SecProbe.io

CORRESP
1
filename1.htm

      Unassociated Document

    April
      19, 2007

    U.S.
      Securities and Exchange Commission

    Brian
      Cascio

    Accounting
      Branch Chief

    100
      F
      Street, N.E.

    Washington,
      D.C. 20549

            Re:

              Comment
                letter dated April 6, 2007

            Form 10-K for the Fiscal Year
              Ended
              December 31, 2006

            Filed March 1,
              2007

            File No.
              001-11083

    Dear
      Mr.
      Cascio:

    This
      letter is in response to your
      letter dated April 6, 2007 regarding the above subject matter. For ease of
      reference, we have reproduced the Staff’s comments below with our response, and
      as appropriate, proposed disclosure for inclusion in future filings following
      each comment.

    Form
      10-K for the Fiscal Year Ended December 31, 2006

    Financial
      Information, page 66

    Note
      A. Significant Accounting Policies, page 71

    Revenue
      Recognition, page 72

              1.

              You
                disclose that as part of your return policy you may “allow customers to
                return previously purchased products for next-generation product
                offerings.” The accounting policy states that you account for these sales
                by establishing “a reserve for sales returns when the initial product is
                sold.” Please tell us in more detail about the nature and terms of these
                sales. Please also include your analysis of the underlying accounting
                literature supporting your accounting method. Discuss your consideration
                of EITF 00-24 and FIN 45.

    The
      interventional medicine market in which we operate is in large part technology
      driven.  Physicians, particularly in interventional cardiology, move
      quickly to new technology and new products.  In order to compete in
      this rapidly changing environment, we are continuously innovating and developing
      next-generation products.  Given the significant investment necessary
      to develop next-generation products and the extensive regulatory path, we
      generally launch next-generation products every two to six years, depending
      on
      the product line.  When we launch next-generation products, we may
      allow customers to return and replace their existing inventory with the new
      product.  The decision to allow customers to return previously
      purchased products for next-generation products (when and if available) is
      at
      our discretion in

    all
      cases, and is not a contractual right of the customer.   When we
      undertake a product transition, we estimate future returns at the time we sell
      the first-generation product and defer revenue until we deliver the
      second-generation product to the customer.

    Since
      a
      customer is required to exercise their right of return in order to obtain
      the next-generation product, we determined that the most relevant accounting
      guidance for product transitions is Financial Accounting Standards
      Board Statement 48, Revenue Recognition when Right of Return
Exists. In accordance with Statement 48, when the right of return
      exists, we may recognize revenue at the time of sale for products that we do
      not
      expect to be returned if we meet six criteria, which include our having the
      ability to estimate future returns reasonably.  We estimate our
      returns based on our prior experience with similar product transitions, the
      timing of the launch and the level of customer-owned inventory in the
      field.  We have the ability to make a reasonable estimate of returns
      based on our significant level of historical experience with product transitions
      and our overall understanding of market dynamics.  Further, based on
      our review of Statement 48 and considering the guidance regarding returns
      accounting included in the AICPA Statement of Position (SOP) No. 97-2, we have
      generally determined, though based upon the specific facts and circumstances
      of
      each product transition, that product transitions from generation to generation
      do not qualify for exchange accounting since the functionality of the new
      products is generally more than minimally different from the original product
      and the development of the new technology requires significant investment in
      research and development.

    In
      assessing the appropriate accounting treatment for product transitions, we
      also
      considered the accounting guidance of FASB Interpretation No. 45 (FIN 45),
      Guarantor’s Accounting and Disclosure Requirements for Guarantees, and
      EITF 00-24, Revenue Recognition: Sales Arrangements that Include
      Specified-Price Trade-In Rights and determined that they were not
      applicable based on the nature of our business. We believe that EITF 00-24
      pertains to fixed-price trade-in rights, where a customer is allowed to exchange
      a purchased product for a specified credit toward another product after some
      period.  We have historically not offered fixed-price trade-in rights
      to customers for our implantable or muti-use devices.  In addition, in
      considering FIN 45 when we sell a product to a customer we do not guarantee
      that
      a next-generation product will be available since our ability to launch a
      next-generation product is largely contingent on external factors, such as
      the
      timing of regulatory approval and the success of clinical trials.

    Based
      on
      our analysis, we believe our accounting policy of estimating returns for a
      product transition and deferring revenue until the new technology is delivered
      to the customer is appropriate and in accordance with the provisions of
      Statement 48.

    In
      response to the Staff’s comment, we propose the following revised
      disclosure:

    Proposed
      Disclosure

    We
      generally allow our customers to return defective, damaged and, in certain
      cases, expired products for credit. In addition, we may allow customers to
      return previously purchased products for next-generation product offerings.
      In
      accordance with FASB Statement No. 48, we establish a reserve for sales returns
      when we sell the initial product and recognize revenue when we deliver the
      next-generation product to the customer. We base our estimate of sales returns
      on historical trends and record such amount as a reduction to
      revenue.

    Valuation
      of Business Combinations, page 73

              2.

              You
                disclose that you “allocate the purchase price in excess of net tangible
                assets acquired to identifiable intangible assets, including purchased
                research and development.”  From your disclosure, it appears
                that the value you assign to your identifiable intangible assets
                acquired
                in business combinations may not always be stated at fair value consistent
                with paragraph 35 of SFAS 141, or, if applicable, paragraph 44 of
                SFAS
                141. Please discuss how your accounting policy considered that
                guidance.

    In
      performing our purchase price allocation for business combinations, we state
      intangible assets at fair value and follow the guidance prescribed by Statement
      No. 141 for all business combinations completed after July 1, 2001 using the
      purchase method of accounting. We accounted for business combinations completed
      before July 1, 2001 under Accounting Principles Board Opinion
      No.  16.   Specifically, in determining the purchase
      price allocation, we allocate the cost of an acquired entity to the assets
      and
      liabilities assumed based upon their estimated fair values at the date of
      acquisition consistent with paragraph 35 of FAS 141.  Furthermore, and
      consistent with paragraph 44 of FAS 141, in those circumstances where the
      amounts assigned to assets acquired and liabilities assumed exceeds the cost
      of
      the acquired entity and the purchase agreement does not provide for contingent
      consideration that might result in an additional element of cost of the acquired
      entity when the contingency is resolved that equals or exceeds the excess of
      fair value over cost, the excess is allocated as a pro rata reduction of the
      amounts that otherwise would have been assigned to all of the acquired assets,
      including purchased research and development, except for a) financial assets
      other than investments accounted for under the equity method, b) assets to
      be
      disposed of by sale, c) deferred tax assets, d) prepaid assets relating to
      pension or other postretirement benefit plans and e) any other current
      assets.  In those circumstances where an acquisition involves
      contingent consideration, we recognize an amount equal to the lesser of the
      maximum amount of the contingent payment or the excess of fair value over cost
      as a liability.  As of December 31, 2006, the cost of each of our
      acquired entities exceeds the fair value amounts assigned to assets acquired
      and
      liabilities assumed.

    In
      response to the Staff’s comment, we propose the following revised
      disclosure:

    Valuation
      of Business Combinations

    We
      record intangible assets acquired in
      recent business combinations under the purchase method of accounting. We
      allocate the amounts we pay for each acquisition to the assets we acquire and
      liabilities we assume based on their fair values at the dates of acquisition
      in
      accordance with Statement 141, including identifiable intangible assets and
      purchased research and development, which either arise from a contractual or
      legal right or are separable from goodwill. We base the fair value of
      identifiable intangible assets and purchased research and development on
      detailed valuations that use information and assumptions provided by management.
      We allocate any excess purchase price over the fair value of the net tangible
      and identifiable intangible assets acquired to goodwill.   In
      circumstances where the amounts assigned to assets acquired and liabilities
      assumed exceeds the cost of the acquired entity and the purchase agreement
      does
      not provide for contingent consideration that might result in an additional
      element of cost of the

    acquired
      entity when the contingency is resolved that equals or exceeds the excess of
      fair value over cost, the excess is allocated as a pro rata reduction of the
      amounts that otherwise would have been assigned to all of the acquired assets,
      including purchased research and development, except for a) financial assets
      other than investments accounted for under the equity method, b) assets to
      be
      disposed of by sale, c) deferred tax assets, d) prepaid assets relating to
      pension or other postretirement benefit plans and e) any other current
      assets.  In those circumstances where an acquisition involves
      contingent consideration, we recognize an amount equal to the lesser of the
      maximum amount of the contingent payment or the excess of fair value over cost
      as a liability.  As of December 31, 2006, the cost of each of our
      acquired entities exceeds the fair value amounts assigned to assets acquired
      and
      liabilities assumed.

    Amortization
      and Impairment of Intangible Assets, page 74

              3.

              You
                disclose that you test your March 31st
                goodwill
                balances during the second quarter of each year for impairment. While
                you
                may perform the annual goodwill impairment test “any time during the
                fiscal year provided the test is performed at the same time every
                year,”
                consistent with paragraph 26 of SFAS 142, please tell us why you
                believe
                it is appropriate under U.S. GAAP to test the ending balance of your
                first
                quarter goodwill in the second quarter of your fiscal year. To help
                us
                understand your accounting, please tell us in which quarter you would
                record an impairment loss if an impairment existed. We also note
                the
                provisions of paragraph 22 of SFAS
                142.

    Historically,
      we have performed the annual test for impairment as of April 1, the beginning
      of
      the second quarter of the year. To derive net assets by reporting unit, we
      have
      relied on March 31 financial information since we believe this approximates
      our
      financial position as of April 1, the beginning of the second
      quarter.  We perform detailed valuations that we base on information
      obtained from various individuals throughout our organization to determine
      the
      fair value of our reporting units. In addition, we may seek the input of
      specialists in performing these valuations.  The first step of our
      annual impairment test requires approximately two to three months to
      complete.

    If
      we
      determined that the carrying amount of a reporting unit exceeded its fair value
      while performing our annual goodwill impairment test, we would perform the
      second step of the goodwill impairment test.  To the extent we were
      able to complete this test and determined that an impairment existed, we would
      record an impairment loss during the second quarter.  However,
      consistent with paragraph 22 of SFAS 142, if we were unable to complete the
      test
      prior to the issuance of the financial statements and an impairment loss was
      probable and could be reasonably estimated, we would recognize our best estimate
      of the loss in the June 30 interim financial statements and disclose that the
      amount is an estimate.  We would then recognize any adjustment to that
      estimate in subsequent reporting periods, once the second step of the impairment
      analysis is finalized.  In prior years, the fair values of our
      reporting units have exceeded the carrying value and it has not been necessary
      to perform the second step of the goodwill impairment test.

    In
      response to the Staff’s comment, we propose the following revised
      disclosure:

    Proposed
      Disclosure

    Annually
      we test our goodwill balances during the second quarter of the year as of April
      1, the beginning of the second quarter, using financial information available
      as
      of that time, or more frequently if certain indicators are present or changes
      in
      circumstances suggest that impairment may exist. In performing the test, we
      utilize the two-step approach prescribed under FASB Statement No. 142,
Goodwill and Other Intangible Assets. The first step requires a
      comparison of the carrying value of the reporting units, as defined, to the
      fair
      value of these units. As of December 31, 2006, we identified our 10
      domestic divisions, which in aggregate make up the U.S. reportable segment,
      and
      our three international operating segments as our reporting units for purposes
      of the goodwill impairment test.  To derive the carrying value of our
      reporting units at the time of acquisitio