Business Combination (GVT Acquisition)

12 Months Ended

Dec. 31, 2012

GVT Acquisition

Business Acquisition [Line Items]

Business Combination

Business Combination

GVT Acquisition Overview

On July 2, 2012 (the “GVT Closing Date”), the Company terminated its exclusive distribution agreement with its Italian distributor, Global Vascular Technologies S.r.l. ("GVT"). Immediately after termination, the Company closed an asset purchase agreement with GVT for its business for total consideration of $2.4 million (the “GVT Acquisition”), of which the Company's cash payment for GVT was offset by $1.0 million of trade receivables due to the Company from GVT. This business consists of (i) a trained and assembled Italian sales workforce (on the GVT Closing Date, four former GVT sales employees joined the Company to assume similar roles), and (ii) various active distribution and direct sales agreements in Italy, which were assumed by the Company.

Since July 2, 2012, the results of operations of the former GVT business, since renamed Endologix Italia S.r.l., have been included in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss).

Direct Costs of the GVT Acquisition

The Company's direct costs of the GVT Acquisition included legal and accounting fees of $0.4 million. Such amount is included in "contract termination and business acquisition expenses" within the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2012.

GVT Business Purchase Price Allocation

The GVT business purchase price of $2.4 million was allocated based on the below fair value estimates of the acquired assets and liabilities: 

Customer relationships	$	500
Total identifiable net assets	$	500
Goodwill	1,867
Total purchase price allocation	$	2,367

Amortization of the customer relationships intangible asset began in July 2012 and such expense of $0.1 million is included in "general and administrative" expense within the Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2012. Amortization of the customer relationship intangible asset will continue to be recorded over its estimated period of benefit of three years. To estimate fair value of the customer relationships, the Company used the “income approach” which is a valuation technique that converts future expected net cash flows to be derived from this asset into a single, present-valued amount.

Goodwill

Goodwill presented above of $1.9 million represents the difference of the GVT business purchase price of $2.4 millionminus the net identifiable intangible asset acquired. This goodwill value has been recorded in Euros by the Company's wholly-owned Italian subsidiary, and will thus be subject to foreign currency translation adjustments at each balance sheet date. Such goodwill value adjustment was $0.1 million from the GVT Closing Date to the December 31, 2012 balance sheet date.

In accordance with applicable GAAP, the Company will not amortize goodwill associated with the GVT acquisition. Goodwill is subject to annual impairment testing. The goodwill resulting from the GVT acquisition is expected to be amortized over 18 years for tax purposes.

Applicable GAAP requires that the value of a trained and assembled workforce be included in goodwill, and not presented as a separate intangible asset. The four sales employees hired as part of the GVT Acquisition are clinically adept with the Company's ELG System; have long-standing professional relationships with Italian distributors and physicians; and have a high degree of sales experience within the Italian EVAR market. The Company believes these acquired employees will provide the foundation for meaningful revenue growth in Italy, which is widely recognized as the second-largest EVAR market in Europe, behind Germany.

Supplemental Pro Forma Financial Information (Unaudited)

The following unaudited pro forma financial information is presented to reflect the results of the Company's consolidated operations for the years ended December 31, 2012 and 2011, as if the acquisition of GVT had occurred on January 1, 2011. To reflect the combined businesses, adjustments have been made to include the effects of amortization of the acquired intangible asset and removal of one-time transaction costs directly associated with the GVT Acquisition. These pro forma results have been prepared for informational purposes only and may not be indicative of what operating results would have been, had the acquisition actually taken place on January 1, 2011, and may not be indicative of future operating results.

	(Pro Forma and Unaudited)
	Year Ended December 31,
	2012			2011
Pro Forma Revenue	$	106,132		$	83,879
Pro Forma Cost of goods sold	25,282			18,746
Pro Forma Total operating expenses	102,430			84,402
Pro Forma Net loss	(35,464		)	(28,862		)
Pro Forma Net loss per share - basic and diluted	(0.59		)	(0.51		)