Acquisitions

3 Months Ended

Sep. 30, 2011

Acquisitions [Abstract]

Acquisitions

Note 5 – Acquisitions

Fiscal 2011 Asset Acquisitions

During the prior fiscal year ended June 30, 2011, in separate transactions, the Company acquired substantially all of the assets and certain operational liabilities of Nerites Corporation and certain operational assets and certain liabilities relating to the business and product lines of Norian.

Asset Acquisition of Nerites Corporation

In January 2011, the Company acquired substantially all of the assets and certain operational liabilities of Nerites Corporation (Nerites), a privately-held development stage company based in Wisconsin, for $19.7 million. Approximately $16.7 million of the purchase price was paid at the acquisition date, financed from the Company's available cash and investments on hand. The remaining $3.0 million, of which $1.5 million is reported as each a component of Other current liabilities and Long-term deferred acquisition payments on the Condensed Consolidated Balance Sheet as of September 30, 2011, was held back by the Company under the terms of the acquisition as security for certain potential Nerites indemnification obligations and is expected to be financed with cash on hand; of such hold-back amount, $1.5 million will be released on each of the first and second anniversaries of the acquisition date to Nerites, to the extent that the hold-back amount is not applied toward any such indemnification obligations.

The Company accounted for the transaction as an asset acquisition based on an evaluation of the accounting guidance (ASC 805) and considering the early research stage of Nerites' technology. The Company concluded that the acquired net assets of Nerites did not constitute a business as defined under ASC 805 due to the incomplete nature of the inputs and the absence of processes from a market participant perspective. The total purchase price of $19.7 million had been allocated to the tangible and intangible acquired assets, such as acquired in-process research and development (IPR&D), based on their respective estimated fair values as of the date of the acquisition. Acquired IPR&D in the asset acquisition was accounted for in accordance with FASB ASC Topic 730, "Research and Development" (ASC 730). Management was responsible for the valuation and considered a number of factors including internal and third party valuations and appraisals. For further information on the transaction and the purchase price allocation, see Note 5 "Acquisitions" to the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended June 30, 2011.

Asset Acquisition of Norian

On May 24, 2011 (date of acquisition), the Company completed its acquisition of certain operational assets and certain liabilities relating to the business and product lines of Norian, a wholly owned subsidiary of Synthes, pursuant to an Asset Purchase Agreement and related Property Purchase Agreement, for a total purchase price of approximately $26 million ($22 million pursuant to the Asset Purchase Agreement and $4 million pursuant to the Property Purchase Agreement). On the date of acquisition, the Company paid to Synthes total cash consideration of $11.9 million from the Company's available cash on hand. The Company is required to pay the remaining $14 million on the earlier of the date on which the transfer of the manufacturing operation from the purchased West Chester, Pennsylvania facility to the Company's corporate headquarters facility located in Exton, Pennsylvania has been completed or the 18-month anniversary of the date of acquisition. The $14 million deferred payment has been classified by the Company as a long-term liability as of September 30, 2011.

In accordance with ASC 805, the Company has accounted for the asset acquisition using the purchase method of accounting under U.S. GAAP. Under the purchase method of accounting, the total purchase price of approximately $26 million had been allocated to the tangible and intangible acquired assets and assumed liabilities of Norian, based on their respective estimated fair values as of the date of the acquisition. Management was responsible for the valuation and considered a number of factors including internal and third party valuations and appraisals. For further information on this transaction and the purchase price allocation, see Note 5 "Acquisitions" to the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended June 30, 2011.

The results of operations associated with Norian have been consolidated with those of the Company since the date of acquisition.

The following pro forma information sets forth the combined revenues and net income of the Company and the historical unaudited Norian financial information for the prior comparative period for the three months ended September 30, 2010, as if the acquisition had occurred as of July 1, 2010, and includes certain business combination accounting adjustments for such expenses, including, but not limited to, amortization charges from acquired tangible and intangible assets, acquisition related transaction costs and tax related effects. Historically, Norian had not maintained certain distinct and separate accounts from Synthes. The historical unaudited Norian financial information reflected the manufacturing and selling of the product lines through inter-company arms-length transactions with Synthes at negotiated prices. Therefore, the pro forma information presented below is not necessarily indicative of that which would have been attained had the transaction occurred at an earlier date, nor are these results necessarily indicative of future consolidated results of operations of the Company. The pro forma information as presented below is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal 2011.

	For the Three Months Ended
	September 30, 2010
Total revenues	$	22,683
Net income	$	4,334
Basic earnings per share	$	0.48
Diluted earnings per share	$	0.47