Business Combinations

3 Months Ended

Sep. 30, 2011

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

(5) Acquisition. On March 18, 2011, UTMD purchased all of the common shares of Femcare Holdings Ltd (Femcare) of the United Kingdom, and its subsidiaries. Femcare is best known for its leading global brand the Filshie Clip System – a female surgical contraception device (tubal ligation). UTMD expects the business combination will provide diversification, expansion and integration benefits that each company separately did not have the opportunity to achieve. UTMD anticipates that the acquisition will be accretive to financial performance in 2011 and beyond.

While UTMD used its best estimates and assumptions as a part of the $41 million purchase price allocation process to accurately value assets acquired and liabilities assumed at the acquisition date, its estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, UTMD will record adjustments to the assets acquired and liabilities assumed with the corresponding offset to intangible assets. Upon the conclusion of the measurement period or final determination of the values of assets or liabilities assumed, which ever comes first, any subsequent adjustments will be recorded to consolidated statements of operations. UTMD believes that the accounting of fixed assets is complete, but liabilities and intangible asset balances remain uncertain. As of September 30, 2011, no adjustments have been made in the purchase price set on the closing date, or in the initial valuation of assets and liabilities and allocation of intangible assets.

A two-year $3.2 million escrow was set aside from the purchase price to back the warranties and representations of the sellers. The purchase price allocation is currently as follows:

Assets Acquired
Accounts receivable	$	2,176
Prepaid expenses		344
Inventory		1,319
Property and equipment		606
Identifiable intangibles
Patents		97
Non-compete agreements		162
Trademarks, trade names		11,559
Customer relationships		11,559
Regulatory approvals & product certifications		15,419
Goodwill		9,084
Total assets acquired		52,325

Liabilities Assumed
Accounts payable		1,107
Accrued expenses		1,049
Deferred tax liability		9,084
Total liabilities assumed		11,241

Net assets acquired	$	41,084

With respect to the assets acquired from Femcare, UTMD will amortize the patents and non-compete agreements over 10 and 5 years, respectively. The remaining $38,537 in identifiable intangibles will be amortized over 15 years. The $9,084 in deferred tax liability and goodwill results from the difference between the book basis and tax basis of the accumulated amortization of identifiable intangible assets. The deferred tax liability will decline to zero over 15 years as the tax basis of the intangibles declines. The goodwill will not be amortized, but will be written down if and when the value becomes impaired.

The Company incurred $8 towards acquisition related expenses, all of which are categorized under General and Administrative expenses in the Consolidated Condensed Statements of Income for the three months ended September 30, 2011, and $293 for the nine months ended September 30, 2011.