Stock-Based Compensation

6 Months Ended

Jun. 30, 2011

Stock-Based Compensation

Stock-Based Compensation

3. Stock-Based Compensation

The Company’s primary types of share-based compensation are in the form of stock options and restricted stock. The Company recorded stock-based compensation expense for the three and six months ended June 30, 2011 and 2010 as follows (in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Stock options	$	1.6	$	1.5	$	3.2	$	2.8
Restricted stock	0.4		0.2		0.6		0.5
Total stock-based compensation pre-tax	2.0		1.7		3.8		3.3
Tax benefit	0.2		0.2		0.5		0.5
Total stock-based compensation net of tax	$	1.8	$	1.5	$	3.3	$	2.8

Compensation expense is amortized on a straight-line basis over the underlying vesting terms of the share-based award. Stock options to purchase the Company’s common stock are periodically awarded to executive officers and other employees of the Company subject to a vesting period of three to five years. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. Assumptions regarding volatility, expected life, dividend yield and risk-free interest rate are required for the Black-Scholes model and are presented in the table below:

	2011	2010
Risk-free interest rate	2.13%-3.12%	1.73%-3.46%
Expected life	6.5 years	6.5 years
Volatility	57.2%	62.0%
Expected dividend yield	0.0%	0.0%

The risk-free interest rate is the yield on zero-coupon U.S. Treasury securities for a period that is commensurate with the expected life assumption. Expected life is determined through the simplified method as defined in the SEC Staff Accounting Bulletin No. 110. The Company believes that this is the best estimate of the expected life of a new option. Expected volatility can be based on a number of factors, but the Company currently believes that the exclusive use of historical volatility results is the best estimate of the grant-date fair value of employee stock options because it reflects the market’s current expectations of future volatility. Expected dividend yield was not considered in the option pricing formula since the Company does not pay dividends and has no current plans to do so in the future. The terms of some of the Company’s indebtedness also currently restrict the Company’s ability to pay dividends to its stockholders.

Bruker Corporation Stock Plan

In May 2010, the Bruker Corporation 2010 Incentive Compensation Plan (the “2010 Plan”) was approved by the Company’s stockholders. The 2010 Plan provides for the issuance of up to 8,000,000 shares of the Company’s common stock. The Plan allows a committee of the Board of Directors (the “Committee”) to grant incentive stock options, non-qualified stock options and restricted stock awards. The Committee has the authority to determine which employees will receive the awards, the amount of the awards and other terms and conditions of any awards. Awards granted by the Committee typically vest over a period of three to five years.

Stock option activity for the six months ended June 30, 2011 was as follows:

	Shares Subject to Options		Weighted Average Option Price		Weighted Average Remaining Contractual Term (Yrs)	Aggregate Intrinsic Value (in millions) (b)
Outstanding at December 31, 2010	4,718,648		$	9.99
Granted	162,500		18.45
Exercised	(306,585	)	9.56			$	2.9
Forfeited	(95,755	)	10.87
Outstanding at June 30, 2011	4,478,808		$	10.31	6.1	$	44.9
Exercisable at June 30, 2011	2,498,976		$	8.87	5.0	$	28.7
Exercisable and expected to vest at June 30, 2011 (a)	4,375,857		$	10.29	6.1	$	44.1

(a)In addition to the options that are exercisable at June 30, 2011, the Company expects a portion of the unvested options to become exercisable in the future. Options expected to vest in the future are determined by applying an estimated forfeiture rate to the options that are unvested as of June 30, 2011.

(b) The aggregate intrinsic value is based on the positive difference between the fair value of the Company’s common stock price of $20.36 on June 30, 2011, or the date of exercises, as appropriate, and the exercise price of the underlying stock options.

Restricted stock activity for the six months ended June 30, 2011, was as follows:

	Shares Subject to Restriction		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2010	247,258		$	8.02
Granted	156,822		21.28
Vested	(46,420	)	7.69
Forfeited	(300	)	7.55
Outstanding at June 30, 2011	357,360		$	13.88

At June 30, 2011, the Company expects to recognize pre-tax stock-based compensation expense of $12.3 million associated with outstanding stock option awards granted under the Company’s stock plans over the weighted average remaining service period of 2.0 years. In addition, the Company expects to recognize additional pre-tax stock-based compensation expense of $4.1 million associated with outstanding restricted stock awards granted under the Company’s stock plans over the weighted average remaining service period of 3.6 years.

Bruker Energy & Supercon Technologies Stock Plan

In October 2009, the Board of Directors of BEST adopted the Bruker Energy & Supercon Technologies, Inc. 2009 Stock Option Plan (the “BEST Plan”). The BEST Plan provides for the issuance of up to 1,600,000 shares of BEST common stock in connection with awards under the BEST Plan. The BEST Plan allows a committee of the BEST Board of Directors to grant incentive stock options, non-qualified stock options and restricted stock awards. The Compensation Committee of the BEST Board of Directors has the authority to determine which employees will receive the awards, the amount of the awards and other terms and conditions of any awards. Awards granted pursuant to the BEST Plan typically vest over a period of three to five years.

There has been no activity in the BEST Plan during the six months ended June 30, 2011. At June 30, 2011, there were 800,000 options outstanding under the BEST Plan. The Company expects to recognize pre-tax stock-based compensation expense of $1.5 million associated with outstanding stock option awards granted under the BEST Plan over the weighted average remaining service period of 2.8 years.