Issue link: http://catalog.e-digitaleditions.com/i/114936
NOTE 3 - DERIVATIVE INSTRUMENTS AND HEDGING STRATEGIES The estimated fair value of our forward currency exchange contracts represents the measurement of the contracts at month-end spot rates as adjusted by current forward points. We are exposed to credit loss in the event of nonperformance by counterparties on our outstanding forward currency exchange contracts but do not anticipate nonperformance by any of our counterparties. Should a counterparty default, our maximum exposure to loss is the asset balance of the instrument. For the years ended December 31, 2012, 2011 and 2010, recognized foreign currency transaction gains (losses) included in other income (expense) in earnings were ($7), ($3) and $7, respectively. The outstanding derivative contracts and their effects on our Consolidated Balance Sheets at December 31, 2012 and 2011 were: Notional Amount 2012 2011 Forward currency exchange contracts $ 1,352 $ 1,577 Assets 2012 $ Liabilities 2012 2011 2011 3 $ 1 $ 1 $ Maximum Term (Days) 2012 2011 9 183 119 NOTE 4 - ACQUISITIONS In November 2012 we acquired Surpass Medical, Ltd. (Surpass) in an all cash transaction for $100, with an additional $35 to be paid upon the completion of certain milestones. Surpass develops and commercializes next-generation flow diversion stent technology to treat brain aneurysms using a unique mesh design and delivery system. The acquisition of Surpass enhances our product offerings within our Neurotechnology and Spine segment. In October 2011 we acquired Concentric Medical, Inc. (Concentric), which manufactures and markets minimally invasive products for the treatment of acute ischemic stroke, in an all cash transaction for $135. The acquisition of Concentric enhances our product offerings within our Neurotechnology and Spine segment. In July 2011 we acquired Memometal Technologies (Memometal) in an all cash transaction for $150, including assumed debt of $9, and an additional $12 to be paid upon the completion of certain milestones. Memometal develops, manufactures and markets products for extremity (hand and foot) indications. The acquisition of Memometal enhances our product offerings within our Reconstructive segment. In June 2011 we acquired Orthovita, Inc. (Orthovita), a developer and manufacturer of orthobiologic and biosurgery products, in an all cash transaction for $316. The acquisition of Orthovita complements our existing product offerings, primarily within our Neurotechnology and Spine segment. In January 2011 we acquired the assets of the Neurovascular division of Boston Scientific Corporation (Neurovascular) in an all cash transaction for $1,450, with an additional $50 payment to be made upon completion of certain milestones. The acquisition of Neurovascular substantially enhances our presence in the neurotechnology market, allowing us to offer a comprehensive portfolio of products in both neurosurgical and neurovascular devices. The effects of all the acquisitions described above are included in our Consolidated Financial Statements prospectively from the date of acquisition. Pro forma consolidated results of operations for the years ended December 31, 2012 and 2011 would not differ significantly as a result of these acquisitions. The purchase price allocations are based upon preliminary valuations, and our estimates and assumptions are subject to change within the measurement period as valuations are finalized. The preliminary allocation of the purchase price to the acquired net assets of the acquisitions described above are as follows: 2012 Surpass Purchase price paid Contingent consideration Net debt assumed Total purchase consideration Tangible assets acquired: Inventory Other assets Other liabilities Identifiable intangible assets: Customer relationship In-process research and development Developed technology Other Goodwill 31 $ $ 2011 Concentric 100 33 ��� 133 $ $ 135 ��� ��� 135 Memometal $ $ 141 11 9 161 Orthovita $ $ 316 ��� ��� 316 2 1 (44) $ 7 17 (27) 16 20 (43) 10 17 7 12 92 135 4 4 57 30 73 161 26 8 66 5 140 316 $ 39 105 (73) ��� 62 45 ��� 67 133 Neurovascular $ $ $ $ 1,450 49 ��� 1,499 145 31 ��� $ 100 19 479 29 696 1,499 Dollar amounts in millions except per share amounts or as otherwise specified