Acquisitions

6 Months Ended

Jun. 26, 2011

Acquisitions

Acquisitions

Note 3 — Acquisitions

On January 10, 2011, the Company acquired 100% of the outstanding equity of VasoNova Inc. ("VasoNova"), a developer of central venous catheter navigation technology that allows for real-time confirmation of the placement of peripherally inserted central catheters and central venous catheters. The acquisition of VasoNova complements the vascular access product line in the Company's Critical Care division. In connection with the acquisition, the Company made an initial payment to the former VasoNova security holders of $24.9 million and agreed to make additional payments of between $15.0 million and $30.0 million contingent upon the achievement of certain regulatory approvals and specified sales targets within three years after closing. In March 2011, $6.0 million of the contingent consideration was paid to the former VasoNova security holders upon receipt of 510(k) clearance from the U.S. Food and Drug Administration with respect to an expanded use of VasoNova's VPS peripherally inserted central catheter tip location technology.

The fair value of the consideration is estimated at $40.3 million, which includes the initial payment of $24.9 million in cash and the estimated fair value of the contingent consideration to be paid to the former VasoNova security holders of $15.4 million. The fair value of the contingent consideration is estimated based on the probability of obtaining the applicable regulatory approvals and achieving the specified sales targets. Any future change in the estimated fair value of the contingent consideration will be recognized in the statement of income for the period in which it occurs. A change in fair value of the contingent consideration could have a material effect on the Company's results of operations and financial position for the period in which the change in estimate occurs.

We estimated the fair value of the acquisition-related contingent consideration using a probability-weighted discounted cash flow model. This fair value measurement is based on significant inputs not observed in the market and thus is categorized within Level 3 of the fair value hierarchy (see Note 9, "Fair value measurements").

The following table summarizes the purchase price allocation of the cost to acquire VasoNova based on the fair values of the net assets acquired as of January 10, 2011:

	(Dollars in thousands)
Assets
Current assets	$	942
Property, plant and equipment		314
Intangible assets		29,550
Goodwill		13,048
Other assets		50
Total assets acquired		43,904
Less:
Current liabilities		(536	)
Deferred tax liabilities		(3,023	)
Total liabilities assumed		(3,559	)
Net assets acquired	$	40,345

As of June 26, 2011, the Company finalized the valuation of tangible and intangible assets and the purchase price allocation as of the acquisition date with no further adjustments.

Certain assets acquired in the VasoNova acquisition qualify for recognition as intangible assets, apart from goodwill. The estimated fair values of intangible assets acquired include purchased technology of $26.8 million and trade names of $2.8 million. Purchased technology and trade names have useful lives of 15 years and 10 years, respectively. The goodwill resulting from the VasoNova acquisition is primarily due to the expected revenue growth that is attributable to anticipated increased market penetration from future products and customers. Goodwill and the step-up in basis of the intangible assets are not deductible for tax purposes.

The unaudited pro forma results reflecting the acquisition of VasoNova in prior periods is not materially different from the Company's financial results as reported.