expenses of the percentage of revenue would have been much more inline. There is a little bit of expense overspending, but many of the divisions have really also at here recently quite well to the expense lining that we had put in place.

In addition to that, we did see somewhat suddenly, a change in demand pattern in Europe. I know many people had predicted that, but quite honestly that our Analyst Day, we had April data and April in Germany, Central Europe was all really quite good. And then in Germany in particular, it seems like that German business confidence really plummeted in May, June with people really stepping on the brakes. So, a country that’s fairly sizable for us as a market of the order of 10% that’s a big as China or as big as Japan for Bruker.

Stepping on the brake throughout rather quickly it seemed in May, June and that we had not anticipated has been aware of till really sometime in early June. And it’s actually relaxed a little bit towards the end of June. But I hesitate to make any predictions there nor do I have July data today or anything like that. So that what you’ve seem to be restricted somewhat to the Mediterranean clearly went to the biggest economy in Europe and surrounding economies pretty quickly in May and June.

So, while we have long backlog and some of our delivery items takes six months or nine months or maybe 12 months before we delivered them. We also in some of our businesses have revenue that comes in from orders we get 30 days or 45 days earlier, of course it’s a mix. And so some of that demand weakness in the second half of the second quarter does have a little bit of an impact also, of course in revenue and margin, but again it’s one of several drivers.

Charles Wagner

Tim, I’ll just add, I alluded to it in my comments, obviously there’s some process improvements we need to make as the company. Bruker has been very growth and revenue focused, and we need to end our ability to have insight into the kind of the revenue trend line is greater than to say the expense trend line in mid-quarter if you will.

And so one of the things, I’ll be looking at is, it’s a function of the way the company has organized, very decentralized, not necessarily fully integrated systems, so that the process of rolling up inside is little more difficult and in otherwise could be. But initially we’ll be looking and making some process changes to give us a better visibility all the way time to operating margin, and then over time making system investments to do that in an automated and integrated way.

Tim Evans – Wells Fargo Securities LLC

Okay, great. Thank you for the comments.

Operator

Your next question comes from Dan Leonard from Leerink Swann. Please proceed.

Dan Leonard – Leerink Swann LLC

Hi, thank you. First question on the CAM...

Frank H. Laukien

Dan, we lost you in mid sentence.

Operator

The next question comes from Ross Muken from ISI Group. Please proceed.

Ross Muken – ISI Group

Good morning, gentlemen.

Frank H. Laukien

Hi, Ross.

Ross Muken – ISI Group

I’m still trying to sort of kind of the – sort of components of the delta versus forecast. I know you’ve laid out sort of the various moving parts. But in terms of magnitude, what drove particularly on the gross margin line the [NAS]. And it seems like CAM were certainly worse and it sounds like optical. But I guess, I’m trying to piece out sort of what was actually market related in terms of the European weakening? What was kind of the backlog conversion comment, which I’m not still sure, I totally understand. So, I’m just trying to figure out, if you had a pie of 100%, how you would sort of allocate that amongst the various buckets of sort of difference?

Charles Wagner

Yeah Ross, this is Charlie. It’s a good question, and I can answer it for you directionally. Unfortunately, it is all of the above though. I mean, we saw pricing pressure in couple of businesses including BBIO and you see that flow through straight to margins around some of the businesses.

As I mentioned, we’re starting to look at consolidation of manufacturing and other changes and trying to make our order execution process run more smoothly part of what we’re doing is ERP installations and some of the manufacturing entities.

In general, our ability to sort of control the business in the quarter was not where it needed to be. So in some cases, we had stepped up in anticipation of production and burning down the backlog and the net burn down didn’t happen. So you’ve essentially have idle manufacturing resources that are under observed in a few different businesses, so that drive some of it. We had some scrap and right off issues in the quarter, I wouldn’t call that extraordinary, but it certainly contributed.

And then next, Optics is by far our highest margin business and had a very light quarter. So that miss in Optics was offset by growth in other businesses, but businesses that come through in a much lower margin like CAM. So without getting precise on splitting up the pie and tell you it’s four or five different things that contributed to disappointing gross margin.

Ross Muken – ISI Group

That’s fair. I guess, Frank, you’ve done a good job in terms of making this one of the best sort of R&D engines we see in the industry and obviously the investment required to kind of fuel that has been significant. I mean, how are you thinking in the current environment where demand by all stretches that we look at is probably incrementally weakening into the third quarter and then probably for the back half relative to what most of us assumed would happen, maybe three to six months ago, how are you thinking about sort of prioritizing the short-term investment needed to reinvigorate some of the acquired businesses, and then keep the top line momentum versus sort of the tradeoff of wanting to deliver the profitability. Obviously I know you’re not happy with today's result. But there’s sort of that shorter term target versus longer-term strategic investment question I'm sure you've been wrestling with.

Frank H. Laukien

Yeah. And I think Charlie give you some sort of phased approach to that. in near-term, we will be looking at OpEx, at expenses, at headcounts and hiring. We’re not prepared to give a number today. But there will be a lot of work on that in the weeks to come.

In addition, but more on – let’s say planning cycle over a couple of quarters, we will be looking at many growth initiatives and strategic growth initiatives that we have for instance in BEST, for instance in CAM. And I'm not talking about the division of course, but I'm talking about the various projects and product lines. and it may well be that we may have to take a step back on one of the other growth initiative. It could also be in one of the other divisions.

It's nice to have the growth, but we probably have – right now, we have too many strategic growth initiatives in different products and many of them are very fear and very important to us. and we will power through them and others may well be require or review we may not remain over the next remainder of the year I would say decide that perhaps one of the other we will not continue with in some markets that perhaps will be developing in the more distant future. So there are both short-term and longer-term questions.

In addition to all of that, I think there are emerging plans and if anything they will be accelerated in substantial outsourcing and substantial factory reorganization, lean manufacturing, some small-scale non-strategic divestitures and things like that. So things like this are also underplayed, so it's really three sets of elements plus systems implementation and process improvement that Charlie has mentioned, some nearer term, the bigger ones probably more long-term 2013.

Ross Muken – ISI Group

Great, thanks guys.

Operator

And your next question comes from Dan Leonard from Leerink Swann. Please proceed.

Dan Leonard – Leerink Swann LLC

Hi, thank you. Can you hear me now?

Frank H. Laukien

Yes, we hear you.

Dan Leonard – Leerink Swann LLC

All right, great, thanks. Looking for a bit more detail on CAM, what were the revenues in that business in the quarter?

Frank H. Laukien

We don't disclose that at this point, Dan.

Charles Wagner

CAM had good revenue growth, but without going into the details any further.

Dan Leonard – Leerink Swann LLC

Well, I’m just trying to better understand, I thought that the facility on California was running fulfilled and that would be drawing down backlog and reducing the loss in that business. It sounds like the revenue line held up on that front, but...

Charles Wagner

Directionally CAM did not meet its revenue objectives, but its still – it had very high growth goals, it grew quite a bit but it didn’t grow to the extent that we were hoping for. Yes.

Dan Leonard – Leerink Swann LLC

Okay.

Charles Wagner

And operationally it wasn’t running at fulfilled. So it grew a lot, but that was one of the businesses where we had some trouble in production and then obviously on top of that some spending year-over-year took the business on a good footing contributed to the operating loss that Frank described.

Dan Leonard – Leerink Swann LLC

Okay. That’s helpful. Thanks. And then my follow-up question, I’m trying to get a better understanding of a lot of the initiatives you are talking about to improve margins I thought were part of the prior plan to get BSI margins up to 18% over some period of time. Can you help me understand really what’s incremental or what the changes for maybe the prior margin improvement plan to what you might consider doing going forward?

Charles Wagner

Again very directionally, clearly many of these things indeed have been part of our margin improvement plan and those will generally continue. But given the miss, we will certainly look at additional steps in terms of OpEx and additional steps that we had previously not contemplated.

Dan Leonard – Leerink Swann LLC

Okay, thank you.

Operator

Your next question comes from Peter Lawson from Mizuho Securities USA. Please proceed.

Peter Lawson – Mizuho Securities USA

Frank, just wonder if you could talk through the dynamics in BEST business. Looks like strong gross margins despite less than some expected revenue. Just wonder if you can talk through the dynamics there and I think 24% to 25% gross margin, is that achieved in the second half on BEST?

Frank H. Laukien

Peter, yes indeed, BEST was short on revenue. But on the bottom line nearly where they wanted to be because of better gross margins as you’ve pointed out. So that was a positive development and indeed I think some of the traditional metallic superconductor or low temperature superconductor business has demand and deliveries have been strong. And they’ve probably also benefited a little bit from the weaker euro, because of course they do all of their manufacturing in Euro countries, in Germany in this case. So, a few trends came together to give BEST a nice gross margin improvement indeed.

Peter Lawson – Mizuho Securities USA

And then the comments on the slower than expected backlog conversion, did that hit mostly on the BEST side or the BSI side, and which do you think quicker to recover?

Frank H. Laukien

A little bit on BEST, but primarily on BSI. And so that was – in a number of divisions and groups within the BSI segment, there was some of that in BEST, but primary in BSI.

Peter Lawson – Mizuho Securities USA

And just finally around SG&A trended up, are there any unexpected one-time in that trending up or should we expect that to trend up through the second half or do you think that’s kind of controlled?

Charles Wagner

Peter, there weren't any significant one timers in the adjusted results, as it just trended up. This is the first half, obviously there is some spending in the first half in sales and marketing and so to say a lot of technical and trade shows and different things that doesn’t necessarily continue into the third quarter and the fourth quarter. But we’re looking right now at ways to sort of control or reduce the rate heading into the second half of the year.

Peter Lawson – Mizuho Securities USA

Great, thank you. And good to see Charlie and look forward to working with Bruker?

Charles Wagner

Thanks, Peter.

Operator

And your next question comes from Amanda Murphy from William Blair. Please proceed.

Amanda Murphy – William Blair & Company, LLC

Thanks. I had just a follow-up on the pricing commentary that you made I think you mentioned that you saw some pressure specifically in BioSpin, is that fair? And can you just give a little more perspective on what’s going on there and kind of just at a high level, how you are thinking about pricing across your business as a whole?

Frank H. Laukien

Yes, Amanda, this is Frank. So indeed as Charlie has pointed out some of the gross margin pressure also came from the B-bio, large division and there we have seen some AS, some average sales pricing pressure and some pricing pressure for competitive reasons. I believe there are also other areas as the economy – as the world economy and the European economy in particular is decelerating, our Europe is I think already in a recession, most of Europe, a little bit like in 2008, 2009 maybe not to the same extent.

We do see a little bit more pricing pressure as apparently a number of competitors at times like this when their growth is not there tend to result to a little bit more pricing pressure. So, that’s something we have also begun to observe in the last couple of months at least. And in some areas, longer than that, but there is maybe more of a competitive trends rather than a macro economic trend.

Amanda Murphy – William Blair & Company, LLC

Okay. And then, just I guess another CAM question. So, I think last quarter you were talked about benefiting some just – I guess this quarter or full quarter of benefit from the consolidation as the facilities. I’m just trying to get a better idea of what’s going on there obviously you practice in backlog conversions as you did. In terms of the expense structure there, just wondering if you can provide a little more detail sort of what’s going on relative to your expectations last quarter?

Frank H. Laukien

Yeah, so CAM did not meet our expectations on the top line, but didn’t mean CAM didn’t grow. It actually grew clearly in the – I mean, it had some about one of the highest growth rate, but not nearly where we expected it to be either in Q2. So yes, that’s not a contradiction. We just said pretty high expectations then it only met those halfway. Let’s put it this way in terms of growth.

And some of the expenses of course at CAM are scaled and targeted to support the faster growth rate, and that’s so good growth rate, but not a very fast growth rate that we have anticipate is that means we will also be looking at OpEx also in the CAM business, clearly a growth division, clearly a priority, many good products that have come out and more to come. But we’ll also need to lower our growth expectations for that business, for that division, level data and right size the expenses for that.

Amanda Murphy – William Blair & Company, LLC

And how are you thinking about the CAM product line at this point? Do you invest quite a bit in last year that down at this point and now it’s more of an operational investment or do you still need to do some work on the product side?

Frank H. Laukien

We’re still very much in the product ramp up, still very much product investment, continued strong product investments will always continue and that’s one of the features of Bruker. But I think that’s part of particularly strong effort at CAM will continue for approximately another year, and then I think you will drop that. Let’s talk about that again as we even go to 2013 business line and so on.

Amanda Murphy – William Blair & Company, LLC

Okay. And then just last one from me, just thinking about the structure of the business that higher level you’ve talked about the benefits of a decentralized structure entry. How you’re thinking about that going forward, is that something that you might change just given some of the expense issue that you’ve had?

Frank H. Laukien

For the key of course, it generally worthy be to maintain the benefits of the entrepreneurial culture with – as Charlie said, great one-on-one customer connections and the innovation engine. But I think there’s quite a bit more than that we had in the pipeline and more that we will be considering now going forward in sharing resources and without going into lot of details.

I’m not saying we’re abandoning our structure, and going to something fully integrated perhaps not as flexible on entrepreneurial any more. But I think we can make further improvements from the one Bruker initiatives from our operational excellence initiatives that as element in each division, but also elements where we take synergies between divisions, and we can get more out of that financially and make this more valuable company.

Amanda Murphy – William Blair & Company, LLC

Okay, thanks very much.

Operator

Your next question comes from Tycho Peterson from JPMorgan. Please proceed

Tycho Peterson – JPMorgan

Hey, good morning. Thanks for taking my questions. A number of might have been answered, but maybe just to probe on the comments you made on Optics, Frank obviously to the smaller business for you guys, but you didn’t call it out is being softer. What was that driver there?

Frank H. Laukien

There, it’s little bit product cycle, but mostly there I think it’s the macro economy. They have clearly seen the European slowdown, and their inventory reach is not that long, they have more smaller products that they ship in 30 or 45 days and things that. And yeah, that’s a very high gross margin and operating margin divisions delightfully so. But when they slowdown it effects or makes especially below gross margin business at least at this stage. And longer-term, we think they’re all be at a similar ranges. But for now CAM is a much slower gross margin business, and as we see growth there and slowdown in Bruker Optics doesn’t affect our gross margin mix.

Tycho Peterson – JPMorgan

Okay. Then maybe just stepping back a little bit, you obviously [got off] here by the slowdown in Europe and you’ve talked a lot of this call about the advantages having a decentralized structure, but obviously that carries some disadvantages as well. As we think about the guidance that you’ve laid out for the back half of the year, can you give us a sense as to what makes you think that it’s achievable? and going forward, do you envision reinstating long-term guidance targets, I think you’ve kind of officially pulled the long-term guidance you’ve head up previously, but as you lay out the restructuring plan, do you envision kind of reinstating long-term targets as well?

Charles Wagner

Yeah Tycho, it’s Charlie. I think to the first part, obviously given the backlog, we've got even with a kind of a softening, macroeconomic outlook that we've got some confidence that we can deliver on shipments and revenues for the balance of the year, obviously we need to improve performance in some of our factories, improve order execution performance overall. But we feel like, we have the ability to do that. And so that does gives us, maybe relative to some companies a little bit more confidence in the top line guidance that we've issued. with that, we also feel then that we can manage expenses more closely in the second half than we’ve done. And if you look what’s implied for operating margins in the second half, it’s sequentially much higher than the first half. But it's not a stretch, compared to last year. So no doubt, we have to tighten up for sure, but we think that we can do that. Again, it's all predicated on hitting that revenue number, but we do have some confidence that based on the backlog.

Tycho Peterson – JPMorgan

And then on reinstating long-term guidance, is that some of your envision doing over the next six to nine months, or help me how should we just think about your [flash] with it?

Charles Wagner

Yeah, yes. Absolutely, I mean obviously with kind of the trajectory of the first half of this year. And even with the initiatives that are underway, the benefits aren’t coming as quickly as we might have hoped. So we go to regroup a little bit there, I expand what we’re doing, manage it more carefully, and drive it harder and as we get a sense for that over the next six months or so, I absolutely would intend to reinstate some mid-term guidance.

Tycho Peterson – JPMorgan

And then from a capital deployment strategy, I mean you’ve obviously got a lot going on with kind of the integrations going forward. I mean how are you thinking about additional M&A at this point, is it on hold for the foreseeable future or we still look opportunistically at adding on bolt-ons?

Charles Wagner

The latter, I mean, we’re always – it’s not our focus right now, I think we have a lot of internal opportunities for a) growth and b) more importantly margin improvement and operational excellence, working capital improvement. But we do keep our eyes open and from time-to-time there may be additional so-called smaller bolt-ons. we have the capital to do that for sure. And while it's not a priority for us, compared to the other thing that our priority that were previously mentioned. it is something that you’ll that may welcome up from time-to-time.

Tycho Peterson – JPMorgan

Okay. And then last one, just what we understand the backlog conversion issues, I mean it seems like a lot of that is related to NMR if our understanding is right and these tend to be kind of longer multi-year lead times. Can you just talk about what has held up kind of improving that the backlog conversion? And is it really related to NMR? Are we kind of misunderstanding that?

Charles Wagner

Some of it is related to Bruker BioSpin, which is NRM, preclinical MRI, EPR, the magnetic resonance business. Some of it is also part of our BMAT group, Bruker AXS, Bruker Elemental divisions, we’re not happy with the revenue with backlog conversion, and the revenue generated there. We should be able to do more and integrated order execution and some investments there actually, including even some expense investments in getting people that can install these systems, because only when do we get acceptance by the customer, and revenue recognition, order priority. so this is not just NMR, but NMR was a contributor.

Tycho Peterson – JPMorgan

Okay, thank you.

Operator

Your next question comes from Dan Arias from UBS. please proceed.

Daniel Arias – UBS Equities

Yeah. Hi, good morning. Just wondering if you’d be willing to give a feel for revenue growth by geography in the quarter maybe in terms of ranges, I know you typically don’t put two fine of a point on the growth components. But just giving the regional differences that we’re seeing it might be helpful as we model going forward?

Charles Wagner

Maybe more on the orders, I mean clearly, Europe is the one – Europe, including most of Europe, not only Mediterranean Europe, it is the one that has slowed down considerably by the second half of the second quarter. The United, but Latin America, India are actually doing okay for us, Japan has been okay, China is mixed, and it’s really Europe, I mean in the United States there are some trends that were growth hasn't been that strong and nothing has changed there prolifically as we all know. But demand has been all right, and of course a lot of the demand is driven by our products and competitive positioning, it's clearly Europe that has changed significantly in the past couple of two to three months including July now.

Daniel Arias – UBS Equities

Okay, thanks. And then Charlie, can you give a sense of where margins came in for the BNS business in 2Q, where they significantly below 20%, and then I guess going forward would you be willing to comment broadly on growth expectations there, just given the trajectory of that business is still different from most of BSI?

Charles Wagner

Yeah, so BNS really was the standout performer in the quarter both from growth standpoint and a profitability standpoint. I prefer not to give out detailed profitable information by division for Bruker. But you can assume that of all the businesses that’s the one we are most pleased within the quarter both top line and bottom line. It’s been a great acquisition and a great performing business.

Daniel Arias – UBS Equities

Okay. And then I guess just lastly, curious whether any of the changes that are being made or will be made will trigger tax rate alterations not sure, if I missed the comment on taxes, but how should we be looking at that rate in 2012 at this point?

Charles Wagner

2012 I think, you could assume kind of a continuation of where we've been in the first half. Absolutely, we are at kind of tax planning underway given some of the comments I made earlier about the complexity of the company that extends all the way down to legal and each structure of the company and impacts the transfer pricing and other tax planning activities of the company, those are all under pretty comprehensive review right now. I do see that as a driver of value going forward.

Although as you know, it takes quite a while actually to realize that, because if you're going to make changes to structure or transfer pricing or where IP is migrated taxing authorities want to be paid upfront. So it's a long-term structural improvement opportunity for the company, but it's not likely to yield lots of improvement in the next 24 months.

Daniel Arias – UBS Equities

Okay, thanks.

Operator

Your next question comes from Isaac Ro from Goldman Sachs. Please proceed.

Isaac Ro – Goldman Sachs

Good morning. Thanks for taking the question. Wanted to reconcile your comments on that drop-off that you're telling Europe during the quarter versus what we've seen thus far during earnings season from your competitors. Because I think everyone certainly sided some level of pressure, but at the same time the velocity of that drop-off and the pricing comments you made were somewhat unique. So just want to make sure you guys are confident, there wasn’t really a market share dynamic going on an underlying basis beyond the end markets?

Charles Wagner

Yeah, Isaac, good question. No, we don't think there's a market or competitive from market share dynamics for – indeed we've done, we’ve held up perhaps exceptionally well in Europe for a very long time with strength in Germany and surrounding countries, Central, Eastern Europe and that indeed is slowdown. It really quite in – Germany was quite surprising really in May to June, Germany stepped on the break hard it seems, and we certainly felt that. I think that's been, I cannot comment for others, but we don't think we all of a sudden lost a lot of deals that our market share changed in Europe. So we think it's really the economic trend.

Isaac Ro – Goldman Sachs

Okay, and then maybe a follow-up on the long-term, Charlie, if we look across competitive landscape, a lot of your bigger competitors are pretty steadily moving their manufacturing to emerging markets. And we really haven't seen what I would call a drop off in quality or ramification, so that strategic investments. So I'm just wondering why isn’t the long-term kind of right answer for you guys as well, just given where your current manufacturing and cost basis is located?

Charles Wagner

Yeah, I mean I wouldn’t rule it out right. We have a long way to go though right, there's a lot of consolidation and other improvement opportunities that we’d like to take advantage of. We may kind of indirectly been moving some of our manufacturing to some of those same regions through outsourcing. So we're starting selectively, but we intend to expand outsourced production as a percentage of Bruker's overall production in coming quarters, and in coming years. So I would absolutely not rule it out, it's just that we're not as far along in that planning perhaps as some others.

Frank H. Laukien

And indeed there's a lot of ongoing discussions about pretty substantial amount of non-core manufacturing going to contract manufacturers, many of which of course have facilities in various Eastern Europe or Southeast Asia or other lower-cost manufacturing regions. You'll see a big push for that, and in fact it may even accelerate.

Isaac Ro – Goldman Sachs

Okay, any idea of when you guys might have an update for us on that initiative is sort of like a 2013 Analyst Meeting kind of thing or could we sort of reiterate if you go through the process?

Frank H. Laukien

Yes, I think we’ll keep you informed along the way. Like I said, we’re not – like we’re sitting still waiting for a big plan to emerge. So, there will be indicators along the way that we’ll touch on every quarter. But I would say in terms of expectations are on a more comprehensive plan, yeah, would be the first half of 2013.

Isaac Ro – Goldman Sachs

Okay, fair enough. Thank you.

Operator

Your next question is comes from Jon Groberg from Macquarie. Please proceed.

Jon Groberg – Macquarie Research Equities

Thanks for taking me [here], and congratulations Charlie, I agree with you as a tremendous amount of opportunity here. So Frank, can you maybe just talk about what were your organic growth expectations heading into 2Q?

Frank H. Laukien

They were sort of at the 10% plus range, and of course the currency changes hit us harder on the reported line. And we did not convert as much of the backlog as we would have like to see. So, I was hoping who would do even better, and I know whoever doing okay in organic growth. I was hoping who would do even better.

Jon Groberg – Macquarie Research Equities

And I guess the rational for the question on your growth of 10% was pretty good, and if you go back even through all of your 2011, and then there is one of the higher rates you had pretty decent margins kind of consistently throughout 2011 through the first quarter. And if you look at ’12, I know FX would hit the top line, but that would have also helped you from a cost perspective right on your cost over in Europe? So, I’m just trying to understand – what change so dramatically in the second quarter?

Frank H. Laukien

And I wouldn’t say that everything you see in the second quarter is a long-term trend. Some of it is and or may be and some of it may not be. If you recall, we had very good margin trends in the first quarter. Unfortunately, those (inaudible) become long-term trends. So, we’ll need to really get a better feel for that. We don’t have all the answers right now.

But it is clear that based on this we’ll be very proactive, and taking not only accelerating the initiatives that are underway that would help our margins and working capital in any scenario. But we’ll be looking very much at additional OpEx control, and also even more aggressive restructuring outsourcing and so on. But while we’re in the midst of a lot of that, and some of this will be rolling out sooner, and we’ll be updating the street on that quarterly for sure, and some of this will may also been interm planning that kicks in 2013 and so on.

Jon Groberg – Macquarie Research Equities

And so if you look ex-CAM and the BSI division was down, I think you implant some of that on pricing, and my understand like BioSpin, for example pricing is that’s pretty long dated stuff. So, is there something that could or these contracts that you were 12 months ago did not even finding – we under pricing and this is going to go on for a quite a while here over the next 12 months or so, they get installed?

Frank H. Laukien

It is – some of your observations are correct. Some BBIO contracts are six, nine, 12 and sometimes even longer. And some of that kind of this pricing pressure, we’ve seen isn’t going to evaporate in Q3 or Q4. I think those are slightly longer-term trend. But there is also of course in many, many steps in anticipation of that in lowering the cost basis. But quite honestly that has not kicked in as quickly as we would have like to see. So that’s a selling prices and will be dynamic doesn’t mean we’re anticipating that as well. But some of what we’re doing as [constant] measures has not necessarily – has not arrived at the same time.

Jon Groberg – Macquarie Research Equities

Last one, quickly from me. I guess Charlie, taking your – I’m just still trying to piece it all together, but big picture is basically as a simple way of thinking about this is some of the improvement that you saw maybe not as good of a handle on as you thought, and this is really just kind of a – having some visibility both from a revenue, and a pricing, and cost like you just really have as much visibility and that’s the main thing that kind of need to change or if you to reset this going forward?

Charles Wagner

I think that’s about – right, I mean some of the improvement let’s say, in last year some of it wasn’t has sustainable as we thought not that it can’t be sustained. But we don’t necessarily have kind of the management practices or systems in place to make it happen consistently. Similarly, I don’t think the one – per quarter is a [death knell] for the business. So, visibility needs to go up dramatically, a control and consistency needs to go up dramatically, because bouncing around isn’t good for anybody.

Jon Groberg – Macquarie Research Equities

Okay, thanks. Again I agree to have a lot of opportunity.

Charles Wagner

Thanks Jon.

Operator

Your next question comes from the Derik De Bruin from Bank of America. Please proceed.

Derik De Bruin – Bank of America/Merrill Lynch

Hi, good morning and welcome back Charlie.

Charles Wagner

Hi, Derik.

Derik De Bruin – Bank of America/Merrill Lynch

Hey, so the $0.65 to $0.70 EPS guidance, is that an all-in number that’s for BEST and BSI?

Charles Wagner

Yeah.

Derik De Bruin – Bank of America/Merrill Lynch

Okay. You mentioned some weakness in metrology business, could you elaborate on that?

Charles Wagner

Yeah, we had that surprising strength in semiconductor and data storage orders at BNS at Bruker AXS. And the first half of this year, some of it maybe have nothing to do with this cycle for instance at some very large companies invest simply in the next generation of 450 millimeter fabs and so on and they tend to do that through whatever the cycle is.

And but we also – as we look at other comps in the semiconductor metrology, which is, it’s about $100 million business for us per year. So, it’s less than 10%, but it’s not insignificant and clearly that part is slowing down right now, and then I think that’s visible anywhere in that space, and we’re not – we’re seeing that as well. So we’re anticipating sequentially second half over first half of 2012 less orders and it’s not just exceeding all the people spreads to leases that we see that in beginning so that in our own business.

Data storage always reacts very, very quickly and semiconductor reacts fairly quickly. Again some of what we’re doing is not cyclical, but some of it of course is affected by the cycle and that cycle is slowing down.

Derik De Bruin – Bank of America/Merrill Lynch

Okay. And one final question, I just want to go back on this whole order execution. I mean is it that customer sites aren’t ready, you’re not getting product ready on time for shipment as promised. I mean I’m just trying to really comprehend and what exactly do you mean by order execution in this? And it’s kind of goes away that’s like how does this change dramatically from June 1 from the Analyst Day to today? I mean it seems like these would be problems that would be endemic that should have been – I won’t say obvious, but certainly it should have been had more in sign?

Frank H. Laukien

Probably it’s incremental, it’s not that dramatic. but it gets compounded with some other issues like the gross margin pressure, some of the OpEx being a little bit on the high side, some tax issues where we have unbenefited tax losses from CAM and so on. So that by itself, those four or five issues coming together make the miss in Q2 more than an incremental miss. We understand that.

The incremental weakness in order execution was one of the incremental [pieces] in AXS and BBIO, and Bruker MAT also a little bit in BEST. That really became clearer in June as you can imagine the systems business, a lot of the revenue recognition much more than a third occurs in the third month, very often close to 50%.

And then again, not to frustrate you, but it is a little bit of all the things that you’ve mentioned. in some areas, we were ready, but those costs is a letter of credits or the customer site is not ready, and sometimes, we cannot deliver fast enough and sometimes that the full integrated systems, but honestly the process that we have in place that’s not sufficiently integrated and global, and we need to improve that. So it’s a mix of those factors and collectively, they’re one of the elements that have led to the Q2 miss, but clearly not the only one.

Charles Wagner

Yeah, Derik, what I’ll add is just try to illustrate. If you think about, you’ve got Bruker manufacturing entities, you’ve got Bruker distribution entities and then you’ve got a customer. And so there are a couple of different possible points for communication to break-down. And so some of it as Frank described, customer sites not being ready. In other cases, its intelligence not flowing black timely enough from the distribution subs to the manufacturing subs.

And still what you see is that we don’t have as much visibility at the end of the quarter as we would need. But you also see is that the company carries more interims at inventory than most of our peers, because that order execution cycle, as you elongate it and the buffer for that lack of visibility is more inventory. So it’s pretty clear that through streamlining our operational practices and putting more robust systems in place. we need more visibility from the factory to the customer without so many potential break points in between. that is not easily fixed overnight by the way. But now, there’s at least recognition of that problem, the symptoms of that problem that we’re starting to work on it.

Frank H. Laukien

And some of our divisions have improved this quite a bit.

Charles Wagner

Yeah.

Frank H. Laukien

Others are still lagging behind and are working hard and fixing that now.

Derik De Bruin – Bank of America/Merrill Lynch

Okay, great. Thank you very much.

Stacey Desrochers

Operator, how many more people do we have in the queue?

Operator

Yes, one.

Stacey Desrochers

Okay, thank you.

Operator

The next question comes from Sung Ji Nam from Cantor. Please proceed.

Sung Ji Nam – Cantor Fitzgerald & Co.

Thanks for taking my questions. most of my questions have been answered. Just few quick ones, would you mind breaking out what the acquisition impact was for the quarter, and what your assumptions are for the remainder of the year. I know it’s pretty small, but...?

Frank H. Laukien

Yeah. Acquisitions contributed just kind of 1 to 1.5 percentage points of growth in the quarter.

Sung Ji Nam – Cantor Fitzgerald & Co.

Okay.

Frank H. Laukien

Deriving for the most first half of the year, the impact lessens as you get through the balance of the year.

Sung Ji Nam – Cantor Fitzgerald & Co.

Okay, great. And then for the CAM division, would you be able to quantify what the incremental investment might be for year. I know you talked about roughly 10 million in operating loss for the year, I’m assuming that maybe higher obviously, but I was wondering kind of if you could provide quantitatively or qualitatively what the incremental investment?

Frank H. Laukien

I think at this point, we prefer to study that more closely, and we’re also discussing additional steps at CAM in terms of potential restructuring outsourcing expense revisions. So rather than giving a forecast on if we did nothing, we’re going to start – that might going to happen, so I would like to defer that one actually, and actually we’ll give you a more meaningful answer in a quarter rather than just giving you a static view right now.

Charles Wagner

Yeah. I think, what we can’t say is that at mid-year, we’ve already gone past that $10 million number. So that guidance is not good.

Sung Ji Nam – Cantor Fitzgerald & Co.

Okay, that’s fair. And then finally, in terms of your BEST business, a little softer on the top line this quarter, I know in the past you’re booking out guidance for the division, I was wondering if there’s additional color for the remainder of the year, is it kind of on drop there, is it have to deal with revenue recognition or I was wondering if you could provide more color there, obviously you got more to accomplish quarter...?

Frank H. Laukien

And at this point, as we’ve really only given full year guidance for the company overall in terms of revenue and adjusted EPS and has not drilled down into any either segments or into any of the divisions or groups. and given where we’re at right now, we would defer to not drill down on that, because all these of the answers to all of that are dynamic as we’re looking at, we’re not only looking at one or two or three divisions. But I think this is a Bruker overall problem, so while Tom may have contributed more than others. He doesn’t mean that we’re – at the end of day, we’re looking in every division, what can we do to improve margin, lower working capital. And yes, we’re obligable and BEST is one of those, also improved order execution.

Sung Ji Nam – Cantor Fitzgerald & Co.

Okay, great. Thank you.

Frank H. Laukien

Thank you very much.

Operator

At this present time, we have no more on audio questions.

Frank H. Laukien

Okay, thank you very much, operator. And thank you to all of the participants for joining us today. This concludes our earnings call. and goodbye and we’re looking forward to speaking to you next quarter or at the conferences in-between. Thank you very much. bye-bye.

Operator

Ladies and gentlemen that conclude today’s conference. Thank you for your participation. you may now disconnect. have a great day.

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