Note 2 — Business Combination

The acquisition described below was accounted for as a business combination and, accordingly, the Company has included the results of operations of the acquired entity in its consolidated statements of income from the date of acquisition. Neither separate financial statements nor pro forma results of operations have been presented because the acquisition does not meet the quantitative materiality tests under Regulation S-X.

Acquisition of GTI Diagnostics

In December 2010, the Company acquired GTI Diagnostics, a privately held specialty diagnostics company focused on the transplantation, specialty coagulation and transfusion-related blood bank markets, for $53.0 million on a net-cash basis. As a result of the acquisition, GTI Diagnostics became a wholly owned subsidiary of the Company. The Company financed the acquisition with cash on hand.

The purchase price allocation for the acquisition of GTI Diagnostics set forth below is preliminary and subject to change as more detailed analysis is completed and additional information with respect to the fair value of the assets and liabilities acquired becomes available. The Company expects to finalize the purchase price allocation during the remainder of 2011. The preliminary allocation of the purchase price for the Company’s acquisition of GTI Diagnostics is as follows (in thousands):


Total purchase price	$	53,000


Net working capital	$	7,881
Fixed assets		966
Goodwill		28,040
Deferred tax liabilities		(11,137	)
Other intangible assets		32,100
Liabilities assumed		(4,850	)

Allocated purchase price	$	53,000

The fair values of the acquired identifiable intangible assets with definite lives are as follows (in thousands):


Patents	$	10,600
In-process research and development		11,900
Customer relationships		3,500
Trade secrets		6,100

Total	$	32,100

The amortization periods for the acquired identifiable intangible assets with definite lives are as follows: six to nine years for patents, ten years for customer relationships, 20 years for trade secrets, and an estimated life to be determined for each in-process research and development project (to commence upon commercialization of the associated product). The Company is amortizing the acquired identifiable intangible assets set forth in the table above using the straight-line method of amortization. The Company believes that the use of the straight-line method is appropriate given the high customer retention rate of the acquired business and the historical and projected growth of revenues and related cash flows. The Company will monitor and assess the acquired identifiable intangible assets and will adjust, if necessary, the expected life, amortization method or carrying value of such assets to best match the underlying economic value.

The fair value assigned to trade secrets has been determined primarily by using the income approach and a variation of the income approach known as the relief from royalty method, which estimates the future royalties which would have to be paid to the licensor of the asset for its current use. Tax is deducted and a discount rate is used to state future cash flows to a present value. This is based on the asset in its current use and is based on savings from owning the asset, or relief from royalties that would be paid to the asset owner. The fair value assigned to patents, in-process research and development, and customer relationships has been determined primarily by using the income approach and a variation of the income approach known as the excess earnings method, which estimates the value of an asset based on discounted future earnings specifically attributed to that asset, that is, in excess of returns for other assets that contributed to those earnings. The discount rates used in these valuation methods ranged from 13 to 16 percent.

The estimated amortization expense for the acquired identifiable intangible assets over future periods, excluding the in-process research and development assets due to uncertainty with respect to the commercialization of such assets, is as follows (in thousands):


Years Ending December 31,
Remainder of 2011	$	994
2012		1,988
2013		1,988
2014		1,988
2015		1,988
Thereafter		10,316

Total	$	19,262

Changes in Goodwill Resulting From Acquisitions

The $53.0 million purchase price for GTI Diagnostics exceeded the value of the acquired tangible and identifiable intangible assets, and therefore the Company allocated $28.0 million to goodwill. Included in this initial goodwill amount was $11.1 million primarily related to deferred tax liabilities recorded as a result of non-deductible amortization of acquired identifiable intangible assets.

Changes in goodwill for the six months ended June 30, 2011 were as follows (in thousands):


Goodwill balance as of December 31, 2010	$	150,308
Additional goodwill recognized		35
Changes due to foreign currency translation		487

Goodwill balance as of June 30, 2011	$	150,830