(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. The acquisition was accretive to financial performance in both 2Q and 1H 2011 as well as 2Q and 1H 2012.

A one-year measurement period was initially established during which UTMD could make residual adjustments to valuations of assets and liabilities. No adjustments were made in 1H 2012, and the adjustment period has now expired.

A two-year escrow was set aside from the purchase price to back the warranties and representations of the sellers. No claims against the escrow have been made by UTMD.

The Company incurred $35 in acquisition-related expenses in 2Q 2011 and $285 in 1H 2011, all of which were categorized under General and Administrative expenses in the Consolidated Statements of Income. A portion, $266, of the 1H 2011 acquisition-related expense was not tax deductible.

Revenue for the six months ended June 30, 2012 includes revenue from Femcare of $8,862. Net income from Femcare (after tax) in 1H 2012 was $2,326. Revenue for the six months ended June 30, 2011 includes revenue from Femcare during the period after acquisition of $4,679. Net income from Femcare (after tax) during the period after acquisition in 1H 2011 was $730.

Revenue and net income of the combined entity as though the business combination occurred as of the beginning of the reporting period is:

Six months ended

June 30, 2012 (as reported)

Six months ended

June 30, 2011

Revenue

21,230

21,089

Net income

5,190

4,064

Pro forma net income of $4,064 for the six months ended June 30, 2011 does not include $285 in UTMD legal costs directly attributable to the acquisition, and $1,765 in Femcare expenses for employee shareholder bonuses, loan redemption premium related to termination of ownership, buy-out of warrants, financial advisory fees and an insurance premium for sellers’ liability which are directly attributable to the acquisition.


Assets Acquired
Accounts receivable	$	2,176
Prepaid expenses		773
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		8,249
Total assets acquired		51,919

Liabilities Assumed
Accounts payable		1,107
Accrued expenses		644
Deferred tax liability		9,084
Total liabilities assumed		10,835

Net assets acquired	$	41,084