BRUKER CORPORATION The following discussion of our financial condition and results of operations should be read in conjunction with our interim unaudited condensed consolidated financial statements and the notes to those statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q, and in conjunction with the consolidated financial statements contained in our Annual Report on Form 10-K for the year endedDecember 31, 2021 . Statements contained in Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Quarterly Report on Form 10-Q, which express that we "believe," "anticipate," "plan," "expect," "seek," "may," "will," "intend," "estimate," "should" and similar expressions are intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Any forward-looking statements contained herein are based on current expectations but are subject to a number of risks and uncertainties. Forward-looking statements include, but are not limited to, statements regarding the impact of COVID-19 on our business operations, the impact of supply chain challenges, expectations regarding the global economy and geopolitical tensions, our intentions regarding our intellectual property, the impact of government contracts and government regulation, our working capital requirements and sufficiency of cash, our competition, the seasonality of our business, the sufficiency of our facilities, our employee relations, the impact of legal or intellectual property proceedings, the impact of changes to tax and accounting rules and changes in law, our anticipated tax rate, our expectations regarding cash dividends, share repurchases, interest expense, interest rate swap agreements, expenses and capital expenditures, the impact of foreign currency exchange rates and changes in commodity prices, the impact of our restructuring initiatives, our expectations regarding backlog and revenue and other risk factors discussed herein and from time to time in our other filings with theSecurities and Exchange Commission , orSEC . These and other factors are identified and described in more detail in our filings with theSEC , including, without limitation, our annual report on Form 10-K for the year endedDecember 31, 2021 and subsequent filings. We expressly disclaim any intent or obligation to update these forward-looking statements other than as required by law.
Non-GAAP Measures
Although our consolidated financial statements have been prepared in accordance with generally accepted accounting principles inthe United States of America (GAAP), we believe describing revenue and expenses, excluding the effects of foreign currency, acquisitions and divestitures, as well as certain other charges, net, provides meaningful supplemental information regarding our performance. We rely internally on certain measures that are not calculated according to GAAP. These measures are organic revenue, free cash flow, non-GAAP gross profit margin and non-GAAP operating margin. Our management believes that these financial measures provide relevant and useful information that is widely used by equity analysts, investors and competitors in our industry, as well as by our management, in assessing both consolidated and business unit performance. We define the term organic revenue as GAAP revenue excluding the effect of foreign currency translation changes and the effect of acquisitions and divestitures. We define the term non-GAAP gross profit margin as GAAP gross profit margin with certain non-GAAP measures excluded and non-GAAP operating margin as GAAP operating margin with certain non-GAAP measures excluded. These non-GAAP measures exclude costs related to restructuring actions, acquisition and related integration expenses, amortization of acquired intangible assets, costs associated with our global information technology transition initiatives, and other non-operational costs and we believe these are useful measures to evaluate our continuing business. We define free cash flow as net cash provided by operating activities less additions to property, plant, and equipment. We believe free cash flow is a useful measure to evaluate our business as it indicates the amount of cash generated after additions to property, plant, and equipment which is available for, among other things, investments in our business, acquisitions, share repurchases, dividends and repayment of debt. We regularly use these non-GAAP financial measures internally to understand, manage, and evaluate our business results and make operating decisions. We also measure our employees and compensate them, in part, based on such non-GAAP measures and use this information for our planning and forecasting activities. These measures may also be useful to investors in evaluating the underlying operating performance of our business. The presentation of these non-GAAP financial measures is not intended to be a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP and may be different from non-GAAP financial measures used by other companies, and therefore, may not be comparable among companies. 24 --------------------------------------------------------------------------------
OVERVIEW
We are a developer, manufacturer and distributor of high-performance scientific instruments and analytical and diagnostic solutions that enable our customers to explore life and materials at microscopic, molecular and cellular levels. Our corporate headquarters are located inBillerica, Massachusetts . We maintain major technical and manufacturing centers inEurope ,Asia andNorth America and we have sales offices located throughout the world. Bruker is organized into three reportable segments: the BSI Life Science segment (comprised of theBruker BioSpin Group and theBruker CALID Group ), the BSI Nano segment and theBruker Energy & Supercon Technologies (BEST) segment. Revenue for the three months endedMarch 31, 2022 increased by$40.3 million , or 7.3%, to$595.0 million , compared to$554.7 million for the comparable period in 2021. Included in revenue was a decrease of approximately$23.7 million from unfavorable foreign exchange rate movements, offset by an increase of$5.8 million from acquisitions. Excluding the unfavorable effects of foreign exchange rate movements and our recent acquisitions, our organic revenue, a non-GAAP measure, increased$58.2 million . Revenue increases were driven by strong demand for our products and solutions compared to the same period in 2021. Our gross profit margin increased to 51.5% during the three months endedMarch 31, 2022 , as compared to 50.2% in the same period in 2021, the result of higher revenue and volume leverage. Our income tax provision in the three months endedMarch 31, 2022 and 2021 was$31.9 million and$27.5 million , respectively, representing effective tax rates of 33.9% and 32.2%, respectively. The increase in our effective tax rate was primarily due to i) the impact of legislation that became effective during the quarter limiting the deductibility of R&D and the benefit relating to foreign tax credits and ii) the settlement of a tax audit. Diluted earnings per share for the three months endedMarch 31, 2022 was$0.41 , an increase of$0.04 compared to$0.37 per share in the same period in 2021. The increase in net income and earnings per diluted share in the three months endedMarch 31, 2022 was primarily driven by favorable revenue mix and operating leverage compared to the same period in 2021.
The following table presents a reconciliation from net cash provided by operating activities, which is the most directly comparable GAAP operating financial measure, to free cash flow as used by management (in millions):
Three Months Ended
March 31,
2022 2021
Net cash provided by operating activities
$ 58.8 $ 73.3 The following table presents reconciliations from gross profit and gross profit margin, which are the most directly comparable GAAP operating performance measures, to non-GAAP gross profit and non-GAAP gross profit margin as used by management (in millions): Three Months Ended March 31, 2022 2021 Gross profit$ 306.3 51.5 %$ 278.7 50.2 % Non-GAAP adjustments: Restructuring costs 0.1 - 1.1 0.2 % Acquisition-related costs 0.2 - - - Purchased intangible amortization 4.5 0.8 % 4.5 0.9 % Other costs 2.2 0.4 % - - Non-GAAP gross profit$ 313.3 52.7 %$ 284.3 51.3 % Our non-GAAP gross profit margin was 52.7% and 51.3% in the three months endedMarch 31, 2022 and 2021, respectively. The increase in our non-GAAP gross profit margins in the three months endedMarch 31, 2022 was driven by favorable revenue mix and operating leverage, partially offset by supply chain challenges compared to 2021. 25 -------------------------------------------------------------------------------- The following table presents reconciliations from operating income and operating margin, which are the most directly comparable GAAP operating performance measures, to non-GAAP operating income and non-GAAP operating margin as used by management (in millions): Three Months Ended March 31, 2022 2021 Operating income$ 96.5 16.2 %$ 89.1 16.1 % Non-GAAP adjustments: Restructuring costs 0.4 0.1 % 2.4 0.4 % Acquisition-related costs 5.3 0.9 % 0.9 0.2 % Purchased intangible amortization 9.3 1.6 % 9.0 1.6 % Other costs 4.3 0.7 % 0.8 0.1 % Non-GAAP operating income$ 115.8 19.5 %$ 102.2 18.4 % Our non-GAAP operating margin was 19.5% and 18.4% in the three months endedMarch 31, 2022 and 2021, respectively. Our non-GAAP operating margin increased in 2022 due to higher gross margin resulting from differentiated products and operating leverage, partially offset by planned commercial investments, as compared to 2021.
We can experience quarter-to-quarter fluctuations in our operating results as a result of various factors, some of which are outside our control, such as:
•
the impact of the COVID-19 global pandemic, inflation, and geopolitical tensions on our customers, supply chain or manufacturing capabilities;
•
the impact of certain weather-related disruptions, such as the recent flooding
in
•
the timing of governmental stimulus programs and academic research budgets;
•
the time it takes between the date customer orders and deposits are received, systems are shipped and accepted by our customers and full payment is received;
•
foreign currency exchange rates;
•
the time it takes for us to receive critical materials to manufacture our products;
•
general economic conditions, including the impact of COVID-19 or other factors on the global economy;
•
the time it takes to satisfy local customs requirements and other export/import requirements;
•
the time it takes for customers to construct or prepare their facilities for our products; and
•
the time required to obtain governmental licenses.
Several of these factors have in the past affected the amount and timing of revenue recognized on sales of our products and receipt of related payments and will likely continue to do so in the future. Accordingly, our operating results in any particular quarter may not necessarily be an indication of any future quarter's operating performance. The COVID-19 pandemic continues to present a challenging operating environment. Throughout the COVID-19 pandemic, we have been focused on and continue to focus on three key priorities: the health and safety of our employees, customers and partners; maintaining business continuity and service levels for our customers; and delivering enabling research and diagnostic products to help fight the pandemic, and to support other essential priorities of our society.
Health and safety of our valued employees, customers and partners
In response to the COVID-19 pandemic, we implemented strict social distancing,
enhanced cleaning protocols and other preventative measures, in our major
facilities to ensure the health and safety of our valued employees, customers
and partners. While many of our office colleagues worked remotely at the height
of the pandemic and through subsequent surges, we placed enhanced focus on our
service organization and factory employees for whom work from home was not
feasible. Where customer sites were accessible and open, our field service
organizations operated under social distancing protocols with proper face
coverings to ensure the safety of customer sites, when our employees needed to
be on site. Consistent with local government and health organization guidelines,
many of our facilities have started a gradual return to the office for employees
who have been working remotely. As we continue to monitor developments and make
appropriate adjustments, as needed, employee and visitor health and safety will
remain our paramount concern.
26
--------------------------------------------------------------------------------Maintaining business continuity and service levels to our customers
Ensuring our ability to supply our enabling technologies and solutions and maintaining high service levels for our customers is another top priority for Bruker. In late March and during parts ofApril 2020 , several of our manufacturing sites underwent temporary controlled shutdowns or were operating at reduced capacity to implement new safety protocols, comply with local rules, and manage cost and inventory levels. These sites thereafter ramped back up with expanding capacity and productivity levels. However, with any resurgence of the virus or the emergence of additional strains of the virus, particularly any new strains of the virus that are more resistant to existing vaccines, we may again need to consider temporary controlled shutdowns or reduced capacity measures. In addition, we are continuing capital investments in production facilities for efficiencies and expansion. We continue to manage supply chain risks, more recently associated with the economic recovery from the pandemic and geopolitical tensions and, the worldwide shortage of semiconductor chips, components and raw materials, such as copper.
Delivering enabling research and diagnostic products to help fight the pandemic and to support other essential priorities of our society
Bruker is providing critical technologies and solutions to help combat the COVID-19 pandemic, most notably our Microbiology and infectious disease diagnostics portfolio and our nuclear magnetic resonance and mass spectrometry systems which are used in critical disease, therapeutic and vaccine research.
The COVID-19 global pandemic has driven volatility and uncertainty in global markets and has in the past affected our operations significantly. We continue to work to manage the impact of COVID-19 on our operations; however, the full extent to which any resurgence of the virus, the emergence of any new strains of the virus, or the availability and effectiveness of COVID-19 vaccines will impact our business, directly or indirectly, cannot accurately be predicted at this time. We continue to monitor the impact of COVID-19 on our business and our supply chain and respond accordingly. For additional information on the various risks posed by the COVID-19 pandemic, refer to Item 1A. Risk Factors included in this report.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
This discussion and analysis of our financial condition and results of operations is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to: revenue recognition; stock-based compensation expense; restructuring and other related charges; income taxes, including the recoverability of deferred tax assets; allowances for doubtful accounts; inventory reductions for excess and obsolete inventories; estimated fair values of long-lived assets used to measure the recoverability of long-lived assets; intangible assets and goodwill; expected future cash flows used to measure the recoverability of intangible assets and long-lived assets; warranty costs; derivative financial instruments; and contingent liabilities. We base our estimates and judgments on our historical experience, current market and economic conditions, industry trends, and other assumptions that we believe are reasonable and form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates. We believe the following critical accounting policies and estimates to be both those most important to the portrayal of our financial position and results of operations and those that require the most estimation and subjective judgment: • Revenue recognition; • Income taxes; • Inventories; •
•
Business combinations.
For a further discussion of our critical accounting policies, please refer to
our Annual Report on Form 10-K for the year ended
27
--------------------------------------------------------------------------------RESULTS OF OPERATIONS
Three Months Ended
Consolidated Results
The following table presents our results (in millions):
Three Months Ended
March 31,
Dollar Percentage
2022 2021 Change Change
Product revenue $ 490.4 $ 458.6 $ 31.8 6.9 %
Service revenue 103.2 94.1 9.1 9.7 %
Other revenue 1.4 2.0 (0.6 ) (30.0 )%
Total revenue 595.0 554.7 40.3 7.3 %
Cost of product revenue 229.0 220.9 8.1 3.7 %
Cost of service revenue 59.6 54.8 4.8 8.8 %
Cost of other revenue 0.1 0.3 (0.2 ) (66.7 )%
Total cost of revenue 288.7 276.0 12.7 4.6 %
Gross profit 306.3 278.7 27.6 9.9 %
Operating expenses:
Selling, general and administrative 145.7 131.8 13.9 10.5 %
Research and development 56.6 54.8 1.8 3.3 %
Other charges, net 7.5 3.0 4.5 150.0 %
Total operating expenses 209.8 189.6 20.2 10.7 %
Operating income 96.5 89.1 7.4 8.3 %
Interest and other income (expense),
net (2.5 ) (3.8 ) 1.3 (34.2 )%
Income before income taxes and
noncontrolling interest in
consolidated subsidiaries 94.0 85.3 8.7 10.2 %
Income tax provision 31.9 27.5 4.4 16.0 %
Consolidated net income 62.1 57.8 4.3 7.4 %
Net income attributable to
noncontrolling interests in
consolidated subsidiaries 0.5 1.1 (0.6 ) (54.5 )%
Net income attributable to Bruker
Corporation $ 61.6 $ 56.7 $ 4.9 8.6 %
Revenue
Revenue increases were driven by strong demand for our differentiated instruments and solutions as compared to the same period in 2021.
Gross Profit
The increase in gross profit in the three months endedMarch 31, 2022 , as compared to the same period in 2021, was a result of higher revenue and volume leverage and from differentiated instruments and solutions, partially offset by inflationary margin challenges in 2022.
Selling, General and Administrative
Our selling, general and administrative expenses for the three months endedMarch 31, 2022 increased to 24.5% of total revenue, from 23.8% of total revenue for the comparable period in 2021. The increase as a percentage of revenue was a result of the timing of certain sales and marketing investments, driven by higher freight, logistics and commission costs.
Research and Development
Our research and development expenses for the three months endedMarch 31, 2022 decreased to 9.5% of total revenue from 9.9% of total revenue for the comparable period in 2021. The decrease as a percentage of revenue was a result of the increase in revenue period over period. 28 --------------------------------------------------------------------------------
Other Charges, Net
Other charges, net recorded for the three months endedMarch 31, 2022 consisted of$5.1 million of acquisition-related charges related to acquisitions completed in 2022 and 2021,$1.0 million of costs associated with our global information technology (IT) transformation activities,$0.7 million related to suspension of operations inRussia ,$0.4 million of professional fees incurred in connection with investigation matters, and$0.3 million of restructuring costs. The IT transformation initiative is a multi-year project aimed at updating and integrating our global enterprise resource planning and human resource information systems. Other charges, net for the three months endedMarch 31, 2021 consisted primarily of$1.3 million of restructuring costs,$0.9 million of acquisition-related charges related to acquisitions completed in 2021 and 2020,$0.7 million of costs associated with our global IT transformation initiative and$0.1 million of professional fees incurred in connection with investigation matters.
Operating Income
The increase in operating income was due to higher gross margin resulting from differentiated products and operating leverage, partially offset by inflationary margin challenges in 2022, as compared to 2021.
Interest and Other Income (Expense), Net
The decline in net interest and other income (expense) in the three months endedMarch 31, 2022 , as compared to the same period in 2021 was mainly due to other strategic investment activity.
Income Tax Provision
The 2022 and 2021 effective tax rates were estimated using projected annual pre-tax income on a jurisdictional basis. Expected tax benefits, including tax credits and incentives, the impact of changes to valuation allowances and the effect of jurisdictional differences in statutory tax rates were also considered in the calculation. The effective tax rates for the three months endedMarch 31, 2022 and 2021 were 33.9% and 32.2%, respectively. The increase in our effective tax rate was primarily due to i) the impact of legislation that became effective during the quarter limiting the deductibility of R&D and the benefit relating to foreign tax credits and ii) the settlement of a tax audit.
Net Income (Loss) Attributable to Noncontrolling Interests
The net income (loss) attributable to noncontrolling interests represented the
minority shareholders' proportionate share of the net income recorded by our
majority-owned subsidiaries.
29
--------------------------------------------------------------------------------Reportable Segment Revenue
The following table presents revenue, change in revenue and revenue growth by reportable segment (in millions):
Three Months Ended
March 31,
Dollar Percentage
2022 2021 Change Change
BSI Life Science $ 361.0 $ 351.8 $ 9.2 2.6 %
BSI Nano 178.5 154.4 24.1 15.6 %
BEST 59.7 52.4 7.3 13.9 %
Eliminations (a) (4.2 ) (3.9 ) (0.3 )
Total revenue $ 595.0 $ 554.7 $ 40.3 7.3 %
(a)Represents product and service revenue between reportable segments.
For financial reporting purposes, we aggregate theBruker BioSpin Group andBruker CALID Group as the BSI Life Science segment. This aggregation reflects the similar economic characteristics, production processes, customer services provided, types and classes of customers, methods of distribution and regulatory environments. The increase in revenue for the BSI Life Science segment in the three months endedMarch 31, 2022 was due to strong demand, business and end market recovery, and was led by growth in Preclinical Imaging (PCI) and Microbiology and Diagnostic solutions. The increase in revenue for the BSI Nano segment was driven by industrial research demand and continued strong demand from semiconductor and microelectronics customers. The increase in revenue for the BEST segment resulted from demand from superconductors for healthcare MRI in the three months endedMarch 31, 2022 .
Operating Income
The following table presents operating income and operating margins on revenue by reportable segment (in millions):
Three Months Ended March 31,
2022 2021
Percentage of Percentage of
Operating Segment Operating Segment
Income (Loss) Revenue Income (Loss) Revenue
BSI Life Science $ 85.9 23.8 % $ 88.9 25.3 %
BSI Nano 22.3 12.5 % 12.3 8.0 %
BEST 6.6 11.1 % 4.1 7.8 %
Corporate, eliminations and other (a) (18.3 ) (16.2 )
Total operating income $ 96.5 16.2 % $ 89.1 16.1 %
(a)Represents corporate costs and eliminations not allocated to the reportable segments.
The operating margin increases in the BSI Life Science and BSI Nano segments was primarily due to higher gross margin resulting from differentiated products and operating leverage, partially offset by planned commercial investments. The operating margin increase in the BEST segment resulted from higher revenue and favorable mix.
LIQUIDITY AND CAPITAL RESOURCES
We anticipate that our existing cash and credit facilities will be sufficient to support our operating and investing needs for at least the next twelve months. Our future cash requirements could be affected by acquisitions that we may complete, purchases of our common stock or the payment of dividends in the future. Historically, we have financed our growth and liquidity needs through cash flow generation from operations and a combination of debt financings and issuances of common stock. In the future, there are no assurances that we will continue to generate cash flow from operations or that additional financing alternatives will be available to us, if required, or if available, will be obtained on terms favorable to us. Cash, cash equivalents and short-term investments atMarch 31, 2022 andDecember 31, 2021 totaled$916.1 million and$1,168.2 million , respectively, of which$607.5 million and$646.9 million , respectively, related to cash, cash equivalents and short-term investments held outside of theU.S. in our foreign subsidiaries, most significantly inthe Netherlands ,Switzerland andHong Kong . 30 -------------------------------------------------------------------------------- The following table presents our cash flows from operating activities, investing activities and financing activities for the periods presented (in millions): Three Months Ended March 31, 2022 2021 Net cash provided by operating activities $ 77.8$ 98.0 Net cash used in investing activities (101.8 ) (24.0 ) Net cash used in financing activities (217.4 ) (38.1 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash (10.7 )
(21.0 ) Net change in cash, cash equivalents and restricted cash
$ (252.1 )
Cash provided by operating activities during the three months endedMarch 31, 2022 resulted primarily from consolidated net income adjusted for non-cash items of$81.6 million , partially offset by a change in operating assets and liabilities, net of acquisitions and divestitures of$3.8 million . The decrease was primarily due to strategic inventory management to handle supply chain challenges, timing of tax payment payables partially offset by customer advances received during the period for related to new orders. Cash provided by operating activities during the three months endedMarch 31, 2021 resulted primarily from consolidated net income adjusted for non-cash items of$93.7 million , in addition to a change in operating assets and liabilities, net of acquisitions and divestitures of$4.3 million . The increase in operating assets and liabilities, net of acquisitions and divestitures for the three months endedMarch 31, 2021 was primarily due to higher payables and accrued liabilities as well as timing of income tax payables offset by improved inventory turnover within the same period of the prior year. Cash used in investing activities during the three months endedMarch 31, 2022 resulted primarily from acquisitions of$83.8 million , purchases of property, plant and equipment of$19.0 million , and strategic investments of$12.0 million , offset by$12.7 million of net proceeds from sales of property, plant and equipment. Cash used in investing activities during the three months endedMarch 31, 2021 was primarily attributed to cash paid for net purchases of property, plant and equipment of$24.7 million , cash paid for acquisitions, net of cash acquired of$4.0 million , offset by$3.5 million from proceeds of cross-currency swap agreements. Net cash used in financing activities during the three months endedMarch 31, 2022 was primarily from cash paid for purchases of common stock under our repurchase program of$105.6 million , repayment of our 2012 Note Purchase Agreement of$105.0 million and$7.5 million for the payment of dividends. Net cash used in financing activities during the three months endedMarch 31, 2021 was primarily from cash paid for repurchases of common stock under our Repurchase Program of$32.6 million and$6.1 million for the payment of dividends, partially offset by proceeds of$1.1 million from the exercise of stock options. Share Repurchase Program InMay 2019 , our Board of Directors approved our share repurchase program (the "2019 Repurchase Program") under which repurchases of common stock in the amount of up to$300.0 million were authorized to occur from time to time, in amounts, at prices, and at such times as we deem appropriate, subject to market conditions, legal requirements and other considerations. During the three months endedMarch 31, 2021 , we purchased 530,729 shares of common stock with an aggregate cost of approximately$32.8 million under the 2019 Repurchase Program. We completed the 2019 Repurchase Program inApril 2021 , after reaching the maximum cumulative spend. InMay 2021 , our Board of Directors approved a share repurchase program (the "2021 Repurchase Program") authorizing the purchase of up to$500.0 million of our common stock over a two-year period from time to time, in amounts, at prices, and at such times as we deem appropriate, subject to market conditions, legal requirements and other considerations. During the three months endedMarch 31, 2022 , we purchased 1,603,055 shares of common stock with an aggregate cost of approximately$105.6 million under the 2021 Repurchase Program. AtMarch 31, 2022 ,$275.5 million remained for future purchase under the 2021 Repurchase Program. We intend to fund any additional repurchases from cash on hand, future cash flows from operations and available borrowings under our revolving credit facility. The purchased shares are reflected withinTreasury stock in the accompanying unaudited condensed consolidated balance sheets. 31 --------------------------------------------------------------------------------
Credit Facilities
OnDecember 7, 2021 , we entered into a note purchase agreement to issue and sellCHF 300 million aggregate principal amount of 0.88% series A senior notes andEUR 150 million aggregate principal amount of 1.03% series B senior notes dueDecember 8, 2031 . We designated ourCHF 300 million series A senior notes as a hedge in our net investment in our Swiss Franc denominated net assets. We designated ourEUR 150 million series B senior notes as a hedge in our net investment in our EUR denominated net assets. Proceeds of the notes will be used for general corporate purposes. OnDecember 11, 2019 , we entered into (1) a new revolving credit agreement to establish a new revolving credit facility in the aggregate principal amount of$600 million ; (2) a term loan agreement to establish a new term loan facility in the aggregate principal amount of$300 million ; and (3) a note purchase agreement to issue and sellCHF 297 million aggregate principal amount of 1.01% senior notes dueDecember 11, 2029 . Floating interest rates under the term loan were simultaneously fixed through cross-currency and interest rate swap agreements into Euro ($150 million ) and Swiss Franc ($150 million ) rates carrying average effective interest rates of 0.94% and hedge our net investment in our Euro and Swiss Franc denominated net assets. The new revolving credit agreement replaced our$500 million five-year revolving credit agreement established onOctober 27, 2015 , that was terminated onDecember 11, 2019 . In addition, we designated ourCHF 297 million senior notes as a hedge in our net investment in our Swiss Franc denominated net assets. Proceeds from this financing were used to repay the outstanding borrowings under our prior 2015 revolving credit facility and we intend to use the remaining proceeds for general corporate purposes and to support corporate strategic objectives. DuringDecember 2019 , we entered intoU.S. Dollar to Euro cross-currency swaps on our existing 2012 private placement notes of$105 million 4.31% Series 2012A Senior Notes, Tranche C, repaid inJanuary 2022 , and the existing$100 million of 4.46% Series 2012A Senior Notes, Tranche D, dueJanuary 18, 2024 , resulting in an average effective interest rate of 2.25% on these instruments. The cross-currency swaps hedge our net investment in our Euro denominated net assets. As ofMarch 31, 2022 , we have several cross-currency and interest rate swap agreements with a notional value of$149.3 million ofU.S. to Swiss Franc and a notional value of$249.3 million ofU.S. to Euro to hedge the variability in the movement of foreign currency exchange rates on portions of our Euro and Swiss Franc denominated net asset investments. As a result of entering into these agreements, the Company lowered net interest expense by$1.1 million and$1.4 million during the three months endedMarch 31, 2022 and 2021, respectively. We anticipate these swap agreements will lower net interest expense in future years.
We had the following debt outstanding (in millions):
March 31 ,
2022 2021
EUR notes (inU.S. dollars) under the 2021 Note Purchase Agreement $ 166.3 $
170.7
CHF notes (inU.S. dollars) under the 2021 Note Purchase Agreement 325.4
329.2
CHF notes (inU.S. dollars) under the 2019 Note Purchase Agreement 322.2
325.9
U.S. Dollar notes under the 2019 Term Loan 298.5
299.2
U.S. Dollar notes under the 2012 Note Purchase Agreement 100.0
205.0
Unamortized debt issuance costs (1.9 ) (2.0 ) Other loans 1.8
1.9
Total notes and loans outstanding 1,212.3 1,329.9 Finance lease obligations 4.1 4.3 Total debt 1,216.4 1,334.2 Current portion of long-term debt (11.0 ) (112.4 ) Total long-term debt, less current portion$ 1,205.4 $
1,221.8
As of
The following is a summary of the maximum commitments and the net amounts available to us under the 2019 Credit Agreement and other lines of credit with various financial institutions located primarily inGermany andSwitzerland that are unsecured and typically due upon demand with interest payable monthly, atMarch 31, 2022 (in millions): Weighted Total Amount Outstanding Total Average Committed by
Outstanding Letters of Amount
Interest Rate Lenders Borrowings Credit Available
2019 Credit Agreement 1.3 % $ 600.0 $ - $ 0.1 $ 599.9
Bank guarantees and
working capital line varies 110.3 - 110.3 -
Total revolving lines of
credit $ 710.3 $ - $ 110.4 $ 599.9
32--------------------------------------------------------------------------------
As of
RECENT ACCOUNTING PRONOUNCEMENTS
Information regarding recent accounting standard changes and developments is
incorporated by reference from Part I, Item 1, Unaudited Condensed Consolidated
Financial Statements, of this document and should be considered an integral part
of this Item 2. See Note 2 in the Notes to the Unaudited Condensed Consolidated
Financial Statements in this Quarterly Report on Form 10-Q for recently adopted
and issued accounting standards.
33--------------------------------------------------------------------------------
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