s1021228ka1.htm

EX-99.2 3 ex99_2.htm EXHIBIT 99.2 ex99_2.htm

Exhibit 99.2

Aspen Surgical Products

Holding, Inc. and Subsidiaries

Consolidated Financial Statements

December 31, 2011 and 2010

Aspen Surgical Products Holding, Inc. and Subsidiaries

Index

December 31, 2011 and 2010

Page(s)

Report of Independent Auditors	1

Consolidated Financial Statements

Balance Sheets	2

Statements of Operations	3

Statements of Stockholders’ Equity and Comprehensive Income	4

Statements of Cash Flows	5

Notes to Financial Statements	6-21

Report of Independent Auditors

To the Board of Directors of

Aspen Surgical Products Holding, Inc.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, stockholders’ equity and comprehensive income and cash flows present fairly, in all material respects, the financial position of Aspen Surgical Products Holding, Inc. and Subsidiaries at December 31, 2011 and 2010, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

April 27, 2012

Aspen Surgical Products Holding, Inc. and Subsidiaries

Consolidated Balance Sheets

December 31, 2011 and 2010

	2011		2010

Assets
Current assets
Cash	$	2,653,609	$	2,212,806
Accounts receivable, net of allowance for doubtful
accounts of $255,101 and $216,712, respectively		15,125,835		6,718,904
Inventories		20,695,180		20,275,147
Prepaid expenses and other current assets		1,287,712		1,131,623
Income taxes refundable		1,708,704		907,913
Deferred income tax asset		1,063,387		1,013,221
Total current assets		42,534,427		32,259,614
Property, plant and equipment, net		30,702,535		29,093,683
Goodwill		65,885,470		65,918,306
Intangible assets, net		66,314,338		73,707,631
Other assets		271,976		374,039
Total assets	$	205,708,746	$	201,353,273
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	5,006,404	$	4,219,543
Accrued expenses		6,390,765		4,039,822
Current maturities of long-term debt		7,525,000		5,375,000
Total current liabilities		18,922,169		13,634,365
Long-term liabilities
Long-term obligations, less current maturities		91,457,938		100,840,763
Deferred income tax liabilities		10,627,074		11,323,644
Total long-term liabilities		102,085,012		112,164,407
Total liabilities		121,007,181		125,798,772
Stockholders’ equity
Common stock, par value $0.01 per share, 22,000 shares
authorized, 21,708 and 21,522 shares issued and outstanding
at December 31, 2011 and 2010, respectively		217		215
Additional paid-in capital		73,482,540		72,514,229
Accumulated other comprehensive income-foreign currency
translation adjustment		287,605		374,980
Retained earnings		10,931,203		2,665,077
Total stockholders’ equity		84,701,565		75,554,501
Total liabilities and stockholders’ equity	$	205,708,746	$	201,353,273

The accompanying notes are an integral part of these consolidated financial statements.

Aspen Surgical Products Holding, Inc. and Subsidiaries

Consolidated Statements of Operation

Years Ended December 31, 2011 and 2010

	2011			2010

Net sales	$	118,109,353		$	76,508,040
Cost of sales		61,371,692			42,136,268
Gross profit		56,737,661			34,371,772
Selling, general and administrative		33,029,156			25,157,559
Business transaction expense		166,082			2,623,082
Income from continuing operations		23,542,423			6,591,131
Interest expense, net		11,775,193			9,345,065
Foreign currency transaction (loss)		(49,436	)		(529,903	)
Income (loss) before income taxes from
continuing operations		11,717,794			(3,283,837	)
Income tax expense (benefit)		3,451,668			(1,422,893	)
Net income (loss) from continuing operations		8,266,126			(1,860,944	)
Discontinued operations, net of income taxes		-			383,743
Net income (loss)	$	8,266,126		$	(1,477,201	)

The accompanying notes are an integral part of these consolidated financial statements.

Aspen Surgical Products Holding, Inc. and Subsidiaries

Consolidated Statements of Stockholders' Equity and Comprehensive Income

Years Ended December 31, 2011 and 2010

										Accumulated Other
										Comprehensive
										Income (Loss)
										Foreign
								Additional		Currency
	Comprehensive			Common Stock				Paid-In		Translation			Retained
	Income (Loss)			Shares		Amount		Capital		Adjustment			Earnings			Total

Balances at December 31, 2009					12,595	$	126	$	33,801,608	$	572,904		$	4,142,278			38,516,916
Issuance of common stock	$	-			5,986		59		25,132,407		-			-			25,132,466
Stock option exercise		-			214		2		661,103		-			-			661,105
Conversion of convertible debt for common stock		-			2,727		28		11,304,955		-			-			11,304,983
Compensation expense related to
stock options		-			-		-		566,129		-			-			566,129
Capital contribution resulting from common
control transaction		-			-		-		1,048,027		-			-			1,048,027
Net loss		(1,477,201	)		-		-		-		-			(1,477,201	)		(1,477,201	)
Foreign currency translation adjustments		(197,924	)		-		-		-		(197,924	)		-			(197,924	)
Total comprehensive income (loss)	$	(1,675,125	)
Balances at December 31, 2010					21,522		215		72,514,229		374,980			2,665,077			75,554,501
Stock option exercise					186		2		598,539		-			-			598,541
Compensation expense related to
stock options									369,772								369,772
Net income	$	8,266,126			-		-		-		-			8,266,126			8,266,126
Foreign currency translation adjustments		(87,375	)		-		-		-		(87,375	)		-			(87,375	)
Total comprehensive income (loss)	$	8,178,751
Balances at December 31, 2011					21,708	$	217	$	73,482,540	$	287,605		$	10,931,203		$	84,701,565

The accompanying notes are an integral part of these consolidated financial statements.

Aspen Surgical Products Holding, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Years Ended December 31, 2011 and 2010

	2011			2010

Operating activities
Net income (loss)	$	8,266,126		$	(1,477,201	)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities
Foreign currency loss on intercompany loans		27,832			513,229
Depreciation and amortization		12,598,322			9,701,000
Paid in kind interest		1,125,545			880,987
Interest converted into common shares		-			74,629
Stock based compensation expense related to stock options		369,772			566,129
Deferred income taxes		(746,736	)		(2,667,285	)
Changes in operating assets and liabilities, net of acquisitions
Accounts receivable		(8,404,050	)		1,342,428
Inventories		(441,550	)		856,271
Prepaid expenses and other assets		(945,146	)		(1,393,494	)
Accounts payable		359,630			524,465
Accrued expenses		2,226,000			2,459,838
Net cash provided by operating activities		14,435,745			11,380,996
Investing activities
Purchases of property, plant and equipment		(4,906,382	)		(2,232,214	)
Proceeds from common control transactions, net of
cash transferred		-			34,771,786
Acquisitions (Note 3)		-			(121,772,397	)
Net cash used in investing activities		(4,906,382	)		(89,232,825	)
Financing activities
Proceeds from term loan		-			46,335,900
Proceeds from senior secured subordinated note		-			9,746,720
Debt issuance and lender costs		-			(4,746,144	)
Proceeds from issuance of stock		-			25,132,466
Proceeds from issuance of subordinated convertible notes		-			11,230,353
Proceeds from exercise of stock options		598,541			661,104
Payments on term loan		(9,375,000	)		(12,489,600	)
Payments on senior secured subordinated note		(146,400	)		-
Net cash (used in) provided by financing activities		(8,922,859	)		75,870,799
Effect of exchange rate on cash		(165,701	)		(101,200	)
Net increase (decrease) in cash		440,803			(2,082,230	)
Cash
Beginning of period		2,212,806			4,295,036
End of period	$	2,653,609		$	2,212,806
Supplemental disclosures of cash information
Cash paid during the period for
Interest	$	9,739,710		$	8,219,146
Income taxes		4,403,752			2,635,142
Noncash financing activities
Conversion of subordinated convertible notes into
common stock		-			11,304,983
Interest paid in kind		1,125,545			880,987

The accompanying notes are an integral part of these consolidated financial statements.

Aspen Surgical Products Holding, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2011 and 2010

1.	Description of Business

Aspen Surgical Products Holding, Inc. and Subsidiaries (collectively, the “Company”) is 81% owned by RoundTable Healthcare Partners II, LP, RoundTable Healthcare Investors II, LP (collectively referred to as “RoundTable”) and 19% owned by fourteen individuals including employees and a former owner of Aspen Surgical Products, Inc. The Company was formed in 2006 to purchase Aspen Surgical Products, Inc. and is engaged in the manufacturing and distribution of both OEM and branded disposable and nondisposable medical products for surgical and general healthcare applications.

2.	Summary of Significant Accounting Policies

Principles of Consolidation

Consolidated financial statements include the accounts of Aspen Surgical Products Holdings, Inc. and its wholly owned subsidiaries, Aspen Surgical Products, Inc., Aspen Medical Europe Limited (U.K.), Ultracell Medical Technologies, Inc., Medical One, Inc., Colby Manufacturing Corporation, Turner Acquisition, LLC, and Aspen Surgical Puerto Rico Corporation. All significant intercompany transactions have been eliminated in consolidation.

During the year ended December 31, 2010, the Company transferred its interests in Ultracell Medical Technologies, Inc., Medical One, Inc., and Turner Acquisition, LLC to entities under common control as discussed in Note 4.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant judgments and estimates include the determination and allocation of the purchase price to acquired assets and liabilities assumed, determining the fair value and estimated useful lives of intangible assets, goodwill valuation for impairment testing, recording accounts receivable reserves, customer rebate reserves, and inventory reserves. The estimates and assumptions used in the accompanying consolidated financial statements are based upon management’s evaluation of the relevant facts and circumstances as of the balance sheet date. Actual results could differ from those estimates.

Foreign Currency Translation

The Company’s U.K. operations operate with the British Pound as their functional currency. Adjustments resulting from the process of translating foreign functional currency financial statements into U.S. dollars are included in accumulated other comprehensive income (loss) in stockholders’ equity. Foreign currency transaction gains and losses are included in current earnings. The Company has provided intercompany debt to fund its U.K. acquisition which is payable in British Pounds. The impact of exchange rate changes in the British Pound related to the intercompany debt translation is recorded in earnings annually.

Cash

Amounts presented as cash include only cash. There are no cash equivalents. The Company maintains cash account balances in excess of FDIC insured limits.

Aspen Surgical Products Holding, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2011 and 2010

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the amount invoiced to customers. The Company’s payment terms do not include charging interest on past due amounts. The allowances for doubtful accounts are recorded based upon the Company’s best estimate of credit losses included in accounts receivable. The allowance is determined based upon historical performance and current available customer information. Account balances are charged off against the allowance when it is deemed that the receivables will not be collected.

Inventory

Inventory is stated at the lower of cost, using the First-In, First-Out (FIFO) method, or market. The Company evaluates inventory levels and expected usage on a periodic basis and records valuation allowances as required.

Property, Plant and Equipment

Property, plant and equipment are carried at cost. Depreciation and amortization of property, plant and equipment are calculated using the straight-line method over the estimated useful lives, or over the lives of the underlying leases, if shorter. Major improvements that extend the useful life are capitalized and charged to expense through depreciation. The cost of routine maintenance and repairs is expensed as incurred. When assets are retired or sold, the net carrying amount is eliminated with any gain or loss on disposal recognized in the year of disposal and classified within selling, general and administrative expenses.

Goodwill and Intangible Assets

The Company’s intangible assets consist of goodwill and intangible assets arising from its acquisitions. Intangible assets include customer relationships, trademarks and trade names, patents, proprietary technology and non competition agreements. Intangible assets with definite lives are being amortized on a straight-line basis and assume no residual value.

In accordance with authoritative guidance, the Company does not amortize goodwill. Instead the Company reviews goodwill and indefinite lived assets for impairment annually or more often should indicators of possible impairment arise The Company first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. A reporting unit is an operating segment or one level below an operating segment for which discrete financial information is prepared and regularly reviewed by management. Based upon the Company’s assessment, no impairment of the carrying value of goodwill existed at December 31, 2011 or 2010.

Long-Lived Assets

The Company reviews long-lived assets (property, plant and equipment and finite-lived intangibles) to assess recoverability from projected undiscounted cash flows whenever events or changes in facts and circumstances indicate that the carrying value of the assets may not be recoverable. An impairment loss is recognized in operating results when future undiscounted cash flows are less than the assets’ carrying value. The impairment loss would adjust the carrying value to the assets’ fair value. To date, the Company has not recorded any impairment charges against long-lived assets.

Aspen Surgical Products Holding, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2011 and 2010

Debt Issuance Costs

Debt issuance costs consist of amounts paid to lenders and third parties in connection with obtaining debt financing. These costs are amortized (and included in interest expense) over the term of the related debt agreements, which range from 5 to 6 years. Lender costs are reflected as a reduction in the carrying value of the debt (debt discount), and third party costs are recorded as deferred financing costs and included in other assets. The net carrying value of debt discount and deferred financing costs at December 31, 2011 were $3,366,021 and $271,976, respectively. The net carrying value of debt discount and deferred financing costs at December 31, 2010 were $4,529,051 and $374,039, respectively. Amortization of debt issuance costs and debt discount included in interest expense for the years ended December 31, 2011 and 2010 was $1,265,092 and $1,884,632, respectively.

Revenue Recognition

The Company records revenue when title and risk of loss pass to the customer (generally upon delivery), the sale price is fixed or determinable, delivery has occurred and collection is reasonably assured. The Company offers its customers promotional programs designed to incent increased sales and build better commercial relationships. Promotional programs are predominantly designed as rebate arrangements based upon levels of sales over specified time periods. These programs are treated as a reduction of sales at the time the sale is recognized. The Company accounts for such programs by establishing rebates based upon its customers’ progress towards achieving specified levels of sales.

During the duration of the Transition Services Agreement (“TSA”) with Becton, Dickinson and Company (“BD”) discussed in Note 3, and as of December 31, 2010, the Company had not yet established direct arrangements with end customers regarding transfers of ownership and pricing, therefore did not recognize sales at the point of delivery. Rather the Company recognized sales when collections on accounts were remitted by BD. The Company deferred $3,944,440 in net sales, $2,191,660 in cost of sales, and $229,534 in other direct expenses for delivered products as of December 31, 2010 which were recognized during the year ended December 31, 2011.

Shipping and Handling Costs

The Company’s invoices include amounts for shipping and handling costs including postage. The Company recognizes these billings as revenue and includes the associated costs in cost of goods sold.

Fair Value of Financial Instruments

The Company’s financial instruments include cash, accounts receivable, accounts payable, accrued liabilities and long-term debt. As a result of the short-term nature of the cash, accounts receivable, accounts payable and accrued liabilities, the carrying value of these items approximates fair value.

The carrying value of long-term debt approximates estimated fair value. The interest rates on long-term debt are variable rates and the interest rates associated with fixed rate debt approximate market rates for similar debt.

Concentration of Credit Risk

The Company’s top two customers accounted for approximately 39% and 20% of consolidated gross sales for the years ended December 31, 2011 and 2010, respectively, and approximately 25% and 7% of accounts receivable as of December 31, 2011 and 2010, respectively.

Aspen Surgical Products Holding, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2011 and 2010

Advertising Costs

Advertising costs are expensed as incurred. Advertising costs were approximately $660,000 and $508,000, respectively, for the years ended December 31, 2011 and 2010.

Income Taxes

Income taxes are accounted for using the asset and liability method that requires the recognition of deferred tax assets and liabilities based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Valuation allowances are provided if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as well as tax-related interest and penalties as a component of income tax expense.

Stock Options

The Company accounts for stock options in accordance with ASC 718, Compensation-Stock Compensation. The Company recognizes the cost of all share-based awards on a straight-line basis over the vesting period of the award based on the fair value of the stock-based compensation award on the date of grant.

The stock based compensation recognized by the Company during the years ended December 31, 2011 and 2010 were $369,771 and $566,129, respectively, and is included in selling, general and administrative expenses.

Recent Accounting Pronouncements

In September 2011, the Financial Accounting Standards Board (FASB) issued authoritative guidance requiring entities to present net income and other comprehensive income in either a single continuous statement or in two separate, but consecutive, statements of net income and other comprehensive income. In December 2011, the FASB issued an amendment to this authoritative guidance which indefinitely deferred the requirement that reclassification adjustments from accumulated other comprehensive income to be measured and presented by income statement line item in net income and also in other comprehensive income. This guidance is effective for fiscal years beginning after December 15, 2011 for non-public entities with early adoption permitted and full retrospective application required. The Company does not expect a significant financial statement impact relating to the adoption of this guidance.

Subsequent Events

The Company has evaluated the impact of subsequent events through April 27, 2012 the date the consolidated financial statements were made available to be issued.

3.	Acquisitions

2010 Acquisitions

Two separate acquisitions occurred in 2010. These included certain of Medtronic Xomed, Inc.’s Merocel® ophthalmic fluid management products and the Bard-ParkerTM surgical blades and scalpels business from Becton, Dickinson and Company.

Merocel® Ophthalmic Fluid Management Product Line

On April 30, 2010, the Company acquired machinery, equipment and certain intangible assets related to Medtronic Xomed, Inc’s (“Medtronic”) Merocel® ophthalmic fluid management product line (“Merocel®”). No liabilities were assumed in the purchase. This purchase was made through the Company’s newly formed US subsidiary, Turner Acquisition, LLC.

Aspen Surgical Products Holding, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2011 and 2010

The aggregate purchase price totaled $31,929,327. All consideration was paid in cash. In connection with the purchase of Merocel®, the Company incurred approximately $611,000 of acquisition related costs in 2010 that were expensed to business transaction expense.

The Company funded the purchase through obtaining $15,335,900 of Senior Debt and $6,611,786 in Subordinated Notes further discussed in Note 10 and the issuance of convertible notes having a combined principal value of $11,230,353 discussed in Note 9.

Goodwill and intangible assets recorded in the acquisition totaling $31,617,327 are amortizable for income tax purposes. No indefinite lived intangible assets were recorded in connection with the acquisition. The weighted average life of acquired intangible assets is 11 years and there is no estimated residual value.

The Company entered into a transition services agreement with Medtronic which requires Medtronic to have continuing involvement in the sales, order fulfillment and cash receipts processes and provide financial accounting and IT support to the Company in exchange for a monthly service fee. Under the terms of the transition services agreement, Medtronic was required on a monthly basis to remit to the Company the net income of the purchased product line net of service fees.

During 2010, the Company transferred its interests in Turner Acquisition, LLC in a transaction with an entity under common control discussed in Note 4.

Bard-ParkerTM Surgical Blades and Scalpels Business

On July 30, 2010, the Company acquired the Bard-ParkerTM surgical blades and scalpels business (“Blades”) from Becton, Dickinson and Company (“BD”). As part of the transaction, the Company acquired a facility in Las Piedras, Puerto Rico dedicated to the manufacturing of the Bard-ParkerTM line. This purchase was made through the Company’s existing US subsidiary, Aspen Surgical Products, Inc through a newly formed Puerto Rican subsidiary, Aspen Surgical Puerto Rico Corporation.

The Company funded the purchase through obtaining $31,000,000 of Senior Debt and $3,000,000 in Subordinated Notes further discussed in Note 10 and a stock issuance to existing shareholders. The Company issued 5,986 shares with a par value of $.01 for a total of $25,132,466. The shares were issued to three of the existing owners. Additionally, the Company received $36,700,000 in proceeds from the transfer of certain assets to an entity under common control further discussed in Note 4.

The aggregate purchase price was $89,843,070. All consideration was paid in cash. In connection with the purchase of Blades, the Company incurred approximately $2,012,000 of acquisition related costs in 2010 that were expensed to business transaction expense.

Goodwill and intangible assets recorded in the acquisition totaling $55,162,935 are amortizable for income tax purposes. No indefinite lived intangible assets were recorded in connection with the acquisition. The weighted average life of acquired intangible assets is 11 years and there is no estimated residual value.

Aspen Surgical Products Holding, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2011 and 2010

The Company had a transition services agreement with BD which required BD to have continuing involvement in the sales, order fulfillment and cash receipts processes, provide financial accounting, IT and human resource support and provide product quality documentation to the Company in exchange for a monthly service fee. Under the terms of the transition services agreement, BD was required on a monthly basis to remit to the Company the net profits of the Blades business net of cash payments for operations made by BD on behalf of the Company net of the service fee. Total service fees incurred and paid by the Company under this arrangement during the years ended December 31, 2011 and 2010 were $271,997 and $692,936, respectively.

These acquisitions were accounted for under the purchase method, in accordance with ASC 805, Business Combinations. The results of the businesses have been consolidated from the date of their acquisition. The purchase prices were allocated based on estimated fair values at the date of acquisition determined through management analysis with the assistance of third party valuation firms.

	Merocel®		Blades		Total

Assets acquired
Inventory	$	-	$	12,807,976	$	12,807,976
Property and equipment		312,000		21,872,159		22,184,159
Goodwill		20,090,327		20,862,935		40,953,262
Customer relationships		10,800,000		14,800,000		25,600,000
Tradenames		727,000		14,200,000		14,927,000
Proprietary technology and patents		-		5,300,000		5,300,000
Total purchase price	$	31,929,327	$	89,843,070	$	121,772,397

Inventories that were acquired in the Bard-ParkerTM acquisition were valued at fair value and accordingly included a step-up in value of $3,641,859 from historical cost basis which was expensed during 2010 when the inventory was sold.

4.	Common Control Transactions

Ultracell Medical Technologies

On July 30, 2010, the Company transferred its interests in Ultracell Medical Technologies, Inc. and Medical One, Inc. (“Ultracell”), a manufacturer of disposable medical supply products, to Beaver-Vistec International, Inc. (“BVI”), for $5,000,000 in cash, in a transaction with an entity under common control.

The difference in the carrying value of the assets and liabilities of Ultracell transferred to BVI and the consideration received was recorded as a capital contribution to the Company. The results of operations of Ultracell are included in the Company’s consolidated results of operations through July 30, 2010 as discontinued operations, net of income taxes as discussed below.

Aspen Surgical Products Holding, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2011 and 2010

The Company had a transition services agreement with BVI which requires the Company to have continuing involvement in the sales, order-taking, order fulfillment, and cash receipts processes of Ultracell until May 1, 2011 in exchange for a monthly service fee. Total service fees earned by the Company under this arrangement during the years ended December 31, 2011 and 2010 were $250,000 and $125,000, respectively, of which $0 and $25,000 were outstanding at December 31, 2011 and December 31, 2010, respectively. The transition services agreement with BVI ended during the year ended December 31, 2011 at which time the Company sold all remaining Ultracell inventories to BVI. At December 31, 2011, the Company had an outstanding receivable of $1,680,786 from BVI related to the sale of these inventories which is included in the Company’s Consolidated Balance Sheet.

Merocel® Ophthalmic Fluid Management Product Line

On July 30, 2010, the Company transferred its interests in Turner Acquisition, LLC (“Turner”), which had acquired the rights to manufacture and distribute the Merocel® Ophthalmic Fluid Management Product Line, to Beaver-Vistec International, Inc. (“BVI”), for $31,700,000 in cash, in a transaction with an entity under common control.

The difference in the carrying value of the assets and liabilities of Turner transferred to BVI and the consideration received was recorded as a capital distribution by the Company. The results of operations of Turner are included in the Company’s consolidated results of operations through July 30, 2010 as discontinued operations, net of income taxes as discussed below.

The Company also transferred to BVI its rights under the transition services agreement with Medtronic discussed in Note 3. BVI then entered into an arrangement with the Company which allowed the Company to benefit from the transition services agreement with Medtronic in relation to certain products in the Merocel® Ophthalmic Fluid Management Product Line that were not transferred to BVI. The Company paid BVI a service fee for these rights and the service fees paid to BVI during the year ended December 31, 2011 and 2010 were $89,491 and $76,231, respectively.

The assets and liabilities transferred to BVI in connection with these common control transactions are listed below.

	Ultracell		Merocel®			Total

Assets
Cash	$	-	$	1,928,214		$	1,928,214
Property and equipment, net		175,107		304,200			479,307
Goodwill		2,110,119		20,090,327			22,200,446
Intangible assets, net		1,364,218		11,062,500			12,426,718
Total assets		3,649,444		33,385,241			37,034,685
Liabilities
Payables, accrued expenses
and other current liabilities		-		868,878			868,878
Deferred tax liabilities		513,834		-			513,834
Total liabilities		513,834		868,878			1,382,712
Net assets		3,135,610		32,516,363			35,651,973
Consideration received		5,000,000		31,700,000			36,700,000
Capital contribution (distribution) resulting
from common control transaction	$	1,864,390	$	(816,363	)	$	1,048,027

Aspen Surgical Products Holding, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2011 and 2010

Upon completion of the transition services arrangement with BVI, the Company concluded that it ceased to have significant continuing involvement in the operations of the disposed components. The results of operations, net of income taxes, of the disposed components were therefore reclassified from continuing operations to discontinued operations in the Company’s consolidated financial statements for 2010. Summarized financial information for the disposed components are as follows:

	2010

Net Sales	$	6,770,386
Gross Profit		2,882,137
Income before income taxes		1,126,870

5.	Inventories

Inventories at December 31, 2011 and 2010 were comprised of the following:

	2011			2010

Finished goods	$	11,051,208		$	12,855,777
Raw materials		8,012,159			6,865,758
Work in progress		2,584,375			1,959,958
Less: Excess and obsolescence reserve		(952,562	)		(1,406,346	)
Inventories, net	$	20,695,180		$	20,275,147

6.	Property, Plant and Equipment

The cost basis and estimated useful lives of property plant, and equipment consist of the following at December 31, 2011 and 2010:

							Estimated
							Useful Life
	2011			2010			(Years)

Land	$	3,300,000		$	3,300,000
Building and leasehold improvements		12,537,815			9,995,547		5-20
Machinery and equipment		17,395,149			16,589,999		5-10
Computer hardware and software		2,110,242			1,678,371		3-5
Furniture and fixtures		502,501			482,673		7
Office equipment		71,162			38,023		7
Construction in progress		4,567,728			3,503,348
		40,484,597			35,587,961
Less: Accumulated depreciation		(9,782,062	)		(6,494,278	)
Property, plant, and equipment, net	$	30,702,535		$	29,093,683

Depreciation expense for the years ended December 31, 2011 and 2010 was $3,898,316 and $2,488,407, respectively.

Aspen Surgical Products Holding, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2011 and 2010

7.	Goodwill and Intangible Assets

At December 31, 2011 and 2010, intangible assets consist of the following:

							Estimated
							Useful Life
	2011			2010			(Years)

Customer relationships	$	58,484,975		$	58,495,591		8-20
Trade names		22,600,749			22,602,917		10-30
Proprietary technology		3,142,584			3,143,402		10
Patents		3,430,000			3,430,000		8-9
Noncompetition agreement		1,197,653			1,197,653		2-5
		88,855,961			88,869,563
Less: Accumulated amortization		(22,541,623	)		(15,161,932	)
	$	66,314,338		$	73,707,631

The Company’s amortization expense of intangible assets for the years ended December 31, 2011 and 2010 were $7,434,914 and $5,940,792, respectively. The Company estimates annual amortization expense of intangible assets to be approximately $7.3 million in 2012, $7.1 million in 2013 and 2014 and $6.9 million in 2015 and 2016 related to these intangibles.

Changes in the carrying amount of goodwill for the years ended December 31, 2011 and 2010 were as follows:

December 31, 2009	$	47,234,592
Acquisitions, Note 3		40,953,262
Common control transactions, Note 4		(22,200,446	)
Foreign currency translation		(69,102	)
December 31, 2010		65,918,306
Foreign currency translation		(32,836	)
December 31, 2011	$	65,885,470

8.	Accrued Expenses

Accrued expenses at December 31, 2011 and 2010 were comprised of the following:

	2011		2010

Accrued compensation	$	3,642,947	$	2,361,309
Accrued rebates		641,598		172,230
Accrued construction in process		629,388		-
Accrued utilities		149,714		299,271
Other accrued expenses		1,327,118		1,207,012
Total accrued expenses	$	6,390,765	$	4,039,822

Aspen Surgical Products Holding, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2011 and 2010

9.	Subordinated Convertible Debt Instruments

During the year ended December 31, 2010, the Company issued $11,230,353 of subordinated convertible notes to five existing shareholders to finance the acquisition of Merocel® described in Note 3. The subordinated convertible notes bore interest at 3.00% and had a maturity of the earlier of October 29, 2016, the date of the sale of Turner, or upon a change in control of the Company. The subordinated convertible notes, together with accrued interest, were converted into common stock upon the transfer of the Company’s interests in Turner in the common control transaction described in Note 4.

10.	Debt Arrangements

Debt at December 31, 2011 and 2010 consists of the following:

	2011			2010

Working capital revolver; $10,000,000 available at
December 31, 2011 and 2010	$	-		$	-
Term loan; payable in quarterly installments ranging from
$1,075,000 to $2,150,000 through June 30, 2015, bearing
interest at variable rates		64,250,500			73,625,500
Subordinated notes with related party; bearing interest
payable quarterly at a fixed rate of 15%, 12% paid in cash
and 3% paid in kind, maturing July 30, 2016		38,098,459			37,119,314
		102,348,959			110,744,814
Less: Debt discount		(3,366,021	)		(4,529,051	)
		98,982,938			106,215,763
Less: Current maturities		(7,525,000	)		(5,375,000	)
	$	91,457,938		$	100,840,763

The Company maintains a credit facility (“Credit Facility”) that has been amended to include a term loan (“Term Loan”), a $10 million revolving line of credit (“Revolver”), and provides for $3 million of availability under letters of credit. The maturity date of the Term Loan and Revolver is July 30, 2015.

The interest rate for amounts borrowed under Revolver and Term Loan, selected by the Company, is either the bank borrowing rate in effect from time to time, plus an applicable margin, or LIBOR, plus an applicable margin. The applicable margin for Revolver and Term Loan borrowings is 4.25% for bank rate borrowings and 5.25% for LIBOR based borrowings. The Company’s interest rate on the Term Loan was 6.75% as of December 31, 2011 and 2010.

Borrowings under the Credit Facility are collateralized by substantially all assets of the Company, subject to permitted liens. The Credit Facility provides for optional prepayments of principal. The Company made optional prepayments of $4,000,000 and $10,612,500 during 2011 and 2010, respectively.

The Credit Facility provides for mandatory prepayment based on excess cash flows as defined in the amended agreement. There were no excess cash flows, as defined, for 2011 or 2010.

Aspen Surgical Products Holding, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2011 and 2010

The Subordinated Notes were issued by a subordinated debt financing fund, which is affiliated through common ownership with RoundTable.

In February 2009, the Company entered into a third Subordinated Note for $14,500,000 through an amended and restated Subordinated Note agreement. Fees associated with this amended and restated Subordinated Note agreement paid to the related party were $290,000. The amended and restated agreement also restated the financial covenants.

In April 2010, in conjunction with the purchase of Merocel® (Note 3), the Company entered into a fourth Subordinated Note for $6,746,720 through an amended and restated Subordinated Note agreement. Fees associated with this amended and restated Subordinated Note agreement paid to the related party were approximately $135,000.

In July 2010, in conjunction with the purchase of Blades (Note 3), the Company entered into a fifth Subordinated Note for $3,000,000 through an amended and restated Subordinated Note agreement. Fees associated with this amended and restated Subordinated Note agreement paid to the related party were $60,000.

The Subordinated Notes do not allow for their prepayment prior to the maturity date except as discussed below. The Company is required to treat interest of 3% as paid in kind, resulting in an increase to the face value of the debt. During 2011 and 2010, interest of $1,125,545 and $880,987 has been added to the carrying value of the debt respectively. The Company is required to make a principal payment on the Subordinated Notes each year following the fifth anniversary of each Subordinated Note in order for the Subordinated Notes to not constitute applicable high-yield debt obligations (“AHYDO”). These principal payments are permitted by the Company’s Credit Facility. Subordinated Note principal payments made during the years ended December 31, 2011 and 2010, were $146,400 and $0, respectively.

The Credit Facility and the Subordinated Notes contain, among other provisions, certain restrictive covenants as defined in the agreements, including maintenance of a minimum fixed charge coverage ratio, limitation on maximum total debt to EBITDA ratio, limitation on maximum senior leverage ratio, and limitation on capital expenditures and restriction on paying dividends and management fees. At December 31, 2011, the Company was in compliance with the covenants contained in the Credit Facility and the Subordinated Notes.

On April 29, 2010, in connection with the acquisition of Merocel® (Note 3), the Company entered into a Consent and Seventh Amendment to the Credit Facility and an amendment to the Subordinated Notes (“April Amendments”). The Company obtained $15,335,900 of additional Senior Debt under the Consent and Seventh Amendment to the Credit Facility. As part of the Consent and Seventh Amendment, the lenders consented to the formulation of Turner Acquisition Corp, LLC, and the addition of $6,746,720 of Subordinated Notes to be used for purposes of paying a portion of the purchase price for Merocel®. The term loan repayment schedule and financial ratio requirements were also modified.

Lender costs of approximately $898,000 were recorded as a reduction in the carrying value of the debt and third party costs of approximately $41,000 were capitalized as deferred financing costs and included in other assets. In addition, the Company incurred approximately $362,000 of interest expense related to the write off of debt issuance and deferred financing costs upon debt modification.

Aspen Surgical Products Holding, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2011 and 2010

On July 29, 2010, in connection with the acquisition of Blades (Note 3), the Company entered into an Amended and Restated Credit Agreement and an Amended and Restated Subordination Agreement (“July Amendments”). The Company obtained $31,000,000 of additional Senior Debt under the Amended and Restated Credit Agreement. As part of the Amended and Restated Credit Facility, the lenders consented to the addition of $3,000,000 of Subordinated Notes to be used for purposes of paying a portion of the purchase price for Blades. The term loan repayment schedule and financial ratio requirement were also modified.

Lender costs of approximately $3,557,000 were recorded as a reduction in the carrying value of the debt and third party costs of approximately $96,000 were capitalized as deferred financing costs and included in other assets.

Outstanding debt as of December 31, 2011 matures as follows:

2012	$	7,525,000
2013		8,600,000
2014		8,600,000
2015		39,525,500
2016		38,098,462
	$	102,348,962

11.	Commitments and Contingencies

Operating Lease Commitments

The Company leases office and warehouse space in Caledonia, Michigan and Redditch, U.K. and certain other equipment under noncancelable operating leases.

During 2011, the Company extended the initial terms on two of its leases in Michigan for four year periods, each extending until 2017. Each lease has the option to renew, one for an additional five years and the other for two additional five year periods, adjusted annually for cost-of-living increases. Under the leasing arrangements, the Company pays property taxes, insurance and maintenance costs.

During 2011, the Company entered into a new 18 month lease for warehouse space. The lease does not have the option to renew. Under the leasing arrangements, the Company pays property taxes, insurance and maintenance costs.

There is one lease on office and warehouse space in the U.K. The lease extends over a ten year period with an option to terminate the lease after five years during 2012. Under the leasing arrangements, the Company pays VAT taxes, insurance and maintenance costs.

For the years ended December 31, 2011 and 2010, total rent expense under operating leases was approximately $1,123,057 and $1,038,378, respectively.

Aspen Surgical Products Holding, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2011 and 2010

Future minimum lease payments under noncancelable operating leases at December 31, 2011 are as follows:

Years Ending December 31,
2012	$	1,336,910
2013		1,259,861
2014		1,177,768
2015		1,138,827
2016		1,162,487
2017 and thereafter		373,193
	$	6,479,046

Litigation

The Company is periodically involved in claims asserted in the normal course of its business. Management believes that losses, if any, resulting from the resolution of these claims will not have a material adverse impact on the Company’s financial position, results of operations or its cash flows.

12.	Income Taxes

Income (loss) from operations was generated from the following:

	2011		2010

United States	$	6,952,784	$	(3,992,542	)
United Kingdom		2,254,678		1,714,941
Puerto Rico		2,510,332		120,633
	$	11,717,794	$	(2,156,968	)

The provision for income taxes for the years ended December 31, 2011 and 2010 are as follows:

	2011			2010

Current
Federal	$	2,799,207		$	1,411,880
State		161,061			38,647
Foreign		1,238,136			536,991
		4,198,404			1,987,518
Deferred
Federal		(722,723	)		(2,367,633	)
State		(81,540	)		(243,727	)
Foreign		(57,527	)		(55,925	)
		(746,736	)		(2,667,285	)
	$	3,451,668		$	(679,767	)

Aspen Surgical Products Holding, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2011 and 2010

A reconciliation between the federal statutory tax rate and the effective tax rate is as follows:

	2011			2010

Computed statutory tax provision	$	3,984,050		$	(733,369	)
Increase (decrease) resulting from
Net gain on common control transactions		-			435,081
Puerto Rico deemed dividend, net of foreign tax credit		269,944			146,792
Section 199 deduction		(329,190	)		(154,853	)
Foreign rate differential		(864,678	)		(139,086	)
Puerto Rico excise tax		485,373			-
State taxes and other differences		(93,831	)		(234,332	)
Provision (benefit) for income taxes	$	3,451,668		$	(679,767	)

The Company had foreign net operating loss carryforwards of $0 and $319,987 as of December 31, 2011 and 2010, respectively.

Components of the net deferred tax assets at December 31, 2011 and 2010 are as follows:

	2011		2010

Deferred income tax assets
Current
Receivables	$	314,006	$	107,897
Inventory		283,693		557,637
Accrued liabilities		655,155		539,499
		1,252,854		1,205,033
Noncurrent
Acquisition expenses		573,941		668,256
Stock options		54,191		71,513
Other		285,147		69,872
		913,279		809,641
Total deferred income tax assets	$	2,166,133	$	2,014,674
Deferred income tax liabilities
Current
Prepaid expenses	$	189,467	$	191,812
		189,467		191,812
Noncurrent
Intangible assets		9,721,651		10,539,936
Unrealized gain/loss		291,198		412,504
Fixed assets		1,527,504		1,180,845
		11,540,353		12,133,285
Total deferred income tax liabilities	$	11,729,820	$	12,325,097

Aspen Surgical Products Holding, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2011 and 2010

13.	Stock Option Plan

During 2007, the Company’s Board of Directors authorized a stock option plan (the “Plan”). Under the Plan, options to purchase shares of the Company’s Common Stock may be granted to certain employees and directors with an exercise price equal to the estimated fair market value of the Company’s Common Stock as determined by the Board of Directors. The Plan shall continue in effect from January 1, 2007, until the earlier of the Plan’s termination by the Board of Directors of the Company or the date on which all shares of Common Stock available for issuance under the Plan have been issued and all restrictions on such shares under the terms of the Plan have lapsed. The Company has reserved 1,111 shares of Common Stock for issuance under the Plan. All options granted have an exercise price which approximated the estimated fair value of the underlying stock at the date of the grant, a term of ten years and vest on a pro rata basis over periods of three to five years, with a provision for acceleration of vesting if the Company is sold.

Stock option activity for the years ended December 31, 2010 and December 31, 2011 is as follows:

				Weighted -
				Average
				Exercise
	Shares			Price

Outstanding on December 31, 2009		641		$	3,051
Granted		283			4,186
Exercised		(214	)		3,089
Forfeited		(49	)		3,169
Outstanding on December 31, 2010		661			3,515
Granted		29			5,335
Exercised		(186	)		3,215
Forfeited		(11	)		3,558
Outstanding on December 31, 2011		493		$	3,735
Exercisable as of December 31, 2011		166		$	3,129

The following table summarizes information about stock options outstanding at December 31, 2011:

	Options Outstanding					Options Vested and Exercisable
	Exercise Price	Shares	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price		Exercise Price		Shares	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price

$	2,438	84	4.7	$	2,438	$	2,438	84	4.7	$	2,438

	3,683	95	6.3		3,683		3,683	42	6.3		3,683

	3,499	88	7.6		3,499		3,499	11	7.7		3,499

	4,198	154	8.0		4,198		4,198	26	5.0		4,198

	4,146	53	8.0		4,146		4,146	3	6.2		4,146

	5,934	19	8.0		5,934		-	-	-		-

Aspen Surgical Products Holding, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2011 and 2010

The fair value of option issuances during the periods ended December 31, 2011 and 2010, are estimated on the date of grant based on the Black-Scholes option pricing model assuming, among other things, the following: a risk free interest rate ranging from 0.38% to 4.63% based on the U.S. Treasury yield rates, no dividend yield, a forfeiture rate of 6.8% based on historical forfeitures, expected volatility of 60.0% based on volatilities of comparable peers, and an expected life ranging from 3.00 to 4.00 years. Exercise prices for the awards were set equal to the estimated fair value of the Company’s common stock on the date of grant. The weighted average fair value of the options granted during the year was $2,140 and $1,962 per share in 2011 and 2010, respectively. Unrecognized compensation expense totaling $420,881 at December 31, 2011 has a weighted average period of 2.3 years over which it will be recognized.

14.	Defined Contribution Savings Plans

The Company maintains a defined contribution savings plan under Section 401(k) of the Internal Revenue Code. This plan covers substantially all domestic employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. Company contributions to the plan may be made at the discretion of the Board of Directors. For the years ended December 31, 2011 and 2010, the Company recorded expense of $152,370 and $134,758, respectively, related to the contributions.

The Company maintains a defined contribution plan for substantially all employees in the U.K. For the years ended December 31, 2011 and 2010, the Company recorded expense of approximately $216,506 and $225,427 related to these contributions.

15.	Related Party Transactions

The Company leases warehouse space from an entity in which a stockholder of the Company is an owner. The Company incurred rent expense of $383,868 and $336,321 for the years ended December 31, 2011 and 2010, respectively, under this arrangement.

The general partner of RoundTable provides office space, secretarial services, sales support and other administrative services to the Company. Fees paid for such services were $378,907 and $388,723 for the years ended December 31, 2011 and 2010, respectively. These amounts are included in selling, general and administrative expenses in the consolidated statements of operations.

As noted in Note 10 above, the Company holds Subordinated Notes that were issued by a subordinated debt financing fund which is affiliated through common ownership with RoundTable.

As noted in Note 4, the Company transferred its interests in certain wholly-owned subsidiaries to entities under common control during the year ended December 31, 2010.

EX-99.3 4 ex99_3.htm EXHIBIT 99.3 ex99_3.htm

Exhibit 99.3

Aspen Surgical Products
Holding, Inc. and Subsidiaries

Interim Financial Statements

Aspen Surgical Products Holding, Inc. and Subsidiaries

Index

	Pages

Condensed Consolidated Balance Sheets (Unaudited) at June 30, 2012 and December 31, 2011	3

Condensed Consolidated Statements of Operations (Unaudited) for the Six Month Periods Ended June 30, 2012 and 2011	4

Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Month Periods Ended June 30, 2012 and 2011	5

Notes to Condensed Consolidated Financial Statements (Unaudited)	6-8

Aspen Surgical Products Holding, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(Dollars in millions)

	June 30, 2012		December 31, 2011

Assets
Current assets
Cash	$	2.8	$	2.6
Accounts receivable, net of allowance for doubtful
accounts of $0.7 and $0.3		16.8		15.1
Inventories		21.3		20.7
Prepaid expenses and other current assets		1.4		1.3
Income taxes refundable		1.0		1.7
Deferred income tax asset		1.2		1.1
Total current assets		44.5		42.5
Property, plant and equipment, net		30.6		30.7
Goodwill		65.9		65.9
Intangible assets, net		62.7		66.3
Other assets		0.3		0.3
Total assets	$	204.0	$	205.7
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	6.1	$	5.0
Accrued expenses		4.0		6.4
Current maturities of long-term debt		8.6		7.5
Total current liabilities		18.7		18.9
Long-term liabilities
Long-term obligations, less current maturities		87.7		91.5
Deferred income tax liabilities		10.2		10.6
Total long-term liabilities		97.9		102.1
Total liabilities		116.6		121.0
Stockholders’ equity
Additional paid-in capital		73.8		73.5
Accumulated other comprehensive income-foreign currency
translation adjustment		0.4		0.3
Retained earnings		13.2		10.9
Total stockholders’ equity		87.4		84.7
Total liabilities and stockholders’ equity	$	204.0	$	205.7

Aspen Surgical Products Holding, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

(Dollars in millions)

	Six Months Ended June 30
	2012		2011

Net sales	$	57.4	$	60.1
Cost of sales		30.3		31.1
Gross profit		27.1		29.0
Selling, general and administrative expenses		18.3		16.1
Operating profit		8.8		12.9
Interest expense, net		5.5		5.9
Foreign currency transaction gain		0.1		0.4
Income before income taxes		3.4		7.4
Income tax expense		1.1		2.3

Net income	$	2.3	$	5.1

Aspen Surgical Products Holding, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in millions)

	Six Months Ended June 30
	2012			2011

Operating activities
Net income	$	2.3		$	5.1
Adjustments to reconcile net income to net cash provided by
operating activities:
Foreign currency gain on intercompany loans		(0.1	)		(0.4	)
Depreciation and amortization		6.4			6.5
Paid in kind interest		0.5			0.6
Stock based compensation expense related to stock options		0.1			0.2
Gain on sale of assets		(0.2	)		-
Deferred income taxes		(0.5	)		(0.1	)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(1.6	)		(3.9	)
Inventories		(0.6	)		0.7
Prepaid expenses and other assets		0.6			(3.0	)
Accounts payable		1.1			0.4
Accrued expenses		(2.6	)		2.3
Net cash provided by operating activities		5.4			8.4
Investing activities
Purchases of property, plant and equipment		(1.8	)		(2.5	)
Net cash used in investing activities		(1.8	)		(2.5	)
Financing activities
Proceeds from exercise of stock options		0.2			0.2
Payments on term loan		(3.5	)		(2.2	)
Payments on senior secured subordinated note		(0.1	)		-
Net cash used in by financing activities		(3.4	)		(2.0	)
Effect of exchange rate changes on cash		-			-
Net increase in cash		0.2			3.9
Cash
Beginning of period		2.6			2.2
End of period	$	2.8		$	6.1

Aspen Surgical Products Holding, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in millions)

1.	Description of Business

Aspen Surgical Products Holding, Inc. and its subsidiaries (collectively, the “Company”) is 81% owned by RoundTable Healthcare Partners II, LP, RoundTable Healthcare Investors II, LP (collectively referred to as “RoundTable”) and 19% owned by fourteen individuals including employees and a former owner of Aspen Surgical Products, Inc. The Company was formed in 2006 to purchase Aspen Surgical Products, Inc. and is engaged in the manufacturing and distribution of both OEM and branded disposable and non-disposable medical products for surgical and general healthcare applications.

2.	Summary of Significant Accounting Policies

Principles of Consolidation

Consolidated financial statements include the accounts of Aspen Surgical Products Holding, Inc. and its wholly owned subsidiaries, Aspen Surgical Products, Inc., Aspen Medical Europe Limited (U.K.), Medical One, Inc., Colby Manufacturing Corporation, and Aspen Surgical Puerto Rico Corporation. All significant intercompany transactions have been eliminated in consolidation.

Use of Estimates

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the amount invoiced to customers. The Company’s payment terms do not include charging interest on past due amounts. The allowances for doubtful accounts are recorded based upon the Company’s best estimate of credit losses and other uncollectible amounts included in accounts receivable. The allowance is determined based upon historical performance and current available customer information, including the effects of a new enterprise resource planning system implementation in early 2012. Account balances are charged off against the allowance when it is deemed that the receivables will not be collected.

Revenue Recognition

During the duration of the Transition Services Agreement (“TSA”) with Becton, Dickinson and Company (“BD”) associated with the acquisition of the Bard-Parker business in July 2010 and as of December 31, 2010, the Company had not yet established direct arrangements with end customers regarding transfers of ownership and pricing, and therefore did not recognize sales at the point of delivery. Rather the Company recognized sales when collections on accounts were remitted by BD. The Company deferred $3.9 million in net sales, $2.2 million in cost of sales, and $0.2 million in other direct expenses for delivered products as of December 31, 2010 which were recognized during the first six months of calendar year 2011.

Income Taxes

3.	Supplementary Balance Sheet Information

	June 30, 2012		December 31, 2011

Inventories:
Finished products	$	11.0	$	11.1
Raw materials and work in process		10.3		9.6
Total inventory	$	21.3	$	20.7

Accumulated depreciation of property, plant and equipment	$	11.5	$	9.8

Accumulated amortization of software and other intangible assets	$	26.3	$	22.5

4.	Contingencies

Litigation

5.	Subsequent Events

On July 23, 2012, the stockholders of the Company entered into a definitive agreement to sell, and simultaneously sold, the entire equity interests of the Company to Hill-Rom, Inc., a wholly-owned subsidiary of Hill-Rom Holdings, Inc. for approximately $402.2 million in cash, including cash acquired. The transaction is subject to customary working capital adjustments following the closing.

EX-99.4 5 ex99_4.htm EXHIBIT 99.4 ex99_4.htm

Exhibit 99.4

Unaudited pro forma condensed combined financial data of Hill-Rom and Aspen

The following unaudited pro forma condensed combined financial data is based upon the historical audited consolidated financial data of Hill-Rom Holdings, Inc. and its consolidated subsidiaries (“Hill-Rom”, “we” or “our”) and Aspen Surgical Products Holding, Inc. and its consolidated subsidiaries (“Aspen”) and has been prepared to reflect our previously announced acquisition of Aspen (the “Aspen Acquisition”), the entry into a new credit facility subsequent to the Aspen Acquisition (the “New Credit Facility”) and borrowings under the New Credit Facility, collectively referred to herein as the “Transactions.” The unaudited pro forma condensed combined balance sheet is presented as if the Transactions had occurred on June 30, 2012. The unaudited pro forma condensed combined statements of operations for the year ended September 30, 2011 and the nine months ended June 30, 2012 were prepared assuming the Transactions occurred on October 1, 2010. The historical consolidated financial data has been adjusted to give effect to estimated pro forma events that are (1) directly attributable to the Transactions, (2) factually supportable, and (3) with respect to the statement of operations, expected to have a continuing impact on the combined results of operations. The historical consolidated financial statements of Aspen have been adjusted to reflect certain reclassifications to conform with our financial statement presentation.

The following unaudited pro forma condensed combined financial data should be read in conjunction with Hill-Rom’s consolidated financial statements and related notes previously filed with the SEC and Aspen’s consolidated financial statements and related notes filed along with this data. The following unaudited pro forma condensed combined financial data has been prepared for illustrative purposes only and is not necessarily indicative of the consolidated financial position or results of operations in future periods or the results that actually would have been realized had Hill-Rom and Aspen been a combined company during the periods specified. The following unaudited pro forma condensed combined financial data has been prepared using the acquisition method of accounting under generally accepted accounting principles in the United States (“GAAP”), which is subject to change and interpretation. For purposes of this unaudited pro forma condensed combined financial data, the cash consideration of $402.2 million (the “Acquisition Consideration”) has been preliminarily allocated to the tangible and intangible assets acquired and the liabilities being assumed based upon various estimates of fair value. The Acquisition Consideration will be allocated among the fair values of the assets acquired and liabilities assumed based upon their estimated fair values as of the date of the Aspen Acquisition. Any excess of the Acquisition Consideration over the fair value of Aspen identifiable net assets will be recorded as goodwill. The final allocation is dependent upon the completion of various asset valuations and contractual adjustments associated with final determined working capital and cash balances at the date of acquisition. The actual amounts recorded at the completion of the Aspen Acquisition purchase price allocation may differ materially from the information presented in the accompanying unaudited pro forma condensed combined financial data and those differences could have a material impact on the unaudited pro forma condensed combined financial data and the combined company’s future results of operations and financial performance.

Hill-Rom and Aspen

Unaudited Pro Forma Condensed Combined Balance Sheet

(Dollars in millions)

	June 30, 2012

	Historic					Pro Forma Adjustments
	Hill-Rom			Aspen		Reclassifications				Acquisition and Financing (d)			Allocation of Acquisition Consideration				Pro Forma Combined
ASSETS
Current Assets
Cash and cash equivalents	$	220.0		$	2.8	$	-			$	305.0		$	-			$	77.8
											(450.0	)
Trade accounts receivable, net of allowances		351.0			16.8		-				-			(0.7	)	(f)		367.1
Inventories		106.7			21.3		(1.1	)	(a)		-			6.1		(f)		133.0
Deferred income taxes		45.0			1.2		-				-			(1.0	)	(g)		45.2
Other current assets		36.2			2.4		1.1		(a)		-			0.7		(f)		40.4
Total current assets		758.9			44.5		-				(145.0	)		5.1				663.5

Property, plant and equipment, net		227.2			30.6		(2.5	)	(b)		-			(3.2	)	(e)		252.1
Investments and investment securities		7.3			-		-				-			-				7.3
Goodwill		121.2			65.9		-				-			(65.9	)	(e)		336.3
														215.1		(e)
Software and other intangible assets, net		127.9			62.7		2.5		(b)		-			(62.7	)	(e)		298.2
														167.8		(e)
Deferred income taxes		34.5			-		-				-			0.2		(g)		34.7
Investment in Aspen		-			-		-				402.2			(402.2	)	(f)		-
Other assets		23.4			0.3		-				2.6			(0.3	)	(f)		26.0
Total Assets	$	1,300.4		$	204.0	$	-			$	259.8		$	(146.1	)		$	1,618.1

LIABILITIES
Current Liabilities
Trade accounts payable	$	61.5		$	6.1	$	0.4		(c)	$	-		$	(0.1	)	(f)	$	67.9
Short-term borrowings		45.0			8.6		-				(45.0	)		(8.6	)	(h)		115.0
											115.0
Accrued compensation		68.9			-		1.5		(c)		-			0.3		(f)		70.7
Accrued product warranties		38.8			-		-				-			-				38.8
Other current liabilities		58.0			4.0		(1.9	)	(c)		(0.2	)		1.0		(f)		60.9
Total current liabilities		272.2			18.7		-				69.8			(7.4	)			353.3

Long-term debt		50.0			87.7		-				190.0			(87.7	)	(h)		240.0

Accrued pension and postretirement benefits		86.2			-		-				-			-				86.2
Deferred income taxes		38.7			10.2		-				-			36.4		(g)		85.3
Other long-term liabilities		42.3			-		-				-			-				42.3
Total Liabilities		489.4			116.6		-				259.8			(58.7	)			807.1

Commitments and Contingencies

SHAREHOLDERS' EQUITY
Common Stock		4.4			-		-				-			-				4.4
Additional paid-in-capital		115.2			73.8		-				-			(73.8	)	(h)		115.2
Retained earnings		1,368.8			13.2		-				-			(13.2	)	(h)		1,368.8
Accumulated other comprehensive loss		(85.6	)		0.4		-				-			(0.4	)	(h)		(85.6	)
Treasury stock, at cost		(591.8	)		-		-				-			-				(591.8	)
Total Shareholders' Equity		811.0			87.4		-				-			(87.4	)			811.0
Total Liabilities and Shareholders' Equity	$	1,300.4		$	204.0	$	-			$	259.8		$	(146.1	)		$	1,618.1

See Notes to Unaudited Pro Forma Condensed Combined Financial Data.

Hill-Rom and Aspen

Unaudited Pro Forma Condensed Combined Statement of Income

(Dollars in millions)

	Year Ended September 30, 2011

	Historic						Pro Forma Adjustments
	Hill-Rom			Aspen*			Acquisition and Financing				Allocation of Acquisition Consideration				Pro Forma Combined
Net Revenues
Capital sales	$	1,119.0		$	118.1		$	-			$	-			$	1,237.1
Rental revenues		472.7			-			-				-				472.7
Total revenues		1,591.7			118.1			-				-				1,709.8

Cost of Revenues
Cost of goods sold		606.8			61.4			-				0.1		(k)		668.3
Rental expenses		203.6			-			-				-				203.6
Total cost of revenues		810.4			61.4			-				0.1				871.9

Gross Profit		781.3			56.7			-				(0.1	)			837.9

Research and development expenses		63.8			-			-				-				63.8
Selling and administrative expenses		502.0			33.2			-				0.3		(k)		539.4
												(7.5	)	(l)
												11.4		(l)
Litigation charge		47.3			-			-				-				47.3
Special charges		1.4			-			-				-				1.4


Operating Profit		166.8			23.5			-				(4.3	)			186.0

Interest expense		(8.5	)		(11.8	)		13.1		(i)		-				(13.1	)
								(5.9	)	(i)
Investment income and other, net		1.4			-			-				-				1.4

Income Before Income Taxes		159.7			11.7			7.2				(4.3	)			174.3

Income tax expense		26.2			3.4			2.4		(m)		(2.3	)	(m)		29.7

Net Income		133.5			8.3			4.8				(2.0	)			144.6

Less: Net income attributable to noncontrolling interest		0.2			-			-				-				0.2

Net Income Attributable to Common Shareholders	$	133.3		$	8.3		$	4.8			$	(2.0	)		$	144.4

Net Income Attributable to Common Shareholders
per Common Share - Basic	$	2.11													$	2.29

Net Income Attributable to Common Shareholders
per Common Share - Diluted	$	2.09													$	2.26


Average Common Shares Outstanding - Basic (thousands)		63,164														63,164

Average Common Shares Outstanding - Diluted (thousands)		63,899														63,899

See Notes to Unaudited Pro Forma Condensed Combined Financial Data.

*Aspen's fiscal year ends on December 31 of each year. In calculating the unaudited pro forma condensed combined statement of income for our fiscal year ended September 30, 2011, we used the results of operations for Aspen for its fiscal year ended December 31, 2011 since the ending date for Aspen's fiscal year is within 93 days of the ending date of our fiscal year.

Hill-Rom and Aspen

Unaudited Pro Forma Condensed Combined Statement of Income (continued)

(Dollars in millions)

	Nine Months Ended June 30, 2012

	Historic						Pro Forma Adjustments
	Hill-Rom			Aspen*			Acquisition and Financing				Allocation of Acquisition Consideration				Pro Forma Combined
Net Revenues
Capital sales	$	868.1		$	85.9		$	-			$	-			$	954.0
Rental revenues		334.6			-			-				-				334.6
Total revenues		1,202.7			85.9			-				-				1,288.6

Cost of Revenues
Cost of goods sold		505.1			45.3			-				-		(k)		550.4
Rental expenses		144.0			-			-				-				144.0
Total cost of revenues		649.1			45.3			-				-				694.4

Gross Profit		553.6			40.6			-				-				594.2

Research and development expenses		48.2			-			-				-				48.2
Selling and administrative expenses		366.3			27.0			-				(0.9	)	(j)		395.4
												0.2		(k)
												(5.7	)	(l)
												8.5		(l)
Impairment of other intangibles		8.0			-			-				-				8.0
Special charges		9.7			-			-				-				9.7


Operating Profit		121.4			13.6			-				(2.1	)			132.9

Interest expense		(4.4	)		(8.4	)		9.3		(i)		-				(7.9	)
								(4.4	)	(i)
Investment income and other, net		1.6			-			-				-				1.6

Income Before Income Taxes		118.6			5.2			4.9				(2.1	)			126.6

Income tax expense		37.0			1.4			1.7		(m)		(1.3	)	(m)		38.8

Net Income	$	81.6		$	3.8		$	3.2			$	(0.8	)		$	87.8

Net Income Attributable to Common Shareholders
per Common Share - Basic	$	1.31													$	1.41

Net Income Attributable to Common Shareholders
per Common Share - Diluted	$	1.31													$	1.41


Average Common Shares Outstanding - Basic (thousands)		62,130														62,130

Average Common Shares Outstanding - Diluted (thousands)		62,423														62,423

See Notes to Unaudited Pro Forma Condensed Combined Financial Data.

*We calculated Aspen's financial results for nine months ended June 30, 2012 by adding the unaudited condensed statement of income of Aspen for the three months ended December 31, 2011 with the unaudited condensed statement of income of Aspen for the six months ended June 30, 2012.

Hill-Rom Holdings, Inc. and Subsidiaries

Notes to Unaudited Pro Forma Condensed Combined Financial Data

(Dollars in millions)

Note 1—Basis of presentation

The accompanying unaudited pro forma condensed combined financial data was prepared in accordance with the provisions of the authoritative guidance for business combinations using the acquisition method of accounting in which Hill-Rom acquired Aspen.

The accompanying unaudited pro forma condensed combined financial data presents the pro forma combined financial position and results of operations based upon the historical audited and unaudited financial statements of Hill-Rom and Aspen, after giving effect to the Transactions, which include the Aspen Acquisition, the New Credit Facility and borrowings under the New Credit Facility. The unaudited pro forma condensed combined financial data has been prepared for illustrative purposes only and does not reflect the cost of any integration activities or benefits from synergies that may be derived from any integration activities, nor does the unaudited pro forma condensed combined statement of consolidated income include the effects of any other items directly attributable to the Aspen Acquisition that are not expected to have a continuing impact on the combined results of operations.

The accompanying unaudited pro forma condensed combined balance sheet gives effect to the Transactions as if they had been consummated on June 30, 2012, and includes estimated pro forma adjustments for the preliminary valuations of assets acquired and liabilities assumed. These adjustments are subject to further revision as additional information becomes available. The unaudited pro forma condensed combined statements of consolidated income give effect to the Transactions as if they had been consummated on October 1, 2010.

The Historic section of the unaudited pro forma condensed combined statement of consolidated income as of September 30, 2011 represents the Hill-Rom year ended September 30, 2011 statement of consolidated income and the Aspen year ended December 31, 2011 statement of consolidated income, since the ending date for Aspen's fiscal year is within 93 days of the ending date of our fiscal year. The Historic section of the unaudited pro forma condensed combined statement of consolidated income for the nine months ended June 30, 2012, represents the Hill-Rom nine-month period ended June 30, 2012 unaudited statement of consolidated income and the combination of the Aspen unaudited statement of consolidated income for the three-month period ended December 31, 2011 and the six-month period ended June 30, 2012.

Note 2—Preliminary allocation of Acquisition Consideration

On July 23, 2012, we entered into, and simultaneously closed on, a Stock Purchase Agreement (the “Agreement”) with Aspen, providing for Hill-Rom’s acquisition of all of the equity interest of Aspen. The total value of the transaction was $400 million, plus cash acquired.

We funded the Aspen Acquisition through a combination of cash on hand and our revolving credit facility. See Note 3.

The following summarizes the preliminary fair value of assets acquired and liabilities assumed at the date of the acquisition.

	Aspen historical balances as of June 30, 2012			Reclassifications and fair value adjustments			Allocation of purchase price
Cash and cash equivalents	$	2.8		$	-		$	2.8
Trade accounts receivable		16.8			(0.7	)		16.1
Inventories		21.3			5.0			26.3
Deferred income taxes		1.2			(1.0	)		0.2
Other current assets		2.4			1.8			4.2
Property, plant and equipment, net		30.6			(5.7	)		24.9
Software and other intangible assets, net		62.7			107.6			170.3
Deferred income taxes (noncurrent assets)		-			0.2			0.2
Other assets		0.3			(0.3	)		-
Trade accounts payable and other current liabilities		(10.1	)		(1.2	)		(11.3	)
Short-term borrowings		(8.6	)		8.6			-
Long-term debt		(87.7	)		87.7			-
Deferred income taxes		(10.2	)		(36.4	)		(46.6	)
Total identifiable net assets		21.5			165.6			187.1
Goodwill		65.9			149.2			215.1
Net assets	$	87.4		$	314.8		$	402.2

Note 3 – Pro forma adjustments

The unaudited pro forma condensed combined financial data includes the following adjustments to conform the Aspen balance sheet and statement of operations with the Hill-Rom presentation, to give effect to the Aspen Acquisition, the financing activities under the New Credit Facility and to adjust historical amounts to estimated fair value in connection with the allocation of purchase price. See Note 2.

Unaudited pro forma condensed combined balance sheet adjustments

a) To reclassify $1.1 million of spare parts and consumables to be used in manufacturing from inventory and in to other current assets.

b) To reclassify $2.5 million of software out of property, plant and equipment to software and other intangibles.

c) To reclassify $1.9 million of other current liabilities to accrued compensation and trade accounts payable.

d) The Aspen Acquisition was funded through a combination of cash on hand of $142.2 million as well as through borrowings under our pre-existing revolving credit facility of $260.0 million, increasing our total borrowings under the revolver to $305.0 million. Shortly after the Aspen Acquisition, on August 24, 2012, we entered into the New Credit Facility. The New Credit Facility provides for revolving loans of up to $500 million, plus term loans in the aggregate amount of $200 million. It is to be used for general corporate purposes, including financing permitted acquisitions. The Company may request to increase the revolving loan commitment and the amount of the term loans by up to an additional $250 million.

All amounts due under the New Credit Facility mature upon expiration on August 24, 2017. The term loans will amortize so that 37.5% of the principal will be repaid over the five year term, with the balance due at maturity. The New Credit Facility replaces in its entirety the Company’s previous $500 million Credit Agreement dated March 28, 2008, as amended, which was scheduled to expire in March 2013.

Borrowings under the New Credit Facility bear interest based on a margin (which varies dependent upon the Company’s credit rating) over certain pre-defined index rates, as selected at the Company’s option.

Upon entering the New Credit Facility, the entire $305.0 million outstanding under the previous revolving credit facility was refinanced with a term loan of $200.0 million and $105.0 million under the revolver portion of the facility.

The financing activities related to the Aspen Acquisition and the entry into the New Credit Facility are as follows:

Financing sources:
Hill-Rom Cash	$	145.0
New debt - Revolving loans		105.0
New debt - Term Loan (current portion $10.0 million)		200.0
	$	450.0

Financing uses:
Cash consideration for Aspen Acquisition (see Note 2):
Cash paid to owners and debt holders	$	400.1
Aspen legal and professional fees		1.8
Aspen employee severance agreements		0.3
		402.2

Payment of amounts outstanding on previous revolving credit facility		45.0
Payment of accrued interest on amounts outstanding on previous revolving credity facility		0.2
Financing costs paid at New Credit Facility closing (deferred as long-term assets)		2.6
	$	450.0

e) To adjust the property, plant and equipment and identifiable intangible assets acquired based upon preliminary estimates of fair value and eliminate historical Aspen goodwill and identifiable intangible balances. The preliminary estimates of fair value for property, plant and equipment and identifiable intangible assets follow:

Property, Plant and Equipment
	Aspen historical net book value as of June 30, 2012 (1)		Estimated fair value		Estimated fair value adjustment
Land and land improvements	$	3.3	$	0.9	$	(2.4	)
Building and building equipment		10.6		4.4		(6.2	)
Machinery and equipment		14.2		19.6		5.4
	$	28.1	$	24.9	$	(3.2	)

Intangible Assets
	Estimated fair value
Indefinite Lived:
Trade name	$	29.0

Finite Lived:
Customer relationships		126.0
Trade name		4.6
Technology		9.1
Other Intangibles		1.6
	$	170.3

(1)

After reclassification of software. See Note 3.

The excess of the Acquisition Consideration for Aspen over the fair value of its identifiable net assets of $215.1 million is recorded as goodwill. See Note 2.

f) To allocate the total Acquisition Consideration paid and properly reflect the fair value of the assets acquired and liabilities assumed. See Note 2.

g) Adjustments to deferred taxes reflect the tax effect of fair value adjustments at the statutory rates applicable in each jurisdiction, along with a revaluation of all acquired tax attributes to reflect the value to Hill-Rom.

	June 30, 2012
Inventory	$	(1.8	)
Property, plant and equipment		(0.2	)
Intangible assets		(38.2	)
Other current liabilities		1.0
Other		2.0
	$	(37.2	)

h) To eliminate the current and long-term portions of Aspen debt paid off at the time of the Acquisition as well as the historical shareholders’ equity balances of Aspen.

Unaudited pro forma condensed combined statement of consolidated income adjustments

i) To eliminate historical interest expense and deferred financing cost amortization related to Aspen debt obligations settled at the closing date and for Hill-Rom debt refinanced under the New Credit Facility; and to add the new interest expense and deferred financing cost amortization related to the New Credit Facility, which are computed as follows:

	Year Ended September 30, 2011		Nine Months Ended June 30, 2012
Historical interest expense eliminated:
Interest expense
Hill-Rom	$	0.3	$	0.2
Aspen		10.5		7.4
Deferred cost amortization and facility fee
Hill-Rom		1.0		0.7
Aspen		1.3		1.0
Total decrease to interest expense	$	13.1	$	9.3

	Year Ended September 30, 2011		Nine Months Ended June 30, 2012
New interest expense:
Debt borrowings under New Credit Facility	$	305.0	$	305.0
Deferred financing costs related to New Credit Facility		2.6		2.6

Interest expense	$	4.5	$	3.3
Deferred cost amortization		0.5		0.4
Facility Fee		0.9		0.7
Total increase to interest expense	$	5.9	$	4.4

New interest expense for each period was computed using the June 30, 2012 interest rate of 1.44 percent under the New Credit Facility. The deferred cost amortization was calculated based upon the credit facility term of 5 years and facility costs are estimated to approximate $0.1 million per month.

A change in the interest rate of one-eighth percent would increase or decrease pro forma annual interest expense by approximately $0.4 million.

j) To eliminate direct incremental costs of the Aspen Acquisition that are reflected in the historical statements of Hill-Rom. Transaction costs unrelated to the Aspen Acquisition were not eliminated. These amounts, on a pro forma basis, totaled $0 and $0.9 million for the year ended September 30, 2011 and the nine months ended June 30, 2012.

k) To record additional depreciation expense based upon the estimated fair value of the property, plant and equipment acquired over each asset’s estimated remaining useful life using the straight-line method of depreciation. The computation of these amounts follows:

					Depreciation expense
	Estimated fair value		Average remaining useful life		Year ended September 30, 2011		Nine months ended June 30, 2012
Land and land improvements	$	0.9			$	-	$	-
Building and building equipment		4.4		12.9		0.4		0.3
Machinery and equipment		19.6		6.5		3.8		2.8

	$	24.9				4.2		3.1

For the year ended September 30, 2011:
Historical Aspen depreciation expense						3.8
Depreciation adjustment					$	0.4

For the nine months ended June 30, 2012:
Historical Aspen depreciation expense								2.9
Depreciation adjustment							$	0.2

l) To eliminate historical Aspen intangible amortization expense and replace with new amortization amounts based upon the estimated fair value of the finite lived intangible assets using the straight-line method of amortization. The computation of the new amortization amounts follow:

					Amortization expense
	Estimated fair value		Estimated weighted average useful life		Year ended September 30, 2011		Nine months ended June 30, 2012
Indefinite lived:
Trade name	$	29.0			$	-	$	-

Finite lived:
Customer relationships		126.0		13.0		9.9		7.4
Trade name		4.6		15.0		0.3		0.2
Technology		9.1		10.0		0.9		0.7
Other Intangibles		1.6		5.3		0.3		0.2
	$	170.3			$	11.4	$	8.5

Historical Aspen amortization expense:
For the year ended September 30, 2011					$	7.5
For the nine months ended June 30, 2012							$	5.7

m) To reflect the tax effect of above adjustments at statutory rates as well as adjust the income tax provision to reflect the pro forma combined company estimated income tax rate.



Indiana	1-6651	35-1160484
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)


1069 State Route 46 East Batesville, Indiana		47006-8835
(Address of principal executive offices)		(Zip Code)

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

	HILL-ROM HOLDINGS, INC.



Date: October 5, 2012	By:	/s/ Susan Lichtenstein
		Susan Lichtenstein
		Senior Vice President of
		Corporate Affairs,
		Chief Legal Officer and Secretary

	Not applicable
	(Former name or former address, if changed since last report)

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP Chicago, Illinois October 5, 2012