Acquisitions

6 Months Ended

Jun. 30, 2011

Acquisitions

Acquisitions

6. Acquisitions.   On June 20, 2011, we entered into an Asset Purchase Agreement to purchase intellectual property rights to a medical device product.  We made an initial payment of $1.0 million in June 2011.  We are obligated to pay an additional $3.5 million upon reaching certain milestones set forth in the agreement.  We have accrued the additional contingent payments of $3.5 million as a cost of the acquisition in other long-term obligations at June 30, 2011.

On April 6, 2011, we supplemented and amended our Exclusive License, Development and Supply Agreement with Vysera Biomedical Limited (“Vysera”) to include the manufacturing rights for their valve technology.  We made an initial payment of $500,000 in April 2011.  We are obligated to pay an additional $500,000 upon reaching certain milestones set forth in the agreement. We accrued the additional contingent payments as a cost of the acquisition, with $250,000 included in accrued expenses and $250,000 in other long-term obligations at June 30, 2011.

On September 10, 2010, we completed our acquisition of BioSphere Medical, Inc. (“BioSphere”) in an all cash merger transaction valued at approximately $96 million, inclusive of all common equity and Series A Preferred preferences.  BioSphere develops and markets embolotherapeutic products for the treatment of uterine fibroids, hypervascularized tumors and arteriovenous malformations.  We believe the acquisition of BioSphere gives us a platform technology applicable to multiple therapeutic areas with significant market potential while leveraging existing interventional radiology call points.  Two immediate applications for the embolotherapy are uterine fibroids and primary liver cancer.  The gross amount of trade receivables we acquired from BioSphere was approximately $4.6 million, of which $51,000 is expected to be uncollectible.  Our consolidated financial statements for the three and six-month periods ended June 30, 2011 reflect sales subsequent to the acquisition date of approximately $7.0 million and $14.6 million, respectively, related to our BioSphere acquisition. We report sales and operating expenses related to this acquisition in our cardiovascular segment.  It is not practical to separately report the earnings related to this acquisition as we cannot split out sales costs related to Biosphere’s products, principally because our sales representatives are selling multiple products (including Biosphere products) in the cardiovascular business segment.  As of December 31, 2010, the purchase price was allocated as follows (in thousands):

Assets Acquired
Marketable securities	$	9,673
Trade receivables	4,529
Inventories	5,694
Other assets	1,340
Property and equipment	546
Deferred income tax assets	16,012
Intangibles
Developed technology	19,000
Customer list	7,900
License agreement	380
Trademark	3,200
Goodwill	34,016
Total assets acquired	102,290
Liabilities Assumed
Accounts payable	322
Accrued expenses	3,617
Deferred income tax liabilities	729
Liabilities related to unrecognized tax benefits	961
Other liabilities	936
Total liabilities assumed	6,565
Net assets acquired, net of cash acquired of $274	$	95,725

No significant changes have been made to the assets acquired and liabilities assumed during the six-month period ended June 30, 2011.

With respect to the BioSphere assets, we are amortizing developed technology over 15 years and a license agreement over 10 years and customer lists on an accelerated basis over 10 years.  While U.S. trademarks can be renewed indefinitely, we currently estimate that we will generate cash flow from the acquired trademarks for a period of 15 years from the acquisition date.  The total weighted-average amortization period for these acquired intangible assets is 13.6 years.

In connection with our BioSphere acquisition, we paid approximately $522,000 in long-term debt issuance costs to Wells Fargo Bank (“Wells Fargo”) for our long-term debt (see Note 10).  These costs consist primarily of loan origination fees and legal costs that we intend to amortize over five years, which is the contract term of an unsecured Credit Agreement, dated September 10, 2010 (the “Credit Agreement”) with lenders who are or may become party thereto (collectively, the “Lenders”) and Wells Fargo, as administrative agent for the Lenders.  We also incurred approximately $24,000 and $86,000 of acquisition-related costs during the three and six-months ended June 30, 2011, respectively, which are included in selling, general and administrative expense in the accompanying consolidated statements of operations.

During the fourth quarter of 2010, we terminated several exclusive BioSphere sales distributor agreements in European countries where we already had previously established direct sales relationships.  In connection with the termination of these agreements, we agreed to purchase customer lists from the terminated distributors.  The total purchase price of the customer lists was approximately $1.3 million and was allocated to customer lists.  We are amortizing the customer lists on an accelerated basis over 10 years.

On February 19, 2010, we entered into a manufacturing and technology license agreement with a medical device manufacturer for certain medical products.  We made an initial payment of $250,000 in February 2010, a second payment of $250,000 in May 2010, a third payment of $250,000 in November 2010 and accrued an additional $250,000 in accrued expenses at December 31, 2010.  The final payment is due upon reaching certain milestones set forth in the agreement.  We have included the $1.0 million intangible asset in license agreements and are amortizing the asset over an estimated life of 10 years.

The following table summarizes our unaudited consolidated results of operations for the three and six-month periods ended June 30, 2010, as well as the unaudited pro forma consolidated results of operations as though the BioSphere acquisition had occurred on January 1, 2010 (in thousands, except per common share amounts):

	Three Months Ended				Six Months Ended
	June 30, 2010				June 30, 2010
	As Reported		Pro Forma		As Reported		Pro Forma
Sales	$	74,948	$	82,744	$	142,380	$	157,296
Net income	5,715		4,625		10,223		7,372
Earnings per common share:
Basic	$	.16	$	.13	$	.29	$	.21
Diluted	$	.16	$	.13	$	.29	$	.21

The unaudited pro forma information set forth above is for informational purposes only and should not be considered indicative of actual results that would have been achieved if BioSphere had been acquired at the beginning of 2010, or results that may be obtained in any future period.