Edgar Filing: DATASCOPE CORP

FORM 10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2008


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-06516

Datascope Corp.

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		13-2529596 (I.R.S. Employer Identification No.)

14 Philips Parkway Montvale, New Jersey (Address of principal executive offices)		07645 (Zip Code)

(201) 391-8100
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to section 12(g) of the Act:

Title of Each Class
Common Stock, par value $0.01 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer þ

Non-accelerated filer o
(Do not check if a smaller reporting company)

Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):

Yes o No þ

The aggregate market value of the common stock held by non-affiliates of the registrant as of December 31, 2007 was approximately $472 million. As of August 29, 2008, there were 15,868,002 outstanding shares of the registrant’s common stock.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission no later than October 28, 2008 pursuant to Regulation 14A of the Securities Exchange Act of 1934 is incorporated by reference in Items 10 through 14 of Part III of this Form 10-K.

DATASCOPE CORP.

FORM 10-K

TABLE OF CONTENTS


Form 10-K
Item No.	Name of Item	Page

	PART I

Item 1.	Business		1
Item 1A.	Risk Factors		15
Item 1B.	Unresolved Staff Comments		18
Item 2.	Properties		19
Item 3.	Legal Proceedings		19
Item 4.	Submission of Matters to a Vote of Security Holders		20
Item 4A.	Executive Officers of the Company		20

	PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		21
Item 6.	Selected Financial Data		24
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		25
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		40
Item 8.	Financial Statements and Supplementary Data		41
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		41
Item 9A.	Controls and Procedures		41
Item 9B.	Other Information		42

	PART III

Item 10.	Directors, Executive Officers and Corporate Governance		42
Item 11.	Executive Compensation		42
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		43
Item 13.	Certain Relationships and Related Transactions, and Director Independence		43
Item 14.	Principal Accountant Fees and Services		43

	PART IV

Item 15.	Exhibits and Financial Statement Schedules		44
EX-21.1: SUBSIDIARIES
EX-23.1: CONSENT OF DELOITTE & TOUCHE LLP
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATIONS

PART I

This Annual Report on Form 10-K contains statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which generally can be identified by the use of forward-looking terminology such as “may,” “expect,” “estimate,” “anticipate,” “believe,” “target,” “plan,” “project” or “continue” or the negatives thereof or other variations thereon or similar terminology. These statements appear in a number of places in this Report on Form 10-K and include statements regarding our intent, belief or current expectations that relate to, among other things, trends affecting our financial condition or results of operations and our business and strategies. We may make additional written or oral forward-looking statements from time to time in filings with the Securities and Exchange Commission or otherwise. Forward-looking statements speak only as of the date the statement is made. Readers are cautioned that these forward-looking statements are not a guarantee of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of many important factors. Many of these important factors cannot be predicted or quantified and are outside of our control, including competitive factors, changes in government regulation and our ability to introduce new products. The accompanying information contained in this Annual Report on Form 10-K, including, without limitation, the information set forth below under Item 1 regarding the description of our business, under Item 1A, Risk Factors and under Item 7 concerning “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” identifies additional important factors that could cause these differences. We do not undertake to publicly update or revise our forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied in this Annual Report on Form 10-K will not be realized. All subsequent written and oral forward-looking statements attributable to us or persons acting for or on our behalf are expressly qualified in their entirety by this section.

Item 1. Business

Overview

Datascope Corp. is a global leader of intra-aortic balloon counterpulsation and a diversified medical device company that develops, manufactures and markets proprietary products for clinical health care markets in interventional cardiology and radiology, cardiovascular and vascular surgery, and critical care. Our products are sold throughout the world through direct sales representatives and independent distributors. Our largest geographic markets are the United States, Europe and Japan. Founded in 1964, we are headquartered in Montvale, New Jersey.

We have two reportable segments, Cardiac Assist Products and Vascular Products. The Cardiac Assist Products segment accounted for 82% of total sales in fiscal 2008. The Cardiac Assist Products segment sells intra-aortic balloon pumps and catheters, endoscopic vessel harvesting products and the Safeguard™ assisted pressure device. Our intra-aortic balloon pump system is used in the treatment of cardiac shock, acute heart failure, irregular heart rhythms, and for cardiac support in open-heart surgery, coronary angioplasty, and stenting. The balloon catheter serves as the pumping device within the patient’s aorta. The Vascular Products segment sells a proprietary line of knitted and woven polyester vascular grafts and patches for reconstructive vascular and cardiovascular surgery, peripheral vascular stent products and stent grafts. The peripheral vascular products are used by vascular surgeons and interventional radiologists for the treatment of peripheral aterial disease. Operating data for each segment for the last three fiscal years is set forth in Note 11 to the Consolidated Financial Statements.

Effective May 1, 2008, we sold our Patient Monitoring (“PM”) business to Mindray Medical International Limited. The sale of the PM business allows us to focus our efforts on our high-margin, market-share leading Cardiac Assist Products and our high-margin Vascular Products segment. We received approximately $209 million in cash at the closing and retained approximately $30 million of receivables generated by the PM business.

In October 2006, we announced a plan to exit the vascular closure market and phase out the Interventional Products (“IP”) business. On August 6, 2008, we completed the sale of assets related to the VasoSeal, On-Site, and X-Site vascular closure devices, and our collagen operations, to St. Jude Medical, Inc. for $21.0 million in cash at closing and $3.0 million to be paid upon the expiration of an 18 month indemnification period. We plan to seek the sale or independent distribution of our ProLumen^tm thrombectomy device for the interventional radiology market; although these plans are subject to the reversal of a verdict that is being appealed (see Item 3. Legal Proceedings for a discussion of litigation relating to ProLumen). In February 2007, we completed the sale of our ProGuide^tm chronic dialysis catheter and the associated assets for $3.0 million plus a royalty on future sales of the ProGuide catheter.

Operating results of the PM and IP businesses are reported as discontinued operations for all periods presented.

On September 15, 2008 we reached an agreement in principle to sell the Company for $53.00 per share in cash. The agreement is expected to contain customary representations, warranties and conditions to closing. If and when the agreement is executed, we intend to file a current report on Form 8-K describing the transaction and attaching the agreement as an exhibit.

In June 2008, we exercised our option to acquire the Peripheral Vascular Stent business of the Sorin Group of Milan. The acquisition follows our successful experience as exclusive distributor of the Sorin peripheral stent product line in Europe, during which sales have grown rapidly since the product launch in January 2007. With the acquisition, we now gain the opportunity to market the product line throughout the world. We estimate the worldwide market at $800 million annually, of which $500 million is in the United States, $200 million is in Europe, and $40 million is in Japan.

Sorin’s innovative vascular peripheral products are used by vascular surgeons and interventional radiologists for the treatment of peripheral arterial disease. Unlike competitive bare metal stents, the Sorin stents incorporate Carbofilm^TM Technology, which has long been a standard for treating the surface of mechanical heart valves. As part of the acquisition, we also received exclusive, worldwide rights to use the Carbofilm^TM1 technology and other intellectual property within the endovascular field of use. The product line includes balloon-expandable and self-expanding stent systems, as well as balloon systems for use in Percutaneous Transluminal Angioplasty (“PTA”). The worldwide market today for peripheral stents and PTA is expected to grow to more than $1 billion by 2012 due to an increase in diagnostic procedures, the demographics of the aging population and the higher incidence of diabetes, high blood pressure, obesity and hypercholesterolemia — all leading causes of peripheral vascular disease.


¹		Carbofilm is a pending trademark of Sorin Biomedica Cardio.

Our Safeguard^tm assisted pressure device received FDA 510(k) clearance to claim reduced manual compression time to stop bleeding following femoral arterial catheterization in diagnostic and interventional procedures in March 2007. In May 2007, following FDA clearance of the new clinical claim, we tripled the Safeguard sales and marketing effort in the United States from a pilot sales group to the entire Cardiac Assist direct sales force. Safeguard is aimed at an estimated $125 million annual worldwide market.

At the end of December 2007, Datascope Japan K.K., a wholly-owned subsidiary of Datascope Corp., began management of our Intra-Aortic Balloon Pump (“IABP”) business in Japan. Datascope Japan K.K. is responsible for import, product service, sales support and product surveillance of the IABP business. USCI Holdings Ltd., our new exclusive distributor, is responsible for sales distribution throughout Japan.

There are also cost containment pressures on healthcare systems outside the United States, particularly in certain European countries. Many companies, some of which are substantially larger than us, are engaged in manufacturing competing products. Our products are generally not affected by economic cycles.

Available Information

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to those reports and other materials we have filed with the Securities and Exchange Commission (SEC) may be read or copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Information regarding the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains a website at http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. Our filings with the SEC are also available on our website at http://www.datascope.com.

We have adopted a written Corporate Business Conduct Policy (including Code of Ethics) that applies to all our employees. The Corporate Business Conduct Policy is posted on our website under the “Corporate Governance” caption. We intend to disclose any amendments to, or waivers from, the Corporate Business Conduct Policy on our website. In addition, the Company’s audit committee charter, compensation committee charter and nominations and corporate governance committee charter are also posted on the Company’s website. A copy of any of these documents is available, free of charge, upon written request sent to Datascope Corp., 14 Philips Parkway, Montvale, New Jersey 07645, Attention: Secretary.

Information included on our website is not deemed to be incorporated into this Annual Report on Form 10-K.

Glossary

We have prepared the glossary below to help you understand our business.

Angioplasty is the reconstruction of blood vessels, usually damaged by atherosclerosis. If the arteries in question are in the heart, a coronary bypass operation may be recommended. However, the nonsurgical method of balloon angioplasty is often employed, especially when only one vessel is blocked.

Balloon Angioplasty, also known as percutaneous transluminal coronary angioplasty (PTCA), is a nonsurgical method of clearing coronary and other arteries blocked by atherosclerotic plaque, fibrous and fatty deposits on the walls of arteries. A catheter with a balloon-like tip is threaded up from the arm or groin through the artery until it reaches the blocked area. The balloon is then inflated, flattening the plaque and increasing the diameter of the blood vessel opening. The arterial passage is thus widened or dilated. Balloon angioplasty has evolved to include direct coronary stenting in greater than 70% of angioplasty procedures to prevent recoil or abrupt closure of the artery post dilatation.

French (Fr.), or French Scale, a system used to indicate the outer diameter of catheters. Each unit is approximately 1/3 millimeter.

Hemostasis is the stopping of bleeding, either by physiological properties of coagulation and vasoconstriction (narrowing of the blood vessels) or by surgical or mechanical means.

Manual Compression is the stopping of bleeding by physical pressure placed specifically on a venous or arterial access site. With relation to our IP products, manual compression is typically applied to the femoral artery.

Percutaneously is via a passage through the skin by needle puncture, including introduction of wires or catheters.

Stenting is a medical procedure that uses tiny mesh tubes to support artery walls to keep the vessels open.

Vascular Access is the means of entering the vasculature percutaneously in order to place a variety of catheters. Vascular Access can be either venous or arterial in nature and can occur at various points of the body. The most typical vascular access points are femoral (groin), subclavian (upper chest), internal and external jugular (neck), brachial and radial (arm).

Reportable Segments

The following table shows the percentage of sales by segment as a percentage of total sales for the last three years:


	Fiscal Year Ended June 30,
	2008			2007			2006
Cardiac Assist		82	%		83	%		83	%
Vascular Products		17	%		16	%		16	%

Below is a more detailed description of our major product lines:

Cardiac Assist

We are a leader and pioneer in intra-aortic balloon (IAB) counterpulsation therapy which is used to support and stabilize heart function. This therapy increases the heart’s output and the supply of oxygen-rich blood to the heart’s coronary arteries while reducing the heart muscle’s workload and its oxygen demand.

Our line of cardiac assist products and their significant features are as follows:

Counterpulsation Products

The intra-aortic balloon pump system is used for the treatment of high-risk cardiac conditions resulting from ischemic heart disease and heart failure. Patients experiencing acute coronary syndromes such as acute myocardial infarction, cardiogenic shock and unstable angina may require IAB therapy to support and stabilize their cardiac status. IAB therapy is also used for high-risk patients who require revascularization procedures such as percutaneous coronary interventions or coronary artery bypass procedures including both on-pump and off-pump techniques. These products and therapy may be used before or during coronary artery bypass grafting or percutaneous coronary interventions for hemodynamic support.

We produce a line of disposable intra-aortic balloon catheters that serve as the pumping device within the patient’s aorta. We introduced the first balloon catheter capable of percutaneous insertion. This innovation eliminated the need for surgical insertion. As a result, the market for cardiac assist products expanded from open-heart surgery to interventional cardiology.

Intra-Aortic Balloon Pumps (IABPs)

CS300™

The CS300 balloon pump, our next generation balloon pump, was introduced in the third quarter of fiscal 2007. The CS300 is a fully automatic pump with all the features of Datascope’s CS100® balloon pump. The CS300 balloon pump teams up with the new Sensation™ 7 Fr. fiber-optic balloon catheter to provide higher fidelity blood pressure monitoring while eliminating the need for an additional invasive arterial pressure catheter as required by conventional balloon pump systems. The CS300 features rapid start-up with a single push button to allow faster initiation to therapy, a valuable feature in cardiac emergencies.

CS100

The CS100 automatic IABP, launched in August 2003, includes IntelliSync^TM automated arrhythmia tracking and timing algorithms. Other features of the CS100 include automated trigger selection for easier and continuous patient support, automatic “Beat to Beat” timing adjustments based on the patient’s physiologic landmarks and faster pneumatics to support the most challenging arrhythmic patients.

System 98XT

The System 98XT IABP incorporates the CardioSync® 2 software with improved algorithms to provide enhanced counterpulsation therapy. Other features of the System 98XT include faster pneumatics and reduced required user intervention.

Significant Developments

In the last few years, we have expanded our product line of IABP’s and achieved the following regulatory and marketing milestones:

	•		CS300 pump sales began in March 2007 to the U.S. and European markets

	•		CS100 approval to distribute in Japan received in August 2004

	•		CS100 United States and European market introduction in August 2003

Intra-Aortic Balloon Catheters (IABs)

We manufacture a broad line of disposable IAB catheters for use with intra-aortic balloon pumps in support of counterpulsation therapy.

Sensation 7 Fr.

In the third quarter of fiscal 2007, we launched the Sensation 7 Fr. IAB catheter. Using fiber optic technology, the Sensation 7 Fr. offers the smallest diameter IAB as well as blood pressure monitoring with greater convenience and higher fidelity blood pressure waveform than conventional invasive blood pressure monitoring. The reduced size of the Sensation 7 Fr. enables clinicians to use counterpulsation therapy for a broader range of patients, including patients with smaller peripheral blood vessels, peripheral vascular disease and diabetes. The Sensation 7 Fr. catheter also employs Datascope’s Durathane™ balloon membrane, the most abrasion resistant of any IAB in the industry. Greater resistance to abrasion allows longer periods of balloon pumping therapy.

Linear^TM 7.5 Fr.

In January 2005, we launched our Linear 7.5 Fr. IAB catheter. Linear 7.5 Fr., with a Durathane membrane and improved 7.5 Fr. introducer sheath, offers easier insertion, abrasion resistance and improved fatigue resistance and is ideal for smaller adults, diabetics and patients with peripheral vascular disease. Linear 7.5 Fr. is available in 25cc, 34cc and 40cc balloon volumes.

Fidelity®

In February 2002, we launched our Fidelity IAB catheter. We believe that Fidelity provides superior performance to all other 8 Fr. catheters in the market. Fidelity also offers the largest central lumen (0.030”) for consistent, clear arterial waveforms which results in better delivery of counterpulsation therapy for the patient and easier patient management for the healthcare provider. The new polymer design enables Fidelity to insert easily and navigate tortuous anatomies. Once inserted, physicians have the longest insertable length available on the market to ensure optimal balloon placement. Fidelity is available in 25cc, 34cc and 40cc balloon volumes.

In addition, we manufacture a complete line of intra-aortic balloon catheters to accommodate counterpulsation therapy in both the adult and pediatric population. We manufacture catheters for pediatric patients in the 2.5cc, 5cc, 7cc, 12cc and 20cc volumes. Our 9.5 Fr. intra-aortic balloon catheters are available in 25cc, 34cc and 40cc volumes. A 50cc volume is also available for patients who are taller than 6 feet. In fiscal 2007, we developed a reduced length membrane balloon for the Japanese market which is specifically designed for clinical needs of Japanese patients.

In June 2004, we introduced the first and only needle-free securement device for IAB catheters, the StatLockÒ², which secures the IAB catheter to the patient without the danger of accidental needlesticks or suture wound complications. We estimate that more than 25% of our U.S. customers are utilizing this device.


²		StatLock is a registered trademark of Venetec International, Inc.

Clinical Support

We provide the following clinical and educational services to our customers:

	•		Telemedicine via our PC-IABP products which offers remote pump monitoring, allowing the healthcare provider continuous access and instantaneous troubleshooting from highly trained technicians.

	•		24 hour, 7 day clinical support.

	•		On-site training and education for all personnel involved with patient care; more than 30,000 clinicians are trained by our clinical staff annually.

	•		Comprehensive educational materials for hospital staff, patient and family.

	•		Consultative services to help hospitals maximize the goals of counterpulsation therapy within the hospital network.

	•		The BenchmarkÒ Registry — a comprehensive registry database to assist hospitals worldwide in tracking and comparing outcomes of counterpulsation therapy administered to their patients. This enables our customers to demonstrate and measure the clinical benefits of the therapy. We believe that we are the only supplier offering a comprehensive, centralized repository of global IABP information.

Endoscopic Vessel Harvesting

In January 2006, we acquired the ClearGlide EVH product line from the CardioVations division of Ethicon, a Johnson & Johnson company. EVH devices enable less-invasive techniques for the harvesting of suitable vessels for use in conjunction with coronary artery bypass grafting.

EVH has been steadily replacing traditional open vessel harvesting techniques since the early 1990s. EVH allows surgeons to avoid problems associated with the traditional “open” vessel harvesting techniques which include significant pain and discomfort for the patient during the recovery period and post incision scars that run the full length of the patient’s leg or forearm. The large incisions resulting from the “open” technique are associated with high rates of wound complications including dehiscence, hematoma and infection, all of which are avoided through the use of EVH.

Our EVH product line consists of the ClearGlide procedural kits for saphenous vein and radial artery harvesting. The major components of these procedural kits are:

The ClearGlide Optical Vessel Dissector is a dissecting device with an optically clear blunt dissecting tip which allows videoscopic visualization and creates a cavity for instrument passage during insertion, tunneling, and dissection. The device consists of a handle, a shaft and a transparent angled blunt tip that creates an operative working space around the vein and its side branches and allows for smooth, atraumatic dissection on anterior and lateral surfaces.

The ClearGlide Ultra Retractor elevates the skin to maintain an operative working space for insertion and passage of dissecting and ligating instruments. It consists of a handle, covered cannula and a transparent blunt tip spoon that dissects tissue and creates a working space within which instruments are positioned, passed and used to manipulate tissue; and permits the user to visualize the tissue beyond the tip during insertion, tunneling, dissection and retraction.

The ClearGlide Precision Bipolar Device is used in conjunction with the ClearGlide Ultra Retractor to provide controlled coagulation and cutting in one step, minimizing instrument exchanges to accelerate EVH procedure time.

The ClearGlide Radial Artery Kit includes the Ethicon Harmonic Scalpel® shear that allows for fast, safe cutting and coagulation of the side branches of the radial artery. Use during radial artery harvesting procedures results in low vessel trauma and spasm as well as reduced blood loss versus other cutting and coagulation methods. Additional kit components include a vessel dissector which is used to ensure that the target vessel is free of all connective tissue and side branch vessels prior to ligation and extraction and endoscopic scissors used to divide and cut tissue. Finally, two tie Endoloop® ligature enables the surgeon to ligate the target vessel without making additional incisions, thus establishing the ClearGlide kit as the only true single incision procedure kit in the EVH market.

Markets, Sales and Competition. Our counterpulsation products are sold primarily to major hospitals with open-heart surgery and balloon angioplasty facilities and community hospitals with cardiac catheterization laboratories. These products have been sold, to a growing degree, to the broader range of community hospitals, where counterpulsation therapy is used for temporary support to the patient’s heart prior to transport to a major hospital center where definitive procedures, such as balloon angioplasty or open-heart surgery, can be conducted. Our main competitor for counterpulsation products is Teleflex Incorporated.

Our EVH products are sold to hospitals performing coronary artery bypass grafting procedures. This user base is consistent with our counterpulsation user base and our existing direct sales force handles both product lines. Clinical support and training for our EVH products is provided by our team of Procedural Specialists who support our sales activities. Our main competitor for EVH products is Maquet.

Manual Compression Assist Product

Our Safeguard assisted pressure device received FDA 510(k) clearance to claim reduced manual compression time to stop bleeding following femoral arterial catheterization in diagnostic and interventional procedures in March 2007. In May 2007, following FDA clearance of the new clinical claim, we tripled the Safeguard sales and marketing effort in the United States from a pilot sales group to the entire Cardiac Assist direct sales force. Safeguard is aimed at an estimated $125 million annual worldwide market.

Safeguard is a manual compression assist device used to assist in obtaining and maintaining hemostasis. It is typically used on the femoral arterial site but may also be used in brachial, radial and subclavian vessels on cardiac, dialysis and/or critical care patients. Safeguard affixes to the site with an adhesive backing and offers hands-free consistent compression through inflation of a bulb with a syringe. Safeguard 24cm was introduced in the second quarter of fiscal 2004. A second product, Safeguard 12cm was launched in March 2005.

The Safeguard device received FDA 510(k) clearance to claim reduced active (manual) compression time needed to stop bleeding following femoral arterial catheterization in diagnostic and interventional procedures in March 2007. The 510(k) included data from a controlled clinical trial of 100 patients at the Indiana Heart Hospital and St. Mary’s of Michigan, which showed that Safeguard reduced the time of manual compression needed to stop bleeding in diagnostic patients to an average of 7 minutes from an average of 29 minutes using manual compression alone (the controls). For interventional patients, Safeguard reduced manual compression time needed to stop bleeding to an average of 10 minutes compared to an average of 27 minutes using manual compression alone. By sharply reducing the amount of nursing labor devoted to post-procedure hemostasis, Safeguard adds a significant economic benefit to its use.

Advantages of Safeguard

	•		Assists in obtaining and maintaining hemostasis during patient recovery and maximizes valuable staff resources.

	•		Reduces active compression time in femoral artery cannulation following diagnostic and interventional procedures.

	•		Innovative design makes Safeguard easy to apply and simple to use.

	•		Provides direct visualization of the site and allows for immediate pressure adjustments.

	•		Enhanced patient comfort: Safeguard is flexible and conformable; it does not restrict patient mobility and no ancillary equipment or straps are required.

Significant Developments — Safeguard

Safeguard has achieved the following milestones:

	•		Safeguard device received FDA 510(k) clearance to claim reduced active (manual) compression time needed to stop bleeding following femoral arterial catheterization in diagnostic and interventional procedures in March 2007.

	•		Safeguard 12cm received the CE Mark in June 2005.

	•		Determined to be a Class I, exempt product within the FDA regulations.

	•		Safeguard 24cm received the CE Mark in October 2003.

Markets, Sales and Competition. We estimate the market for non-invasive compression assist devices to be approximately $125 million annually. We expanded the Safeguard sales and marketing effort in the United States from a pilot sales group to the entire Cardiac Assist direct sales force in May 2007.

Safeguard competes with other non-invasive devices such as FemoStop (Radi) and topical hemostatic patches. A number of companies, some of which are larger than us, manufacture and market competitive products. Among them are Abbott Laboratories, Medtronic, Vascular Solutions and Marine Polymer Technologies.

Vascular Products

Our InterVascular, Inc. subsidiary designs, manufactures and distributes a proprietary line of knitted and woven polyester vascular grafts and patches for reconstructive vascular and cardiovascular surgery. Vascular grafts are used to replace or bypass diseased arteries. In January 2007, we purchased a five-year license from the Sorin Group of Milan, Italy, for exclusive worldwide distribution rights to Sorin’s peripheral vascular stent products, excluding the United States and Japan. As part of that agreement, we received a call option to acquire Sorin’s worldwide peripheral vascular stent business within two years. In June 2008, we exercised our option to purchase Sorin’s peripheral vascular stent business. With the acquisition, we now gain the opportunity to market the product line throughout the world. The product line includes balloon-expandable and self-expanding stent systems to treat stenosis in iliac, femoral, renal and infrapopliteal arteries, as well as expandable balloons for use in PTA.

In February 2006, we became the exclusive worldwide distributor, excluding the United States and Canada, for Vascular Innovations (VI) Aorto UniFemoral (AUF) and Extender Cuff (EC) stent graft products, under a five-year license agreement with VI. The VI stent grafts are unique innovative products that address major abdominal aortic aneurysm issues (migration, endoleak type 1, complex anatomy and rupture).

Vascular Grafts and Patches

Our vascular graft products and their significant features are as follows:

Our vascular grafts, marketed under the InterGard® brand, include knitted collagen coated grafts for use in most vascular applications for reconstruction of abdominal aorta and peripheral arteries and woven products designed primarily for use in thoracic aortic repair and open-heart surgery.

InterGard® Silver is the world’s first antimicrobial vascular graft specifically designed to prevent post-operative graft-related infection by using the broad spectrum, anti-microbial properties of silver, which is released from the surface of the graft into surrounding tissues following implantation. Vascular graft infection, which occurs in 2% to 5% of cases, typically lengthens the hospital stay of a patient by up to 50 days, which results in an increase in treatment cost of approximately $85,000.

InterGard UltraThin is an innovative vascular graft designed to improve outcomes of peripheral bypass procedures. With a wall thickness of 0.35mm, InterGard UltraThin is the thinnest knitted polyester collagen coated graft on the market.

InterGard Heparin is a heparin bonded, collagen coated graft for replacement and bypass of peripheral arteries. Occlusion of a peripheral graft following surgery is the most frequent cause of graft failure. InterGard Heparin is designed to address the issue of occlusion and improve long term patency of the graft by allowing the properties of heparin to be available locally on the graft surface for several weeks following implantation. Three year results of a multicentric prospective randomized study have shown that use of InterGard Heparin has 25% better patency and 65% fewer amputations compared to ePTFE, a synthetic material frequently used for peripheral artery bypass or repair.

Our line of vascular patches, the InterVascular HemaPatch and HemaCarotid Patch products, offer the vascular surgeon a complete range of knitted, collagen coated patches in a wide range of sizes for repair of carotid and peripheral arteries. HemaPatches are available in the Silver configuration and HemaCarotid patches are also manufactured in the UltraThin configuration, with and without Heparin.

InterFlow UltraThin is an innovative ePTFE vascular graft designed for peripheral vascular reconstruction. The unique Multiporous Matrix supports tissue attachment, ensuring hemocompatibility and biocompatibility.

Vascular Stent Products

Our stent products and their significant features are as follows:

Peripheral Stents

The Sorin stent systems are coated with unique Carbofilm Technology, with biocompatible and hemocompatible characteristics, that are clinically proven and provide exclusive antithrombogenic properties.

Radix2 CarboStent is a balloon expandable stent system, indicated for renal therapy. Its unique progressive design provides an optimal longitudinal flexibility and ostial radial force, combined with deliverability.

Isthmus CarboStent is a balloon expandable stent system, indicated for iliac and femoral applications. Its radiopaque markers provide visibility and positioning.

Inperia CarboStent is the first stent system dedicated to infrapopliteal arteries and is a new technique to improve limb salvage rate for diabetic patients. Clinical data has shown significant benefits compared to standard balloon angioplasty.

Flype and Hi-Flype CarboStent are self expandable systems, designed for femoral and iliac indications. Their unique delivery system provides precise and easy handling.

Balloon Catheters

Pegaso 14 and 18 are low profile catheters, mainly indicated for below the knee and renal stenosis.

Stent Grafts

The VI Aorto UniFemoral StentGraft is indicated for use in ruptured acute aortic aneurysm (AAA), complex iliac anatomy and angulated or short aortic neck. Its balloon expandable system provides optimal adaptability through a unique size and allows suprarenal fixation. It is premounted in a 19.5 Fr. outer diameter delivery system.

The VI Extender Cuff is indicated to treat suboptimal stent graft placement at proximal aortic neck, to solve proximal type I endoleak and to extend short or angulated neck prior to bifurcated stent graft implantation. It offers a unique size for optimal adaptability, an expandable balloon with superior radial force, and is pre-mounted on a 19.5 Fr. delivery system. Its open stent structure allows suprarenal fixation.

Significant Developments

In the last few years, we have expanded our line of vascular graft and stent products and achieved the following regulatory and marketing milestones:

	•		In June 2008, we exercised our option to acquire the Peripheral Vascular Stent business of the Sorin Group of Milan.

	•		In January 2007, we purchased a five-year license from the Sorin Group of Milan, Italy, for exclusive worldwide distribution rights to Sorin’s peripheral vascular stent products, excluding the United States and Japan.

	•		InterGard Thoracic Aortic Root Graft was introduced in Europe in May 2006.

	•		Effective February 2006, InterVascular became the exclusive distributor of Vascular Innovations Stent Grafts (AUF and Extender Cuff), in all worldwide markets exclusive of Japan and the United States.

	•		HemaPatch Silver was introduced in Europe in March 2004.

	•		HemaCarotid Patch Heparin was introduced in Europe in March 2004.

	•		Interflow

Markets, Sales and Competition. Effective May 1, 2005, W.L. Gore & Associates Inc. (Gore) became the exclusive distributor of InterVascular’s full line of polyester grafts and patches in the United States. InterVascular’s products are sold by Gore’s U.S. Vascular Surgery Sales Team and co-branded under the InterVascular and Gore names.

In Europe the InterVascular product line continues to be marketed by direct sales representatives and exclusive distributors. In other international markets the InterVascular product line continues to be sold by its distributor network.

Our vascular graft products are sold to vascular and cardiothoracic surgeons. A number of companies, some of which are substantially larger than us, manufacture and market products that compete with our vascular graft products. Our major competitors are Boston Scientific, Vascutek, a Terumo company, W.L. Gore and Impra, a subsidiary of C.R. Bard, Inc.

Our peripheral stents and balloon catheters are sold to vascular surgeons, interventional radiologists, interventional cardiologists and angiologists. A number of companies, some of which are substantially larger than us, manufacture and market products that compete with our stents and balloon catheters. Our major competitors are Boston Scientific, C.R. Bard, Inc, Cordis, a Johnson & Johnson company, Abbott Vascular and Invatec.

Our AUF and Extender Cuff products are sold to interventional radiologist, vascular and cardiothoracic surgeons. A number of companies, some of which are substantially larger than us, manufacture and market products that compete with our stent grafts products. Our major competitors are Cook, Vascutek, W.L. Gore and Medtronic.

Life Science Research Products

Genisphere has developed reagents based on a new, proprietary class of DNA molecules known as 3DNAÒ, or Three Dimensional Nucleic Acid. A reagent is a biologically or chemically active substance. Genisphere’s reagents are used to detect and measure other biological substances. Our 3DNA-based reagents have been shown to provide greater sensitivity in nucleic acid and protein detection assays than it is possible to achieve using conventional detection methods.

Our life science research products are designed primarily for use in newly developed kinds of detection assays. In these markets, adoption of new technologies, such as 3DNA technology, occurs much faster and potential customers are more highly concentrated and easier to reach, when compared to the mature blot market, which was our initial target market. Our first products for these new markets were detection kits designed to improve the reliability and sensitivity of microarray experiments. We have also recently begun selling proprietary products that increase the size of nucleic acid samples and other proprietary products that increase the sensitivity of a wide range of protein assays.

A number of companies, some of which are substantially larger than us, manufacture and market products that compete with our life science research products. Our major competitors include Agilent Technologies, GE Healthcare and Applied Biosystems.

Research and Development (R&D)

We invested approximately $21.1 million or 9.1% of sales in fiscal 2008, $19.9 million or 9.3% of sales in fiscal 2007 and $19.1 million or 9.7% of sales in fiscal 2006 on research and development of new products and improvement of our existing products. We have established relationships with several teaching hospitals for the purpose of clinically evaluating our new products. We also have consulting arrangements with physicians and scientists in the areas of research, product development and clinical evaluation.

Marketing

Our products are sold primarily through direct sales representatives in the United States and a combination of direct sales representatives and independent distributors in international markets. Our largest geographic markets are the United States, Europe and Japan. Our worldwide direct sales organization employs approximately 254 people and consists of sales representatives, sales managers, clinical education specialists and sales support personnel. We have a worldwide clinical education staff, most of whom are critical care and catheterization lab nurses. They conduct seminars and provide in-service training to nurses and physicians. No customer accounted for more than 10% of our total sales in fiscal 2008, 2007 and 2006. Our primary customers include physicians, hospitals and other medical institutions.

We provide service and equipment maintenance to purchasers of our products under warranty. After the warranty expires, we provide service and maintenance on an out of warranty and contract basis. We employ service representatives in the United States, Europe and Japan and maintain service facilities in the United States, the Netherlands, France, Germany, Belgium, the United Kingdom and Japan. We conduct regional service seminars throughout the United States for our customers and their biomedical engineers and service technicians.

International sales as a percentage of our total sales were 57% in fiscal 2008, 52% in fiscal 2007 and 51% in fiscal 2006. We have subsidiaries in the United Kingdom, France, Germany, Italy, Spain, Belgium, the Netherlands and Japan. Because a portion of our international sales are made in foreign currencies, we bear the risk of adverse changes in exchange rates for such sales. Please see Notes 1, 2 and 11 to the Consolidated Financial Statements for additional information with respect to our international operations and foreign currency exposures.

Competition

We believe that customers, primarily hospitals and other medical institutions, choose among competing products on the basis of product performance, features, price and service. In general, we believe price has become an important factor in hospital purchasing decisions because of pressure to cut costs. These pressures on hospitals result from Federal and state regulations that limit reimbursement for services provided to Medicare and Medicaid patients. There are also cost containment pressures on healthcare systems outside the United States, particularly in certain European countries. Many companies, some of which are substantially larger than us, are engaged in manufacturing competing products.

Seasonality

Typically, our net sales are higher in the third and fourth quarters than the first and second quarters. Lower net sales in the first quarter result from fewer hospital procedures during the summer months. Lower net sales in the second quarter result from holidays in the United States and other markets. Independent distributors may randomly place large orders that can distort the net sales pattern just described. In addition, new product introductions, regulatory approvals and product recalls can impact the typical sales patterns.

Suppliers

Our products are made of components which we manufacture or which we purchase from existing and alternate sources of supply. Some of our products are manufactured through agreements with unaffiliated companies. We purchase certain components from single or preferred sources of supply. Our use of single or preferred sources of supply increases our exposure to price increases and production delays.

Intellectual Property

Intellectual property rights are important to our business. We own approximately 120 United States and foreign patents and have approximately 50 pending patent applications. We also rely upon trade secrets, manufacturing know-how, and licensing opportunities to maintain and advance our competitive position. Our policy is to file patent applications in the United States and foreign countries where rights are available and where we believe it is commercially advantageous to do so. We hold a number of United States and foreign patents. In addition, we also have filed a number of patent applications that are currently pending.

Employees

At the end of fiscal 2008, we had approximately 765 employees worldwide. We believe that our employee relations are satisfactory.

Orders Backlog

At June 30, 2008, we had a total backlog of unshipped customer orders of $2.3 million. Substantially all of the backlog will be delivered in fiscal 2009. The total backlog at June 30, 2007 was $2.1 million. The increase in the backlog at June 30, 2008 compared to the same period last year was primarily due to increased orders.

Regulation

Our medical devices are subject to regulation by the FDA. In some cases, they are also subject to regulation by state and foreign governments. The Medical Device Amendment of 1976 and the Safe Medical Devices Act of 1990 (the “Act”) , which are amendments to the Federal Food, Drug and Cosmetics Act of 1938, require manufacturers of medical devices to comply with certain controls that regulate the composition, labeling, testing, manufacturing and distribution of medical devices. FDA regulations known as “Current Good Manufacturing Practices for Medical Devices” provide standards for the design, manufacture, packaging, labeling, storage, installation and servicing of medical devices. Our manufacturing and assembling facilities are subject to routine FDA inspections. The FDA can also conduct investigations and evaluations of our products at its own initiative or in response to customer complaints or reports of malfunctions. The FDA also has the authority to require manufacturers to recall or correct marketed products which it believes do not comply with the requirements of these laws.

Under the Act, all medical devices are classified as Class I, Class II or Class III devices. In addition to the above requirements, Class II devices must comply with pre-market notification, or 510(k), regulations and, in some cases, with performance standards or special controls established by the FDA. Subject to certain exceptions, a Class III device must receive pre-market approval from the FDA before it can be commercially distributed in the United States. Our principal products are designated as Class II and Class III devices.

We also receive inquiries from the FDA and other agencies. Sometimes, we may disagree with positions of staff members of those agencies. To date, the resolutions of such disagreements with the staffs of the FDA and other agencies have not resulted in material cost to us.

Our international business is subject to medical device laws in countries outside the United States. Most major markets for medical devices outside the United States require clearance, approval or compliance with certain standards before a product can be commercially marketed. The applicable laws range from extensive device approval requirements in some countries for all or some of our products, to requests for data or certifications in other countries. Generally, international regulatory requirements are increasing. In the European Union, the regulatory systems have been consolidated, and approval to market in all European Union countries (represented by the CE Mark) can be obtained through one agency. In some cases, we rely on our non-U.S. distributors to obtain registration and approval for our products in a particular foreign jurisdiction.

The United States Medicare-Medicaid Anti-Kickback law, as well as many state laws, prohibit payments of any kind that are intended to induce a referral for any item payable under Medicare, Medicaid or any other governmental healthcare programs. Many foreign countries also have similar laws. We subscribe to the AdvaMed Code (AdvaMed is a U.S. medical device industry trade association) which limits certain marketing and other practices in our relationship with product purchasers. We also adhere to a similar code in Europe.

We are also subject to certain Federal, state and local environmental regulations. The cost of complying with these regulations has not been, and we do not expect them to be, material to our operations.

We are also affected by laws and regulations concerning the reimbursement of our customers’ costs incurred in purchasing our medical devices and products. Healthcare providers that purchase our medical devices and products generally rely on third-party payors, including the Centers for Medicare and Medicaid Services (CMS) which administers Medicaid and Medicare, and other types of insurance programs, to reimburse all or part of the cost of such devices.

The laws and regulations in this area are constantly changing and we are unable to predict whether, and the extent to which, we may be affected in the future by legislative or regulatory developments relating to the reimbursement of our medical devices and products.

Item 1A. Risk Factors

In addition to the other information presented in this Form 10-K, the following risk factors should be considered in evaluating our business. The following discussion of risk factors contains “forward-looking statements,” as discussed in Item 1. Our business and financial condition could be materially adversely affected by any of these risks and our future operating results may differ materially from the results described in this report due to the risks and uncertainties related to our business and our industry, including those discussed below. The risks described below are not the only risks we face. Please note that additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, financial condition or results of operations.

Our markets are highly competitive and we face rapid technological changes in the medical device industry, which may impact the growth of our business.

Our future growth is dependent upon our ability to market our products effectively in a strong competitive environment and respond to rapidly changing technology and alternative products/treatments. The medical device market is intensely competitive and we encounter significant competition from various medical device companies in each market in which our products are sold. Our competitors range from small start-up companies to companies which are larger than we are and have significantly greater resources and broader product offerings. We expect competition will continue to intensify as the medical device industry consolidates and new competitors, products and treatments are brought into the market. In addition, we face competition from alternative therapies primarily in our Cardiac Assist and Vascular Products businesses.

Our customers consider many factors when choosing suppliers, including product reliability, clinical outcomes, product availability, price and services provided by the manufacturer. Market share can shift as a result of technological innovation and other business factors. We may experience decreasing prices for the products and services we offer due to pricing pressure experienced by our customers from managed care organizations and other third-party payors, increased market power of our competitors as the medical device industry consolidates and increased competition among medical device companies. If the prices for our products and services decrease and we are unable to reduce our expenses, our results of operations will be adversely affected.

Our future growth is dependent upon the development of new products, which requires significant research and development, clinical trials and regulatory approval, and therefore may not result in commercially viable products.

Our future growth is dependent upon the development of new products, which requires that significant resources be devoted to research and development activities, clinical trials and obtaining regulatory approval. In order to develop new products and improve current product offerings, we focus our research and development programs largely on the development of next-generation and new technology offerings. We have continued to increase our investments in R&D over the past few years and anticipate that we will continue to increase R&D spending in the future. If we are unable to develop and launch new products as anticipated, or if our R&D efforts do not achieve technical feasibility, our ability to maintain or expand our market position may be adversely impacted.

Failure to successfully select, negotiate and integrate acquired technologies, products or businesses could adversely affect our business.

As part of our strategy to develop and identify new products and technologies, we have made acquisitions and investments in recent years, including our acquisition of the Sorin Peripheral Vascular Stent business in June 2008 and the ClearGlide EVH product in January 2006.

The success of any acquisition or investment that we may undertake will depend on a number of factors, including:

	•		our ability to identify suitable opportunities for acquisition or investment

	•		our ability to finance any future acquisition or investment on terms acceptable to us

	•		litigation related to acquired technologies

	•		our ability to integrate the acquired business or technology successfully with our existing business

	•		the presence or absence of adequate internal controls and/or significant fraud in the financial systems of acquired companies

	•		adverse developments arising out of investigations by governmental entities of the business practices of acquired companies

	•		any decrease in customer loyalty and product orders caused by dissatisfaction with our combined product lines and sales and marketing practices, including price increases

If we are unsuccessful in our acquisitions or investments, we may be unable to continue to grow our business significantly or may need to record asset impairment charges in the future.

We are subject to widespread government regulation which may delay the approval of our products or result in the recall of previously approved products.

We are subject to compliance with numerous Federal, state and international government regulations regarding design, manufacturing, labeling, packaging, storage, distribution, installation and service of medical devices. Our products, development activities and manufacturing processes are subject to extensive and rigorous regulation by the FDA pursuant to the Federal Food, Drug, and Cosmetic Act (the “FDC Act”), by comparable agencies in foreign countries, and by other regulatory agencies and governing bodies. Under the FDC Act, medical devices must receive FDA clearance or approval before they can be commercially marketed in the United States. In addition, most major markets for medical devices outside the U.S. require clearance, approval or compliance with certain standards before a product can be commercially marketed. Under the Safe Medical Device Act of 1990, all medical devices are classified as Class I, Class II or Class III devices. In addition to the above requirements, Class II devices must comply with pre-market notification, or 510(k), regulations and with performance standards or special controls established by the FDA. Subject to certain exceptions, a Class III device must receive pre-market approval from the FDA before it can be commercially distributed in the United States. Our principal products are designated as Class II and Class III devices. The process of obtaining marketing approval or clearance from the FDA for new products, or with respect to enhancements or modifications to existing products, could:

	•		take a significant period of time

	•		require the expenditure of substantial resources

	•		involve rigorous pre-clinical and clinical testing

	•		require changes to the products

	•		result in limitations on the indicated uses of the products

As a device manufacturer, we are subject to periodic inspection by the FDA for compliance with the FDA’s Quality System Regulation requirements, which require manufacturers of medical devices to adhere to certain regulations, including testing, quality control and documentation procedures. In addition, the Federal Medical Device Reporting regulations require us to provide information to the FDA whenever there is evidence that reasonably suggests that a device may have caused or contributed to a death or serious injury or that it malfunctioned in a way that could cause or contribute to a death or serious injury. Compliance with applicable regulatory requirements is subject to continual review and is rigorously monitored through periodic inspections by the FDA. In the European Community, we are required to maintain certain ISO certifications in order to sell our products and must undergo periodic inspections by notified bodies to obtain and maintain these certifications.

Even after products have received marketing approval or clearance, product approvals and clearances by the FDA can be withdrawn due to failure to comply with regulatory standards or the occurrence of unforeseen problems following initial approval. There can be no assurance that we will receive the required clearances from the FDA for new products or modifications to existing products on a timely basis or that any FDA approval will not be subsequently withdrawn. The failure to receive product approval clearance on a timely basis, suspensions of regulatory clearances, seizures or recalls of products or the withdrawal of product approval by the FDA could have a material adverse effect on our business, financial condition or results of operations because we would not be able to sell unapproved or recalled products and we may incur significant costs related to product recalls.

Cost containment pressures and legislative or regulatory reforms may decrease the demand for our products and the prices that customers are willing to pay for our products.

Our future growth is dependent upon health care cost containment and third party/government reimbursement policies including the impact of hospital buying groups and industry consolidation. Healthcare costs have significantly risen over the past decade. There have been and may continue to be proposals by legislators, regulators and third-party payors to control these costs. Certain reform proposals and other policy changes, if passed, could impose limitations on the prices we will be able to charge for our products, or the amounts of reimbursement available for our products from governmental agencies or third-party payors. These limitations could have a material adverse effect on our financial position and results of operations because our sales revenue would be reduced.

Since we derive a significant portion of our revenues from international operations, changes in international economic or regulatory conditions could have a material impact on the results of our operations.

Our products are currently marketed around the world, with our largest geographic markets outside of the United States being Europe and Japan. Our continuing operations in countries outside the United States accounted for approximately 57% of our sales in fiscal 2008. We intend to continue to pursue growth opportunities in international markets which subjects us to risks generally associated with international operations, such as: unexpected changes in regulatory requirements; tariffs, customs, duties and other trade barriers; difficulties in staffing and managing foreign operations; differing labor regulations; longer payment cycles; problems in collecting accounts receivable; risks arising from a specific country’s or region’s political or economic conditions, including the possibility of terrorist actions; fluctuations in currency exchange rates; foreign exchange controls that restrict or prohibit repatriation of funds; export and import restrictions or prohibitions; delays from customs brokers or government agencies; changes in foreign medical reimbursement policies and programs; differing protection of intellectual property; and potentially adverse tax consequences resulting from operating in multiple jurisdictions with different tax laws. Any one or more of these risks could materially adversely impact the success of our international operations.

Reduction or interruption in supply of components and materials used to manufacture our products, resulting from events such as damage to any of our manufacturing facilities or the loss of any of our sole-source suppliers, and the inability to develop alternative sources of supply, could impair our ability to meet sales demand and adversely affect our manufacturing operations and related product sales.

Reduction or interruption in the supply of components and materials used to manufacture our products, reliance on third party manufacturers for certain products, and damage to any of our manufacturing facilities, which could temporarily impair our ability to meet sales demand, may adversely affect our manufacturing and distribution operations and related product sales. If an event occurred that resulted in damage to one or more of our facilities, we may be unable to manufacture the relevant products at previous levels or at all. In addition, we purchase many of the components and raw materials used in manufacturing our products from numerous suppliers. For reasons of quality assurance, sole source availability or cost effectiveness, certain components and raw materials are available only from a sole supplier. Due to the FDA’s stringent regulations and requirements regarding the manufacture of our products, we may not be able to quickly establish additional or replacement

sources for certain components or materials. The reduction or interruption in supply, and an inability to develop alternative sources for such supply, could adversely affect our ability to manufacture our products in a timely or cost effective manner.

A loss of key personnel or our inability to attract and retain additional personnel may adversely affect our business.

Our future growth is dependent upon our reliance on key employees, including executive officers, management, sales and technical employees involved in R&D. The talent and drive of our employees is an important factor in the success of our business. Our sales, technical and other key personnel play an integral role in developing, marketing and selling of new and existing products. If we are unable to recruit, hire, develop and retain talented employees and key management we may not be able to meet our business objectives.

If we are unable to protect our intellectual property successfully our business could be adversely affected.

Intellectual property rights are important to our business and our ability to compete effectively with other companies is dependent upon the proprietary nature of our technologies. We also rely upon trade secrets, manufacturing know-how, continuing technology innovations and licensing opportunities to maintain and improve our competitive position. Our policy is to file patent applications in the United States and foreign countries where rights are available and where we believe it is commercially advantageous to do so. We hold a number of U.S. and foreign patents. In addition, we also have filed a number of patent applications that are currently pending. Pending or future patent applications may not result in issued patents, current or future patents issued to or licensed by us may be challenged, invalidated or circumvented and the rights granted thereunder may not provide a competitive advantage to us or prevent competitors from entering markets which we currently serve. In addition, we may have to take legal action in the future to protect our trade secrets or know-how or to defend them against claimed infringement of the rights of others. Any legal action of that type could be costly and time consuming to us and any lawsuit may not be successful. The invalidation of key patents or proprietary rights which we own or an unsuccessful outcome in lawsuits to protect our intellectual property could increase the competitive pressures that we face and therefore have a material adverse effect on our financial condition and results of operations.

Pending and future litigation and any resulting settlement awards may be costly and impact our ability to obtain cost-effective third-party insurance coverage in the future.

We are a defendant in various proceedings, legal actions and claims arising in the normal course of business, including product liability and other matters. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. To mitigate losses arising from unfavorable outcomes related to product liability and general liability matters, we purchase third-party insurance coverage subject to deductibles and loss limitations. We may incur significant legal expenses regardless of whether we are found to be liable. In addition, such product liability settlements may negatively impact our ability to obtain cost-effective third-party insurance coverage in future periods.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

The following table contains information concerning our significant real property that we own or lease:


		Ownership or
	General Character	Expiration
Location	and Use of Property	Date of Lease

Fairfield, New Jersey	75,000 sq. feet, used for Cardiac Assist Products headquarters, manufacturing and R&D of intra-aortic balloons, R&D of endoscopic vessel harvesting products and Safeguard.	Owned

Hatfield, Pennsylvania	15,000 sq. feet, used for Genisphere manufacturing, distribution, R&D and warehousing.	Leased (until 6/30/11)

La Ciotat, France	30,000 sq. feet, used by InterVascular for manufacturing, R&D and warehousing of vascular grafts, and administrative offices.	Owned

Mahwah, New Jersey	90,000 sq. feet, used for warehousing, packaging, distribution and service offices of Cardiac Assist Products, and offices for IT and customer service.	Owned

Montvale, New Jersey	38,000 sq. feet, used for corporate headquarters	Owned

We also lease office space in England, France, Italy, Belgium, Germany and Japan We believe that our facilities and equipment are in good working condition and are adequate for our needs.

Item 3. Legal Proceedings

We are subject to certain legal actions, including product liability matters, arising in the ordinary course of our business. We believe we have meritorious defenses in all material pending lawsuits. We also believe that we maintain adequate insurance against any potential liability for product liability litigation. In accordance with generally accepted accounting principles we accrue for legal matters if it is probable that a liability has been incurred and an amount is reasonably estimable.

The Public Prosecutor’s Office in Darmstadt, Germany is conducting an investigation of current and former employees of one of our German subsidiaries. The investigation concerns marketing practices prior to February 2003 under which benefits were provided to customers of the subsidiary. We cooperated with the police portion of the investigation that has now been concluded with the filing of a report of the findings with the prosecutor’s office in April 2007. The prosecutor is now reviewing the report to determine how he will proceed. We cannot predict at this time what the outcome of the prosecutor’s review will be, although, we do not believe that it will have a material adverse effect on our business or consolidated financial statements.

The parties have agreed that this matter should be consolidated with the first case and the consolidation has taken place. A jury trial took place in late June 2007 that resulted in a finding that the ProLumen product infringed one or more claims of each of the three patents, that we owed approximately $690,000 in damages to the plaintiffs and an injunction was issued precluding us from further selling the ProLumen product. We filed a Notice of Appeal regarding the lower court’s decision. The appeal has been briefed and was argued before the United States Court of Appeals for the Federal Circuit on April 8, 2008 and we are awaiting a decision. We believe we will be successful on appeal in overturning the lower court’s findings and, therefore, an accrual for the royalty liability has not been recorded and no impairment of the assets related to ProLumen has been taken.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 4A. Executive Officers of the Company

The following table sets forth the names, ages, positions and offices of our executive officers:


Name	Age		Positions and Offices Presently Held

Lawrence Saper		80	Chairman of the Board and Chief Executive Officer
Antonino Laudani		49	Vice President and Chief Operating Officer
Henry M. Scaramelli		55	Vice President, Finance and Chief Financial Officer
Fred Adelman		55	Vice President, Chief Accounting Officer and Treasurer
Nicholas E. Barker		50	Vice President, Corporate Design
Robert O. Cathcart		48	Vice President; President, Interventional Products Division
Timothy J. Krauskopf		47	Vice President, Regulatory and Clinical Affairs
Boris Leschinsky		43	Vice President, Technology

PART II


Item 5.		*Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities*

Market Information

Our common stock is traded over-the-counter and is listed on the NASDAQ Global Select Market (NASDAQ). Our NASDAQ symbol is DSCP. The following table sets forth, for each quarter period during the last two fiscal years, the high and low sale prices as reported by NASDAQ and the quarterly dividends per share declared by us.


Fiscal Year	High		Low		Dividends
2007
First Quarter	$	35.83	$	29.23	$	1.07	(a)
Second Quarter		37.23		32.49		0.10
Third Quarter		37.98		33.85		0.10
Fourth Quarter		39.06		34.98		0.10

2008
First Quarter	$	39.34	$	29.29	$	0.10
Second Quarter		40.00		32.58		1.20	(b)
Third Quarter		41.70		31.75		—
Fourth Quarter		48.75		36.86		0.10


(a)		In fiscal 2007, we declared a special dividend of $1.00 per share, or $15.3 million, which was paid on October 6, 2006 to holders of record on September 28, 2006.

(b)		In fiscal 2008, we declared a special dividend of $1.00 per share, or $15.4 million, paid on October 15, 2007 to stockholders of record as of October 1, 2007

As of August 29, 2008, there were approximately 475 holders of record of our common stock.

Performance Graph

The following graph compares the cumulative total shareholder return on our common stock with the cumulative total return of the Standard & Poor’s 500 Stock Index and the Standard & Poor’s Health Care Equipment Index for the five year period commencing July 1, 2003 and each subsequent June 30 through June 30, 2008. The graph assumes that the value of the investment in Common Stock was $100 on July 1, 2003 and that all dividends were reinvested.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN

Dividend Policy

On December 7, 1999, the Board of Directors inaugurated quarterly cash dividends. Our dividend policy is reviewed periodically.

Recent Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

The following table sets forth information on repurchases by us of our common stock during the fourth quarter of the fiscal year ended June 30, 2008.


					Total Number		Maximum Dollar
					of Shares		Value of Shares
					Purchased as		that May Yet Be
	Total				Part of		Purchased
	Number of		Average		Publicly		Under the
	Shares		Price Paid		Announced		Programs
Fiscal Period	Purchased		Per Share		Programs		($ 000’s)
4/01/08 — 4/30/08		—	$	—		—	$	41,103
5/01/08 — 5/31/08		—		—		—	$	41,103
6/01/08 — 6/30/08		—		—		—	$	41,103

Total Fourth Quarter		—	$	—		—	$	41,103

The current stock repurchase programs were announced on May 16, 2001 and September 15, 2006. Approval was granted for up to $40 million in repurchases for each program and there are no expiration dates on the current programs.

Item 6. Selected Financial Data

The following table sets forth selected consolidated financial data for Datascope as of the dates and for the periods indicated. The data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and related notes thereto on pages F-1 to F-43.

Earnings Statement Data:
(In thousands, except per share data)


	Year Ended June 30,
	2008			2007			2006			2005			2004

Net sales	$	230,915		$	212,991		$	196,516		$	179,266		$	164,390
Cost of sales		80,013			74,148			68,320			59,176			55,387

Gross profit		150,902			138,843			128,196			120,090			109,003

Research and development expenses		21,079			19,901			19,129			20,330			17,463
Selling, general and administrative expenses		92,617			87,424			81,152			78,509			75,012
Other items (a)		—			8,737			—			6,954			—

		113,696			116,062			100,281			105,793			92,475

Operating earnings		37,206			22,781			27,915			14,297			16,528
Other (income) expense:
Interest income		(2,698	)		(2,479	)		(2,225	)		(2,228	)		(1,822	)
Interest expense		84			36			228			221			25
Dividend income (b)		—			(196	)		(4,523	)		—			—
Gain on sale of investments (c)		(13,173	)		(1,273	)		—			—			—
Other, net		1,727			737			1,414			513			423

		(14,060	)		(3,175	)		(5,106	)		(1,494	)		(1,374	)

Earnings from continuing operations before income taxes		51,266			25,956			33,021			15,791			17,902
Income taxes		17,488			7,662			8,289			3,804			4,745

Net earnings from continuing operations		33,778			18,294			24,732			11,987			13,157
Net (loss) earnings from discontinued operations (d)		(3,544	)		(829	)		1,111			2,659			10,751
Net gain on sale of discontinued operations (e)		76,672			—			—			—			—

Net earnings	$	106,906		$	17,465		$	25,843		$	14,646		$	23,908


Net earnings per share, basic:
Continuing operations	$	2.19		$	1.20		$	1.65		$	0.81		$	0.89
Net earnings	$	6.92		$	1.15		$	1.73		$	0.99		$	1.62

Net earnings per share, diluted:
Continuing operations	$	2.16		$	1.19		$	1.62		$	0.79		$	0.87
Net earnings	$	6.85		$	1.14		$	1.69		$	0.97		$	1.58

Weighted average number of common shares outstanding
Basic		15,441			15,244			14,974			14,795			14,782
Diluted		15,617			15,387			15,296			15,124			15,121

Cash dividends declared per common share	$	1.40		$	1.37		$	1.28		$	2.28		$	0.35

Balance Sheet Data:
(In thousands)


	As of June 30,
	2008		2007		2006		2005		2004

Total assets	$	523,738	$	376,156	$	375,680	$	357,082	$	368,335
Working capital		279,201		147,318		157,547		128,960		119,868
Stockholders’ equity		405,550		293,087		293,738		265,865		292,570
Cash dividends declared (f)		21,662		20,883		19,112		33,765		5,177


(a)		Other items include: special charges of $8.7 million in fiscal 2007 comprised of: $4.7 million for the workforce reductions in Genisphere, Corporate and the European sales organization, Genisphere goodwill impairment of $2.3 million and ethics line inquiry expenses of $1.7 million and special charges in fiscal 2005 related to write-downs of investments in two medical technology companies, discontinued development projects and severance charges.

(b)		Dividend income in fiscal 2007 and 2006 was related to a special dividend from a preferred stock investment.

(c)		Gain on sale of investments related to sale of the Masimo investment in fiscal 2008; in fiscal 2007 related to sale of an investment that was impaired in fiscal 2002.

(d)		Net (loss) earnings from discontinued operations relates to the PM and IP businesses.

(e)		Net gain on sale of discontinued operations relates to sale of the PM business in May 2008.


(f)		In fiscal 2008, the company declared a special dividend of $1.00 per share, or $15.4 million, paid on October 15, 2007 to stockholders of record as of October 1, 2007. In fiscal 2007, the Company declared a special dividend of $1.00 per share, or $15.3 million, paid on October 6, 2006 to stockholders of record as of September 28, 2006. In fiscal 2006, the Company declared a special dividend of $1.00 per share, or $14.9 million, which was paid on January 18, 2006 to holders of record on December 27, 2005. In fiscal 2005, the Company declared a special dividend of $2.00 per share, or $29.6 million, which was paid on October 8, 2004 to holders of record on September 30, 2004. In fiscal 2004, the Company declared a special dividend of $0.15 per share, or $2.2 million, which was paid on October 1, 2003 to holders of record on September 2, 2003.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Datascope Corp. is the global leader of intra-aortic balloon counterpulsation and a diversified medical device company that develops, manufactures and markets proprietary products for clinical health care markets in interventional cardiology and radiology, cardiovascular and vascular surgery, and critical care. Our products are sold throughout the world through direct sales representatives and independent distributors. Our largest geographic markets are the United States, Europe and Japan.

Our sales growth depends in part upon the successful development and marketing of new products. We continue to invest in research and development. Our growth strategy includes selective acquisitions or licensing of products and technologies from other companies.

Effective May 1, 2008, we sold our PM business to Mindray Medical International Limited. The sale of the PM business allows us to focus our efforts on our Cardiac Assist Products and Vascular Products segments. We received approximately $209 million in cash at the closing and retained approximately $30 million of receivables generated by the PM business.

In October 2006, we announced a plan to exit the vascular closure market and phase out the Interventional Products IP business. On August 6, 2008, we completed the sale of assets related to the VasoSeal, On-Site, and X-Site vascular closure devices, and our collagen operations, to St. Jude Medical, Inc. for $21.0 million in cash at closing and $3.0 million to be paid upon the expiration of an 18 month indemnification period. We plan to seek the sale or independent distribution of our ProLumen™ thrombectomy device for the interventional radiology market, although these plans are subject to the reversal of a verdict that is being appealed (see Special Items below for a discussion of litigation related to ProLumen). In February 2007, we completed the sale of our ProGuide™ chronic dialysis catheter and the associated assets for $3.0 million plus a royalty on future sales of the ProGuide catheter.

In June 2008, we exercised our option to acquire the Peripheral Vascular Stent business of the Sorin Group of Milan. The acquisition follows our successful experience as exclusive distributor of the Sorin peripheral stent product line in Europe, during which sales have grown rapidly since the product launch in January 2007. With the acquisition, we now gain the opportunity to market the product line throughout the world. We estimate the worldwide market at $800 million annually, of which $200 million is in Europe, $500 million is in the United States and $40 million is in Japan.

In January 2006, we acquired the ClearGlide® endoscopic vessel harvesting (EVH) product, from Ethicon, a Johnson & Johnson company. EVH devices enable less-invasive techniques for the harvesting of suitable vessels for use in coronary artery bypass grafting. The vessel harvesting product line was integrated into the Cardiac Assist business, which markets its products to cardiac surgeons who perform coronary bypass graft surgery. We estimate the potential annual market for EVH to be $220 million.

Our Safeguard™ assisted pressure device received FDA 510(k) clearance to claim reduced manual compression time to stop bleeding following femoral arterial catheterization in diagnostic and interventional procedures in March 2007. In May 2007, following FDA clearance of the new clinical claim, we tripled the Safeguard sales and marketing effort in the United States from a pilot sales group to the entire Cardiac Assist direct sales force. Safeguard is aimed at an estimated $125 million annual worldwide market.

We are committed to improving our operating margins through increasing the efficiency of our manufacturing operations and cost containment programs.

Due to the sale of the PM and IP businesses, which are classified as discontinued operations, the below Results of Operations relates to our continuing businesses, primarily Cardiac Assist and InterVascular.

Results of Operations

Financial Summary

The following table shows the comparison of net earnings and earnings per diluted share from continuing operations over the past three fiscal years.


	(Dollars in millions, except per share data)
	Year ended June 30,
	2008		2007		2006
Net earnings from continuing operations	$	33.8	$	18.3	$	24.7
Earnings per share from continuing operations, diluted	$	2.16	$	1.19	$	1.62

Net Earnings from Continuing Operations

Net earnings from continuing operations were $33.8 million, or $2.16 per diluted share, in fiscal 2008 compared to $18.3 million, or $1.19 per diluted share, in fiscal 2007. Higher earnings in fiscal 2008 were primarily attributable to the higher after-tax gain on sale of investment this year ($6.5 million) and increased earnings in the Cardiac Assist Products segment ($4.7 million) due primarily to a higher gross profit ($15.2 million) from higher sales.

Net earnings from continuing operations were $18.3 million, or $1.19 per diluted share, in fiscal 2007 compared to $24.7 million, or $1.62 per diluted share, in fiscal 2006. The decrease in net earnings from continuing operations and earnings per diluted share in fiscal 2007 compared to fiscal 2006 was primarily attributable to charges associated with workforce reductions ($4.7 million), Genisphere goodwill impairment ($2.3 million) and inquiry expenses ($1.7 million), increased selling and marketing expenses in the Cardiac Assist segment ($3.8 million) primarily associated with the introduction of new products, filling open positions and a full year of EVH selling expense, lower special dividend income ($4.3 million) in fiscal 2007 compared to fiscal 2006 and a higher tax rate of 27.9% compared to 21.6% in fiscal 2006. Partially offsetting the above was the higher gross profit ($10.6 million) on higher sales.

Net Loss from Discontinued Operations

Net (loss) earnings from discontinued operations of the PM and IP businesses were ($3.5 million) in fiscal 2008, ($0.8 million) in fiscal 2007 and $1.1 million in fiscal 2006.

Gain on sale of Discontinued Operations

In the fourth quarter of fiscal 2008, we recognized a gain on sale of the PM business of $76.7 million, net of tax.

Comparison of Results (Continuing Operations) — Fiscal 2008 vs. Fiscal 2007

Net Sales (Sales)

The following table shows sales by reportable segment over the past three fiscal years.


	Sales by Product Line
	(Dollars in millions)
	Year ended June 30,
	2008			2007			2006

Cardiac Assist Products Segment	$	189.3		$	178.3		$	164.8
% change from prior year		6	%		8	%		16	%
% of total sales		82	%		83	%		83	%

Vascular Products Segment	$	40.3		$	33.5		$	30.1
% change from prior year		20	%		11	%		(15	)%
% of total sales		17	%		16	%		16	%

Corporate and Other
Genisphere	$	1.3		$	1.2		$	1.6
% change from prior year		—			—			—
% of total sales		1	%		1	%		—
Total sales	$	230.9		$	213.0		$	196.5
% change from prior year		8	%		8	%		10	%

Sales in fiscal 2008 of $230.9 million increased $17.9 million or 8% compared to $213.0 million in fiscal 2007. Favorable foreign exchange translation increased sales by $5.4 million, or 2% as a result of the weaker U.S. dollar relative to the Euro and the British Pound, the primary currencies in countries in which we have direct sales subsidiaries.

Sales in the United States of $98.8 million, decreased $3.7 million or 4% compared to fiscal 2007, attributable to decreased sales in Cardiac Assist ($2.6 million) and Vascular Products ($1.2 million). Sales in international markets of $132.2 million increased $21.7 million or 20% compared to fiscal 2007. Favorable foreign exchange translation increased international sales by $5.4 million, or 4% due to increased sales in Cardiac Assist ($13.6 million) and Vascular products ($8.0 million).

Cardiac Assist

Sales of Cardiac Assist products in fiscal 2008 increased 6% to $189.3 million, primarily reflecting 18% growth in sales of intra-aortic balloons (“IABs”) in international markets and increased sales of IABs in the United States (3%), the first year-over-year increase in 8 years.

We believe that renewed IAB sales growth in the United States stems from a reorganized and expanded direct sales force that is focused on the clinical benefits of IAB use, and has led to increasing use in cardiac catheterization and open-heart surgical procedures.

International sales of IABs in fiscal 2008 benefited from an initial stocking order to our new distributor in Japan, which was partially offset by reduced shipments to the former distributor. At the end of December 2007, Datascope Japan K.K., a wholly-owned subsidiary of Datascope Corp., began management of Datascope’s Intra-Aortic Balloon Pump (IABP) business in Japan. Datascope Japan K.K. is responsible for import, product service, sales support and product surveillance of the IABP business. USCI Holdings Ltd., our new exclusive distributor is responsible for sales distribution throughout Japan.

Sales of the Safeguard device, which grew 15% over last year, has also increased our presence in the cardiac catheterization lab and given our sales representatives additional opportunities to promote the use of IABs.

Sales of balloon pumps grew 1% over last year, as increased sales in international markets (11%) was partially offset by reduced sales (9%) in the United States, due to record sales last year resulting from the introduction of the CS300™ balloon pump in March 2007.

Favorable foreign exchange translation contributed $3.3 million to Cardiac Assist sales in fiscal 2008.

Vascular Products

Sales of vascular products in fiscal 2008 increased 20% to $40.3 million principally due to sales of peripheral vascular stent products, acquired from Sorin Group, of Milan, Italy. Vascular graft sales increased 11% due to an 18 % increase in sales to international markets as market share increased to offset continued growth of less invasive therapies and competitive pricing pressure in the European markets. Sales of grafts to our exclusive distributor in the United States decreased 25% due to an inventory reduction plan implemented by the distributor. Favorable foreign exchange translation contributed $2.1 million to vascular product sales in fiscal 2008.

Genisphere

Sales of Genisphere products of $1.3 million in fiscal 2008 increased $0.1 million or 7% compared to fiscal 2007. Genisphere continued to pursue its marketing strategy to develop products for use in newly developed protein and nucleic acid detection platforms.

Costs and Expenses

Gross Profit (Net Sales Less Cost of Sales)

Gross profit increased $12.1 million or 9% as a result of increased sales in the Cardiac Assist Products segment ($11.0 million) and the Vascular Products segment ($5.7 million). Gross margin was 65.3% for fiscal 2008 compared to 65.2% last year. The slightly higher gross margin in fiscal 2008 compared to fiscal 2007 was principally due to an improved mix of products as a result of increased sales of higher margin IABs and reduced sales of balloon pumps.

Research and Development (R&D)

R&D expense includes new product development and improvements of existing products, as well as expenses for regulatory filings and clinical evaluations. R&D expense was $21.1 million in fiscal 2008, equivalent to 9.1% of sales, compared to $19.9 million or 9.3% of sales last year.

R&D expense for the Cardiac Assist Products segment was $11.1 million in fiscal 2008 compared to $11.7 million last year, with the decrease primarily due to higher capitalization of balloon pump software development costs this year, which reduced R&D expenses compared to the prior year ($1.2 million) and lower new product development expenses ($0.4 million), partially offset by regulatory costs in our new subsidiary in Japan ($1.1 million).

R&D expense for the Vascular Products segment was $5.4 million in fiscal 2008 compared to $4.4 million in the corresponding period last year, with the increase primarily attributable to higher product validation costs ($0.6 million) and unfavorable foreign currency translation ($0.5 million)

The balance of consolidated R&D is in the Corporate and Other segment and amounted to $4.6 million in fiscal 2008 compared to $3.8 million in the corresponding period last year. Corporate and Other R&D includes corporate design, technology, regulatory and Genisphere R&D expenses.

Selling, General and Administrative (SG&A)

Total SG&A expense was $92.6 million in fiscal 2008 or 40.1% of sales, compared to $87.4 million or 41.0% of sales, last year.

SG&A expense for the Cardiac Assist Products segment of $74.8 million, increased $6.1 million or 9% in fiscal 2008 primarily attributable to expenses associated with our new subsidiary in Japan ($2.1 million), higher corporate allocation ($2.0 million) and unfavorable foreign currency translation ($1.5 million). As a percentage of segment sales, SG&A expense was 39.5% in fiscal 2008 compared to 38.5% in the corresponding period last year.

SG&A expense for the Vascular Products segment of $21.3 million, increased $0.2 million or 1% in fiscal 2008 primarily attributable to unfavorable foreign currency translation ($2.0 million) and higher selling and marketing expenses ($0.9 million), partially offset by lower corporate allocation ($2.7 million). As a percentage of segment sales, SG&A expense was 52.8% in fiscal 2008 compared to 63.0% in the corresponding period last year.

Segment SG&A expense includes allocated corporate G&A charges.

The weaker U.S. dollar compared to the Euro and the British Pound increased total SG&A expense by approximately $5.2 million in fiscal 2008.

Special Charges

Fiscal 2007

Workforce Reductions in the European Sales Organization , Genisphere and Corporate

In fiscal 2007, we reduced the workforce in the European sales organization, Genisphere and Corporate and recorded a charge of $4.7 million for severance, settlement and other termination benefits. The workforce reductions resulted primarily from the merger of the European sales organization and outsourcing the corporate legal and internal audit functions. All of the terminated employees left the Company by the end of fiscal 2007.

Genisphere Goodwill Impairment

Genisphere goodwill was determined to be completely impaired based on the annual goodwill impairment test performed in fiscal 2007. Slower growth in Genisphere’s markets primarily attributable to increased competition in the DNA microarray market, had a negative impact on Genisphere’s operating results and resulted in lower growth expectations. As a result, we recorded a goodwill impairment charge of $2.3 million in the fourth quarter of fiscal 2007.

Inquiry Expenses

In fiscal 2007, we incurred expenses of $1.7 million related to the Audit Committee investigations of ethics line reports related to the Chairman and Chief Executive Officer and an executive officer in Europe. The ethics line permits persons to report activities that they characterize as improper on an anonymous basis. The Audit Committee engaged independent counsel and forensic accountants to investigate these charges.

As disclosed in our Form 8-K filings, based on the results of the investigations, the Audit Committee concluded that there was no evidence to support the allegations made in the ethics line reports. The Audit Committee, with the assistance of independent counsel and independent forensic accountants, also reviewed the matters raised by the Internal Audit Department and Legal Department concerning the Chairman and found the issues raised by them to be without merit.

The special charges noted above were reflected in the Cardiac Assist Products segment ($1.1 million), the Vascular Products segment ($1.1 million) and Corporate and Other ($6.5 million).

Interest Income

Interest income was $2.7 million in fiscal 2008 compared to $2.5 million last year with the increase primarily attributable to a higher average portfolio balance ($73.0 million vs. $50.6 million), partially offset by a decrease in the interest rate yield to 3.26% from 4.60%.

Other, Net

Other, net increased $0.8 million in fiscal 2008 compared to the same period last year attributable primarily to higher foreign exchange losses on inter-company receivables.

Gain on Sale of Investments

We had a preferred stock investment of $5.0 million in Masimo Corporation, a supplier to the PM business. On August 13, 2007, Masimo completed its initial public offering, and concurrently, we sold substantially all of our investment in Masimo, resulting in a pretax gain on the sale of approximately $13.2 million in the first quarter of fiscal 2008.

Income Taxes

In fiscal 2008, the consolidated effective tax rate for continuing operations was 34.1% compared to 29.5% last year. The higher tax rate in fiscal 2008 compared to last year was primarily attributable to the higher tax rate on the gain on sale of investment in the first quarter of fiscal 2008, expiration of the extraterritorial income exclusion on December 31, 2006 and a shift in the geographical mix of earnings to higher taxed jurisdictions. Our effective tax rate could be impacted by changes in the geographic mix of our earnings. Partially offsetting the above was favorable tax adjustments as a result of the expiration of federal and foreign statutes of limitations for fiscal 2004 and other tax benefits recognized due to the sale of the PM business.

Comparison of Results (Continuing Operations) — Fiscal 2007 vs. Fiscal 2006

Sales

Cardiac Assist

Sales of Cardiac Assist Products in fiscal 2007 increased 8% to $178.3 million. Sales of balloon pumps increased 7% and sales of intra-aortic balloons (IABs) increased 2%. Sales of ClearGlide EVH products rose in the first full year of sales since it was acquired in January 2006. Favorable foreign exchange translation contributed $2.5 million to Cardiac Assist sales in fiscal 2007.

Sales growth of balloon pumps reflects strong global demand for our new CS300™ balloon pump, launched in March 2007, and continued growth of replacements of older pump models from the large installed base of our balloon pumps in the United States (23%). Sales of IABs increased principally due to increased volume (3%) in international markets.

The new generation CS300 balloon pump teams up with the new Sensation™ 7 Fr. fiber-optic balloon catheter to provide higher fidelity blood pressure monitoring while eliminating the need for an additional invasive arterial pressure line as required by conventional balloon pump systems. At 7 Fr. in diameter (2.3 mm or 0.093 inch), the Sensation is also the world’s smallest diameter IAB, a highly desirable feature. These new products underscore Datascope’s leadership in the worldwide market for counterpulsation therapy. The Sensation product began shipping in June 2007, and therefore made only a modest contribution to the 2007 increase in Cardiac Assist revenues.

Vascular Products

Sales of vascular products in fiscal 2007 increased 11% to $33.4 million principally due to sales of peripheral vascular stent products, acquired from Sorin Group, of Milan, Italy, in January 2007. Favorable foreign exchange translation contributed $1.3 million to vascular product sales in fiscal 2007.

The five-year agreement with Sorin gives InterVascular exclusive distribution rights to Sorin’s peripheral vascular stent products, excluding the United States and Japan. As part of that agreement, Datascope has the option to purchase that stent business within two years. The product line includes balloon-expandable and self-expanding stent systems to treat stenosis in iliac, renal and infrapopliteal arteries, as well as expandable balloons for use in percutaneous angioplasty (PTA).

Vascular graft sales increased 4% due to a 7% increase in sales to international markets as InterVascular market share increased to offset continued growth of less invasive therapies and competitive pricing pressure in the European markets. Sales of grafts to our exclusive distributor in the United States decreased 9%.

Genisphere

Sales of Genisphere products of $1.2 million in fiscal 2007 decreased $0.4 million or 25% compared to fiscal 2006 primarily attributable to increased competition. Genisphere continued to pursue its marketing strategy to develop products for use in newly developed protein and nucleic acid detection platforms.

Costs and Expenses

Gross Profit (Net Sales Less Cost of Sales)

Gross profit increased $10.6 million or 8% as a result of increased sales in the Cardiac Assist Products segment ($13.5 million) and the Vascular Products segment ($3.3 million). Gross margin was 65.2% for fiscal 2007 and fiscal 2006.

Research and Development (R&D)

R&D expense includes new product development and improvements of existing products, as well as expenses for regulatory filings and clinical evaluations. R&D expense was $19.9 million in fiscal 2007, equivalent to 9.3% of sales, compared to $19.1 million or 9.7% of sales last year.

R&D expense for the Cardiac Assist Products segment was $11.7 million in fiscal 2007 compared to $12.2 million last year, with the decrease primarily due to lower expenses for new product development projects.

R&D expense for the Vascular Products segment was $4.4 million in fiscal 2007 compared to $3.6 million last year, with the increase due primarily to new product development costs for vascular grafts.

The balance of consolidated R&D is in the Corporate and Other segment and amounted to $3.8 million in fiscal 2007 compared to $3.3 million in the corresponding period last year. Corporate and Other R&D includes corporate design, technology, regulatory and Genisphere R&D expenses.

Selling, General and Administrative (SG&A)

Total SG&A expense of $87.4 million in fiscal 2007 or 41.0% of sales, compared to $81.2 million or 41.3% of sales, last year.

SG&A expense for the Cardiac Assist Products segment of $68.7 million, increased $4.8 million or 7% in fiscal 2007. The increase was primarily attributable to higher expense associated with a full year of selling associated with the EVH business, which was acquired in January 2006 ($2.5 million), unfavorable foreign currency translation ($1.2 million) and increased expense due to filling open sales positions ($0.9 million). As a percentage of segment sales, SG&A expenses were 38.5% in fiscal 2007 compared to 38.8% in the corresponding period last year.

SG&A expense for the Vascular Products segment of $21.1 million, increased $1.5 million or 8% in fiscal 2007. The increase was due primarily to unfavorable foreign currency translation ($1.0 million) and increased selling expenses ($0.5 million). As a percentage of segment sales, SG&A expenses were 63.0% in fiscal 2007 compared to 64.8% in the corresponding period last year.

Segment SG&A expense includes allocated corporate G&A charges.

The weaker U.S. dollar compared to the Euro and the British Pound increased total SG&A expense by approximately $3.2 million in fiscal 2007.

Special Charges

Fiscal 2007

Workforce Reductions in European Sales Organization, Corporate and Genisphere

Genisphere Goodwill Impairment

Inquiry Expenses

In fiscal 2007, we incurred expenses of $1.7 million related to the Audit Committee investigations of ethics line reports related to the Chairman and Chief Executive Officer and an Executive Officer in Europe. The ethics line permits persons to report activities that they characterize as improper on an anonymous basis. The Audit Committee engaged independent counsel and forensic accountants to investigate these charges.

As disclosed in our 8-K filings, based on the results of the investigations, the Audit Committee concluded that there was no evidence to support the allegations made in the ethics line reports. The Audit Committee, with the assistance of independent counsel and independent forensic accountants, also reviewed the matters raised by the Internal Audit Department and Legal Department concerning the Chairman and found the issues raised by them to be without merit.

The special charges noted above were reflected in the Cardiac Assist Products segment ($1.1 million), the Vascular Products segment ($1.1 million) and Corporate and Other ($6.5 million).

Fiscal 2006

In the first quarter of fiscal 2006, we recorded a pretax gain of $0.8 million on the sale of an unused facility in Vaals, the Netherlands.

Interest Income

Interest income of $2.5 million in fiscal 2007 increased $0.2 million compared to fiscal 2006. An increase in the average interest rate yield to 4.6% from 4.0%, was partially offset by a slightly lower average portfolio balance ($50.6 million vs. $51.4 million).

Dividend Income

We had a preferred stock investment in Masimo Corporation. In December 2006, Masimo’s Board of Directors and stockholders approved an additional special dividend to all stockholders. The dividend of $0.2 million was paid in the third quarter of fiscal 2007.

In February 2006, Masimo’s Board of Directors and stockholders approved a special dividend payment to all stockholders. In the third quarter of fiscal 2006, we received $3.9 million of that special dividend, with the balance of $0.6 million collected at a later date.

Other, Net

Other, net in fiscal 2007 reflected a pretax gain of $1.3 million on the sale of an investment that was impaired in fiscal 2002. Other, net in fiscal 2006 reflected realized losses of $0.9 million on the sale of marketable securities that were liquidated during fiscal 2006 as part of our planned repatriation of foreign earnings of $29.6 million.

Income Taxes

In fiscal 2007, the consolidated effective tax rate for continuing operations was 29.5% compared to 25.1% last year. The higher tax rate in fiscal 2007 was primarily attributable to the expiration of the extraterritorial income exclusion on December 31, 2006 and a shift in the geographical mix of earnings to higher taxed jurisdictions. These increases were partially offset by an increase in the U.S. research and development credit. Additionally, the tax rate was lower in fiscal 2006 attributable to a lower effective rate on the $4.5 million dividend income due to the U.S. dividends received deduction.

Liquidity and Capital Resources

Fiscal 2008 vs. Fiscal 2007

We consider our cash and cash equivalents, short-term investments and our available unsecured lines of credit to be our principal sources of liquidity.

Cash and cash equivalents and short-term investments at June 30, 2008 were $250.2 million compared to $39.4 million at June 30, 2007. Long-term investments were $22.8 million and $14.3 million at June 30, 2008 and June 30, 2007, respectively. Working capital was $279.2 million compared to $147.3 million at the end of fiscal 2007 and the current ratio was 4.0:1 compared to 3.5:1 last year.

The increase in working capital and the current ratio was primarily due to an increase in short-term investments ($204.4 million), partially offset by a decrease in inventories ($28.4 million) and accounts receivable ($20.4 million).

The increase in short-term investments was primarily due to proceeds from the sale of the PM business. The decrease in accounts receivable was principally due to the partial collection of the $30.0 million of retained PM accounts receivable and reduced revenue as a result of the sale of the PM business, effective May 1, 2008. The decrease in inventories was primarily due to the sale of the PM business and the classification of inventories related to the IP business of $5.8 million reflected in current assets of discontinued operations.

In fiscal 2008, we provided $33.3 million of net cash from operating activities compared to $26.2 million in the prior year with the increase primarily attributable to higher earnings from continuing operations ($15.4 million) and reduction of accounts receivable as a result of the partial collection of the PM business receivables.

In fiscal 2008, we used a net $16.1 million of cash in investing activities. Net sales and maturities of investments yielded $249.2 million and proceeds from the sale of the PM business added $208.6 million of cash.

These $457.8 million of proceeds were spent on $449.2 million of investment purchases, $11.1 million for the acquisition of Sorin, $6.8 million of capital expenditures and technology and $6.9 million of capitalized software.

In fiscal 2008, we used a net $9.6 million of cash in financing activities. We paid $23.2 million in dividends, comprising four quarterly dividends of $0.10 per share and a special dividend of $1.00 per share paid in the second quarter of fiscal 2008. Financing cash outlays were partially funded by $14.7 million of proceeds from the exercise of stock options and $1.3 million of excess tax benefits to be realized from stock-based awards.

At June 30, 2008, we had available unsecured lines of credit totaling $100.2 million, with interest payable at LIBOR-based rates determined by the borrowing period. At June 30, 2008, we had no outstanding borrowings. Of the total available, $25 million expires in October 2008 and $50 million expires in March 2009. These lines are renewable annually at the option of the banks, and we plan to seek renewal. We also had $25.2 million in lines of credit with no expiration date.

We purchased about 46,600 shares of our common stock for approximately $1.9 million during fiscal year 2008. We have a remaining balance of $1.1 million available under the stock repurchase program authorized by the Board of Directors on May 16, 2001.

On September 15, 2006, the Board of Directors approved an additional stock repurchase program for $40 million of our common stock. Purchases under this program may be made from time to time on the open market or in privately negotiated transactions, and may be discontinued at any time at the discretion of the Company.

We believe that our existing cash and investment balances, future cash generated from operations and existing credit facilities will be sufficient to meet our projected working capital, capital and investment needs. The moderate rate of United States and European inflation over the past three fiscal years has not significantly affected the Company.

Subsequent Event

On August 6, 2008, we completed the sale of assets related to the VasoSeal, On-Site, and X-Site vascular closure devices, and our collagen operations, to St. Jude Medical, Inc. for $21.0 million in cash at closing and $3.0 million to be paid upon the expiration of an 18 month indemnification period.

Fiscal 2007 vs. Fiscal 2006

Cash and cash equivalents and short-term investments at June 30, 2007 were $39.4 million compared to $52.6 million at June 30, 2006. Long-term investments were $14.3 million and $22.3 million at June 30, 2007 and June 30, 2006, respectively. Working capital was $147.3 million compared to $157.5 million at the end of fiscal 2006 and the current ratio was 3.5:1 compared to 3.8:1 last year.

The decrease in working capital and the current ratio was primarily due to a decrease in short-term

investments ($19.4 million), partially offset by an increase in accounts receivable ($7.4 million).

The decrease in short-term investments was primarily due to sales of investments to provide cash for the Artema acquisition, the Sorin distribution agreement and payment of a special dividend of $1.00 per share in the second quarter of fiscal 2007. The increase in accounts receivable was principally due to higher sales ($5.8 million) and an increase in days sales outstanding (7).

In fiscal 2007, we provided $26.2 million of net cash from operating activities compared to $29.0 million in the prior year with the decrease primarily attributable to lower net earnings, partially offset by a reduction in inventories.

In fiscal 2007, we used a net $0.8 million of cash in investing activities. Net sales and maturities of investments yielded $102.1 million and proceeds from the sale of assets added $3.0 million of cash. These $105.1 million of proceeds were spent on $74.0 million of investment purchases, $16.4 million for the acquisition of Artema, $8.0 million of capital expenditures and technology and $7.5 million of capitalized software.

In fiscal 2007, we used a net $18.3 million of cash in financing activities. We paid $20.4 million in dividends, comprising two quarterly dividends of $0.07 per share, two quarterly dividends of $0.10 per share and a special dividend of $1.00 per share paid in the second quarter of fiscal 2007. Financing cash outlays were partially funded by $4.0 million of proceeds from the exercise of stock options and $0.4 million of excess tax benefits to be realized from stock-based awards.

We purchased about 55,700 shares of our common stock for approximately $1.7 million during fiscal year 2007.

Presented below is a summary of our contractual obligations and other commitments as of June 30, 2008.


	Payments due by Period
	(Dollars in millions)
			Less than		1-3		3-5		More than
	Total		1 year		years		years		5 years
Operating lease obligations	$	8.5	$	3.5	$	4.2	$	0.8	$	—
Purchase commitments (1)		4.7		4.7		—		—		—
Benefit plan payments (2)		53.6		2.3		10.9		11.0		29.4
Unrecognized tax benefits (3)		0.2		0.2		—		—		—
Other (4)		1.0		0.5		0.5		—		—

Total contractual obligations and other commitments	$	68.0	$	11.2	$	15.6	$	11.8	$	29.4


(1)		These amounts include non-cancelable purchase commitments for inventory and capital expenditures that meet our projected requirements over the related terms and are in the normal course of business.

(2)		Represents expected benefit payments under the U.S and International defined benefit pension plans, the supplemental executive retirement plan and the post-retirement medical benefits plan.

(3)		Represents management’s estimate of the current portion of unrecognized tax benefits. This amount excludes the noncurrent portion of unrecognized tax benefits of $4.8 million, for which the period of cash settlement cannot be reasonably estimated.

(4)		Represents guaranteed milestone payments to X-Site.

Off-Balance Sheet Arrangements

At June 30, 2008 we did not have any off-balance sheet financing arrangements.

Critical Accounting Policies and Estimates

Our financial statements have been prepared in accordance with accounting principles generally accepted in

the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses for each period. We regularly evaluate our estimates and assumptions on an on-going basis and adjust as necessary to accurately reflect current conditions. These estimates and assumptions are based on current and historical experience, on information from third party professionals and on various other factors that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. We believe that the following are our most critical accounting policies and estimates:

Revenue Recognition — We recognize revenue and all related costs, including warranty costs, when persuasive evidence of an arrangement exists, title and risk of loss passes to the customer and collectibility of the fixed sales price is probable. For products shipped FOB shipping point, revenue is recognized when they leave our premises. For products shipped FOB destination, revenue is recognized when they reach the customer. For certain products where we maintain consigned inventory at customer locations, revenue is recognized when the product has been used by the customer. We record estimated sales returns as a reduction of net sales in the same period that the related revenue is recognized. Historical experience is used to estimate an accrual for future returns relating to recorded sales, as well as estimated warranty costs. Revenue for service repairs of equipment is recognized after service has been completed, and service contract revenue is recognized ratably over the term of the contract. We do not have a general right of return for our products. Post shipment obligations for training commitments are considered perfunctory, and sales are recognized when delivered with provision for incremental costs. We reflect shipping and handling fees as revenue and shipping and handling costs as cost of sales.

Allowance for Doubtful Accounts — We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. This allowance is used to report trade receivables at their estimated net realizable value. We rely on prior experience to estimate cash which ultimately will be collected from the gross receivables balance at period-end. Such amount cannot be known with certainty at the financial statement date. We maintain a specific allowance for customer accounts that will likely not be collectible due to customer liquidity issues. We also maintain an allowance for estimated future collection losses on existing receivables, determined based on historical trends.

Inventory Valuation — We value our inventories at the lower of cost or market. Cost is determined by the “first-in, first-out” (FIFO) method. Inventory is recorded at its estimated fair market value based upon our historical experience with inventory becoming obsolete due to age, changes in technology and other factors.

Income Taxes — As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating the current tax expense as well as assessing temporary differences in the treatment of items for tax and accounting purposes. These temporary differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheets. We must then assess whether it will be more likely than not that our deferred tax assets will be recovered from future taxable income and/or the implementation of tax planning strategies. To the extent that we cannot conclude that recovery is likely, a valuation allowance must be established.

We have not recorded U.S. deferred income taxes on certain of our non-U.S. subsidiaries’ undistributed earnings, because such amounts are intended to be reinvested outside the United States indefinitely. Our repatriation of $29.6 million of foreign earnings under the provisions of the American Jobs Creation Act of 2004 was deemed to be distributed entirely from foreign earnings that had previously been treated as indefinitely reinvested. However, this distribution from previously indefinitely reinvested earnings does not change our position going forward that future earnings of our foreign subsidiaries will be indefinitely reinvested.

We operate within multiple taxing jurisdictions and are subject to routine corporate income tax audits in many of those jurisdictions. These audits can involve complex issues, including challenges regarding the timing and amount of deductions and credits and the allocation of income among various tax jurisdictions. Our U.S. income tax returns for fiscal 1999 and prior years have been audited by the Internal Revenue Service (IRS) and

are closed. The U.S. statutory period has expired for fiscal years though 2004, and is open for subsequent periods. The IRS has commenced an audit of our tax returns for fiscal years 2005 -2007. During fiscal 2007, we have closed audits in several state jurisdictions with immaterial adjustments. Statutory periods remain open in a number of foreign and state jurisdictions.

We record our income tax provisions based on our knowledge of all relevant facts and circumstances, including existing tax laws and the status of current examinations. The Company’s unrecognized tax benefits determined in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”) reflect accounting estimates that are subject to inherent uncertainties associated with the tax audit process. We believe that our accrual for income tax liabilities, including related interest, is adequate in relation to the potential for additional tax assessments. The amounts ultimately paid upon resolution of audits could be materially different from the amounts previously included in our income tax expense and therefore could have a significant impact on our tax provision, net income and cash flows.

Pension Plan Actuarial Assumptions — We sponsor defined benefit pension plans in the United States and certain European countries covering eligible employees. We use several actuarial and other statistical factors which attempt to estimate the ultimate expense and liability related to our pension plans. These factors include assumptions about discount rate, expected return on plan assets and rate of future compensation increases. In addition, subjective assumptions, such as withdrawal and mortality rates are utilized. The actuarial assumptions may differ materially from actual results due to the changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of participants. These differences, depending on their magnitude, could have a significant impact on the amount of pension expense we record in any particular period.

Recent Accounting Pronouncements

On July 1, 2007, we adopted the provisions of the Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), an interpretation of Statement of Financial Accounting Standards (“SFAS”) No. 109, Accounting for Income Taxes. FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing that a benefit cannot be recorded in the financial statements unless the tax position has a “more likely than not” chance of being sustained upon audit based solely on the technical merits of the position. Once the “more likely than not” standard is met, the benefit is measured by determining the amount that is greater than 50 percent likely of being realized upon settlement, presuming that the tax position is examined by the appropriate taxing authority that has full knowledge of all relevant information. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. See Note 8 to the consolidated financial statements for additional information related to the impact of adopting FIN 48.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines “fair value” as: the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In addition, SFAS 157 establishes a fair value hierarchy to be used to classify the source of information used in fair value measurements, new disclosures of assets and liabilities measured at fair value based on their level in the hierarchy and a modification of the long-standing accounting presumption that the transaction price of an asset or liability equals its initial fair value. SFAS 157 is effective in fiscal years beginning after November 15, 2007 (effective for our fiscal year 2009 beginning July 1, 2008). The FASB issued Staff Position FAS 157-2, Effective Date of FASB Statement No. 157, which delayed the provisions of SFAS 157 relating to nonfinancial assets and liabilities until fiscal years beginning after November 15, 2008 (our fiscal year 2010 beginning July 1, 2009). SFAS 157 is not expected to materially affect how we determine fair value, but may result in certain additional disclosures.

obligation (“PBO”) for pension plans and as the accumulated postretirement benefit obligation for other postretirement benefit plans. At June 30, 2007, we had a PBO that was approximately $1.1 million higher than the fair value of the U.S. and International defined benefit pension plan assets. The supplemental executive retirement plans (“SERP”) had a PBO of approximately $18.3 million at June 30, 2007. There are no assets in the SERP plans. In addition, we are required to recognize as part of accumulated other comprehensive income (loss), net of taxes, gains and losses due to differences between our actuarial assumptions and actual experience (actuarial gains and losses) and any effects on prior service due to plan amendments (prior service costs or credits) that arise during the period and which are not yet recognized as net periodic benefit costs. At adoption date, we recognized $5.1 million within accumulated other comprehensive loss, net of tax, related to the previously unrecognized net actuarial losses, prior service credits and net transition amounts. We currently meet the SFAS 158 requirement that the measurement date for plan assets and liabilities must coincide with the sponsor’s year end. SFAS 158 also includes additional disclosures in an entity’s annual financial statements. See Note 12 for additional information related to our retirement benefit plans.

During the fourth quarter of fiscal 2007, we adopted the provisions of the Securities and Exchange Commission’s Staff Accounting Bulletin (“SAB”) No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. SAB 108 requires registrants to use both a balance sheet approach and an income statement approach when quantifying and evaluating the materiality of a misstatement and to adjust the financial statements if either approach results in quantifying a misstatement that is material. SAB 108 also contains guidance on correcting errors under the dual approach and provides transition guidance for correcting errors existing in prior years. If prior year errors that had been previously considered immaterial (based on the appropriate use of the registrant’s prior approach) now are considered material based on the approach in SAB 108, the registrant need not restate prior period financial statements. During the second quarter of fiscal 2007 we identified a prior year misstatement that we considered to be immaterial under our current approach for evaluating the materiality of a misstatement. However, upon adoption of SAB 108 this misstatement was considered material to the financial statements and was corrected upon adoption during the fourth quarter of fiscal 2007 through a cumulative effect adjustment impacting beginning retained earnings and cumulative translation adjustments as of the beginning of fiscal 2007. The misstatement relates to a cumulative translation adjustment of approximately $1.1 million that was not written-off in fiscal 2002 when a European subsidiary was closed as part of a restructuring. This adjustment did not have an impact on total consolidated stockholders’ equity.

In November 2006, the FASB issued Emerging Issues Task Force Issue No. 06-10, Accounting for Deferred Compensation and Postretirement Benefits Aspects of Collateral Assignment Split-Dollar Life Insurance Arrangements, which is effective for fiscal years that begin after December 15, 2007 (our fiscal year 2009 beginning July 1, 2008). The Task Force concluded that an employer should recognize a liability for the postretirement benefit related to a collateral assignment split-dollar life insurance arrangement in accordance with either FASB Statement No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions, or Accounting Principles Board Opinion No. 15, Omnibus Opinion, based on the substantive agreement with the employee. The Task Force also concluded that an employer should recognize and measure an asset based on the nature and substance of the collateral assignment split-dollar life insurance arrangement. The Supplemental Benefits Plan for the Chairman and Chief Executive Officer, Mr. Lawrence Saper, provides survivor benefits in the form of a $10 million life insurance policy, maintained pursuant to a collateral assignment split-dollar agreement among Mr. Saper, the Company and a trust for the benefit of Mr. Saper’s family. The present value of the premium reimbursement pursuant to the split-dollar agreement at June 30, 2008 is approximately $3.5 million. Upon adoption, we will record a liability and a cumulative effect adjustment to retained earnings for the present value of the premium reimbursement at the date of adoption.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115 (“SFAS 159”). This statement provides an option to report selected financial assets and liabilities at fair value. In addition, SFAS 159 establishes presentation and disclosure requirements for those assets and liabilities which the registrant has chosen to measure at fair value. SFAS 159 is effective for fiscal years beginning after November 15, 2007 (our fiscal year 2009

beginning July 1, 2008). We do not anticipate that the provisions of SFAS 159 will have a material impact on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160 (“SFAS 160”), Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51. This statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 clarifies a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008 (our fiscal year 2010 beginning July 1, 2009). We are currently evaluating the impact of adopting SFAS 160 on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R) (“SFAS 141(R)”), Business Combinations. This statement establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, the goodwill acquired, and any noncontrolling interest in the acquiree. In addition, SFAS 141(R) establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS 141(R) applies prospectively to business combinations for which the acquisition date is during fiscal years beginning on or after December 15, 2008, the effective date of this statement. We will adopt SFAS 141(R) in the first quarter of our fiscal year 2010 beginning July 1, 2009.

In March 2008, the FASB issued Statement No. 161 (“SFAS 161”), Disclosures about Derivative Instruments and Hedging Activities (“SFAS161”), which is effective for fiscal years beginning after November 15, 2008 (our fiscal year beginning July 1, 2009). Statement 161 requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. We are currently evaluating the impact of adopting SFAS 161, but do not anticipate that the provisions of SFAS 161 will have a material impact on our consolidated financial statements.

In May 2008, the FASB issued Statement No. 162 (“SFAS 162”), The Hierarchy of Generally Accepted Accounting Principles (“SFAS 162”). This Statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements that are presented in conformity with generally accepted accounting principles in the U.S. We are currently evaluating the impact of adopting SFAS 162, but do not anticipate that the provisions of SFAS 162 will have a material impact on our consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Due to the global nature of our operations, we are subject to the exposures that arise from foreign exchange rate fluctuations. Our objective in managing our exposure to foreign currency fluctuations is to minimize net earnings volatility associated with foreign exchange rate changes. We enter into foreign currency forward exchange contracts to hedge foreign currency transactions which are primarily related to certain intercompany receivables denominated in foreign currencies. Our hedging activities do not subject us to exchange rate risk because gains and losses on these contracts offset losses and gains on the intercompany receivables hedged. The net gains or losses on these foreign currency forward exchange contracts are included within Other, net, in our consolidated statements of earnings. We do not use derivative financial instruments for trading purposes.

None of our foreign currency forward exchange contracts are designated as economic hedges of our net investment in foreign subsidiaries. As a result, no foreign currency transaction gains or losses were recorded in accumulated other comprehensive loss for the years ended June 30, 2008, 2007 and 2006.

As of June 30, 2008, we had a notional amount of $17.0 million of foreign exchange forward contracts outstanding, all of which were in Euros and Japanese Yen. The foreign exchange forward contracts generally have

maturities that do not exceed 12 months and require us to exchange foreign currencies for United States dollars at maturity, at rates agreed to when the contract is signed.

Item 8. Financial Statements and Supplementary Data

See Financial Statements following Item 15 of this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

Management’s Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Company’s internal control over financial reporting includes those policies and procedures that:

	•		pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

	•		provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

	•		provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of June 30,

2008. In making this assessment, management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on our assessment and those criteria, management believes that the Company maintained effective internal control over financial reporting as of June 30, 2008.

Deloitte & Touche LLP , the Company’s independent registered public accounting firm, has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting as of June 30, 2008, as stated in their report which is included herein.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Datascope Corp.
Montvale, New Jersey

We have audited the internal control over financial reporting of Datascope Corp. and subsidiaries (the “Company”) as of June 30, 2008, based on criteria established in Internal Control —Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2008, based on the criteria established in Internal Control —Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended June 30, 2008 of the Company and our report dated September 15, 2008 expressed an unqualified opinion on those financial statements and financial statement schedule and included an explanatory paragraph regarding the Company’s adoption of Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, effective June 30, 2007, the provisions of United States Securities and Exchange Commission Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, effective for the year ended June 30, 2007, and the provisions of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes, effective July 1, 2007.

/s/ Deloitte & Touche LLP

Parsippany, New Jersey
September 15, 2008

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Except for the information included in Item 4A of this report, the information required by this item is incorporated by reference from our definitive proxy statement to be filed with the Securities and Exchange Commission no later than October 28, 2008 pursuant to Regulation 14A of the Securities Exchange Act of 1934.

Item 11. Executive Compensation

The information required by this item is incorporated by reference from our definitive proxy statement to be filed with the Securities and Exchange Commission no later than October 28, 2008 pursuant to Regulation 14A of the Securities Exchange Act of 1934.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table provides information as of June 30, 2008 about our common stock that may be issued under our existing equity compensation plans upon the exercise of stock options or otherwise:

Number of securities

remaining available for

Number of securities to

Weighted average exercise

future issuance under equity

be issued upon exercise

price of outstanding

compensation plans

of outstanding options,

options, warrants and

(excluding securities

Plan Category

warrants and rights

rights

reflected in column (a))

(a)

(b)

(c)

Equity compensation plans approved by security holders (1)

Stock options

1,030,500

31.87

716,317

Common stock (2)

64,687

—

1,126,135

Equity compensation plans not approved by security holders (3)

Stock options

15,000

32.19

—

Total

1,110,187

1,842,452


(1)		See Note 10 to the Consolidated Financial Statements for a description of our stock-based plans.

(2)		Includes 4,597 shares of restricted stock granted to members of the Board of Directors in fiscal 2008 under the 2005 Equity Incentive Plan, pursuant to the Compensation Plan for Non-Employee Directors.

(3)		Includes grants of options to a member of the Board of Directors to purchase up to 15,000 shares of our common stock. These options have a term of 10 years with exercise prices ranging from $22.49 to $37.03.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accountant Fees and Services

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) 1. Financial Statements

Our consolidated financial statements are filed on the pages listed below, as part of Part II, Item 8 of this report:


	Page

Report of Independent Registered Public Accounting Firm		F-1
Consolidated balance sheets — June 30, 2008 and 2007		F-2
Consolidated statements of earnings — Years ended June 30, 2008, 2007 and 2006		F-3
Consolidated statements of stockholders’ equity — Years ended June 30, 2008, 2007 and 2006		F-4
Consolidated statements of cash flows — Years ended June 30, 2008, 2007 and 2006		F-5
Notes to consolidated financial statements		F-6-F-43

2. Financial Statement Schedules


Schedule II — Valuation and Qualifying Accounts			S-1

All other schedules have been omitted because they are inapplicable, or not required, or the information is included in the financial statements or footnotes.

3. Exhibits


Exhibit No.		Document Description

2.1		Asset Purchase Agreement dated March 10, 2008, by and between Datascope Corp. and Mindray Medical International Limited, incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on March 15, 2008.

3.1		Exhibit 3.1 Amended and Restated Bylaws of Datascope Corp., incorporated by reference to the registrant’s Current Report on Form 8-K filed on December 21, 2007.

3.2		By-Laws, incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K dated September 27, 2004.

4.1		Specimen of certificate of Common Stock, incorporated by reference to Exhibit 4.2 to the Form 8-B.

4.2		Form of Certificate of Designations of the Company’s Series A Preferred Stock, incorporated by reference to Exhibit 2.2 to the Company’s Registration Statement on Form 8-A, filed with the Commission on May 31, 1991 (the “Form 8-A”).

4.3		Form of Rights Agreement, dated as of May 22, 1991, between the Company and Continental Stock Transfer & Trust Company, incorporated by reference to Exhibit 2.1 to the Form 8-A.


Exhibit No.		Document Description

4.4		Form of Amendment to Rights Agreement, dated May 24, 2000, between the Company and Continental Stock Transfer & Trust Company, incorporated by reference to Exhibit 2 to the Form 8-A/A, filed with the Commission on June 1, 2000.

10.1		Datascope Corp. 1981 Incentive Stock Option Plan, incorporated by reference to Exhibit 10.2.1 to the Form 8-B.

10.2		Datascope Corp. 1995 Stock Option Plan, as amended, incorporated by reference to Annex B to the Company’s Proxy Statement on Schedule 14A filed by the Company on October 28, 2004.

10.3		Datascope Corp. 1997 Executive Bonus Plan, incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the quarter ended December 31, 1997 (the “2Q 1997 10-Q”).

10.4		Datascope Corp. Annual Incentive Plan, incorporated by reference to Exhibit 10.3 to the 2Q 1997 10-Q.

10.5		Datascope Corp. Amended and Restated Compensation Plan for Non-Employee Directors, incorporated by reference to Annex A to the Company’s Proxy Statement on Schedule 14A filed by the Company on October 28, 2002.

10.6		Employment Agreement, dated July 1, 1996, by and between the Company and Lawrence Saper, incorporated by reference to Exhibit 10.8 to the Annual Report on Form 10-K for the fiscal year ended June 30, 1997.

10.7		Split-Dollar Agreement, dated July 25, 1994, by and among the Company, Lawrence Saper and Carol Saper, Daniel Brodsky and Helen Nash, Trustees of the Saper Family 1994 Trust UTA. dtd. 6/28/94, incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K for fiscal year ended June 30, 1996 (the “1996 10-K”).

10.8		Modification Agreement, dated July 25, 1994, by and among the Company, Lawrence Saper and Carol Saper, Daniel Brodsky and Helen Nash, Trustees of the Saper Family 1994 Trust UTA. dtd. 6/28/94, incorporated by reference to Exhibit 10.16 to the 1996 10-K.

10.9		Assignment, dated July 25, 1994, by Carol Saper, Daniel Brodsky and Helen Nash, Trustees of the Saper Family 1994 Trust UTA. dtd. 6/28/94 of Metropolitan Life Insurance Company Insurance Policy No. 940 750 122UM in favor of the Company, incorporated by reference to Exhibit 10.17 to the 1996 10-K.

10.10		Assignment made as of July 25, 1994 by Carol Saper, Daniel Brodsky and Helen Nash, Trustees of the Saper Family 1994 Trust UTA. dtd. 6/28/94 of Security Mutual Life Insurance Company of New York Insurance Policy No. 11047711 in favor of Datascope Corp., incorporated by reference to Exhibit 10.18 to the 1996 10-K.

10.11		Stock Option Agreement between the Company and William E. Cohn, incorporated by reference to Exhibit 4.1 of the Registration Statement on Form S-8, filed with the Commission on June 20, 2000 (the “June 20, 2000 Form S-8”).

10.12		Stock Option Agreement between the Company and Thor W. Nilsen, incorporated by reference to Exhibit 4.2 of the June 20, 2000 Form S-8.

10.13		Stock Option Agreement between the Company and Robert Getts, Ph.D., incorporated by reference to Exhibit 4.3 of the June 20, 2000 Form S-8.

10.14		Stock Option Agreement between the Company and Robert Getts, Ph.D., James Kadushin and William Ohley, Ph.D., incorporated by reference to Exhibit 4.4 of the June 20, 2000 Form S-8.

10.15		Stock Option Agreement between the Company and Arno Nash and Alan Abramson, incorporated by reference to Exhibit 4.5 of the June 20, 2000 Form S-8.

10.16		Stock Option Agreement between the Company and David Altschiller, incorporated by reference to Exhibit 4.7 of the June 20, 2000 Form S-8.

10.17		Amendment to Employment Agreement, dated as of May 30, 2000, by and between Datascope Corp. and Lawrence Saper, incorporated by reference to Exhibit 10.22 of the Company’s Annual Report on Form 10-K for fiscal year ended June 30, 2000.


Exhibit No.		Document Description

10.18		Series G Preferred Stock Purchase Agreement, dated as of September 14, 2001, by and between Masimo Corporation and Datascope Corp., incorporated by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K for fiscal year ended June 30, 2002 (the “2002 10-K”).

10.19		Second Amendment to Employment Agreement, dated as of October 31, 2001, by and between Datascope Corp. and Lawrence Saper, incorporated by reference to Exhibit 10.20 of the 2002 10-K.

10.20		Stock Option Agreement between the Company and William L. Asmundson, incorporated by reference to Exhibit 10.1 of the Registration Statement on Form S-8, filed with the Commission on December 19, 2001 (the “December 19, 2001 Form S-8”).

10.21		Stock Option Agreement between the Company and Jorgen K. Winther, incorporated by reference to Exhibit 10.2 of the December 19, 2001 Form S-8.

10.22		Third Amendment to Employment Agreement, dated as of March 13, 2002, by and between Datascope Corp. and Lawrence Saper, incorporated by reference to Exhibit 10.23 of the 2002 10-K.

10.23		Fourth Amendment to Employment Agreement, dated as of October 1, 2002, by and between Datascope Corp. and Lawrence Saper, incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K for fiscal year ended June 30, 2004 (the “2004 10-K”).

10.24		Stock Option Agreement between the Company and David Altschiller, dated February 25, 2003 incorporated by reference to Exhibit 4.2 of the Registration Statement on Form S-8, filed with the Commission on May 30, 2003 (the “May 30, 2003 Form S-8”).

10.25		Stock Option Agreement between the Company and Dr. Samuel Money, incorporated by reference to Exhibit 4.3 of the May 30, 2003 Form S-8.

10.26		Stock Option Agreement between the Company and Leonard Gottlieb, dated May 20, 2003, incorporated by reference to Exhibit 10.23 to the 2004 10-K.

10.27		Datascope Corp. 2004 Management Incentive Plan, incorporated by reference to Annex A to the Company’s Proxy Statement on Schedule 14A filed by the Company on October 28, 2003.

10.28		Fifth Amendment to Employment Agreement, dated as of April 1, 2005, by and between Datascope Corp. and Lawrence Saper, incorporated by reference to Exhibit 10.28 to the Company’s Annual Report on Form 10-K for fiscal year ended June 30, 2005.

21.1*		Subsidiaries of the Company.

23.1*		Consent of Deloitte & Touche LLP.

31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).

31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).

32.1*		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


*		Filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	DATASCOPE CORP.
Date: September 15, 2008	By:	/s/ Lawrence Saper
		Lawrence Saper
		Chairman of the Board and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Signature	Title	Date

/s/ Lawrence Saper Lawrence Saper	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)	September 15, 2008

/s/ Antonino Laudani, M.D. Antonino Laudani, M.D.	Vice-President and Chief Operating Officer	September 15, 2008

/s/ Henry M. Scaramelli Henry M. Scaramelli	Vice President, Finance and Chief Financial Officer (Principal Financial Officer)	September 15, 2008

/s/ Fred Adelman Fred Adelman	Vice President, Chief Accounting Officer (Principal Accounting Officer) and Treasurer	September 15, 2008

/s/ Alan B. Abramson Alan B. Abramson	Director	September 15, 2008

/s/ David Altschiller David Altschiller	Director	September 15, 2008

/s/ David Dantzker, M.D. David Dantzker, M.D.	Director	September 15, 2008

/s/ James J. Loughlin James J. Loughlin	Director	September 15, 2008

/s/ Robert E. Klatell Robert E. Klatell	Director	September 15, 2008

/s/ William W. Wyman William W. Wyman	Director	September 15, 2008

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Datascope Corp.
Montvale, New Jersey

We have audited the accompanying consolidated balance sheets of Datascope Corp. and subsidiaries (the “Company”) as of June 30, 2008 and 2007, and the related consolidated statements of earnings, stockholders’ equity, and cash flows for each of the three years in the period ended June 30, 2008. Our audits also included the financial statement schedule listed in the index at Item 15(a)2. These financial statements and the financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Datascope Corp. and subsidiaries as of June 30, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2008, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, effective June 30, 2007, the provisions of United States Securities and Exchange Commission Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, effective for the year ended June 30, 2007, and the provisions of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes, effective July 1, 2007.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of June 30, 2008, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated September 15, 2008 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP

Parsippany, New Jersey
September 15, 2008

F-1

DATASCOPE CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)


	June 30,
	2008			2007
Assets
Current assets:
Cash and cash equivalents	$	22,106		$	15,780
Short-term investments		228,106			23,681
Accounts receivable less allowance for doubtful accounts of $2,777 and $2,603		65,178			85,553
Inventories		31,030			59,455
Prepaid income taxes		—			2,293
Prepaid expenses and other current assets		16,425			11,167
Current deferred taxes		2,476			7,238
Current assets of discontinued operations		5,773			—

Total current assets		371,094			205,167

Property, plant and equipment, net		49,710			82,812
Long-term investments		22,846			14,346
Intangible assets, net		15,873			26,074
Goodwill		4,575			12,860
Other assets		43,974			34,897
Noncurrent assets of discontinued operations		15,666			—

	$	523,738		$	376,156


Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	16,951		$	18,386
Accrued expenses		13,833			17,661
Accrued compensation		14,377			17,422
Deferred revenue		2,728			4,380
Income taxes payable		43,504			—
Current liabilities of discontinued operations		500			—

Total current liabilities		91,893			57,849

Other liabilities		25,836			25,220
Other liabilities of discontinued operations		459			—

Commitments and contingencies (Note 13)

Stockholders’ equity:
Preferred stock, par value $1.00 per share:
Authorized 5,000 shares; Issued, none		—			—
Common stock, par value $0.01 per share:
Authorized, 45,000 shares;
Issued, 19,401 and 18,867 shares		194			189
Additional paid-in capital		126,805			109,384
Treasury stock at cost, 3,567 and 3,521 shares		(108,897	)		(107,037	)
Retained earnings		377,194			294,765
Accumulated other comprehensive income (loss):
Cumulative translation adjustments		10,043			1,899
Benefit plan adjustments		(55	)		(5,827	)
Unrealized gain (loss) on available-for-sale securities		266			(286	)

Total stockholders’ equity		405,550			293,087

	$	523,738		$	376,156

See notes to consolidated financial statements

F-2

DATASCOPE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)


	Year Ended June 30,
	2008			2007			2006
Net sales	$	230,915		$	212,991		$	196,516
Cost of sales		80,013			74,148			68,320

Gross profit		150,902			138,843			128,196

Operating expenses:
Research and development expenses		21,079			19,901			19,129
Selling, general and administrative expenses		92,617			87,424			81,152
Special charges		—			8,737			—

		113,696			116,062			100,281

Operating earnings		37,206			22,781			27,915

Other (income) expense:
Interest income		(2,698	)		(2,479	)		(2,225	)
Interest expense		84			36			228
Dividend income		—			(196	)		(4,523	)
Gain on sale of investments		(13,173	)		(1,273	)		—
Other, net		1,727			737			1,414

		(14,060	)		(3,175	)		(5,106	)

Earnings from continuing operations before income taxes		51,266			25,956			33,021
Income taxes		17,488			7,662			8,289

Net earnings from continuing operations		33,778			18,294			24,732
Net (loss) earnings from discontinued operations		(3,544	)		(829	)		1,111
Net gain on sale of discontinued operations		76,672			—			—

Net earnings	$	106,906		$	17,465		$	25,843


Net earnings (loss) per share, basic:
Continuing operations	$	2.19		$	1.20		$	1.65
Discontinued operations		(0.23	)		(0.05	)		0.08
Net gain on sale of discontinued operations		4.96			—			—


Net earnings	$	6.92		$	1.15		$	1.73


Weighted average number of common shares outstanding, basic		15,441			15,244			14,974


Net earnings (loss) per share, diluted:
Continuing operations	$	2.16		$	1.19		$	1.62
Discontinued operations		(0.22	)		(0.05	)		0.07
Net gain on sale of discontinued operations		4.91			—			—


Net earnings	$	6.85		$	1.14		$	1.69


Weighted average number of common shares outstanding, diluted		15,617			15,387			15,296

See notes to consolidated financial statements

F-3

DATASCOPE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except per share amounts)


																		Accumulated
																		Other Com-
	Common Stock					Additional			Treasury Stock									prehensive
				Par		Paid-in									Retained			Income
	Shares			Value		Capital			Shares			Cost			Earnings			(Loss)			Total
Balance, June 30, 2005		18,256		$	183	$	88,773			(3,460	)	$	(105,175	)	$	292,524		$	(10,440	)	$	265,865

Net earnings																25,843						25,843
Minimum pension liability adjustments, net of tax of ($3,498)																			5,066			5,066
Foreign currency translation																			1,413			1,413
Unrealized loss on available-for-sale securities, net of tax of $98																			(152	)		(152	)

Total comprehensive income																						32,170


Common stock transactions		475			4		13,821			(24	)		(838	)								12,987
Restricted stock awards		14																				—
Stock-based compensation							558															558
Tax benefit relating to stock-based awards							1,414															1,414
Cancellation of treasury stock		(24	)				(838	)		24			838									—
Common stock repurchased										(5	)		(144	)								(144	)
Cash dividends declared on common stock ($1.28 per share)																(19,112	)					(19,112	)

Balance, June 30, 2006		18,721			187		103,728			(3,465	)		(105,319	)		299,255			(4,113	)		293,738
Net earnings																17,465						17,465
Minimum pension liability adjustments, net of tax of ($1,164)																			1,686			1,686
Foreign currency translation																			2,127			2,127
Unrealized gain on available-for-sale securities, net of tax of ($47)																			90			90

Total comprehensive income																						21,368


Cumulative effect of SFAS 158 adoption, net of tax of $3,618																			(5,076	)		(5,076	)
Cumulative effect of SAB 108 adoption																(1,072	)		1,072			—
Common stock transactions		156			2		4,661															4,663
Restricted stock awards		4																				—
Stock-based compensation							695															695
Tax benefit relating to stock-based awards							300															300
Cancellation of restricted stock awards		(14	)																			—
Common stock repurchased										(56	)		(1,718	)								(1,718	)
Cash dividends declared on common stock ($1.37 per share)																(20,883	)					(20,883	)

Balance, June 30, 2007		18,867			189		109,384			(3,521	)		(107,037	)		294,765			(4,214	)		293,087

Net earnings																106,906						106,906
Benefit plan adjustments, net of tax of ($3,828)																			5,772			5,772
Foreign currency translation																			8,144			8,144
Unrealized gain on available- for-sale securities, net of tax of $325																			552			552

Total comprehensive income																						121,374


Cumulative effect of FIN 48 adoption																(2,815	)					(2,815	)
Common stock transactions		469			5		14,835															14,840
Restricted stock awards		75																				—
Stock-based compensation							1,341															1,341
Tax benefit relating to stock-based awards							1,245															1,245
Cancellation of restricted stock awards		(10	)																			—
Common stock repurchased										(46	)		(1,860	)								(1,860	)
Cash dividends declared on common stock ($1.40 per share)																(21,662	)					(21,662	)

Balance, June 30, 2008		19,401		$	194	$	126,805			(3,567	)	$	(108,897	)	$	377,194		$	10,254		$	405,550

See notes to consolidated financial statements

F-4

DATASCOPE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)


	Year Ended June 30,
	2008			2007			2006
Operating Activities:
Net earnings	$	106,906		$	17,465		$	25,843
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation		12,852			15,209			15,162
Amortization		5,056			6,279			5,371
Provision for supplemental pension and post-retirement medical		1,371			1,284			1,164
Provision for losses on accounts receivable		609			456			461
Cash surrender value of officers life insurance		(249	)		(248	)		(308	)
Net gain on sale of discontinued operations		(76,672	)		—			—
Gains on asset sales		—			(2,235	)		(810	)
Realized (gains) losses on sale of investments		(13,173	)		(1,268	)		853
Stock-based compensation expense		1,341			695			558
Excess tax benefits from stock-based compensation		(1,279	)		(350	)		(1,406	)
Deferred income tax expense (benefit)		(169	)		(199	)		320
Special charges asset write-offs and impairments		841			2,648			1,614
Purchased in-process research and development		—			440			—
Changes in operating assets and liabilities, net of business acquisition:
Accounts receivable		21,602			(4,892	)		(3,353	)
Inventories		(7,480	)		(6,116	)		(11,084	)
Prepaid expenses and other assets		(10,632	)		(2,263	)		(4,710	)
Accounts payable		2,628			(2,800	)		627
Accrued and other liabilities		(9,354	)		2,102			(1,301	)
Income taxes payable		(943	)		—			—


Net cash provided by operating activities		33,255			26,207			29,001


Investing Activities:
Capital expenditures		(6,763	)		(5,885	)		(6,255	)
Proceeds from asset sales		—			3,000			2,653
Purchases of investments		(449,172	)		(73,960	)		(72,010	)
Proceeds from investment maturities		230,797			70,035			30,596
Proceeds from investment sales		18,363			32,103			28,065
Capitalized software		(6,876	)		(7,458	)		(4,059	)
Purchased technology and licenses		(13	)		(2,157	)		(459	)
Proceeds from sale of discontinued operations, net of cash divested		208,603			—			—
Business acquisition payment, net of cash acquired		(11,056	)		(16,423	)		—
Other		—			(88	)		(88	)


Net cash used in investing activities		(16,117	)		(833	)		(21,557	)


Financing Activities:
Short-term borrowings		—			—			15,200
Repayments of short-term borrowings		—			—			(19,200	)
Exercise of stock options		14,660			3,988			12,987
Treasury shares acquired under repurchase programs		(1,860	)		(1,718	)		(144	)
Excess tax benefits from stock-based compensation		1,279			350			1,406
Cash dividends paid		(23,155	)		(20,389	)		(19,079	)
Guaranteed milestone payments		(500	)		(500	)		(500	)


Net cash used in financing activities		(9,576	)		(18,269	)		(9,330	)


Effect of exchange rates on cash		(1,236	)		(804	)		(823	)

Increase (decrease) in cash and cash equivalents		6,326			6,301			(2,709	)
Cash and cash equivalents, beginning of year		15,780			9,479			12,188


Cash and cash equivalents, end of year	$	22,106		$	15,780		$	9,479


Supplemental Cash Flow Information
Cash paid during the year for:
Interest	$	87		$	41		$	246

Income taxes paid	$	15,984		$	11,370		$	8,857

Income taxes refunded	$	3,772		$	3,538		$	3,192


Non-cash investing and financing activities:
Net transfers of inventory to fixed assets for use as demonstration equipment	$	4,989		$	6,809		$	6,518

Dividends declared, not paid	$	70		$	1,563		$	1,069

Capitalized software and property, plant & equipment acquired, not paid	$	493		$	128		$	477

Cancellation of treasury stock	$	—		$	—		$	838

Proceeds due from broker — common stock transactions	$	617		$	441		$	—

Issuance of deferred shares	$	4		$	234		$	—

See notes to consolidated financial statements

F-5

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

1. Summary of Significant Accounting Policies

Company Overview

Datascope Corp. (the “Company,” which may be referred to as our, us or we) is the global leader of intra-aortic balloon counterpulsation and a diversified cardiovascular device company that develops, manufactures and markets proprietary products for clinical health care markets in interventional cardiology, cardiovascular and vascular surgery, and critical care. Our products are sold throughout the world through direct sales representatives and independent distributors. Our two reportable segments are Cardiac Assist Products and Vascular Products. The Cardiac Assist Products segment accounted for 82% of total sales in fiscal 2008. The Cardiac Assist Products segment sells intra-aortic balloon pumps and catheters, endoscopic vessel harvesting products that provide a less-invasive alternative to surgical harvesting of blood vessels for use in coronary bypass and the Safeguard™ assisted pressure device. Our intra-aortic balloon pump system is used in the treatment of cardiac shock, acute heart failure, irregular heart rhythms, and for cardiac support in open-heart surgery, coronary angioplasty, and stenting. The balloon catheter serves as the pumping device within the patient’s aorta. The Vascular Products segment sells a proprietary line of knitted and woven polyester vascular grafts and patches for reconstructive vascular and cardiovascular surgery, peripheral vascular stent products and stent grafts.

Effective May 1, 2008, we sold our Patient Monitoring (“PM”) business to Mindray Medical International Limited.

Principles of Consolidation

The consolidated financial statements include the accounts of Datascope Corp. and its subsidiaries. All intercompany balances and transactions have been eliminated.

Reclassifications

We have reclassified our consolidated statements of earnings to reflect the results of discontinued operations for all fiscal years presented.

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 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. Actual results could differ from those estimates.

F-6

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

Foreign Currency Translation

For each of our foreign subsidiaries, the local currency is the functional currency. Assets and liabilities of foreign subsidiaries have been translated at year-end exchange rates, while revenues and expenses have been translated at average exchange rates in effect during the year. Resulting cumulative translation adjustments have been recorded as a component of accumulated other comprehensive income (loss) in stockholders’ equity.

Taxes on Income

We utilize the asset and liability method for accounting for income taxes in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 109, Accounting for Income Taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates in effect for the years in which the differences are expected to reverse. We reduce our deferred tax assets by a valuation allowance if, based upon the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. We consider relevant evidence, both positive and negative, to determine the need for a valuation allowance. On July 1, 2007, we adopted the provisions of the Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), an interpretation of SFAS No. 109, Accounting for Income Taxes. We have elected to retain our existing accounting policy with respect to the treatment of interest and penalties attributable to income taxes in accordance with FIN 48, and continue to reflect interest and penalties attributable to income taxes, to the extent they arise, as a component of our income tax provision or benefit as well as our outstanding income tax assets and liabilities. See Recently Adopted Accounting Pronouncements and Note 8 for additional information related to the impact of adopting FIN 48.

Cash and Cash Equivalents

Cash and cash equivalents consist primarily of highly liquid investments which have maturities when purchased of less than 90 days. We maintain overdraft facilities with certain banks. Book overdraft positions at the end of each reporting period are reclassified to accounts payable within the consolidated balance sheet.

Investments

Investments in debt and equity securities are classified as available-for-sale and are reported at fair market value based on quoted market prices. Unrealized gains and losses, net of taxes, are reported as a component of stockholders’ equity. On an ongoing basis we evaluate our investments to determine if a decline in fair value is other-than-temporary. Realized gains and losses on investments are included in Other, net, or separately to the extent material. All other investments are initially recorded at cost and charged against income when a decline in the fair market value of an individual security is determined to be other-than-temporary.

F-7

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. This allowance is used to report trade receivables at estimated net realizable value. We rely on prior experience to estimate cash which ultimately will be collected from the gross receivables balance at period-end. We maintain a specific allowance for customer accounts that will likely not be collectible due to customer liquidity issues. We also maintain an allowance for estimated future collection losses on existing receivables, determined based on historical trends.

Concentration of Credit Risk

Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising our customer base. Ongoing credit evaluations of customers’ financial condition are performed. We maintain reserves for potential credit losses and these losses have not exceeded our expectations.

Inventories

We value our inventories at the lower of cost or market. Cost is determined by the “first-in, first-out” (“FIFO”) method. Inventory is reported at its estimated fair market value based upon our historical experience with inventory becoming obsolete due to age, changes in technology and other factors. Inventories consist of the following:


	June 30,
	2008		2007
Materials	$	9,999	$	20,189
Work in process		8,628		11,253
Finished goods		12,403		28,013

	$	31,030	$	59,455

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Additions and improvements are capitalized, while maintenance and repairs are expensed as incurred. Asset and accumulated depreciation accounts are relieved for dispositions, with resulting gains or losses reflected in earnings. Depreciation of property, plant and equipment is provided using the straight-line method over the estimated useful lives of the various assets, or for leasehold improvements, over the term of the lease, if shorter. Certain products used as sales demonstration and service loaner equipment are transferred from inventory to machinery and equipment and depreciated over 3 to 5 years.

F-8

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

The major categories of property, plant and equipment consist of the following:


	June 30,
	2008			2007
Land	$	4,251		$	9,248
Buildings		37,836			57,061
Machinery, furniture and equipment		80,624			116,787
Leasehold improvements		562			476

		123,273			183,572
Less accumulated depreciation and amortization		(73,563	)		(100,760	)

	$	49,710		$	82,812

Depreciation expense was $12.9 million in fiscal 2008 and $15.2 million in fiscal 2007 and 2006. We estimate the useful life of machinery and equipment at 3 to 5 years, furniture at 8 years and buildings at 40 years.

Impairment of Long Lived Assets

The recoverability of certain long-lived assets is evaluated by an analysis of undiscounted cash flows expected to result from the use and eventual disposition of an asset or group of assets compared to its carrying value, and consideration of other significant events or changes in the business environment. If we believe an impairment exists, the carrying amount of these assets is reduced to fair value as defined in SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.

Other Assets

Capitalized Software Development Costs

In accordance with SFAS No. 86, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed, costs incurred in the research and development of new software components and enhancements to existing software components are expensed as incurred until technological feasibility has been established. After technological feasibility is established, any additional software development costs are capitalized and included in Other Assets. Capitalized software amortization is the greater of the ratio of current revenues for a product to the total of current and anticipated future gross revenues for that product or on a straight-line basis over the remaining estimated economic life of the product, including the current reporting period (not to exceed five years).

Internal Use Capitalized Computer Software Costs

We capitalize costs incurred to develop internal use computer software during the application development stage, in accordance with American Institute of Certified Public Accountants Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. Internal use computer software costs are amortized on a straight line basis over the remaining estimated economic life of the software, not to exceed 5 years. Costs become amortizable as functionality of the computer software is achieved.

F-9

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

Intangible Assets

We capitalize payments for purchased technology, licenses and other intangible assets when it is considered probable that the product will be brought to market in the near future and the anticipated profitability is such that it can support recovery of the investment. Satisfaction of the above conditions requires that there be no significant uncertainty about attaining marketability and the remaining open issues necessary to have a saleable product are reasonably predictable. Purchased technology and licenses are amortized through cost of sales on a straight-line basis, over the remaining estimated economic or legal life of the product, generally 5 to 13 years. Other intangible assets consist of customer relationships, a non-compete agreement and a trademark and are amortized on a straight-line basis using lives ranging from 5 to 7 years. The straight-line basis is used for intangible assets when the pattern of consumption of the economic benefits of the intangible asset is not determinable.

Goodwill

Goodwill represents the excess of cost over the fair value of net assets acquired. On an annual basis, or when management determines that the carrying value of goodwill may not be recoverable based upon the existence of certain indicators of impairment, we calculate the fair value of a reporting unit, which is based on a discounted cash flow analysis, and compare it to the reporting unit’s carrying value. If the carrying value of the reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to the difference. There was no impairment of goodwill based on our testing and analysis in fiscal 2008 and 2006. We recorded a pretax goodwill impairment charge of $2.3 million in fiscal 2007 related to Genisphere. The impairment charge is included in the Corporate and Other segment.

Revenue Recognition

We recognize revenue and all related costs, including warranty costs, when persuasive evidence of an arrangement exists, title and risk of loss passes to the customer and collectibility of the fixed sales price is probable. For products shipped FOB shipping point, revenue is recognized when they leave our premises. For products shipped FOB destination, revenue is recognized when they reach the customer. For certain products where we maintain consigned inventory at customer locations, revenue is recognized when the product has been used by the customer. We record estimated sales returns as a reduction of net sales in the same period that the related revenue is recognized. Historical experience is used to estimate an accrual for future returns relating to recorded sales, as well as estimated warranty costs. Revenue for service repairs of equipment is recognized after service has been completed, and service contract revenue is recognized ratably over the term of the contract. We do not have a general right of return for our products. Post shipment obligations for training commitments are considered perfunctory, and sales are recognized when delivered with provision for incremental costs. We reflect shipping and handling fees as revenue and shipping and handling costs as cost of sales.

Earnings Per Share

In accordance with SFAS No. 128, Earnings Per Share, we report basic earnings per share, which is based upon weighted average common shares outstanding, and diluted earnings per share, which includes the dilutive effect of stock awards outstanding.

Stock-Based Compensation

F-10

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

In accordance with SFAS No. 123 (revised 2004) (“SFAS 123(R)”), Share-Based Payment, we establish the fair value for our equity awards to determine their cost and recognize the related stock-based compensation expense over the appropriate vesting period. See Note 10 for additional information related to stock-based compensation expense.

Recently Adopted Accounting Pronouncements

On July 1, 2007, we adopted the provisions of the FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), an interpretation of SFAS No. 109, Accounting for Income Taxes. FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing that a benefit cannot be recorded in the financial statements unless the tax position has a “more likely than not” chance of being sustained upon audit based solely on the technical merits of the position. Once the “more likely than not” standard is met, the benefit is measured by determining the amount that is greater than 50 percent likely of being realized upon settlement, presuming that the tax position is examined by the appropriate taxing authority that has full knowledge of all relevant information. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. See Note 8 for additional information related to the impact of adopting FIN 48.

On June 30, 2007, we adopted the provisions of SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans (“SFAS 158”), an amendment of SFAS 87, 88, 106 and 132(R). SFAS 158 requires registrants to fully recognize an asset or liability for the overfunded or the underfunded status of their benefit plans on their consolidated balance sheet. The pension asset or liability equals the difference between the fair value of the plan’s assets and its benefit obligation. The benefit obligation is measured as the projected benefit obligation (“PBO”) for pension plans and as the accumulated postretirement benefit obligation for other postretirement benefit plans. At June 30, 2007, we had a PBO that was approximately $1.1 million higher than the fair value of the U.S. and International defined benefit pension plan assets. The supplemental executive retirement plans (“SERP”) had a PBO of approximately $18.3 million at June 30, 2007. There are no assets in the SERP plans. In addition, we are required to recognize as part of accumulated other comprehensive income (loss), net of taxes, gains and losses due to differences between our actuarial assumptions and actual experience (actuarial gains and losses) and any effects on prior service due to plan amendments (prior service costs or credits) that arise during the period and which are not yet recognized as net periodic benefit costs. At adoption date, we recognized $5.1 million within accumulated other comprehensive loss, net of tax, related to the previously unrecognized net actuarial losses, prior service credits and net transition amounts. We currently meet the SFAS 158 requirement that the measurement date for plan assets and liabilities must coincide with the sponsor’s year end. SFAS 158 also includes additional disclosures in an entity’s annual financial statements. See Note 12 for additional information related to our retirement benefit plans.

F-11

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

Recent Accounting Pronouncements, Not Required to be Adopted as of June 30, 2008

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines “fair value” as: the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In addition, SFAS 157 establishes a fair value hierarchy to be used to classify the source of information used in fair value measurements, new disclosures of assets and liabilities measured at fair value based on their level in the hierarchy and a modification of the long-standing accounting presumption that the transaction price of an asset or liability equals its initial fair value. SFAS 157 is effective for fiscal years beginning after November 15, 2007 (our fiscal year 2009 beginning July 1, 2008). The FASB issued Staff Position FAS 157-2, Effective Date of FASB Statement No. 157, which delayed the provisions of SFAS 157 relating to nonfinancial assets and liabilities until fiscal years beginning after November 15, 2008 (our fiscal year 2010 beginning July 1, 2009). SFAS 157 is not expected to materially affect how we determine fair value, but may result in certain additional disclosures.

In November 2006, the FASB issued Emerging Issues Task Force Issue No. 06-10, Accounting for Deferred Compensation and Postretirement Benefits Aspects of Collateral Assignment Split-Dollar Life Insurance Arrangements, which is effective for fiscal years that begin after December 15, 2007 (our fiscal year 2009 beginning July 1, 2008). The Task Force concluded that an employer should recognize a liability for the postretirement benefit related to a collateral assignment split-dollar life insurance arrangement in accordance with either FASB Statement No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions, or Accounting Principles Board Opinion No. 12, Omnibus Opinion, based on the substantive agreement with the employee. The Task Force also concluded that an employer should recognize and measure an asset based on the nature and substance of the collateral assignment split-dollar life insurance arrangement. The Supplemental Benefits Plan for the Chairman and Chief Executive Officer, Mr. Lawrence Saper, provides survivor benefits in the form of a $10 million life insurance policy, maintained pursuant to a collateral assignment split-dollar agreement among Mr. Saper, the Company and a trust for the benefit of Mr. Saper’s family. The present value of the premium reimbursement pursuant to the split-dollar agreement at June 30, 2008 was approximately $3.5 million. Upon adoption, we will record a liability and a cumulative effect adjustment to retained earnings for the present value of the premium reimbursement at the date of adoption.

F-12

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51 (“SFAS 160”). This statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 clarifies a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008 (our fiscal year 2010 beginning July 1, 2009). We are currently evaluating the impact of adopting SFAS 160 on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (“SFAS 141(R)”). This statement establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, the goodwill acquired and any noncontrolling interest in the acquiree. In addition, SFAS 141(R) establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS 141(R) applies prospectively to business combinations for which the acquisition date is during fiscal years beginning on or after December 15, 2008, the effective date of this statement. We will adopt SFAS 141(R) in the first quarter of our fiscal year 2010 beginning July 1, 2009.

In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities (“SFAS161”), which is effective for fiscal years beginning after November 15, 2008 (our fiscal year beginning July 1, 2009). Statement 161 requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. We are currently evaluating the impact of adopting SFAS 161, but do not anticipate that the provisions of SFAS 161 will have a material impact on our consolidated financial statements.

In May 2008, the FASB issued Statement No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS 162”). This Statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements that are presented in conformity with generally accepted accounting principles in the U.S. We are currently evaluating the impact of adopting SFAS 162, but do not anticipate that the provisions of SFAS 162 will have a material impact on our consolidated financial statements.

F-13

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

2. Financial Instruments and Investments

The fair value of accounts receivable and accounts payable approximate their carrying value because of their short maturity. Our short- and long-term marketable investments are primarily held in U.S. treasury securities, AAA-Rated U.S. government guaranteed agency securities and AAA—Rated corporate notes. Fair values of short- and long-term investments are based upon quoted market prices, including accrued interest. We do not hold any auction rate securities.

As of June 30, 2008, investments were classified as follows:


			Gross Unrealized
	Cost		Gains		Losses		Fair Value
Short-term
U.S. treasury and agency securities	$	205,232	$	97	$	7	$	205,322
Foreign government treasury securities		7,967		—		—		7,967
Guaranteed Euro deposits		14,611		—		—		14,611
Corporate equity security		26		180		—		206

Short-term total	$	227,836	$	277	$	7	$	228,106


Long-term
U.S. treasury and agency securities	$	20,645	$	173	$	79	$	20,739
AAA—Rated corporate notes		2,031		76		—		2,107

Long-term total	$	22,676	$	249	$	79	$	22,846

Totals	$	250,512	$	526	$	86	$	250,952

We had 2 securities with a fair market value of $3.1 million and unrealized losses of $22 thousand at June 30, 2008 that had a continuous loss position for more than 12 months. We had 10 securities with a fair market value of $31.9 million and unrealized losses of $64 thousand at June 30, 2008 that had a continuous loss position for less than 12 months. Unrealized losses from these investments are primarily attributable to interest rate changes.

A realized gain of $13.2 million was recorded in net earnings related to our sale of the Masimo investment (cost basis of $5.0 million) in fiscal 2008. The realized gain is included in gain on sale of investments in the consolidated statement of earnings. The pretax change in unrealized gain on available-for-sale securities that has been included as a separate component of stockholders’ equity was a gain of $877 thousand in fiscal 2008. No losses were reclassified from stockholders’ equity to the statement of earnings in fiscal 2008.

F-14

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

As of June 30, 2007, investments were classified as follows:


			Gross Unrealized
	Cost		Gains		Losses		Fair Value
Short-term
U.S. treasury and agency securities	$	23,942	$	2	$	263	$	23,681


Long-term
U.S. treasury and agency securities	$	6,105	$	—	$	201	$	5,904
AAA—Rated corporate notes		2,062		26		—		2,088
Preferred stock		5,000		—		—		5,000
Call option		1,354		—		—		1,354

Long-term total	$	14,521	$	26	$	201	$	14,346

Totals	$	38,463	$	28	$	464	$	38,027

We had 6 securities with a fair market value of $12.5 million and unrealized losses of $421 thousand at June 30, 2007 that had a continuous loss position for more than 12 months. We had 5 securities with a fair market value of $4.2 million and unrealized losses of $43 thousand at June 30, 2007 that had a continuous loss position for less than 12 months. Unrealized losses from these investments are primarily attributable to interest rate changes.

Realized losses of $5 thousand on the sale of $31.5 million of investments in fiscal 2007 were determined based on the specific identification method. The pretax change in unrealized loss on available-for-sale securities that has been included as a separate component of stockholders’ equity was a gain of $136 thousand in fiscal 2007. No losses were reclassified from stockholders’ equity to the statement of earnings in fiscal 2007.

Realized losses of $853 thousand on the sale of $28.9 million of investments in fiscal 2006 were determined based on the specific identification method. The sale of these investments was due to the repatriation of approximately $30.0 million of foreign earnings under the American Jobs Creation Act of 2004. The change in unrealized loss on available-for-sale securities that has been included in the separate component of stockholders’ equity was a loss of $484 thousand in fiscal 2006. Losses of $234 thousand were reclassified from stockholders’ equity to the statement of earnings in fiscal 2006.

We have determined that the gross unrealized losses on our investment securities at June 30, 2008 and 2007 were temporary in nature. We review our investments for indications of possible impairment. Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

Contractual maturities of debt securities as of June 30, 2008 are as follows:


Available-for-Sale	Fair Value
Due within one year	$	227,900
Due after one year through five years		22,846

	$	250,746

F-15

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

Derivative Financial Instruments

We have limited involvement with derivative financial instruments and do not use them for trading purposes. We utilize foreign currency forward exchange contracts primarily to mitigate the foreign exchange impact of gains or losses relating to certain intercompany receivables denominated in foreign currencies. Our hedging activities do not subject us to exchange rate risk because gains and losses on these contracts offset losses and gains on the intercompany receivables hedged. These contracts are not designated as hedges and are recorded at fair value with any gains or losses recognized in current period earnings.

We recorded net losses related to these contracts of $2.7 million in fiscal 2008, $0.9 million in fiscal 2007 and $1.0 million in fiscal 2006. These amounts, included within other, net, in our consolidated statements of earnings, consist of gains and losses from contracts settled during fiscal 2008, 2007 and 2006 as well as contracts outstanding at June 30, 2008, 2007 and 2006 that are recorded at fair value.

As of June 30, 2008, we had a notional amount of $17.0 million of foreign currency forward exchange contracts outstanding, all of which were in Euros and Japanese Yen. As of June 30, 2007, we had a notional $16.3 million of foreign currency forward exchange contracts outstanding, all of which were in Euros and British Pounds. The foreign currency forward exchange contracts generally have maturities that do not exceed 12 months and require that we exchange foreign currencies for U.S. dollars at maturity, at rates agreed to at inception of the contracts. The foreign currency forward exchange contracts are with large international financial institutions.

3. Discontinued Operations

Effective May 1, 2008, we sold our Patient Monitoring (“PM”) business to Mindray Medical International Limited. We received approximately $209 million in cash at the closing and retained approximately $30 million of receivables generated by the PM business. The sale of the PM business allows us to focus our efforts on our continuing businesses, primarily Cardiac Assist Products and Vascular Products segments. The sale of the PM business resulted in a gain of approximately $76.7 million, net of $47.4 million income tax expense, or $4.91 per diluted share. Patient Monitoring was formerly part of the Cardiac Assist / Monitoring Products segment.

In October 2006, we announced a plan to exit the vascular closure market and phase out the Interventional Products (“IP”) business. Effective August 6, 2008, we completed the sale of IP assets related to the VasoSeal, On-Site, and X-Site vascular closure devices, and our collagen operations, to St. Jude Medical, Inc. for $21.0 million in cash at closing and $3.0 million to be paid upon the expiration of an 18 month indemnification period. At June 30, 2008, we determined that the Interventional Products (“IP”) business met the criteria to be accounted for as a discontinued operation, and have reflected the IP financial results as discontinued operations in the consolidated statements of earnings for fiscal 2008, 2007 and 2006. Interventional Products was formerly part of the Inteventional / Vascular Products segment.

F-16

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

Net sales and pretax (loss) earnings from discontinued operations for fiscal 2008, 2007 and 2006 are shown below.


	Year Ending June 30,
	2008			2007			2006
Net sales:
Patient Monitoring business	$	134,160		$	156,501		$	159,402
Interventional Products business		4,163			9,308			17,082

Net sales from discontinued operations	$	138,323		$	165,809		$	176,484


Pretax (loss) earnings:
Patient Monitoring business	$	(5,772	)	$	3,562		$	11,815
Interventional Products business		506			(4,915	)		(10,347	)

Pretax (loss) earnings from discontinued operations	$	(5,266	)	$	(1,353	)	$	1,468

The assets and liabilities classified as discontinued operations as of June 30, 2008 are as follows:


Inventories (current assets of discontinued operations)	$	5,773


Property, plant and equipment, net of accumulated depreciation of $2,813	$	2,253
Intangible assets, net		13,413

Noncurrent assets of discontinued operations	$	15,666


Accrued expenses (current liabilities of discontinued operations)	$	500


Other liabilities of discontinued operations	$	459

4. Acquisitions

On June 11, 2008, we exercised our option to acquire the peripheral vascular stent business of the Sorin Group of Milan, Italy. We had been the exclusive distributor of the Sorin peripheral stent product line in Europe since January 2007. The acquisition allows us to gain the opportunity to market the product line throughout the world. The peripheral vascular products are used by vascular surgeons and interventional radiologists for the treatment of peripheral arterial disease.

F-17

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

The total cost of the acquisition was approximately $14.3 million in cash, including acquisition-related expenses, of which $11.1 million was paid in June 2008 and the remaining balance of $3.2 million was paid in January 2007 for the initial purchase option and distribution license agreement. The acquired stent business was assigned entirely to the Vascular Products segment. The following table summarizes the preliminary allocation of the purchase price of the acquisition:


			Weighted Average
			Amortization
	Cost		Period
Intangible assets:
Purchased technology	$	8,886	9.8 years
Customer relationships and other		2,124	6.6 years
Trademark		529	7.0 years
Goodwill		2,762	—

Total assets acquired	$	14,301

The weighted average amortization period for all acquired intangible assets subject to amortization is 9.1 years.

In June 2007, we acquired all of the outstanding stock of Artema Medical AB, a privately held Swedish manufacturer of proprietary gas analyzers, which identify and measure the concentration of anesthetic agents used during surgery. The cost of the Artema acquisition was approximately $16.4 million in cash, including acquisition related expenses, less $0.1 million cash acquired. Artema was sold as part of the sale of the PM business in May 2008.

5. Intangible Assets


	June 30,
	2008			2007
Amortized intangible assets:
Purchased technology	$	14,612		$	22,176
Licenses		390			5,272
Customer relationships and other		2,685			1,077

Subtotal		17,687			28,525


Accumulated amortization:
Purchased technology		(1,540	)		(1,300	)
Licenses		(265	)		(1,512	)
Customer relationships and other		(9	)		(12	)

Subtotal		(1,814	)		(2,824	)

Amortized intangible assets, net	$	15,873		$	25,701


Indefinite-lived intangible assets:
Trade name	$	—		$	373

The components of intangible assets primarily represent the fair value of intangibles assets acquired for the peripheral vascular stent business, purchased technology for the ClearGlide endoscopic vessel harvesting device and purchased technology for the ProLumen thrombectomy device.

F-18

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

Amortization expense for fiscal 2008 and 2007 was $1.6 million and $1.3 million, respectively.

Expected future amortization expense for intangible assets subject to amortization for fiscal 2009 through 2013 is as follows:


	Year Ending June 30,
	2009		2010		2011		2012		2013
Amortization expense	$	1,773	$	1,773	$	1,773	$	1,773	$	1,759

The remaining weighted average amortization period for intangible assets is approximately 9.6 years.

6. Goodwill

Goodwill as of June 30, 2008 and 2007 was $4.6 million and $12.9 million, respectively. We acquired $2.8 million of goodwill as a result of the acquisition of the Sorin vascular peripheral stent business in fiscal 2008. In connection with the sale of the PM business, $11.1 million of goodwill that was acquired through the acquisition of Artema Medical in fiscal 2007 was sold in fiscal 2008. All of the goodwill is included within the Vascular Products segment at June 30, 2008.

Our annual impairment test is performed during the fourth quarter of our fiscal year. There was no goodwill impairment in fiscal 2008. In fiscal 2007, we recorded a pretax goodwill impairment charge of $2.3 million related to Genisphere. Slower growth in Genisphere’s markets primarily attributable to increased competition in the DNA microarray market had a negative impact on Genisphere’s operating results and resulted in lower growth expectations. As a result, the Genisphere goodwill was determined to be completely impaired.

7. Other Assets


	June 30,
	2008		2007
Capitalized software, net of accumulated amortization of $5,391 and $20,975	$	11,830	$	20,173
Cash surrender value of officers’ life insurance		12,402		12,153
Non-current pension asset		17,127		1,261
Non-current deferred tax assets		1,251		249
Other non-current assets		1,364		1,061

	$	43,974	$	34,897

Amortization of capitalized software costs was $3.5 million in fiscal 2008, $5.0 million in fiscal 2007 and $4.5 million in fiscal 2006.

F-19

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

8. Income Taxes

Earnings from continuing operations before income taxes consists of the following:


	Year Ended June 30,
	2008		2007		2006
U.S.	$	43,498	$	10,842	$	18,775
Foreign		7,768		15,114		14,246

Earnings before income taxes	$	51,266	$	25,956	$	33,021

The related provision for income taxes for continuing operations consists of the following:


	Year Ended June 30,
	2008			2007			2006
Current income taxes:
Federal	$	9,167		$	4,175		$	5,802
State		1,491			1,797			1,736
Foreign		2,247			1,913			585

Total current		12,905			7,885			8,123

Deferred income taxes:
Federal		4,490			235			(242	)
State		(601	)		(48	)		320
Foreign		694			(410	)		88

Total deferred		4,583			(223	)		166

Total income taxes	$	17,488		$	7,662		$	8,289

Amounts are reflected in the preceding table based on the location of the taxing authorities.

Included in the change in deferred tax assets (liabilities) are certain items that have been recorded as components of accumulated other comprehensive income (loss). These amounts resulted in a $0.7 million increase in deferred tax assets in fiscal 2008, $2.6 million increase in deferred tax assets in fiscal 2007 and a $3.4 million decrease in deferred tax assets in fiscal 2006.

At June 30, 2005, we determined that we would repatriate approximately $30.0 million under the American Jobs Creation Act of 2004 (“AJCA”) and, accordingly, recorded a current deferred tax liability of $2.0 million for Federal and state taxes attributable to the repatriation of earnings. During the fourth quarter of fiscal 2006, we completed the repatriation of foreign earnings, totaling $29.6 million, and finalized the computations of the related aggregate tax impact resulting in an additional tax liability of $175 thousand. During fiscal 2006, $5 million of the repatriated funds was used to supplement our contributions to our defined benefit pension plan and the remaining repatriated funds were used to fund other qualified expenditures as defined under the AJCA, such as research and development and capital expenditures.

At June 30, 2008, the cumulative amount of undistributed foreign earnings was approximately $48.3 million. Income taxes have not been provided on this undistributed income because we intend to reinvest these earnings in our overseas operations. It is not practicable to estimate the amount of income taxes payable on the earnings that are permanently reinvested in foreign operations.

F-20

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

Reconciliation of the U.S. statutory income tax rate on continuing operations to our effective tax rate is shown below:


	Year Ended June 30,
	2008						2007						2006
				Effective						Effective						Effective
	Amount			Rate			Amount			Rate			Amount			Rate
Tax computed at Federal statutory rate	$	17,943			35.0	%	$	9,085			35.0	%	$	11,557			35.0	%
(Decrease) increase resulting from:
Benefit from extraterritorial income exclusion		—			—			(373	)		(1.4	)		(1,173	)		(3.5	)
State income taxes, net of Federal income tax benefit		780			1.5			1,018			3.9			1,055			3.2
Rate differential on foreign income		(487	)		(1.0	)		(1,237	)		(4.7	)		(1,973	)		(6.0	)
Domestic manufacturing deduction		(622	)		(1.2	)		(146	)		(0.6	)		(93	)		(0.3	)
Research and development credit, net		(169	)		(0.3	)		(355	)		(1.4	)		(248	)		(1.0	)
Repatriation of foreign earnings		—			—			—			—			175			0.8
Special dividend income		(67	)		(0.1	)		(48	)		(0.2	)		(1,108	)		(3.4	)
Other		110			0.2			(282	)		(1.1	)		97			0.3

Total income taxes	$	17,488			34.1	%	$	7,662			29.5	%	$	8,289			25.1	%

The adjustment reflected in the above table for the special dividend income in fiscal 2008, 2007 and 2006 reflects the favorable effect of the Federal dividends received deduction.

Deferred taxes arise because of differences between the financial statement basis and tax basis of assets and liabilities, known as “temporary differences.” We record the tax effect of these temporary differences as “deferred tax assets” (generally items that can be used as a tax deduction or credit in future periods) and “deferred tax liabilities” (generally items that we receive a tax deduction for, but have not yet been recorded in the consolidated statement of earnings). Deferred tax assets and liabilities are measured using the enacted tax rates in effect for the years in which the differences are expected to reverse.

F-21

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

The tax effects of the major items recorded as deferred tax assets and liabilities are:


	June 30,
	2008			2007
Deferred Tax Assets:
Inventories	$	2,966		$	5,044
Accounts receivable		552			623
Foreign and state tax credits		2,229			2,585
Unrealized foreign exchange losses		455			140
Supplemental executive retirement plan		6,979			7,385
Tax loss carryforwards		6,300			3,765
Benefit plan adjustments		5,268			4,138
Asset write-downs		1,792			1,865
Accrued expenses		546			1,545
Unrealized losses on available-for-sale securities		—			178
Other		1,453			957

Deferred tax assets before valuation allowance		28,540			28,225
Valuation allowance		(4,446	)		(4,855	)

Deferred tax assets after valuation allowance		24,094			23,370


Deferred Tax Liabilities:
Accelerated depreciation		11,942			10,780
Unrealized gains on available-for-sale securities		167			—
Acquisition intangibles		—			1,024
State income taxes		—			261
Accrued insurance		966			1,064
Defined benefit plans		6,849			2,780
Other		2,188			1,108

Deferred tax liabilities		22,112			17,017

Net deferred tax assets	$	1,982		$	6,353

Our consolidated balance sheet at June 30, 2008 includes the following deferred tax balances: current deferred tax asset of $2.5 million; noncurrent deferred tax asset of $1.3 million (reflected in other assets); current deferred tax liability of $0.3 million (reflected in accrued expenses); and noncurrent deferred tax liability of $1.4 million (reflected in other liabilities).

At June 30, 2008, we had total net operating loss carryforwards of $78.0 million ($7.8 million foreign and $70.2 million state tax net operating loss carryforwards). The tax effect of the operating loss carryforwards was $6.3 million ($2.6 million foreign and $3.7 million state). Most of the foreign tax loss carryforwards may be carried forward indefinitely ($3.0 million expire during the 2016 through 2023 time period). The benefits from state tax carryforwards expire during the period 2009 through 2026. An insignificant amount of these carryforwards expire in the next 3 years. We also have $3.4 million of gross credit carryforwards of state research and development tax credits as of June 30, 2008. The benefits of the state credits expire during the period 2011 through 2015.

We reduce our deferred tax assets by a valuation allowance if, based upon the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. We consider relevant evidence, both positive and negative, to determine the need for a valuation allowance. We recorded a valuation allowance at June 30, 2008 and 2007 of $4.4 million and $4.9 million, respectively, against the foreign and state tax net operating loss carryforwards and for 2007 a portion of the state research and development tax credits.

F-22

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

The valuation allowance decreased by $0.5 million during fiscal 2008, due to a net increase in foreign and state tax net operating loss carryforwards and a decrease in the portion of state tax credits that are more likely than not to expire before utilization. The valuation allowance increased by $1.5 million during fiscal 2007, due to the net increase in foreign and state tax net operating loss carryforwards and the portion of state research and development tax credits that are more likely than not to expire before utilization.

At June 30, 2008, the total amount of unrecognized tax benefits was $10.9 million. Of this total, $3.9 million represents the amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate in future periods. The total amount of accrued interest and penalties resulting from such unrecognized tax benefits was $0.9 million at June 30, 2008 and $1.1 million at July 1, 2007. The total amount of interest and penalties recognized in our consolidated statements of earnings during fiscal 2008, 2007 and 2006 was $0.4 million, $10 thousand and $2 thousand, respectively.

Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable. We adjust these reserves in light of changing facts and circumstances, such as the outcome of tax audits. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate. Accruals for tax contingencies are provided for in accordance with the requirements of FIN 48. We have elected to retain our existing accounting policy with respect to the treatment of interest and penalties attributable to income taxes in accordance with FIN 48, and continue to reflect interest and penalties attributable to income taxes, to the extent they arise, as a component of our income tax provision or benefit.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits as of June 30, 2008 was as follows:


Balance at July 1, 2007	$	7,643
Additions based on tax positions related to the current year		4,319
Additions for tax positions of prior years		2,189
Reductions for tax positions of prior years		(489	)
Reductions due to lapse of applicable statute of limitations		(2,748	)
Audit settlements paid during fiscal 2008		—


Balance at June 30, 2008		10,914
Interest and penalties		923


Total balance at June 30, 2008	$	11,837

We operate within multiple taxing jurisdictions and are subject to routine corporate income tax audits in many of those jurisdictions. These audits can involve complex issues, including challenges regarding the timing and amount of deductions and credits and the allocation of income among various tax jurisdictions. Our U.S. income tax returns for fiscal 1998 and prior years have been audited by the Internal Revenue Service and are closed.

F-23

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

The U.S. statutory period has expired for the fiscal years through 2004, and is open for subsequent periods. Currently, our tax returns are being examined by the Internal Revenue Service for fiscal 2005 through 2007 and the State of New Jersey for fiscal 2001 through 2006. In four other state jurisdictions, we have been notified of an intent to audit. For the remaining states, our fiscal 2004 through 2007 tax returns remain open for examination by the tax authorities under a general four year statue of limitations. Our foreign tax returns generally remain open for examination from fiscal 2005 through 2007 under a general three year statute of limitations.

Currently we do not expect the total amount of unrecognized tax benefits will significantly increase or decrease within the next year.

9. Other Liabilities


	June 30,
	2008		2007
Noncurrent benefit plans liabilities	$	17,807	$	20,714
Noncurrent FIN 48 income tax liability		4,786		—
Noncurrent deferred income		649		1,152
Noncurrent deferred taxes		1,399		1,134
Other noncurrent liabilities		1,195		2,220

	$	25,836	$	25,220

10. Stock-Based Awards

We maintain the following equity incentive plans:

•

The 2005 Equity Incentive Plan (“2005 Plan”), approved by stockholders in December 2005, authorized 1,200,000 shares covering several different types of awards, including stock options, performance shares, performance units, stock appreciation rights, restricted shares and deferred shares.

	•		The Amended and Restated 1995 Employee Stock Option Plan covering 4,150,000 shares of common stock.

	•		The Amended and Restated Non-Employee Director Plan covering 150,000 shares of common stock. Under the provisions of SFAS 123(R), members of the Board of Directors are considered employees.

The stock option plans provide that options may be granted at an exercise price of 100% of fair market value of our common stock on the date of grant, may be exercised in full or in installments, at the discretion of the Board of Directors, and must be exercised within ten years from date of grant. We recognize stock-based compensation expense on a straight-line basis over the requisite service period based on fair values, generally four years.

F-24

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

Stock-based compensation expense in fiscal 2008, 2007 and 2006 was recorded in the consolidated statements of earnings as follows:


	Year Ended June 30,
	2008		2007		2006
Continuing operations
Cost of sales	$	24	$	5	$	3
Research and development expense		108		71		45
Selling, general and administrative expense		862		411		373

Total stock-based compensation expense	$	994	$	487	$	421


Total stock-based compensation expense, net of tax	$	594	$	288	$	249


Discontinued operations
Net (loss) earnings from discontinued operations	$	668	$	123	$	81

The fair value of the stock options granted was estimated on the date of grant using a Black-Scholes option valuation model that uses the assumptions noted in the following table. The expected dividend yield is based on the annualized projection of regular and special dividends. Expected volatility was based on historical volatility for a period equal to the stock option’s expected life and calculated on a monthly basis. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected life (estimated period of time outstanding) of stock options granted was estimated using the historical exercise behavior of employees for grants with a 10-year term.


	Year Ended June 30,
	2008		2007			2006
Expected dividend yield		*		4.00	%		2.22	%
Expected volatility		*		27	%		29	%
Risk-free interest rate		*		4.62	%		4.63	%
Expected life		*	4.8 Years			4.9 Years


*		Not applicable. There were no stock options granted during fiscal 2008.

Stock Options

On May 5, 2008, in connection with the sale of the PM business, the Board of Directors approved the accelerated vesting of all unvested stock options outstanding for those employees who would be transferred upon the sale closing. Options to purchase 62,600 shares became exercisable immediately. In addition, the Board of Directors approved a plan for the net cash settlement of all stock options outstanding and exercisable for the PM employees. The net cash settlement of options to purchase 159,300 shares was $770 thousand, of which $342 thousand was recognized as an incremental expense to the Black-Scholes grant date fair value cost for those options. The additional compensation expense, net of tax, is reflected in net loss from discontinued operations on our consolidated statement of earnings for fiscal 2008.

F-25

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

Changes in our stock options were as follows:


	Year Ended June 30,
	2008					2007					2006
				Weighted					Weighted					Weighted
				Average					Average					Average
				Exercise					Exercise					Exercise
	Shares			Price		Shares			Price		Shares			Price
Outstanding at July 1		1,741,161		$	32.47		2,040,626		$	32.47		2,477,153		$	31.73
Granted		—			—		167,250			33.91		176,100			35.85
Exercised		(459,510	)		32.28		(152,861	)		28.97		(475,095	)		29.10
Settled		(159,300	)		35.67		—			—		—			—
Forfeited/Expired		(76,851	)		35.00		(313,854	)		34.93		(137,532	)		35.13

Outstanding at June 30		1,045,500		$	31.87		1,741,161		$	32.47		2,040,626		$	32.47

Vested and expected to vest at June 30		1,038,681		$	31.85		1,700,212		$	32.41		2,017,132		$	32.43

Exercisable at June 30		996,063		$	31.69		1,534,136		$	32.17		1,876,484		$	32.22

At June 30, 2008, there were 1,761,817 shares of common stock reserved for stock options. We generally issue shares for the exercise of stock options from unissued reserved shares. We anticipate that shares repurchased will offset shares to be issued for the stock-based awards and reduce the dilutive impact of the share-based activity. However, since the timing and amount of future repurchases is not known, we cannot estimate the number of shares expected to be repurchased during fiscal 2009.

The weighted average remaining contractual term was approximately 4.3 years for stock options outstanding, approximately 4.1 years for stock options exercisable and 4.3 years for stock options vested and expected to vest as of June 30, 2008. The weighted average fair value of options granted was $6.89 in fiscal 2007 and $9.64 in fiscal 2006. As noted above, there were no stock options granted during fiscal 2008.

The total intrinsic value (the excess of the market price over the exercise price) was approximately $15.8 million for stock options outstanding, $15.2 million for stock options exercisable and $15.7 million for stock options vested and expected to vest as of June 30, 2008. The total intrinsic value for stock options exercised was approximately $4.0 million in fiscal 2008, $1.1 million in fiscal 2007 and $3.9 million in fiscal 2006.

The amount of cash received from the exercise of stock options was approximately $14.7 million and the related tax benefit was approximately $1.2 million in fiscal 2008.

SFAS 123(R) requires that cash flows resulting from tax benefits attributable to tax deductions in excess of the compensation expense recognized for those options (excess tax benefits) be classified as financing cash flows. As a result, we classified $1.3 million, $0.4 million and $1.4 million of excess tax benefits as financing cash flows in fiscal 2008, 2007 and 2006, respectively.

F-26

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

The following table summarizes information concerning outstanding and exercisable stock options at June 30, 2008.


	Stock Options Outstanding						Stock Options Exercisable
			Weighted		Weighted				Weighted
			Average		Average				Average
Range of			Remaining		Exercise				Exercise
Exercise Prices	Options		Contractual Life		Price		Options		Price
$22.49 — $28.53		43,850		5.03	$	26.97		43,850	$	26.97
$28.67		500,000		3.64	$	28.67		500,000	$	28.67
$28.80 — $41.58		501,650		4.90	$	35.50		452,213	$	35.49

		1,045,500		4.30	$	31.87		996,063	$	31.69

As of June 30, 2008, unrecognized stock-based compensation expense related to stock options was approximately $0.8 million and is expected to be recognized over a weighted average period of 2.0 years.

Restricted Stock

The following table summarizes restricted stock activity under the 2005 Plan during fiscal 2008, 2007 and 2006.


	Year Ended June 30,
	2008					2007					2006
				Weighted					Weighted				Weighted
				Average					Average				Average
				Grant					Grant				Grant
	Shares			Price		Shares			Price		Shares		Price
Nonvested at July 1		3,908		$	35.84		13,937		$	35.88		—	$	—
Granted		79,917			33.91		3,908			35.84		13,937		35.88
Vested		(9,178	)		34.19		—			—		—		—
Forfeited		(9,960	)		33.22		(13,937	)		35.88		—		—

Nonvested at June 30		64,687		$	34.09		3,908		$	35.84		13,937	$	35.88

As of June 30, 2008, unrecognized stock-based compensation expense related to nonvested awards was approximately $1.7 million and is expected to be recognized over a weighted average period of 3.1 years.

Shareholder Rights Plan

On May 22, 1991, we adopted a Shareholder Rights Plan. The purpose of the plan is to prevent us from being the target of an unsolicited tender offer or unfriendly takeover. On May 16, 2000, we amended the Shareholder Rights Plan to provide for (i) an extension of the final expiration date of the Shareholder Rights Plan from June 2, 2001 to June 2, 2011 and (ii) a change in the purchase price of the rights from $300 to $200 per one one-thousandths of a share of Series A Preferred Stock, subject to adjustment.

F-27

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

Under the plan, our common stockholders were issued one preferred stock purchase right for each share of common stock owned by them. Until they are redeemed by us or expire, each preferred stock purchase right entitles the holder to purchase .001 share of our Series A Preferred Stock, par value $1.00 per share, at an exercise price of $200. We may redeem the preferred stock purchase rights for $.01 per right at any time until after the date on which our right to redeem them has expired. In addition, the preferred stock purchase rights do not become exercisable until our right to redeem them has expired. Our right to redeem the preferred stock purchase rights expires on the 10th business day after the date of a public announcement that a person, or an acquiring person, has acquired ownership of our stock representing 15 percent or more of our shareholders’ general voting power. Before an acquiring person acquires 50 percent or more of our outstanding common stock, the plan provides that we may offer to exchange the rights, in whole or in part, on the basis of an exchange ratio of one share of common stock for each right. However, any rights owned by the acquiring person and its affiliates and associates will be null and void and cannot be exchanged for common stock.

The plan also provides that, after the date of a public announcement that a person has acquired ownership of our stock representing 15 percent or more of our shareholders’ general voting power, generally each holder of a preferred stock purchase right will have the right to purchase, at the exercise price, a number of shares of our preferred stock having a market value equal to twice the exercise price. The plan further provides that if certain other business combinations occur, generally each holder of a preferred stock purchase right will have the right to purchase, at the exercise price, a number of shares of the acquiring person’s common stock having a market value of twice the exercise price.

Stock Repurchase Programs

On September 12, 2006, the Board of Directors approved the adoption of a stock repurchase program authorizing an additional $40 million for future purchases of our common stock. Through June 30, 2008, there were no stock repurchases under this program. Currently, we have $1.1 million remaining and available from the stock repurchase program authorized by the Board of Directors on May 16, 2001. Under this previous program, we have acquired 1,017,105 shares through June 30, 2008 at a cost of $38.9 million. There is no expiration date on the current programs.

Compensation Plan for Non-Employee Directors

We have a compensation plan for non-employee directors, which became effective on January 1, 2007. Any member of the Board of Directors who is not an employee or a consultant to us or any of our divisions or subsidiaries will receive an annual retainer of $25 thousand payable in cash, deferred shares or restricted shares and an annual equity grant of $70 thousand payable in deferred shares or restricted shares. All payments made in shares of our common stock are pursuant to the 2005 Plan. Prior to the beginning of calendar year 2007, compensation for non-employee directors was covered under the Amended and Restated Non-Employee Director Plan, which became effective in calendar year 1998. Under the previous compensation plan, eligible non-employee directors received an annual retainer of $24 thousand payable in shares of our common stock and an annual grant of options to purchase 5,000 shares of our common stock.

11. Segment Information

We develop, manufacture and sell medical devices in two reportable segments, Cardiac Assist Products and Vascular Products.

F-28

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

The Cardiac Assist Products segment includes intra-aortic balloon pumps and catheters that are used in the treatment of cardiovascular disease, endoscopic vessel harvesting products that provide a less-invasive alternative to surgical harvesting of blood vessels for use in coronary bypass and the Safeguard assisted pressure device.

The Vascular Products segment sells a proprietary line of knitted and woven polyester vascular grafts and patches for reconstructive vascular and cardiovascular surgery, peripheral vascular stent products and stent grafts. The peripheral vascular products are used by vascular surgeons and interventional radiologists for the treatment of peripheral arterial disease.

Management evaluates the revenue and profitability performance of each of our product lines to make operating and strategic decisions. We have no intersegment revenue.


	Cardiac					Corporate
	Assist		Vascular			and
	Products		Products			Other (a)			Consolidated
Year ended June 30, 2008
Net sales to external customers	$	189,316	$	40,333		$	1,266		$	230,915
Operating earnings (loss)	$	38,350	$	(224	)	$	(920	)	$	37,206
Assets	$	127,303	$	83,537		$	312,898		$	523,738
Long-lived asset expenditures	$	4,959	$	2,080		$	6,447		$	13,486
Depreciation and amortization	$	7,672	$	1,779		$	8,457		$	17,908

Year ended June 30, 2007
Net sales to external customers	$	178,321	$	33,484		$	1,186		$	212,991
Operating earnings (loss) (b)	$	33,576	$	(2,878	)	$	(7,917	)	$	22,781
Assets	$	126,825	$	62,103		$	187,228		$	376,156
Long-lived asset expenditures	$	2,360	$	3,682		$	9,197		$	15,239
Depreciation and amortization	$	7,526	$	1,482		$	12,480		$	21,488

Year ended June 30, 2006
Net sales to external customers	$	164,782	$	30,147		$	1,587		$	196,516
Operating earnings (loss)	$	29,405	$	(1,107	)	$	(383	)	$	27,915
Assets	$	112,188	$	60,309		$	203,183		$	375,680
Long-lived asset expenditures	$	3,536	$	1,944		$	5,858		$	11,338
Depreciation and amortization	$	7,585	$	1,166		$	11,782		$	20,533


(a)		Net sales of life science products by Genisphere are included within Corporate and Other. Assets within Corporate and Other include cash, investments, property, plant and equipment, net, including the corporate headquarters, cash surrender value of officers’ life insurance and assets related to the PM and IP discontinued businesses. Corporate and Other includes long-lived asset expenditures and depreciation and amortization expense for the PM and IP discontinued businesses. Segment SG&A expenses include fixed corporate G&A allocated charges.

(b)		Operating earnings for the Cardiac Assist Products segment includes special charges of $1.1 million in fiscal 2007. Operating loss for the Vascular Products segment includes special charges of $1.1 million in fiscal 2007. Operating loss for Corporate and Other includes special charges of $6.5 million in fiscal 2007.

F-29

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

Reconciliation to earnings from continuing operations before income taxes:


	Year Ended June 30,
	2008			2007			2006
Consolidated operating earnings	$	37,206		$	22,781		$	27,915
Interest income, net		2,614			2,443			1,997
Dividend income		—			196			4,523
Gain on sale of investments		13,173			1,273			—
Other, net		(1,727	)		(737	)		(1,414	)

Earnings from continuing operations before income taxes	$	51,266		$	25,956		$	33,021

The following table presents net sales by segment for continuing operations:


	Year Ended June 30,
	2008		2007		2006
Cardiac Assist Products	$	189,316	$	178,321	$	164,782
Vascular Products		40,333		33,484		30,147
Genisphere		1,266		1,186		1,587

Total	$	230,915	$	212,991	$	196,516

The following table presents net sales from continuing operations based on the geographic location of the external customer. No individual foreign country accounted for more than 10% of our worldwide sales in fiscal 2008, 2007 and 2006.


	Year Ended June 30,
	2008		2007		2006
United States	$	98,758	$	102,503	$	96,586
Foreign countries		132,157		110,488		99,930

Total	$	230,915	$	212,991	$	196,516

The following table presents long-lived assets for continuing operations by geographic location:


	June 30,
	2008		2007		2006
United States	$	83,076	$	68,131	$	70,657
Foreign countries		29,805		13,076		7,728

Total	$	112,881	$	81,207	$	78,385

12. Retirement Benefit Plans

We have various retirement benefit plans covering substantially all U.S. and international employees. Total expense for the domestic and international retirement plans was $6.9 million in fiscal 2008, $6.8 million in fiscal 2007 and $7.6 million in fiscal 2006. Below is a further description of our retirement benefit plans.

F-30

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

Defined Benefit Pension Plans — U.S. and International

We have a defined benefit pension plan designed to provide retirement benefits to eligible U.S. employees. U.S. pension benefits are based on years of service, compensation and the primary social security benefits. Funding for the U.S. plan is within the range prescribed under the Employee Retirement Income Security Act of 1974. Retirement benefits for the international plans are based on years of service, final average earnings and social security benefits. Funding policies for the international plans are based on local statutes and any assets are invested in guaranteed insurance contracts.

Supplemental Executive Retirement Plans (SERP)

We have noncontributory, unfunded supplemental defined benefit retirement plans (“SERP”) for the Chairman and Chief Executive Officer, Mr. Lawrence Saper, and certain former key officers. Life insurance has been purchased to recover a portion of the net after tax cost for these SERPs. Under SFAS 87, Employers’ Accounting for Pensions, the life insurance policies do not qualify as plan assets. Accordingly, the cash surrender values of the policies are not considered when determining the funded status of these SERPs. The assumptions used to develop the supplemental pension cost and the actuarial present value of the projected benefit obligation are reviewed annually.

A summary of Mr. Saper’s SERP, as amended, is as follows:

	•		Mr. Saper is entitled to receive a lifetime pension of up to 60% of his average earnings for the three-year period in which Mr. Saper’s compensation was greatest of the ten years immediately preceding his retirement.

	•		The SERP will not be less than the value of the benefit that would have been payable had his retirement occurred at age 65.

	•		The expected annual SERP payment to Mr. Saper commencing at a presumed retirement age of 81, based on the above plan would be $3.1 million.

	•		The plan provides survivor benefits in the form of a $10 million life insurance policy, maintained pursuant to a split-dollar agreement between us, Mr. Saper and a trust for the benefit of Mr. Saper’s family.

The SERP expense for Mr. Saper recognized in the consolidated financial statements was $1.2 million in fiscal 2008, $1.1 million in fiscal 2007 and $0.9 million in fiscal 2006.

The SERP covering certain former key officers provides a pension at age 65, for up to 15 years, based on a predetermined earnings level for the five-year period prior to retirement. The SERP for one former officer provides a lifetime retirement benefit. The SERP expense for these executives recognized in the consolidated financial statements was $0.1 million in fiscal 2008, $0.2 million in fiscal 2007 and $0.3 million in fiscal 2006.

Post-Retirement Medical Benefits Plan

In addition to the SERP, we have a noncontributory, unfunded post-retirement medical benefits plan for Mr. Saper. The post-retirement medical plan provides certain lifetime medical benefits to Mr. Saper and his wife upon the termination of Mr. Saper’s employment with us. The expense recognized in the consolidated financial statements was $22 thousand in fiscal 2008 and $18 thousand in fiscal 2007 and 2006.

F-31

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

Defined Contribution Plans

We have defined contribution savings and supplemental retirement plans for U.S. employees and certain international employees. The plans provide an incentive to employees to save and invest regularly for their retirement. In the U.S. we maintain a 401(k) savings and supplemental retirement plan for eligible U.S. employees. The contributions are based on matching 50% of participating employees’ contributions up to a maximum of 6% of compensation. The provisions for the international defined contribution plans vary by local country. The total expense under these plans was $1.9 million for fiscal 2008 and 2007 and $1.7 million for fiscal 2006.

Adoption of New Accounting Standard

On June 30, 2007, we adopted the provisions of SFAS 158. The incremental impact of applying SFAS 158 to our consolidated balance sheet as of June 30, 2007, was to reduce our total stockholders’ equity by $5.1 million, primarily due to the recognition of previously unrecognized actuarial losses that are now required to be recognized within accumulated other comprehensive loss, net of tax. The following table sets forth the incremental effect of applying SFAS 158 to individual line items in our consolidated balance sheet as of June 30, 2007.


				SFAS 87/88
	Before			Minimum						After
	SFAS 87/88/158			Pension Liability			SFAS 158			SFAS 87/88/158
	Adjustments			Adjustments			Adjustments			Adjustments
Prepaid expenses and other current assets	$	18,809		$	—		$	(7,642	)	$	11,167
Other assets, including non-current deferred taxes		31,398			(1,332	)		4,831			34,897
Accrued expenses		17,612			—			49			17,661
Other liabilities		26,022			(3,018	)		2,216			25,220
Accumulated other comprehensive loss		(824	)		1,686			(5,076	)		(4,214	)

F-32

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

Net Periodic Benefit Costs

The components of net periodic benefit costs of the U.S. and International defined benefit pension plans, the SERP and the post-retirement medical benefits plan include the following:


	Year Ended June 30,
	2008			2007			2006			2008			2007			2006
	U.S. and International									SERP
Net Periodic Benefit Costs
Service cost	$	2,531		$	2,700		$	3,240		$	376		$	350		$	387
Interest cost		4,415			4,069			3,714			1,057			1,000			829
Expected return on assets		(4,269	)		(3,697	)		(3,326	)		—			—			—
Amortization of:
Net loss		301			521			1,168			12			9			23
Unrecognized prior service cost		(43	)		12			13			(95	)		(75	)		(75	)
Special termination benefits (a)		551			—			—			—			—			—
Curtailment loss (b)		83			14			—			—			—			—

Net periodic benefit costs	$	3,569		$	3,619		$	4,809		$	1,350		$	1,284		$	1,164


(a)		In the fourth quarter of fiscal 2008, we recognized a special termination benefits expense related to U.S. workforce reductions as a result of the sale of the PM business.

(b)		In the fourth quarter of fiscal 2008, we recognized a curtailment loss related to U.S. and International workforce reductions as a result of the sale of the PM business. In the second quarter of fiscal 2007, we recognized a curtailment loss related to U.S. workforce reductions in the Interventional Products and Patient Monitoring businesses.


	Year Ended June 30,
	2008		2007		2006
	Post-Retirement Medical
Net Periodic Benefit Costs
Service cost	$	—	$	—	$	—
Interest cost		15		12		11
Expected return on assets		—		—		—
Amortization of:
Net loss		3		1		2
Unrecognized prior service cost		4		5		5

Net periodic benefit costs	$	22	$	18	$	18

F-33

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

Obligations and Funded Status

The following table shows the changes in fiscal 2008 and 2007 in the projected benefit obligation, plan assets and funded status of the U.S. and International defined benefit pension plans, the SERP and the post-retirement medical benefits plan:


	Year Ended June 30,
	2008			2007			2008			2007
	U.S. and International						SERP
Change in Projected Benefit Obligation
Pension benefit obligation at beginning of year	$	67,655		$	62,084		$	18,306		$	16,113
Service cost		2,531			2,700			376			350
Interest cost		4,415			4,069			1,057			1,000
Foreign exchange impact		499			171			—			—
Employee contributions		64			48			—			—
Plan amendments		—			(1,186	)		—			—
Special termination benefits		551			—			—			—
Curtailment		(2,151	)		(388	)		—			—
Actuarial (gain) loss		(4,309	)		1,406			(1,835	)		1,078
Benefits paid		(1,400	)		(1,249	)		(234	)		(235	)

Pension benefit obligation at end of year	$	67,855		$	67,655		$	17,670		$	18,306

Accumulated benefit obligation at end of year	$	64,563		$	61,601		$	17,670		$	18,306


Change in Plan Assets
Fair value of plan assets at beginning of year	$	66,513		$	56,179			*			*
Actual return on assets		5,468			3,952			*			*
Foreign exchange impact		751			231			*			*
Employer contributions		13,423			7,352			*			*
Employee contributions		64			48			*			*
Benefits paid		(1,400	)		(1,249	)		*			*

Fair value of plan assets at end of year	$	84,819		$	66,513			*			*


*		Not applicable.


	Year Ended June 30,
	2008		2007			2008			2007
	U.S. and International					SERP
Funded Status at June 30,
Fair value of plan assets	$	84,819	$	66,513		$	—		$	—
Pension benefit obligation		67,855		67,655			17,670			18,306

Funded status-plan assets less than benefit obligation	$	16,964	$	(1,142	)	$	(17,670	)	$	(18,306	)

F-34

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)


	Year Ended June 30,
	2008			2007
	Post-Retirement Medical
Change in Projected-Benefit Obligation
Benefit obligation at beginning of year	$	232		$	191
Service cost
Interest cost		15			12
Plan amendments		—			—
Actuarial (gain) loss		(38	)		29

Benefit obligation at end of year	$	209		$	232

Accumulated benefit obligation at end of year	$	209		$	232


Funded Status at June 30,
Benefit obligation	$	209		$	232
Fair value of plan assets		—			—

Funded status-plan assets less than benefit obligation	$	(209	)	$	(232	)

The favorable change in the funded status of our U.S. and International defined benefit pension plans in the aggregate as of June 30, 2008 was primarily due to higher employer contributions, the curtailment resulting from the sale of the PM business, the increase in the discount rate used to calculate the net periodic benefit cost and the higher actual return on plan assets earned in fiscal 2008 as compared to fiscal 2007.

The following are recognized in the consolidated balance sheets:


	Year Ended June 30,
	2008			2007			2008			2007
	U.S. and International						SERP
Current benefit liability	$	—		$	—		$	(235	)	$	(227	)
Non-current benefit liability		(163	)		(2,403	)		(17,435	)		(18,079	)
Non-current pension asset		17,127			1,261			—			—

Funded status	$	16,964		$	(1,142	)	$	(17,670	)	$	(18,306	)


	2008			2007
	Post-Retirement Medical
Current benefit liability	$	—		$	—
Non-current benefit liability		(209	)		(232	)
Non-current pension asset		—			—

Funded status	$	(209	)	$	(232	)

F-35

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

The components of the amount recognized in accumulated other comprehensive loss (income) in the consolidated balance sheet at June 30, 2008 were as follows:


	U.S. and						Post-Retirement
	International			SERP			Medical
Net actuarial loss (gain)	$	1,447		$	(26	)	$	65
Prior service (credit) cost		(1,121	)		(26	)		26

Accumulated other comprehensive loss (income), gross	$	326		$	(52	)	$	91

Accumulated other comprehensive loss (income), net of tax	$	32		$	(31	)	$	54

The following table presents the amount in accumulated other comprehensive loss (income) expected to be amortized into net periodic benefit costs for fiscal 2009.


	U.S. and						Post-Retirement
	International			SERP			Medical
Net actuarial (gain) loss	$	(3	)	$	11		$	1
Prior service (credit) cost		(52	)		(28	)		4

Total	$	(55	)	$	(17	)	$	5

Plan Assumptions

Weighted average assumptions used in developing the benefit obligations and net periodic benefit cost for the U.S. and International defined benefit pension plans were as follows:


	2008			2007			2006
Benefit Obligation
Discount rate		7.18	%		6.43	%		6.50	%
Rate of compensation increase		4.47	%		4.50	%		4.50	%
Expected return on plan assets		5.58	%		6.04	%		6.30	%


	2008			2007			2006
Net Periodic Benefit Cost
Discount rate		6.53	%		6.18	%		5.50	%
Rate of compensation increase		4.49	%		4.50	%		4.50	%
Expected return on plan assets		6.15	%		6.40	%		6.50	%

The measurement date for the defined benefit pension plans and the SERP is June 30, the end of the fiscal year.

The healthcare cost trend rate for our post-retirement medical benefit plan was 8.00% at June 30, 2008. The trend rate is expected to decline to 4.75% by the year 2013. A one-percentage-point change in assumed healthcare cost trend rates would not have a material effect on our financial statements.

F-36

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

U.S. Plan Asset Allocation and Investment Guidelines

The percentages of the fair value of plan assets allocated at June 30, 2008 and 2007 by asset category and the weighted average target allocations for fiscal 2009 for the U.S. defined pension plan are as follows:


	June 30,
	2009			2008			2007
Asset Category	Target Allocation			Percentage of Plan Assets
Small Capitalization Equities (a)		10.0	%		7.7	%		8.1	%
Fixed Income Bonds — Corporate		15.0	%		11.7	%		14.6	%
Fixed Income Bonds — Government		75.0	%		73.6	%		75.7	%
Cash		0.0	%		7.0	%		1.6	%

		100.0	%		100.0	%		100.0	%


(a)		Represents investment in our common stock of $6.2 million and $5.0 million (131,000 shares) at June 30, 2008 and 2007, respectively.

The expected long-term rate of return of 5.7% for the U.S. plan is calculated by using the target allocation and expected returns for each asset class in the table above.

Below is a summary of our U.S. pension investment guidelines.

	•		Our investment objective is to invest in securities which provide minimal risk, a high degree of liquidity and an adequate return. Return on such investments, while recognized as important, is not the primary consideration. Safety of principal and liquidity are the key objectives.

	•		At least 50% of the fixed portion of the portfolio will be invested in Treasury and Federal Agency obligations. The maximum maturity of each security is 10 years.

	•		No more than 50% of the portfolio will be invested in 5 to 10 year medium-term AAA-rated corporate notes.

	•		No more than $3 million in aggregate will be invested in any single company’s AAA-rated corporate notes.

	•		Investments may include Datascope common stock. The amount of Datascope stock is limited by ERISA rules (section 407 (a)), which says that the pension fund can purchase Company stock, as long as immediately thereafter, the aggregate fair market value of Company stock held by the fund does not exceed 10% of the fair market value of all pension fund assets.

Expected benefit payments under the U.S. and International defined benefit pension plans, the SERP and the post-retirement medical benefits plan over future years are as follows:


	U.S. and				Post-Retirement
Fiscal Year	International		SERP		Medical
2009	$	2,107	$	242	$	—
2010		2,336		3,114		22
2011		2,511		2,919		24
2012		2,732		2,714		25
2013		2,993		2,502		26
2014 — 2018		20,007		9,228		72

F-37

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

The expected employer contribution to the U.S. defined benefit pension plan in fiscal 2009 is between $0 million (minimum regulatory requirement) and $40.0 million (maximum contribution). No decision has been made at this time on the fiscal 2009 contribution.

13. Commitments and Contingencies

Leases

Future minimum rental commitments under non-cancelable operating leases are as follows:


Fiscal Year
2009	$	3,529
2010		2,708
2011		1,452
2012		535
2013		297
Thereafter		—

Total future minimum rental payments	$	8,521

Total rent expense was approximately $4.1 million in fiscal 2008, $4.6 million in fiscal 2007 and $4.2 million in fiscal 2006. Certain of our leases contain purchase and/or renewal options.

Litigation

The Public Prosecutor’s Office in Darmstadt, Germany is conducting an investigation of current and former employees of one of our German subsidiaries. The investigation concerns marketing practices prior to February 2003 under which benefits were provided to customers of the subsidiary. We cooperated with the police portion of the investigation that has now been concluded with the filing of a report of the findings with the prosecutor’s office in April 2007. The prosecutor is reviewing the report to determine how he will proceed. We cannot predict at this time what the outcome of the prosecutor’s review will be, although we do not believe that it will have a material adverse effect on our business or consolidated financial statements.

F-38

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

On March 18, 2005, Johns Hopkins University and Arrow International, Inc. filed a complaint in the United States District Court for the District of Maryland, seeking a permanent injunction and damages for patent infringement. They allege that our ProLumen Rotational Thrombectomy System infringes one or more claims of their U.S. patents 5,766,191 and 6,824,551. We have filed an answer denying such infringement and discovery has been completed. On October 13, 2006, Johns Hopkins and Arrow filed a second complaint based upon their newly issued U.S. patent 7,108,704 claiming our ProLumen device infringes one or more claims of this patent. The parties have agreed that this matter should be consolidated with the first case and the consolidation has taken place. A jury trial took place in late June 2007 that resulted in a finding that the ProLumen product infringed one or more claims of each of the three patents, that we owed approximately $690 thousand in damages to the plaintiffs and an injunction was issued precluding us from further selling the ProLumen product. We have filed a Notice of Appeal regarding the lower court’s decision. The appeal has been briefed and was argued before the United States Court of Appeals for the Federal Circuit on April 8, 2008, and we are awaiting a decision. We believe we will be successful on appeal in overturning the lower court’s findings and, therefore, an accrual for the royalty liability has not been recorded and no impairment of the assets related to ProLumen has been taken.

Credit Arrangements

We had available unsecured lines of credit at June 30, 2008 totaling $100.2 million, with interest payable at LIBOR-based rates determined by the borrowing period. At June 30, 2008, we had no outstanding borrowings. Of the total available, $25 million expires in October 2008 and $50 million expires in March 2009. These lines are renewable annually at the option of the banks, and we plan to seek renewal. We also had $25.2 million in lines of credit with no expiration date. At June 30, 2007, we had available unsecured lines of credit totaling $99.5 million, with interest payable at LIBOR-based rates determined by the borrowing period.

Purchase Commitments

We had $4.7 million in non-cancelable purchase commitments as of June 30, 2008. This amount includes commitments for inventory and capital expenditures that meet our projected requirements and are in the normal course of business.

Warranty Obligations

We provide warranty on all of our products. We estimate the costs that may be incurred under warranties and record a liability in the amount of such costs at the time the product is sold. Factors that affect our warranty liability include the number of units sold, historical and anticipated rates of warranty claims and cost per claim. We periodically assess the adequacy of our recorded warranty liabilities and adjust the amounts as necessary. Warranty expense is recorded in cost of sales.

F-39

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

Changes in accrued warranty for the years ended June 30, 2008, 2007 and 2006 were as follows:


	Year Ended June 30,
	2008			2007			2006
Warranty reserve at the beginning of the year	$	250		$	350		$	300
Warranties for discontinued operations divested during the year		(225	)		—			—
Warranties accrued during the year		50			79			389
Warranties settled during the year		(35	)		(179	)		(339	)

Warranty reserve at the end of the year	$	40		$	250		$	350

The warranty reserve at June 30, 2008 is included in accrued expenses on our consolidated balance sheet.

Rabbi Trust

We have established a trust to hold amounts which may become payable in the future to certain executives of the Company pursuant to various employment, supplemental benefit and severance agreements upon a change of control of the Company. We are obligated to fund the trust upon the occurrence of events tending to indicate that a future change in control of the Company could occur.

14. Special Charges

Fiscal 2007

Workforce Reductions in the European Sales Organization, Corporate and Genisphere

Goodwill Impairment — Genisphere

The Genisphere goodwill was determined to be completely impaired based on the annual goodwill impairment test. Slower growth in Genisphere’s markets primarily attributable to increased competition in the DNA microarray market had a negative impact on Genisphere’s operating results and resulted in lower growth expectations. As a result, we recorded a goodwill impairment charge of $2.3 million in the fourth quarter of fiscal 2007.

Inquiry Expenses

F-40

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

The special charges in fiscal 2007 for the continuing operations are reflected in the following segments:


Cardiac Assist Products		$1.1 million
Vascular Products		$1.1 million
Corporate and Other		$6.5 million

15. Quarterly Financial Data (Unaudited)


	Year Ended June 30, 2008
	First			Second		Third		Fourth
	Quarter			Quarter		Quarter		Quarter			Total
Net sales	$	48,015		$	59,234	$	60,331	$	63,335		$	230,915

Gross profit	$	31,298		$	38,375	$	39,898	$	41,331		$	150,902

Net earnings from continuing operations	$	11,869		$	5,353	$	8,976	$	7,580		$	33,778

Net (loss) earnings from discontinued operations	$	(77	)	$	1,736	$	113	$	(5,316	)	$	(3,544	)

Net gain on sale of discontinued operations	$	—		$	—	$	—	$	76,672		$	76,672

Net earnings	$	11,792		$	7,089	$	9,089	$	78,936		$	106,906


Net earnings per share from continuing operations, basic	$	0.77		$	0.35	$	0.58	$	0.48		$	2.19

Net earnings per share from continuing operations, diluted	$	0.76		$	0.35	$	0.58	$	0.48		$	2.16


	Year Ended June 30, 2007
	First			Second			Third		Fourth
	Quarter			Quarter			Quarter		Quarter			Total
Net sales	$	49,591		$	50,984		$	55,826	$	56,590		$	212,991

Gross profit	$	32,879		$	33,079		$	35,749	$	37,136		$	138,843

Net earnings from continuing operations	$	5,527		$	5,289		$	5,589	$	1,889		$	18,294

Net (loss) earnings from discontinued operations	$	(994	)	$	(1,954	)	$	2,272	$	(153	)	$	(829	)

Net earnings	$	4,533		$	3,335		$	7,861	$	1,736		$	17,465


Net earnings per share from continuing operations, basic	$	0.36		$	0.35		$	0.37	$	0.12		$	1.20

Net earnings per share from continuing operations, diluted	$	0.35		$	0.34		$	0.36	$	0.12		$	1.19

F-41

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

Quarterly and total year earnings per share are calculated independently based on the weighted average number of shares outstanding during each period.

16. Earnings Per Share

The computation of basic and diluted net earnings per share is shown in the table below.


	Year Ended June 30,
	2008		2007		2006

Net earnings	$	106,906	$	17,465	$	25,843


Weighted average number of common shares outstanding, basic		15,441		15,244		14,974
Effect of dilutive stock awards		176		143		322


Weighted average number of common shares outstanding, diluted		15,617		15,387		15,296


Net earnings per share, basic	$	6.92	$	1.15	$	1.73


Net earnings per share, diluted	$	6.85	$	1.14	$	1.69

At June 30, 2008, 2007 and 2006, common shares related to options outstanding under the Company’s stock option plans amounting to 344 thousand, 646 thousand and 766 thousand, respectively, were excluded from the computation of diluted earnings per share, as the effect would have been antidilutive.

17. Related Party Transactions

At June 30, 2007, we had a preferred stock investment of $5.0 million in Masimo Corporation, a supplier to our Patient Monitoring business. We purchased $11.6 million of product from Masimo Corporation during fiscal 2007 and $10.0 million in fiscal 2006. On August 13, 2007, Masimo Corporation completed its initial public offering, and concurrently, we sold substantially all of our investment in Masimo, resulting in a pretax gain on the sale of approximately $13.2 million.

In fiscal 2002, we advanced Mr. Saper $260 thousand for payment of a club membership deposit. Mr. Saper will repay such amount upon the termination of Mr. Saper’s membership in the club or, if earlier, upon the termination of Mr. Saper’s employment with the Company.

In fiscal 2000, we loaned $200 thousand to Boris Leschinsky, Vice President of Technology. The promissory note requires annual payments of $20 thousand plus interest, based on an annual rate of eight percent with the final payment due on June 8, 2010. The principal balance at June 30, 2008 was $40 thousand.

F-42

DATASCOPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, except per share data)

18. Subsequent Event

On August 6, 2008. we completed the sale of assets of our vascular closure business, including assets related to our VasoSeal®, On-Site™ and X-Site® devices and our collagen operation to St. Jude Medical, Inc. We received $21.0 million at closing and will receive an additional $3.0 million upon the expiration of an 18 month indemnification period.

F-43

DATASCOPE CORP. AND SUBSIDIARIES

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS


Column A	Column B		Column C				Column D			Column E
			Additions
			(1)		(2)
			Charged to		Charged to		Deductions
	Balance at		Costs		Other		from			Balance at
	Beginning		and		Accounts		Reserves-			Close of
Description	of Period		Expenses		Describe		Describe			Period
	(Dollars in thousands)

Year Ended June 30, 2008
Allowance for doubtful accounts	$	2,603	$	609	$	—	$	435	(A)	$	2,777


Year Ended June 30, 2007
Allowance for doubtful accounts	$	2,301	$	456	$	—	$	154	(A)	$	2,603


Year Ended June 30, 2006
Allowance for doubtful accounts	$	2,279	$	461	$	—	$	439	(A)	$	2,301


(A)		Write-offs

S-1