Hologic
Annual Report 2014

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KHOLOGIC INC - HOLXFiled: November 20, 2014 (period: September 27, 2014)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 __________________________________________________________ FORM 10-K (Mark One)ýANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended: September 27, 2014or ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934For the transition period from to Commission File Number: 1-36214__________________________________________________________ Hologic, Inc.(Exact name of registrant as specified in its charter)Delaware 04-2902449(State or Other Jurisdiction ofIncorporation or Organization) (I.R.S. Employer Identification No.)35 Crosby Drive, Bedford, Massachusetts 01730(Address of Principal Executive Offices) (Zip Code)Registrant’s Telephone Number, Including Area Code (781) 999-7300Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on which RegisteredCommon Stock, $.01 par value The NASDAQ Stock Market LLCSecurities registered pursuant to Section 12(g) of the Act: None __________________________________________________________Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No ¨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 ¨ No ýIndicate 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 1934during 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 filingrequirements for the past 90 days. Yes ý No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorterperiod that the registrant was required to submit and post such files). Yes ý No ¨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 thebest 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 thisForm 10-K. ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Seethe definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one).Large accelerated filer ý Accelerated filer ¨Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company ¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ¨ No ýThe aggregate market value of the registrant's Common Stock held by non-affiliates of the registrant as of March 29, 2014 was $5,770,736,085 basedon the price of the last reported sale on Nasdaq Global Select Market on that date.As of November 14, 2014, 278,664,059 shares of the registrant’s Common Stock, $0.01 par value, were outstanding.Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.__________________________________________________________DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrant’s Proxy Statement for the registrant’s annual meeting of stockholders to be filed within 120 days of the end of its fiscal yearended September 27, 2014 are incorporated into Part III (Items 10, 11, 12, 13 and 14) of this Annual Report on Form 10-K where indicated. Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsHOLOGIC, INC.ANNUAL REPORT ON FORM 10-KFor the Fiscal Year Ended September 27, 2014TABLE OF CONTENTS PagePART I Item 1.Business4 Item 1A.Risk Factors16 Item 1B.Unresolved Staff Comments35 Item 2.Properties36 Item 3.Legal Proceedings36 Item 4.Mine Safety Disclosures36 PART II Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities37 Item 6.Selected Financial Data39 Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations40 Item 7A.Quantitative and Qualitative Disclosures About Market Risk71 Item 8.Financial Statements and Supplementary Data72 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure72 Item 9A.Controls and Procedures72 Item 9B.Other Information75 PART III Item 10.Directors, Executive Officers and Corporate Governance76 Item 11.Executive Compensation76 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters76 Item 13.Certain Relationships and Related Transactions, and Director Independence77 Item 14.Principal Accounting Fees and Services77 PART IV Item 15.Exhibits and Financial Statement Schedules78 2Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsSPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTSSome of the statements contained in this report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 andSection 21E of the Securities Exchange Act of 1934. These statements involve known and unknown risks, uncertainties and other factors which may causeour or our industry’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed orimplied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding:•the effect of the continuing worldwide macroeconomic uncertainty on our business and results of operations;•the coverage and reimbursement decisions of third-party payors relating to the use of our products and treatments;•the uncertainty of the impact of cost containment efforts and federal healthcare reform legislation on our business and results of operations;•the ability to successfully manage ongoing organizational and strategic changes, including the ability of the Company to attract, motivate and retainkey employees;•the impact and anticipated benefits of any prior acquisitions and acquisitions we may complete in the future;•the ability to consolidate certain of our manufacturing and other operations on a timely basis and within budget, without disrupting our business andto achieve anticipated cost synergies in connection therewith;•our goal of expanding our market positions;•the development of new competitive technologies and products;•regulatory approval and clearances for our products;•production schedules for our products;•the anticipated development of our markets and the success of our products in these markets;•the anticipated performance and benefits of our products;•business strategies;•estimated asset and liability values;•the impact and costs and expenses of any litigation we may be subject to now or in the future;•our compliance with covenants contained in our indebtedness;•anticipated trends relating to our financial condition or results of operations; and•our capital resources and the adequacy thereof.In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,”“anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential” and similar expressions intended to identify forward-looking statements. Thesestatements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity,performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by suchforward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, these forward-lookingstatements represent our estimates and assumptions only as of the date of this report. Except as otherwise required by law, we expressly disclaim anyobligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained in this report to reflect any change in ourexpectations or any change in events, conditions or circumstances on which any of our forward-looking statements are based. Factors that could cause orcontribute to differences in our future financial results include the cautionary statements set forth herein and in our other filings with the Securities andExchange Commission, or SEC, including those set forth under “Risk Factors” set forth in Part I, Item 1A of this annual report on Form 10-K. We qualify allof our forward-looking statements by these cautionary statements.TRADEMARK NOTICEHologic is a trademark of Hologic, Inc. Other trademarks, logos, and slogans registered or used by Hologic and its divisions and subsidiaries in theUnited States and other countries include, but are not limited to, the following: Affirm, Aptima, Aptima Combo 2, Aquilex, ATEC, Celero, Cervista, Contura,C-View, Dimensions, Discovery, Eviva, Fluoroscan, Gen-Probe, Healthcome, Horizon, HTA, Interlace, Invader, MammoSite, MultiCare, MyoSure, NovaSure,Panther, PreservCyt, SecurView, Selenia, StereoLoc, TCT, ThinPrep, Tigris, and TLI IQ.3Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPART IItem 1. BusinessOverviewWe are a developer, manufacturer and supplier of premium diagnostics products, medical imaging systems and surgical products. Our core businessunits are focused on diagnostics, breast health, GYN surgical and skeletal health. We sell and service our products through a combination of direct sales andservice forces and a network of independent distributors and sales representatives.We offer a wide range of diagnostic products which are used primarily to aid in the diagnosis of human diseases and screen donated human blood. Ourprimary diagnostics products include our Aptima family of assays, including our advanced instrumentation (Panther and Tigris), our ThinPrep system, theRapid Fetal Fibronectin Test and our Procleix blood screening assays. The Aptima family of assays is used to detect the infectious microorganisms that causethe common sexually transmitted diseases, or STDs, chlamydia and gonorrhea, certain high-risk strains of human papillomavirus, or HPV, and Trichomonasvaginalis, the parasite that causes trichomoniasis. The ThinPrep System is primarily used in cytology applications, such as cervical cancer screening, and theRapid Fetal Fibronectin Test assists physicians in assessing the risk of pre-term birth. In blood screening, we develop and manufacture the Procleix family ofassays, which are used to detect various infectious diseases. These blood screening products are marketed worldwide by our blood screening collaborator,Grifols S.A., or Grifols, under Grifols' trademarks.Our breast health products include a broad portfolio of breast imaging and related products and accessories, including digital mammography systems,computer-aided detection, or CAD, for mammography and minimally invasive breast biopsy devices, breast biopsy site markers, breast biopsy guidancesystems and breast brachytherapy products. Our most advanced breast imaging platform, Dimensions, utilizes a technology called tomosynthesis to produce3D images, as well as conventional 2D full field digital mammography images.Our GYN surgical products include our NovaSure Endometrial Ablation System, or NovaSure, and our MyoSure Hysteroscopic Tissue Removal System,or MyoSure. The NovaSure system involves a trans-cervical procedure for the treatment of abnormal uterine bleeding. The MyoSure system is a tissueremoval device that is designed to provide incision-less removal of fibroids, polyps, and other pathology within the uterus.Our skeletal health products include dual-energy X-ray bone densitometry systems, an ultrasound-based osteoporosis assessment product, and ourFluoroscan mini C-arm imaging products.Available InformationOur Internet website address is http://www.hologic.com. Through our website, we make available, free of charge, our annual report on Form 10-K,quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as well as proxy statements, and, from time to time, otherdocuments as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission, or SEC.These SEC reports can be accessed through the investor relations section of our website. The information found on our website is not part of this or any otherreport we file with or furnish to the SEC.Investors and others should note that we announce material financial information to our investors using our investor relations website(http://investors.hologic.com), SEC filings, press releases, public conference calls and webcasts. We use these channels as well as social media tocommunicate with our members and the public about our company, our services and other issues. It is possible that the information we post on social mediacould be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our company to review the information wepost on the social media channels listed on our investor relations website. Hologic has used, and intends to continue to use, our investor relations website, aswell as our Twitter account (@Hologic), as means of disclosing material non-public information and for complying with its disclosure obligations underRegulation FD. Further corporate governance information, including our certificate of incorporation, bylaws, governance guidelines, board committeecharters, and code of business conduct and ethics, is also available on our investor relations website under the heading “Corporate Governance.” Thecontents of our websites are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we filewith the SEC, and any references to our websites are intended to be inactive textual references only.4Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsYou may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You mayobtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website thatcontains reports, proxy and information statements, and other information regarding Hologic and other issuers that file electronically with the SEC. TheSEC’s Internet website address is http://www.sec.gov.ProductsWe view our operations and manage our business in four principal reporting segments: Diagnostics, Breast Health, GYN Surgical and Skeletal Health.Financial information concerning these segments is provided in Note 15 to our audited consolidated financial statements contained in Item 15 of this AnnualReport. The following describes our principal products in each of our segments.Diagnostics ProductsAptima Family of AssaysOur Aptima family of assays includes the Aptima Combo 2 assay for the simultaneous detection of Chlamydia trachomatis and Neisseria gonorrhoeae,the infectious microorganisms that cause chlamydia and gonorrhea, respectively, the standalone Aptima CT and Aptima GC assays for the detection ofChlamydia trachomatis and Neisseria gonorrhoeae, respectively, the Aptima HPV assay for the detection of 14 sub-types of high-risk HPV associated withcervical cancer, the Aptima HPV 16 18/45 Genotype assay and the Aptima Trichomonas assay for the detection of Trichomonas vaginalis, the parasite thatcauses trichomoniasis. Our Aptima products integrate various proprietary technologies, including our target capture technology, our Transcription MediatedAmplification, or TMA, technology, and our hybridization protection assay, or HPA, and dual kinetic assay, or DKA, technologies, to produce highly refinedamplification assays that increase assay performance, improve laboratory efficiency and reduce laboratory costs. Each of these technologies is described ingreater detail below.Target Capture/Nucleic Acid Extraction Technology. The detection of target organisms that are present in small numbers in a large-volume clinicalsample requires that target organisms be concentrated to a detectable level. One way to accomplish this is to isolate the particular nucleic acid of interest bybinding it to a solid support. This support, with the target bound to it, can then be separated from the original sample. We refer to such techniques as “targetcapture.” We have developed target capture techniques to immobilize nucleic acids on magnetic beads by the use of a “capture probe” that attaches to thebead and to the target nucleic acid. We use a magnetic separation device to concentrate the target by drawing the magnetic beads to the sides of the sampletube, while the remainder of the sample is washed away and removed. When used in conjunction with our patented amplification methods, target capturetechniques concentrate the nucleic acid target(s) and also remove materials in the sample that might otherwise interfere with amplification.Transcription-Mediated Amplification (TMA) Technology. The goal of amplification technologies is to produce millions of copies of the target nucleicacid sequences that are present in samples in small numbers. These copies can then be detected using DNA probes. Amplification technologies can yieldresults in only a few hours versus the several days or weeks required for traditional culture methods. TMA is a transcription-based amplification system thatuses two different enzymes to drive the process. The first enzyme is a reverse transcriptase that creates a double-stranded DNA copy from an RNA or DNAtemplate. The second enzyme, an RNA polymerase, makes thousands of copies of the complementary RNA sequence, known as the “RNA amplicon,” fromthe double-stranded DNA template. Each RNA amplicon serves as a new target for the reverse transcriptase and the process repeats automatically, resulting inan exponential amplification of the original target that can produce over a billion copies of amplicon in less than thirty minutes.Hybridization Protection Assay (HPA) and Dual Kinetic Assay (DKA) Technologies. With our patented HPA technology, we have simplified testing,further increased test sensitivity and specificity, and increased convenience. In the HPA process, the acridinium ester, or AE, molecule is protected within thedouble-stranded helix that is formed when the probe binds to its specific target. Prior to activating the AE molecule, known as “lighting off,” a chemical isadded that destroys the AE molecule on any unhybridized probes, leaving the label on the hybridized probes largely unaffected. When the “light off” ordetection reagent is added to the specimen, only the label attached to the hybridized probe is left to produce a signal indicating that the target organism’sDNA or RNA is present. All of these steps occur in a single tube and without any wash steps, which were required as part of conventional probe tests. OurDKA technology uses two types of AE molecules-one that “flashes” and another one that “glows.” By using DKA technology, we have created nucleic acidtest, or NAT, assays that can detect two separate targets simultaneously.5Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsProcleix Family of Assays for Blood ScreeningWe develop and manufacture the Procleix family of assays, which are marketed and sold worldwide by Grifols, our blood screening collaborator, underGrifols’ trademarks. The Procleix family of assays includes the Ultrio and Ultrio Plus assays which simultaneously detect HIV type-1, or HIV-1, the hepatitisC virus, or HCV, and the hepatitis B virus, or HBV, in donated blood, plasma, organs and tissues, the Ultrio Elite assay which simultaneously detects HIV-1,HIV type-2, or HIV-2, HBV and HCV in donated blood, plasma, organs and tissues, the HEV assay, which detects the hepatitis E Virus in donated blood,plasma, organs and tissues, the WNV assay, which detects West Nile Virus, or WNV, in donated blood, plasma, organs and tissues, and the HAV and Parvoassays, which detects the hepatitis A virus, or HAV, and Parvoviruses in donated blood, plasma, organs and tissues.Instrumentation. We have developed and continue to develop instrumentation and software designed specifically for use with certain of our diagnosticassays, including the Aptima family of assays and the Procleix family of assays. We also provide technical support and instrument service to maintain theseinstrument systems in the field. By placing our proprietary instrumentation in laboratories and hospitals, we can establish a platform for future sales of ourdiagnostic assays.Our instrumentation includes the Tigris system, an integrated, fully-automated testing instrument for high-volume laboratories which is approved foruse with a number of our Aptima and Procleix assays, the Panther instrument system, an integrated, fully automated testing instrument for lower-volumelaboratories, and our semi-automated direct tube sampling, or DTS, instruments which are used to run a number of infectious disease assays. In the fourthquarter of fiscal 2014, we also introduced our Tomcat instrument, a fully-automated general purpose instrument designed to ease the strain of pre-analyticalsample processing by eliminating the inefficient and error-prone activities associated with manually aliquoting samples.Our Panther system was CE-marked and launched in Europe for diagnostic use in the fourth quarter of 2010 and was granted a medical device license byHealth Canada to run our Aptima Combo 2 assay in Canada in August 2011. In addition, our Panther system was CE-marked for use in the blood screeningmarket in June 2012, and we currently offer the Ultrio Elite, WNV and HEV blood screening assays on the Panther system in the European Economic Areaand in other countries where the CE-mark is recognized. The Panther system is not currently approved for use in the blood screening market in the U.S. Wealso sell Panther systems to Roka Bioscience, Inc. for use in certain industrial markets. In addition, we are working on development programs to add real-timepolymerase chain reaction, or PCR, capabilities to a new instrument system that also incorporates the capabilities of our first-generation Panther system.In May 2012, we received FDA clearance to use our Aptima Combo 2 assay for the detection of chlamydia and gonorrhea on our Panther system. Thiswas followed by FDA approval in October 2012 to run our Aptima HPV 16 18/45 Genotype Assay on our Tigris system, FDA clearance in January 2013 torun our Aptima assay for Trichomonas vaginalis on our Panther system and FDA approval in July 2013 to run our Aptima HPV assay on our Panther system.In addition, in November 2013, we received FDA approval to use our Aptima HPV 16 18/45 Genotype Assay on our Panther system.Our HPV tests have been approved for triaging women with undetermined cervical cytology and co-testing with cervical cytology for women thirtyyears and older. Our genotype assays have been approved to be used adjunctively with our HPV tests in combination with cervical cytology to assess thepresence of high risk HPV types, as well as to triage women with undetermined cervical cytology results along with our HPV tests. Our HPV tests are targetedto meet a broad spectrum of customer needs across both centralized and decentralized segments of the clinical laboratory markets.Invader Chemistry PlatformOur Invader chemistry platform is a DNA probe-based system for highly sensitive detection of specific nucleic acid sequences. It is an accurate andspecific method for detecting single-base pair changes, insertions, deletions, gene copy number, infectious agents, and gene expression. Invader reactions canbe performed using genomic DNA, amplified RNA, PCR, or real-time PCR products. Our products and clinical diagnostic offerings based upon our Invaderchemistry include our Cervista HPV tests and products to assist in the diagnosis of cystic fibrosis, cardiovascular risk and other diseases.ThinPrep SystemThe ThinPrep System is the most widely used method for cervical cancer screening in the U.S. If detected in the pre-cancerous stage, most cervicalcancer cases are preventable. The ThinPrep System consists of any one or more of the following: the ThinPrep 2000 Processor, ThinPrep 3000 Processor,ThinPrep 5000 Processor, ThinPrep Imaging System, and related reagents, filters and other supplies, such as the ThinPrep Pap Test and our ThinPrepPreservCyt Solution. Our ThinPrep 5000 Processor has been launched for full use outside of the U.S. but is limited to non-gynecological screening samples inthe U.S. We are currently seeking FDA approval of the ThinPrep 5000 Processor for gynecological screening, although we can give no assurance that we willobtain such approval on a timely basis or at all.6Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe ThinPrep Process. The ThinPrep process begins with the patient’s cervical sample being obtained by the physician using a cervical samplingdevice that, rather than being smeared on a microscope slide as in a conventional Pap smear, is inserted into a vial filled with our proprietary ThinPrepPreservCyt Solution. This enables most of the patient’s cell samples to be preserved before the cells can be damaged by air drying. The ThinPrep specimenvial is then labeled and sent to a laboratory equipped with a ThinPrep Processor for slide preparation. At the laboratory, the ThinPrep specimen vial isinserted into a ThinPrep Processor, a proprietary sample preparation device, which automates the process of preparing cervical slides for staining andmicroscopic examination.In the case of manual screening, the cytotechnologist screens each Pap test slide with a microscope to first determine the adequacy of the slide and thento examine the entire slide to differentiate diseased or abnormal cells from normal cells. With the ThinPrep Imaging System, the screening process has beenautomated to combine the power of computer imaging technology and human interpretive skills. Prior to human review, the ThinPrep Imaging Systemrapidly scans and locates areas of interest for review. By directing the cytotechnologist to areas of interest on a slide, the system may increase a cytologylaboratory’s screening productivity and diagnostic accuracy. In Europe, where laboratories tend to be smaller and process fewer tests, we also offer a lowerthroughput imaging device to assist in the detection of cervical cancer.Additional Applications. In addition to serving as a replacement for the conventional Pap smear, the ThinPrep System can also be used for non-gynecological cytology screening applications including fine-needle aspiration specimens (e.g., breast, thyroid, lung or liver), body fluids (e.g., urine, pleuralfluid, ascitic fluid or pericardial fluid), respiratory specimens (e.g., sputum or brushing of respiratory tracts) and ancillary testing (e.g., cell blocks,immunocytochemistry or special stains).Rapid Fetal Fibronectin TestThe Rapid Fetal Fibronectin Test is a patented single-use disposable test used to determine a woman’s risk of pre-term birth by detecting the presence ofa specific protein, fetal fibronectin, in vaginal secretions during pregnancy. This test is approved by the FDA for use in assessing the risk of pre-term birth.The test utilizes a single-use, disposable cassette and is analyzed on our patented instrument, the TLI IQ System.Virology and Infectious Disease ProductsIn virology, NAT assays can be used to detect viral DNA or RNA in a patient sample. These tests can be qualitative, meaning that the tests simplyprovide a “yes-no” answer for the presence or absence of the virus, or quantitative, meaning that the test determines the quantity of virus in the patientsample. We currently offer Aptima assays for the qualitative detection of HIV-1 and HCV. We are developing quantitative viral load assays for thequantitation of HIV-1, HBV and HCV to run on our Panther instrument system.We offer a number of products in the infectious disease space, including a number of assays for the detection of certain respiratory and gastrointestinaldiseases. Our infectious disease products include multiplex real-time PCR assays to detect and differentiate various influenza types and viruses, a rapid assayfor the direct detection of Streptococcus pyogenes in one hour from a throat swab and an amplified TMA assay to detect the Tuberculosis pathogen.Breast Health ProductsFull Field Digital Mammography SystemOur full field digital mammography systems are based on our proprietary DirectRay digital detector, which employs an amorphous seleniumphotoconductor to directly convert x-ray photons into an electrical signal. No intensifying screens or additional processes are required to capture and convertthe x-ray energy, enabling high imaging resolution and contrast sensitivity. Other digital technologies employ an indirect two-step process by firstconverting x-ray energy into light and then converting the light energy into electrical signals. We believe that digital x-ray imaging technologies thatrequire light conversion may compromise image resolution, lessening detection capability.Dimensions: Breast TomosynthesisOur Dimensions platform includes a mammography gantry incorporating our DirectRay digital detector capable of performing both 2D and 3D imageacquisition and display. When operating in 3D mode, the system acquires a series of low dose x-ray images taken in a scanning motion at various angles. Theimages are mathematically processed into a series of small slices, revealing breast tissue from a 3D perspective. We believe that by allowing the clinician toreview breast tissue in three dimensional space, the more subtle architecture of various types of suspicious lesions may be able to be better interpreted, whichmay ultimately increase cancer detection and reduce unnecessary patient callbacks. Our clinical results for FDA approval demonstrated that conventional 2Ddigital mammography with the addition of 3D tomosynthesis is superior to 2D digital mammography alone for both screening and diagnostics.7Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsC-View SystemOur C-View product provides a 2D image that is mathematically synthesized from the data within a 3D tomosynthesis exam. Our current recommendedclinical practice involves what we refer to as a “combo” exam involving a tomosynthesis exam and a conventional digital 2D exam, but performed under thesame breast compression. The C-View product allows for the mathematical construction of a 2D image from the 3D data, without the need for an actual 2Dexposure. Elimination of the 2D exposure reduces the breast compression time and patient dose compared to the current combo exam. Our C-View software isapproved for sale throughout the European Economic Area and in other countries recognizing the CE-mark. In May 2013, the FDA approved the use of the C-View software with our Dimensions 3D system.SeleniaThe Selenia product family is our original full field digital mammography platform. The Selenia product family includes the Selenia base configuration,the Selenia S configuration (a screening-only configuration), the Selenia Performance (a lower cost alternative to the Selenia base configuration) and theSelenia Encore (refurbished units), each of which offer customers varying performance capabilities and product costs.SecurView WorkstationThe images captured by digital mammography systems are typically transmitted electronically for review by a radiologist at a work station. To this end,we developed the SecurViewDX breast imaging softcopy workstation, approved for interpretation of digital mammograms from most vendors as well asimages from other diagnostic breast modalities. To complement this product, we also developed the SecurViewRT workstation, a technologist workstationenabling bi-directional exchange of electronic communications between the reviewer and the technologist.CAD (Computer Aided Detection) SystemsWe have developed CAD software tools for our mammography products and visualization tools for magnetic resonance imaging, or MRI.Mammography CAD is used by radiologists as “a second pair of eyes” when reading a woman’s mammogram. Use of this technology provides reviewers withthe potential to detect findings that might otherwise be overlooked during the review process, thus potentially increasing cancer detection. We also marketan MRI visualization product, which manages the data set from an MRI procedure, designed to improve data workflow for the physician and provideanalytical tools to aid in the identification and evaluation of the extent of disease.Stereotactic Breast Biopsy SystemsWe provide clinicians with the flexibility of choosing upright or prone systems for breast biopsy by offering three minimally invasive stereotacticbreast biopsy guidance systems, the MultiCare Platinum dedicated, prone breast biopsy table, the StereoLoc II upright attachment, and the Affirm uprightattachment. The StereoLoc II attachment is used in conjunction with our Selenia full field digital mammography systems. The Affirm upright attachment isemployed with our Dimensions 2D and 3D systems. These breast biopsy systems provide an alternative to open surgical biopsy, and can be performed as anoutpatient procedure under local anesthesia, allowing shorter recovery times. The Affirm 3D option provides faster lesion targeting and reduced patientprocedure time compared to traditional stereotactic biopsy procedures. The Affirm system is pre-programmed for use with our Eviva and ATEC vacuum-assisted breast biopsy devices.Breast Biopsy ProductsWe offer a wide range of minimally invasive products for breast biopsy and biopsy site marking. Our breast biopsy portfolio includes two types oftethered vacuum-assisted breast biopsy products, the Automated Tissue Excision Collection, or ATEC, and Eviva devices. Each tethered device is adisposable biopsy tool that is powered by a console and utilizes our patented fluid management system. The ATEC device can be used under all standardimaging guidance modalities (stereotactic x-ray, ultrasound, MRI and molecular breast imaging) whereas our Eviva device is used exclusively understereotactic x-ray guidance. In addition to ATEC and Eviva products, we also offer the Celero device, a non-tethered (no separate console), vacuum-assisted,spring-loaded, disposable core biopsy device which is used exclusively under ultrasound-guidance. All of our breast biopsy devices have been designed toaccommodate a broad spectrum of patients as well as hard-to-reach lesions in the axilla, near the chest wall, near implants or behind the nipple.Breast Brachytherapy ProductsThe MammoSite Radiation Therapy System and Contura Multi-Lumen Balloon Brachytherapy System are breast brachytherapy technologies that offeraccelerated partial breast irradiation, or APBI, therapy to treat breast cancer. With both systems, a balloon is inserted into the surgical cavity remaining after alumpectomy that delivers a 5-day course of concentrated radiation to the tissue most likely to contain residual cancerous cells following surgery. Thesesystems are designed to reduce radiation exposure to adjacent healthy tissue.8Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Sentinelle Medical MRI Coils and WorkstationWe developed, manufactured and marketed a suite of high performance breast MRI coils. MRI coils are antenna receivers that are used to collect radio-frequency information emitted from a patient during an MRI procedure. In the second quarter of fiscal 2014, we finalized our decision to sell our MRI coilsproduct line and completed the sale of this product line in the fourth quarter of fiscal 2014.Photoconductor CoatingsWe develop, manufacture, and sell non-medical selenium for use in a variety of other electro-photographic applications, including copying andprinting. We acquired this business, along with an organic photoconductor manufacturing business, in connection with the acquisition of our sole-supplier ofamorphous selenium photoconductor coatings employed in our Dimensions and Selenium systems. In the fourth quarter of fiscal 2013, in connection withour cost reduction initiatives, we decided to shut-down our organic photoconductor manufacturing line. The shutdown was completed in fiscal 2014.GYN Surgical ProductsNovaSureThe NovaSure system involves a minimally-invasive procedure that allows physicians to treat women suffering from abnormal uterine bleeding. Thesystem consists of a disposable device and a controller that delivers radio frequency, or RF, energy to ablate the endometrial lining of the uterus in order toeliminate or reduce the patient’s bleeding. The NovaSure disposable device is a hand-held, single-use device that incorporates a flexible gold-plated meshelectrode used to deliver the RF energy during the NovaSure procedure. The NovaSure RF Controller generates and delivers the RF energy customized foreach patient, monitors several critical treatment and safety parameters, and automatically controls other aspects of the procedure.The NovaSure system is approved by the FDA to be performed without drug or surgical pre-treatment. Pre-treatment can be time-consuming, expensiveand inconvenient for both patients and physicians and can result in uncomfortable or painful side effects and complications. In contrast, the NovaSureprocedure is typically performed as an outpatient procedure in the hospital, ambulatory surgery center or physician’s office and often does not require the useof general anesthesia.MyoSureThe MyoSure system is designed to provide efficient and effective hysteroscopic removal of fibroids located just below the lining of the uterus as wellas uterine polyps and other pathology within the uterus. Removal of fibroids can provide effective relief of heavy menstrual bleeding commonly attributed tosuch pathology. Unlike other methods of tissue removal, the excavated tissue samples remain intact, which allows them to be tested for abnormalities. Also,minimal tissue destruction makes the MyoSure system a good choice for women seeking to preserve uterine form and function.The MyoSure system consists of a tissue removal device, control unit, and hysteroscope. The MyoSure tissue removal device is single-use and featuressimultaneous tissue cutting and removal. The device incorporates a rapidly rotating cutting blade designed to remove a 3 cm fibroid in less than 10 minutes.During the procedure, the tissue removal device is inserted through the MyoSure hysteroscope. This tissue removal device is powered by a control unit,which features a simple user interface and is foot pedal activated. The MyoSure device is sold in three variations, the Classic, Lite and XL, depending on theneeds and requirements of the patient and physician.Skeletal Health ProductsDiscovery and Horizon X-Ray Bone DensitometersBone densitometry is the measurement of bone density to assist in the diagnosis and monitoring of osteoporosis and other metabolic bone diseases thatcan lead to debilitating bone fractures. Osteoporosis is a disease that is most prevalent in post-menopausal women. Our proprietary Discovery x-ray bonedensitometers incorporate dual-energy x-ray technology to precisely assess bone density of the most important fracture sites, the spine and hip. Since ourcommercial introduction of the first bone densitometer employing dual-energy x-ray technology in 1987, we have continually improved upon ourtechnology, and the use of dual-energy x-ray technology has become and remains a leading bone densitometry assessment tool. We offer a range of bonedensitometers with various features and options to address the requirements of our diverse customer base. In the fourth quarter of fiscal 2013, we launched ourHorizon line of x-ray bone densitometers, which incorporates advanced features and performance characteristics.9Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsMini C-arm ImagingWe manufacture and distribute Fluoroscan mini C-arm imaging systems. Mini C-arms provide low intensity, real-time x-ray imaging, with high-resolution images at radiation levels and at a cost below those of conventional x-ray and fluoroscopic equipment. Mini C-arm systems are used primarily byorthopedic surgeons to perform minimally invasive surgical procedures on a patient’s extremities, such as the hand, wrist, knee, foot and ankle.Marketing, Sales and ServiceWe sell and service our products through a combination of direct sales and service forces and a network of independent distributors and salesrepresentatives. In fiscal 2014, 2013 and 2012, no customer accounted for more than 10% of our consolidated revenues. In fiscal 2014 and 2013, revenuesunder our blood screening collaboration agreement, which is currently with Grifols, accounted for 18.8% and 16.6% of our Diagnostics segment revenue,respectively. No other customer accounted for more than 10% of our revenues in any other business segment in fiscal 2014, 2013 or 2012. In fiscal 2014,2013 and 2012, international revenues accounted for 26%, 26% and 27% of our product sales, respectively. See Note 15 to our consolidated financialstatements contained in Item 15 of this Annual Report for geographical information.Our U.S. sales force is structured to specifically target the customers in each of our business segments. We maintain distinct teams focused on theDiagnostics, Breast Health, GYN Surgical, and Skeletal Health markets. A critical element of our strategy in the U.S. has been to utilize the results of ourclinical trials and expanded FDA labeling to demonstrate safety, efficacy and productivity improvements to our target customers. Our end customers includeclinical laboratories, hospitals, healthcare providers and surgeons in both hospital and office settings, and we target various specialists at healthcare entitieswho use our products, such as radiologists and breast surgeons. Our U.S. sales efforts also include the use of national account managers focused on obtainingpurchasing contracts from large purchasing entities, such as managed care organizations, integrated delivery networks and government healthcare facilities.In addition, in certain regions of the U.S., we use a limited number of independent dealers or distributors to sell and service our products. Internationally, ourproducts are marketed and sold through a combination of a direct sales force and a network of distributors. We maintain direct sales operations in Canada,Europe, Australia and China.Our service organization is responsible for installing our products and providing warranty and repair services, applications training and biomedicaltraining. Products sold by our direct sales force typically carry limited warranties covering parts and labor for twelve months. Products sold through dealersalso carry limited warranties that typically last for twelve months and cover only parts and components. We also offer service contracts that generally last oneto five years after the original warranty period. We provide both repair services and routine maintenance services under these arrangements, and also offerrepair and maintenance services on a time and materials basis to customers that do not have service contracts. Internationally, we primarily use distributors,sales representatives and third parties to provide maintenance service for our products.CompetitionThe healthcare industry is highly competitive and characterized by continual change and improvements in technology. This is particularly the case inthe market segments in which we operate. A number of companies have developed, or are expected to develop products that compete or will compete withour products. Many of these competitors offer a broader product portfolio and have greater brand recognition than we do, which may make these competitorsmore attractive to hospitals, radiology clients, group purchasing organizations, laboratories, physicians and other potential customers. Competitors maydevelop superior products or products of similar quality for sale at the same or lower prices. Moreover, our products could be rendered obsolete by newindustry standards or changing technology. We can give no assurance that we will be able to compete successfully with existing or new competitors.In the current environment of managed care, economically-motivated buyers, consolidation among healthcare providers, increased competition anddeclining reimbursement rates, we have been increasingly required to compete on the basis of price, value, reliability and efficiency. We believe the currentglobal economic conditions and healthcare reform measures are putting additional competitive pressure on us, including on our average selling prices,overall procedure rates and market sizes.We believe that the success of our products depends on our ability to differentiate ourselves and to demonstrate that our products deliver the attributesthat are most important and cost-effective to customers. These attributes include, but are not limited to, superiority in efficacy, ease of use, reliability,accuracy, quality and cost. We believe our continued success depends in large part upon our ability to invest in product enhancements and technologies thatwill help us distinguish ourselves from our competitors.10Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsDiagnostics. Our ThinPrep liquid-based cytology product faces direct competition in the U.S. primarily from Becton, Dickinson and Company, or BD,which manufactures a competitive offering. We also compete with the conventional Pap smear and other alternative methods for detecting cervical cancerand/or its precursors. Internationally, our ThinPrep product competes with a variety of companies and other non-FDA approved tests, since fewer regulatorybarriers exist in most international markets as compared to the U.S.We believe that our Rapid Fetal Fibronectin Test is currently the only approved in vitro diagnostic test for predicting the risk of pre-term birth in theU.S. Internationally, our Rapid Fetal Fibronectin Test competes with Actim Partus manufactured by Alere, Inc. However, this product could experiencecompetition from companies that manufacture and market pregnancy-related diagnostic products and services. In addition, healthcare providers usediagnostic techniques such as clinical examination and ultrasound to diagnose the likelihood of pre-term birth and may choose these techniques rather thanuse the Rapid Fetal Fibronectin Test.In the molecular diagnostics market, our products compete with many companies in the U.S. and abroad engaged in the development,commercialization and distribution of similar products intended for clinical molecular diagnostic applications. Clinical laboratories also may offer testingservices that are competitive with our products and may use reagents purchased from us or others to develop their own diagnostic tests.In the global clinical diagnostics market, we compete with several companies offering alternative technologies to our diagnostic products includingAbbott Laboratories, Siemens, BD, bioMérieux SA, Cepheid, Life Technologies Corporation, Luminex Corporation, Qiagen N.V., and Roche DiagnosticsCorporation, or Roche. Specifically, in the U.S., our Aptima Combo 2 tests compete against BD and Roche, and our Aptima HPV and Cervista HPV testscompete with tests marketed by Qiagen and Roche.In the market for blood screening products, our primary competitor is Roche. We also compete with assays developed internally by blood screeningcenters and laboratories based on PCR technology. In the future, our blood screening products may compete with viral inactivation or reduction technologiesand blood substitutes.Grifols retains certain rights to grant licenses of the patents related to HCV and HIV to third parties in blood screening using nucleic acid testing. Priorto its acquisition by Novartis, Chiron Corporation, or Chiron, granted HIV and HCV licenses to Roche in the blood screening and clinical diagnostics fields.Chiron also granted HIV and HCV licenses in the clinical diagnostics field to Bayer Healthcare LLC (now Siemens), together with the right to grant certainadditional HIV and HCV sublicenses in the field to third parties. If Grifols or Siemens grant additional licenses, further competition will be created for sales ofHCV and HIV assays and these licenses could affect the prices that can be charged for certain of our products.Breast Health. Our mammography and related products and subsystems compete on a worldwide basis with products offered by a number ofcompetitors, including General Electric Company, or GE, Siemens, Koninklijke Philips NV, or Philips, Planmed Oy, or Planmed, Agfa-Gevaert N.V., or Agfa,Carestream Health, Inc., FUJIFILM Holdings Corporation, or Fuji, I.M.S., and Toshiba Corporation. In the U.S., our full field digital mammography systemscompete with digital mammography systems from GE, Siemens, Fuji, I.M.S., Philips and Planmed. Our digital mammography systems also compete withFuji’s and Carestream Health’s Computed Radiography, or CR mammography systems, and other lower-priced alternatives to 2D digital mammography andanalog mammography systems. In the U.S., GE received FDA approval in September 2014 for its 3D breast tomosynthesis system. In addition, we understandthat certain of our other competitors, including Siemens and Fuji, are developing 3D tomosynthesis systems for commercial use in the U.S. Our 3Dtomosynthesis systems also compete in certain countries outside of the U.S. with 3D tomosynthesis systems developed by GE, Siemens, Fuji, and I.M.S.The primary competitor for our breast biopsy product line is Devicor Medical Products, Inc. In addition, other competitors include CareFusionCorporation, Sanarus Technologies, LLC and Intact Medical Corporation.GYN Surgical. Our NovaSure system currently faces direct competition from Johnson & Johnson, Boston Scientific Corporation, or Boston Scientific,and The Cooper Companies, Inc., or CooperSurgical, each of which currently markets an FDA approved endometrial ablation device for the treatment ofabnormal uterine bleeding. In addition to these devices, we also compete with alternative treatments to our NovaSure system, such as drug therapy,intrauterine devices, hysterectomy, dilation and curettage and rollerball ablation. Internationally, our products compete with drug therapy and firstgeneration rollerball technology, as well as other endometrial ablation devices, including Johnson & Johnson’s Gynecare Thermachoice product, BostonScientific’s Genesys HTA system, and two other relatively small companies that market products that are not FDA approved. Because drug therapy is analternative to our NovaSure procedure, NovaSure’s competitors also include many major pharmaceutical companies that manufacture hormonal drugs forwomen.11Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOur MyoSure product competes directly with hysteroscopic loop resection and Smith & Nephew’s TruClear tissue morcellator. The MyoSure productalso competes with alternative therapeutic techniques such as hysteroscopic resection with a monopolar or bipolar loop, which is currently the most commontechnique for removing intrauterine fibroids and polyps.Skeletal Health. GE is our primary competitor in the bone densitometry market, and we also compete with Orthoscan in the mini-C arm market.ManufacturingWe have historically purchased many of the components, subassemblies, and raw materials used in our products from numerous suppliers worldwide.For reasons of quality assurance, scarcity or cost effectiveness, certain components, subassemblies, and raw materials used in the manufacture of our productsare available only from one or a limited number of suppliers. We have worked closely with our suppliers to develop contingency plans to assure continuity ofsupply while maintaining high quality and reliability, and in some cases, we have established long-term supply contracts with our suppliers. In certaininstances, we have developed in-house capability to offset potential shortages caused by sole source suppliers. Due to the high standards and FDArequirements applicable to the manufacturing of our products, such as the FDA's Quality System Regulation and Good Manufacturing Practices, we may notbe able to quickly establish additional or replacement sources for certain components or materials. In the event that we are unable to obtain sufficientquantities of raw materials or components or subassemblies on commercially reasonable terms or in a timely manner, our ability to manufacture our productson a timely and cost-competitive basis may be compromised, which may have a material adverse effect on our business, financial condition and results ofoperations.Our current supplier of certain key raw materials for certain of our amplified NAT diagnostic assays, pursuant to a fixed-price contract, is Roche. Inaddition, we have a supply and purchase agreement for oligonucleotides for HPV with Roche Molecular Systems, Inc. We also have a supply agreement withan affiliate of GE for membranes used in connection with our ThinPrep product line. GE competes with us in our Breast Health and Skeletal Healthbusinesses.We have one third-party manufacturer for each of our molecular diagnostics instrument product lines. KMC Systems, Inc., or KMC Systems, is the onlymanufacturer of the Tigris instrument; Stratec Biomedical AG, or Stratec, is the only manufacturer of the Panther instrument; and D&K Engineering, Inc., orD&K, is the only manufacturer of the Tomcat instrument. We are dependent on these third-party manufacturers, and this dependence exposes us to increasedrisks associated with production delays, delivery schedules, manufacturing capability, quality control, quality assurance and costs.We have no firm long-term commitments from KMC Systems, Stratec, D&K, or any of our other contract manufacturers to supply products to us for anyspecific period, or in any specific quantity, except as may be provided in a particular purchase order. If KMC Systems, Stratec, D&K, or any of our other third-party manufacturers experiences delays, disruptions, capacity constraints or quality control problems in its development or manufacturing operations orbecomes insolvent or otherwise fails to supply us with products in sufficient quantities, then instrument shipments to our customers could be delayed, whichwould decrease our revenues and harm our competitive position and reputation. Further, because we place orders with our manufacturers based on forecasts ofexpected demand for our instruments, if we inaccurately forecast demand we may be unable to obtain adequate manufacturing capacity or adequatequantities of components to meet our customers’ delivery requirements.We and our contract manufacturers manufacture our products at a relatively limited number of different facilities located throughout the world, and inmost cases, the manufacturing of each of our products is concentrated in one or a few locations. An interruption in manufacturing capabilities at any of thesefacilities, as a result of equipment failure or other reasons, could reduce, delay or prevent the production of our products. Because some of our manufacturingoperations are located outside of the U.S., including in Costa Rica, Canada, the United Kingdom, Germany and China, those manufacturing operations arealso subject to additional challenges and risks associated with international operations described under the caption “Risk Factors” in Item 1A below.We continually review our operations and facilities in an effort to reduce costs and increase efficiencies and have recently completed the process ofconsolidating our Madison, Wisconsin molecular diagnostics operations into our Diagnostics facilities in San Diego, California. During fiscal 2013, wemoved our selenium panel coating production line from Germany into our digital detector manufacturing facility in Newark, Delaware, and have completedthe consolidation of our breast biopsy operations, including manufacturing, research and development and sales support to our Costa Rica manufacturingfacility and facilities in Massachusetts. We may experience unexpected problems and expenses associated with our consolidation of operations and facilitiesthat could materially harm our business and prospects.12Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsFrom time to time new regulations are enacted that can affect the content and manufacturing of our products. We continue to evaluate the necessarysteps for compliance with regulations as they are enacted. In August 2012, the SEC adopted a new rule requiring disclosures of specified minerals, known asconflict minerals, that are necessary to the functionality or production of products manufactured or contracted to be manufactured by public companies. Theconflict minerals rule requires companies annually to diligence, disclose and report whether or not such minerals originate from the Democratic Republic ofCongo or an adjoining country. The conflict minerals rule could affect sourcing at competitive prices and availability in sufficient quantities of certainminerals used in the manufacture of our products, including tantalum, tin, gold and tungsten. The number of suppliers who provide conflict-free minerals maybe limited. In addition, there may be material costs associated with complying with the disclosure requirements, such as costs related to determining thesource of certain minerals used in our products, as well as costs of possible changes to products, processes, or sources of supply as a consequence of suchverification activities. Since our supply chain is complex, we may not be able to sufficiently verify the origins of the relevant minerals used in our productsthrough the due diligence procedures that we implement, which may harm our reputation. In addition, we may encounter challenges to satisfy thosecustomers who require that all of the components of our products be certified as conflict-free, which could place us at a competitive disadvantage if we areunable to do so.Other regulations which affect the content and manufacturing of our products include, for example, the Registration, Evaluation, Authorization andRestriction of Chemical substances, or REACH, the Restriction on the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Directive,or RoHS, and the Waste Electrical and Electronic Equipment Directive, or WEEE, enacted in the European Union which regulate the use of certain hazardoussubstances in, and require the collection, reuse and recycling of waste from, certain products we manufacture. Similar legislation that has been or is in theprocess of being enacted in Japan and China and various states of the U.S. may require us to re-design our products to ensure compliance with the applicablestandards, for example by requiring the use of different types of materials. These redesigns or alternative materials may detrimentally impact the performanceof our products, add greater testing lead-times for product introductions or have other similar effects.BacklogOur backlog as of October 26, 2014 and November 3, 2013 totaled $377.0 million and $299.2 million, respectively. Backlog consists of customerorders for which a delivery schedule within the next twelve months has been specified. Orders included in backlog may be canceled or rescheduled bycustomers without significant penalty. Backlog as of any particular date should not be relied upon as indicative of our net revenues for any future period.Research and DevelopmentThe markets in which we participate are characterized by rapid technological change, frequent product introductions and evolving customerrequirements. Investment in research and development is critical to driving our future growth. Our research and development efforts are focused on the furtherdevelopment and improvement of our existing products, the design and development of innovative medical technologies and regulatory compliance.In addition to product development, our research and development personnel play an active role in the review of product specifications, clinicalprotocols and FDA submissions, as well as ensuring that certain of our products conform to European health, safety and environmental requirements, or CE-marking. Our research and development expenses were $203.2 million, $197.6 million and $131.0 million in fiscal 2014, 2013 and 2012, respectively. Theseexpenses do not include acquired in-process research and development expenses of $4.5 million in fiscal 2012.Patents and Proprietary RightsWe rely primarily on a combination of trade secrets, patents, copyrights and confidentiality procedures to protect our products and technology. Due tothe rapid technological changes that characterize the markets we operate in, we believe that the enhancement of existing products, reliance upon trade secretsand unpatented proprietary know-how and the development of new products are generally as important as patent protection in establishing and maintaining acompetitive advantage. Nevertheless, we have obtained patents and will continue to make efforts to obtain patents, when available, in connection with ourproduct development programs.13Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsWe own numerous U.S. patents and have applied for numerous additional U.S. patents relating to our technologies. We also own or have applied forcorresponding patents in selected foreign countries. These patents relate to various aspects of most of our products. We do not know if current or future patentapplications will issue with the full scope of the claims sought, if at all, or whether any patents issued will be challenged or invalidated. There is a risk thatour patent applications will not result in granted patents or that granted patents will not provide significant protection for our products and technology.Unauthorized third parties may infringe our intellectual property rights, or copy or reverse engineer portions of our technology. Our competitors mayindependently develop similar or superior technology that our patents do not cover. In addition, because patent applications in the U.S. are not generallypublicly disclosed until eighteen months after the application is filed, applications may have been filed by third parties that relate to our technology.Moreover, there is a risk that foreign intellectual property laws will not protect our intellectual property rights to the same extent as intellectual property lawsin the U.S. The rights provided by a patent are finite in time. Over the coming years, certain patents relating to current products will expire in the U.S. andabroad thus allowing third parties to utilize certain of our technologies. In the absence of significant patent protection, we may be vulnerable to competitorswho attempt to copy our products, processes or technology.In addition to the patents we have been issued or we have acquired, we license patents from others on a variety of terms and conditions.We are engaged in intellectual property litigation as described in Note 13 to our consolidated financial statements entitled “Litigation and RelatedMatters,” and we may be notified in the future of claims that we may be infringing intellectual property rights possessed by third-parties. In connection withany such litigation or if any claims are asserted against us or our products, we may seek to enter into settlement and/or licensing arrangements. There is a riskin these situations that no license will be available or that a license will not be available on reasonable terms. Alternatively, we may decide or be required tolitigate such claims. A successful claim by a third-party may require us to remove the infringing product from the market or to design around the patentedtechnology, potentially resulting in a less acceptable product.Regulatory and ReimbursementRegulatoryThe manufacture, sale, lease and service of medical diagnostic and surgical devices intended for commercial use are subject to extensive governmentalregulation by the FDA in the U.S. and by a variety of regulatory agencies in other countries. Under the Federal Food, Drug and Cosmetic Act, known as theFD&C Act, manufacturers of medical products and devices must comply with certain regulations governing the design, testing, manufacturing, packaging,servicing and marketing of medical products. Some of our products are also subject to the Radiation Control for Health and Safety Act, administered by theFDA, which imposes performance standards and record keeping, reporting, product testing and product labeling requirements for devices that emit radiation,such as x-rays. FDA product approvals may be withdrawn or suspended if compliance with regulatory standards is not maintained or if problems occurfollowing initial marketing.The FDA generally must clear the commercial sale of new medical devices. Commercial sales of our medical devices within the U.S. must be precededby either a pre-market notification filing pursuant to Section 510(k) of the FD&C Act or the granting of a pre-market approval application, or PMA. A 510(k)pre-market notification filing must contain information establishing that the device to be sold is substantially equivalent to a device commerciallydistributed prior to May 28, 1976. The PMA procedure involves a complex and lengthy testing and review process by the FDA and may require several yearsto obtain. We may need to first obtain an investigational device exemption, known as an IDE, in order to conduct extensive clinical testing of the device toobtain the necessary clinical data for submission to the FDA. The FDA will grant a PMA only if after evaluating clinical data it finds that the safety andefficacy of the product has been sufficiently demonstrated. This approval may restrict the number of devices distributed or require additional patient follow-up for an indefinite period of time.The laboratories that purchase certain of our products, including the ThinPrep System, ThinPrep Imaging System, Rapid Fetal Fibronectin Test, AptimaCombo 2, Aptima HPV and Cervista HPV tests are subject to extensive regulation under the Clinical Laboratory Improvement Amendments of 1988, or CLIA,which requires laboratories to meet specified standards in the areas of personnel qualifications, administration, participation in proficiency testing, patienttest management, quality control, quality assurance and inspections. Adverse interpretations of current CLIA regulations or future changes in CLIAregulations could have an adverse effect on sales of any affected products.14Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOur blood screening products are subject to extensive pre- and post-market regulation as biologics by the FDA, including regulations that govern thetesting, manufacturing, safety, efficacy, labeling, storage, record keeping, advertising and promotion of the products under the FD&C Act and the PublicHealth Service Act, and by comparable agencies in most foreign countries. The process required by the FDA before a biologic may be marketed in the U.S.generally involves the completion of pre-clinical testing; the submission of an investigational new drug application which must become effective beforeclinical trials may begin; and the performance of adequate and well controlled human clinical trials to establish the safety and effectiveness of the biologic’sproposed intended use.Certain analyte specific reagents, referred to as ASR products, may be sold without 510(k) clearance or PMA approval. However, ASR products aresubject to significant restrictions. The manufacturer may not make clinical or analytical performance claims for the ASR product, may not promote their usewith additional laboratory equipment and may only sell the ASR product to clinical laboratories that are qualified to run high complexity tests under CLIA.Each laboratory must validate the ASR product for use in diagnostic procedures as a laboratory developed test.We are also subject to a variety of federal, state and foreign laws which broadly relate to our interactions with healthcare practitioners and otherparticipants in the healthcare system, including, among others, the following:•anti-kickback and anti-bribery laws, such as the Foreign Corrupt Practices Act, or FCPA, the UK’s Bribery Act 2010, or the UK Anti-Bribery Act;•laws regulating the confidentiality of sensitive personal information and the circumstances under which such information may be released, such asthe Health Insurance Portability and Accountability Act of 1996, or HIPAA, and the Health Information Technology for Economic and ClinicalHealth Act, or HITECH Act; and•healthcare reform laws, such as the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of2010, which we refer to together as PPACA, which include new regulatory mandates and other measures designed to constrain medical costs, as wellas stringent new reporting requirements of financial relationships between device manufacturers and physicians and teaching hospitals.In addition, we are subject to numerous federal, state, foreign and local laws relating to safe working conditions, manufacturing practices,environmental protection, fire hazard control and disposal of hazardous or potentially hazardous substances, among others. We may be required to incursignificant costs to comply with these laws and regulations in the future, and complying with these laws may result in a material adverse effect upon ourbusiness, financial condition and results of operations.Sales of medical devices outside of the U.S. are subject to foreign requirements that vary widely from country to country. For example, our ability tomarket our products outside of the U.S. is contingent upon maintaining our International Standards Organization, or ISO, certification, complying withEuropean directives and in some cases receiving specific marketing authorization from the appropriate foreign regulatory authorities. Foreign registration isan ongoing process as we register additional products and/or product modifications.The time required to obtain approval from a foreign country to market and sell our products may be longer or shorter than that required for FDAapproval and the requirements may differ. In addition, we may be required to meet the FDA’s export requirements or receive FDA export approval for theexport of our products to foreign countries.In September 2012, the European Commission proposed new regulations for medical devices. The proposed new regulations cover in one regulationdevices that are currently the subject of three separate directives. The adoption of these regulations may impact our international operations through abroadened scope of medical device oversight and/or regulatory reach. Compliance with the new European Commission regulations, if and when adopted,may impose additional administrative and financial burdens on us.Federal, state and foreign regulations regarding the manufacture and sale of medical devices and pharmaceuticals are subject to future change. Wecannot predict what impact, if any, such changes might have on our business.For additional information about the regulations to which our business is subject and the impact such regulations may have on our business, see thedisclosures under the caption “Risk Factors” in Item 1A below.ReimbursementMarket acceptance of our medical products in the U.S. and other countries is dependent upon the purchasing and procurement practices of ourcustomers, patient demand for our products and procedures, and the reimbursement of patients’ medical expenses by government healthcare programs, privateinsurers or other healthcare payors. In the U.S., the Centers for Medicare & Medicaid Services, known as CMS, establishes coverage policies and paymentrates for Medicare beneficiaries. CMS publishes payment rates for physician, hospital, laboratory and ambulatory surgical center services on an annual basis.15Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsUnder current CMS policies and regulations, varying payment levels have been established for tests and procedures performed using our products. Coveragepolicies for Medicare patients may vary by regional Medicare contractor in the absence of a national coverage determination and payment rates forprocedures will vary based on the geographic price index. Coverage and reimbursement for patients with private insurance is dependent on the individualprivate payor’s decisions and may not follow the policies and rates established by CMS. Moreover, private insurance carriers may choose not to follow theCMS coverage policies or payment rates. The use of our products outside of the U.S. is similarly affected by reimbursement policies adopted by foreignregulatory authorities and insurance carriers.Healthcare reform proposals and medical cost containment measures are being adopted in the U.S. and in many foreign countries. These reforms andmeasures, including those envisioned by the adoption in 2010 of U.S. healthcare reform, could among other things limit the use of our products andtreatments and further reduce payment rates or coverage available for such use. In addition, the uncertainty in the medical community regarding their natureand effect could have an adverse effect on our customers’ purchasing decisions regarding our products and treatments and could harm our business, results ofoperations, financial condition and prospects. Significant reductions in payment rates proposed or implemented for the use of any our products have had andmay continue to have a material adverse effect on the sales of those products. We also expect that pricing of medical products and services will remain underpressure as alternative payment models such as bundling, value-based purchasing, integrated health systems and accountable care organizations begin totake shape in the U.S.On October 31, 2014, CMS for the first time released payment rates for screening and diagnostic 3D mammography (breast tomosynthesis). This actionestablishes national average payment rates for the Category I Current Procedural Terminology (CPT) code for 3D mammography screening and creates a newadd-on Healthcare Common Procedure Coding System (HCPCS) code for 3D diagnostic mammography. These codes and rates go into effect January 1, 2015.Coverage policies for 3D mammography still need to be determined by most government and private payors. We continue to work with governmentalauthorities, professional societies, healthcare providers, insurance companies and other third-party payors in efforts to secure policies and payment for the useof 3D tomosynthesis.EmployeesAs of September 27, 2014, we had approximately 5,351 full-time employees, including 1,567 in manufacturing operations, 775 in research anddevelopment, 2,374 in marketing, sales and support services, and 635 in finance and administration. The non-management employees of our Hitec-Imagingsubsidiary located in Germany are represented by a union. Hitec-Imaging’s 79 non-management German employees were subject to collective bargainingagreements negotiated on a national and regional basis between Unternehmens-Verband Südôstliches Westfalen e.V., the Employers Association of NorthRhine-Westphalia, and the German Metal Workers Union, IndustrieGewerkschaft Metall. In addition, Hitec-Imaging’s German employees are represented by aworks council, a Betriebsrat, with respect to various shop agreements for social matters and working conditions. We believe that our relationship with ouremployees is good. Except as described herein, none of our other employees are represented by a union.SeasonalityWorldwide sales, including U.S. sales, do not reflect any significant degree of seasonality; however, customer purchases of our GYN Surgical productshave been historically lower in our second fiscal quarter as compared to our other fiscal quarters. We expect continuing fluctuations in our manufacture andshipment of blood screening products and instruments to our blood screening collaborator, Grifols, which vary each period based on Grifols’ inventory levelsand supply chain needs. Our respiratory infectious disease product line is also subject to significant seasonal and year-over-year fluctuations. In addition, thesummer months, which occur during our fiscal fourth quarter, typically have had lower order rates internationally for most of our products.Item 1A. Risk FactorsThis report contains forward-looking information that involves risks and uncertainties, including statements regarding our plans, objectives,expectations and intentions. Our actual results could differ materially from those discussed herein. Other risks and uncertainties not presently known to usor that we currently deem immaterial may also materially adversely affect us. Factors that could cause or contribute to such differences include thosediscussed below, as well as those discussed elsewhere in this report. The cautionary statements made under the heading “Special Note Regarding Forward-Looking Statements” and elsewhere in this report are intended to be applicable to all related forward-looking statements wherever they may appear in thisreport. We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.16Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsRisks Relating to our BusinessThe continuing worldwide macroeconomic uncertainty may adversely affect our business and prospects.Market acceptance of our medical products in the U.S. and other countries is dependent upon the medical equipment purchasing and procurementpractices of our customers, patient demand for our products and procedures and the reimbursement of patients’ medical expenses by government healthcareprograms and third-party payors. The continuing uncertainty surrounding world financial markets and continuing weak worldwide macroeconomicconditions have caused and may continue to cause the purchasers of medical equipment to decrease their medical equipment purchasing and procurementactivities. Economic uncertainty as well as increasing health insurance premiums and co-payments may continue to result in cost-conscious consumersmaking fewer elective trips to their physicians and specialists, which in turn would adversely affect demand for our products and procedures. Job losses orslow improvement in the unemployment rate in the U.S. as a result of current macroeconomic conditions may result in a smaller percentage of our patientsbeing covered by an employer health group and a larger percentage being covered by lower paying Medicare and Medicaid programs. Furthermore,governments and other third-party payors around the world facing tightening budgets could move to further reduce the reimbursement rates or the scope ofcoverage offered, which could adversely affect sales of our products. If the current adverse macroeconomic conditions continue, our business and prospectsmay be negatively impacted.Sales and market acceptance of our products is dependent upon the coverage and reimbursement decisions made by third-party payors. The failure ofthird-party payors to provide appropriate levels of coverage and reimbursement for the use of our products and treatments facilitated by our productscould harm our business and prospects.Sales and market acceptance of our medical products and the treatments facilitated by our products in the U.S. and other countries is dependent uponthe coverage decisions and reimbursement policies established by government healthcare programs and private health insurers. Market acceptance of ourproducts and treatments has and will continue to depend upon our customers’ ability to obtain an appropriate level of coverage for, and reimbursement fromthird-party payors for, these products and treatments.Healthcare reform proposals and medical cost containment measures are being adopted in the U.S. and in many foreign countries. These reforms andmeasures, including those envisioned by the adoption in 2010 of U.S. healthcare reform, could among other things limit the use of our products andtreatments and further reduce reimbursement available for such use. In addition, the uncertainty in the medical community regarding their nature and effectcould have an adverse effect on our customers’ purchasing decisions regarding our products and treatments and could harm our business, results ofoperations, financial condition and prospects. Significant reductions in reimbursement rates proposed or implemented for the use of any our products havehad and may continue to have a material adverse effect on the sales of those products. We also expect that pricing of medical products and services willremain under pressure as alternative payment models such as bundling, value-based purchasing and accountable care organizations develop in the U.S.The adoption of healthcare reform in the U.S. and the uncertainty surrounding the implementation of these reforms could harm our business andprospects.The healthcare industry has undergone significant change driven by various efforts to reduce costs, trends toward managed care, cuts in Medicare,consolidation of healthcare distribution companies and collective purchasing arrangements by office-based healthcare practitioners. The effect of theimplementation of PPACA on our business is uncertain. Among other things, the law requires the medical device industry to subsidize healthcare reform inthe form of a 2.3% excise tax on U.S. sales of certain medical devices which became effective on January 1, 2013. We expect that this excise tax will continueto apply to the majority, if not all, of our products sold in the U.S. In addition, the judgments we make regarding which of our products are subject to theexcise tax based on our interpretations of the law, related Internal Revenue Service, or IRS, regulations and the underlying factors used to calculate theamount of tax due on the sale of such products could differ from the judgments made by the IRS, resulting in additional charges to our results of operations.Our U.S. product revenues represented 74% of our net product revenues for the years ended September 27, 2014 and September 28, 2013. The Companyincurred $21.9 million and $15.7 million of excise tax expense related to the domestic sales of its medical device products for the years ended September 27,2014 and September 28, 2013, respectively.17Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe law also includes regulatory mandates and other measures designed to constrain medical costs, as well as stringent reporting requirements offinancial relationships between device manufacturers and physicians and teaching hospitals. Specifically, under Section 6002 of PPACA, which is commonlyreferred to as the Physician Payment Sunshine Act, we are required to collect data on and annually report to CMS certain payments or other transfers of valueto physicians and teaching hospitals and annually report certain ownership and investment interests held by physicians or their immediate family members.Compliance with the healthcare legislation, including with these reporting requirements and the excise tax, has imposed significant additional administrativeand financial burdens on us. Various healthcare reform proposals have also emerged at the state level. The healthcare reform legislation and these proposalscould reduce medical procedure volumes and impact the demand for our products or the prices at which we sell our products. These reforms include anational pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency ofcertain healthcare services through bundled payment models. In addition, the excise tax has increased our costs of doing business. The impact of thishealthcare reform legislation, and practices including price regulation, competitive pricing, comparative effectiveness of therapies, technology assessments,and managed care arrangements could harm our business and prospects, results of operations and/or financial condition. Healthcare reform proposals andmedical cost containment measures in the U.S. and in many foreign countries could:•limit the use of our products and treatments;•reduce reimbursement available for such use;•further tax the sale or use of our products;•adversely affect the use of new therapies for which our products may be targeted; and•further increase the administrative and financial burden of compliance.These reforms, cost containment measures and new taxes, including the uncertainty in the medical community regarding their nature and effect, couldalso have an adverse effect on our customers’ purchasing decisions regarding our products and treatments and could harm our business, results of operations,financial condition and prospects.Changes in laws affecting the healthcare industry could adversely affect our revenues and profitability.We operate in a highly regulated industry. As a result, governmental actions may adversely affect our business, operations or financial condition,including:•new laws, regulations or judicial decisions, or new interpretations of existing laws, regulations or decisions, related to healthcare availability,method of delivery and payment for healthcare products and services;•changes in the FDA and foreign regulatory approval processes that may delay or prevent the approval of new products and treatments and resultin lost market opportunity;•changes in FDA and foreign regulations that may require additional safety monitoring, labeling changes, restrictions on product distribution oruse, or other measures after the introduction of our products and treatments to market, which could increase our costs of doing business,adversely affect the future permitted uses of approved products or treatments, or otherwise adversely affect the market for our products andtreatments; and•new laws, regulations and judicial decisions affecting pricing or marketing practices.We anticipate that governmental authorities will continue to scrutinize the healthcare industry closely and that additional regulation by governmentalauthorities may cause increased compliance costs, exposure to litigation and other adverse effects to our operations.Guidelines, recommendations and studies published by various organizations may reduce the use of our products.Professional societies, government agencies, practice management groups, private health/science foundations, and organizations involved in healthcareissues may publish guidelines, recommendations or studies to the healthcare and patient communities. Recommendations of government agencies or theseother groups/organizations may relate to such matters as usage, cost-effectiveness, and use of related therapies. Organizations like these have in the past maderecommendations about our products and those of our competitors. Recommendations, guidelines or studies that are followed by healthcare providers andinsurers could result in decreased use of our products. For example, in November 2012, the American Congress of Obstetrics and Gynecologists, known as theACOG, released updates in which they have recommended less frequent cervical cancer screening similar to guidelines released in March 2012 by the U.S.Preventative Services Task Force and the American Cancer Society. We believe that these recommendations and guidelines may have contributed toincreased screening intervals for cervical cancer, which we believe has and may continue to adversely affect our ThinPrep revenues.18Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOur long-term success will depend upon our ability to successfully develop and commercialize new products and treatments and enhance our existingproducts and treatments.We are devoting significant resources to our continuing research and development programs which are designed to develop new products andtreatments and to enhance and improve our existing products and treatments. The successful development of our products and product enhancements issubject to numerous risks, both known and unknown, including:•unanticipated delays in development, clinical trials or the approval or clearance process by the FDA or other applicable regulatory authority;•access to capital;•budget overruns;•third-party intellectual property;•technical problems; and•other difficulties that could result in the abandonment or substantial change in the design, development and commercialization of these newproducts, including, for example, changes requested by the FDA in connection with pre-market approval applications or 510(k) clearance.Given the uncertainties inherent with product development, introduction, and enhancement our efforts may not be completed on a timely basis orwithin budget, if at all. Our failure to develop new products and product enhancements on a timely basis or within budget, if at all, could harm our businessand prospects.If we cannot maintain our current corporate collaborations and enter into new corporate collaborations, our product development could be delayed. Inparticular, any failure by us to successfully maintain our blood screening collaboration could have a material adverse effect on our business.In some instances we have entered into corporate collaborations, including alliances and joint ventures, with certain partners or companies that couldmake it more difficult for us to enter into advantageous business transactions or relationships with others.With respect to certain of our products we have relied, to a significant extent, on corporate collaborators for funding development and marketing. Inaddition, we expect to rely on our corporate collaborators for the commercialization of certain products. If any of our corporate collaborators were to breachor terminate its agreement with us or otherwise fail to conduct its collaborative activities successfully and in a timely manner, the development orcommercialization and subsequent marketing of the products contemplated by the collaboration could be delayed or terminated. We cannot control theamount and timing of resources our corporate collaborators devote to our programs or potential products.The continuation of any of these collaboration agreements depends upon their periodic renewal by us and our collaborators. If any of our currentcollaboration agreements are terminated, or if we are unable to renew those collaborations on acceptable terms, we may be required to devote additionalinternal resources to product development or marketing or to terminate some development programs or seek alternative corporate collaborations. In addition,in the event of a dispute under our current or any future collaboration agreements, a court or arbitrator may not rule in our favor and our rights or obligationsunder an agreement subject to a dispute may be adversely affected, which may have an adverse effect on our business or operating results. Any corporatecollaboration may divert management time and resources. Entering into a disadvantageous corporate collaboration, failing to manage a collaborationeffectively, or failing to comply with the obligations associated with a collaboration, could harm our business and prospects.If we or our contract manufacturers are unable to manufacture our products in sufficient quantities, on a timely basis, at acceptable costs and incompliance with regulatory and quality requirements, our ability to sell our products will be harmed.The manufacture of many of our products is highly complex and requires precise high quality manufacturing that is difficult to achieve. We have in thepast and may in the future experience difficulties in manufacturing our products on a timely basis and in sufficient quantities. These difficulties haveprimarily related to delays and difficulties associated with ramping up production of newly introduced products and may result in increased delivery lead-times and increased costs of manufacturing these products. In addition, production of these newer products may require the development of newmanufacturing technologies and expertise, which we may be unable to develop. Our failure, including the failure of our contract manufacturers, to achieveand maintain the required high manufacturing standards could result in further delays or failures in product testing or delivery, cost overruns, product recallsor withdrawals, increased warranty costs or other problems that could harm our business and prospects.19Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIn determining the required quantities of our products and the manufacturing schedule, we must make significant judgments and estimates based onhistorical experience, inventory levels, current market trends and other related factors. Because of the inherent nature of estimates, there could be significantdifferences between our estimates and the actual amounts of products we and our distributors require, which could harm our business and results ofoperations.Blood screening, medical diagnostic and surgical device products are regulated by the FDA as well as other foreign medical regulatory bodies. In somecases, such as in the U.S. and the EU, certain products may also require individual lot release testing. Maintaining compliance with multiple regulators, andmultiple centers within the FDA, adds complexity and cost to our manufacturing processes. In addition, our manufacturing facilities and those of our contractmanufacturers are subject to periodic regulatory inspections by the FDA and other regulatory agencies, and these facilities are subject to the FDA's QualitySystem Regulation and Good Manufacturing Practices. We or our contractors may fail to satisfy these regulatory requirements in the future, and any failure todo so may prevent us from selling our products.Our business could be harmed if our products contain undetected errors or defects or do not meet applicable specifications.We are continuously developing new products and improving our existing products. Our existing and newly introduced products can containundetected errors or defects. In addition, these products may not meet their performance specifications under all conditions or for all applications. If, despiteinternal testing and testing by customers, any of our products contain errors or defects or fail to meet applicable specifications, then we may be required toenhance or improve those products or technologies. We may not be able to do so on a timely basis, if at all, and may only be able to do so at considerableexpense. In addition, any significant reliability problems could result in adverse customer reaction, negative publicity, mandatory or voluntary recalls orlegal claims and could harm our business and prospects.Our products may be subject to recalls even after receiving regulatory clearance or approval, which could harm our reputation, business andprospects.The FDA and similar governmental bodies in other countries have the authority to require the recall of medical products in the event of materialdeficiencies or defects in design or manufacture. A government mandated or voluntary recall by us could occur as a result of component failures,manufacturing errors or design defects, including defects in labeling. Any recall could divert managerial and financial resources, be difficult and costly tocorrect, result in the suspension of sales of certain of our products, harm our reputation and the reputation of our products and adversely affect our businessand prospects.Interruptions, delays, shutdowns or damage at our manufacturing facilities could harm our business.We and our contract manufacturers manufacture our products at a relatively limited number of different facilities located throughout the world. Aninterruption in manufacturing capabilities at any of these facilities, as a result of equipment failure or other reasons, could reduce, delay or prevent theproduction of our products. Our manufacturing facilities and those of our contract manufacturers are subject to the risk of catastrophic loss due tounanticipated events, such as fires, earthquakes, explosions, floods or weather conditions. Manufacturing facilities may experience plant shutdowns, strikesor other labor disruptions, or periods of reduced production as a result of equipment failures, loss of power, gray outs, delays in deliveries or extensivedamage, which could harm our business and prospects. Because some of our manufacturing operations are located outside the U.S., including in Costa Rica,Canada, the United Kingdom, Germany and China, those manufacturing operations are also subject to additional challenges and risks associated withinternational operations described below.Our inability to obtain, or any delay in obtaining, any necessary U.S. or foreign regulatory clearances or approvals for our newly developed productsand treatments or product enhancements could harm our business and prospects.Our products and treatments are subject to a high level of regulatory oversight. Our inability to obtain, or any delay in obtaining, any necessary U.S. orforeign regulatory clearances or approvals for our newly developed products or product enhancements could harm our business and prospects. The process ofobtaining clearances and approvals can be costly and time-consuming. In addition, there is a risk that any approvals or clearances, once obtained, may bewithdrawn or modified.Medical devices cannot be marketed in the U.S. without 510(k) clearance or premarket approval by the FDA. Any modifications to a device that hasreceived a pre-market approval that affect the safety or effectiveness of the device require a pre-market approval supplement or possibly a separate pre-marketapproval, either of which is likely to be time-consuming, expensive and uncertain to obtain. If the FDA requires us to seek one or more pre-market approvalsupplements or new pre-market approvals for any modification to a previously approved device, we may be required to cease marketing or to recall themodified device until we obtain approval, and we may be subject to significant criminal and/or civil sanctions, including, but not limited to, regulatory finesor penalties.20Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsMedical devices sold in the U.S. must also be manufactured in compliance with FDA Good Manufacturing Practices, which regulate the design,manufacture, packing, storage and installation of medical devices. Moreover, medical devices are required to comply with FDA regulations relating toinvestigational research and labeling. States may also regulate the manufacture, sale and use of medical devices, particularly those that employ x-raytechnology. Our products are also subject to approval and regulation by foreign regulatory and safety agencies.Delays in receipt of, or failure to obtain, clearances or approvals for future products could delay or preclude realization of product revenues from newproducts or result in substantial additional costs which could decrease our profitability. In September 2012, the European Commission proposed newregulations for medical devices. The proposed new regulations cover in one regulation devices that are currently the subject of three separate directives Theadoption of these regulations may impact our international operations through a broadened scope of medical device oversight and/or regulatory reach.Compliance with the new European Commission regulations, if and when adopted, may impose additional administrative and financial burdens on us. The markets for our newly developed products and treatments and newly introduced enhancements to our existing products and treatments may notdevelop as expected.The successful commercialization of our newly developed products and treatments and newly introduced enhancements to our existing products andtreatments are subject to numerous risks, both known and unknown, including:•uncertainty of the development of a market for such product or treatment;•trends relating to, or the introduction or existence of, competing products, technologies or alternative treatments or therapies that may be moreeffective, safer or easier to use than our products, technologies, treatments or therapies;•the perception of our products or treatments as compared to other products and treatments;•recommendation and support for the use of our products or treatments by influential customers, such as hospitals, radiological practices, breastsurgeons and radiation oncologists and treatment centers;•the availability and extent of data demonstrating the clinical efficacy of our products or treatments;•competition, including the presence of competing products sold by companies with longer operating histories, more recognizable names andmore established distribution networks; and•other technological developments.Often, the development of a significant market for a product or treatment will depend upon the establishment of a reimbursement code or anadvantageous reimbursement level for use of the product or treatment. Moreover, even if addressed, such reimbursement codes or levels frequently are notestablished until after a product or treatment is developed and commercially introduced, which can delay the successful commercialization of a product ortreatment.If we are unable to successfully commercialize and create a significant market for our newly developed products and treatments and newly introducedenhancements to our existing products and treatments our business and prospects could be harmed.Our business may be harmed by prior acquisitions or acquisitions we may complete in the future.We have acquired a number of businesses, technologies, product lines and products, and may make additional acquisitions in the future. Promisingacquisitions are difficult to identify and complete for a number of reasons, including competition among prospective buyers and the need for regulatory,including antitrust, approvals. We may not be able to identify and successfully complete acquisition transactions. Any acquisition we may complete may bemade at a substantial premium over the fair value of the net assets of the acquired company. Further, the long-term success of our acquisitions and anyadditional acquisitions we may complete in the future will depend upon our ability to realize the anticipated benefits from combining the acquiredbusinesses with our business. We may fail to realize anticipated benefits for a number of reasons, including the following:•problems may arise with our ability to successfully integrate the acquired businesses, which may result in us not operating as effectively andefficiently as expected, and may include:•diversion of management time, as well as a shift of focus from operating the businesses to issues related to integration andadministration or inadequate management resources available for integration activity and oversight;•failure to retain and motivate key employees;21Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents•failure to successfully oversee international sales efforts and inability to prevent FCPA violations;•failure to successfully obtain appropriate regulatory approval or clearance for products under development;•failure to successfully manage relationships with customers, distributors and suppliers;•failure of customers to accept new products;•failure to effectively coordinate sales and marketing efforts;•failure to combine product offerings and product lines quickly and effectively;•failure to effectively enhance acquired technology and products or develop new products relating to the acquired businesses;•potential difficulties and inefficiencies in managing and operating businesses in multiple locations or operating businesses in whichwe have either limited or no direct experience;•potential difficulties integrating financial reporting systems;•potential difficulties in the timely filing of required reports with the SEC; and•potential difficulties in implementing controls, procedures and policies, including disclosure controls and procedures and internalcontrol over financial reporting, appropriate for a larger public company at companies that, prior to the acquisition of such companies,had lacked such controls, procedures and policies, which may result in ineffective disclosure controls and procedures or materialweaknesses in internal control over financial reporting;•we may not be able to achieve the expected synergies from an acquisition or it may take longer than expected to achieve those synergies;•an acquisition may result in future impairment charges related to a decline in the fair value of the acquired business as compared to the price wepaid for such acquisition;•an acquisition may involve restructuring operations or reductions in workforce which may result in substantial charges to our operations;•our current and prospective customers and suppliers may experience uncertainty associated with an acquisition, including with respect tocurrent or future business relationships with us and may attempt to negotiate changes in existing business;•an acquisition may involve unexpected costs or liabilities, including as a result of pending and future shareholder lawsuits relating toacquisitions or exercise by shareholders of their statutory appraisal rights, or the effects of purchase accounting may be different from ourexpectations;•an acquisition may involve significant deferred or contingent payments that may adversely affect our future liquidity or capital resources; and•the acquired businesses may be adversely affected by future legislative, regulatory, or tax decisions and/or changes as well as other economic,business and/or competitive factors.Our failure to realize the anticipated benefits from combining acquired businesses could harm our business and prospects.If we are successful in pursuing future acquisitions, we may be required to expend significant funds, incur additional debt or other obligations, or issueadditional securities, which may negatively affect our operating results and financial condition. If we spend significant funds or incur additional debt or otherobligations, our ability to obtain financing for working capital or other purposes could decline, and we may be more vulnerable to economic downturns andcompetitive pressures. We cannot guarantee that we will be able to finance additional acquisitions or that we will realize any anticipated benefits fromacquisitions that we complete.22Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIt may be difficult for us to implement our strategies for sustaining growth.Some of the markets in which we compete have been flat or declining. For example, in fiscal 2014 and 2013, we experienced declines in domestic salesof our ThinPrep and NovaSure systems, and worldwide sales of our 2D mammography systems. We attribute the decline in ThinPrep system sales to theincreased time intervals between cervical cancer screenings as a result of recent screening recommendations, the decline in the sale of NovaSure systems tothe continuing effect of unemployment and economic uncertainty and the increase in insurance deductibles and the availability of less expensive, althoughoften less effective, alternative therapies, and the decline in 2D mammography sales to our introduction of the Dimensions 3D tomosynthesis system. At theend of fiscal 2013 and in 2014, we also experienced a modest decline in prices for our molecular diagnostics products. We also continue to experiencepressures resulting from ongoing economic challenges and uncertainty resulting from healthcare reforms, reimbursement pressures and capital budgetuncertainty. We expect such trends and pressures to continue in fiscal 2015.To offset these pressures, we are pursuing a number of strategies to sustain our business, including:•continuing to aggressively place our molecular diagnostics instrumentation in laboratories, particular our Panther system, to drive longer termgrowth from the use of those systems and the purchase of our assays;•continuing to aggressively market and sell our Dimensions 3D tomosynthesis system;•expanding our product offerings, particularly within our Diagnostics segment;•allocating research and development funding to products with higher growth prospects;•developing new applications for our technologies;•strengthening our presence in selected geographic markets;•implementing targeted customer initiatives; and•supporting cross-selling opportunities of products and services to take advantage of the breadth of our product offerings.We may not be able to successfully implement these strategies, and these strategies may not result in the desired growth of our business.Consolidation in the healthcare industry could lead to increased demands for price concessions or the exclusion of some suppliers from certain of oursignificant market segments, which could harm our business and prospects.The cost of healthcare has risen significantly over the past decade and numerous initiatives and reforms by legislators, regulators and third-party payorsto curb these costs have resulted in a consolidation trend in the healthcare industry, including with respect to hospitals and clinical laboratories. Thisconsolidation has resulted in greater pricing pressures, decreased average selling prices, and the exclusion of certain suppliers from important marketsegments as group purchasing organizations, independent delivery networks and large single accounts continue to consolidate purchasing decisions for someof our hospital customers. We expect that market demand, government regulation, third-party reimbursement policies, government contracting requirements,and societal pressures will continue to change the worldwide healthcare industry, resulting in further business consolidations and alliances among ourcustomers and competitors, which may reduce competition and continue to exert further downward pressure on the prices of our products and adverselyimpact our business, financial condition or results of operations. In particular, we are dependent upon a relatively small number of large clinical laboratorycustomers in the U.S. for a significant portion of our sales of diagnostics products. Due in part to a trend toward consolidation of clinical laboratories in recentyears and the relative size of the largest U.S. laboratories, it is likely that a significant portion of these sales will continue to be concentrated among arelatively small number of large clinical laboratories.Our business is dependent on technologies we license, and if we fail to maintain these licenses or license new technologies and rights to particular nucleicacid sequences for targeted diseases in the future, we may be limited in our ability to develop new products.Our business is dependent on licenses from third parties for some of our key technologies. For example, our patented TMA technology is based ontechnology we licensed from Stanford University. We anticipate that we will enter into new licensing arrangements in the ordinary course of business toexpand our product portfolio and access new technologies to enhance our products and develop new products. Many of these licenses will provide us withexclusive rights to the subject technology or disease marker. If our license with respect to any of these technologies or markers is terminated for any reason,we may not be able to sell products that incorporate the technology. Similarly, we may lose competitive advantages if we fail to maintain exclusivity underan exclusive license.23Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsAdditionally, the U.S. Supreme Court has issued several recent decisions, the full impact of which is not yet known. For example, in March 2012 inMayo Collaborative Services, DBA Mayo Medical Laboratories, et al. v. Prometheus Laboratories, Inc., the Court held that several claims drawn to measuringdrug metabolite levels from patient samples and correlating them to drug doses were not patentable subject matter. The decision appears to impactdiagnostics patents that merely apply a law of nature via a series of routine steps and has created uncertainty around the patentability of certain biomarker-related method claims. Additionally, in June 2013 in Association for Molecular Pathology v. Myriad Genetics, Inc., the Court held that claims to isolatedgenomic DNA are not patentable, but claims to complementary DNA, or cDNA, molecules were held to be valid. The effect of the decision on patents forother isolated natural products is uncertain and we may lose competitive advantages should the subject matter of an exclusive license be deemed non-statutory and we therefore fail to maintain exclusivity to such subject matter as a result.Our ability to develop additional diagnostic tests for diseases may depend on the ability of third parties to discover particular sequences or markers andcorrelate them with disease, as well as the rate at which such discoveries are made. Our ability to design products that target these diseases may depend on ourability to obtain the necessary rights from the third parties that make any of these discoveries. In addition, there are a finite number of diseases and conditionsfor which our NAT diagnostic assays may be economically viable. If we are unable to access new technologies or the rights to particular sequences or markersnecessary for additional diagnostic products on commercially reasonable terms, we may be limited in our ability to develop new diagnostic products.Our products and manufacturing processes will require access to technologies and materials that may be subject to patents or other intellectual propertyrights held by third parties. We may need to obtain additional intellectual property rights in order to commercialize our products. We may be unable toobtain such rights on commercially reasonable terms or at all, which could adversely affect our ability to grow our business.Our business could be harmed if we are unable to protect our proprietary technology.We have relied primarily on a combination of trade secrets, patents, copyrights and confidentiality procedures to protect our products and technology.Despite these precautions, unauthorized third parties may infringe our intellectual property, or copy or reverse engineer portions of our technology. Thepursuit and assertion of a patent right, particularly in areas like nucleic acid diagnostics and biotechnology, involve complex determinations and, therefore,are characterized by substantial uncertainty. We do not know if current or future patent applications will be issued with the full scope of the claims sought, ifat all, or whether any patents that do issue will be challenged or invalidated. The patents that we own or license could also be subject to interferenceproceedings or similar disputes over the priority of the inventions, and an unfavorable outcome could require us to cease using the related technology or toattempt to license rights to the technology from the prevailing party. In addition, the laws governing patentability and the scope of patent coverage continueto evolve, particularly in the field of biotechnology. As a result, patents might not issue from certain of our patent applications or from applications licensedto us.We have obtained or applied for corresponding patents and patent applications in several foreign countries for some of our U.S. patents and patentapplications. There is a risk that these patent applications will not be granted or that the patent or patent application will not provide significant protectionfor our products and technology. Moreover, there is a risk that foreign intellectual property laws will not protect our intellectual property rights to the sameextent as intellectual property laws in the U.S.The rights provided by a patent are finite in time. Over the coming years, certain patents relating to current products will expire in the U.S. and abroadthus allowing third parties to utilize certain of our technologies.Our competitors may independently develop similar or superior technology that our patents do not cover. In addition, because patent applications inthe U.S. are not generally publicly disclosed until eighteen months after the application is filed, applications may have been filed by third parties that relateto our technology. Even if our proprietary information is protected by patents or otherwise, the initiation of actions to protect our proprietary informationcould be costly and divert the efforts and attention of our management and technical personnel, and the outcome of such litigation is often uncertain. As aresult of these uncertainties, we could also elect to forego such litigation or settle such litigation without fully enforcing our proprietary rights. In the absenceof significant patent protection, we may be vulnerable to competitors who attempt to copy our products, processes or technology.Additionally, the effect of the Prometheus Laboratories and Myriad Genetics decisions on patents for other isolated natural products is uncertain andthese decisions could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issuedpatents, all of which could have a material adverse effect on our business and financial condition.24Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOur business could be harmed if we infringe upon the intellectual property rights of others.There has been substantial litigation regarding patent and other intellectual property rights in the medical device, diagnostic products and relatedindustries. We are and have been involved in patent litigation, and may in the future be subject to further claims of infringement of intellectual propertyrights possessed by third parties.In connection with claims of patent infringement, we may seek to enter into settlement and/or licensing arrangements. There is a risk in these situationsthat no license will be available or that a license will not be available on reasonable terms. Alternatively, we may decide to litigate such claims or to designaround the patented technology. These actions could be costly and would divert the efforts and attention of our management and technical personnel. As aresult, any infringement claims by third parties or claims for indemnification by customers resulting from infringement claims, whether or not proven to betrue, may harm our business and prospects.Our international operations and foreign acquisitions expose us to additional operational challenges that we might not otherwise face.We are subject to a number of additional risks and expenses due to our international operations, including our operations in China. Any of these risks orexpenses could harm our operating results. These risks and expenses include:•difficulties in developing staffing and simultaneously managing operations in multiple locations as a result of, among other things, distance,language and cultural differences;•protectionist laws and business practices that favor local companies;•difficulties in the collection of trade accounts receivable;•difficulties and expenses related to implementing internal control over financial reporting and disclosure controls and procedures;•expenses associated with customizing products for clients in foreign countries;•possible adverse tax consequences;•the inability to obtain favorable third-party reimbursements;•the inability to obtain required regulatory approvals;•governmental currency controls;•multiple, conflicting and changing government laws and regulations (including, among other things antitrust and tax requirements);•operation in parts of the world where strict compliance with anti-bribery laws may conflict with local customs and practices;•reduced protection for intellectual property rights in some countries;•political and economic changes and disruptions, export/import controls and tariff regulations;•the inability to effectively obtain or enforce intellectual property rights and otherwise protect against clone or “knock off” products; and•the lack of ability to enforce non-compete agreements with former owners of acquired businesses competing with us in China and other foreigncountries.Our global operations are required to comply with the FCPA, Chinese anti-corruption and similar anti-bribery laws in other jurisdictions and with U.S.and foreign export control, trade embargo and customs laws. If we fail to comply with any of these laws, we could suffer civil and criminal sanctions.Our China operations are subject to national, regional and local regulations. The regulatory environment in China is evolving, and officials in theChinese government exercise broad discretion in deciding how to interpret and apply regulations. It is possible that the Chinese government’s current orfuture interpretation and application of existing or new regulations will negatively impact our China operations, result in regulatory investigations or lead tofines or penalties.25Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsWe utilize distributors for a portion of our sales, the loss of which could harm our revenues in the territory serviced by these distributors.We rely on strategic relationships with a number of key distributors for sales and service of our products. For example, in our Diagnostics business weare dependent on Grifols to distribute the blood screening products we manufacture. Commercial blood screening product sales to Grifols accounted for18.8% and 16.6% of our Diagnostics segment revenue in fiscal 2014 and 2013 respectively. If our blood screening relationship or any of our other strategicrelationships are terminated and not replaced, our revenues and/or ability to service our products in the territories serviced by these distributors could beadversely affected. If any of our distribution or marketing agreements are terminated, particularly our blood screening collaboration agreement, or if we electto distribute new products directly, we will have to invest in additional sales and marketing resources, including additional field sales personnel, whichwould significantly increase future selling, general and administrative expenses. We may not be able to enter into new distribution or marketing agreementson satisfactory terms, or at all. If we fail to enter into acceptable distribution or marketing agreements or fail to successfully market our products, our productsales will decrease. We may also be exposed to risks as a result of transitioning a territory from a distributor sales model to a direct sales model, such asdifficulties maintaining relationships with specific customers, hiring appropriately trained personnel or ensuring compliance with local product registrationrequirements, any of which could result in lower revenues than previously received from the distributor in that territory.Fluctuations in the exchange rates of European currencies and the other foreign currencies in which we conduct our business, in relation to the U.S.dollar, could harm our business and prospects.We maintain sales and service offices outside the U.S., have manufacturing facilities outside the U.S. in Costa Rica, Canada, the United Kingdom,Germany and China, and conduct business worldwide. The expenses of our international offices are denominated in local currencies, except at our Costa Ricasubsidiary, where the majority of business is conducted in U.S. dollars. Our foreign sales may be denominated in local currencies, the Euro or U.S. dollar.Fluctuations in foreign currency exchange rates could affect our revenues, cost of goods and operating margins and could result in exchange losses. Inaddition, currency devaluation can result in a loss if we hold deposits of that currency. In the last few years we have not hedged foreign currency exposures,but we may in the future hedge foreign currency denominated sales. There is a risk that any hedging activities will not be successful in mitigating our foreignexchange risk exposure and may adversely impact our financial condition and results of operations.We have only one third-party manufacturer for certain of our product lines and rely on one or a limited number of suppliers for some key rawmaterials, components or subassemblies for our products. This reliance exposes us to increased risks associated with production delays, deliveryschedules, manufacturing capability, quality control, quality assurance and costs.Certain of our raw materials, components or subassemblies are purchased from a single-source due to cost, quality, expertise or other considerations.Obtaining alternative sources of supply of these raw materials, components or subassemblies could involve significant delays and other costs and regulatorychallenges, and may not be available to us on reasonable terms, if at all. The failure of a supplier to provide sufficient quantities, acceptable quality andtimely delivery of goods at an acceptable price, or an interruption in the delivery of goods from such a supplier could harm our business and prospects. Anydisruption of supplies of goods could delay or reduce shipments, which could result in lost or deferred sales. For example, we have one third-partymanufacturer for each of our molecular diagnostics instruments. KMC Systems, Inc., or KMC Systems, is the only manufacturer of the Tigris instrument;Stratec Biomedical AG, or Stratec, is the only manufacturer of the Panther instrument; and D&K Engineering, Inc., or D&K, is the only manufacturer of theTomcat instrument. We have no firm long-term commitments from KMC Systems, Stratec, D&K or any of our other contract manufacturers to supply goods tous for any specific period, or in any specific quantity, except as may be provided in a particular purchase order. If KMC Systems, Stratec, D&K or any of ourother third-party manufacturers experiences delays, disruptions, capacity constraints or quality control problems in its development or manufacturingoperations or becomes insolvent or otherwise fails to supply us with goods in sufficient quantities, then instrument shipments to our customers could bedelayed, which would decrease our revenues and harm our competitive position and reputation. Further, because we place orders with our manufacturersbased on forecasts of expected demand for our products, if we inaccurately forecast demand we may be unable to obtain adequate manufacturing capacity oradequate quantities of components to meet our customers' delivery requirements. Similarly, we rely on one or a limited number of suppliers for some key rawmaterials for our products. For example, our current supplier of certain key raw materials for certain of our amplified NAT diagnostic assays, pursuant to afixed-price contract, is Roche and we have a supply and purchase agreement for oligonucleotides for HPV with Roche Molecular Systems, Inc. We also havea supply agreement with an affiliate of GE for membranes used in connection with our ThinPrep product line. GE competes with us in our Breast Health andSkeletal Health businesses.26Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsWe may in the future need to find new contract manufacturers or suppliers to replace existing manufacturers or suppliers, increase our volumes or reduceour costs. We may not be able to find contract manufacturers or suppliers that meet our needs, and even if we do the process is expensive and time consuming.If we are required or elect to change contract manufacturers or suppliers, we may lose revenues and our customer relationships may suffer.We may experience unexpected problems and expenses associated with our planned consolidation of operations and facilities that could materiallyharm our business and prospects.We continually review our operations and facilities in an effort to reduce costs and increase efficiencies. To that end, we recently completedconsolidating our Madison, Wisconsin molecular diagnostics operations into our facilities in San Diego, California. During fiscal 2013, we moved ourselenium panel coating production line into our digital detector manufacturing facility in Newark, Delaware from Germany, and have completed theconsolidation of our breast biopsy operations, including manufacturing, research and development and sales support to our Costa Rica manufacturing facilityand facilities in Massachusetts. Uncertainty is inherent within the consolidation process, and unforeseen circumstances, costs and expenses could offset theanticipated benefits, disrupt operations, including the timely delivery of products and service to customers, and impact product quality, which couldmaterially harm our business and prospects. In addition, we may fail to retain key employees who possess specific knowledge or expertise and who wedepend upon for the timely and successful transition, we may not be able to attract a sufficient number of skilled workers at the new locations to handle theadditional production and other demands, and the relocation may absorb significant management and key employee attention and resources. If any of theserisks materialize, our business, results of operations, financial condition and prospects may be adversely affected.We face intense competition from other companies and may not be able to compete successfully.A number of companies have developed, or are expected to develop, products that compete or will compete with our products. In addition, somecompanies may have significant competitive advantages over us, which may make them more attractive to hospitals, radiology clients, group purchasingorganizations, laboratories, and physicians, including:•greater brand recognition;•larger or more established distribution networks and customer bases;•a broader product portfolio, resulting in the ability to offer rebates or bundle products to offer discounts or incentives to gain a competitiveadvantage;•higher levels of automation and greater installed bases of such equipment;•more extensive research, development, sales, marketing, and manufacturing capabilities and greater financial resources; and•greater technical resources positioning them to continue to improve their technology in order to compete in an evolving industry.The markets in which we sell our products are intensely competitive, subject to rapid technological change and may be significantly affected by newproduct introductions and other market activities of industry participants, and these competitive pressures may reduce our gross margins. Other companiesmay develop products that are superior to and/or less expensive than our products. Improvements in existing competitive products or the introduction of newcompetitive products may reduce our ability to compete for sales, particularly if those competitive products demonstrate better safety or effectiveness,clinical results, ease of use or lower costs.The current environment of managed care, economically-motivated buyers, consolidation among healthcare providers, increased competition anddeclining reimbursement rates, together with current global economic conditions and healthcare reform measures, may put additional competitive pressure onus, including on our average selling prices, overall procedure rates and market sizes.If we are unable to compete effectively against existing and future competitors and existing and future alternative products and treatments, our businessand prospects could be harmed.27Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOur Diagnostics segment depends on a small number of customers for a significant portion of its product sales, the loss of any of these customers or anycancellation or delay of a large purchase by any of these customers could significantly reduce revenues in our Diagnostics segment.Although we do not currently have any customers that represent more than 10% of our consolidated revenues, a material portion of product sales in ourDiagnostics segment comes from a limited number of customers. We have long-term commitments with some of our Diagnostics’ customers, but only ourcollaboration agreement with Grifols results in revenues of more than 10% of our Diagnostics segment's total revenues. Product sales from our bloodscreening collaboration with Grifols accounted for 18.8% and 16.6% of our Diagnostics segment revenue in fiscal 2014 and 2013, respectively. In fiscal2014, our blood screening collaboration was largely dependent on two significant customers in the U.S., The American Red Cross and Creative TestingSolutions, although we did not receive any revenues directly from those entities. We anticipate that our operating results in our Diagnostics segment willcontinue to depend, to a significant extent, upon revenues from a small number of customers. The loss of any of these key customers, or a significantreduction in sales volume or pricing to these customers, could significantly reduce our Diagnostics segment revenues or profitability.Our success depends upon our ability to adapt to rapid changes in technology and customer requirements.The markets for our products have been characterized by rapid technological change, frequent product introductions and evolving customerrequirements. These trends will likely continue into the foreseeable future. Our success depends, in part, upon our ability to enhance our existing products,successfully develop new products that meet increasingly challenging customer requirements and gain market acceptance. If we fail to do so our productsmay be rendered obsolete or uncompetitive by new industry standards or changing technology.We will likely continue to incur significant research and development expenses, which may reduce our profitability.Historically, we have incurred significant costs in connection with the development and improvement of our products and technologies. We expect thatresearch and development expenditures will remain high as we seek to expand our product offerings and continue to develop and improve products andtechnologies. As a result, we will need to continue to generate significant revenues to maintain current levels of profitability. We may not be able to generatesufficient revenues to maintain current levels of profitability in the future.Our results of operations are subject to significant quarterly variation.Our results of operations have been and may continue to be subject to significant quarterly variation. Our results for a particular quarter may also varydue to a number of factors, including:•the overall state of healthcare and cost containment efforts;•the timing and level of reimbursement for our products domestically and internationally;•the development status and demand for our products;•the development status and demand for therapies to treat the health concerns addressed by our products and treatments;•economic conditions in our markets;•foreign exchange rates;•the timing of orders;•the timing of expenditures in anticipation of future sales;•the mix of products we sell and markets we serve;•regulatory approval of products;•the introduction of new products and product enhancements by us or our competitors;•pricing and other competitive conditions;•unanticipated expenses;•complex revenue recognition rules pursuant to U.S. generally accepted accounting principles, which we refer to as U.S. GAAP;•asset impairments;•contingent consideration charges;•restructuring and consolidation charges; and•seasonality of sales of certain of our products.28Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsCustomers may also cancel or reschedule shipments. Production difficulties could also delay shipments. Any of these factors also could harm ourbusiness and prospects.Some of our activities may subject us to risks under federal and state laws prohibiting “kickbacks” and false or fraudulent claims.We are subject to the provisions of a federal law commonly known as the anti-kickback statute, and several similar state laws, which prohibit paymentsintended to induce physicians or others either to refer patients or to acquire or arrange for or recommend the acquisition of healthcare products or services.While the federal law applies only to products or services for which payment may be made by a federal healthcare program, state laws often apply regardlessof whether federal funds may be involved. These laws constrain the sales, marketing and other promotional activities of manufacturers of medical devices bylimiting the kinds of financial arrangements, including sales programs, that may be used with hospitals, physicians, laboratories and other potentialpurchasers of medical devices. Other federal and state laws generally prohibit individuals or entities from knowingly presenting, or causing to be presented,claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent, or are for items or services that were not provided asclaimed. Anti-kickback and false claims laws prescribe civil and criminal penalties (including fines) for noncompliance that can be substantial. Similarly, ourinternational operations are subject to the provisions of the FCPA, which prohibits U.S. companies and their representatives from offering, promising,authorizing, or making payments to foreign officials for the purpose of influencing any act or decision of such official in his or her official capacity, inducingthe official to do any act in violation of his or her lawful duty, or to secure any improper advantage in obtaining or retaining business. In many countries, thehealthcare professionals we regularly interact with may meet the definition of a foreign official for purposes of the FCPA. In addition to the FCPA, ourinternational operations are also subject to various other international anti-bribery laws such as the UK Anti-Bribery Act. Our policies mandate compliancewith these anti-bribery laws. However, despite meaningful measures that we undertake to facilitate lawful conduct, which include training and complianceprograms and internal control policies and procedures, we may not always prevent unauthorized, reckless or criminal acts by our employees or agents, oremployees or agents of businesses or operations we may acquire. It is possible that our practices might be challenged under federal or state anti-kickback,FCPA or similar laws due to the breadth of the statutory provisions and the absence of extensive guidance regarding compliance. Violations of these laws, orallegations of such violations, could disrupt our operations, involve significant management distraction and have a material adverse effect on our business,financial condition and results of operations. We also could be subject to adverse publicity, severe penalties, including criminal and civil penalties,disgorgement, further changes or enhancements to our procedures, policies and controls, personnel changes and other remedial actions. Moreover, our failureto comply with domestic or foreign laws could result in various adverse consequences, including possible delay in approval or refusal to approve a product,recalls, seizures, and withdrawal of an approved product from the market.Failure to comply with laws relating to the confidentiality of sensitive personal information or standards related to the transmission of electronic healthdata, may require us to make significant changes to our products, or incur penalties or other liabilities.State, federal and foreign laws, such as the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, regulate the confidentialityof sensitive personal information and the circumstances under which such information may be released. These measures may govern the disclosure and use ofpersonal and patient medical record information and may require users of such information to implement specified security measures, and to notifyindividuals in the event of privacy and security breaches. Evolving laws and regulations in this area could restrict the ability of our customers to obtain, useor disseminate patient information, or could require us to incur significant additional costs to re-design our products in a timely manner to reflect these legalrequirements, either of which could have an adverse impact on our results of operations. Other health information standards, such as regulations underHIPAA, establish standards regarding electronic health data transmissions and transaction code set rules for specified electronic transactions, for exampletransactions involving submission of claims to third party payors. These standards also continue to evolve and are often unclear and difficult to apply. Inaddition, under the federal Health Information Technology for Economic and Clinical Health Act, or HITECH Act, some of our businesses that werepreviously only indirectly subject to federal HIPAA privacy and security rules became directly subject to such rules because the businesses may be deemed toserve as “business associates” to certain of our customers. In January 2013, the Office for Civil Rights of the Department of Health and Human Servicesreleased a final rule implementing the HITECH Act and making certain other changes to HIPAA privacy and security requirements. Compliance with the rulewill increase the requirements applicable to some of our businesses. Failure to maintain the confidentiality of sensitive personal information in accordancewith the applicable regulatory requirements, or to abide by electronic health data transmission standards, could expose us to breach of contract claims, finesand penalties, costs for remediation and harm to our reputation.29Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsNew regulations related to “conflict minerals” may cause us to incur additional expenses and could limit the supply and increase the cost of certainmetals used in manufacturing our products.In August 2012, the SEC adopted a new rule requiring disclosures of specified minerals, known as conflict minerals, that are necessary to thefunctionality or production of products manufactured or contracted to be manufactured by public companies. The conflict minerals rule requires companiesannually to diligence, disclose and report whether or not such minerals originate from the Democratic Republic of Congo and other specified countries. Thenew rule could affect sourcing at competitive prices and availability in sufficient quantities of certain minerals used in the manufacture of our products,including tantalum, tin, gold and tungsten. The number of suppliers who provide conflict-free minerals may be limited. In addition, there may be materialcosts associated with complying with the disclosure requirements, such as costs related to determining the source of certain minerals used in our products, aswell as costs of possible changes to products, processes, or sources of supply as a consequence of such verification activities. Since our supply chain iscomplex, we may not be able to sufficiently verify the origins of the relevant minerals used in our products through the due diligence procedures that weimplement, which may harm our reputation. In addition, we may encounter challenges to satisfy those customers who require that all of the components ofour products be certified as conflict-free, which could place us at a competitive disadvantage if we are unable to do so.Security breaches and other disruptions could compromise our information, expose us to liability and harm our reputation and business.In the ordinary course of our business we collect and store sensitive data, including intellectual property, personal information, our proprietary businessinformation and that of our customers, suppliers and business partners, and personally identifiable information of our customers and employees in our datacenters and on our networks. The secure maintenance and transmission of this information is critical to our operations and business strategy. We rely oncommercially available systems, software, tools and monitoring to provide security for processing, transmission and storage of confidential information.Computer hackers may attempt to penetrate our computer systems and, if successful, misappropriate personal or confidential business information. Inaddition, an associate, contractor, or other third-party with whom we do business may attempt to circumvent our security measures in order to obtain suchinformation, and may purposefully or inadvertently cause a breach involving such information. Any such compromise of our data security and access, publicdisclosure, or loss of personal or confidential business information could result in legal claims or proceedings, liability under laws that protect the privacy ofpersonal information, and regulatory penalties, disrupt our operations, damage our reputation and customers’ willingness to transact business with us, andsubject us to additional costs and liabilities any of which could adversely affect our business. Although we have experienced occasional, actual or attemptedbreaches of our computer systems, to date none of these breaches has had a material effect on our business, operations or reputation.We are subject to the risk of product liability claims relating to our products.Our business involves the risk of product liability and other claims inherent to the medical device business. If even one of our products is found to havecaused or contributed to injuries or deaths, we could be held liable for substantial damages. We maintain product liability insurance subject to deductiblesand exclusions. There is a risk that the insurance coverage will not be sufficient to protect us from product and other liability claims, or that product liabilityinsurance will not be available to us at a reasonable cost, if at all. An under-insured or uninsured claim could harm our business and prospects. In addition,claims could adversely affect the reputation of the related product, which could damage that product’s competitive position in the market.The sale and use of our diagnostic products could also lead to the filing of product liability claims if someone were to allege that one of our productscontained a design or manufacturing defect that resulted in inaccurate test results or the failure to detect a disorder for which it was being used to screen, orcaused injuries to a patient. Any product liability claim brought against us, with or without merit, could result in an increase in our product liabilityinsurance rates or the inability to secure additional coverage in the future. Also, even a meritless or unsuccessful product liability claim could be timeconsuming and expensive to defend, which could result in a diversion of management’s attention from our business and could adversely affect the perceivedsafety and efficacy of our products, and could harm our business and prospects.30Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsWe use hazardous materials and products.Our research and development and manufacturing processes involve the controlled use of hazardous materials, such as toxic and carcinogenicchemicals and various radioactive compounds. Although we believe that our safety procedures for handling and disposing of such materials comply with thestandards prescribed by federal, state, foreign and local regulations, the risk of accidental contamination or injury from these materials cannot be eliminated.In the event of this type of accident, we could be held liable for any resulting damages, and any such liability could be extensive. From time to time newregulations are enacted, and it is difficult to anticipate how such regulations will be implemented and enforced. We continue to evaluate the necessary stepsfor compliance with regulations as they are enacted. These regulations include, for example, the Registration, Evaluation, Authorization and Restriction ofChemical substances, or REACH, the Restriction on the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Directive, or RoHS, andthe Waste Electrical and Electronic Equipment Directive, or WEEE, enacted in the European Union which regulate the use of certain hazardous substances in,and require the collection, reuse and recycling of waste from, certain products we manufacture. This and similar legislation that has been or is in the processof being enacted in Japan and China and various states of the U.S. may require us to re-design our products to ensure compliance with the applicablestandards, for example by requiring the use of different types of materials. These redesigns or the use of alternative materials may detrimentally impact theperformance of our products, add greater testing lead-times for product introductions or have other similar effects. We believe we comply with all suchlegislation where our products are sold and we will continue to monitor these laws and the related regulations to determine our responsibilities. We are alsosubject to substantial regulation relating to occupational health and safety, environmental protection, hazardous substance control, and waste managementand disposal. The failure to comply with such regulations could subject us to, among other things, fines and criminal liability.We may incur losses in excess of our insurance coverage.Our insurance coverage includes product liability, property, fire, terrorism and business interruption policies. Our insurance coverage contains policylimits, specifications and exclusions. We believe that our insurance coverage is consistent with general practices within our industry. Nonetheless, we mayincur losses of a type for which we are not covered by insurance or which exceed the limits of liability of our insurance policies. In that event, we couldexperience a significant loss which could have a material adverse impact on our financial condition.Our future success depends on the continued services of key personnel.We constantly monitor the dynamics of the economy, the healthcare industry and the markets in which we compete; and we continue to assess our keypersonnel that we believe are essential to our long-term success. During the last year we effected a leadership change and have made significantorganizational and strategic changes in connection therewith. If we fail to effectively manage our ongoing organizational and strategic changes, our financialcondition, results of operations, and reputation, as well as our ability to successfully attract, motivate and retain key employees, could be harmed.Moreover, in our industry, there is substantial competition for key personnel in the regions in which we operate and we may face increased competitionfor such employees. The loss of any of our key personnel, particularly management or key research and development personnel, could harm our business andprospects and could impede the achievement of our research and development, operational or strategic objectives. Our success also depends upon our abilityto attract and retain other qualified managerial and technical personnel. Competition for such personnel is intense. We may not be able to attract and retainpersonnel necessary for the development of our business.An adverse change in the projected cash flows from our business units or the business climate in which they operate, including the continuation of thecurrent financial and economic uncertainty, could require us to record an impairment charge, which could have an adverse impact on our operatingresults.At least annually, we review the carrying value of our goodwill, and for other long-lived assets when indicators of impairment are present, to determineif any adverse conditions exist or a change in circumstances has occurred that would indicate impairment of the value of these assets. Conditions that couldindicate impairment and necessitate an evaluation of these assets include, but are not limited to, a significant adverse change in the business climate or thelegal or regulatory environment within which we operate. In addition, the deterioration of a company’s market capitalization significantly below its net bookvalue is an indicator of impairment. We assess goodwill for impairment at the reporting unit level and in evaluating the potential impairment of goodwill, wemake assumptions regarding the amount and timing of future cash flows, terminal value growth rates and appropriate discount rates.31Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsAll of our reporting units passed step 1 of the goodwill impairment test in fiscal 2014. One reporting unit within our Diagnostics segment passed step 1by less than 10% and is at risk of failing such tests in the future. This reporting unit had $202.8 million of goodwill at September 27, 2014. Although we usereasonable methodologies for developing assumptions and estimates underlying the fair value calculations used in our impairment tests, these estimates areuncertain by nature and can vary from actual results. It is possible that the continuation of the current global financial and economic uncertainty couldnegatively affect our anticipated future cash flows, or the discount rates used to value the cash flows for each reporting unit, to such an extent that we couldbe required to perform an interim impairment test during fiscal 2015.Our effective tax rate may fluctuate and we may incur obligations in tax jurisdictions in excess of amounts that have been accrued.We are subject to income taxes and non-income based taxes in both the U.S. and various foreign jurisdictions. In certain instances, we take certainincome tax return positions and provide additional taxes if it is more-likely-than-not that the tax position will not withstand a tax authority’s challenge. Weare subject to ongoing tax audits in various jurisdictions, and tax authorities may disagree with certain positions we have taken and assess additional taxes.We regularly evaluate the likely outcomes of audits to determine the appropriateness of our tax provision and tax reserves. However, we can give noassurance that we will accurately predict the audits’ outcomes, which could have a material impact on our operating results and financial condition.Our effective tax rate may be lower or higher than prior years due to numerous factors, including a change in our geographic earnings mix and changesin tax laws or tax rulings. Any of these factors could cause us to experience an effective tax rate significantly different from previous periods or our currentexpectations, which could have a material impact on our business and operating results. In addition, U.S. law makers are considering several U.S. corporatetax reform proposals, including, among others, proposals which could reduce or eliminate U.S. income tax deferrals on unrepatriated foreign earnings andeliminate tax incentives, such as the domestic manufacturing deduction and research credits, in exchange for a lower U.S. statutory tax rate.Risks Relating to our IndebtednessWe incurred significant indebtedness in order to finance the acquisition of Gen-Probe, which will limit our operating flexibility, and could adverselyaffect our operations and financial results and prevent us from fulfilling our obligations.As of September 27, 2014, we had approximately $4.27 billion aggregate principal of indebtedness. We also have other contractual obligations anddeferred tax liabilities. This significant level of indebtedness and our other obligations may:•make it more difficult for us to satisfy our obligations with respect to our outstanding indebtedness;•increase our vulnerability to general adverse economic and industry conditions, including increases in interest rates;•require us to dedicate a substantial portion of our cash flow from operations to interest and principal payments on our indebtedness, which willreduce the availability of our cash flow to fund working capital, capital expenditures, expansion efforts and other general corporate purposes;•limit our flexibility in planning for, or reacting to, changes in our business and the markets in which we participate;•place us at a competitive disadvantage compared to our competitors that have less debt; and•limit our ability to borrow additional funds for working capital, capital expenditures, general corporate purposes or acquisitions.In addition, the terms of our credit facilities require us to meet certain financial covenants that are customary with these types of credit facilities, whichare described in Note 5 “Borrowings and Credit Arrangements” in the accompanying notes to the consolidated financial statements included in Item 15 ofthis Annual Report. Our ability to comply with these covenants may be adversely affected by general economic conditions, industry conditions and otherevents beyond our control. If we are unable to comply with these covenants, we could default under the credit facilities, which could cause us to be unable toborrow additional amounts under the credit facilities and may result in the acceleration of the maturity of our outstanding indebtedness under the facilities. Ifthe maturities were accelerated, we may not have sufficient funds available for repayment, and if we were unable to make additional borrowings under thefacilities, we may not be able to make investments in our business to support our strategy or we may end up in bankruptcy proceedings, or other processes, inwhich our business would be negatively impacted. In addition, our shareholders could be adversely impacted as shareholder value could decrease to a pointof limited return. Each scenario would result in significant negative implications to our liquidity and results of operations.32Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsFurther, the terms of our indebtedness contain covenants that restrict our ability, and that of our subsidiaries, to engage in certain transactions and mayimpair our ability to respond to changing business and economic conditions, including, among other things, limitations on our ability to:•incur indebtedness or issue certain preferred equity;•pay dividends, redeem stock or make other distributions or restricted payments;•make certain investments;•agree to payment restrictions affecting the restricted subsidiaries;•sell or otherwise transfer or dispose of assets, including equity interests of our subsidiaries;•enter into transactions with our affiliates;•create liens;•designate our subsidiaries as unrestricted subsidiaries;•consolidate, merge or sell substantially all of our assets; and•use the proceeds of permitted sales of our assets.If there were an event of default under one of our debt instruments or a change of control, the holders of the debt could cause all amounts outstandingwith respect to that debt to be due and payable immediately and may be cross-defaulted to other debt, including our senior notes. Our assets or cash flow maynot be sufficient to fully repay borrowings under our outstanding debt instruments if accelerated upon an event of default or a change of control, and there isno guarantee that we would be able to repay, refinance or restructure the payments on such debt. See “Management’s Discussion and Analysis of FinancialCondition and Results of Operations-Liquidity and Capital Resources.”We may not be able to generate sufficient cash flow to service all of our indebtedness and other obligations.Our ability to make payments on and to refinance our indebtedness and to fund planned capital expenditures, strategic transactions and expansionefforts will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative,regulatory and other factors that are beyond our control.Our business may not be able to generate sufficient cash flow from operations, and we can give no assurance that future borrowings will be available tous in amounts sufficient to enable us to pay our indebtedness as such indebtedness matures and to fund our other liquidity needs. If this occurs, we will needto refinance all or a portion of our indebtedness on or before maturity, and there can be no assurance that we will be able to refinance any of our indebtednesson commercially reasonable terms, or at all. We may need to adopt one or more alternatives, such as reducing or delaying planned expenses and capitalexpenditures, selling assets, restructuring debt, or obtaining additional equity or debt financing. These alternative strategies may not be affected onsatisfactory terms, if at all. Our ability to refinance our indebtedness or obtain additional financing, or to do so on commercially reasonable terms, willdepend on, among other things, our financial condition at the time, restrictions in agreements governing our indebtedness, and other factors, including thecondition of the financial markets and the markets in which we compete.If we do not generate sufficient cash flow from operations, and additional borrowings, refinancings or proceeds from asset sales are not available to us,we may not have sufficient cash to enable us to meet all of our obligations.A significant portion of our indebtedness is subject to floating interest rates, which may expose us to higher interest payments.A significant portion of our indebtedness is subject to floating interest rates, which makes us more vulnerable in the event of adverse economicconditions, increases in prevailing interest rates, or a downturn in our business. As of September 27, 2014, approximately $2.05 billion aggregate principal ofour indebtedness, which represents the outstanding principal under our tranche A term loan facility and our tranche B term loan facility, was subject tofloating interest rates. We currently have no hedging arrangements in place to mitigate the impact of higher interest rates.33Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsRisks Relating to our Common StockFuture issuances of common stock and hedging activities may depress the trading price of our common stock and our convertible notes.Any future issuance of equity securities, including the issuance of shares upon conversion of our convertible notes, could dilute the interests of ourexisting stockholders, including holders who have received shares upon conversion of our convertible notes, and could substantially decrease the tradingprice of our common stock and our convertible notes. We may issue equity securities in the future for a number of reasons, including to finance ouroperations and business strategy (including in connection with acquisitions, strategic collaborations or other transactions), to adjust our ratio of debt toequity, to satisfy our obligations upon the exercise of outstanding warrants or options or for other reasons.In addition, the price of our common stock could also be affected by possible sales of our common stock by investors who view our convertible notes asa more attractive means of equity participation in our company and by hedging or arbitrage trading activity that we expect to develop involving our commonstock. The hedging or arbitrage could, in turn, affect the trading price of our convertible notes, or any common stock that note holders receive uponconversion of their notes.Future sales of our common stock in the public market or the issuance of securities senior to our common stock could adversely affect the trading priceof our common stock and the value of our convertible notes and our ability to raise funds in new securities offerings.Future sales of our common stock, the perception that such sales could occur or the availability of shares of our common stock or securities convertibleinto or exercisable for our common stock for future sale could adversely affect the market price of our common stock and the value of our convertible notesprevailing from time to time and could impair our ability to raise capital through future offerings of equity or equity-related securities. In addition, we mayissue common stock or equity securities senior to our common stock in the future for a number of reasons, including to finance our operations and businessstrategy, to adjust our ratio of debt to equity, to satisfy our obligations upon the exercise of options or for other reasons.Provisions in our charter, bylaws, and indebtedness may have the effect of discouraging advantageous offers for our business or common stock andlimit the price that investors might be willing to pay in the future for shares of our common stock.Our charter, bylaws, and the provisions of the Delaware General Corporation Law include provisions that may have the effect of discouraging orpreventing a change of control. Our indebtedness also contains provisions which either accelerate or require us to offer to repurchase the indebtedness at apremium upon a change of control. These provisions could limit the price that our stockholders might receive in the future for shares of our common stock.Our stock price is volatile.The market price of our common stock has been, and may continue to be, highly volatile. We believe that a variety of factors could cause the price ofour common stock to fluctuate, perhaps substantially, including:•new, or changes in, recommendations, guidelines or studies that could affect the use of our products;•announcements and rumors of developments related to our business, including changes in reimbursement rates or regulatory requirements,proposed and completed acquisitions, or the industry in which we compete;•published studies and reports relating to the comparative efficacy of products and markets in which we participate;•quarterly fluctuations in our actual or anticipated operating results and order levels;•general conditions in the worldwide economy;•our stock repurchase program;•announcements of technological innovations;•new products or product enhancements by us or our competitors;•developments in patents or other intellectual property rights and litigation;•developments in relationships with our customers and suppliers;•the implementation of healthcare reform legislation and the adoption of additional reform legislation in the future; and•the success or lack of success of integrating our acquisitions.34Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe price of our common stock also may be adversely affected by the amount of common stock issuable upon conversion of our convertible notes. Inaddition, in recent years the stock market in general and the markets for shares of “high-tech” companies, have experienced extreme price fluctuations whichhave often been unrelated to the operating performance of affected companies. Any such fluctuations in the future could adversely affect the market price ofour common stock, and the market price of our common stock may decline.Our previously announced stock repurchase program could affect the price of our common stock and increase volatility and may be suspended orterminated at any time, which may result in a decrease in the trading price of our common stock.In November 2013, we announced that our Board of Directors authorized the repurchase of up to $250 million of our outstanding common stock overthe next three years. Under the stock repurchase program, we are authorized to repurchase, from time-to-time, shares of our outstanding common stock on theopen market or in privately negotiated transactions in the U.S. The timing and amount of stock repurchases will be determined based upon our evaluation ofmarket conditions and other factors. The stock repurchase program may be suspended, modified or discontinued at any time, and we have no obligation torepurchase any amount of our common stock under the program. Repurchases pursuant to our stock repurchase program could affect our stock price andincrease the volatility of our common stock. The existence of a stock repurchase program could also cause our stock price to be higher than it would be in theabsence of such a program and could potentially reduce the market liquidity for our stock. There can be no assurance that any stock repurchases will enhancestockholder value because the market price of our common stock may decline below the levels at which we repurchased shares of common stock. Althoughour stock repurchase program is intended to enhance long-term stockholder value, short-term stock price fluctuations could reduce the program’seffectiveness. Through September 27, 2014, we had not repurchased any shares of our common stock under this stock repurchase program.Item 1B. Unresolved Staff CommentsNone.35Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsItem 2. PropertiesWe own and lease the real property identified below. We believe that we have adequate space for our anticipated needs and that suitable additionalspace will be available at commercially reasonable prices as needed. Principal Properties Owned: Primary Use Floor SpaceNewark, DE (a)(b) DirectRay digital detector research and development and plate manufacturingoperations 164,000 sq. ft.Warstein, Germany Hitec-Imaging’s manufacturing operations, research and development andadministrative functions 201,000 sq. ft.Londonderry, NH Manufacturing operations 47,000 sq. ft.San Diego, CA (b) Diagnostics headquarters, including research and development, administrativeand manufacturing operations 262,000 sq. ft.San Diego, CA (b)(c) Diagnostics headquarters, including research and development, administrativeand manufacturing operations 290,000 sq. ft.San Diego, CA (b) Manufacturing operations for blood screening products 94,000 sq. ft. Principal Properties Leased: Primary Use Floor Space LeaseExpiration(fiscal year) RenewalsBedford, MA Headquarters, including research anddevelopment, administrative andmanufacturing operations 207,000 sq. ft. 2022 4, five-yr. periodsDanbury, CT Manufacturing facility 62,000 sq. ft. 2022 4, five-yr. periodsMarlborough, MA Administrative, research and development,manufacturing and distribution operations 216,000 sq. ft. 2019 2, five-yr. periodsMarlborough, MA Manufacturing operations 146,000 sq. ft. 2019 2, five-yr. periodsDanbury, CT Manufacturing operations and research anddevelopment 60,000 sq. ft. 2018 1, five-yr. periodAlajuela, Costa Rica Manufacturing facility 164,000 sq. ft. 2018 2, five-yr. periodsManchester, England Manufacturing operations and research anddevelopment 66,000 sq. ft. 2035 None____________(a)We currently occupy approximately 59,000 square feet of this building, which houses our plate manufacturing facility, including both a Class 1 and aClass 2 clean room. We lease approximately 105,000 square feet of the facility to Siemens under a lease which expires in April 2020.(b)Subject to a mortgage to secure obligations under our senior secured credit facilities.(c)We currently occupy approximately 221,000 square feet of this building, with the remaining space available to accommodate future growth.We lease other facilities utilized for office space and manufacturing and distribution operations across the United States, Europe, Canada and China. Wealso lease several sales and service offices throughout the world. Item 3. Legal ProceedingsFor a discussion of legal matters as of September 27, 2014, please see Note 13 to our consolidated financial statements entitled “Litigation and RelatedMatters,” which is incorporated by reference into this item.Item 4. Mine Safety DisclosuresNot Applicable.36Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPART IIItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket Information. Our common stock is traded on the Nasdaq Global Select Market under the symbol “HOLX.” The following table sets forth thehigh and low sales prices per share of our common stock, as reported by the Nasdaq Global Select Market.Fiscal Year Ended September 27, 2014 High LowFirst Quarter $23.07 $19.25Second Quarter 22.72 19.91Third Quarter 26.18 20.24Fourth Quarter 26.75 24.07Fiscal Year Ended September 28, 2013 High LowFirst Quarter $22.00 $18.51Second Quarter 23.96 19.76Third Quarter 22.97 18.90Fourth Quarter 23.24 18.46Number of Holders. As of November 14, 2014, there were approximately 1,243 holders of record of our common stock, including multiple beneficialholders at depositories, banks and brokers listed as a single holder in the street name of each respective depositary, bank or broker.Dividend Policy. We have never declared or paid cash dividends on our capital stock, and we have no plans to do so. Our current policy is to retain allof our earnings to finance future growth, pay down our existing indebtedness and repurchase our common stock. The existing covenants under our debtinstruments also place limits on our ability to issue dividends and repurchase stock.Recent Sales of Unregistered Securities. We did not sell unregistered equity securities during the fourth quarter of fiscal 2014.Issuer's Purchases of Equity SecuritiesPeriod of RepurchaseTotal Number ofShares Purchased(#) (1) Average PricePaid Per Share($) (1) Total Number ofShares Purchased AsPart of PubliclyAnnounced Plans orPrograms (#) (2) MaximumNumber (or Approximate DollarValue) of Shares That May YetBe Purchased Under OurPrograms (in millions) June 29, 2014 – July 26, 201433 $20.27 — $250.0July 27, 2014 – August 23, 201423,858 25.60 — 250.0August 24, 2014 – September 27, 2014— — — 250.0Total23,891 $25.59 — $250.0 ___________________________________(1)For the majority of restricted stock units granted, the number of shares issued on the date that the restricted stock units vest is net of the minimumstatutory tax withholding requirements that we pay in cash to the appropriate taxing authorities on behalf of our employees. These repurchases of ourcommon stock were to cover employee income tax withholding obligations in connection with the vesting of restricted stock units under our equityincentive plans.(2)On November 11, 2013, we announced that our Board of Directors authorized the repurchase of up to $250.0 million of our outstanding common stockover a three year period. Through September 27, 2014, we had not repurchased any shares of our common stock under this program.37Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStock Performance GraphThe following graph compares cumulative total shareholder return on our common stock since September 26, 2009 with the cumulative total return ofthe Russell 1000 Index and the Standard & Poor’s Health Care Supplies Index. This graph assumes the investment of $100 on September 26, 2009 in ourcommon stock, the Russell 1000 Index and the S&P Health Care Supplies Index. Measurement points are the last trading day of each respective fiscal year.38Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsItem 6. Selected Financial DataThe following selected financial data should be read in conjunction with our consolidated financial statements and related notes appearing elsewherein this Annual Report on Form 10-K, beginning on page F-1. In the fourth quarter of fiscal 2012, we acquired Gen-Probe. In the second, third and fourthquarters of fiscal 2011, we acquired Interlace, TCT and Healthcome, respectively. In the fourth quarter of fiscal 2010, we acquired Sentinelle Medical. Resultsof operations for each of these businesses are included in our consolidated financial statements from the date of acquisition. Fiscal Years Ended September 27,2014 (5) September 28,2013 (4) September 29,2012 (3) September 24,2011 (2) September 25,2010 (1) (In millions, except per share data)Consolidated Statement of Operations Data Total revenues $2,530.7 $2,492.3 $2,002.6 $1,789.3 $1,679.6Total operating costs and expenses $2,251.0 $3,398.5 $1,888.9 $1,414.9 $1,609.6Net income (loss) $17.3 $(1,172.8) $(73.6) $157.2 $(62.8)Basic net income (loss) per common share $0.06 $(4.36) $(0.28) $0.60 $(0.24)Diluted net income (loss) per common share $0.06 $(4.36) $(0.28) $0.59 $(0.24)Consolidated Balance Sheet Data Working capital $946.2 $535.8 $901.7 $833.5 $657.0Total assets $8,414.7 $9,000.8 $10,477.1 $6,008.8 $5,625.8Long-term debt obligations, less currentportion (6) $4,162.6 $4,254.4 $4,986.3 $1,506.4 $1,467.5Total stockholders’ equity $2,063.0 $1,941.5 $2,961.0 $2,936.9 $2,698.5____________(1)Fiscal 2010 total operating costs and expenses include impairment charges of $143.5 million for intangible assets and $76.7 million for goodwill, bothof which related to our MammoSite reporting unit within our Breast Health reportable segment. Also included in total costs and expenses was $11.4million of net charges for litigation related settlements.(2)Fiscal 2011 total operating costs and expenses include a net gain on the sale of intellectual property of $84.5 million, and included in net income infiscal 2011 was a debt extinguishment loss of $29.9 million.(3)Fiscal 2012 total operating costs and expenses include charges for contingent consideration of $119.5 million related to certain of our acquisitions,aggregate restructuring and divestiture charges of $36.6 million and acquisition transaction costs related to the Gen-Probe acquisition of $34.3 million.Included in net loss was a debt extinguishment loss of $42.3 million.(4)Fiscal 2013 total operating costs and expenses include a goodwill impairment charge of $1.1 billion, which related to our Molecular Diagnosticsreporting unit within our Diagnostics reportable segment, contingent consideration of $91.3 million related to certain of our acquisitions, restructuringand divestiture charges of $32.8 million partially offset by a net gain on the sale of intellectual property of $53.9 million. Included in net loss was a debtextinguishment loss of $9.2 million and related transaction costs of $7.5 million.(5)Fiscal 2014 total operating costs and expenses include restructuring and divestiture charges of $51.7 million and intangible asset impairment charges of$32.2 million. Included in net income was a debt extinguishment loss of $7.4 million and related transaction costs of $1.0 million.(6)Long-term obligations are net of unamortized debt discounts of $121.3 million, $157.1 million, $188.8 million, $236.4 million and $277.9 million forfiscal years 2014, 2013, 2012, 2011, and 2010, respectively.39Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsItem 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the information describedunder the caption “Risk Factors” in Part I, Item 1A of this report.OVERVIEWWe are a developer, manufacturer and supplier of premium diagnostics products, medical imaging systems and surgical products. Our core businessunits are focused on diagnostics, breast health, GYN surgical and skeletal health. We sell and service our products through a combination of direct sales andservice forces and a network of independent distributors and sales representatives.We offer a wide range of diagnostic products which are used primarily to aid in the diagnosis of human diseases and screen donated human blood. Ourprimary diagnostics products include our Aptima family of assays, including our advanced instrumentation (Panther and Tigris), our ThinPrep system, theRapid Fetal Fibronectin Test and Procleix blood screening assays. The Aptima family of assays is used to detect the infectious microorganisms that cause thecommon sexually transmitted diseases, or STDs, chlamydia and gonorrhea, certain high-risk strains of human papillomavirus, or HPV, and Trichomonasvaginalis, the parasite that causes trichomoniasis. The ThinPrep System is primarily used in cytology applications, such as cervical cancer screening, and theRapid Fetal Fibronectin Test assists physicians in assessing the risk of pre-term birth. In blood screening, we develop and manufacture the Procleix family ofassays, which are used to detect various infectious diseases. These blood screening products are marketed worldwide by our blood screening collaborator,Grifols S.A., or Grifols, under Grifols' trademarks.Our breast health products include a broad portfolio of breast imaging and related products and accessories, including digital and film-basedmammography systems, computer-aided detection, or CAD, for mammography and minimally invasive breast biopsy devices, breast biopsy site markers,breast biopsy guidance systems and breast brachytherapy products. Our most advanced breast imaging platform, Dimensions, utilizes a technology calledtomosynthesis to produce 3D images, as well as conventional 2D full field digital mammography images.Our GYN surgical products include our NovaSure Endometrial Ablation System, or NovaSure, and our MyoSure Hysteroscopic Tissue Removal System,or MyoSure. The NovaSure system involves a trans-cervical procedure for the treatment of abnormal uterine bleeding. The MyoSure system is a tissueremoval device that is designed to provide incision-less removal of fibroids, polyps, and other pathology within the uterus.Our skeletal health products include dual-energy X-ray bone densitometry systems, an ultrasound-based osteoporosis assessment product, and ourFluoroscan mini C-arm imaging products.Unless the context otherwise requires, references to we, us, Hologic or our company refer to Hologic, Inc. and its consolidated subsidiaries.RECENT DEVELOPMENTSMarket acceptance of our medical products in the United States and other countries is dependent upon the purchasing and procurement practices of ourcustomers, patient demand for our products and procedures, and the reimbursement of patients’ medical expenses by government healthcare programs, privateinsurers or other healthcare payors. In the United States, the Centers for Medicare & Medicaid Services, known as CMS, establishes coverage policies andpayment rates for Medicare beneficiaries. Under current CMS policies, varying payment levels have been established for certain of our products andtreatments. Coverage and payment policies and rates applicable to patients with private insurance are dependent upon individual private payor decisionswhich may not follow the policies and rates established by CMS. The use of our products outside the United States is similarly affected by payment policiesadopted by foreign regulatory authorities and insurance carriers. On October 31, 2014, CMS for the first time released payment rates for screening anddiagnostic 3D mammography (breast tomosynthesis). This action establishes national average payment rates for the Category I Current ProceduralTerminology, or CPT, code for 3D mammography screening and creates a new add-on Healthcare Common Procedure Coding System, or HCPCS, code for 3Ddiagnostic mammography. These codes and rates go into effect January 1, 2015. Coverage policies for 3D mammography still need to be determined by mostgovernment and private payors.40Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe continuing uncertainty surrounding worldwide financial markets and macroeconomic conditions has caused and may continue to cause thepurchasers of medical equipment to decrease or delay their medical equipment purchasing and procurement activities. Economic uncertainty as well asincreasing health insurance premiums, deductibles and co-payments have resulted and may continue to result in cost-conscious consumers focusing on acutecare rather than wellness, which has and may continue to adversely affect demand for our products and procedures. Furthermore, governments and other third-party payors around the world facing tightening budgets could move to further reduce the reimbursement rates or the scope of coverage offered, which couldadversely affect sales of our products. If the current adverse macroeconomic conditions continue, our business and prospects may be negatively impacted.In March 2010, significant reforms to the healthcare system were adopted as law in the United States. The law includes provisions that, among otherthings, reduce and/or limit Medicare reimbursement, require all individuals to have health insurance (with limited exceptions) and imposes new and/orincreased taxes. Specifically, the law requires the medical device industry to subsidize healthcare reform in the form of a 2.3% excise tax on United Statessales of certain medical devices effective January 1, 2013. Since the effective date of the medical device excise tax, the Company has incurred $21.9 millionand $15.7 million in fiscal 2014 and 2013, respectively, of excise tax expense related to the domestic sales of its medical device products. The law alsoincludes regulatory mandates and other measures designed to constrain medical costs, as well as stringent reporting requirements of financial relationshipsbetween medical device manufacturers and physicians and hospitals. Compliance with the healthcare legislation, including these reporting requirements andthe excise tax, has imposed significant additional administrative and financial burdens on us. Various healthcare reform proposals have also emerged at thestate level and in various foreign countries. The healthcare reform legislation and these proposals could reduce medical procedure volumes and impact thedemand for our products or the prices at which we sell our products. In addition, the excise tax has increased our cost of doing business. These reforms, costcontainment measures and new taxes, including the uncertainty in the medical community regarding their nature and effect, could also have an adverse effecton our customers’ purchasing decisions regarding our products and treatments and could harm our business, results of operations, financial condition andprospects.We operate in a highly regulated industry and other governmental actions may adversely affect our business, operations or financial condition,including, without limitation: new laws, regulations or judicial decisions, or new interpretations of existing laws, regulations or decisions, related tohealthcare availability, methods of delivery and payment for healthcare products and services; changes in the FDA and foreign regulatory approval processesthat may delay or prevent the approval of new products and result in lost market opportunity; changes in FDA and foreign regulations that may requireadditional safety monitoring, labeling changes, restrictions on product distribution or use, or other measures after the introduction of our products to market,any of which could increase our costs of doing business, adversely affect the future permitted uses of approved products, or otherwise adversely affect themarket for our products and treatments; new laws, regulations and judicial decisions affecting pricing or marketing practices; and changes in the tax lawsrelating to our operations, including those associated with the recently adopted healthcare reform law discussed above.Professional societies, government agencies, practice management groups, private health/science foundations, and organizations involved inhealthcare issues may publish guidelines, recommendations or studies to the healthcare and patient communities from time to time. Recommendations ofgovernment agencies or these other groups/organizations may relate to such matters as usage, cost-effectiveness, and use of related preventative services andtreatments/therapies. Recommendations, guidelines or studies that are followed by patients and healthcare providers could result in decreased reimbursementor use of our products. For example, in November 2012, the American Congress of Obstetrics and Gynecologists, known as the ACOG, released updates inwhich they have recommended less frequent cervical cancer screening similar to guidelines released in March 2012 by the U.S. Preventative Services TaskForce, known as the USPSTF, and the American Cancer Society. However, the USPSTF recommendations now also include HPV co-testing for certain patientpopulations, an update from their draft guidelines in October 2011. Overall, we believe that these guidelines have contributed to an increase in testingintervals in the U.S. for cervical cancer screening, resulting in fewer such tests being performed.Over the last few years, including in October 2014, there have been periodic significant fluctuations in foreign currencies relative to the U.S. dollar. Theongoing fluctuations of the value of the U.S. dollar may cause our products to be less competitive in international markets and may impact sales andprofitability over time. A majority of our international sales are denominated in foreign currencies. Given the uncertainty in the worldwide financial markets,foreign currency fluctuations may be significant in the future and we may experience a material adverse effect on our international revenues and operatingresults. 41Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsACQUISITIONSFiscal 2012 Acquisition:Gen-Probe IncorporatedOn August 1, 2012, we completed the acquisition of Gen-Probe for $3.97 billion, which was funded through available cash and financing consisting ofsenior secured credit facilities and senior notes resulting in aggregate proceeds of $3.48 billion, net of discounts. Gen-Probe’s revenue and pre-tax loss fromcontinuing operations for the period from the acquisition date to September 29, 2012 were $89.5 million and $47.7 million, respectively.42Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsRESULTS OF OPERATIONSThe following table sets forth, for the periods indicated, the percentage of total revenues represented by items as shown in our Consolidated Statementsof Operations. All dollar amounts in tables are presented in millions. Fiscal Years Ended September 27, 2014 September 28, 2013 September 29, 2012Revenues: Product 82.8 % 84.3 % 82.8 %Service and other 17.2 % 15.7 % 17.2 % 100.0 % 100.0 % 100.0 %Costs of revenues: Product 28.9 % 32.8 % 30.8 %Amortization of intangible assets 12.4 % 12.3 % 10.1 %Impairment of intangible assets 1.1 % 0.1 % — %Service and other 8.4 % 8.2 % 9.5 %Gross Profit 49.2 % 46.6 % 49.7 %Operating expenses: Research and development 8.0 % 7.9 % 6.5 %Selling and marketing 13.1 % 13.7 % 16.1 %General and administrative 10.3 % 9.1 % 11.0 %Amortization of intangible assets 4.5 % 4.5 % 3.6 %Impairment of intangible assets 0.2 % — % — %Contingent consideration—compensation expense — % 3.2 % 4.0 %Contingent consideration—fair value adjustments — % 0.5 % 1.9 %Impairment of goodwill — % 44.8 % 0.3 %Gain on sale of intellectual property — % (2.2)% (0.6)%Acquired in-process research and development — % — % 0.2 %Restructuring and divestiture charges 2.0 % 1.3 % 0.9 % 38.2 % 83.0 % 44.0 %Income (loss) from operations 11.1 % (36.4)% 5.7 %Interest income 0.1 % 0.1 % 0.1 %Interest expense (8.7)% (11.3)% (7.0)%Debt extinguishment loss (0.3)% (0.4)% (2.1)%Other (expense) income, net (0.2)% 0.1 % 0.2 %Income (loss) before income taxes 1.9 % (47.9)% (3.1)%Provision (benefit) for income taxes 1.2 % (0.8)% 0.6 %Net income (loss) 0.7 % (47.1)% (3.7)%43Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsFiscal Year Ended September 27, 2014 Compared to Fiscal Year Ended September 28, 2013Product Sales. Years Ended September 27, 2014 September 28, 2013 Change Amount % of TotalRevenue Amount % of TotalRevenue Amount %Product Revenues Diagnostics $1,136.9 44.9% $1,156.2 46.4% $(19.3) (1.7)%Breast Health 587.9 23.2% 576.3 23.1% 11.6 2.0 %GYN Surgical 306.6 12.1% 305.8 12.3% 0.8 0.3 %Skeletal Health 63.5 2.5% 62.6 2.5% 0.9 1.4 % $2,094.9 82.7% $2,100.9 84.3% $(6.0) (0.3)%Diagnostics product revenues decreased 1.7% in fiscal 2014 compared to fiscal 2013 primarily due to a reduction in ThinPrep revenues of $31.5million and a decrease of $23.1 million in Lifecodes revenue as a result of the divestiture of this product line in the second quarter of fiscal 2013. Thesedecreases were partially offset by an increase in our molecular diagnostics products of $12.4 million primarily due to an increase in revenues from our Aptimafamily of assays and an increase in blood screening revenues of $24.5 million, which were partially offset by lower sales of our Tigris and Pantherinstrumentation and lower Prodesse sales.We attribute the reduction in ThinPrep revenues primarily to lower domestic sales volumes resulting from an increase in screening intervals based onguidelines released in 2012 by the American Congress of Obstetrics and Gynecologists and the U.S. Preventative Services Task Force and lower average salesprices internationally.The increase in revenues in the current year related to our Aptima family of assays was primarily due to increased volumes from our strategic alliancewith Quest Diagnostics Incorporated, or Quest, entered into in the third quarter of fiscal 2013, our increased installed base of Panther instruments, andincreased sales volumes of our HPV screening assay, which was FDA approved for use on our Panther system in the fourth quarter of fiscal 2013. Theseincreases were partially offset by slightly lower average sales prices for our Aptima products due to increased competitive pressures, and a reduction inCervista HPV revenues as our larger customers transition to our Panther system and Aptima HPV assay. The reduction in instruments sales was primarily dueto the ramp up of unit sales to Quest in the fourth quarter of fiscal 2013. Prodesse revenues decreased in the current year primarily due to a milder flu seasonthis year compared to the corresponding period in the prior year and the recent introduction of competitive products.Our blood screening revenues increased in fiscal 2014 compared to fiscal 2013 primarily due to the inclusion of contingent revenue under our bloodscreening collaboration that was not recognized in the first quarter of fiscal 2013, and to a lesser extent the second quarter of fiscal 2013, due to unbilledaccounts receivable being recorded as a fair value adjustment in purchase accounting. Under the collaboration, a portion of our blood screening revenue iscontingent on donations testing revenue earned by our blood screening collaborator. As a result, amounts that were to be received for this contingent revenuerelated to inventory on hand and not yet utilized by Novartis’ (our blood screening collaborator at the time) customers as of the date we acquired Gen-Probewere recorded as unbilled accounts receivable on the balance sheet in purchase accounting, and these amounts were not recorded as revenue in our results ofoperations in fiscal 2013. The amount of this contingent revenue not recorded as revenue in the prior year was $23.5 million. We also experienced anincrease in volume due to the recent agreement between Grifols, our current blood screening partner, and the Japanese Red Cross. These increases werepartially offset by lower West Nile Virus assay sales compared to the corresponding period in fiscal 2013 as last year had a higher incidence of the West NileVirus resulting in higher donation testing in the prior year.Breast Health product revenues increased 2.0% in fiscal 2014 compared to fiscal 2013. Our digital mammography systems and related products revenueincreased $22.8 million in fiscal 2014 compared to fiscal 2013 primarily due to the increase in 3D Dimensions units sold on a worldwide basis and higherworkstations and workflow product revenue driven by our C-View product. As expected, we continue to experience a decline in the number of 2D systemssold as customers transition to the 3D Dimensions systems, which is occurring primarily in the United States. In addition, our breast biopsy products revenueincreased $2.3 million in fiscal 2014 compared to fiscal 2013 primarily due to the increase in the number of Eviva biopsy devices sold worldwide. Theseincreases were partially offset by declines in our analog mammography systems and Hitec Imaging products.44Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsGYN Surgical product revenues increased 0.3% in fiscal 2014 compared to fiscal 2013 primarily due to an increase in MyoSure system sales of $18.3million partially offset by lower NovaSure device sales of $16.8 million. The MyoSure system continues to gain strong market acceptance as unit salesincrease globally, partially offset by product mix. We experienced a decrease in the number of NovaSure devices sold in the United States, which we continueto believe is primarily attributable to patients delaying surgery or opting for lower cost and generally less effective alternatives, partially offset by higherinternational volume.Skeletal Health product revenues increased 1.4% in fiscal 2014 compared to fiscal 2013 primarily due to an increase in our osteoporosis assessmentproduct sales, namely our Horizon product, which was introduced in late fiscal 2013, and to a lesser extent our mini C-arm systems, partially offset by lowervolumes of our older Discovery products and pricing pressures. In fiscal 2014, 73.6% of product revenues were generated in the United States, 13.8% in Europe, 8.6% in Asia-Pacific, and 4.0% in other internationalmarkets. In fiscal 2013, 73.9% of product revenues were generated in the United States, 13.6% in Europe, 8.9% in Asia-Pacific, and 3.6% in otherinternational markets.Service and Other Revenues. Years Ended September 27, 2014 September 28, 2013 Change Amount % ofTotalRevenue Amount % ofTotalRevenue Amount %Service and Other Revenues $435.8 17.2% $391.4 15.7% $44.4 11.3%Service and other revenues are primarily comprised of revenue generated from our field service organization to provide ongoing service, installationand repair of our products. The majority of these revenues are generated within our Breast Health segment. Service and other revenues increased 11.3% infiscal 2014 compared to fiscal 2013 primarily due to an increase in the number of service contracts in our Breast Health business driven by an increase in theinstalled base of our digital mammography systems, an increase in services not covered by service contracts and higher installation and training revenuesrelated to our 3D Dimensions systems. In addition, within our Diagnostics' segment, we executed a license amendment with Roka Bioscience, Inc. andreceived $20.1 million of non-recurring revenue in the fourth quarter of fiscal 2014.Cost of Product Revenues. Years Ended September 27, 2014 September 28, 2013 Change Amount % of ProductSales Amount % of ProductSales Amount %Cost of Product Revenues $731.3 34.9% $818.2 38.9% $(86.9) (10.6)%Amortization of Intangible Assets 314.6 15.0% 307.9 14.7% 6.7 2.2 %Impairment of Intangible Assets 26.6 1.3% 1.7 0.1% 24.9 1,464.7 % $1,072.5 51.2% $1,127.8 53.7% $(55.3) (4.9)%Product gross margin increased to 48.8% in fiscal 2014 compared to 46.3% in fiscal 2013.Cost of Product Revenues. The cost of product revenues, excluding amortization and impairment of intangible assets, as a percentage of productrevenue was 34.9% in fiscal 2014 compared to 38.9% in fiscal 2013. Cost of product revenues as a percentage of product revenues in the current yeardecreased in Diagnostics, Breast Health and Skeletal Health and remained relatively consistent in GYN Surgical compared to the corresponding period in theprior year, resulting in an overall improved gross margin.Diagnostics’ product costs as a percentage of revenue decreased in fiscal 2014 compared to fiscal 2013 primarily due to the inclusion of $52.4 millionin the prior year of additional costs related to the sale of acquired inventory written up to fair value in purchase accounting for the Gen-Probe acquisition. Inaddition, we were able to recognize contingent revenue under our blood screening collaboration in the current year that we were not able to recognize infiscal 2013 due to a purchase accounting adjustment as described above. We also had lower Tigris and Panther sales in fiscal 2014 and these instrument salesare typically low margin transactions. Furthermore, we experienced favorable manufacturing variances across many of our products and lower royalty costsfor ThinPrep, partially offset by unfavorable pricing on ThinPrep and Aptima sales and increased service costs for placed instruments.45Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsBreast Health’s product costs as a percentage of revenue decreased in fiscal 2014 compared to fiscal 2013 primarily due to the increase in 3DDimensions sales on both a unit basis and as a percentage of total digital mammography systems sales compared to our 2D systems. Our 3D Dimensionssystems have higher average sales prices than our 2D systems resulting in higher gross margins. In addition, we had higher software related sales for 3Dupgrades and our C-View product, which have higher gross margins than capital equipment sales.GYN Surgical’s product costs as a percentage of revenue in fiscal 2014 was relatively consistent with fiscal 2013. While we have experienced lowerdomestic NovaSure volumes and a change in MyoSure product mix, this trend was offset by the increased utilization at our Costa Rica facility in fiscal 2014as a result of the transfer of our breast biopsy products from our Indianapolis, Indiana facility during the second half of fiscal 2013.Skeletal Health’s product costs as a percentage of revenue decreased in fiscal 2014 compared to fiscal 2013 primarily due to the increase in revenue forour Horizon product, which has a higher gross margin than our legacy Discovery products.Amortization of Intangible Assets. Amortization of intangible assets relates to acquired developed technology. These intangible assets are generallyamortized over their estimated useful lives of between 8.5 and 20 years using a straight-line method or, if reliably determinable, based on the pattern in whichthe economic benefits of the assets are expected to be consumed. The economic pattern is based on undiscounted future cash flows. The increase inamortization expense in fiscal 2014 compared to fiscal 2013 was primarily due to certain in-process research and development projects recorded in the Gen-Probe acquisition receiving FDA approval in fiscal 2013. As a result, these approved projects are now being amortized. In addition, we adjusted the estimatedlife of the MRI breast coils developed technology assets in the third quarter of fiscal 2014 resulting in higher amortization expense.Impairment of Intangible Assets. In the second quarter of fiscal 2014, we evaluated our MRI breast coils product line asset group, which is within ourBreast Health segment, for impairment due to our expectation that it would be sold or disposed of significantly before the end of its previously estimateduseful life. The undiscounted cash flows expected to be generated by this asset group over its estimated remaining life were not sufficient to recover itscarrying value. At that time, we estimated the fair value of the asset group resulting in an aggregate impairment charge of $28.6 million, comprised of $27.1million of intangible assets and $1.5 million of property and equipment. The impairment charge was allocated to the long-lived assets, resulting in $26.6million being allocated to developed technology. The MRI breast coils product line was sold in the fourth quarter of fiscal 2014.During the third quarter of fiscal 2013, we determined that a developed technology asset was impaired due to our decision to cease selling andproviding support for such product. As a result, we recorded a $1.7 million charge to record the asset at its fair value.Cost of Service and Other Revenues. Years Ended September 27, 2014 September 28, 2013 Change Amount % of Serviceand OtherRevenues Amount % of Serviceand OtherRevenues Amount %Cost of Service and Other Revenues $212.7 48.8% $203.1 51.9% $9.6 4.7%Service and other revenues gross margin was 51.2% in fiscal 2014 compared to 48.1% in fiscal 2013. Within our Breast Health segment, the continuedconversion of a high percentage of our domestic installed base of digital mammography systems to service contracts upon expiration of the warranty periodwithout a corresponding increase in costs to service these contracts has resulted in higher gross margins. In addition, the $20.1 million of revenue from theRoka Bioscience, Inc. license amendment transaction, which did not have any corresponding costs, increased gross margin.46Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOperating Expenses. Years Ended September 27, 2014 September 28, 2013 Change Amount % of TotalRevenue Amount % of TotalRevenue Amount %Operating Expenses Research and development $203.2 8.0% $197.6 7.9 % $5.6 2.8 %Selling and marketing 331.7 13.1% 342.1 13.7 % (10.4) (3.0)%General and administrative 259.8 10.3% 227.7 9.1 % 32.1 14.1 %Amortization of intangible assets 113.8 4.5% 112.6 4.5 % 1.2 1.1 %Impairment of intangible assets 5.6 0.2% — — % 5.6 **Contingent consideration—compensation expense — —% 80.0 3.2 % (80.0) (100.0)%Contingent consideration—fairvalue adjustments — —% 11.3 0.5 % (11.3) (100.0)%Impairment of goodwill — —% 1,117.4 44.8 % (1,117.4) (100.0)%Gain on sale of intellectual property — —% (53.9) (2.2)% 53.9 (100.0)%Restructuring and divestiturecharges 51.7 2.0% 32.8 1.3 % 18.9 57.6 % $965.8 38.1% $2,067.6 82.8 % $(1,101.8) (53.3)%** Percentage not meaningfulResearch and Development Expenses. Research and development expenses increased 2.8% in fiscal 2014 compared to fiscal 2013 primarily due to anincrease in compensation, additional program spend for our virology product line and increased spending for our next generation breast biopsy products.These increases were partially offset by lower headcount, reductions to certain development programs, primarily in the GYN Surgical business as part of ourcost containment measures implemented in fiscal 2013 and the beginning of the first quarter of fiscal 2014, lower integration costs related to the Gen-Probeacquisition, and the divestiture of Lifecodes (in the second quarter of fiscal 2013), which contributed $4.2 million of expense in the prior year. Research anddevelopment primarily reflects spending on new product development programs, regulatory compliance and clinical research and trials. At any point in time,we have a number of different research projects and clinical trials being conducted and the timing of these projects and related costs can vary from period toperiod.Selling and Marketing Expenses. Selling and marketing expenses decreased 3.0% in fiscal 2014 compared to fiscal 2013 primarily due to lowercompensation as a result of headcount reductions and lower spend on trade shows, seminars, consulting services, medical education and travel, primarily as aresult of our cost containment measures, and lower integration costs related to the Gen-Probe acquisition. In addition, fiscal 2013 included $4.6 million ofexpense related to Lifecodes. These reductions were partially offset by an increase in spend for advertising initiatives and market research.General and Administrative Expenses. General and administrative expenses increased 14.1% in fiscal 2014 compared to fiscal 2013 primarily due toan increase in the medical device excise tax of $6.2 million (primarily due to the inclusion of this expense for the entire fiscal year in 2014 compared to threequarters in fiscal 2013), legal and consulting fees of $4.7 million incurred in the first quarter of fiscal 2014 to assist us in our negotiations and response toshareholder activism, higher legal fees for litigation, an increase in certain non-income tax expenses, tax consulting fees and credit card fees related tocustomer payments, partially offset by lower compensation due to headcount reductions from our cost containment measures and lower integration costsrelated to the Gen-Probe acquisition. In addition, the first quarter of fiscal 2013 included legal settlement benefits of $8.9 million.47Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsAmortization of Intangible Assets. Amortization of intangible assets results from customer relationships, trade names, business licenses and non-compete agreements related to our acquisitions. These intangible assets are generally amortized over their estimated useful lives of between 2 and 30 yearsusing a straight-line method or, if reliably determinable, based on the pattern in which the economic benefits of the assets are expected to be consumedutilizing expected undiscounted future cash flows. The increase in fiscal 2014 compared to fiscal 2013 was primarily due to shortening the remaining life ofcertain corporate trade names as we decided to phase out their use during the second quarter of fiscal 2014 partially offset by lower amortization fromintangibles acquired in the Cytyc, Inc. acquisition in fiscal 2008 as the pattern of economic benefits decreases.Impairment of Intangible Assets. In the fourth quarter of fiscal 2014, we recorded a $5.1 million impairment charge for our existing in-process researchand development, or IPR&D, projects from our Gen-Probe acquisition primarily due to a reduction in estimated future revenues from these products.Contingent Consideration—Compensation Expense. In connection with our acquisition of TCT International Co., Ltd., or TCT, we were obligated tomake contingent earn-out payments. The payments were contingent on future employment and based on achieving certain incremental revenue growthmilestones. The measurement period ended in fiscal 2013, and as such, there were no charges in fiscal 2014.Contingent Consideration—Fair Value Adjustments. In connection with our acquisition of Interlace Medical, Inc., or Interlace, we were required topay future consideration that was contingent on achieving certain revenue based milestones. As of the acquisition date, we recorded a contingentconsideration liability for the estimated fair value of the amount we expected to pay to the former shareholders of Interlace. This liability was based on futurerevenue projections. We recorded charges of $11.3 million in fiscal 2013 reflecting an increase in the fair value of the liability due to higher revenues fromInterlace than originally estimated. The measurement period for this contingent consideration ended in the second quarter of fiscal 2013, and as such, therewere no charges in fiscal 2014.Impairment of Goodwill. During the fourth quarter of fiscal 2013, as a result of our company-wide annual budgeting and forecasting process and a fullre-evaluation of our existing product development efforts and cost structure, we reduced our short term and long term revenue forecasts and determined thatindicators of impairment existed in our Molecular Diagnostics reporting unit. The updated forecast, which reflected pricing pressures, for revenue andprofitability was lower than those expected at the time of the Gen-Probe acquisition. As such, the fair value of this reporting unit declined. As a result ofperforming Step 2 of the goodwill impairment test, which requires the completion of a hypothetical purchase price allocation to determine the fair value ofthe implied goodwill, we recorded a $1.1 billion goodwill impairment charge. For additional information, refer to Note 2— “Intangible Assets and Goodwill”to the consolidated financial statements contained in Item 15 of this Annual Report.Gain on Sale of Intellectual Property. In the first quarter of fiscal 2013, we recorded a net gain of $53.9 million related to the sale of our Makena assetto K-V Pharmaceutical Company, or KV. On August 4, 2012, KV and certain of its subsidiaries filed voluntary petitions for reorganization under Chapter 11of Title 11 of the United States Code in the United States Bankruptcy Court for the Southern District of New York. At that time, KV still owed us $95.0million. In December 2012, we executed a settlement agreement with KV and released KV from all claims in consideration of a $60.0 million payment. Werecorded this payment, net of certain costs, in the first quarter of fiscal 2013. For additional information, please refer to Note 7 contained in Item 15 of thisAnnual Report.Restructuring and Divestiture Charges. In the fourth quarter of fiscal 2012, in connection with our acquisition of Gen-Probe, we implemented arestructuring action to consolidate our Diagnostics operations by decreasing headcount and closing our legacy molecular diagnostics operations in Madison,Wisconsin. We also finalized our decision to transfer production of our interventional breast products from our Indianapolis facility to our Costa Ricafacility. In fiscal 2013 and in the first quarter of fiscal 2014, we implemented cost containment measures that primarily resulted in headcount reductions. Inthe second, third and fourth quarters of fiscal 2014, we terminated certain personnel at our Hitec Imaging operation in Germany, and as part of ongoingmanagement changes and structural refinement, we terminated certain executives and employees on a worldwide basis. Pursuant to U.S. generally acceptedaccounting principles, the related severance and benefit charges are being recognized either ratably over the respective required employee service periods orwhen benefits become probable for contractual and statutory benefits, and other charges are being recognized as incurred. In fiscal 2014 and 2013, werecorded aggregate charges of $51.7 million and $32.8 million, respectively, from these actions. The charges recorded in fiscal 2014 primarily related toseverance and benefits and include a $3.1 million impairment charge to record certain buildings at our Warstein, Germany location to their estimated fairvalue. In addition, these charges include a loss on divestiture of $5.3 million related to the sale of our MRI breast coils product line in the fourth quarter offiscal 2014. The charges in fiscal 2013 primarily related to severance and benefits. In addition, in fiscal 2013 we recorded a net gain of $0.6 million primarilyrelated to the sale48Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsof our Lifecodes business in the second quarter of fiscal 2013. For additional information, please refer to Note 4 contained in Item 15 of this Annual Report.Interest Income. Years Ended September 27, 2014 September 28, 2013 Change Amount Amount Amount %Interest Income $1.3 $1.3 $— —%Interest income remained flat in fiscal 2014 compared to fiscal 2013.Interest Expense. Years Ended September 27, 2014 September 28, 2013 Change Amount Amount Amount %Interest Expense $(220.6) $(281.1) $60.5 (21.5)%Interest expense consists primarily of the cash interest costs and the related amortization of the debt discount and deferred financing costs on ouroutstanding debt. The decrease in interest expense in fiscal 2014 compared to fiscal 2013 was primarily due to principal payments in fiscal 2013 and 2014,which included $325.0 million of voluntary pre-payments, of amounts borrowed under our Credit Agreement, lower weighted-average interest rates due torefinancing both the Term Loan A and Term Loan B facilities, and the redemption of $405.0 million in principal amount of our 2.00% Convertible Notes due2037, or the 2007 Notes, in December 2013. These decreases were partially offset by additional interest expense from the accretion of principal on our 2.00%Convertible Notes due 2043, or the 2013 Notes, at 4.0% annually.Debt Extinguishment Loss. Years Ended September 27, 2014 September 28, 2013 Change Amount Amount Amount %Debt Extinguishment Loss $(7.4) $(9.2) $1.8 (19.6)%In the second quarter of fiscal 2014, we refinanced the Term Loan B facility of our Credit Agreement and voluntarily prepaid $25.0 million of principal.In connection with this transaction, we recorded a debt extinguishment loss of $4.5 million for the write off of the pro-rata share of the debt discount anddeferred issuance costs. In the first quarter of fiscal 2014, we made a $100.0 million voluntary pre-payment on our Term Loan B facility. As a result, the pro-rata share of the debt discount and deferred issuance costs aggregating $2.9 million related to this prepayment was recorded as a debt extinguishment loss.In the fourth quarter of fiscal 2013, we refinanced the Term Loan B facility of the Credit Agreement and made a voluntary prepayment of $200.0 millionof principal. In connection with this transaction, we recorded a debt extinguishment loss of $6.0 million for the write-off of the pro-rata share of the debtdiscount and deferred issuance costs. In the second quarter of fiscal 2013, we refinanced the Term Loan A facility of the Credit Agreement and certainexisting creditors opted not to participate in such refinancing. In connection with this transaction, we recorded a debt extinguishment loss of $3.2 million forthe write-off of the pro-rata share of the debt discount and deferred issuance costs.Other (Expense) Income, net. Years Ended September 27, 2014 September 28, 2013 Change Amount Amount Amount %Other (Expense) Income, net $(4.9) $2.3 $(7.2) (313.0)%In fiscal 2014, this account was primarily comprised of other-than-temporary impairment charges on cost-method equity investments of $6.9 millionand net foreign currency exchange losses of $1.8 million, partially offset by gains of $3.8 million on the cash surrender value of life insurance contracts andmutual funds related to our deferred compensation plan. In fiscal 2013, this account was primarily comprised of gains on our investments for our deferred compensation plan of $4.7 million, a $2.0 million gainon the sale of a cost-method investment, $1.3 million from insurance and investment49Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsrecoveries, and net foreign currency exchange gains of $0.5 million. Partially offsetting these gains were other-than-temporary impairment charges for cost-method equity investments of $6.4 million.Provision (Benefit) for Income Taxes. Years Ended September 27, 2014 September 28, 2013 Change Amount Amount Amount %Provision (Benefit) for Income Taxes $30.8 $(20.1) $50.9 (253.2)%Our effective tax rate for fiscal 2014 was 63.9% compared to a benefit of 1.7% on the pretax loss in fiscal 2013. For fiscal 2014, the effective tax ratewas higher than the statutory rate primarily due to unbenefited foreign losses partially offset by the domestic production activities deduction benefit.For fiscal 2013, the effective tax rate was lower than the statutory rate primarily due to the non-deductible goodwill impairment charge, non-deductiblecontingent consideration expense related to the TCT and Interlace acquisitions and unbenefited foreign losses, partially offset by the domestic productionactivities deduction benefit and the release of a $19.9 million valuation allowance related to capital losses utilized to offset capital gains generated duringthe year.Segment Results of OperationsWe report our business as four segments: Diagnostics, Breast Health, GYN Surgical and Skeletal Health. The accounting policies of the segments are thesame as those described in the footnotes to the accompanying consolidated financial statements contained in Item 15 of this Annual Report. We measuresegment performance based on total revenues and operating income or loss. Revenues from product sales of each of these segments are described in furtherdetail above. The discussion that follows is a summary analysis of total revenues and the primary changes in operating income or loss by segment.Diagnostics. Years Ended September 27, 2014 September 28, 2013 Change Amount Amount Amount %Total Revenues $1,186.8 $1,189.8 $(3.0) (0.3)%Operating Income (Loss) $48.7 $(1,149.1) $1,197.8 104.2 %Operating Income (Loss) as a % of SegmentRevenue 4.1% (96.6)% Diagnostics revenues decreased in fiscal 2014 compared to fiscal 2013 primarily due to the decrease in product revenues discussed above.Operating income for this business segment increased in fiscal 2014 compared to fiscal 2013, primarily due to the goodwill impairment charge of $1.1billion recorded in the fourth quarter of fiscal 2013 related to our Molecular Diagnostics reporting unit discussed above.Gross profit in absolute dollars increased primarily due to the inclusion in the prior fiscal year of fair value adjustments of $52.4 million for acquiredGen-Probe inventory that did not recur in the current year. In addition, we were able to record contingent revenue under our blood screening collaboration inthe current fiscal year that had previously been recorded as unbilled accounts receivable in purchase accounting as described above. Furthermore, weexperienced favorable manufacturing variances across many of our products, lower royalty costs for ThinPrep, and lower instrumentation sales, partiallyoffset by lower ThinPrep volumes and slightly lower pricing on ThinPrep and Aptima sales. As a result, the gross margin improved to 46.8% in fiscal 2014from 41.4% in fiscal 2013.Operating expenses, excluding the goodwill impairment charge noted above, decreased in fiscal 2014 compared to fiscal 2013 primarily due to adecrease of $80.0 million of contingent consideration charges related to TCT, the divestiture of Lifecodes, which contributed $9.4 million of operatingexpenses in fiscal 2013, and lower Gen-Probe integration costs, restructuring charges, and compensation from headcount reductions as part of our costcontainment measures. These decreases were partially offset by the $5.1 million IPR&D charge, increases in spending on research and development for ourvirology products and market research, higher intangible asset amortization expense of $4.2 million due to changes in estimated useful lives, and an increasein the medical device excise tax of $2.8 million. As discussed above, the prior fiscal year included a $53.9 million gain related to the settlement with KV forthe sale of our rights to Makena.50Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsBreast Health. Years Ended September 27, 2014 September 28, 2013 Change Amount Amount Amount %Total Revenues $944.7 $905.1 $39.6 4.4 %Operating Income $187.6 $216.1 $(28.5) (13.2)%Operating Income as a % of Segment Revenue 19.9% 23.9% Breast Health revenues increased in the fiscal 2014 compared to fiscal 2013 primarily due to the $28.0 million increase in service revenues and $11.6million increase in product revenues discussed above.Operating income for this business segment decreased in fiscal 2014 compared to fiscal 2013 primarily due to higher operating expenses partially offsetby an increase in gross profit in absolute dollars. Gross profit in absolute dollars increased primarily due to the increase in product and service revenues andthe favorable product mix between 3D Dimensions and our 2D systems partially offset by a $24.9 million increase in developed technology asset impairmentcharges related to our impairment assessment of the MRI breast coils product line in the second quarter of fiscal 2014 discussed above and higher intangibleasset amortization expense. As a result, overall gross margin declined slightly to 50.1% in fiscal 2014 compared to 50.2% in fiscal 2013.Operating expenses increased in fiscal 2014 compared to fiscal 2013 primarily due to higher restructuring and divestiture charges, which includescorporate allocated amounts and the loss on disposal of the MRI breast coils product line of $5.3 million, higher research and development expendituresprimarily for next generation breast biopsy devices, higher compensation and an increase in the medical device excise tax of $2.6 million and intangibleasset and property impairment charges related to the MRI breast coils product line aggregating $1.8 million.GYN Surgical. Years Ended September 27, 2014 September 28, 2013 Change Amount Amount Amount %Total Revenues $307.9 $307.1 $0.8 0.3%Operating Income $30.3 $19.7 $10.6 53.8%Operating Income as a % of Segment Revenue 9.8% 6.4% GYN Surgical revenues remained relatively flat in fiscal 2014 compared to fiscal 2013 as discussed above.Operating income for this business segment increased in fiscal 2014 compared to fiscal 2013 primarily due to a decrease in operating expenses whilegross profit in absolute dollars was relatively flat as revenues were consistent year over year. Gross margin was 56.9% in both fiscal 2014 and 2013.Operating expenses decreased in fiscal 2014 primarily due to the $11.3 million of contingent consideration charges related to the Interlace earn-outincluded in the prior year. Additional reductions in operating expenses were primarily due to headcount reductions, lower research and development programexpenditures and lower marketing related expenditures, all as a result of our cost containment measures, and lower intangible asset amortization expense.These decreases were offset by higher legal fees associated with our ongoing litigation, restructuring charges and an increase in the medical device excise tax.51Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsSkeletal Health. Years Ended September 27, 2014 September 28, 2013 Change Amount Amount Amount %Total Revenues $91.3 $90.3 $1.0 1.1%Operating Income $13.1 $7.1 $6.0 84.5%Operating Income as a % of Segment Revenue 14.3% 7.9% Skeletal Health revenues increased in fiscal 2014 compared to fiscal 2013 primarily due to the increase in product revenues of $0.9 million discussedabove and a slight increase in service and other revenue.Operating income increased in fiscal 2014 compared to the prior year primarily due to the increase in gross profit in absolute dollars as a result ofhigher sales of our higher margin Horizon product and lower operating expenses. The decrease in operating expenses was primarily driven by a decrease inrestructuring charges.52Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsFiscal Year Ended September 28, 2013 Compared to Fiscal Year Ended September 29, 2012Product Revenues. Years Ended September 28, 2013 September 29, 2012 Change Amount % of TotalRevenue Amount % of TotalRevenue Amount %Product Revenues Diagnostics $1,156.2 46.4% $707.5 35.3% $448.7 63.4 %Breast Health 576.3 23.1% 572.5 28.6% 3.8 0.7 %GYN Surgical 305.8 12.3% 311.6 15.6% (5.8) (1.9)%Skeletal Health 62.6 2.5% 66.1 3.3% (3.5) (5.3)% $2,100.9 84.3% $1,657.7 82.8% $443.2 26.7 %Diagnostics product revenues increased 63.4% in fiscal 2013 compared to fiscal 2012 primarily due to the inclusion of Gen-Probe’s product sales(acquired in the fourth quarter of fiscal 2012), which contributed $483.1 million of additional revenue in fiscal 2013, partially offset by lower ThinPreprevenues of $28.5 million and fiscal 2013 had one less week than fiscal 2012, which was a 53-week fiscal period. The decline in ThinPrep revenue wasprimarily due to lower domestic volumes and, to a lesser extent, lower average selling prices internationally. We attributed the domestic volume decline to anincrease in testing intervals as a result of recent screening recommendations from governmental agencies and professional organizations. We alsoexperienced lower average selling prices in China, at least in part, due to restructuring the sales channel as we move toward using a combination of dealersand our direct sales force to gain broader market coverage compared to principally a direct sales strategy in fiscal 2012. However, international ThinPrep unitvolumes were higher in fiscal 2013 as compared to fiscal 2012. We also experienced a decrease in our Rapid Fetal Fibronectin test revenue compared to theprior year primarily due to lower domestic volumes. Partially offsetting these decreases was an increase in revenues from our sale of Cervista HPV productsprimarily in the United States, as we continued to gain new customer accounts and increase unit sales to existing customers. The inclusion of Gen-Probe’sresults was partially impacted by our blood screening collaboration. Pursuant to the collaboration, a portion of Gen-Probe’s revenue is contingent ondonations testing revenue earned by Novartis (currently our partner is Grifols). As a result, amounts to be received for this contingent revenue related toinventory on hand and not yet utilized by Novartis’ customers as of the date of our acquisition of Gen-Probe were recorded as unbilled accounts receivableon the balance sheet in purchase accounting and were not recorded as revenue in our results of operations. In fiscal 2013 and fiscal 2012 this contingentrevenue of $23.5 million and $11.6 million, respectively, was not recognized in our results of operations.Breast Health product revenues increased 0.7% in fiscal 2013 compared to fiscal 2012. Our digital mammography systems revenue increased $23.0million in fiscal 2013 compared to fiscal 2012 primarily due to the increase in our 3D Dimensions systems revenue of $52.5 million in fiscal 2013 comparedto fiscal 2012 as we sold more 3D Dimensions units with higher average selling prices in the United States, partially offset by slightly lower average sellingprices internationally. Partially offsetting the increase in 3D Dimensions sales in fiscal 2013, we had lower unit sales and, to a lesser extent, lower averageselling prices of our 2D Dimensions systems and Selenia systems on a worldwide basis. We also experienced a decline in sales of related components andworkstation products of $7.0 million in fiscal 2013 compared to the prior year primarily because customers that upgrade to 3D Dimensions do not alwaysrequire new versions of these related products. Our breast biopsy products revenue increased $7.8 million in fiscal 2013 compared to fiscal 2012 primarilydue to an increase in the number of Eviva biopsy devices sold in the United States and, to a lesser extent, internationally, and an increase in the number ofCelero devices sold in the United States. Partially offsetting these increases was a decline in the unit sales and average selling price of our ATEC devices,which we attribute to the introduction and increased sales of our Eviva biopsy devices. Additionally, in fiscal 2013, we experienced an $8.0 million declinein revenue from our organic photoconductor materials business as this non-core product line continues to experience pricing pressures in a competitivemarket space. We decided to phase out this product line in the fourth quarter of fiscal 2013.GYN Surgical product revenues decreased 1.9% in fiscal 2013 compared to fiscal 2012 primarily due to the decline in sales of NovaSure devices of$24.0 million and an $11.3 million decrease due to the discontinuance of Adiana system sales. In addition, fiscal 2013 had one less week than fiscal 2012.These decreases were partially offset by an increase in MyoSure system sales, including our new Aquilex fluid management system used with our MyoSuredevices, of $29.5 million. We experienced a decrease in the number of NovaSure devices sold in the United States, which we primarily attributed to thecontinuing effect of unemployment and economic uncertainty and the trend toward higher insurance co-payments and deductibles, resulting in cost-conscious patients delaying surgery or opting for lower cost and generally less effective alternatives. Partially offsetting this decrease, we sold more unitsinternationally in fiscal 2013 compared to the prior year. The discontinuance of Adiana system sales was due to our decision to cease manufacturing,marketing and selling the product as of53Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsthe end of the second quarter of fiscal 2012, determining it was not financially viable and would not become so in the foreseeable future. The increase inMyoSure system revenue in fiscal 2013 was substantially due to an increase in units sold domestically offset slightly by lower average selling prices due tothe introduction of new variations of the primary MyoSure device compared to fiscal 2012.Skeletal Health product revenues decreased 5.3% in fiscal 2013 compared to fiscal 2012 primarily due to a decline of $5.2 million in our osteoporosisassessment system sales worldwide and lower average selling prices internationally, partially offset by an increase in mini C-arm sales of $1.6 million,primarily due to the introduction of our new Insight FD product.In fiscal 2013, 73.9% of product sales were generated in the United States, 13.6% in Europe, 8.9% in Asia-Pacific, and 3.6% in other internationalmarkets. In fiscal 2012, 72.8% of product sales were generated in the United States, 11.9% in Europe, 9.3% in Asia-Pacific, and 6.0% in other internationalmarkets.The increase in product revenues in the United States as a percent of consolidated product revenues in fiscal 2013 compared to fiscal 2012 wasprimarily due to the inclusion of Gen-Probe and to a lesser extent higher sales of our 3D Dimensions systems. The increase in European product revenues as apercent of consolidated product revenues in fiscal 2013 compared to fiscal 2012 was primarily due to the inclusion of Gen-Probe product sales in Europe and,to a lesser extent, a higher percentage of Selenia system unit sales to total sales in that region.Service and Other Revenues. Years Ended September 28, 2013 September 29, 2012 Change Amount % of TotalRevenue Amount % of TotalRevenue Amount %Service and Other Revenues $391.4 15.7% $344.9 17.2% $46.5 13.5%Service and other revenues increased 13.5% in fiscal 2013 compared to fiscal 2012 primarily in our Breast Health business due to an increase in thenumber of service contracts driven by an increase in the installed base of our digital mammography systems. In addition, the inclusion of Gen-Probecontributed an additional $24.4 million, primarily comprised of other revenue, in fiscal 2013 compared to fiscal 2012. Partially offsetting these increases wasone less week in fiscal 2013 compared to fiscal 2012.Cost of Product Revenues. Years Ended September 28, 2013 September 29, 2012 Change Amount % of ProductRevenue Amount % of ProductRevenue Amount %Cost of Product Revenues $818.2 38.9% $616.8 37.2% $201.4 32.7%Amortization of Intangible Assets 307.9 14.7% 201.9 12.2% 106.0 52.5%Impairment of Intangible Assets 1.7 0.1% — —% 1.7 ** $1,127.8 53.7% $818.7 49.4% $309.1 37.8%** Percentage not meaningfulProduct gross margin decreased to 46.3% in fiscal 2013 compared to 50.6% in fiscal 2012 primarily due to higher intangible asset amortizationexpense and charges for additional costs related to the sale of acquired inventory written up to fair value in purchase accounting.Cost of Product Revenues. The cost of product revenues as a percentage of product revenues was 38.9% in fiscal 2013 compared to 37.2% in fiscal2012. Cost of product revenues as a percentage of product revenues in the current fiscal year increased moderately in Diagnostics and slightly in BreastHealth and decreased in GYN Surgical and to a lesser extent in Skeletal Health compared to the prior year, resulting in an overall increased rate in fiscal 2013compared to fiscal 2012.54Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsDiagnostics’ gross margin declined in fiscal 2013 compared to fiscal 2012 due to the inclusion of Gen-Probe, which included $52.4 million ofadditional costs related to the sale of acquired inventory written up to fair value in purchase accounting in fiscal 2013 compared to $19.9 million of suchcosts in fiscal 2012. We also recorded impairment charges of $6.3 million in the fourth quarter of fiscal 2013 to write down certain instruments and relatedinventory due to our plan to transition certain customers to our Panther instrumentation from our HTA instrument. In addition, Gen-Probe’s gross marginsince acquisition has been lower than its historical gross margin rate primarily due to the purchase accounting effect on our collaboration agreement withGrifols in our blood screening business. Based on the Grifols collaboration terms, a portion of Gen-Probe’s revenue is contingent on donations testingrevenue earned by Grifols, however, Gen-Probe recognizes the full product cost upon shipment. As a result, amounts to be received for this contingentrevenue related to inventory on hand and not yet utilized by Grifols’ customers as of the acquisition date were recorded as unbilled accounts receivable onthe balance sheet in purchase accounting and were not recorded as revenue in our results of operations. This contingent revenue not recognized in our resultsof operations was $23.5 million and $11.6 million in fiscal 2013 and fiscal 2012, respectively. Also contributing to the decline in the Diagnostics grossmargin rate was a decline in domestic ThinPrep sales and lower average selling prices in China and other international markets, unfavorable manufacturingand overhead variances, higher service costs, depreciation of equipment at customer sites, and distribution costs.Breast Health experienced a slight decrease in gross margin in fiscal 2013 compared to fiscal 2012 primarily due to the lower gross margin rate in ourbreast biopsy business from higher sales of our Eviva disposable, which carries lower gross margins due to higher manufacturing costs and royalty costscompared to our ATEC disposable, and lower average selling prices of our ATEC disposables domestically. We also experienced unfavorable absorption andhigher production spend for this line of business primarily due to the transfer of our manufacturing lines from Indianapolis to Costa Rica, resulting inproduction of some of our breast biopsy products at two facilities. Partially offsetting these decreases was an increase in unit sales and average selling pricesof our 3D Dimensions systems in the United States coupled with a decrease in our 2D digital systems sales as a percentage of total unit sales in fiscal 2013compared to fiscal 2012. This 2D digital systems decrease was primarily related to our Selenia system and, to a lesser extent, our 2D Dimensions systems.Selenia systems have lower average selling prices and gross margins than our Dimensions systems.GYN Surgical gross margin increased in fiscal 2013 compared to fiscal 2012 due to favorable manufacturing absorption and the discontinuance of theAdiana system in fiscal 2012, offset by the impact of lower NovaSure system sales. The Adiana system had a much lower gross margin rate compared to theNovaSure and MyoSure systems. During the second quarter of fiscal 2012, we determined the Adiana product was not financially viable and would notbecome so in the foreseeable future. As a result, we ceased manufacturing, marketing and selling our Adiana system and recorded a charge of $19.1 million infiscal 2012 for the write-off of inventory, manufacturing equipment and equipment at customer sites, and contractual purchase orders for which there was noexpected future use of the materials and components. In addition, the improved gross margin in fiscal 2013 is partially due to the increase in MyoSure systemsales and the transfer of its production to Costa Rica, which has resulted in overall lower production costs.Skeletal Health had a slightly higher gross margin in fiscal 2013 compared to fiscal 2012 primarily due to favorable product mix.Amortization of Intangible Assets. The increase in amortization expense in fiscal 2013 compared to fiscal 2012 is primarily due to the inclusion ofGen-Probe, which accounted for $112.6 million of additional expense, partially offset by fiscal 2013 having one less week compared to fiscal 2012.Impairment of Intangible Assets. During the third quarter of fiscal 2013, we determined that a developed technology asset was impaired, primarily dueto our decision to cease selling and providing support for such product. As a result, we recorded a charge of $1.7 million to record the asset at its fair value.55Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsCost of Service and Other Revenues. Years Ended September 28, 2013 September 29, 2012 Change Amount % of Serviceand OtherRevenues Amount % of Serviceand OtherRevenues Amount %Cost of Service and Other Revenues $203.1 51.9% $189.5 54.9% $13.6 7.2%Service and other revenues gross margin was 48.1% in fiscal 2013 compared to 45.1% in fiscal 2012. Within our Breast Health segment, the continuedconversion of a high percentage of our domestic installed base of digital mammography systems to service contracts upon expiration of the warranty periodwithout a corresponding increase in costs to service such contracts has resulted in higher gross margins, partially offset by increased warranty, higher spareparts and additional headcount costs.Operating Expenses. Years Ended September 28, 2013 September 29, 2012 Change Amount % of TotalRevenue Amount % of TotalRevenue Amount %Operating Expenses Research and development $197.6 7.9 % $131.0 6.5 % $66.6 50.8 %Selling and marketing 342.1 13.7 % 322.3 16.1 % 19.8 6.1 %General and administrative 227.7 9.1 % 220.5 11.0 % 7.2 3.3 %Amortization of intangible assets 112.6 4.5 % 72.0 3.6 % 40.6 56.4 %Contingent consideration—compensation expense 80.0 3.2 % 81.0 4.0 % (1.0) (1.2)%Contingent consideration—fairvalue adjustments 11.3 0.5 % 38.5 1.9 % (27.2) (70.6)%Impairment of goodwill 1,117.4 44.8 % 5.8 — 1,111.6 **Gain on sale of intellectual property (53.9) (2.2)% (12.4) (0.6)% (41.5) 334.7 %Acquired in-process research anddevelopment — — % 4.5 — (4.5) **Restructuring and divestiturecharges 32.8 1.3 % 17.5 0.9 % 15.3 87.4 % $2,067.6 82.8 % $880.7 43.4 % $1,186.9 134.8 %** Percentage not meaningfulResearch and Development Expenses. Research and development expenses increased 50.8% in fiscal 2013 compared to fiscal 2012 primarily due to$76.0 million of additional expense from the inclusion of Gen-Probe. Partially offsetting this increase was a decline in compensation and benefits from lowerheadcount and bonus expense in the legacy Hologic businesses. In addition, expenses were lower in fiscal 2013 due to a decrease in prototype materials andconsulting expense based on the status and timing of various projects and the discontinuance of Adiana development projects in fiscal 2012.Selling and Marketing Expenses. Selling and marketing expenses increased 6.1% in fiscal 2013 compared to fiscal 2012 primarily due to $39.0million of additional expense from the inclusion of Gen-Probe, higher compensation for additional sales personnel worldwide, and integration costs relatedto the Gen-Probe acquisition. In fiscal 2013, we also had higher marketing spend for our initiatives related to our 3D Dimensions tomosynthesis products andMyoSure system, and higher training and travel expenses for our increased sales personnel headcount. Partially offsetting these increases in fiscal 2013 wasthe absence of expenditures for our NovaSure direct-to-consumer advertising campaign, which was completed in fiscal 2012, the discontinuance of theAdiana system in fiscal 2012, decreased expenditures for international trade shows, meetings and medical education and a reduction of headcount in thesecond half of fiscal 2013. In addition, there was one less week in fiscal 2013 compared to fiscal 2012.56Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsGeneral and Administrative Expenses. General and administrative expenses increased 3.3% in fiscal 2013 compared to fiscal 2012 primarily due to$41.4 million of additional expense from the inclusion of Gen-Probe, integration costs related to the Gen-Probe acquisition, the medical device excise tax of$15.7 million, higher compensation and benefits, and an increase in information technology service contracts from an increase of licenses, partially offset bylower acquisition transaction costs to third-parties and lower consulting costs as well as a reduction in headcount in the second half of fiscal 2013. In fiscal2013, these increases were partially offset by legal settlement benefits of $8.9 million, lower international bad debt expense, and lower charges for sales andother non-income tax audits as compared to fiscal 2012. In addition, there was one less week in fiscal 2013 compared to fiscal 2012.Amortization of Intangible Assets. The increase in amortization expense in fiscal 2013 compared to fiscal 2012 was primarily due to the inclusion ofGen-Probe, which accounted for $45.0 million of additional expense, partially offset by one less week in fiscal 2013 compared to fiscal 2012.Contingent Consideration—Compensation Expense. The amounts recorded in fiscal 2013 relate solely to TCT, and in fiscal 2012, primarily relate toTCT. The measurement period for the TCT earn-out was completed in fiscal 2013.Contingent Consideration—Fair Value Adjustments. In connection with our acquisitions of Sentinelle Medical and Interlace, we were required to payfuture consideration that was contingent on achieving certain revenue based milestones. The Sentinelle Medical final measurement period ended in thefourth quarter of fiscal 2012, and as a result the charges recorded in fiscal 2013 relate solely to Interlace. We recorded a charge of $11.3 million in fiscal 2013reflecting an increase in the fair value of the liability due to higher revenues for Interlace than estimated. In fiscal 2012, we recorded a charge of $38.5 millionrelated to an increase in estimated Interlace revenues resulting in a charge of $41.8 million offset by a benefit of the Sentinelle Medical liability of $3.3million due to a reduction in estimated revenues. The measurement period for the Interlace earn-out was completed in fiscal 2013.Impairment of Goodwill. During the fourth quarter of fiscal 2013, as a result of our company-wide annual budgeting and forecasting process and a fullre-evaluation of our existing product development efforts and cost structure, we reduced our short term and long term revenue forecasts and determined thatindicators of impairment existed in our Molecular Diagnostics reporting unit. The Molecular Diagnostics reporting unit is primarily comprised of our Aptimabusiness acquired in the Gen-Probe acquisition and the molecular diagnostics business acquired in the Third Wave acquisition. The updated forecast, whichreflected pricing pressures, for revenue and profitability were lower than those expected at the time of the Gen-Probe acquisition. As such, the fair value ofthis reporting unit declined. As a result of performing Step 2 of the goodwill impairment test, which requires the completion of a hypothetical purchase priceallocation to determine the fair value of the implied goodwill, we recorded a $1.1 billion goodwill impairment charge.During the fourth quarter of fiscal 2012, we recorded an impairment charge of $5.8 million related to our MammoSite reporting unit, which is includedin our Breast Health segment. The fair value of this reporting unit declined from fiscal 2011 primarily due to our reassessment in the fourth quarter of fiscal2012 of the overall market size of breast brachytherapy and long-term growth projections. For additional information, refer to Note 2— “Intangible Assetsand Goodwill” to the consolidated financial statements contained in Item 15 of this Annual Report.Gain on Sale of Intellectual Property. In the first quarter of fiscal 2013, we recorded a net gain of $53.9 million related to the sale of our Makena assetsto KV. On August 4, 2012, KV and certain of its subsidiaries filed voluntary petitions for reorganization under Chapter 11 of Title 11 of the United StatesCode in the United States Bankruptcy Court for the Southern District of New York. In December 2012, we and KV executed a settlement agreement, whichbecame effective on December 28, 2012. Under the settlement agreement, we released KV from all claims in consideration of a $60.0 million payment. Werecorded this amount net of certain costs, including contingent fees and amounts due to the inventor. We will receive no more payments from KV. During thesecond quarter of fiscal 2012, we received a scheduled payment of $12.5 million from KV, which was recorded net of amounts owed to the original inventorof Makena. For additional information, please refer to Note 7 contained in Item 15 of this Annual Report.Acquired In-Process Research and Development. During the fourth quarter of fiscal 2012, we acquired certain research and development assets thatwere determined to have no future alternative use and recorded a $4.5 million charge within our GYN Surgical segment.Restructuring and Divestiture Charges. In the fourth quarter of fiscal 2012, in connection with our acquisition of Gen-Probe, we implemented arestructuring action to consolidate our Diagnostics operations by decreasing headcount and transferring our legacy molecular diagnostics operations inMadison, Wisconsin to San Diego, California. We also finalized our decision to transfer production of our interventional breast products from ourIndianapolis facility to our Costa Rica facility. In addition, we transfered our Selenium panel coating production line from Germany to Newark, Delaware. Inthe third and fourth quarters of fiscal 2013, we implemented additional restructuring actions to reduce expenses which included terminating57Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsemployees. Pursuant to U.S. generally accepted accounting principles, the majority of severance and benefit charges were being recognized ratably over therespective required employee service periods, and in certain circumstances we were recording charges pursuant to contractual or statutory requirements. Othercharges, such as facility closure costs are being recognized as incurred. In fiscal 2013 and 2012, we recorded restructuring charges of $32.8 million and $17.5million, respectively, which were primarily comprised of severance and related benefits, including stock compensation for acceleration of equity awards. Foradditional information, please refer to Note 4 contained in Item 15 of this Annual Report.Interest Income. Years Ended September 28, 2013 September 29, 2012 Change Amount Amount Amount %Interest Income $1.3 $2.3 $(1.0) (43.5)%Interest income decreased in fiscal 2013 compared to fiscal 2012 primarily due to lower rates on funds invested in sweep accounts.Interest Expense. Years Ended September 28, 2013 September 29, 2012 Change Amount Amount Amount %Interest Expense $(281.1) $(140.3) $140.8 100.4%The increase in interest expense in fiscal 2013 compared to fiscal 2012 was primarily due to debt borrowed under the Credit Agreement and sale ofSenior Notes in connection with our Gen-Probe acquisition in the fourth quarter of fiscal 2012. In fiscal 2013, we incurred additional expenses of $4.1million related to our retirement of $370.0 million in aggregate principal of our 2007 Notes for $370.0 million in aggregate principal of 2013 Notes. Thisexchange enabled us to extend the first put date to December 15, 2017 as well as the subsequent put dates with the conversion price of the notes remaining atapproximately $38.59. In addition, in fiscal 2013, we incurred additional expenses of $3.5 million related to our refinancing of the Term Loan A and TermLoan B facilities under the Credit Agreement, which lowered the interest rates on these facilities by 100 basis points and 75 basis points, respectively. Themajority of the refinancings was accounted for as a modification for accounting purposes and the pro-rata amount of issuance costs were expensed and notcapitalized. Partially offsetting this increase was lower amortization of our convertible notes’ debt discount.Debt Extinguishment Loss. Years Ended September 28, 2013 September 29, 2012 Change Amount Amount Amount %Debt Extinguishment Loss $(9.2) $(42.3) $(33.1) (78.3)%In the fourth quarter of fiscal 2013, we refinanced the Term Loan B facility of the Credit Agreement and made a voluntary prepayment of $200.0million of principal. In connection with this transaction, we recorded a debt extinguishment loss of $6.0 million for the write-off of the pro-rata share of thedebt discount and deferred issuance costs. In the second quarter of fiscal 2013, we refinanced the Term Loan A facility of the Credit Agreement and certainexisting creditors opted not to participate in such refinancing. In connection with this transaction, we recorded a debt extinguishment loss of $3.2 million forthe write-off of the pro-rata share of the debt discount and deferred issuance costs.In the second quarter of fiscal 2012, we retired $500.0 million in aggregate principal of our 2007 Notes for $500.0 million in aggregate principal of new2.00% Convertible Notes due 2042, or the 2012 Notes. This exchange enabled us to extend the first put date to March 1, 2018 as well as the subsequent putdates. In consideration, the equity conversion price of the notes was reduced to approximately $31.18 from $38.59, and the cash coupon payment period wasextended four and a quarter more years, consistent with extending the first put date, instead of accreting the coupon to the principal as required under theoriginal terms. In connection with this transaction, we recorded a debt extinguishment loss of $42.3 million, which includes the write-off of the pro-rataallocation of deferred financing costs.58Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOther Income (Expense), net. Years Ended September 28, 2013 September 29, 2012 Change Amount Amount Amount %Other Income (Expense), net $2.3 $4.9 $(2.6) 53.1%In fiscal 2013, this account was primarily comprised of gains on our investments for our deferred compensation plan of $4.7 million, a $2.0 million gainon the sale of a cost-method investment, $1.3 million from insurance and investment recoveries, and net foreign currency exchange gains of $0.5 million.Partially offsetting these gains were other-than-temporary impairment charges for cost-method equity investments of $6.4 million.In fiscal 2012, this account was primarily comprised of gains on the cash surrender value of life insurance contracts related to our deferredcompensation plan of $3.2 million, net foreign currency transaction gains of $0.8 million, and other miscellaneous gains.Provision (Benefit) for Income Taxes. Years Ended September 28, 2013 September 29, 2012 Change Amount Amount Amount %Provision (Benefit) for Income Taxes $(20.1) $11.9 $(32.0) (268.9)%Our effective tax rate for fiscal 2013 was a benefit of 1.7% on the pretax loss compared to 19.4% of the pretax loss in fiscal 2012. For fiscal 2013, theeffective tax rate was lower than the statutory rate primarily due to the non-deductible goodwill impairment charge, non-deductible contingent considerationexpense related to the TCT and Interlace acquisitions and unbenefited foreign losses, partially offset by the domestic production activities deduction benefitand the release of a $19.9 million valuation allowance related to capital losses utilized to offset capital gains generated during the year.Our effective tax rate in fiscal 2012 was significantly impacted by non-deductible contingent consideration compensation expense related to the TCT,Interlace and Sentinelle Medical acquisitions, nondeductible acquisition costs, a nondeductible goodwill impairment charge, and a net increase in incometax reserves and valuation allowances on certain foreign losses. The unfavorable tax impact of these items was partially offset by the domestic productionactivities deduction benefit and a loss claimed related to the discontinuance of the Adiana product line.Segment Results of OperationsDiagnostics. Years Ended September 28, 2013 September 29, 2012 Change Amount Amount Amount %Total Revenues $1,189.8 $718.1 $471.7 65.7%Operating Loss $(1,149.1) $(32.8) $(1,116.3) **Operating Loss as a % of Segment Revenue (96.6)% (4.6)% ** Percentage not meaningfulDiagnostics revenues increased in fiscal 2013 compared to fiscal 2012 primarily due to the increase in product revenues discussed above, which isprincipally attributable to the inclusion of Gen-Probe for a full year.Operating loss for this business segment increased in fiscal 2013 compared to fiscal 2012, primarily due to the goodwill impairment charge of $1.1billion recorded in the fourth quarter of fiscal 2013 related to our Molecular Diagnostics reporting unit discussed above.While gross profit in absolute dollars increased in fiscal 2013 due primarily to the inclusion of Gen-Probe as discussed above, higher operatingexpenses, excluding the impact of the goodwill impairment charge, more than offset the gross margin impact. Gross margin decreased to 41.4% in fiscal 2013compared to 50.5% in fiscal 2012, which was primarily attributable to the inclusion of Gen-Probe for the full year and incremental charges related todeveloped technology intangible asset amortization expense of $112.6 million and inventory written up to fair value in purchase accounting of $32.5million. In addition, we recorded impairment charges of $6.3 million in the fourth quarter to write down certain instruments and related59Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsinventory due to our plan to transition certain customers to our Panther instrumentation from our HTA instrumentation. Gross margin was also impacted bylower ThinPrep volumes in the U.S. and lower average selling prices in China and other international markets, unfavorable manufacturing and overheadvariances, higher service costs, depreciation of equipment at customer sites, and distribution costs.Operating expenses, excluding the goodwill impairment charge noted above, increased in fiscal 2013 compared to fiscal 2012 primarily due to theinclusion of Gen-Probe, which contributed an incremental $197.9 million of expenses comprised of research and development, sales and marketing, generaland administrative and amortization expense. In addition, this segment incurred incremental charges and expenses for restructuring of $4.0 million, TCTcontingent consideration expense of $4.6 million, medical device excise taxes of $6.8 million and integration and retention costs. Partially offsetting theseincreases were reductions in headcount, bonus expense, international trade shows and marketing initiatives and project spend in the legacy Hologicbusinesses. In addition, in fiscal 2013, we recorded a net gain of $53.9 million related to the settlement with KV for the sale of our rights to Makena discussedabove, and in the prior year second quarter, we recorded a net gain of $12.4 million related to the Makena sale.Breast Health. Years Ended September 28, 2013 September 29, 2012 Change Amount Amount Amount %Total Revenues $905.1 $875.8 $29.3 3.3%Operating Income $216.1 $186.1 $30.0 16.1%Operating Income as a % of Segment Revenue 23.9% 21.2% Breast Health revenues increased in fiscal 2013 compared to fiscal 2012 primarily due to the $25.5 million increase in service revenue and the $3.8million in product revenues discussed above.Operating income for this business segment increased in fiscal 2013 compared to fiscal 2012 primarily due to an increase in gross profit dollars fromhigher revenues discussed above and lower operating expenses.In fiscal 2013, overall gross margin increased to 50.2% compared to 49.4% in the prior year. Product gross margin decreased slightly to 49.3% in fiscal2013 compared to 49.9% in fiscal 2012 as discussed above. Operating expenses decreased in fiscal 2013 compared to fiscal 2012 primarily due to a gain onthe settlement of class-action litigation of $5.7 million, lower clinical trials spend, lower compensation from headcount reductions, and lower corporateallocations due to the Gen-Probe acquisition. Partially offsetting these decreases were incremental restructuring charges of $7.1 million, and the medicaldevice excise tax of $5.3 million.GYN Surgical. Years Ended September 28, 2013 September 29, 2012 Change Amount Amount Amount %Total Revenues $307.1 $313.1 $(6.0) (1.9)%Operating Income (Loss) $19.7 $(51.9) $71.6 (138.0)%Operating Income (Loss) as a % of Segment Revenue 6.4% (16.6)% GYN Surgical revenues decreased in fiscal 2013 compared to fiscal 2012 due to the decrease in product revenues discussed above.Operating income for this business segment increased in fiscal 2013 compared to fiscal 2012. In fiscal 2013, gross profit in absolute dollars increasedcompared to fiscal 2012 primarily because fiscal 2012 included $19.1 million of charges recorded in cost of product sales related to the discontinuance of theAdiana system discussed above. Gross margin improved to 56.9% in fiscal 2013 from 50.3% in fiscal 2012. Gross margin also improved primarily due tohigher sales of our MyoSure system, which was partially offset by a reduction in NovaSure system sales and higher intangible asset amortization expense of$2.9 million.Operating expenses decreased in fiscal 2013 primarily due a reduction in Interlace contingent consideration charges of $30.5 million, a reduction inadvertising expenditures for our NovaSure system’s direct-to-consumer advertising campaign which ended in fiscal 2012, lower legal expenses primarilyrelating to a lawsuit settlement in fiscal 2012, lower marketing,60Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsmedical education and research and development expenses due to the discontinuance of the Adiana product line, and lower compensation due to headcountreductions. In addition, in fiscal 2012, we recorded charges for an ongoing sales tax audit. Partially offsetting these decreases were higher spend ondeveloping the next generation NovaSure device, marketing initiatives for the MyoSure system and the medical device excise tax of $2.7 million.Skeletal Health. Years Ended September 28, 2013 September 29, 2012 Change Amount Amount Amount %Total Revenues $90.3 $95.7 $(5.4) (5.6)%Operating Income $7.1 $12.3 $(5.2) (42.3)%Operating Income as a % of Segment Revenue 7.9% 12.9% Skeletal Health revenues decreased in fiscal 2013 compared to fiscal 2012 primarily due to the decrease in product revenues of $3.5 million discussedabove and reduction in service revenues of $2.0 million. Operating income decreased in fiscal 2013 compared to the prior year primarily due to lowerrevenues and higher operating expenses. Higher operating expenses were primarily driven by restructuring charges of $3.8 million and the medical deviceexcise tax of $0.9 million.LIQUIDITY AND CAPITAL RESOURCESAt September 27, 2014, we had $946.2 million of working capital, and our cash and cash equivalents totaled $736.1 million. Our cash and cashequivalents balance decreased by $86.4 million during fiscal 2014 principally due to principal payments on our outstanding debt and capital expenditurespartially offset by cash generated from operations and net proceeds from stock option exercises.In fiscal 2014, our operating activities provided us with $508.4 million of cash, which included net income of $17.3 million, non-cash charges fordepreciation and amortization aggregating $523.2 million, non-cash interest expense of $68.7 million related to our outstanding debt, stock-basedcompensation expense of $50.0 million, asset impairment charges of $38.4 million, and debt extinguishment losses of $7.4 million. These adjustments to netincome were partially offset by a decrease in net deferred tax liabilities of $243.1 million, primarily from the amortization of intangible assets. Cash providedby operations included a net cash inflow of $44.5 million from changes in our operating assets and liabilities. Changes in our operating assets and liabilitieswere driven primarily by a decrease in prepaid income taxes of $22.4 million due to the timing of payments versus their utilization for our tax liability, adecrease in prepaid expenses and other assets of $17.3 million, an increase in deferred revenue of $15.1 million primarily due to an increase in our installedbase of digital mammography systems, an increase in accrued expenses and other liabilities of $14.7 million primarily due to a net increase in bonus andbenefits accruals, and restructuring and professional fees, partially offset by contingent consideration payments and lower accrued interest on our debt basedon the timing of payments. These cash flow increases were partially offset by an increase in inventories of $44.7 million for expected demand and to build upour safety stock of instruments and assays primarily in our Diagnostics business.In fiscal 2014, our investing activities utilized $67.0 million of cash primarily for capital expenditures of $80.2 million, which consisted primarily ofthe placement of equipment under customer usage agreements and purchases of manufacturing equipment and computer hardware, partially offset byproceeds of $10.1 million received from the divestiture of product lines, and net sales of mutual funds and insurance contracts of $6.5 million to payparticipant withdrawals from our deferred compensation plan due to employee terminations.In fiscal 2014, our financing activities used cash of $525.1 million, primarily due to $595.0 million in debt principal payments comprised of $405.0million to pay off our 2007 Notes and $190.0 million under our Credit Agreement, and $9.8 million to pay employee-related taxes withheld for the net sharesettlement of vested restricted stock units. Partially offsetting these uses of cash were proceeds of $81.4 million from our equity plans, primarily from theexercise of stock options.DebtWe had total recorded debt outstanding of $4.3 billion at September 27, 2014, which is comprised of amounts outstanding under our amended CreditAgreement of $2.03 billion (principal $2.05 billion), Senior Notes of $1.0 billion and convertible notes of $1.24 billion (principal $1.32 billion). No amountswere outstanding under our Revolving Facility.61Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsCredit AgreementThe facilities under the amended Credit Agreement initially consisted of:•$1.0 billion senior secured tranche A term loan, or Term Loan A, with a final maturity date of August 1, 2017;•$1.5 billion senior secured tranche B term loan, or Term Loan B, with a final maturity date of August 1, 2019; and•$300.0 million secured revolving credit facility, or Revolving Facility, with a final maturity date of August 1, 2017.As of September 27, 2014, the interest rates under our Term Loan A facility and Term Loan B facility were 2.15% and 3.25%, respectively, and theprincipal amounts outstanding were $900.0 million and $1.15 billion, respectively.The credit facilities are secured by first-priority liens on, and a first-priority security interest in, substantially all of our assets and the assets of theGuarantors, including all of the capital stock of substantially all of the U.S. subsidiaries owned by us and the Guarantors, 65% of the capital stock of certainof our first-tier foreign subsidiaries and all intercompany debt.We are required to make scheduled principal payments under the Term Loan A facility in an increasing amount, which is currently $25.0 million perthree month period and increase to $50.0 million per three month period commencing October 31, 2015, and under the Term Loan B facility in equalinstallments of $3.75 million per three month period beginning on October 31, 2012 and for 27 three month periods thereafter. The remaining balance of$400 million for Term Loan A and $1.07 billion for Term Loan B is due at maturity. Any amounts outstanding under the Revolving Facility are due atmaturity. We are required to make principal repayments first, pro rata among the term loan facilities, and second to the Revolving Facility from specifiedexcess cash flows from operations and from the net proceeds of specified types of asset sales, debt issuances, insurance recoveries and equity offerings.Subject to certain limitations, we may voluntarily pre-pay any of the credit facilities without premium or penalty.The amended Credit Agreement contains affirmative and negative covenants customarily applicable to senior secured credit facilities, includingcovenants restricting our ability and the ability of the Guarantors, subject to negotiated exceptions, to incur additional indebtedness and additional liens ontheir assets, engage in mergers or acquisitions or dispose of assets, enter into sale-leaseback transactions, pay dividends, repurchase or redeem capital stock ormake other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments, and change the nature oftheir businesses.The amended Credit Agreement contains two financial ratio covenants measured as of the last day of each fiscal quarter: a total net leverage ratio andan interest coverage ratio. The total net leverage ratio covenant is currently 6.00:1.00, which then decreases over time to 4.00:1.00 for the fiscal quarterending September 30, 2017 and each fiscal quarter thereafter. The interest coverage ratio is currently 3.25:1.00, which increases over time to 3.75:1.00 for thefiscal quarter ending September 30, 2017 and each quarter thereafter. The total net leverage ratio covenant is defined as the ratio of our consolidated net debtas of the quarter end to our consolidated adjusted EBITDA for the four-fiscal quarter period ending on the measurement date. The interest coverage ratio isdefined as the ratio of our consolidated adjusted EBITDA for the prior four-fiscal quarter period ending on the measurement date to adjusted consolidatedcash interest expense for the same measurement period. These terms, and the calculation thereof, are defined in further detail in the amended CreditAgreement. As of September 27, 2014, we were in compliance with these covenants.Senior NotesOn August 1, 2012, we completed a private placement of $1.0 billion aggregate principal amount of our Senior Notes at an offering price of 100% ofthe aggregate principal amount of the Senior Notes. The Senior Notes are our general senior unsecured obligations and are guaranteed on a senior unsecuredbasis by the Guarantors. The Senior Notes mature on August 1, 2020 and bear interest at the rate of 6.25% per year, payable semi-annually on February 1 andAugust 1 of each year, commencing on February 1, 2013.The indenture for our Senior Notes contains customarily applicable affirmative and negative covenants, including covenants restricting our ability andthe ability of certain of our subsidiaries’, subject to negotiated exceptions and qualifications, to: incur additional indebtedness; pay dividends or repurchaseor redeem capital stock or make other distributions; make certain investments; incur liens; enter into certain types of transactions with our affiliates; and sellassets or consolidate or merge with or into other companies. We are not required to maintain any financial covenants with respect to the Senior Notes.62Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsWe may redeem up to 35% of the aggregate principal amount of the Senior Notes with the net cash proceeds of certain equity offerings at any time andfrom time to time before August 1, 2015, at a redemption price equal to 106.250% of the aggregate principal amount so redeemed, plus accrued and unpaidinterest, if any, to the redemption date. We also have the option to redeem the Senior Notes on or after: August 1, 2015 through July 31, 2016 at 103.125% ofpar; August 1, 2016 through July 31, 2017 at 102.083% of par; August 1, 2017 through July 31, 2018 at 101.042% of par; and August 1, 2018 and thereafterat 100% of par. In addition, if we undergo a change of control, as provided in the indenture, we will be required to make an offer to purchase each holder’sSenior Notes at a price equal to 101% of the aggregate principal amount of the Senior Notes, plus accrued and unpaid interest, if any, to the repurchase date.Convertible NotesAt September 27, 2014, our convertible notes, in the aggregate principal amount of $1.32 billion, are recorded at $1.24 billion, which is net of theunamortized debt discount attributed to the embedded conversion feature of the convertible notes. These notes consist of:•$450 million of our 2.00% Convertible Exchange Senior Notes due 2037 issued in November 2010 (2010 Notes);•$500 million of our 2.00% Convertible Senior Notes due 2042 issued in March 2012 (2012 Notes); and•$370 million of our 2.00% Convertible Senior Notes due 2043 issued in February 2013 (2013 Notes).The 2010 Notes, 2012 Notes and 2013 Notes are collectively referred to herein as the convertible notes. Interest on the 2013 Notes is currently beingaccreted to principal, from their date of issuance, at a rate of 4.00% per year until and including December 15, 2017, and 2.00% per year thereafter. All othernotes bear interest at a rate of 2.00% per year on the original principal amount, payable semi-annually in arrears until their first put date and thereafter accreteprincipal at the rate of 2.00% per year. In addition, under certain circumstances contingent interest may be payable under the convertible notes after each oftheir first put date.Holders may require us to repurchase the 2010 Notes on each of December 15, 2016, 2020, 2025, on December 13, 2030 and on December 14, 2035, orupon a fundamental change, as provided in the indenture for the 2010 Notes, at a repurchase price equal to 100% of their accreted principal amount, plusaccrued and unpaid interest.Holders may require us to repurchase the 2012 Notes on each of March 1, 2018, 2022, 2027 and 2032, and on March 2, 2037, or upon a fundamentalchange, as provided in the indenture for the 2012 Notes, at a repurchase price equal to 100% of their accreted principal amount, plus accrued and unpaidinterest.Holders may require us to repurchase the 2013 Notes on each of December 15, 2017, 2022, 2027, 2032 and 2037, or upon a fundamental change, asprovided in the indenture for the 2013 Notes, at a repurchase price equal to 100% of their accreted principal amount, plus accrued and unpaid interest.We may redeem any of the 2010 Notes, 2012 Notes and 2013 Notes beginning December 19, 2016, March 6, 2018, and December 15, 2017,respectively. We may redeem all or a portion of the 2010 Notes, 2012 Notes and 2013 Notes (i.e., in cash or a combination of cash and shares of our commonstock) at a redemption price equal to 100% of their principal amount, plus accrued and unpaid interest to, but excluding, the applicable redemption date.We have recorded deferred tax liabilities related to the convertible notes original issuance discount, representing the spread between the cash couponrate and the higher interest rate deductible for tax purposes. When our convertible notes are extinguished, we are required to recapture the original issuancediscount previously deducted for tax purposes.Stock Repurchase ProgramOn November 11, 2013, we announced that our Board of Directors authorized the repurchase of up to $250 million of our outstanding common stockover the next three years. Under the stock repurchase program, we are authorized to repurchase, from time-to-time, shares of our outstanding common stock onthe open market or in privately negotiated transactions in the United States. The timing and amount of stock repurchases will be determined based upon ourevaluation of market conditions and other factors. The stock repurchase program may be suspended, modified or discontinued at any time, and we have noobligation to repurchase any amount of our common stock under the program. Through September 27, 2014 we had not repurchased any shares of ourcommon stock under this program.63Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsContractual ObligationsThe following table summarizes our contractual obligations and commitments as of September 27, 2014: Payments Due by PeriodContractual Obligations Less than1 year 1-3 years 3-5 years More than5 years TotalLong-Term Debt Obligations (1) $115.0 $1,280.0 $2,048.4 $1,000.0 $4,443.4Interest on Long-Term Debt Obligations 137.3 257.1 195.7 62.5 652.6Operating Leases 18.9 27.6 18.5 24.7 89.7Financing Leases (2) 2.9 6.2 3.2 — 12.3Purchase Obligations (3) 53.7 6.4 0.8 — 60.9Royalty and Collaborative Commitments (4) 0.9 2.2 1.2 4.0 8.3Pension Obligations (5) 0.4 0.8 0.8 8.3 10.3Total Contractual Obligations $329.1$1,580.3$2,268.6$1,099.5$5,277.5 (1)Included within long-term debt obligations, we have three issuances (2010 Notes, 2012 Notes and 2013 Notes) of convertible notes which can first beput to us on December 15, 2016 ($450 million principal), March 1, 2018 ($500 million principal), and December 15, 2017 ($370 million principal)and we have assumed for purpose of the above table that the principal amounts for each issuance will be paid off when they first can be put to us,which is in fiscal 2017 and fiscal 2018. The 2013 Notes also have principal accretion of 4% annually, which is included in the principal amount inthe 3-5 years column above. The amounts in the table do not include deferred tax liabilities for the recapture of the original issuance discount.(2)The financing leases represent two leases for an office building and a manufacturing facility, which were required to be recorded on our balance sheetunder U.S. GAAP. See Note 12 to our consolidated financial statements contained in Item 15 of this Annual Report.(3)Purchase obligations primarily represent minimum purchase commitments for inventory and instruments and, to a lesser extent, other operatingexpense commitments.(4)Represents minimum royalties due on net sales of products incorporating licensed technology and subject to a minimum annual royalty payment, andpayments under collaborative agreements. In addition to the minimum payments due under our collaborative agreements included above, we may berequired to pay up to $4.4 million in milestone payments, plus royalties on net sales of any products using specified technology(5)Pension obligations do not include our obligation under our deferred compensation plans of $35.8 million, which is recorded as a current liability.Deferred compensation plan benefits are generally paid out at retirement or termination of employment.The above table does not reflect our long-term liabilities associated with uncertain tax positions recorded under FIN 48 (codified primarily in ASC 740,Income Taxes) totaling $131.4 million. Due to the complexity associated with tax uncertainties, we cannot reasonably make a reliable estimate of the periodin which we expect to settle these non-current liabilities. See Note 8 to our consolidated financial statements contained in Item 15 of this Annual Report formore information on our unrecognized tax benefits. In addition, certain of our cost method equity investments give us the option to acquire the company inthe future. Since it is not possible to estimate when, or even if, we will exercise our option to acquire these companies, we have not included these futurepotential payments in the table above.Future Liquidity ConsiderationsWe expect to continue to review and evaluate potential strategic transactions and alliances that we believe will complement our current or futurebusiness. Subject to the Risk Factors set forth in Part I, Item 1A of this Annual Report and the general disclaimers set forth in our Special Note RegardingForward-Looking Statements at the outset of this Annual Report, we believe that cash flow from operations and the cash available under our RevolvingFacility will provide us with sufficient funds in order to fund our expected normal operations, and debt payments, including interest over the next twelvemonths. Our longer-term liquidity is contingent upon future operating performance. We may also require additional capital in the future to fund capitalexpenditures, repayment of debt, acquisitions or other investments, or to repay our convertible notes and related deferred tax liabilities. As described above,we have significant indebtedness outstanding under our Credit Agreement, Senior Notes and convertible notes. These capital requirements could besubstantial. Our operating performance may also be affected64Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsby matters discussed under the above-referenced Risk Factors set forth elsewhere in this report. These risks, trends and uncertainties may also adversely affectour long-term liquidity.Legal ContingenciesWe are currently involved in certain legal proceedings and claims. In connection with these legal proceedings and claims, management periodicallyreviews estimates of potential costs to be incurred by us in connection with the adjudication or settlement, if any, of these proceedings. These estimates arebased on an analysis of potential litigation outcomes and settlement strategies. In accordance with ASC 450, Contingencies, loss contingencies are accruedif, in the opinion of management, an adverse outcome is probable and such outcome can be reasonably estimated. It is possible that future results for anyparticular quarter or annual period may be materially affected by changes in our assumptions or the effectiveness of our strategies relating to theseproceedings.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have beenprepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires us to makeestimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets andliabilities. On an on-going basis, we evaluate our estimates, including those related to revenue recognition for multiple element arrangements, allowance fordoubtful accounts, reserves for excess and obsolete inventories, valuations, purchase price allocations and contingent consideration related to businesscombinations, expected future cash flows including growth rates, discount rates, terminal values and other assumptions used to evaluate the recoverability oflong-lived assets and goodwill, estimated fair values of intangible assets and goodwill, amortization methods and periods, warranty reserves, certain accruedexpenses, restructuring and other related charges, stock-based compensation, contingent liabilities, tax reserves and recoverability of our net deferred taxassets and related valuation allowances. We base our estimates on historical experience and various other assumptions that are believed to be reasonableunder the circumstances. Actual results could differ from these estimates if past experience or other assumptions do not turn out to be substantially accurate.Any differences may have a material impact on our financial condition and results of operations.The following is a discussion of what we believe to be the more significant critical accounting policies and estimates used in the preparation of ourconsolidated financial statements.InventoryOur inventories include material, labor and overhead, and are stated at the lower of cost (first-in, first-out) or market. As a developer and manufacturer ofhigh technology medical equipment, we may be exposed to a number of economic and industry factors that could result in portions of our inventorybecoming either obsolete or in excess of anticipated usage. These factors include, but are not limited to, technological changes in our markets, our ability tomeet changing customer requirements, competitive pressures on products and prices, and reliability and replacement of and the availability of keycomponents from our suppliers. Our policy is to establish inventory reserves when conditions exist that suggest that our inventory may be in excess ofanticipated demand or is obsolete based upon our assumptions about future demand for our products and market conditions. We regularly evaluate ourability to realize the value of our inventory based on a combination of factors including the following: historical usage rates, forecasted sales or usage,product expiration or end of life dates, estimated current and future market values and new product introductions. Assumptions used in determining ourestimates of future product demand may prove to be incorrect, in which case the provision required for excess and obsolete inventory would have to beadjusted in the future. If inventory is determined to be overvalued, excess or obsolete, we would be required to record impairment charges within cost ofgoods sold at the time of such determination. Although considerable effort is made to ensure the accuracy of our forecasts of future product demand, anysignificant unanticipated changes in demand or expected usage could have a significant negative impact on the value of our inventory and our operatingresults. When recorded, our reserves are intended to reduce the carrying value of our inventory to its net realizable value.Accounts Receivable ReservesWe maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. Weregularly evaluate the collectability of our trade receivables based on a combination of factors, including discussions with the customer to determine thecause of non-payment, and evaluation of the customer’s current financial situation. In the event it is determined that the customer may not be able to meet itsfull obligation to us, we record a specific allowance to reduce the receivable to the amount that we expect to recover given all information present. Weperform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and our assessment of the customer’s current creditworthiness. We continuously monitor collections from our customers and maintain a provision for65Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsestimated credit losses based upon our historical experience and any specific customer collection issues that we have identified. While such credit losseshave historically been within our expectations and the provisions established, we cannot guarantee that we will continue to experience the same credit lossrates in the future. If the financial condition of our customers were to deteriorate, additional allowances may be required.We also record a provision for estimated sales returns and allowances on product and service related sales in the same period as the related revenues arerecorded. These estimates are based on the specific facts and circumstances of particular orders, analysis of credit memo data and other known factors. If thedata we use to calculate these estimates do not properly reflect reserve requirements, then a change in the allowances would be made in the period in whichsuch a determination is made and revenues in that period could be adversely affected.Business CombinationsWe record tangible and intangible assets acquired and liabilities assumed in business combinations under the purchase method of accounting. Amountspaid for each acquisition are allocated to the assets acquired and liabilities assumed based on their fair values at the dates of acquisition. Contingentconsideration, which is not deemed to be linked to continuing employment, is recorded at fair value as measured on the date of acquisition. The valuerecorded is based on estimates of future financial projections under various potential scenarios, which are generally probability weighted as to the outcome ofeach scenario. These cash flow projections are discounted with an appropriate risk adjusted rate. Quarterly until such contingent amounts are earned, the fairvalue of the liability is reassessed at each reporting period and adjusted as a component of operating expenses based on changes to the underlyingassumptions. The estimates used to determine the fair value of the contingent consideration liability are subject to significant judgment and actual results arelikely to differ from the amounts originally recorded.The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions provided by management, whichconsider management’s best estimate of inputs and assumptions that a market participant would use. We allocate any excess purchase price over the fair valueof the net tangible and intangible assets acquired and liabilities assumed to goodwill.Purchased research and development represents the value of in-process projects that have not yet reached technological feasibility and have noalternative future uses as of the date of acquisition. We use the income approach to determine the fair values of our purchased research and development. Thisapproach determines fair value by estimating the after-tax cash flows attributable to an in-process project over its useful life and then discounting these after-tax cash flows back to a present value. We base our revenue assumptions on estimates of relevant market sizes, expected market growth rates, expected trendsin technology and expected product introductions by competitors. In arriving at the value of the in-process projects, we consider, among other factors, the in-process projects’ stage of completion, the complexity of the work completed as of the acquisition date, the costs already incurred, the projected costs tocomplete, the contribution of core technologies and other acquired assets, the expected introduction date and the estimated useful life of the technology. Webase the discount rate used to arrive at a present value as of the date of acquisition on the time value of money and medical technology investment riskfactors. We believe that the estimated purchased research and development amounts so determined represent the fair value at the date of acquisition and donot exceed the amount a third-party would pay for the projects. If the projects are not successful or completed in a timely manner, we may not realize thefinancial benefits expected for these projects or for the acquisitions as a whole and impairments may result.We also used the income approach, as described above, to determine the estimated fair value of certain other identifiable intangible assets includingdeveloped technology, customer relationships and contracts, and trade names. Developed technology represents patented and unpatented technology andknow-how. Customer relationships represent established relationships with customers, which provide a ready channel for the sale of additional products andservices. Trade names represent acquired company and product names.With respect to property, plant and equipment, we estimate the fair value of these assets using a combination of the cost and market approaches,depending on the component. Generally, we apply the cost approach as the primary method in estimating the fair value of land and buildings as the marketapproach is less reliable based on potential significant differences between the property being valued and the potentially comparable sales of similarproperties.Intangible Assets and GoodwillIntangible AssetsWe amortize our intangible assets that have finite lives using either the straight-line method or, if reliably determinable, based on the pattern in whichthe economic benefit of the asset is expected to be consumed. The economic pattern is based on undiscounted future cash flows. Amortization is recordedover the estimated useful lives ranging from 2 to 30 years. We review66Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsour intangible assets subject to amortization to determine if any adverse conditions exist or a change in circumstances has occurred that would indicateimpairment or a change in the remaining useful life. If the carrying value of an asset exceeds its undiscounted cash flows, we will write-down the carryingvalue of the intangible asset to its fair value in the period identified. In assessing fair value, we must make assumptions regarding estimated future cash flowsand discount rates. If these estimates or related assumptions change in the future, we may be required to record impairment charges. We generally determinefair value based on the present value of estimated future cash flows to be generated by the asset using a risk-adjusted discount rate. If the estimate of anintangible asset’s remaining useful life is changed, we will amortize the remaining carrying value of the intangible asset prospectively over the revisedremaining useful life.GoodwillWe test goodwill at the reporting unit level for impairment on an annual basis and between annual tests if events and circumstances indicate it is morelikely than not that the fair value of a reporting unit is less than its carrying value. Events that could indicate impairment and trigger an interim impairmentassessment include, but are not limited to current economic and market conditions, including a decline in market capitalization, a significant adverse changein legal factors, business climate, operational performance of the business or key personnel, and an adverse action or assessment by a regulator. Our annualimpairment test date is the first day of our fiscal fourth quarter.In performing the test, we utilize the two-step approach prescribed under ASC 350. The first step requires a comparison of the reporting unit’s carryingvalue to its fair value. We consider a number of factors to determine the fair value of a reporting unit, including an independent valuation to conduct this test.The valuation is based upon expected future discounted operating cash flows of the reporting unit as well as analysis of recent sales and ratio comparisons ofsimilar companies. We base the discount rate on the weighted average cost of capital, or WACC, of market participants. If the carrying value of a reportingunit exceeds its estimated fair value, we will perform the second step of the goodwill impairment test to measure the amount of impairment loss, if any. Thesecond step of the goodwill impairment test compares the implied fair value of a reporting unit’s goodwill to its carrying value. The second step requires us toperform a hypothetical purchase allocation as of the measurement date and estimate the fair value of net tangible and intangible assets. The fair value ofintangible assets is determined as described above and is subject to significant judgment.We conducted our fiscal 2014 annual impairment test on the first day of the fourth quarter. We utilized discounted cash flows, or DCF, and marketapproaches to estimate the fair value of our reporting units as of June 29, 2014 and ultimately used the fair value determined by the DCF in making ourimpairment test conclusions. We believe we used reasonable estimates and assumptions about future revenue, cost projections, cash flows, market multiplesand discount rates as of the measurement date. As a result of completing Step 1, all of the reporting units had fair values exceeding their carrying values, andas such, Step 2 of the impairment test was not required for those reporting units. For illustrative purposes, had the fair value of each of our remaining reportingunits been lower by 10%, all of our other reporting units, except for one, would have still passed Step 1 of the goodwill impairment test. The one reportingunit that was at risk of failing Step 1 is within the Diagnostics segment and had goodwill of $202.8 million at September 27, 2014.Since the fair value of our reporting units was determined by use of the DCF, and the key assumptions that drive the fair value in this model are theWACC, terminal values, growth rates, and the amount and timing of expected future cash flows, significant judgment is applied in determining fair value. Ifthe current economic environment were to deteriorate, this would likely result in a higher WACC because market participants would require a higher rate ofreturn. In the DCF as the WACC increases, the fair value decreases. The other significant factor in the DCF is our projected financial information (i.e., amountand timing of expected future cash flows and growth rates) and if these assumptions were to be adversely impacted, this could result in a reduction of the fairvalue of this reporting unit.At September 27, 2014, we believe that all reporting units, except for one within our Diagnostics segment as noted above, with goodwill aggregating$2.61 billion were not at risk of failing Step 1 of the goodwill impairment test based on the current forecasts.We conducted our fiscal 2013 annual impairment test on the first day of the fourth quarter. We utilized discounted cash flows, or DCF, and marketapproaches to estimate the fair value of our reporting units as of June 30, 2013 and ultimately used the fair value determined by the DCF in making ourimpairment test conclusions. We believe we used reasonable estimates and assumptions about future revenue, cost projections, cash flows, market multiplesand discount rates as of the measurement date. As a result of completing Step 1, all of the reporting units, except for our Molecular Diagnostics reporting unit,which is within our Diagnostics reportable segment, had fair values exceeding their carrying values, and as such, Step 2 of the impairment test was notrequired for those reporting units.As a result of our company-wide annual budgeting and strategic planning process and a full re-evaluation of our existing product development effortsand cost structure performed in the fourth quarter, we reduced our short term and long term67Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsrevenue forecasts and determined that indicators of impairment existed in our Molecular Diagnostics reporting unit. The Molecular Diagnostics reportingunit is primarily comprised of our Aptima business acquired in the Gen-Probe acquisition and the molecular diagnostics business acquired in the Third Waveacquisition. The updated forecast, which reflected pricing pressures, for revenue and profitability were lower than those expected at the time of the Gen-Probeacquisition.As a result, the fair value of this reporting unit was below its carrying value. We performed Step 2 of the impairment test, consistent with the proceduresdescribed above, and recorded a goodwill impairment charge of $1.1 billion. The basis of fair value for Molecular Diagnostics assumed the reporting unitwould be purchased or sold in a taxable transaction, and the discount rate of 10% applied to the after-tax cash flows was relatively consistent with that usedin our purchase accounting for the Gen-Probe acquisition. For illustrative purposes, had the fair value of Molecular Diagnostics been lower by 10%, theCompany would have recorded an additional impairment charge of $195.4 million.Revenue RecognitionWe generate revenue from the sale of products, primarily medical imaging systems and diagnostic and surgical disposable products, and relatedservices, which are primarily support and maintenance services on our medical imaging systems.We recognize product revenue upon shipment provided that there is persuasive evidence of an arrangement, there are no uncertainties regardingacceptance, the sales price is fixed or determinable, no right of return exists and collection of the resulting receivable is reasonably assured. Generally, ourproduct arrangements for capital equipment sales, primarily in our Breast Health and Skeletal Health reporting segments, are multiple-element arrangements,including services, such as installation and training, and multiple products. In accordance with ASC 605-25, based on the terms and conditions of the productarrangements, we believe that these services and undelivered products can be accounted for separately from the delivered product element as our deliveredproducts have value to our customers on a stand-alone basis. Accordingly, revenue for services not yet performed at the time of product shipment are deferredand recognized as such services are performed. The relative selling price of any undelivered products is also deferred at the time of shipment and recognizedas revenue when these products are delivered. There is no customer right of return in our sales agreements.Service revenues primarily consist of amounts recorded under service and maintenance contracts and repairs not covered under warranty, installationand training, and shipping and handling costs billed to customers. Service and maintenance contract revenues are recognized ratably over the term of thecontract. Other service revenues are recognized as the services are performed.For revenue arrangements with multiple deliverables, we record revenue as separate units of accounting if the delivered items have value to thecustomer on a stand-alone basis, and if the arrangement includes a general right of return relative to the delivered items, the delivery or performance of theundelivered items is considered probable and substantially within our control. Some of our products have both software and non-software components thatfunction together to deliver the product’s essential functionality. We determined that except for our CAD products and C-View product, the software elementin our other products is incidental and not within the scope of the software revenue recognition rules, ASC 985-605, Software—Revenue Recognition. Wedetermined that given the significance of the software component’s functionality to our CAD and C-View systems, which are sold by our Breast Healthsegment, these products are within the scope of the software revenue recognition rules. We evaluated the appropriate revenue recognition treatment of ourother hardware products, including our Dimensions digital mammography systems, which have both software and non-software components that functiontogether to deliver the products’ essential functionality (i.e., it is a tangible product), and determined they are not within the scope of ASC 985-605.We are required to allocate revenue to multiple element arrangements based on the relative fair value of each element’s selling price. We typicallydetermine the selling price of our products based on our best estimate of selling price, referred to as ESP, and services based on vendor-specific objectiveevidence of selling price, referred to as VSOE. We determine VSOE based on our normal pricing and discounting practices for the specific product or servicewhen sold on a stand-alone basis. In determining VSOE, our policy requires a substantial majority of selling prices for a product or service to be within areasonably narrow range. We also consider the class of customer, method of distribution, and the geographies into which our products and services are soldwhen determining VSOE. If VSOE cannot be established, which may occur in instances when a product or service has not been sold separately, stand-alonesales are too infrequent, or product pricing is not within a narrow range, we attempt to establish the selling price based on third-party evidence of sellingprice, referred to as TPE. TPE is determined based on competitor prices for similar deliverables when sold separately. When we cannot determine VSOE orTPE, we use ESP in our allocation of arrangement consideration. The objective of ESP is to determine the price at which we would typically transact a stand-alone sale of the product or service. ESP is determined by considering a number of factors including our pricing policies, internal costs and gross marginobjectives, method of distribution, information gathered from experience in customer negotiations, market research and information, recent technologicaltrends, competitive landscape and geographies.68Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsFor those arrangements accounted for under the software revenue recognition rules, ASC 985-605 generally requires revenue earned on softwarearrangements involving multiple elements to be allocated to each element based on their relative VSOE of fair value. If VSOE does not exist for a deliveredelement, the residual method is applied in which the arrangement consideration is allocated to the undelivered elements based on their VSOE with theremaining consideration recognized as revenue for the delivered elements. For multiple-element software arrangements where VSOE of fair value of Post-Contract Customer Support, referred to as PCS, has been established, we recognize revenue using the residual method at the time all other revenuerecognition criteria have been met.As part of our Diagnostics reporting segment, we manufacture blood screening products according to demand schedules provided by our collaborationpartner, Grifols. Our agreement provides that we share a portion of Grifols’s revenue from screening blood donations. Upon shipment to Grifols, we recognizeblood screening product sales at an agreed upon fixed transfer price, which is not refundable, and record the related cost of products sold. Based on the termsof our collaboration agreement with Grifols, our ultimate share of the net revenue from sales to the end user in excess of the transfer price revenues recognizedis not known until it is reported to us by Grifols. On a monthly basis, Grifols reports net revenue generated during the prior month and remits an additionalcorresponding net payment to us which we record as revenue at that time. This payment combined with the transfer price revenues previously recognizedrepresents our ultimate share of net revenue under the agreement.While the majority of our instruments are placed at customer sites, in certain instances, we sell sell instruments to our clinical diagnostics customers andrecord sales of these instruments upon delivery and customer acceptance. Prior to delivery, each instrument is tested to meet the Company’s specificationsand the specifications of the FDA, and is shipped fully assembled. Customer acceptance of the Company’s clinical diagnostic instrument systems requiresinstallation and training by our technical service personnel. Installation is a standard process consisting principally of uncrating, calibrating and testing theinstrumentation. We sell our instruments to Grifols for use in blood screening and record these instrument sales upon delivery since Grifols is responsible forthe placement, maintenance and repair of the units with its customers.Within our Diagnostics business and, to a lesser extent, our GYN Surgical business, we provide our instrumentation (for example, the ThinPrepProcessor, ThinPrep Imaging System, Panther and Tigris) and certain other hardware to customers without requiring them to purchase the equipment or enterinto a lease. Instead, we recover the cost of providing the instrumentation and equipment in the amount we charge for our diagnostic tests and assays andother disposables. Customers enter into a customer usage agreement, and we install the equipment at customer sites and customers commit to purchasingminimum quantities of disposable products at a stated price over a defined contract term, which is typically between three and five years. Revenue isrecognized over the term of the customer usage agreement as tests, assays and other disposable products are shipped or delivered, depending on the customerarrangement.Stock-Based CompensationWe recognize stock-based compensation expense associated with the granting of stock options, restricted stock units and performance stock unitsissued to our employees. Determining the amount of stock-based compensation to be recorded requires us to develop estimates to be used in calculating thegrant-date fair value of stock options. We use a binomial lattice model to determine the fair value of our stock options. We consider a number of factors todetermine the fair value of stock options including the advice of an outside valuation advisor and the advisor’s model. The model requires us to makeestimates of the following assumptions:Expected volatility—We are responsible for estimating volatility and have considered a number of factors, including third-party estimates, whenestimating volatility. We currently use a combination of historical and implied volatility, which is weighted based on a number of factors.Expected term—We use historical employee exercise and option expiration data to estimate the expected term assumption. We believe that thishistorical data is currently the best estimate of the expected term of a new option, and that generally, all of our employees exhibit similar exercise behavior.Risk-free interest rate—The yield on zero-coupon U.S. Treasury securities for a period that is commensurate with the expected term assumption is usedas the risk-free interest rate.The amount of stock-based compensation expense recognized during a period is based on the value of the portion of the awards that are ultimatelyexpected to vest. ASC 718, Stock Compensation, requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods ifactual forfeitures differ from those estimates. Based on an analysis of historical forfeitures, we have determined a specific forfeiture rate for certain employeegroups and have applied forfeiture rates ranging from 0% to 6.5% as of September 27, 2014 depending on the specific employee group. This analysis is re-evaluated69Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsperiodically and the forfeiture rate is adjusted as necessary. Ultimately, the actual expense recognized over the vesting period will only be for those awardsthat vest.We recognized $50.0 million, $52.3 million and $40.6 million of stock-based compensation expense for employee equity awards in fiscal years 2014,2013 and 2012, respectively. As of September 27, 2014, there was $24.4 million and $62.1 million of unrecognized compensation expense related to stockoptions and stock units, respectively, that we expect to recognize over a weighted-average period of 3.0 years and 2.6 years, respectively.Income TaxesWe use the asset and liability method for accounting for income taxes. Under this method, we determine deferred tax assets and liabilities based on thedifference between our assets and liabilities financial reporting and taxes bases. We measure deferred tax assets and liabilities using enacted tax rates andlaws that will be in effect when we expect the differences to reverse.We have recognized $1.34 billion in net deferred tax liabilities at September 27, 2014 and $1.58 billion at September 28, 2013. The liabilitiesprimarily relate to deferred taxes associated with our acquisitions and debt. The tax assets relate primarily to net operating loss carryforwards, accruals andreserves, stock-based compensation, and research credits. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likelythan not to be realized. While we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need forthe valuation allowance, in the event we determine that we could realize our deferred tax assets in the future in excess of the net recorded amount, anadjustment to the deferred tax assets would increase income in the period such determination is made. Likewise, should we determine that we would not beable to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period suchdetermination is made.We had $137.0 million in gross unrecognized tax benefits, excluding interest, at September 27, 2014 and $121.8 million at September 28, 2013. AtSeptember 27, 2014, $66.1 million represents the amount of unrecognized tax benefits that, if recognized, would result in a reduction of the Company’seffective tax rate. In the next twelve months, it is reasonably possible that we will reduce our unrecognized tax benefits by $6.0 to $8.0 million due to statuteof limitations expiring and potentially favorably settling with taxing authorities.In the ordinary course of global business, there are many transactions and calculations where the ultimate tax outcome is uncertain. Judgment isrequired in determining our worldwide income tax provision. In our opinion, we have made adequate provisions for income taxes for all years subject toaudit. While we consider our estimates reasonable, no assurance can be given that the final tax outcome will not be different than amounts reflected in ourhistorical income tax provisions and accruals. If our assumptions are incorrect, the differences could have a material impact on our income tax provision andoperating results in the period in which such determination is made.Recent Accounting PronouncementsIn August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-15, Disclosure ofUncertainties about an Entity's Ability to Continue as a Going Concern. ASU 2014-15 explicitly requires management to evaluate, at each annual or interimreporting period, whether there are conditions or events that exist that raise substantial doubt about an entity's ability to continue as a going concern withinone year after the date the financial statements are issued and to provide related disclosures. ASU 2014-15 is effective for annual periods ending afterDecember 15, 2016 and earlier application is permitted. The adoption of ASU 2014-15 is not expected to have a material effect on our condensedconsolidated financial statements or disclosures.In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 660), which provides guidance for revenue recognition.This ASU is applicable to any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer ofnonfinancial assets. ASU 2014-09 will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specificguidance. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount thatreflects the consideration to which the company expects to be entitled to receive in exchange for those goods or services. In doing so, companies will need touse more judgment and make more estimates than under current U.S. GAAP. These may include identifying performance obligations in the contract,estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performanceobligation. ASU 2014-09 is effective prospectively for fiscal years, and interim reporting periods within those years, beginning after December 15, 2016,which is fiscal 2018 for the Company. We are currently evaluating the impact of the adoption of ASU 2014-09 on our consolidated financial position andresults of operations.70Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIn July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a SimilarTax Loss, or a Tax Credit Carryforward Exist. ASU 2013-11 amends the presentation requirements of ASC 740 and requires an unrecognized tax benefit tobe presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, similar tax loss, or a tax credit carryforward.To the extent the tax benefit is not available at the reporting date under the governing tax law or if the entity does not intend to use the deferred tax asset forsuch purpose, the unrecognized tax benefit should be presented as a liability and not combined with deferred tax assets. The ASU is effective for annualperiods, and interim periods within those years, beginning after December 15, 2013, which is fiscal 2015 for us. The amendments are to be applied to allunrecognized tax benefits that exist as of the effective date and may be applied retrospectively to each prior reporting period presented. We are currentlyevaluating the impact of the adoption of ASU 2013-11 on our consolidated financial position.In March 2013, FASB issued ASU 2013-05, Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustmentupon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity. ASU 2013-05 addresses theaccounting for the cumulative translation adjustment when a parent either sells a part or all of its investment in a foreign entity or no longer holds acontrolling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. The guidance outlines theevents when cumulative translation adjustments should be released into net income. The ASU is effective for annual periods, and interim periods within thoseyears, beginning after December 15, 2013, which is fiscal 2015 for us. We will apply the guidance prospectively to any derecognition events that may occurafter the effective date and does not expect the adoption of ASU 2013-05 to have a material impact on our consolidated financial position and results ofoperations.Item 7A. Quantitative and Qualitative Disclosures About Market RiskFinancial Instruments, Other Financial Instruments, and Derivative Commodity Instruments. Financial instruments consist of cash equivalents,accounts receivable, publicly-traded equity securities, cost-method equity investments, mutual funds, insurance contracts and related deferred compensationplan liabilities, accounts payable and debt obligations. Except for our outstanding convertible notes and Senior Notes, the fair value of these financialinstruments approximates their carrying amount. As of September 27, 2014, we have $1.3 billion of principal of convertible notes outstanding, which arecomprised of our 2010 Notes with a principal of $450.0 million, our 2012 Notes with a principal of $500.0 million, and our 2013 Notes with a principal of$370.0 million. The convertible notes are recorded net of the unamortized discount on our consolidated balance sheets. The fair value of our 2010 Notes,2012 Notes and 2013 Notes as of September 27, 2014 was approximately $536.6 million, $531.7 million and $401.1 million, respectively. The fair value ofour Senior Notes was approximately $1.03 billion.Amounts outstanding under our Credit Agreement aggregating $2.1 billion aggregate principal as of September 27, 2014 are subject to variable rates ofinterest based on current market rates, and as such, we believe the carrying amount of these obligations approximates fair value.Primary Market Risk Exposures. Our primary market risk exposure is in the areas of interest rate risk and foreign currency exchange rate risk. We incurinterest expense on borrowings outstanding under our convertible notes, Senior Notes and Credit Agreement. The convertible notes and Senior Notes havefixed interest rates. Borrowings under our Credit Agreement bear interest at a rate per annum, at our option, initially, with respect to all loans made underTerm Loan A; (i) at the Base Rate plus 1.00% per annum, or (ii) at the Adjusted Eurodollar Rate (i.e., the Libor rate) plus 2.00%, and with respect to loansmade under Term Loan B: (i) at the Base Rate, with a floor of 1.75%, plus 1.50%, or (ii) at the Adjusted Eurodollar Rate, with a floor of 0.75% plus 2.50%.As of September 27, 2014, there was $2.1 billion of aggregate principal outstanding under the Credit Agreement comprised of $900.0 million under theTerm Loan A facility and $1.15 billion under the Term Loan B facility. Since these debt obligations are variable rate instruments, our interest expenseassociated with these instruments is subject to change. A 10% adverse movement (increase in Libor rate) would increase annual interest expense by less than$1 million due to the low current interest rate environment and the floor on our Term Loan B facility.The return from cash and cash equivalents will vary as short-term interest rates change. A hypothetical 10% increase or decrease in interest rates,however, would not have a material adverse effect on our financial condition.Foreign Currency Exchange Risk. Our international business is subject to risks, including, but not limited to: unique economic conditions, changes inpolitical climate, differing tax structures, other regulations and restrictions, and foreign exchange rate volatility. Accordingly, our future results could bematerially adversely impacted by changes in these or other factors.71Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsWe conduct business worldwide and maintain sales and service offices outside the United States as well as manufacturing facilities in Costa Rica,Germany, England, Canada and China. The expenses of our international offices are denominated in local currencies, except at our Costa Rica subsidiary,where the majority of the business is conducted in U.S. dollars. Our international sales are denominated in a number of currencies, primarily the Euro, U.S.dollar and Renminbi. Fluctuations in the foreign currency rates could affect our sales, cost of goods and operating margins and could result in exchangelosses. In addition, currency devaluations can result in a loss if we hold deposits of that currency.We believe that the operating expenses of our international subsidiaries that are incurred in local currencies will not have a material adverse effect onour business, results of operations or financial condition. Our operating results and certain assets and liabilities that are denominated in the Euro are affectedby changes in the relative strength of the U.S. dollar against the Euro. Our expenses, denominated in Euros, are positively affected when the U.S. dollarstrengthens against the Euro and adversely affected when the U.S. dollar weakens. However, we believe that the foreign currency exchange risk is notsignificant. A hypothetical 10% increase or decrease in foreign currencies that we transact in would not have a material adverse impact on our financialcondition or results of operations. During fiscal 2014, 2013 and 2012, we incurred net foreign exchange gains (losses) of $(1.8) million, $0.5 million and $0.8million, respectively.Item 8. Financial Statements and Supplementary DataOur Consolidated Financial Statements and Supplementary Data are listed under Part IV, Item 15, in this report.Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone.Item 9A. Controls and ProceduresEvaluation of Disclosure Controls and ProceduresWe maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Actreports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information isaccumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timelydecisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls andprocedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours aredesigned to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls andprocedures.As of September 27, 2014, we carried out an evaluation, under the supervision and with the participation of our management, including our ChiefExecutive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined inRules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based upon that evaluation, our Chief Executive Officer and Chief FinancialOfficer concluded that our disclosure controls and procedures are effective.72Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsReport of Management on Internal Control over Financial ReportingWe are responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting isdefined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of ourprincipal executive and principal financial officers and effected by our board of directors, management and other personnel to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally acceptedaccounting principles and includes those policies and procedures that:•pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of our assets;•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorization of our management anddirectors; and•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have amaterial effect on the financial statements.Our internal control system was designed to provide reasonable assurance to our management and board of directors regarding the preparation and fairpresentation of published financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detectmisstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because ofchanges in conditions, or that the degree of compliance with the policies or procedures may deteriorate.Management has assessed the effectiveness of our internal control over financial reporting as of September 27, 2014. In making this assessment, weused the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (COSO) in Internal Control-Integrated Framework.Subject to the foregoing, based on management’s assessment, we believe that, as of September 27, 2014, our internal control over financial reporting iseffective at a reasonable assurance level based on these criteria.Ernst & Young LLP, an independent registered public accounting firm, has issued an attestation report on the effectiveness of our internal control overfinancial reporting. This report in which they expressed an unqualified opinion is included below.73Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsReport of Independent Registered Public Accounting FirmThe Board of Directors and Stockholders of Hologic, Inc.:We have audited Hologic Inc.’s internal control over financial reporting as of September 27, 2014, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria). HologicInc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internalcontrol over financial reporting included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is toexpress 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 requirethat we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in allmaterial respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures aswe 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 to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’sinternal 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 asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate.In our opinion, Hologic, Inc. maintained, in all material respects, effective internal control over financial reporting as of September 27, 2014, based onthe COSO criteria.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balancesheets of Hologic, Inc. as of September 27, 2014 and September 28, 2013 and the related consolidated statements of operations, comprehensive loss,stockholders’ equity and cash flows for each of the three years in the period ended September 27, 2014 of Hologic, Inc. and our report dated November 20,2014 expressed an unqualified opinion thereon./s/ Ernst & Young LLP Boston, MassachusettsNovember 20, 201474Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsChanges in Internal Control over Financial ReportingDuring the quarter ended September 27, 2014, there have been no changes in our internal control over financial reporting that have materially affected,or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other InformationNone.75Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPART IIIItem 10. Directors, Executive Officers and Corporate GovernancePursuant to Section 406 of the Sarbanes-Oxley Act of 2002, we have adopted a Code of Ethics for Senior Financial Officers that applies to our principalexecutive officer and principal financial officer, principal accounting officer and controller, and other persons performing similar functions. Our Code ofEthics for Senior Financial Officers is publicly available on our website at investors.hologic.com as Appendix A to our Code of Conduct. We intend to satisfythe disclosure requirement under Item 5.05 of Current Report on Form 8-K regarding an amendment to, or waiver from, a provision of this code by postingsuch information on our website, at the address specified above.The additional information required by this item is incorporated by reference to our Definitive Proxy Statement for our annual meeting of stockholdersto be filed with the Securities and Exchange Commission within 120 days after the close of our fiscal year.Item 11. Executive CompensationThe information required by this item is incorporated by reference to our Definitive Proxy Statement for our annual meeting of stockholders to be filedwith the Securities and Exchange Commission within 120 days after the close of our fiscal year.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersWe maintain a number of equity compensation plans for employees, officers, directors and others whose efforts contribute to our success. The tablebelow sets forth certain information as of the end of our fiscal year ended September 27, 2014 regarding the shares of our common stock available for grant orgranted under stock option plans and equity incentives that (i) were approved by our stockholders, and (ii) were not approved by our stockholders.Equity Compensation Plan InformationPlan Category Number ofsecurities to beissued uponexercise ofoutstandingoptions, warrantsand rights(a) Weighted-averageexercise price ofoutstandingoptions,warrants and rights(b) (2) Number of securitiesremaining available forfuture issuance underequity compensationplans (excludingsecurities reflected incolumn (a))(c)Equity compensation plans approved by security holders (1) 14,274,166 $20.62 10,730,943Equity compensation plans not approved by security holders (3) 30,295 $9.80 —Total 14,304,461 $20.59 10,730,943___________(1)Includes 4,543,117 shares that are issuable upon restricted stock units (RSUs), performance stock units (PSUs) and market stock units (MSUs) vesting.The remaining balance consists of outstanding stock option grants.(2)The weighted average exercise price does not take into account the shares issuable upon vesting of outstanding RSUs PSUs and MSUs, which have noexercise price.(3)Includes the following plans: 1997 Employee Equity Incentive Plan and 2000 Acquisition Equity Incentive Plan. A description of each of these plans isas follows:1997 Employee Equity Incentive Plan. The purpose of the 1997 Employee Equity Incentive Plan, or the 1997 Plan, adopted by the Board of Directorsin May 1997, was to attract and retain key employees, consultants and advisors, to provide an incentive for them to assist us in achieving long-rangeperformance goals, and to enable such person to participate in our long-term growth. In general, under the 1997 Plan, all employees, consultants, and advisorswho were not executive officers or directors were eligible to participate in the 1997 Plan. The 1997 Plan was administered by our Compensation Committee.Participants in the 1997 Plan were eligible to receive non-qualified stock options, stock appreciation rights, restricted stock and performance shares. A totalof 4,400,000 shares of our common stock were reserved for issuance under the 1997 Plan. Of the shares reserved for issuance under the 1997 Plan, options topurchase 17,895 shares are outstanding as of September 27, 2014. In September 2005, our Compensation Committee determined that no further awards wouldbe made under this plan and cancelled all remaining 332,168 shares available for issuance under the 1997 Plan that were not subject to outstanding stockoption awards.76Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents2000 Acquisition Incentive Plan. The purpose of the 2000 Acquisition Equity Incentive Plan, or the 2000 Plan, adopted by the Board of Directors inApril 2001, was to attract and retain (a) employees, consultants and advisors, of newly acquired businesses who were being hired as employees, consultants oradvisors of our company or any of our consolidated subsidiaries, and (b) employees, consultants and advisors, of our company who have or were anticipatedto provide significant assistance in connection with the acquisition of a newly acquired business or its integration with our company, and to provide suchpersons an incentive for them to achieve long-range performance goals, and to enable them to participate in our long-term growth. In general, under the 2000Plan, only employees, consultants and advisors who were not officers or directors of our company were eligible to participate in the 2000 Plan. The 2000 Planwas administered by our Compensation Committee. Participants in the 2000 Plan were eligible to receive non-qualified stock options, stock appreciationrights, restricted stock and performance shares. A total of 3,200,000 shares of our common stock were reserved for issuance under the 2000 Plan. Of the sharesreserved for issuance under the 2000 Plan, options to purchase 12,400 shares were outstanding as of September 27, 2014. In September 2005, ourCompensation Committee determined that no further awards would be made under this plan and cancelled all remaining 835,408 shares available forissuance under the 2000 Plan that were not subject to outstanding stock option awards.The additional information required by this item is incorporated by reference to our Definitive Proxy Statement for our annual meeting of stockholdersto be filed with the Securities and Exchange Commission within 120 days after the close of our fiscal year. Item 13. Certain Relationships and Related Transactions and Director IndependenceThe information required by this item is incorporated by reference to our Definitive Proxy Statement for our annual meeting of stockholders to be filedwith the Securities and Exchange Commission within 120 days after the close of our fiscal year.Item 14. Principal Accounting Fees and ServicesThe information required by this item is incorporated by reference to our Definitive Proxy Statement for our annual meeting of stockholders to be filedwith the Securities and Exchange Commission within 120 days after the close of our fiscal year.77Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPART IVItem 15. Exhibits and Financial Statement Schedules(a) The following documents are filed as part of this report:(1) Financial StatementsReport of Independent Registered Public Accounting Firm on Consolidated Financial StatementsConsolidated Statements of Operations for the years ended September 27, 2014, September 28, 2013 and September 29, 2012Consolidated Statements of Comprehensive Loss for the years ended September 27, 2014, September 28, 2013 and September 29, 2012Consolidated Balance Sheets as of September 27, 2014 and September 28, 2013Consolidated Statements of Stockholders’ Equity for the years ended September 27, 2014, September 28, 2013 and September 29, 2012Consolidated Statements of Cash Flows for the years ended September 27, 2014, September 28, 2013 and September 29, 2012Notes to Consolidated Financial Statements(2) Financial Statement SchedulesAll schedules have been omitted because they are not required or because the required information is given in the Consolidated FinancialStatements or Notes thereto.(b) Listing of Exhibits Incorporated byReferenceExhibitNumber Exhibit Description Form Filing Date/Period EndDate 2.1 Agreement and Plan of Merger, dated April 29, 2012, by and among Hologic, GoldAcquisition Corp. and Gen-Probe Incorporated. 8-K 05/01/2012 3.1 Certificate of Incorporation of Hologic. S-1 01/24/1990 3.2 Certificate of Amendment to Certificate of Incorporation of Hologic. 10-Q 03/30/1996 3.3 Certificate of Amendment to Certificate of Incorporation of Hologic. 10-K 09/24/2005 3.4 Certificate of Amendment to Certificate of Incorporation of Hologic. 8-K 10/22/2007 3.5 Certificate of Amendment to Certificate of Incorporation of Hologic. 8-K 03/11/2008 3.6 Certificate of Designation of Series A Junior Participating Preferred Stock of Hologic. 8-K 11/21/2013 3.7 Certificate of Elimination of Series A Junior Participating PreferredStock of Hologic. 8-K 06/25/2014 3.8 Fourth Amended and Restated By-laws, as amended of Hologic. 10-Q 12/28/2013 4.1 Specimen Certificate for Shares of Hologic’s Common Stock. 8-A 01/31/1990 4.2 Description of Capital Stock (Contained in Hologic’s Certificate of Incorporation, asamended, filed as Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5 hereto). 4.3 Indenture, dated December 10, 2007, by and between Wilmington Trust Company, as Trustee,and Hologic. 8-K 12/10/2007 78Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Incorporated byReferenceExhibitNumber Exhibit Description Form Filing Date/Period EndDate4.4 Second Supplemental Indenture, dated November 23, 2010, by and between WilmingtonTrust Company, as Trustee, and Hologic. 10-K 09/25/2010 4.5 Form of 2.00% Convertible Exchange Senior Note due 2037 (included in Exhibit 4.4). 10-K 09/25/2010 4.6 Third Supplemental Indenture, dated March 5, 2012, by and between Wilmington TrustCompany, as Trustee, and Hologic. 8-K 03/08/2012 4.7 Form of 2.00% Convertible Senior Note due 2042 (included in Exhibit 4.6). 8-K 03/08/2012 4.8 Fourth Supplemental Indenture, dated February 21, 2013, by and between Wilmington TrustCompany, as Trustee, and Hologic. 8-K 02/21/2013 4.9 Form of 2.00% Convertible Senior Note due 2043 (included in Exhibit 4.8). 8-K 02/21/2013 4.10 Indenture, dated August 1, 2012, by and among Wells Fargo Bank, National Association, asTrustee, Hologic and certain subsidiaries of Hologic party thereto. 8-K 08/01/2012 4.11 Form of 6.25% Senior Note due 2020 (included in Exhibit 4.10). 8-K 08/01/2012 10.1* Second Amended and Restated 1999 Equity Incentive Plan. 10-Q 03/25/2006 10.2* Amendment No. 1 to Second Amended and Restated 1999 Equity Incentive Plan. S-8 10/23/2007 10.3* Amendment No. 2 to Second Amended and Restated 1999 Equity Incentive Plan. 8-K 10/22/2007 10.4* Amendment No. 3 to Second Amended and Restated 1999 Equity Incentive Plan. 8-K 12/12/2008 10.5* 2000 Acquisition Equity Incentive Plan. 10-K 09/29/2001 10.6* Cytyc Corporation 2004 Omnibus Stock Plan S-8 10/23/2007 10.7* The 2003 Incentive Award Plan of Gen-Probe Incorporated as amended and restated. S-8 08/02/2012 10.8* Hologic Amended and Restated 2008 Equity Incentive Plan. 8-K 03/11/2013 10.9* Form of Stock Option Award Agreement Under 2008 Equity Incentive Plan (adopted fiscal2014). 8-K 11/12/2013 10.10* Form of Stock Option Award Agreement Under 2008 Equity Incentive Plan (adopted fiscal2015). 8-K 11/05/2014 10.11* Form of Restricted Stock Unit Award Agreement Under 2008 Equity Incentive Plan (adoptedfiscal 2014). 8-K 11/12/2013 10.12* Form of Performance Stock Unit Award Agreement Under 2008 Equity Incentive Plan(adopted fiscal 2014). 8-K 11/12/2013 10.13* Form of Performance Stock Unit Award Agreement Under 2008 Equity Incentive Plan(adopted fiscal 2015). 8-K 11/05/2014 10.14* Form of Cumming Stock Option Award Agreement Under 2008 Equity Incentive Plan (fiscal2013). 8-K 08/05/2013 10.15* Form of Cumming Restricted Stock Unit Award Agreement Under 2008 Equity Incentive Plan(fiscal 2013). 8-K 08/05/2013 10.16* Form of Independent Director Stock Option Award Agreement Under 2008 Equity IncentivePlan (annual grant, adopted fiscal 2014). 10-K 09/28/2013 79Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Incorporated byReferenceExhibitNumber Exhibit Description Form Filing Date/Period EndDate10.17*† Form of Independent Director Stock Option Award Agreement Under 2008 Equity IncentivePlan (annual grant, adopted fiscal 2015). 10.18* Form of Independent Director Restricted Stock Unit Award Agreement Under 2008 EquityIncentive Plan (annual grant). 10-K 09/28/2013 10.19* Form of Independent Director Stock Option Award Agreement Under 2008 Equity IncentivePlan (initial grant, adopted fiscal 2014). 10-K 09/28/2013 10.20*† Form of Independent Director Stock Option Award Agreement Under 2008 Equity IncentivePlan (initial grant, adopted fiscal 2015). 10.21* Form of Independent Director Restricted Stock Unit Award Agreement Under 2008 EquityIncentive Plan (initial grant). 10-K 09/28/2013 10.22* Hologic 2012 Employee Stock Purchase Plan. 8-K 03/08/2012 10.23* Hologic 2014 Short-Term Incentive Plan. 8-K 11/12/2013 10.24* Hologic 2015 Short-Term Incentive Plan. 8-K 11/10/2014 10.25* Amended and Restated Non-qualified Deferred Compensation Plan. 8-K 11/12/2013 10.26* Rabbi Trust Agreement. 10-K 09/28/2013 10.27* Form of Indemnification Agreement (as executed with each director of Hologic). # 8-K 03/06/2009 10.28* Form of Senior Vice President Change of Control Agreement. # 10-Q 12/29/2012 10.29* Form of Senior Executive Officer Change of Control Agreement. # 8-K 11/17/2009 10.30* Form of Senior Vice President Severance Agreement. # 10-K 09/28/2013 10.31* Transition Agreement dated November 5, 2009, by and between John W. Cumming andHologic. 8-K 11/09/2009 10.32* Employment Letter dated July 18, 2013 by and between John W. Cumming and Hologic. 8-K 07/19/2013 10.33* Separation Agreement and General Release of All Claims dated December 11, 2013 by andbetween John W. Cumming and Hologic. 10-Q 12/28/2013 10.34* Severance and Change of Control Agreement dated March 5, 2013 by and between Mark J.Casey and Hologic. 8-K 03/11/2013 10.35* Separation Agreement and General Release of All Claims dated November 10, 2014 by andbetween Mark J. Casey and Hologic. 8-K 11/10/2014 10.36* Transition and Separation Agreement and General Release of All Claims dated July 18, 2013by and between Robert A. Cascella and Hologic. 8-K 07/19/2013 10.37* Separation and Release Agreement dated January 22, 2013 by and between Carl W. Hull andHologic. 8-K 01/22/2013 10.38* Consulting Agreement dated January 22, 2013 by and between Carl W. Hull and Hologic. 8-K 01/22/2013 10.39* Employment Agreement dated December 6, 2013 by and between Stephen P. MacMillan andHologic. 8-K 12/09/2013 10.40* Form of Price Targets Performance Stock Unit Award Agreement. 8-K 12/09/2013 10.41* Form of Matching Restricted Stock Unit Award Agreement. 8-K 12/09/2013 80Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Incorporated byReferenceExhibitNumber Exhibit Description Form Filing Date/Period EndDate10.42* Change of Control Agreement dated December 6, 2013 by and between Stephen P. MacMillanand Hologic. 8-K 12/09/2013 10.43* Retention Agreement dated July 31, 2012 by and between Rohan F. Hastie and Hologic. 10-Q 12/28/2013 10.44* Separation and Release Agreement dated September 2, 2014 by and between Rohan F. Hastieand Hologic. 8-K 09/08/2014 10.45* Offer Letter dated March 9, 2014 by and between Eric B. Compton and Hologic. 8-K 03/14/2014 10.46* Severance and Change of Control Agreement dated March 9, 2014 by and between Eric B.Compton and Hologic. 8-K 03/14/2014 10.47* Transition Agreement dated March 13, 2014 by and between Glenn P. Muir and Hologic. 8-K 03/14/2014 10.48* Transition and Severance Agreement dated May 1, 2014 by and between David P. Harding andHologic. 10-Q 03/29/2014 10.49* Settlement and Release Agreement dated May 1, 2014 by and between David P. Harding andHologic. 10-Q 03/29/2014 10.50* Offer Letter dated May 8, 2014 by and between Robert W. McMahon and Hologic. 8-K 05/13/2014 10.51* Severance and Change of Control Agreement dated May 8, 2014 by and between Robert W.McMahon and Hologic. 8-K 05/13/2014 10.52* Offer Letter dated May 4, 2014 by and between Peter J. Valenti and Hologic. 10-Q 06/28/2014 10.53*† Senior Vice President Severance Agreement dated May 26, 2014 by and between Peter J. Valentiand Hologic. 10.54*† Offer Letter dated August 21, 2014 by and between Thomas A. West and Hologic. 10.55*† Senior Vice President Severance Agreement dated October 3, 2014 by and between Thomas A.West and Hologic. 10.56*† Letter of Intent dated February 27, 2014 and Terms and Conditions of Employment dated March10, 2014 by and between Claus Egstrand and Hologic. 10.57*† Severance and Change of Control Agreement dated September 18, 2014 by and between ClausEgstrand and Hologic. 10.58 Facility Lease (Danbury) dated December 30, 1995 by and among Melvin J. Powers and Mary P.Powers D/B/A M&N Realty and Lorad. Trex MedicalCorporationS-1 03/29/1996 10.59 Lease Agreement (Danbury and Bedford) by and between BONE (DE) QRS 15-12, INC., andHologic dated August 28, 2002. 10-K 09/28/2002 10.60 First Amendment to Lease Agreement (Danbury and Bedford) by and between BONE (DE) QRS15-12, INC., and Hologic dated October 29, 2007. 10-K 09/29/2007 10.61 Office Lease dated December 31, 2003 between Cytyc and Marlborough Campus LimitedPartnership. CytycCorporation10-K 12/31/2003 10.62 Lease Agreement by and between Zona Franca Coyol S.A. and Cytyc Surgical Products CostaRica S.A. dated April 23, 2007. 10-K 09/29/2007 81Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Incorporated byReferenceExhibitNumber Exhibit Description Form Filing Date/Period EndDate10.63 Lease Agreement by and between 445 Simarano Drive, Marlborough LLC and Cytyc dated July11, 2006. 10-K 09/29/2007 10.64 Lease Guaranty dated October 22, 2007 between Bel Marlborough I LLC and Hologic, asguarantor thereunder. 8-K 10/22/2007 10.65 Form of Exchange Agreement. 8-K 02/15/2013 10.66 Credit and Guaranty Agreement, dated August 1, 2012, by and among Hologic, the guarantorsparty thereto, Goldman Sachs Bank USA, as Administrative Agent and Collateral Agent, and thelenders party thereto. ‡ 8-K/A 10/15/2012 10.67 Refinancing Amendment No. 1 dated March 20, 2013 by and among Hologic, the guarantorsparty thereto, Goldman Sachs Bank USA, and the lenders party thereto. 8-K 03/20/2013 10.68 Refinancing Amendment No. 2 dated August 2, 2013 by and among Hologic, the guarantorsparty thereto, Goldman Sachs Bank USA, and the lenders party thereto. 8-K 08/02/2013 10.69 Refinancing Amendment No. 3 dated February 26, 2014 by and among Hologic, the guarantorsparty thereto, Goldman Sachs Bank USA, and the lenders party thereto. 8-K 02/26/2014 10.70 Pledge and Security Agreement, dated August 1, 2012, by and among the grantors party theretoand Goldman Sachs Bank USA, as Collateral Agent. 8-K/A 10/15/2012 10.71 Restated Agreement dated July 24, 2009 by and between Gen-Probe Incorporated and NovartisVaccines and Diagnostics, Inc. ‡ Gen-Probe10-Q/A 09/30/2009 10.72 First Amendment to Restated Agreement dated November 8, 2013 by and between Gen-ProbeIncorporated and Novartis Vaccines and Diagnostics, Inc. 10-K 09/28/2013 10.73 Supply Agreement for Panther Instrument System effective November 22, 2006 between Gen-Probe Incorporated and STRATEC Biomedical Systems AG. ‡ Gen-Probe10-Q 09/30/2007 10.74 Nomination and Standstill Agreement dated December 8, 2013 by and among Hologic, IcahnPartners Master Fund LP, Icahn Partners Master Fund II LP, Icahn Partners Master Fund III LP,Icahn Partners LP, Icahn Onshore LP, Icahn Offshore LP, Icahn Capital LP, IPH GP LLC, IcahnEnterprises Holdings LP, Icahn Enterprises G.P. Inc., Beckton Corp., High River LimitedPartnership, Hopper Investments LLC, Barberry Corp., Carl C. Icahn, Jonathan Christodoro andSamuel Merksamer. 8-K 12/09/2013 10.75 Confidentiality Agreement dated December 8, 2013 by and among Hologic, Icahn PartnersMaster Fund LP, Icahn Partners Master Fund II LP, Icahn Partners Master Fund III LP, IcahnPartners LP, Icahn Onshore LP, Icahn Offshore LP, Icahn Capital LP, IPH GP LLC, IcahnEnterprises Holdings LP, Icahn Enterprises G.P. Inc., Beckton Corp., High River LimitedPartnership, Hopper Investments LLC, Barberry Corp., Carl C. Icahn, Jonathan Christodoro andSamuel Merksamer. 8-K 12/09/2013 12.1† Ratio of Earnings to Fixed Charges. 21.1† Subsidiaries of Hologic. 23.1† Consent of Independent Registered Public Accounting Firm. 31.1† Certification of Hologic’s CEO pursuant to Item 601(b)(31) of Regulation S-K, as adoptedpursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2† Certification of Hologic’s CFO pursuant to Item 601(b)(31) of Regulation S-K, as adoptedpursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 82Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Incorporated byReferenceExhibitNumber Exhibit Description Form Filing Date/Period EndDate32.1*** Certification of Hologic’s CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002. 32.2*** Certification of Hologic’s CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002. 101.INS† XBRL Instance Document. 101.SCH† XBRL Taxonomy Extension Schema Document. 101.CAL† XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF† XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB† XBRL Taxonomy Extension Label Linkbase Document. 101.PRE† XBRL Taxonomy Extension Presentation Linkbase Document. ______________* Indicates management contract or compensatory plan, contract or arrangement.† Filed herewith.*** Furnished herewith.# List of officers or directors, as applicable, to whom provided filed herewith.‡ Confidential treatment has been granted with respect to certain portions of this exhibit. A complete version of this exhibit has been filed separately withthe U.S. Securities and Exchange Commission.83Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsSIGNATURESPursuant 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 itsbehalf by the undersigned, thereunto duly authorized.HOLOGIC, INC. By: /S/ STEPHEN P. MACMILLAN Stephen P. MacMillan President and Chief Executive OfficerDate: November 20, 2014Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated.Signature Title Date /S/ STEPHEN P. MACMILLAN President and Chief Executive Officer(Principal Executive Officer) November 20, 2014STEPHEN P. MACMILLAN /S/ ROBERT W. MCMAHON Chief Financial Officer (PrincipalFinancial Officer) November 20, 2014ROBERT W. MCMAHON /S/ KARLEEN M. OBERTON Corporate Vice President, Finance andAccounting (Controller) November 20, 2014KARLEEN M. OBERTON /S/ DAVID R. LAVANCE, JR. Chairman of the Board November 20, 2014DAVID R. LAVANCE, JR. /S/ JONATHAN CHRISTODORO Director November 20, 2014JONATHAN CHRISTODORO /S/ SALLY W. CRAWFORD Director November 20, 2014SALLY W. CRAWFORD /S/ SCOTT T. GARRETT Director November 20, 2014SCOTT T. GARRETT /S/ NANCY L. LEAMING Director November 20, 2014NANCY L. LEAMING /S/ LAWRENCE M. LEVY Director November 20, 2014LAWRENCE M. LEVY /S/ SAMUEL MERKSAMER Director November 20, 2014SAMUEL MERKSAMER /S/ CHRISTIANA STAMOULIS Director November 20, 2014CHRISTIANA STAMOULIS /S/ ELAINE S. ULLIAN Director November 20, 2014ELAINE S. ULLIAN /S/ WAYNE WILSON Director November 20, 2014WAYNE WILSON Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsHologic, Inc.Consolidated Financial StatementsYears ended September 27, 2014, September 28, 2013 and September 29, 2012Contents Report of Independent Registered Public Accounting Firm F-2 Consolidated Financial Statements Consolidated Statements of Operations F-3 Consolidated Statements of Comprehensive Loss F-4 Consolidated Balance Sheets F-5 Consolidated Statements of Stockholders’ Equity F-6 Consolidated Statements of Cash Flows F-7 Notes to Consolidated Financial Statements F-8 F-1Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsReport of Independent Registered Public Accounting FirmThe Board of Directors and Stockholders of Hologic, Inc.:We have audited the accompanying consolidated balance sheets of Hologic, Inc. as of September 27, 2014 and September 28, 2013 and the relatedconsolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended September 27,2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financialstatements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position ofHologic, Inc. at September 27, 2014 and September 28, 2013, and the consolidated results of its operations and cash flows for each of the three years in theperiod ended September 27, 2014, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Hologic, Inc.’s internalcontrol over financial reporting as of September 27, 2014, based on criteria established in Internal Control-Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission (1992 framework) and our report dated November 20, 2014 expressed an unqualified opinionthereon. /s/ Ernst & Young LLP Boston, MassachusettsNovember 20, 2014F-2Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsHologic, Inc.Consolidated Statements of Operations(In millions, except number of shares, which are reflected in thousands, and per share data) Years ended September 27, 2014 September 28, 2013 September 29, 2012Revenues: Product $2,094.9 $2,100.9 $1,657.7Service and other 435.8 391.4 344.9 2,530.7 2,492.3 2,002.6Costs of revenues: Product 731.3 818.2 616.8Amortization of intangible assets 314.6 307.9 201.9Impairment of intangible assets 26.6 1.7 —Service and other 212.7 203.1 189.5Gross Profit 1,245.5 1,161.4994.4Operating expenses: Research and development 203.2 197.6 131.0Selling and marketing 331.7 342.1 322.3General and administrative 259.8 227.7 220.5Amortization of intangible assets 113.8 112.6 72.0Impairment of intangible assets 5.6 — —Contingent consideration – compensation expense — 80.0 81.0Contingent consideration – fair value adjustments — 11.3 38.5Impairment of goodwill — 1,117.4 5.8Gain on sale of intellectual property — (53.9) (12.4)Acquired in-process research and development — — 4.5Restructuring and divestiture charges 51.7 32.8 17.5 965.8 2,067.6 880.7Income (loss) from operations 279.7 (906.2)113.7Interest income 1.3 1.3 2.3Interest expense (220.6) (281.1) (140.3)Debt extinguishment loss (7.4) (9.2) (42.3)Other (expense) income, net (4.9) 2.3 4.9Income (loss) before income taxes 48.1 (1,192.9)(61.7)Provision (benefit) for income taxes 30.8 (20.1) 11.9Net income (loss) $17.3 $(1,172.8)$(73.6)Net income (loss) per common share: Basic $0.06 $(4.36) $(0.28)Diluted $0.06 $(4.36) $(0.28)Weighted average number of shares outstanding: Basic 275,499 268,704 264,041Diluted 278,360 268,704 264,041See accompanying notes.F-3Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsHologic, Inc.Consolidated Statements of Comprehensive Loss(In millions) Years ended September 27, 2014 September 28, 2013 September 29, 2012Net income (loss) $17.3 $(1,172.8) $(73.6)Changes in foreign currency translation adjustment (13.3) 1.4 6.2Changes in unrealized holding gains and losses on available-for-salesecurities (3.2) 12.1 0.1Changes in pension plans, net of taxes of $0.2 in 2014, $0.1 in 2013and $0.6 in 2012 (1.3) 0.1 (1.5)Other comprehensive (loss) income (17.8) 13.64.8Comprehensive loss $(0.5) $(1,159.2)$(68.8)See accompanying notes.F-4Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsHologic, Inc.Consolidated Balance Sheets(In millions, except number of shares, which are reflected in thousands, and par value) September 27, 2014 September 28, 2013ASSETS Current assets: Cash and cash equivalents$736.1 $822.5Restricted cash5.5 6.9Accounts receivable, less reserves of $12.0 and $8.8, respectively396.0 409.3Inventories330.6 289.4Deferred income tax assets39.4 —Prepaid income taxes22.4 44.7Prepaid expenses and other current assets35.8 48.4Other current assets – assets held-for-sale— 3.0Total current assets1,565.8 1,624.2Property, plant and equipment, net461.9 491.5Intangible assets, net3,433.6 3,906.7Goodwill2,810.8 2,814.5Other assets142.6 163.9Total assets$8,414.7 $9,000.8LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current portion of long-term debt$114.5 $563.8Accounts payable92.1 80.5Accrued expenses262.1 272.0Deferred revenue150.9 132.3Deferred income tax liabilities— 39.8Total current liabilities619.6 1,088.4Long-term debt, net of current portion4,153.2 4,242.1Deferred income tax liabilities1,375.4 1,535.3Deferred service obligations – long-term20.1 25.5Other long-term liabilities183.4 168.0Commitments and contingencies (Note 12) Stockholders’ equity: Preferred stock, $0.01 par value – 1,623 shares authorized; 0 shares issued— —Common stock, $0.01 par value – 750,000 shares authorized; 277,972 and 272,036 shares issued,respectively2.8 2.7Additional paid-in-capital5,658.2 5,536.3Accumulated deficit(3,600.6) (3,616.4)Accumulated other comprehensive income2.6 20.4Treasury stock, at cost – 219 shares at September 28, 2013— (1.5)Total stockholders’ equity2,063.0 1,941.5Total liabilities and stockholders’ equity$8,414.7 $9,000.8See accompanying notes.F-5Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsHologic, Inc.Consolidated Statements of Stockholders' Equity(In millions, except number of shares which are reflected in thousands) Common Stock AdditionalPaid-in-Capital AccumulatedDeficit AccumulatedOtherComprehensiveIncome Treasury Stock TotalStockholders’Equity Number ofShares Par Value Number ofShares Amount Balance at September 24,2011 262,459 $2.6 $5,303.7 $(2,370.0) $2.0 219 $(1.5) $2,936.8Exercise of stockoptions 2,457 — 27.7 — — — — 27.7Issuance of commonstock to employeesupon vesting ofrestricted stock units,net of shares withheldfor employee taxes 673 — (5.7) — — — — (5.7)Issuance of commonstock under theemployee stockpurchase plan 46 — 0.9 — — — — 0.9Stock-basedcompensation expense — — 40.0 — — — — 40.0Excess tax benefit fromemployee equity awards — — 4.4 — — — — 4.4Fair value of optionsexchanged in a businesscombination — — 2.7 — — — — 2.7Equity componentrelated to convertiblenotes, net of taxes — — 23.0 — — — — 23.0Net loss — — — (73.6) — — — (73.6)Foreign currencytranslation adjustment — — — — 6.2 — — 6.2Adjustment to minimumpension liability, net — — — — (1.5) — — (1.5)Unrealized gain onmarketable securities — — — — 0.1 — — 0.1Balance at September 29,2012 265,6352.65,396.7(2,443.6)6.8219(1.5)2,961.0Exercise of stockoptions 4,786 0.1 65.6 — — — — 65.7Issuance of commonstock to employeesupon vesting ofrestricted stock units,net of shares withheldfor employee taxes 1,117 — (12.3) — — — — (12.3)Issuance of commonstock under theemployee stockpurchase plan 498 — 8.0 — — — — 8.0Stock-basedcompensation expense — — 52.4 — — — — 52.4Excess tax benefit fromemployee equity awards — — 5.9 — — — — 5.9Equity componentrelated to convertiblenotes, net of taxes — — 20.0 — — — — 20.0Net loss — — — (1,172.8) — — — (1,172.8)Foreign currencytranslation adjustment — — — — 1.4 — — 1.4Adjustment to minimumpension liability, net — — — — 0.1 — — 0.1Unrealized gain onmarketable securities — — — — 12.1 — — 12.1Balance at September 28,2013 272,0362.75,536.3(3,616.4)20.4219(1.5)1,941.5Exercise of stockoptions 4,697 0.1 70.5 — — — — 70.6Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Issuance of commonstock to employeesupon vesting ofrestricted stock units,net of shares withheldfor employee taxes 846 — (9.8) — — — — (9.8)Issuance of commonstock under theemployee stockpurchase plan 612 — 10.9 — — — — 10.9Stock-basedcompensation expense — — 49.5 — — — — 49.5Excess tax benefit fromemployee equity awards — — 0.8 — — — — 0.8Net income — — — 17.3 — — — 17.3Foreign currencytranslation adjustment — — — — (13.3) — — (13.3)Adjustment to minimumpension liability, net — — — — (1.3) — — (1.3)Retirement of treasuryshares (219) — — (1.5) — (219) 1.5 —Unrealized losses onmarketable securities — — — — (3.2) — — (3.2)Balance at September 27,2014 277,972$2.8$5,658.2$(3,600.6)$2.6—$—$2,063.0See accompanying notes.F-6Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsHologic, Inc.Consolidated Statements of Cash Flows(In millions) Years ended September 27, 2014 September 28, 2013 September 29, 2012OPERATING ACTIVITIES Net income (loss)$17.3 $(1,172.8) $(73.6)Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation94.7 95.5 71.9Amortization428.5 420.5 273.9Non-cash interest expense68.7 81.2 75.0Stock-based compensation expense50.0 52.3 40.6Excess tax benefit related to equity awards(5.7) (7.4) (6.2)Deferred income taxes(243.1) (198.0) (155.2)Gain on sale of intellectual property— (53.9) (12.4)Fair value adjustments to contingent consideration— 11.3 38.5Fair value write-up of inventory sold— 52.4 19.9Impairment of goodwill— 1,117.4 5.8Asset impairment charges38.4 9.4 16.9Acquired in-process research and development— — 4.5Debt extinguishment losses7.4 9.2 42.3Cost-method equity investment impairment charges6.9 6.4 —Gain on sale of cost-method equity investment— (2.0) —Loss on disposal of property and equipment7.1 4.9 3.8Loss on sale of businesses5.5 — —Other(11.8) 2.9 (3.7)Changes in operating assets and liabilities, net of effects from acquisitions: Accounts receivable7.9 4.1 (11.0)Inventories(44.7) 25.2 (12.2)Prepaid income taxes22.4 25.1 6.1Prepaid expenses and other assets17.3 0.9 69.8Accounts payable11.8 (6.4) 3.8Accrued expenses and other liabilities14.7 2.3 (41.0)Deferred revenue15.1 13.3 12.7Net cash provided by operating activities508.4 493.8370.2INVESTING ACTIVITIES Acquisition of businesses, net of cash acquired— (6.3) (3,762.4)Payment of additional acquisition consideration— (16.8) (9.8)Proceeds from sale of business, net of cash transferred10.1 85.1 —Purchase of property and equipment(44.3) (49.0) (33.1)Increase in equipment under customer usage agreements(35.9) (41.1) (45.6)Net sales (purchases) of insurance contracts13.8 (4.0) —Purchases of mutual funds(29.7) — —Sales of mutual funds22.4 — —Proceeds from sale of intellectual property— 60.0 12.5Acquisition of in-process research and development assets— — (4.5)Purchase of cost-method equity investments— (3.7) (0.3)Sale of a cost-method equity investment— 2.1 —Increase in other assets(3.4) (7.5) (7.6)Net cash (used in) provided by investing activities(67.0) 18.8 (3,850.8)FINANCING ACTIVITIES Proceeds from long-term debt— — 3,476.3Repayment of long-term debt(595.0) (265.0) —Payment of debt issuance costs(2.4) (9.4) (81.4)Payment of contingent consideration— (43.0) (51.7)Payment of deferred acquisition consideration(5.0) (1.6) (44.2)Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Net proceeds from issuance of common stock pursuant to employee stock plans81.4 75.1 28.6Excess tax benefit related to equity awards5.7 7.4 6.2Payment of minimum tax withholdings on net share settlements of equity awards(9.8) (12.3) (5.7)Net cash (used in) provided by financing activities(525.1) (248.8)3,328.1Effect of exchange rate changes on cash and cash equivalents(2.7) (1.7) 0.6Net (decrease) increase in cash and cash equivalents(86.4) 262.1(151.9)Cash and cash equivalents, beginning of period822.5 560.4 712.3Cash and cash equivalents, end of period$736.1 $822.5$560.4See accompanying notes.F-7Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsHologic, Inc.Notes to Consolidated Financial Statements(all tabular amounts in millions, except number of shares which are reflected in thousands)1. OperationsHologic, Inc. (the “Company” or “Hologic”) develops, manufactures and distributes premium diagnostics products, medical imaging systems andsurgical products. The Company’s core business units are focused on Diagnostics, Breast Health, GYN Surgical and Skeletal Health.2. Summary of Significant Accounting PoliciesPrinciples of ConsolidationThe consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions andbalances have been eliminated in consolidation. The Company’s fiscal year ends on the last Saturday in September. Fiscal 2014, 2013 and 2012 ended onSeptember 27, 2014, September 28, 2013 and September 29, 2012, respectively. Fiscal 2014 and 2013 were 52 week periods and fiscal 2012 was a 53 weekperiod.Management’s Estimates and UncertaintiesThe preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to makesignificant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions bymanagement affect the Company’s revenue recognition for multiple element arrangements, allowance for doubtful accounts, the net realizable value ofinventory, estimated fair value of cost-method equity investments, valuations, purchase price allocations and contingent consideration related to businesscombinations, expected future cash flows including growth rates, discount rates, terminal values and other assumptions and estimates used to evaluate therecoverability of long-lived assets and goodwill, estimated fair values of intangible assets and goodwill, amortization methods and periods, warranty reserves,certain accrued expenses, restructuring and other related charges, stock-based compensation, contingent liabilities, tax reserves, deferred tax rates andrecoverability of the Company’s net deferred tax assets and related valuation allowances.Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. Changes in estimates are recordedin the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to bereasonable under the circumstances.The Company is subject to a number of risks similar to those of other companies of similar size in its industry, including dependence on third-partyreimbursements to support the markets of the Company’s products, early stage of development of certain products, rapid technological changes,recoverability of long-lived assets (including intangible assets and goodwill), competition, stability of world financial markets, ability to obtain regulatoryapprovals, changes in the regulatory environment, limited number of suppliers, customer concentration, integration of acquisitions, substantial indebtedness,government regulations, future sales or issuances of its common stock, management of international activities, protection of proprietary rights, patent andother litigation and dependence on key individuals.Cash EquivalentsCash equivalents are highly liquid investments with insignificant interest rate risk and maturities of three months or less at the time of acquisition. AtSeptember 27, 2014 and September 28, 2013, the Company’s cash equivalents consisted of money market accounts.Marketable SecuritiesThe Company’s marketable securities are comprised of equity securities and mutual funds. The equity securities are investments in the common stockof publicly traded companies, and the mutual funds are used to fund a portion of the Company's deferred compensation plan. The equity securities areclassified as available-for-sale and are recorded at fair value with the unrealized gains or losses, net of tax, within accumulated other comprehensive income(loss), which is a component of stockholders’ equity. The mutual funds are classified as trading and are recorded at fair value with unrealized gains and lossesrecorded in other income (expense), net in the Consolidated Statements of Operations.F-8Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe Company periodically reviews its marketable equity securities classified as available-for-sale for other-than-temporary declines in fair value belowcost basis, or whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. The determination that a decline isother-than-temporary is, in part, subjective and influenced by many factors. When assessing marketable equity securities for other-than-temporary declines invalue, the Company considers factors including: the significance of the decline in value compared to the cost basis; the underlying factors contributing to adecline in the price of the security; how long the market value of the investment has been less than its cost basis; any market conditions that impact liquidity;the views of external investment analysts; the financial condition and near-term prospects of the investee; any news or financial information that has beenreleased specific to the investee; and the outlook for the overall industry in which the investee operates. The Company concluded there was not an other-than-temporary impairment at September 27, 2014.The following reconciles cost basis to fair market value. Cost Gross UnrealizedGains Gross UnrealizedLosses Fair ValueAs of September 27, 2014 $15.5 $10.2 $(1.3) $24.4As of September 28, 2013 $5.9 $12.2 $— $18.1As of September 29, 2012 $5.9 $0.1 $— $6.0Concentrations of Credit RiskFinancial instruments that subject the Company to credit risk primarily consist of cash and cash equivalents, cost-method equity investments, and tradeaccounts receivable. The Company invests its cash and cash equivalents with high credit quality financial institutions.The Company’s customers are principally located in the United States, Europe and Asia. The Company performs ongoing credit evaluations of thefinancial condition of its customers and generally does not require collateral. Although the Company is directly affected by the overall financial condition ofthe healthcare industry, as well as global economic conditions, management does not believe significant credit risk exists as of September 27, 2014. TheCompany generally has not experienced any material losses related to receivables from individual customers or groups of customers in the healthcareindustry. The Company maintains an allowance for doubtful accounts based on accounts past due and historical collection experience.There were no customers with balances greater than 10% of accounts receivable as of September 27, 2014 and September 28, 2013, or any customersthat represented greater than 10% of consolidated revenues for fiscal years 2014, 2013 and 2012.Supplemental Cash Flow Statement Information Years endedSeptember 27, 2014 September 28, 2013 September 29, 2012Cash paid during the period for income taxes $231.8 $79.9 $166.6Cash paid during the period for interest $155.7 $192.8 $55.0Non-Cash Investing Activities: Fair value of stock options assumed in the Gen-Probe acquisition $— $— $2.7Non-Cash Financing Activities: Fair value of contingent consideration at acquisition $— $0.5 $—Deferred payments for acquisitions $— $— $1.7F-9Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsInventoriesInventories are valued at the lower of cost or market on a first in, first out basis. Work-in-process and finished goods inventories consist of materials,labor and manufacturing overhead. The valuation of inventory requires management to estimate excess and obsolete inventory. The Company employs avariety of methodologies to determine the net realizable value of its inventory. Provisions for excess and obsolete inventory are primarily based onmanagement’s estimates of forecasted sales, usage levels and expiration dates, as applicable for disposable products. A significant change in the timing orlevel of demand for the Company’s products compared to forecasted amounts may result in recording additional charges for excess and obsolete inventory inthe future. The Company records charges for excess and obsolete inventory within cost of product revenues.Inventories consisted of the following: September 27, 2014 September 28, 2013Raw materials $115.6 $115.6Work-in-process 57.1 51.2Finished goods 157.9 122.6 $330.6 $289.4Property, Plant and EquipmentProperty, plant and equipment is recorded at cost less allowances for depreciation. The straight-line method of depreciation is used for all property andequipment.Property, plant and equipment consisted of the following as of: September 27, 2014 September 28, 2013Equipment and software $342.5 $318.5Equipment under customer usage agreements 285.2 275.7Buildings and improvements 176.9 171.5Leasehold improvements 63.2 68.1Land 51.6 51.6Furniture and fixtures 16.3 22.6 935.7 908.0Less - accumulated depreciation and amortization (473.8) (416.5) $461.9 $491.5Property, plant and equipment are depreciated over the following estimated useful lives:Asset Classification Estimated Useful LifeBuilding and improvements 35–40 yearsEquipment and software 3–10 yearsEquipment under customer usage agreements 3–8 yearsFurniture and fixtures 5–7 yearsLeasehold improvements Shorter of the Original Term of Leaseor Estimated Useful LifeEquipment under customer usage agreements primarily consists of diagnostic instrumentation and medical imaging equipment located at customersites but owned by the Company. Generally, the customer has the right to use it for a period of time provided they meet certain agreed to conditions. TheCompany recovers the cost of providing the equipment from the sale of disposables. The depreciation costs associated with equipment under customer usageagreements are charged to cost of product revenues over the estimated useful life of the equipment. The costs to maintain the equipment in the field arecharged to cost of product revenue as incurred.F-10Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsLong-Lived AssetsThe Company reviews its long-lived assets, which includes property, plant and equipment and identifiable intangible assets (see below for discussionof intangible assets), for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable inaccordance with ASC 360-10-35-15, Property, Plant and Equipment—Impairment or Disposal of Long-Lived Assets (ASC 360). Recoverability of theseassets is evaluated by comparing the carrying value of the assets to the undiscounted cash flows estimated to be generated by those assets over theirremaining economic life. If the undiscounted cash flows are not sufficient to recover the carrying value of the assets, the assets are considered impaired. Theimpairment loss is measured by comparing the fair value of the assets to their carrying value. Fair value is determined by either a quoted market price, if any,or a value determined by a discounted cash flow technique.In the second quarter of fiscal 2014, the Company evaluated its MRI breast coils product line asset group, which is within its Breast Health segment, forimpairment due to the Company’s expectation that it would be sold or disposed of significantly before the end of its previously estimated useful life. At thistime, the undiscounted cash flows expected to be generated by this asset group over its estimated remaining useful life were not sufficient to recover itscarrying value. The Company estimated the fair value of the asset group using market participant assumptions, which were based on underlying cash flowestimates, resulting in an impairment charge of $28.6 million. Pursuant to ASC 360, Property, Plant, and Equipment-Other, subtopic 10-35-28, theimpairment charge was allocated to the long-lived assets, with $27.1 million to intangible assets and $1.5 million to property and equipment. The propertyand equipment charge was recorded to cost of product revenues and general and administrative expenses in the amounts of $0.3 million and $1.2 million,respectively. The Company believes this adjustment falls within Level 3 of the fair value hierarchy. The Company completed the sale of this product line inthe fourth quarter of fiscal 2014 (see Note 4).In the first quarter of fiscal 2014, the Company recorded a $3.1 million impairment charge to record certain of its buildings at fair value related to theshutdown of its Hitec Imaging organic photoconductor manufacturing line (see Note 4).At the end of the fourth quarter of fiscal 2013, the Company decided to transition certain of its placed equipment at customer sites to its Pantherinstrument, and as a result, the Company recorded a charge of $6.3 million to cost of product revenues of which $3.7 million related to recording certainequipment at its fair value.At the end of the second quarter of fiscal 2012, the Company decided to cease manufacturing, marketing and selling its Adiana system, which was aproduct line within the Company’s GYN Surgical segment, determining that the product was not financially viable and would not become so in theforeseeable future. As a result, in fiscal 2012, the Company recorded charges of $19.5 million of which $6.5 million was recorded within cost of productrevenues to write down certain manufacturing equipment and equipment placed at customer sites to its fair value that had no further utility.Business Combinations and Acquisition of Intangible AssetsThe Company records tangible and intangible assets acquired in business combinations under the purchase method of accounting. The Companyaccounts for acquisitions in accordance with ASC 805, Business Combinations (ASC 805). Amounts paid for each acquisition are allocated to the assetsacquired and liabilities assumed based on their fair values at the dates of acquisition. The Company allocates the purchase price in excess of the fair value ofthe net tangible assets acquired to identifiable intangible assets, including purchased research and development, based on detailed valuations that use certaininformation and assumptions provided by management. The Company allocates any excess purchase price over the fair value of the net tangible andintangible assets acquired to goodwill. The use of alternative valuation assumptions, including estimated cash flows and discount rates, and alternativeuseful life assumptions could result in different purchase price allocations and intangible asset amortization expense in current and future periods.The Company uses the income approach to determine the fair value of developed technology and in-process research and development ("IPR&D")acquired in a business combination. This approach determines fair value by estimating the after-tax cash flows attributable to the respective asset over itsuseful life and then discounting these after-tax cash flows back to a present value. The Company bases its revenue assumptions on estimates of relevantmarket sizes, expected market growth rates, expected trends in technology and expected product introductions by competitors. Developed technologyrepresents patented and unpatented technology and know-how. Regarding the value of the in-process projects, the Company considers, among other factors,the in-process projects’ stage of completion, the complexity of the work completed as of the acquisition date, the projected costs to complete, thecontribution of core technologies and other acquired assets, the expected introduction date and the estimated useful life of the technology. The Companybelieves that the estimated developed technology and IPR&D amounts represent the fair value at the date of acquisition and do not exceed the amount athird-party would pay for the assets.F-11Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe Company also uses the income approach, as described above, to determine the estimated fair value of certain other identifiable intangible assetsincluding customer relationships, trade names and business licenses. Customer relationships represent established relationships with customers, whichprovide a ready channel for the sale of additional products and services. Trade names represent acquired company and product names.Intangible Assets and GoodwillIntangible AssetsIntangible assets are initially recorded at fair value and stated net of accumulated amortization and impairments. The Company amortizes its intangibleassets that have finite lives using either the straight-line method, or if reliably determinable, based on the pattern in which the economic benefit of the asset isexpected to be utilized. Amortization is recorded over the estimated useful lives ranging from 2 to 30 years. The Company evaluates the realizability of itsdefinite lived intangible assets whenever events or changes in circumstances or business conditions indicate that the carrying value of these assets may notbe recoverable based on expectations of future undiscounted cash flows for each asset group. If the carrying value of an asset or asset group exceeds itsundiscounted cash flows, the Company estimates the fair value of the assets, generally utilizing a discounted cash flow analysis based on the present value ofestimated future cash flows to be generated by the assets using a risk-adjusted discount rate. To estimate the fair value of the assets, the Company uses marketparticipant assumptions pursuant to ASC 820, Fair Value Measurements.Indefinite lived intangible assets, such as IPR&D assets, are required to be tested for impairment annually, or more frequently if indicators ofimpairment are present. The Company’s annual impairment test date is as of the first day of its fourth quarter. The Company tested its IPR&D assets utilizingthe discounted cash flow ("DCF") model.During the fourth quarter of fiscal 2014, the Company recorded impairment charges of $5.1 million for a reduction in fair value of its remaining IPR&Dassets. The reduction in fair value was primarily due to lower revenue projections of the respective products compared to those estimated at the time of theGen-Probe acquisition.During the second quarter of fiscal 2014, the Company recorded impairment charges of $26.6 million and $0.5 million to developed technology andtrade names, respectively, related to its MRI breast coils product line discussed above. In addition, the Company periodically re-evaluates the lives of itsdefinite-lived intangible assets, and in the second quarter of fiscal 2014 shortened the life of certain corporate trade names, which will be phased out.During the fourth quarter of fiscal 2013, as a result of the Company’s conclusion that its Molecular Diagnostics reporting unit was impaired (asdiscussed below), the Company performed an impairment test of this reporting unit’s long-lived assets as of the first day of the fourth quarter. The impairmentevaluation was based on expectations of future undiscounted cash flows compared to the carrying value of the long-lived assets. The Company’s cash flowestimates were based upon future projected net cash flows derived from the Company-wide annual planning process, which were used for the annual goodwillimpairment test discussed below. Based on this analysis, the Molecular Diagnostics long-lived assets were deemed to not be impaired. The Company believesits procedures for estimating future cash flows were reasonable and consistent with market conditions at the time of estimation.During the third quarter of fiscal 2013, the Company determined that a certain developed technology asset was impaired and recorded a $1.7 millioncharge to cost of product revenues to record the asset at its estimated fair value.During the fourth quarter of fiscal 2012, the Company acquired certain IPR&D assets that were not part of a business acquisition. Since these assets hadno alternative future use, the Company recorded IPR&D charges of $4.5 million in fiscal 2012.F-12Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIntangible assets consisted of the following: September 27, 2014 September 28, 2013Description GrossCarryingValue AccumulatedAmortization GrossCarryingValue AccumulatedAmortizationDeveloped technology $3,951.1 $1,390.5 $4,009.0 $1,094.5In-process research and development 17.9 — 24.0 —Customer relationships and contracts 1,102.4 384.7 1,101.9 296.5Trade names 236.5 105.3 238.1 81.8Patents 14.5 8.9 13.0 8.5Business licenses 2.6 2.0 2.6 0.6 $5,325.0$1,891.4$5,388.6$1,481.9In fiscal 2012, as a result of its acquisition of Gen-Probe, the Company recorded $1.57 billion of developed technology assets and $227.0 million ofIPR&D assets related to six projects. In fiscal 2013, management revised its valuation analysis for a correction of projected revenues expected from certain ofthe development projects which increased the value of the developed technology assets to $1.7 billion and reduced the IPR&D assets to $117.0 million. TheCompany recorded this adjustment in fiscal 2013 and determined it was immaterial to its financial statements.Subsequent to the acquisition and through September 2014, the Company has received United States Food and Drug Administration ("FDA") approvalfor four projects with an aggregate value of $94.0 million. Amortization of these assets begins once FDA approval is received. The other projects are expectedto be completed over the next three years. Given the uncertainties inherent with product development and commercial introduction, there can be noassurance that any of the Company’s product development efforts will be successful, completed on a timely basis or within budget, if at all.Amortization expense related to developed technology and patents is classified as a component of cost of product revenues—amortization ofintangible assets. Amortization expense related to customer relationships and contracts, trade names, business licenses and non-competes is classified as acomponent of amortization of intangible assets within operating expenses.The estimated amortization expense at September 27, 2014 for each of the five succeeding fiscal years was as follows: Fiscal 2015$403.3Fiscal 2016$374.5Fiscal 2017$365.4Fiscal 2018$354.9Fiscal 2019$343.1GoodwillIn accordance with ASC 350, Intangibles—Goodwill and Other (ASC 350), the Company tests goodwill for impairment at the reporting unit level on anannual basis and between annual tests if events and circumstances indicate it is more likely than not that the fair value of a reporting unit is less than itscarrying value. Events that could indicate impairment and trigger an interim impairment assessment include, but are not limited to, current economic andmarket conditions, including a decline in market capitalization, a significant adverse change in legal factors, business climate, operational performance of thebusiness or key personnel, and an adverse action or assessment by a regulator.In performing the impairment test, the Company utilizes the two-step approach prescribed under ASC 350. The first step requires a comparison of thecarrying value of each reporting unit to its estimated fair value. To estimate the fair value of its reporting units for Step 1, the Company primarily utilizes theincome approach. The income approach is based on a DCF analysis and calculates the fair value by estimating the after-tax cash flows attributable to areporting unit and then discounting the after-tax cash flows to a present value using a risk-adjusted discount rate. Assumptions used in the DCF requiresignificant judgment, including judgment about appropriate discount rates and terminal values, growth rates, and the amount and timing of expected futurecash flows. The forecasted cash flows are based on the Company’s most recent budget and strategic plan and for years beyond this period, the Company’sestimates are based on assumed growth rates expected as of the measurement date. The Company believes its assumptions are consistent with the plans andestimates used to manage the underlying businesses. The discount rates used are intended to reflect the risks inherent in future cash flow projections and arebased on estimates of the weighted-average cost of capital (“WACC”) of market participants relative to each respective reporting unit. The marketF-13Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsapproach considers comparable market data based on multiples of revenue or earnings before interest, taxes, depreciation and amortization (“EBITDA”) andis primarily used as a corroborative analysis to the results of the DCF analysis. The Company believes its assumptions used to determine the fair value of itsreporting units are reasonable. If different assumptions were used, particularly with respect to forecasted cash flows, terminal values, WACCs, or marketmultiples, different estimates of fair value may result and there could be the potential that an impairment charge could result. Actual operating results and therelated cash flows of the reporting units could differ from the estimated operating results and related cash flows.If the carrying value of a reporting unit exceeds its estimated fair value, the Company is required to perform the second step of the goodwill impairmenttest to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of a reporting unit’sgoodwill to its carrying value. The implied fair value of goodwill is derived by performing a hypothetical purchase price allocation for each reporting unit asof the measurement date and allocating the reporting unit’s estimated fair value to its assets and liabilities. The residual amount from performing thisallocation represents the implied fair value of goodwill. To the extent this amount is below the carrying value of goodwill, an impairment charge is recorded.The Company conducted its fiscal 2014 annual impairment test on the first day of the fourth quarter, and as noted above used DCF and marketapproaches to estimate the fair value of its reporting units as of June 29, 2014, and ultimately used the fair value determined by the DCF approach in makingits impairment test conclusions. The Company believes it used reasonable estimates and assumptions about future revenue, cost projections, cash flows,market multiples and discount rates as of the measurement date. As a result of completing Step 1, all of the Company’s reporting units had fair valuesexceeding their carrying values, and as such, Step 2 of the impairment test was not required. For illustrative purposes, had the fair value of each of thereporting units that passed Step 1 been lower by 10%, all of the reporting units, except for one, would have still passed Step 1 of the goodwill impairmenttest. The one reporting unit that was at risk of failing Step 1 is within the Diagnostics segment and had a goodwill balance of $202.8 million at September 27,2014.At September 27, 2014, the Company believes that each reporting unit, except for one within its Diagnostics segment as noted above, with goodwillaggregating $2.61 billion, was not at risk of failing Step 1 of the goodwill impairment test based on the current forecasts.The Company conducted its fiscal 2013 annual impairment test on the first day of the fourth quarter, and as noted above used a DCF analysis toestimate the fair value of its reporting units as of June 30, 2013. The Company believes it used reasonable estimates and assumptions about future revenue,cost projections, cash flows, market multiples and discount rates as of the measurement date. As a result of completing Step 1, all of the Company’s reportingunits, except for its Molecular Diagnostics reporting unit, which is within the Company’s Diagnostics segment, had fair values exceeding their carryingvalues, and as such, Step 2 of the impairment test was not required for those reporting units. In connection with its company-wide annual budgeting andstrategic planning process performed in the fourth quarter of fiscal 2013, the Company performed a full re-evaluation of its existing product developmentefforts and cost structure. As a result, the Company reduced its short term and long term revenue forecasts and determined that indicators of impairmentexisted in its Molecular Diagnostics reporting unit. The Molecular Diagnostics reporting unit is primarily comprised of the Company’s Aptima businessacquired in the Gen-Probe acquisition and the molecular diagnostics business acquired in the Third Wave acquisition. The updated forecast of revenue andprofitability, which reflected recent pricing pressures at that time, were lower than those expected at the time of the Gen-Probe acquisition. As a result, the fairvalue of this reporting unit was below its carrying value. The Company performed Step 2 of the impairment test, consistent with the procedures describedabove, and recorded a goodwill impairment charge of $1.1 billion. The basis of fair value for Molecular Diagnostics assumed the reporting unit would bepurchased or sold in a taxable transaction, and the discount rate of 10% applied to the after-tax cash flows was relatively consistent with that used in theCompany’s purchase accounting for the Gen-Probe acquisition. For illustrative purposes, had the fair value of Molecular Diagnostics been lower by 10%, theCompany would have recorded an additional impairment charge of $195.4 million. In addition, for illustrative purposes, had the fair value of each of thereporting units that passed Step 1 been lower by 10%, all of the remaining reporting units would have still passed Step 1 of the goodwill impairment test.The Company conducted its fiscal 2012 annual impairment test on the first day of the fourth quarter and utilized the DCF analysis to estimate the fairvalue of its reporting units as of June 24, 2012. The Company believes it used reasonable estimates and assumptions about future revenue, cost projections,cash flows, market multiples and discount rates as of the measurement date. As a result of completing Step 1, all of the Company’s reporting units, exceptMammoSite, which is within the Company’s Breast Health segment, had fair values exceeding their carrying values, and as such, Step 2 of the impairmenttest was not required for those reporting units. MammoSite’s fair value declined from fiscal 2011 primarily due to a reduction in the Company’s revenueprojections and long-term growth rates. The changes in MammoSite’s financial projections were a result of the continuing deterioration of the brachytherapymarket, and competition from existing technologies. The Company performed the Step 2 analysis for MammoSite, consistent with the procedures describedabove, and recorded a $5.8 million goodwill impairment charge, resulting in no remaining goodwill for this reporting unit. For the Company’s otherreporting units, if theirF-14Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsrespective fair values had been lower by 10%, each reporting unit would have still passed Step 1 of the goodwill impairment test.The Company believes that the procedures performed and the estimates and assumptions used in its Step 1 and Step 2 analyses for each reporting unitwere reasonable and in accordance with U.S. GAAP. The estimate of fair value requires significant judgment. The impairment testing process is subjective andrequires judgment at many points throughout the analysis. If these estimates or their related assumptions change in the future, the Company may be requiredto record impairment charges for these assets not previously recorded.A rollforward of goodwill activity by reportable segment from September 28, 2013 to September 27, 2014 is as follows: Diagnostics Breast Health GYN Surgical Skeletal Health TotalBalance at September 28, 2013$1,153.5 $636.4 $1,016.4 $8.2 $2,814.5Disposition of a portion of a reporting unit(0.2) (0.7) — — (0.9)Tax adjustments(0.7) — — — (0.7)Foreign currency and other1.5 (4.0) 0.4 — (2.1)Balance at September 27, 2014$1,154.1$631.7$1,016.8$8.2 $2,810.8A rollforward of accumulated goodwill impairment losses by reportable segment from September 28, 2013 to September 27, 2014 is as follows: Diagnostics Breast Health GYN Surgical TotalBalance at September 28, 2013 $2,025.7 $348.4 $1,165.8 $3,539.9Impairment charge — — — —Balance at September 27, 2014 $2,025.7 $348.4$1,165.8 $3,539.9Other AssetsOther assets consisted of the following: September 27, 2014 September 28, 2013Other Assets Deferred financing costs $44.9 $60.6Life insurance contracts 22.4 33.9Mutual funds 15.4 6.9Marketable securities 24.4 18.1Manufacturing access fees 14.1 16.0Cost-method equity investments 5.2 12.6Other 16.2 15.8 $142.6 $163.9Deferred financing costs are related to the Company’s Convertible Notes, Credit Agreement and Senior Notes (see Note 5 for further discussion). TheCompany amortizes amounts related to each debt issuance using the effective interest rate method over the period of earliest redemption or the term of suchdebt. Life insurance contracts were purchased in connection with the Company’s Nonqualified Deferred Compensation Plan (“DCP”) and are recorded at theircash surrender value (see Note 11 for further discussion). The manufacturing access fees are related to a manufacturing supply and purchase agreement for ourAptima HPV products and are being amortized over the term of the agreement.The Company’s cost-method equity investments are carried at cost as the Company owns less than 20% of the voting equity and does not have theability to exercise significant influence over these companies. The Company regularly evaluates the carrying value of its cost-method equity investments forimpairment and whether any events or circumstances are identified that would significantly harm the fair value of the investment. The primary indicators theCompany utilizes to identify these events and circumstances are the investee’s ability to remain in business, such as the investee’s liquidity and rate of cashuse, and the investee’s ability to secure additional funding and the value of that additional funding. In the event a decline in fairF-15Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsvalue is judged to be other-than-temporary, the Company will record an other-than-temporary impairment charge in other income (expense), net in theConsolidated Statements of Operations. During fiscal 2014 and 2013, the Company recorded other-than-temporary impairment charges of $6.9 million and$6.4 million, respectively, related to certain of its cost-method equity investments to adjust their carrying amounts to fair value. No such charges wererecorded in fiscal 2012. In the third quarter of fiscal 2013, the Company sold one of its investments and recorded a gain of $2.0 million.Research and Software Development CostsCosts incurred for the research and development of the Company’s products are expensed as incurred. Nonrefundable advance payments for goods orservices to be received in the future by the Company for use in research and development activities are deferred and capitalized. The capitalized amounts areexpensed as the related goods are delivered or the services are performed.The Company accounts for the development costs of software embedded in the Company’s products in accordance with ASC 985, Software. Costsincurred in the research, design and development of software embedded in products to be sold to customers are charged to expense until technologicalfeasibility of the ultimate product to be sold is established. The Company’s policy is that technological feasibility is achieved when a working model, withthe key features and functions of the product, is available for customer testing. Software development costs incurred after the establishment of technologicalfeasibility and until the product is available for general release are capitalized, provided recoverability is reasonably assured. Software development costseligible for capitalization have not been significant to date.Foreign Currency TranslationThe financial statements of the Company’s foreign subsidiaries are translated in accordance with ASC 830, Foreign Currency Matters. The reportingcurrency for the Company is the U.S. dollar. With the exception of its Costa Rica subsidiary, whose functional currency is the U.S. dollar, the functionalcurrency of the Company’s foreign subsidiaries is their local currency. Accordingly, assets and liabilities of these subsidiaries are translated at the exchangerate in effect at each balance sheet date. Before translation, the Company re-measures foreign currency denominated assets and liabilities, including inter-company accounts receivable and payable, into the functional currency of the respective entity, resulting in unrealized gains or losses recorded in otherincome (expense), net in the Consolidated Statements of Operations. Revenues and expenses are translated using average exchange rates during therespective period. Foreign currency translation adjustments are accumulated as a component of other comprehensive income (loss) as a separate componentof stockholders’ equity. Gains and losses arising from transactions denominated in foreign currencies are included in other income (expense), net in theConsolidated Statements of Operations and were not significant in any of the reporting periods presented.Accumulated Other Comprehensive IncomeOther comprehensive income includes certain transactions that have generally been reported in the statement of stockholders’ equity. The componentsof accumulated other comprehensive income consisted of the following: September 27, 2014 September 28, 2013Foreign currency translation adjustment $(4.7) $8.6Unrealized gains on available-for-sale securities 8.9 12.1Minimum pension liability, net of tax of $0.2 and $0.2, respectively (1.6) (0.3) $2.6 $20.4Revenue RecognitionThe Company generates revenue from the sale of its products, primarily medical imaging systems and diagnostic and surgical disposable products, andrelated services, which are primarily support and maintenance services on its medical imaging systems.The Company recognizes product revenue upon shipment provided that there is persuasive evidence of an arrangement, there are no uncertaintiesregarding acceptance, the sales price is fixed or determinable, no right of return exists and collection of the resulting receivable is reasonably assured.Generally, the Company’s product arrangements for capital equipment sales, primarily in its Breast Health and Skeletal Health reporting segments, aremultiple-element arrangements, including services, such as installation and training, and multiple products. Based on the terms and conditions of the productarrangements, the Company believes that these services and undelivered products can be accounted for separately from the delivered product element as theCompany’s delivered products have value to its customers on a stand-alone basis. Accordingly, revenue for services not yet performed at the time of productshipment are deferred and recognized as such services are performed. TheF-16Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsrelative selling price of any undelivered products is also deferred at the time of shipment and recognized as revenue when these products are delivered. Thereis no customer right of return in the Company’s sales agreements.Service revenues primarily consist of amounts recorded under service and maintenance contracts and repairs not covered under warranty, installationand training, and shipping and handling costs billed to customers. Service and maintenance contract revenues are recognized ratably over the term of thecontract. Other service revenues are recognized as the services are performed.For revenue arrangements with multiple deliverables, the Company records revenue as separate units of accounting if the delivered items have value tothe customer on a stand-alone basis, and if the arrangement includes a general right of return relative to the delivered items, the delivery or performance of theundelivered items is considered probable and substantially within the Company’s control. Some of the Company’s products have both software and non-software components that function together to deliver the product’s essential functionality. The Company determined that except for its computer-aideddetection (“CAD”) products and C-View product, the software element in its other products is incidental and not within the scope of the software revenuerecognition rules, ASC 985-605, Software—Revenue Recognition. The Company determined that given the significance of the software component’sfunctionality to its CAD and C-View systems, which are sold by its Breast Health segment, these products are within the scope of the software revenuerecognition rules. The Company evaluated the appropriate revenue recognition treatment of its other hardware products, including its Dimensions digitalmammography systems, which have both software and non-software components that function together to deliver the products’ essential functionality (i.e., itis a tangible product), and determined they are not within the scope of ASC 985-605.The Company is required to allocate revenue to its multiple element arrangements based on the relative fair value of each element’s selling price. TheCompany typically determines the selling price of its products based on its best estimate of selling prices (“ESP”) and services based on vendor-specificobjective evidence of selling price (“VSOE”). The Company determines VSOE based on its normal pricing and discounting practices for the specific productor service when sold on a stand-alone basis. In determining VSOE, the Company’s policy requires a substantial majority of selling prices for a product orservice to be within a reasonably narrow range. The Company also considers the class of customer, method of distribution, and the geographies into which itsproducts and services are sold when determining VSOE. If VSOE cannot be established, which may occur in instances when a product or service has not beensold separately, stand-alone sales are too infrequent, or product pricing is not within a narrow range, the Company attempts to establish the selling pricebased on third-party evidence of selling price (“TPE”). TPE is determined based on competitor prices for similar deliverables when sold separately. When theCompany cannot determine VSOE or TPE, it uses ESP in its allocation of arrangement consideration. The objective of ESP is to determine the price at whichthe Company would typically transact a stand-alone sale of the product or service. ESP is determined by considering a number of factors including Companypricing policies, internal costs and gross margin objectives, method of distribution, information gathered from experience in customer negotiations, marketresearch and information, recent technological trends, competitive landscape and geographies.For those arrangements accounted for under the software revenue recognition rules, ASC 985-605 generally requires revenue earned on softwarearrangements involving multiple elements to be allocated to each element based on their relative VSOE of fair value. If VSOE does not exist for a deliveredelement, the residual method is applied in which the arrangement consideration is allocated to the undelivered elements based on their VSOE with theremaining consideration recognized as revenue for the delivered elements. For multiple-element software arrangements where VSOE of fair value of Post-Contract Customer Support (“PCS”) has been established, the Company recognizes revenue using the residual method at the time all other revenuerecognition criteria have been met.Within its Diagnostics segment, the Company manufactures blood screening products according to demand schedules provided by its collaborationpartner, Grifols, S.A. (“Grifols”). The Company’s agreement provides that it shares a portion of Grifols’s revenue from screening blood donations. Uponshipment to Grifols, the Company recognizes product revenue at an agreed upon fixed transfer price, which is not refundable, and records the related cost ofproducts sold. Based on the terms of the Company’s collaboration agreement with Grifols, the Company’s ultimate share of the net revenue from sales to theend user in excess of the transfer price is not known until it is reported to the Company by Grifols. On a monthly basis, Grifols reports net revenue generatedduring the prior month and remits an additional corresponding net payment to the Company, which is recorded as revenue at that time. This paymentcombined with the transfer price revenues previously recognized represents the Company’s ultimate share of net revenue under the agreement.While the majority of its instruments are placed at customer sites, in certain instances the Company sells instruments to its clinical diagnosticscustomers and records sales of these instruments upon delivery and customer acceptance. For certain customers with non-standard payment terms, instrumentsales are recorded based upon expected cash collection. Prior to delivery, each instrument is tested to meet the Company’s specifications and thespecifications of the FDA, and is shipped fully assembled. Customer acceptance of the Company’s clinical diagnostic instrument systems requires installationand training byF-17Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsthe Company’s technical service personnel. Installation is a standard process consisting principally of uncrating, calibrating and testing the instrumentation.The Company sells its instruments to Grifols for use in blood screening and records these instrument sales upon delivery since Grifols is responsible for theplacement, maintenance and repair of the units with its customers.Within its Diagnostics business, and to a lesser extent, its GYN Surgical business, the Company provides its instrumentation (for example, the ThinPrepProcessor, ThinPrep Imaging System, and the Panther and Tigris systems) and certain other hardware to customers without requiring them to purchase theequipment or enter intoa lease. The Company installs the instrumentation or equipment at the customer’s site and recovers the cost of providing the instrumentation or equipment inthe amount it charges for its diagnostic tests, assays and other disposables. Customers enter into a customer usage agreement and typically commit topurchasing minimum quantities of disposable products at a stated price over a defined contract term, which is typically between three and five years.Revenue is recognized over the term of the customer usage agreement as tests, assays and other disposable products are shipped or delivered, depending onthe customer's arrangement.Accounts Receivable and ReservesThe Company records reserves for doubtful accounts based upon a specific review of all outstanding invoices, known collection issues and historicalexperience. The Company regularly evaluates the collectability of its trade accounts receivables and performs ongoing credit evaluations of its customersand adjusts credit limits based upon payment history and its assessment of the customer’s current credit worthiness.Accounts receivable reserve activity for fiscal 2014, 2013 and 2012 was as follows: Balance atBeginningof Period Charged toCosts andExpenses Write-offs andPayments Balance atEnd ofPeriodPeriod Ended: September 27, 2014 $8.8 $4.4 $(1.2) $12.0September 28, 2013 $6.4 $4.3 $(1.9) $8.8September 29, 2012 $6.5 $3.3 $(3.4) $6.4Cost of Service and Other RevenuesCost of service and other revenues primarily represents payroll and related costs associated with the Company’s professional services’ employees,consultants, infrastructure costs and overhead allocations, including depreciation, rent and materials consumed in providing the service.Stock-Based CompensationThe Company accounts for share-based payments in accordance with ASC 718, Stock Compensation (ASC 718). As such, all share-based payments toemployees, including grants of stock options, restricted stock units, performance stock units and market stock units and shares issued under the Company’semployee stock purchase plan, are recognized in the Consolidated Statements of Operations based on their fair values on the date of grant.Net Income (Loss) Per ShareBasic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding. Dilutednet income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares and the dilutive effect of potentialfuture issuances of common stock from outstanding stock options, restricted stock units and convertible debt determined by applying the treasury stockmethod. In accordance with ASC 718, the assumed proceeds under the treasury stock method include the average unrecognized compensation expense of in-the-money stock options and restricted stock units. This results in the assumed buyback of additional shares, thereby reducing the dilutive impact of equityawards.The Company applies the provisions of ASC 260, Earnings Per Share, Subsection 10-45-44, to determine the diluted weighted average sharesoutstanding as it relates to its convertible notes, and due to the type of debt instrument issued and its accounting policy, the Company applies the treasurystock method and not the if-converted method. The dilutive impact of the Company’s convertible notes is based on the difference between the Company’scurrent period average stock price and theF-18Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsconversion price of the convertible notes, provided there is a premium. As such, dilution related to the conversion premium on the 2010 Notes is included inthe calculation of diluted weighted-average shares outstanding in fiscal 2014.A reconciliation of basic and diluted share amounts for fiscal 2014, 2013, and 2012 was as follows: September 27, 2014 September 28, 2013 September 29, 2012Basic weighted average common shares outstanding 275,499 268,704 264,041Weighted average common stock equivalents from assumed exercise ofstock options and restricted stock units 2,368 — —Incremental shares from assumed conversion of the Convertible Notespremium 493 — —Diluted weighted average common shares outstanding 278,360 268,704 264,041Weighted-average anti-dilutive shares related to: Outstanding stock options 5,033 8,445 10,491Restricted stock units 20 1,109 1,378In those reporting periods in which the Company has reported net income, anti-dilutive shares generally are comprised of those stock options thateither have an exercise price above the average stock price for the period or the stock options’ combined exercise price, average unrecognized stockcompensation expense and assumed tax benefits upon exercise is greater than the average stock price for the period. In those reporting periods in which theCompany has a net loss, anti-dilutive shares are comprised of the impact of those number of shares that would have been dilutive had the Company had netincome plus the number of common stock equivalents that would be anti-dilutive had the Company had net income.Product WarrantiesThe Company generally offers a one-year warranty for its products. The Company provides for the estimated cost of product warranties at the timeproduct revenue is recognized. Factors that affect the Company’s warranty reserves include the number of units sold, historical and anticipated rates ofwarranty repairs and the cost per repair. The Company periodically assesses the adequacy of the warranty reserve and adjusts the amount as necessary.Product warranty activity for fiscal 2014 and 2013 was as follows: Balance atBeginning ofPeriod Provisions Settlements/Adjustments Balance at Endof PeriodPeriod ended: September 27, 2014 $9.3 $7.1 $(10.1) $6.3September 28, 2013 $6.2 $12.8 $(9.7) $9.3Advertising CostsAdvertising costs are charged to operations as incurred. The Company does not have any direct-response advertising. Advertising costs, which includetrade shows and conventions, were approximately $14.1 million, $14.1 million and $29.8 million for fiscal 2014, 2013 and 2012, respectively, and wereincluded in selling and marketing expense in the Consolidated Statements of Operations.Recently Issued Accounting PronouncementsIn August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-15, Disclosure ofUncertainties about an Entity's Ability to Continue as a Going Concern. ASU 2014-15 requires management to evaluate, at each annual or interim reportingperiod, whether there are conditions or events that exists that raise substantial doubt about an entity's ability to continue as a going concern within one yearafter the date the financial statements are issued and provide related disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016and earlier application is permitted. The adoption of ASU 2014-15 is not expected to have a material effect on the Company's condensed consolidatedfinancial statements or disclosures.F-19Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIn May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 660), which provides guidance for revenue recognition.This ASU is applicable to any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer ofnonfinancial assets. ASU 2014-09 will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specificguidance. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount thatreflects the consideration to which the company expects to be entitled to receive in exchange for those goods or services. In doing so, companies will need touse more judgment and make more estimates than under current U.S. GAAP. These judgments may include identifying performance obligations in thecontract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performanceobligation. ASU 2014-09 is effective prospectively for fiscal years, and interim reporting periods within those years, beginning after December 15, 2016,which is fiscal 2018 for the Company. The Company is currently evaluating the impact of the adoption of ASU 2014-09 on its consolidated financialposition and results of operations.In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a SimilarTax Loss, or a Tax Credit Carryforward Exist. ASU 2013-11 amends the presentation requirements of ASC 740 and requires an unrecognized tax benefit tobe presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, similar tax loss, or a tax credit carryforward.To the extent the tax benefit is not available at the reporting date under the governing tax law or if the entity does not intend to use the deferred tax asset forsuch purpose, the unrecognized tax benefit should be presented as a liability and not combined with deferred tax assets. The ASU is effective for annualperiods, and interim periods within those years, beginning after December 15, 2013, which is fiscal 2015 for the Company. The amendments are to be appliedto all unrecognized tax benefits that exist as of the effective date and may be applied retrospectively to each prior reporting period presented. The Companyis currently evaluating the impact of the adoption of ASU 2013-11 on its consolidated financial position.In March 2013, FASB issued ASU 2013-05, Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustmentupon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity. ASU 2013-05 addresses theaccounting for the cumulative translation adjustment when a parent either sells a part or all of its investment in a foreign entity or no longer holds acontrolling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. The guidance outlines theevents when cumulative translation adjustments should be released into net income. The ASU is effective for annual periods, and interim periods within thoseyears, beginning after December 15, 2013, which is fiscal 2015 for the Company. The Company will apply the guidance prospectively to any derecognitionevents that may occur after the effective date and does not expect the adoption of ASU 2013-05 to have a material impact on its consolidated financialposition or results of operations.3. Business CombinationsFiscal 2013 Acquisitions:Chindex Medical LimitedOn December 31, 2012, the Company acquired certain assets from Chindex Medical Limited (“Chindex”) for a net purchase price of $4.4 million,including contingent consideration. Chindex was a distributor of certain of the Company’s Breast Health products in China. The Company accounted for thistransaction as the acquisition of a business pursuant to ASC 805 and allocated the majority of the purchase price to customer relationships.SenoRx, Inc.On May 31, 2013, through the settlement of litigation, the Company acquired certain assets related to SenoRx, Inc.’s (“SenoRx”) Conturabrachytherapy device for a net purchase price of $2.4 million. The Company accounted for this transaction as the acquisition of a business pursuant to ASC805 and allocated the majority of the purchase price to developed technology.Fiscal 2012 Acquisition:Gen-Probe IncorporatedOn August 1, 2012, the Company completed its acquisition of Gen-Probe and acquired all of the outstanding shares of Gen-Probe. Pursuant to themerger agreement, each share of common stock outstanding immediately prior to the effective time of the acquisition was cancelled and converted into theright to receive $82.75 in cash. In addition, all outstanding restricted shares, restricted stock units, performance shares, and those stock options granted priorto February 8, 2012 were canceled and converted into the right to receive $82.75 per share in cash less the exercise price, as applicable. Stock options grantedafter February 8, 2012 were converted into stock options to acquire shares of Hologic common stock determined by a conversion formula defined in themerger agreement. The Company paid $3.8 billion to the shareholders of Gen-Probe and $169.0 millionF-20Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsto equity award holders. The Company funded the acquisition using available cash and financing consisting of senior secured credit facilities and SeniorNotes (see Note 5 for further discussion) resulting in aggregate proceeds of $3.48 billion, excluding financing fees to the underwriters. The Company incurredapproximately $34.3 million of direct transaction costs, which were recorded within general and administrative expenses in fiscal 2012.Gen-Probe, headquartered in San Diego, California, is a leader in molecular diagnostics products and services that are used primarily to diagnosehuman diseases and screen donated human blood. The Company executed this acquisition to enhance its molecular diagnostics franchise and to complementits existing portfolio of diagnostics products. Gen-Probe’s results of operations are reported within the Company’s Diagnostics reportable segment from thedate of acquisition.The purchase price consideration was as follows: Cash paid$3,967.9Deferred payment1.7Fair value of stock options exchanged2.6Total purchase price$3,972.2The fair value of stock options exchanged, that were recorded as purchase price, represented the fair value of Gen-Probe options converted into theCompany’s stock options attributable to pre-combination services pursuant to ASC 805. The remainder of the fair value of these stock options of $23.2million is being recognized as stock-based compensation expense ratably over the remaining vesting period, which was approximately 3.5 years at the dateof acquisition. The Company estimated the fair value of the stock options using a binomial valuation model with the following weighted averageassumptions: risk free interest rate of 0.41%, expected volatility of 39.9%, expected life of 3.6 years and dividend yield of 0.0%. The weighted average fairvalue of stock options granted was $7.07 per share.The allocation of the purchase price presented below was based on estimates of the fair value of assets acquired and liabilities assumed as of August 1,2012. The final, adjusted components of the purchase price allocation are as follows: Cash$205.5Accounts receivable81.4Inventory153.4Property, plant and equipment274.1Other assets192.0Assets held-for-sale, net87.5Accounts payable(19.7)Accrued expenses(131.6)Other liabilities(22.9)Identifiable intangible assets: Developed technology1,700.0In-process research and development117.0Customer contract585.0Trade names95.0Deferred income taxes, net(985.5)Goodwill1,641.0Purchase Price$3,972.2The purchase price was allocated to the acquired assets and liabilities based on management’s estimate of their fair values. During fiscal 2013, theCompany revised its valuation analysis for a correction to projected revenues expected from certain development projects which increased developedtechnology assets by $135.0 million, reduced IPR&D assets by $110.0 million and lowered trade names by $2.0 million with an offsetting net decrease togoodwill after the impact to deferred tax liabilities. In addition, certain tax related adjustments have been recorded. The Company concluded that theseadjustments recorded in fiscal 2013 were immaterial to its financial statements.F-21Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsCertain of Gen-Probe’s assets were designated as assets held-for-sale and recorded at fair value less the estimated cost to sell such assets. Theserepresented non-core assets to the Company’s business plan and were sold within one year of the acquisition.On January 3, 2013, the Company entered into a definitive agreement to sell its Lifecodes business (acquired in its acquisition of Gen-Probe) toImmucor, Inc. for $85.0 million in cash, subject to adjustment, plus a contingent payment of an additional $10.0 million if certain future revenue results wereachieved. This transaction closed on March 22, 2013, and the Company recorded a gain on the sale of $0.9 million in the second quarter of fiscal 2013. Therevenue milestone was not achieved and as such the Company will not receive any contingent payment. Lifecodes sells molecular and antibody-based assaysin the markets of transplant diagnostics, specialty coagulation and transfusion medicine. In the first and third quarters of fiscal 2013, the Company completedthe sale of the other asset groups classified as held-for-sale for an aggregate of $2.8 million.As part of the purchase price allocation, the Company determined that the identifiable intangible assets were developed technology, IPR&D, acustomer contract, and trade names. The fair value of the intangible assets was estimated using the income approach and the cash flow projections werediscounted using rates ranging from 10% to 12%. The cash flows were based on estimates used to price the transaction, and the discount rates applied werebenchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital.The developed technology assets are comprised of know-how, patents and technologies embedded in Gen-Probe’s products and relate to currentlymarketed products and related instrument automation. In valuing the developed technology assets, consideration was only given to products that havereceived regulatory approval. The developed technology assets primarily comprise the significant product families used in diagnostic testing, and themajority of fair value relates to the Aptima family of assays for testing of certain sexually transmitted diseases and microbial infectious diseases and theProcleix family of assays for blood screening. The Company applied the Excess Earnings Method under the income approach to determine the fair value ofthe developed technology assets excluding the Procleix technology asset, for which the Company applied the Relief-from-Royalty Method to determine itsfair value.IPR&D projects relate to in-process projects that have not reached technological feasibility as of the acquisition date and have no alternative future use.The primary basis for determining technological feasibility of these projects was obtaining regulatory approval to market the underlying product, whichprimarily pertains to receiving approval to perform certain diagnostic testing on Gen-Probe’s instrumentation, such as the Panther and Tigris systems. TheCompany recorded $117.0 million of IPR&D assets related to six projects. Subsequent to the acquisition and through September 27, 2014, the Company hasreceived FDA approval for four projects with an aggregate value of $94.0 million. The other projects are expected to be completed over the next 3 years.Given the uncertainties inherent with product development and commercial introduction, there can be no assurance that any of the Company’s productdevelopment efforts will be successful, completed on a timely basis or within budget, if at all. All of the IPR&D assets were valued using the Multiple-PeriodExcess Earnings Method approach using a discount rate of 12.0%.The customer contract intangible asset pertains to Gen-Probe’s relationship with its blood screening partner, which is currently Grifols, and theCompany used the Excess Earnings Method to estimate the fair value of this asset. Trade names relate to the Gen-Probe corporate name and the primaryproduct names, and the Company used the Relief-from-Royalty Method to estimate the fair value of these assets.Developed technology, customer contract and trade names are being amortized on a straight-line basis over a weighted average period of 13.4 years,13.0 years and 11.0 years, respectively.The Company estimated the fair value of property, plant and equipment using a combination of the cost and market approaches, depending on thecomponent. The Company applied the cost approach as the primary method in estimating the fair value of land and buildings. In total, the fair valueadjustment to increase the carrying amount of property, plant and equipment was $107.9 million, of which $70.6 million related to land and buildings.The excess of the purchase price over the estimated fair value of the net tangible and intangible assets acquired was recorded to goodwill. The factorscontributing to the recognition of the amount of goodwill were based on several strategic and synergistic benefits that were expected to be realized from theGen-Probe acquisition. These benefits include the expectation that the combination of the combined company’s complementary products in the moleculardiagnostics market with Gen-Probe’s fully automated product franchise would significantly broaden the Company’s offering in women’s health anddiagnostics. The combined company was expected to benefit from a broader global presence and with Hologic’s direct sales force and marketing in Europeand its investment in China distribution, the growth prospects of Gen-Probe’s products were expected to be enhanced. The combined company anticipatedsignificant cross-selling opportunities within the diagnosticsF-22Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsmarket through Hologic’s larger channel coverage and physician sales team. None of the goodwill is expected to be deductible for income tax purposes.Gen-Probe’s revenue and pre-tax loss for the period from the acquisition date to September 29, 2012 were $89.5 million and $47.7 million,respectively. The following unaudited pro forma information presents the combined financial results for the Company and Gen-Probe as if the acquisition ofGen-Probe had been completed at the beginning of fiscal 2011: Year EndedSeptember 29, 2012(unaudited)Revenue $2,526.3Net loss $(164.5)Basic and diluted net loss per common share $(0.62)The unaudited pro forma information for fiscal 2012 was calculated after applying the Company’s accounting policies and the impact of acquisitiondate fair value adjustments. Fiscal 2012 unaudited pro forma net loss was adjusted to exclude acquisition-related transaction costs and restructuring costssolely related to the consolidation of the Diagnostics business. In addition, the fiscal year 2012 unaudited pro forma net loss was adjusted to excludenonrecurring expenses related to the fair value adjustments associated with the acquisition of Gen-Probe that were recorded by the Company. These pro formacondensed consolidated financial results have been prepared for comparative purposes only and include certain adjustments to reflect pro forma results ofoperations as if the acquisition occurred on September 26, 2010, such as fair value adjustments to inventory, accounts receivable, and property, plant andequipment, increased expenses for restructuring charges and retention costs, increased interest expense on debt obtained to finance the transaction, lowerinvestment income and increased amortization for the fair value of acquired intangible assets. The pro forma information does not reflect the effect of costs,other than restructuring and retention, or synergies that would have been expected to result from the integration of the acquisition. The pro forma informationdoes not purport to be indicative of the results of operations that actually would have resulted had the combination occurred at the beginning of each periodpresented, or of future results of the consolidated entities.F-23Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents4. Restructuring and Divestiture ChargesThe Company evaluates its operations for opportunities to improve operational effectiveness and efficiency, including facility and operationsconsolidation, and to better align expenses with revenues. As a result of these assessments, the Company has undertaken various restructuring actions whichare described below. The following table displays charges taken related to restructuring actions in fiscal 2014, 2013 and 2012 and a rollforward of thecharges to the accrued balances as of September 27, 2014: Abandonment ofAdiana ProductLine Consolidation ofDiagnosticsOperations Closure ofIndianapolisFacility Fiscal 2014Actions Fiscal 2013Actions Other OperatingCost Reductions Total Restructuring andDivestiture Charges Fiscal 2012 charges: Non-cash impairmentcharge$16.3 $0.6 $— $— $— $— $16.9Purchase orders andother contractualobligations3.1 — — — — — 3.1Workforce reductions0.1 14.2 0.9 — — — 15.2Facility closure costs— — — — — 0.4 0.4Other— — 0.9 — — — 0.9Fiscal 2012 restructuringand divestiture charges$19.5 $14.8 $1.8 $— $— $0.4 $36.5Recorded to cost ofproduct revenues$19.0 $— $— $— $— $— $19.0Recorded to restructuring$0.5 $14.8 $1.8 $— $— $0.4 $17.5Fiscal 2013 charges: Workforce reductions$— $14.0 $4.8 $— $11.3 $1.1 $31.2Facility closure costs— — 0.2 — — 0.4 0.6Other— — 0.7 — — 0.2 0.9Fiscal 2013 restructuringcharges$— $14.0 $5.7 $— $11.3 $1.7 $32.7Divestiture net charges 0.1Fiscal 2013 restructuringand divestiture charges $32.8Fiscal 2014 charges: Workforce reductions$— $2.9 $0.2 $29.5 $0.9 $8.7 $42.2Non-cash impairmentcharge— — — — — 3.1 3.1Facility closure costs— — 0.5 — — 0.1 0.6Other— 0.1 — — — 0.2 0.3Fiscal 2014 restructuringcharges$— $3.0 $0.7 $29.5 $0.9 $12.1 $46.2Divestiture net charges 5.5Fiscal 2014 restructuringand divestiture charges $51.7F-24Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Abandonment ofAdiana ProductLine Consolidation ofDiagnosticsOperations Closure ofIndianapolisFacility Fiscal 2014Actions Fiscal 2013Actions Other OperatingCost Reductions Total Rollforward of AccruedRestructuring Fiscal 2012 charges$19.5 $14.8 $1.8 $— $— $0.4 $36.5Non-cash impairmentcharges(16.3) (0.6) — — — — (16.9)Stock-based compensation— (3.5) — — — — (3.5)Severance payments(0.1) (2.4) — — — (0.1) (2.6)Other payments(2.6) — — — — (0.3) (2.9)Acquired and other— 0.1 — — — 0.1 0.2Balance as of September29, 2012$0.5 $8.4 $1.8 $— $— $0.1 $10.8 Fiscal 2013 restructuringcharges$— $14.0 $5.7 $— $11.3 $1.7 $32.7Stock-based compensation— (6.3) — — (1.6) — (7.9)Non-cash impairmentcharges— — — — — (0.1) (0.1)Severance payments— (13.1) (3.1) — (4.4) (0.9) (21.5)Other payments(0.5) — (0.6) — — (0.6) (1.7)Balance as of September28, 2013$— $3.0 $3.8 $— $5.3 $0.2 $12.3 Fiscal 2014 restructuringcharges$— $3.0 $0.7 $29.5 $0.9 $12.1 $46.2Stock-based compensation— — — (6.6) — — (6.6)Non-cash impairmentcharges— — — — — (3.1) (3.1)Severance payments— (3.0) (4.0) (10.9) (6.1) (7.0) (31.0)Other payments— — (0.5) — — (0.4) (0.9)Balance as of September27, 2014$— $3.0 $— $12.0 $0.1 $1.8 $16.9Abandonment of Adiana Product LineAt the end of the second quarter of fiscal 2012, the Company decided to cease manufacturing, marketing and selling its Adiana system, which was aproduct line within the Company’s GYN Surgical segment. Management determined that the product was not financially viable and would not become so inthe foreseeable future. In addition, the Company settled its intellectual property litigation regarding the Adiana system with Conceptus. As a result, in thesecond quarter of fiscal 2012, the Company recorded a charge of $18.3 million and recorded additional adjustments in fiscal 2012 resulting in an aggregatecharge of $19.5 million. Of the total charge, $19.0 million was recorded within cost of product revenues and $0.5 million was recorded in restructuring. Theamount recorded in cost of product revenues comprised impairment charges of $9.9 million to record inventory at its net realizable value, $6.5 million towrite down certain manufacturing equipment and equipment placed at customer sites to its fair value that had no further utility, and $2.6 million foroutstanding contractual purchase orders of raw materials and components that would not be utilized and other contractual obligations. In connection withthis action, the Company terminated certain manufacturing and other personnel primarily at its Costa Rica location, resulting in severance charges of $0.1million, and incurred other contractual charges of $0.4 million. All identified employees were terminated and paid as of September 29, 2012.F-25Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsConsolidation of Diagnostics OperationsIn connection with its acquisition of Gen-Probe, the Company implemented restructuring actions to consolidate its Diagnostics operations, includingstreamlining product development initiatives, reducing overlapping functional areas in sales, marketing and general and administrative functions, andconsolidating manufacturing resources, field services and support. As a result, the Company terminated certain employees from Gen-Probe and its legacydiagnostics business in research and development, sales, marketing, and general and administrative functions. The Company recorded severance and benefitcharges in fiscal 2012 of $13.3 million related to this action pursuant to ASC 420, Exit or Disposal Cost Obligations (ASC 420). The majority of theseemployees ceased working in the fourth quarter of fiscal 2012, and their full severance charge was recorded in the fourth quarter of fiscal 2012. In addition,certain of the terminated Gen-Probe employees had unvested stock options, which were accelerated at termination pursuant to the stock options’ originalterms. As such, the severance charges in fiscal 2012 include $3.5 million of stock-based compensation expense. In fiscal 2013, the Company recorded $10.8million of severance charges, including $6.3 million for stock-based compensation. Included in these charges was $9.7 million recorded in the second quarterof fiscal 2013 related to the termination of certain Gen-Probe executives, including Carl Hull, Gen-Probe’s former Chairman, President and Chief ExecutiveOfficer. The charge was for the acceleration of certain retention payments and equity awards pursuant to the original terms of the related agreements. Noadditional charges were recorded in fiscal 2014 under this portion of the action.In addition, under this plan, the Company recently completed moving its legacy molecular diagnostics operations from Madison, Wisconsin to Gen-Probe’s facilities in San Diego, California. This transfer was finalized at the end of fiscal 2014 and, as a result, many of the employees in Madison wereterminated. The Company recorded severance and benefit charges pursuant to ASC 420, which resulted in total severance and benefits charges of $7.1million. These charges were recorded ratably over the required service period of the affected employees. The Company recorded $3.0 million, $3.2 million,and $0.9 million in the years ended September 27, 2014, September 28, 2013, and September 29, 2012, respectively. The Company also recorded non-cashcharges of $0.6 million in the fourth quarter of fiscal 2012 as a result of exiting certain research projects. This action is complete and no additional chargeswill be recorded.Closure of Indianapolis FacilityIn the fourth quarter of fiscal 2012, the Company finalized its decision to transfer production of the majority of its interventional breast products, whichare included within the Breast Health segment, from its Indianapolis, Indiana facility to its facility in Costa Rica. The transfer was completed in the firstquarter of fiscal 2014, and all employees at the Indianapolis location were terminated. The Company recorded total severance and benefit charges under thisaction of $5.9 million pursuant to ASC 420. These charges were recorded ratably over the required service period of the affected employees. The Companyrecorded severance and benefits charges of $0.2 million, $4.8 million and $0.9 million in fiscal 2014, 2013 and 2012, respectively, related to this action. Inaddition, the Company recorded a charge of $0.4 million in the first quarter of fiscal 2014 related to the termination of its Indianapolis lease. The Companyalso recorded miscellaneous charges of $0.8 million in fiscal 2013 and $0.9 million in fiscal 2012 for amounts owed to the state of Indiana for employmentcredits. This action is complete and no additional charges will be recorded.Fiscal 2014 ActionsDuring the first quarter of fiscal 2014, the Company implemented a cost reduction initiative comprised of reducing headcount and evaluating researchprojects and operating costs. In connection with this plan, the Company terminated certain employees on a worldwide basis. The Company recorded theseverance and benefit charges pursuant to ASC 420 and ASC 712, Compensation-Nonretirement Postemployment Benefits (ASC 712), depending on theemployee terminated. The Company recorded $6.3 million of severance and benefit charges in the first quarter of fiscal 2014, which included $0.4 million ofstock-based compensation.On December 6, 2013, Stephen P. MacMillan was appointed as President, Chief Executive Officer and a director of the Company. The employment ofJohn W. Cumming, the Company’s prior President and Chief Executive Officer, terminated upon Mr. MacMillan’s appointment. The Company providedseparation benefits to Mr. Cumming pursuant to his employment letter dated July 18, 2013 resulting in a charge of $6.6 million in the first quarter of fiscal2014, which included $4.4 million of stock-based compensation related to the acceleration of all of Mr. Cumming’s outstanding equity awards in accordancewith the existing terms of Mr. Cumming’s share based payment arrangements.In the second, third, and fourth quarters of fiscal 2014, the Company continued to make executive management changes and implement additional costreduction initiatives resulting in the termination of certain executives and employees on a worldwide basis. In addition, in the fourth quarter of fiscal 2014the Company decided to consolidate and close certainF-26Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsinternational offices. Severance and benefit charges under these actions have been recorded pursuant to ASC 420 and ASC 712 depending on thecircumstances, and the Company recorded severance and benefit charges of $16.6 million in fiscal 2014. Included in the charge is $1.8 million of stock-basedcompensation for the modification of the terms of equity awards to certain employees. Since a portion of the charges are pursuant to ASC 420, the Companyexpects to incur approximately $5.0 million during fiscal 2015 of additional charges as the severance benefits are recorded ratably over the required serviceperiod. Charges related to lease obligations will be recorded upon either the cease-use date or entering into a termination contract.Fiscal 2013 ActionsDuring the third quarter of fiscal 2013, the Company implemented a cost reduction initiative comprised of reducing headcount and evaluating researchprojects and operating costs. In connection with this plan, the Company terminated certain employees on a worldwide basis. The Company primarilyrecorded severance and benefit charges pursuant to ASC 420, and the total severance and benefits charge related to this plan was $5.4 million. For thoseemployees who continued to be employed beyond the minimum retention period, charges were recorded ratably over the estimated service period of theaffected employees. The Company recorded severance and benefit charges of $0.9 million and $4.6 million in fiscal 2014 and 2013, respectively, related tothis action.During the fourth quarter of fiscal 2013, Robert A. Cascella resigned as the Company’s President and Chief Executive Officer and as a member of theBoard of Directors of the Company, and effective at the same time, Mr. Cumming was appointed as the Company’s President and Chief Executive Officer. Inconnection with this management change, additional headcount reductions were implemented. As a result of this action, the Company recorded $6.8 millionin the fourth quarter of fiscal 2013 for severance and benefits charges. All employees were notified prior to September 28, 2013 and primarily ceasedemployment in the fourth quarter of fiscal 2013. The severance and benefit charges were recorded pursuant to ASC 712 for those employees with contractualarrangements and under ASC 420 for the remainder of the affected employees. In addition to the acceleration of stock options pursuant to the stock options’original terms for certain employees, the Company also modified the terms of equity awards to certain employees resulting in aggregate stock-basedcompensation charges of $1.4 million recorded in the fourth quarter of fiscal 2013.Other Operating Cost Reductions:Hitec-Imaging Organic Photoconductor Manufacturing Line Shut-downIn the fourth quarter of fiscal 2013, in connection with the Company’s cost reduction initiatives, the Company decided to shut-down its Hitec-Imagingorganic photoconductor manufacturing line located in Germany. This production line was included within the Breast Health segment. As a result, theCompany terminated certain employees, primarily in manufacturing, in fiscal 2014. During the first quarter of fiscal 2014, the Company completed itsnegotiations with the local Works Council to determine severance benefits for the approximately 95 affected employees. The Company is recordingseverance and benefit charges pursuant to ASC 420 and estimates the severance and related charges will be approximately $9.1 million. The Companyrecorded charges of $8.7 million in fiscal 2014 in connection with terminating these employees.In the first quarter of fiscal 2014, the Company recorded an impairment charge of $3.1 million to record certain buildings at this location to theirestimated fair value.Consolidation of Selenium Panel Coating ProductionDuring the third quarter of fiscal 2012, the Company finalized its decision to consolidate its Selenium panel coating process and transfer theproduction line to its Newark, Delaware facility from its Hitec-Imaging German subsidiary. This production line is included within the Breast Health segment.The transfer was completed in the fourth quarter of fiscal 2013. In connection with this consolidation plan, the Company terminated certain employees,primarily manufacturing personnel. Severance charges were recorded pursuant to ASC 420. The termination communications began in January 2013 and theCompany recorded severance charges of $1.1 million in fiscal 2013.DivestituresIn the fourth quarter of fiscal 2014, the Company completed the sale of its MRI breast coils product line and recorded a loss on disposal of $5.3 million.The Company will provide certain transition services, including the manufacturing and sale of inventory to the buyer, over a six-month period. In the fourthquarter of fiscal 2013, the Company designated the assets of its Elucigene product line as assets held-for-sale, and recorded a charge of $0.7 million to recordthe assets at fair value. In the first quarter of fiscal 2014, the Company finalized the sale of the assets for $2.8 million, resulting in additional charges of $0.2F-27Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsmillion in fiscal 2014. At September 28, 2013, assets held-for-sale consisted of inventory and certain equipment valued at $2.4 million and goodwill of $0.6million.The Company completed the sale of its Lifecodes business and recorded a net gain of $0.9 million in the second quarter of fiscal 2013. For the yearended September 28, 2013, the Company recorded a charge of $0.3 million related to the disposition of certain other assets held-for-sale.5. Borrowings and Credit ArrangementsThe Company’s borrowings consisted of the following: September 27, 2014 September 28, 2013Current debt obligations, net of debt discount: Term Loan A$99.6 $49.7Term Loan B14.9 114.0Convertible Notes— 400.1Total current debt obligations114.5 563.8Long-term debt obligations, net of debt discount: Term Loan A796.7 894.8Term Loan B1,120.9 1,159.3Senior Notes1,000.0 1,000.0Convertible Notes1,235.6 1,188.0Total long-term debt obligations4,153.2 4,242.1Total debt obligations$4,267.7 $4,805.9The debt maturity schedule for the Company’s obligations as of September 27, 2014 is as follows: 2015 2016 2017 2018 2019 2020 andThereafter TotalTerm Loan A $100.0 $200.0 $600.0 $— $— $— $900.0Term Loan B 15.0 15.0 15.0 15.0 1,085.0 — 1,145.0Senior Notes — — — — — 1,000.0 1,000.0Convertible Notes (1) — — 450.0 894.5 — — 1,344.5 $115.0$215.0$1,065.0$909.5$1,085.0$1,000.0$4,389.5 (1)Classified based on the earliest date of redemption for each respective issuance and the balance in fiscal 2018 reflects accretion on the 2013 Notesthrough September 27, 2014 as described below.Credit AgreementOn August 1, 2012, the Company and certain domestic subsidiaries (the “Guarantors”) entered into a credit and guaranty agreement (the “CreditAgreement”) with Goldman Sachs Bank USA, in its capacity as administrative and collateral agent, and the lenders party thereto (collectively, the “Lenders”).The credit facilities under the Credit Agreement initially consisted of:•$1.0 billion senior secured tranche A term loan (“Term Loan A”) with a final maturity date of August 1, 2017;•$1.5 billion secured tranche B term loan (“Term Loan B”) with a final maturity date of August 1, 2019; and•$300.0 million secured revolving credit facility (“Revolving Facility”) with a final maturity date of August 1, 2017.Pursuant to the terms and conditions of the Credit Agreement, the Lenders committed to provide senior secured financing in an aggregate amount of upto $2.8 billion. As of the closing of the Gen-Probe acquisition, the Company borrowed $2.5 billion aggregate principal under the term loans of the CreditAgreement. Net proceeds to the Company were $2.41 billion, after issuing the term loans at a discount and deducting associated fees and expenses, all ofwhich will be amortized to interest expense over the respective maturity dates of the debt. The proceeds were used to fund a portion of the purchase price forthe Gen-Probe acquisition.F-28Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOn March 20, 2013, the Company, the Guarantors, Goldman Sachs, and the Lenders entered into Refinancing Amendment No. 1 (the “CreditAgreement Amendment”) to the Credit Agreement. The Credit Agreement Amendment (i) refinanced the Company’s original Term Loan A with a new seniorsecured tranche A term loan facility with the same principal amount, maturity date and amortization schedule but with an applicable margin 1.00% less thanthe original Term Loan A (at each margin level), (ii) refinanced the Company’s original Revolving Facility with a new senior secured revolving credit facilitywith the same principal amount and maturity date, but with an applicable margin 1.00% less than the original Revolving Facility (at each margin level), and(iii) amended certain covenants and terms of the Credit Agreement.Effective as of the date of the Credit Agreement Amendment and as of September 27, 2014, amounts outstanding under the new Term Loan A and thenew Revolving Facility bear interest, at the Company’s option: (i) at the Base Rate plus 1.00% per annum, or (ii) at the Adjusted Eurodollar Rate (i.e., theLibor rate) plus 2.00% per annum. The applicable margin with respect to the new Term Loan A and the new Revolving Facility are subject to specifiedchanges depending on the Company’s total net leverage ratio, as defined in the Credit Agreement.Pursuant to ASC 470, Debt (ASC 470), the accounting for this refinancing was evaluated on a creditor by creditor basis to determine whether eachtransaction should be accounted for as a modification or extinguishment. Certain creditors under the Credit Agreement did not participate in this refinancingtransaction and ceased being creditors of the Company. As a result, the Company recorded a debt extinguishment loss of $3.2 million to write-off the pro-rataamount of unamortized debt discount and deferred issuance costs related to these creditors for the initial borrowings under the Term Loan A facility. For theremainder of the creditors, this transaction has been accounted for as a modification because the present value of the cash flows on a creditor by creditor basisbetween the two debt instruments was less than 10%. Pursuant to ASC 470, subtopic 50-40, third-party costs incurred directly related to the exchange wereexpensed as incurred. As such, the Company recorded issuance costs related to the refinancing of $2.4 million to interest expense in the second quarter offiscal 2013.On August 2, 2013, the Company, the Guarantors, Goldman Sachs, and the Lenders entered into Refinancing Amendment No. 2 (the “Credit AgreementAmendment 2”) to the Credit Agreement. The Credit Agreement Amendment 2 (i) refinanced the Company’s original Term Loan B with a new senior securedtranche B term loan facility with the same principal amount (subject to the prepayment referenced below), maturity date and amortization schedule but withan applicable margin 0.75% less than the original Term Loan B, and (ii) amended certain covenants and terms of the Credit Agreement. Effective as of thedate of the Credit Agreement Amendment 2, amounts outstanding under the new Term Loan B bore interest, at the Company’s option: (A) at the Base Ratewith a floor of 2.00%, plus 1.75% per annum, or (B) at the Adjusted Eurodollar Rate (i.e., the Libor rate) with a floor of 1.00%, plus 2.75% per annum. Inconnection with this refinancing, the Company voluntarily prepaid $200.0 million of principal of the Term Loan B facility.Pursuant to ASC 470, the accounting for this refinancing was consistent with that described above for the Credit Agreement Amendment. As a result,the Company recorded a debt extinguishment loss of $6.0 million to write-off the pro-rata amount of unamortized debt discount and deferred issuance costsrelated to the voluntary prepayment of the Term Loan B facility. The Company expensed direct third-party costs of $1.1 million to interest expense in thefourth quarter of fiscal 2013.On October 31, 2013, the Company voluntarily pre-paid $100.0 million of its Term Loan B facility, which was reflected in current debt obligations asof September 28, 2013. As a result, the Company recorded a debt extinguishment loss of $2.9 million in the first quarter of fiscal 2014 to write-off the pro-rataamount of unamortized debt discount and deferred issuance costs related to this voluntary prepayment.On February 26, 2014, the Company, the Guarantors, Goldman Sachs, and the Lenders entered into Refinancing Amendment No. 3 to the CreditAgreement. The Refinancing Amendment No. 3 refinanced the new Term Loan B facility with a new senior secured tranche B term loan facility (the“Amended Term Loan B”) with an issue price of 99.875% of the principal amount of the new Term Loan B (subject also to the prepayment referenced below).This amendment resulted in a 50 basis point reduction in the interest rate on the Amended Term Loan B. Amounts outstanding under the Amended TermLoan B bear interest, at the Company’s option: (a) at the Base Rate, with a floor of 1.75%, plus 1.50% per annum, or (b) at the Adjusted Eurodollar Rate (i.e.,the Libor rate), with a floor of 0.75%, plus 2.50% per annum. In addition, the Company voluntarily prepaid $25.0 million of the Amended Term Loan B.Pursuant to ASC 470, the accounting for this refinancing is consistent with that described above for the Credit Agreement Amendment. As a result, theCompany recorded a debt extinguishment loss of $4.5 million in the second quarter of fiscal 2014 to write-off the pro-rata amount of unamortized debtdiscount and deferred issuance costs related to those creditors who did not participate in the refinancing. For the remainder of the creditors, this transactionhas been accounted for as a modification because the present value of the cash flows on a creditor-by-creditor basis between the two debt instruments was lessthan 10%. The Company expensed direct third-party costs of $1.0 million to interest expense.F-29Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe Guarantors have guaranteed the Company’s obligations under the credit facilities, and the credit facilities are secured by first-priority liens on, anda first-priority security interest in, substantially all of the assets of the Company and the Guarantors, including all of the capital stock of substantially all ofthe U.S. subsidiaries owned by the Company and the Guarantors, 65% of the capital stock of certain of the Company’s first-tier foreign subsidiaries and allintercompany debt. The security interests are evidenced by a pledge and security agreement by and among Goldman Sachs Bank USA, as collateral agent, theCompany and the Guarantors and other related agreements, including certain intellectual property security agreements and mortgages.The Company is required to make scheduled principal payments under Term Loan A in increasing amounts ranging from $12.5 million per three monthperiod beginning October 31, 2012 to $50.0 million per three month period commencing October 31, 2015, and under Term Loan B in equal installments of$3.75 million per three month period beginning on October 31, 2012 and for 27 three month periods thereafter. The remaining balance for each term loan isdue at maturity. Any amounts outstanding under the Revolving Facility are due at maturity. Subject to certain limitations, the Company may voluntarilyprepay any of the credit facilities without premium or penalty. The Company is required to make principal repayments first, pro rata among the term loanfacilities, and second to the Revolving Facility from specified excess cash flows from operations and from the net proceeds of specified types of asset sales,debt issuances, insurance recoveries and equity offerings.Interest accruing at the Base Rate generally is payable by the Company on a quarterly basis. Interest accruing at the Eurodollar Rate generally ispayable on the last day of selected interest periods (which can be one, two, three and six months and in certain circumstances nine or twelve months) unlessthe interest period exceeds three months, in which case, interest is due at the end of every three month period. The Company is required to pay a quarterlycommitment fee at an annual rate of 0.50% on the undrawn committed amount available under the Revolving Facility (which rate is subject to reductiondepending on the total net leverage ratio as defined in the Credit Agreement).Borrowings outstanding under the Credit Agreement in fiscal 2014, 2013 and 2012 had weighted-average interest rates of 2.89%, 3.70% and 4.0%,respectively. The interest rates on the outstanding Term Loan A and Term Loan B borrowings at September 27, 2014 were 2.15% and 3.25%, respectively.Interest expense under the Credit Agreement totaled $75.3 million, $107.6 million and $18.4 million for fiscal 2014, 2013 and 2012, respectively, whichincludes non-cash interest expense of $12.7 million, $14.5 million and $2.4 million, respectively, related to the amortization of the deferred financing costsand accretion of the debt discount.The Credit Agreement contains affirmative and negative covenants customarily applicable to senior secured credit facilities, including covenantsrestricting the ability of the Company and the guarantors, subject to negotiated exceptions, to: incur additional indebtedness and additional liens on theirassets; engage in mergers or acquisitions or dispose of assets; enter into sale-leaseback transactions; pay dividends or make other distributions; voluntarilyprepay other indebtedness; enter into transactions with affiliated persons; make investments; and change the nature of their businesses.The Credit Agreement contains total net leverage ratio and interest coverage ratio financial covenants measured as of the last day of each fiscal quarter,effective in the first quarter of fiscal 2013. The maximum net leverage ratio as of September 27, 2014 is 6.00:1.00, which decreases over time to 4.00:1.00 forthe quarter ending September 30, 2017 and each fiscal quarter thereafter. The minimum interest coverage ratio as of September 27, 2014 is 3.25:1.00, whichincreases over time to 3.75:1.00 for the fiscal quarter ending September 30, 2017 and each quarter thereafter. The total net leverage ratio is defined as theratio of the Company's consolidated net debt as of the quarter end to its consolidated adjusted EBITDA for the four-fiscal quarter period ending on themeasurement date. The interest coverage ratio is defined as the ratio of the Company's consolidated adjusted EBITDA for the prior four-fiscal quarter periodending on the measurement date to adjusted consolidated cash interest expense for the same measurement period. These terms, and the calculation thereof,are defined in further detail in the Credit Agreement. The Company was in compliance with these financial covenants as of September 27, 2014.The Company has evaluated the Credit Agreement for derivatives pursuant to ASC 815, Derivatives and Hedging, and identified embedded derivativesthat require bifurcation as the features are not clearly and closely related to the host instrument. The embedded derivatives are a default provision, whichcould require additional interest payments, and provision requiring contingent payments to compensate the lenders for changes in tax deductions. TheCompany has determined that the fair value of these embedded derivatives was nominal as of September 27, 2014 and September 28, 2013.Senior NotesOn August 1, 2012, the Company completed a private placement of $1.0 billion aggregate principal amount of its 6.25% senior notes due 2020(“Senior Notes”) at an offering price of 100% of the aggregate principal amount of the Senior Notes. Net proceeds to the Company were $987.4 million afterdeducting underwriting fees and offering expenses, which are being amortized to interest expense over the term of the Senior Notes. The Senior Notes wereregistered under the Securities Act ofF-30Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents1933 in fiscal 2013. The Senior Notes are general senior unsecured obligations of the Company and are guaranteed on a senior unsecured basis by theGuarantors. The proceeds were used to fund a portion of the Gen-Probe acquisition.The Senior Notes mature on August 1, 2020 and bear interest at the rate of 6.25% per year, payable semi-annually on February 1 and August 1 of eachyear, commencing on February 1, 2013. The Company recorded interest expense of $64.0 million, $63.9 million and $10.7 million in fiscal 2014, 2013 and2012, respectively, which includes non-cash interest expense of $1.7 million, $1.6 million and $0.3 million in fiscal 2014, 2013 and 2012, respectively,related to the amortization of the deferred financing costs.The indenture contains customarily applicable affirmative and negative covenants, including covenants restricting the ability of the Company andcertain of its subsidiaries’, subject to negotiated exceptions and qualifications, to: incur additional indebtedness; pay dividends or repurchase or redeemcapital stock; make certain investments; incur liens; enter into certain types of transactions with the Company’s affiliates; and sell assets or consolidate ormerge with or into other companies. The Company is not required to maintain any financial covenants with respect to the Senior Notes.The Company may redeem up to 35% of the aggregate principal amount of the Senior Notes with the net cash proceeds of certain equity offerings atany time and from time to time before August 1, 2015, at a redemption price equal to 106.250% of the aggregate principal amount so redeemed, plus accruedand unpaid interest, if any, to the redemption date. The Company also has the option to redeem the Senior Notes on or after: August 1, 2015 through July 31,2016 at 103.125% of par; August 1, 2016 through July 31, 2017 at 102.083% of par; August 1, 2017 through July 31, 2018 at 101.042% of par; andAugust 1, 2018 and thereafter at 100% of par. In addition, if the Company undergoes a change of control, as provided in the indenture, the Company will berequired to make an offer to purchase each holder’s Senior Notes at a price equal to 101% of the aggregate principal amount of the Senior Notes, plus accruedand unpaid interest, if any, to the repurchase date.The Company has evaluated the Senior Notes for derivatives pursuant to ASC 815 and did not identify any embedded derivatives that requirebifurcation. All features were deemed to be clearly and closely related to the host instrument.Convertible NotesOn December 10, 2007, the Company issued and sold $1.725 billion, at par, of 2.00% Convertible Senior Notes due December 15, 2037 (“2007Notes”). Net proceeds from the offering were $1.69 billion, after deducting offering expenses. On November 18, 2010, the Company entered into separate,privately-negotiated exchange agreements under which it retired $450.0 million in aggregate principal of its 2007 Notes for $450.0 million in aggregateprincipal of new 2.00% Convertible Exchange Senior Notes due December 15, 2037 (“2010 Notes”). In connection with this exchange transaction, theCompany recorded a debt extinguishment loss of $29.9 million in the first quarter of fiscal 2011. On February 29, 2012, the Company entered into separate,privately-negotiated exchange agreements under which it retired $500.0 million in aggregate principal of the 2007 Notes for $500.0 million in aggregateprincipal of new 2.00% Convertible Senior Notes due March 1, 2042 (“2012 Notes”). In connection with this exchange transaction, the Company recorded adebt extinguishment loss of $42.3 million in the second quarter of fiscal 2012. On February 14, 2013, the Company entered into separate, privately-negotiated exchange agreements under which it retired $370.0 million in aggregate principal of the 2007 Notes for $370.0 million in aggregate principal ofnew 2.00% Convertible Senior Notes due 2043 (“2013 Notes”). This exchange transaction was accounted for as a modification and no debt extinguishmentloss or gain was recorded.On November 14, 2013, the Company announced that it had issued a notice of redemption to the holders of its 2007 Notes to redeem any 2007 Notesoutstanding on December 18, 2013 at a redemption price payable in cash equal to 100.00% of the principal amount of the 2007 Notes plus accrued andunpaid interest to, but not including, December 18, 2013. Holders of the 2007 Notes also had the option of putting the 2007 Notes to the Company as ofDecember 13, 2013. The 2007 Notes were redeemed at their par value aggregating $405.0 million. Under ASC 470, the derecognition of the 2007 Notes didnot result in a gain or loss as the fair value of the liability component of the 2007 Notes was determined to be equal to the consideration paid to redeem the2007 Notes, and as a result, no value was allocated to the reacquisition of the conversion option.The 2010 Notes, the 2012 Notes and the 2013 Notes are collectively referred to herein as the “Convertible Notes.”Holders may require the Company to repurchase the Convertible Notes prior to maturity on the dates set forth below:•the 2010 Notes on each of December 15, 2016, 2020 and 2025, December 13, 2030 and December 14, 2035;•the 2012 Notes on each of March 1, 2018, 2022, 2027 and 2032 and March 2, 2037; and•the 2013 Notes on each of December 15, 2017, 2022, 2027, 2032 and 2037.Holders may also require the Company to repurchase the Convertible Notes upon a fundamental change, as defined in each of the applicableindentures. The Company may redeem all or a portion of the 2010 Notes at any time on or after December 19, 2016, all or a portion of the 2012 Notes at anytime on or after March 6, 2018 and all or a portion of the 2013F-31Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsNotes at any time on or after December 15, 2017. If, prior to maturity, a holder requires the Company to repurchase the Convertible Notes or the Companyelects to redeem the Convertible Notes, the repurchase or redemption price of each Convertible Note will equal 100% of its principal amount, plus accruedand unpaid interest to, but excluding, the redemption or repurchase date, as applicable.The 2010 Notes bear interest at a rate of 2.00% per year on the principal amount, payable semi-annually in arrears in cash on June 15 and December 15of each year ending on December 15, 2016 and will accrete principal from December 15, 2016 at a rate that provides holders with an aggregate annual yieldto maturity of 2.00% per year. Beginning with the six month interest period commencing December 15, 2016, the Company will pay contingent interestduring any six month interest period to the holders of 2010 Notes if the “trading price”, as defined, of the 2010 Notes for each of the five trading days endingon the second trading day immediately preceding the first day of the applicable six month interest period equals or exceeds 120% of the accreted principalamount of the 2010 Notes. The holders of the 2010 Notes may convert the 2010 Notes into shares of the Company’s common stock at a conversion price ofapproximately $23.03 per share, subject to adjustment, prior to the close of business on September 15, 2037 under any of the following circumstances:(1) during any calendar quarter if the last reported sale price of the Company’s common stock exceeds 130% of the conversion price for at least 20 tradingdays in the 30 consecutive trading days ending on the last trading day of the preceding calendar quarter; (2) during the five business day period after any fiveconsecutive trading day period in which the trading price per note for each day of such period was less than 98% of the product of the last reported sale priceof the Company’s common stock and the conversion rate on each such day; (3) if the 2010 Notes have been called for redemption; or (4) upon the occurrenceof specified corporate events. None of these triggering events had occurred as of September 27, 2014.The 2012 Notes bear interest at a rate of 2.00% per year on the principal amount, payable semi-annually in arrears in cash on March 1 and September 1of each year, beginning September 1, 2012 and ending on March 1, 2018 and will accrete principal from March 1, 2018 at a rate that provides holders with anaggregate annual yield to maturity of 2.00% per year. Beginning with the six month interest period commencing March 1, 2018, the Company will paycontingent interest during any six month interest period to the holders of 2012 Notes if the “trading price”, as defined, of the 2012 Notes for each of the fivetrading days ending on the second trading day immediately preceding the first day of the applicable six month interest period equals or exceeds 120% of theaccreted principal amount of the 2012 Notes. The holders of the 2012 Notes may convert the 2012 Notes into shares of the Company’s common stock at aconversion price of $31.175 per share, subject to adjustment, prior to the close of business on March 1, 2042, subject to prior redemption or repurchase of the2012 Notes, under any of the following circumstances: (1) during any calendar quarter if the last reported sale price of the Company’s common stock exceeds130% of the conversion price for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding calendar quarter;(2) during the five business day period after any five consecutive trading day period in which the trading price per note for each day of such period was lessthan 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such day; (3) if the 2012 Notes havebeen called for redemption; or (4) upon the occurrence of specified corporate events. None of these triggering events had occurred as of September 27, 2014.The 2013 Notes bear interest at a rate of 2.00% per year on the original principal amount, payable semi-annually in arrears in cash on June 15 andDecember 15 of each year, ending on December 15, 2013. The 2013 Notes accrete principal from their date of issuance at a rate of 4.00% per year until andincluding December 15, 2017, and 2.00% per year thereafter. Beginning with the six month interest period commencing December 15, 2017, the Companywill pay contingent interest to the holders of 2013 Notes during any six month interest period if the “trading price,” as defined, of the 2013 Notes for each ofthe five trading days ending on the second trading day immediately preceding the first day of the applicable six month interest period equals or exceeds120% of the accreted principal amount of the 2013 Notes. The holders of the 2013 Notes may convert the notes into shares of the Company’s common stockat a conversion price of approximately $38.59 per share, subject to adjustment, prior to the close of business on September 15, 2043 under any of thefollowing circumstances: (1) during any calendar quarter if the last reported sale price of the Company’s common stock exceeds 130% of the conversion pricefor at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding calendar quarter; (2) during the five businessday period after any five consecutive trading day period in which the trading price per note for each day of such period was less than 98% of the product ofthe last reported sale price of the Company’s common stock and the conversion rate on each such day; (3) if the notes have been called for redemption; or(4) upon the occurrence of specified corporate events. At the option of the holder, regardless of the foregoing circumstances, holders may convert theirrespective 2013 Notes at any time on or after September 15, 2043 through the close of business on the second scheduled trading day immediately precedingthe maturity date. The conversion rate will not be adjusted for accrued interest or accreted principal in excess of the original $1,000 principal amount, asaccrued interest and accreted principal will not be convertible into common stock. None of these triggering events had occurred as of September 27, 2014.In lieu of delivery of shares of the Company’s common stock in satisfaction of the Company’s obligation upon conversion of the Convertible Notes,the Company may elect to deliver cash or a combination of cash and shares of its commonF-32Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsstock. If the Company elects to satisfy its conversion obligation in a combination of cash and shares of the Company’s common stock, the Company isrequired to deliver up to a specified dollar amount of cash per $1,000 original principal amount of Convertible Notes, and will settle the remainder of itsconversion obligation in shares of its common stock, in each case based on the daily conversion value calculated as provided in the respective indentures forthe Convertible Notes. This net share settlement election is in the Company’s sole discretion and does not require the consent of holders of the ConvertibleNotes. It is the Company’s current intent and policy to settle any conversion of the Convertible Notes as if the Company had elected to make the net sharesettlement election.The Convertible Notes are the Company’s senior unsecured obligations and rank equally with all of its existing and future senior unsecured debt andprior to all future subordinated debt. The Convertible Notes are effectively subordinated to any future secured indebtedness to the extent of the collateralsecuring such indebtedness, and structurally subordinated to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries.Accounting for the Convertible NotesThe Convertible Notes have been recorded pursuant to FASB Staff Position (“FSP”) APB 14-1, Accounting for Convertible Debt Instruments That MayBe Settled in Cash upon Conversion (Including Partial Cash Settlement) (FSP APB 14-1) (codified within ASC 470) since they can be settled in cash orpartially in cash upon conversion. FSP APB 14-1 requires the liability and equity components of the convertible debt instrument to be separately accountedfor in a manner that reflects the entity’s nonconvertible debt borrowing rate when interest expense is subsequently recognized. The excess of the debt’sprincipal amount over the amount allocated to the liability component is recognized as the value of the embedded conversion feature (“equity component”)within additional-paid-in capital in stockholders’ equity and amortized to interest expense using the effective interest method. The liability component isinitially recorded at its fair value, which is calculated using a discounted cash flow technique. Key inputs used to estimate the fair value of the liabilitycomponent included the Company’s estimated nonconvertible debt borrowing rate as of the measurement date (i.e., the date the Convertible Notes areissued), the amount and timing of cash flows, and the expected life of the Convertible Notes. In addition, third-party transaction costs are required to beallocated to the liability and equity components based on their relative values.On September 27, 2009 (the first day of fiscal 2010), as required, the Company adopted this accounting standard, which was applicable to the originalissuance of its Convertible Notes at which time there was one issue, the 2007 Notes. The Company estimated the fair value of the 2007 Notes without theconversion feature as of the date of issuance (“liability component”). The estimated fair value of the liability component of $1.256 billion was determinedusing a discounted cash flow technique. The estimated effective interest rate of 7.62% was estimated by comparing other companies’ debt issuances that hadfeatures similar to the Company’s debt excluding the conversion feature and who had similar credit ratings during the same annual period as the Company.The excess of the gross proceeds received over the estimated fair value of the liability component totaling $468.9 million was allocated to theconversion feature (“equity component”) as an increase to additional paid-in-capital with a corresponding offset recognized as a discount to reduce the netcarrying value of the 2007 Notes. The discount, after adjustment for the exchange of Convertible Notes as discussed below, was being amortized to interestexpense over a six-year period ended December 18, 2013 (the expected life of the liability component) using the effective interest method. In addition, aportion of the deferred financing costs were allocated to the equity component and recorded as a reduction to additional paid-in-capital.The Company accounted for the 2007 Notes retirement in fiscal 2012, discussed above, under the derecognition provisions of subtopic ASC 470-20-40, which requires the allocation of the fair value of the consideration transferred (i.e., the 2012 Notes) between the liability and equity components of theoriginal instrument to determine the gain or loss on the transaction. In connection with the 2012 Notes transaction, the Company recorded a debtextinguishment loss of $42.3 million in fiscal 2012. This debt extinguishment loss was comprised of the loss on the debt itself of $39.7 million and the write-off of the pro-rata amount of debt issuance costs of $2.6 million allocated to the notes retired. The loss on the debt itself was calculated as the differencebetween the fair value of the liability component of the 2007 Notes amount retired immediately before the respective exchanges and its related carryingvalue immediately before the exchanges. The fair value of the liability component was calculated similar to the description above for initially recording the2007 Notes under FSP APB 14-1, and the Company used an effective interest rate of 2.89% for the 2012 Notes representing the estimated nonconvertibledebt borrowing rate with a maturity as of the measurement date consistent with the 2007 Notes first put date of December 2013. In addition, under thisaccounting standard, a portion of the fair value of the consideration transferred is allocated to the reacquisition of the equity component, which is thedifference between the fair value of the consideration transferred and the fair value of the liability component immediately before the exchange. As a result,on a gross basis in the 2012 Notes transaction, $41.6 million was allocated to the reacquisition of the equity component of the original instrument, which wasrecorded net of deferred taxes within capital in excess of par value.F-33Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsSince the 2012 Notes have the same characteristics as the 2007 Notes and can be settled in cash or a combination of cash and shares of common stock(i.e., partial settlement), the Company is required to account for the liability and equity components of its 2012 Notes separately to reflect its nonconvertibledebt borrowing rate. The Company estimated the fair value of the liability component of the 2012 Notes to be $454.2 million using a discounted cash flowtechnique with an estimated effective interest rate of 3.72%. The rate represents the estimated nonconvertible debt borrowing rate with a maturity as of themeasurement date consistent with the 2012 Notes first put dates of March 2018.The excess of the fair value of the consideration transferred, which was estimated using a binomial lattice model, over the estimated fair value of theliability component of $79.7 million for the 2012 Notes was allocated to the embedded conversion feature as an increase to additional paid-in-capital with acorresponding offset recognized as a discount to reduce the net carrying value of the 2012 Notes. The net debt discount of the 2012 Notes is being amortizedto interest expense over a six-year period ending March 1, 2018 (the expected life of the liability component) using the effective interest method.The 2013 Notes exchange transaction was accounted for as a modification pursuant to ASC 470-50 and not an extinguishment because the terms of thetwo debt instruments were not substantially different. This determination was based on the fact that the present value of the cash flows on a creditor bycreditor basis between the two debt instruments was less than 10% and the change in the fair value of the conversion option before and after the exchangetransaction was less than 10%. As a result, there is no gain or loss from this exchange. As required, the Company recorded the increase in the fair value of theconversion option of $32.5 million from this exchange to additional paid-in-capital, net of deferred taxes. The Company determined the fair value of theconversion option for each debt instrument on the date of modification by calculating the fair value of each debt instrument using the binomial model andsubtracting the fair value of the respective debt instrument’s liability component. The fair value of the liability component for each debt instrument wasdetermined by using a discounted cash flow technique with an effective interest rate of 3.25% and 5.42% for the 2007 Notes and 2013 Notes, respectively.These rates represent the estimated nonconvertible borrowing rate with a maturity as of the measurement date consistent with the first put dates of each debtinstrument. The difference between the debt’s fair value and the fair value of its liability component represents the value allocated to the debt’s conversionoption. In addition, direct costs incurred for this exchange of $4.1 million were expensed as incurred within interest expense.As of September 27, 2014 and September 28, 2013, the Convertible Notes and related equity components (recorded in additional paid-in-capital, net ofdeferred taxes) consisted of the following: 2014 20132007 Notes principal amount $— $405.0Unamortized discount — (4.9)Net carrying amount $— $400.1Equity component, net of taxes $— $121.52010 Notes principal amount $450.0 $450.0Unamortized discount (41.5) (58.3)Net carrying amount $408.5 $391.7Equity component, net of taxes $60.1 $60.12012 Notes principal amount $500.0 $500.0Unamortized discount (27.3) (34.6)Net carrying amount $472.7 $465.4Equity component, net of taxes $49.2 $49.22013 Notes principal amount $370.0 $370.0Principal accretion 24.5 9.2Unamortized discount (40.1) (48.3)Net carrying amount $354.4 $330.9Equity component, net of taxes $131.5 $131.5F-34Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsInterest expense under the Convertible Notes is as follows: Years Ended September 27, 2014 September 28, 2013 September 29, 2012Amortization of debt discount$37.1 $52.7 $68.5Amortization of deferred financing costs1.9 3.0 3.8Principal accretion15.3 9.2 —Non-cash interest expense54.3 64.9 72.32.00% accrued interest (cash)22.3 34.4 34.9 $76.6 $99.3 $107.2If the Company fails to comply with the reporting obligations contained in the agreements for the Convertible Notes, the sole remedy of the holders ofthe Convertible Notes for the first 90 days following such event of default consists exclusively of the right to receive an extension fee in an amount equal to0.25% of the accreted principal amount of the Convertible Notes. Based on its evaluation of the Convertible Notes in accordance with ASC 815, theCompany determined that the Convertible Notes contain a single embedded derivative, comprising both the contingent interest feature and the filing failurepenalty payment, requiring bifurcation as the features are not clearly and closely related to the host instrument. The Company has determined that the valueof this embedded derivative was nominal as of September 27, 2014 and September 28, 2013.As of September 27, 2014, upon conversion, including the potential premium that could be payable on a fundamental change (as defined), theCompany would issue a maximum of approximately 62.5 million shares of common stock to the holders of the Convertible Notes.6. Fair Value MeasurementsThe Company applies the provisions of ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value each reportingperiod and its nonfinancial assets and liabilities that are re-measured and reported at fair value on a non-recurring basis. Fair value is the price that would bereceived from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determiningfair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participantswould use when pricing the asset or liability.Fair Value HierarchyASC 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. Financial assets and liabilities are categorized withinthe valuation hierarchy based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy are definedas follows:•Level 1—Inputs to the valuation methodology are quoted market prices for identical assets or liabilities.•Level 2—Inputs to the valuation methodology are other observable inputs, including quoted market prices for similar assets or liabilities and market-corroborated inputs.•Level 3—Inputs to the valuation methodology are unobservable inputs based on management’s best estimate of inputs market participants would usein pricing the asset or liability at the measurement date, including assumptions about risk.Assets/Liabilities Measured and Recorded at Fair Value on a Recurring BasisThe Company has equity investments in publicly-traded companies and mutual funds, both of which are valued using quoted market prices,representing Level 1 assets. The Company has a payment obligation to the participants under its DCP. This liability is recorded at fair value based on theunderlying value of certain hypothetical investments under the DCP as designated by each participant for their benefit. Since the value of the DCP obligationis based on market prices, the liability is classified within Level 1. In addition, in fiscal 2013 and 2012, the Company had a contingent consideration liabilityrelated to its acquisition of Interlace Medical, Inc. ("Interlace") that was recorded at fair value and based on Level 3 inputs.F-35Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsAssets and liabilities measured and recorded at fair value on a recurring basis consisted of the following: Fair Value Measurements at September 27, 2014 Carrying Value Quoted Prices inActive Market forIdentical Assets(Level 1) SignificantOtherObservableInputs (Level 2) SignificantUnobservableInputs (Level 3)Assets: Marketable securities: Equity securities$24.4 $24.4 $— $—Mutual funds15.4 15.4 — —Total$39.8 $39.8 $— $—Liabilities: Deferred compensation liabilities$35.8 $35.8 $— $—Total$35.8 $35.8 $— $— Fair Value Measurements at September 28, 2013 Carrying Value Quoted Prices inActive Market forIdentical Assets(Level 1) SignificantOtherObservableInputs (Level 2) SignificantUnobservableInputs (Level 3)Assets: Marketable securities: Equity security$18.1 $18.1 $— $—Mutual funds6.9 6.9 — —Total$25.0 $25.0 $— $—Liabilities: Deferred compensation liabilities$38.6 $38.6 $— $—Contingent consideration3.8 — — 3.8Total$42.4 $38.6 $— $3.8Changes in the fair value of recurring fair value measurements using significant unobservable inputs (Level 3), which solely consisted of contingentconsideration liabilities, during the years ended September 27, 2014, September 28, 2013, and September 29, 2012 were as follows: 2014 2013 2012Balance at beginning of period$3.8 $86.4 $103.8Contingent consideration recorded at acquisition— 0.5 —Fair value adjustments— 11.3 38.5Payments / Accruals(3.8) (94.4) (55.9)Balance at end of period$— $3.8 $86.4Assets Measured and Recorded at Fair Value on a Nonrecurring BasisThe Company remeasures the fair value of certain assets and liabilities upon the occurrence of certain events. Such assets are comprised of cost-methodequity investments and long-lived assets, including property, plant and equipment, intangible assets and goodwill. During fiscal 2013 and 2012, theCompany recorded goodwill impairment charges of $1.1 billion and $5.8 million, related to its Molecular Diagnostics and MammoSite reporting units,respectively. These adjustments fall within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs to determine fair value. Thefair value measurements were determined using a DCF analysis, and the amount and timing of future cash flows within the analysis were based on theCompany’s most recent operational budgets, long-range strategic plans and other estimates at the time such remeasurements were made.F-36Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIn the fourth quarter of fiscal 2014, the Company recorded a $5.1 million impairment charge within its Diagnostics segment to record its remainingIPR&D assets at fair value. This adjustment falls within Level 3 of the fair value hierarchy.In the second quarter of fiscal 2014, the Company recorded an impairment charge of $28.6 million within its Breast Health segment, which wascomprised of $27.1 million for intangible assets and $1.5 million for property and equipment. This adjustment falls within Level 3 of the fair value hierarchy.In the first quarter of fiscal 2014, the Company recorded a $3.1 million impairment charge to record certain of its buildings at fair value related to theshutdown of the Hitec Imaging organic photoconductor manufacturing line. This adjustment falls within Level 3 of the fair value hierarchy.The Company holds certain cost-method equity investments in non-publicly traded securities aggregating $5.2 million and $12.6 million atSeptember 27, 2014 and September 28, 2013, respectively, which are included in other long-term assets on the Company’s Consolidated Balance Sheets.These investments are generally carried at cost, less any write-downs for other-than-temporary impairment charges. To determine the fair value of theseinvestments, the Company uses all available financial information related to the entities, including information based on recent or pending third-party equityinvestments in these entities. In certain instances, a cost method investment’s fair value is not estimated as there are no identified events or changes incircumstances that may have a significant adverse effect on the fair value of the investment and to do so would be impractical. During fiscal 2014 and 2013,the Company recorded other-than-temporary impairment charges of $6.9 million and $6.4 million, respectively, related to its cost-method equity investmentsto adjust their carrying value amounts to fair value.The following chart depicts certain assets presented at fair value using level 3 inputs under the fair value hierarchy measured on a nonrecurring basis forwhich the Company has recorded impairment charges: Fair Value Measurements Using Fair Value Quoted Prices inActive Market forIdentical Assets(Level 1) SignificantOtherObservableInputs (Level 2) SignificantUnobservableInputs (Level 3) TotalLossesFiscal 2014: Intangible assets$36.2 — — $36.2 $(32.2)Property and equipment1.0 — — 1.0 (1.5)Buildings1.4 — — 1.4 (3.1)Cost-method equity investments0.8 — — 0.8 (6.9) $(43.7)Fiscal 2013: Goodwill$277.8 — — $277.8 $(1,117.4)Equipment1.4 — — 1.4 (5.0)Cost-method equity investments1.5 — — 1.5 (6.4) $(1,128.8)Fiscal 2012: Equipment$— — — $— $(6.5)Goodwill— — — — (5.8) $(12.3)The above fair value amounts represent only those individual assets remeasured and not the consolidated balances. Refer to Note 5 for disclosure of thenonrecurring fair value measurement related to the debt extinguishment losses recorded in fiscal 2014, 2013 and 2012. Refer to Note 4 for the disclosure ofthe nonrecurring fair value measurement related to assets held-for-sale in the fourth quarter of fiscal 2013.Disclosure of Fair Value of Financial InstrumentsThe Company’s financial instruments mainly consist of cash and cash equivalents, accounts receivable, marketable securities, cost-method equityinvestments, insurance contracts, DCP liability, accounts payable and debt obligations. The carrying amounts of the Company’s cash equivalents, accountsreceivable and accounts payable approximate their fair value due to the short-term nature of these instruments. The Company’s marketable securities arerecorded at fair value. The carryingF-37Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsamount of the insurance contracts are recorded at the cash surrender value, as required by U.S. GAAP, which approximates fair value, and the related DCPliability is recorded at fair value. The Company believes the carrying amounts of its cost-method equity investments approximate fair value.Amounts outstanding under the Company’s Credit Agreement of $2.05 billion aggregate principal are subject to variable rates of interest based oncurrent market rates, and as such, the Company believes the carrying amount of these obligations approximates fair value. The Company’s Senior Notes had afair value of approximately $1.03 billion and $1.05 billion as of September 27, 2014 and September 28, 2013, respectively, based on their trading price,representing a Level 1 measurement. The fair value of the Company’s Convertible Notes is based on the trading prices of the respective notes and represents aLevel 1 measurement. Refer to Note 5 for the carrying amounts of the various components of the Company’s debt.The estimated fair values of the Company’s Convertible Notes at September 27, 2014 and September 28, 2013 are as follows: 2014 20132007 Notes$— $405.02010 Notes536.6 510.82012 Notes531.7 518.82013 Notes401.1 385.7 $1,469.4 $1,820.37. Sale of MakenaIn fiscal 2008, the Company sold the rights of its Makena (formerly Gestiva) pharmaceutical product to K-V Pharmaceutical Company (“KV”) uponFDA approval of the then pending Makena new drug application. The Company executed certain amendments to this agreement that resulted in an increasein the total sales price to $199.5 million and a change in the timing of when payments were due to the Company. On February 3, 2011, the Company receivedFDA approval of Makena, and all rights to Makena were transferred to KV. As a result in fiscal 2011, the Company recorded the up-front payments receivedprior to FDA approval under this agreement, which had been deferred, and a payment received at FDA approval as a gain on the sale of intellectual propertyof $84.5 million, which was net of certain asset write-offs and related expenses. In fiscal 2012, the Company received another scheduled payment andrecorded a gain of $12.4 million, which was net of certain costs. In August 2012, KV and certain of its subsidiaries filed voluntary petitions for reorganizationunder Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court. At that time, additional payments were still owed to theCompany, and in December 2012 the Company and KV executed a settlement agreement, which released KV from all claims in consideration of a $60.0million payment. The Company recorded this amount in the first quarter of fiscal 2013, net of certain costs, resulting in a gain of $53.9 million. TheCompany will receive no further payments from KV.8. Income TaxesThe Company’s income (loss) before income taxes consisted of the following: Years endedSeptember 27, 2014 September 28, 2013 September 29, 2012Domestic $95.1 $(1,184.6) $(46.0)Foreign (47.0) (8.3) (15.7) $48.1 $(1,192.9) $(61.7)F-38Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe provision (benefit) for income taxes contains the following components: Years endedSeptember 27, 2014 September 28, 2013 September 29, 2012Federal: Current $242.2 $154.9 $146.2Deferred (212.5) (182.7) (143.6) 29.7(27.8)2.6State: Current 22.1 15.3 15.3Deferred (24.7) (16.7) (10.2) (2.6) (1.4) 5.1Foreign: Current 9.6 7.7 5.6Deferred (5.9) 1.4 (1.4) 3.7 9.1 4.2 $30.8 $(20.1) $11.9The income tax provision (benefit) differs from the tax provision computed at the U.S. federal statutory rate due to the following: Years endedSeptember 27, 2014 September 28, 2013 September 29, 2012Income tax provision (benefit) at federal statutory rate 35.0 % (35.0)% (35.0)%Increase (decrease) in tax resulting from: Goodwill impairment — 32.8 3.3Domestic production activities deduction (30.6) (1.2) (20.3)State income taxes, net of federal benefit 4.3 (0.2) 5.3Research and investment tax credits (5.2) (1.2) (1.6)Unrecognized tax benefits 2.5 0.3 13.5Contingent consideration — 2.6 59.8Nondeductible transaction expenses — — 7.5Cessation of Adiana — — (28.6)Compensation 5.5 0.2 2.3Foreign rate differential 10.7 0.1 3.1Change in valuation allowance 35.4 (0.8) 5.4Other 6.3 0.7 4.7 63.9 % (1.7)% 19.4 %The Company’s effective tax rate in fiscal 2014 was higher than the statutory rate primarily due to unbenefited foreign losses partially offset by thedomestic production activities deduction benefit.The Company’s effective tax rate in fiscal 2013 was lower than the statutory rate primarily due to the non-deductible goodwill impairment charge, non-deductible contingent consideration expense related to the TCT International Co., Ltd. ("TCT") and Interlace acquisitions, and unbenefited foreign losses,partially offset by the domestic production activities deduction benefit and the release of a $19.9 million valuation allowance related to capital losses whichwere utilized to offset capital gains generated during the year.The Company’s effective tax rate in fiscal 2012 was significantly impacted by non-deductible contingent consideration compensation expense, non-deductible acquisition costs, a non-deductible goodwill impairment charge, and a net increase in income tax reserves and valuation allowances on certainforeign losses. The impact from these items was partially offset by the domestic production activities deduction benefit and a loss claimed on thediscontinued Adiana product line. The fiscal 2012 pre-tax loss magnified the permanent items’ impact on the effective tax rate.F-39Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe Company uses the liability method to account for income taxes in accordance with ASC 740, Income Taxes. Under this method, deferred incometaxes are recognized for the future tax consequences of differences between the tax and financial accounting bases of assets and liabilities at each reportingperiod. Deferred income taxes are based on enacted tax laws and statutory tax rates applicable to the period in which these differences are expected to affecttaxable income. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized.The Company’s significant deferred tax assets and liabilities are as follows: September 27, 2014 September 28, 2013Deferred tax assets Net operating loss carryforwards $54.2 $49.3Capital losses 22.3 23.8Non-deductible accruals 16.8 21.5Non-deductible reserves 27.1 16.1Stock-based compensation 25.0 30.2Research and other credits 12.3 10.7Nonqualified deferred compensation plan 13.7 14.7Other temporary differences 11.6 7.0 183.0 173.3Less: valuation allowance (62.8) (43.4) $120.2 $129.9Deferred tax liabilities Depreciation and amortization $(1,314.6) $(1,494.1)Debt discounts and deferrals (120.9) (189.3)Debt issuance costs (6.8) (10.9)Investment in subsidiary (13.9) (10.7) $(1,456.2) $(1,705.0) $(1,336.0) $(1,575.1)Under ASC 740, the Company can only recognize a deferred tax asset for the future benefit to the extent that it is “more likely than not” that theseassets will be realized. After considering all available positive and negative evidence, the Company established a valuation allowance against specificallyidentified deferred tax assets because it is more-likely-than-not that these will not be realized. In determining these assets realizability, the Companyconsidered numerous factors including historical profitability, the character and estimated future taxable income, prudent and feasible tax planningstrategies, and the industry in which it operates. The valuation allowance increased $19.4 million in fiscal 2014 from fiscal 2013 primarily due tounbenefited foreign losses and unrealized capital losses on investment write-downs.At September 27, 2014, the Company had $20.7 million, $94.7 million and $63.8 million in gross federal, state, and foreign net operating losses,respectively, and $3.7 million, $11.0 million and $1.8 million in federal, state, and foreign credit carryforwards, respectively. These losses and credits expirebetween 2015 and 2034, except for $62.0 million in losses and $6.6 million in credits that have unlimited carryforward periods. The federal, state, andforeign net operating losses exclude $4.5 million, $203.3 million and $63.1 million, respectively, of net operating losses, which the Company expects willexpire unutilized.The Company had $137.0 million in gross unrecognized tax benefits, excluding interest, at September 27, 2014 and $121.8 million at September 28,2013. At September 27, 2014, $66.1 million represents the unrecognized tax benefits that, if recognized, would reduce the Company’s effective tax rate. Inthe next twelve months it is reasonably possible that the Company will reduce its gross unrecognized tax benefits by $6.0 to $8.0 million due to statutes oflimitations expiring and potential favorable settlements with taxing authorities.F-40Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe Company’s unrecognized income tax benefits activity for fiscal 2014 and 2013 was as follows: 2014 2013Balance at beginning of fiscal year $121.8 $53.1Tax positions related to current year: Additions 10.8 65.0Reductions — —Tax positions related to prior years: Additions related to change in estimate 10.9 3.3Reductions (2.7) (0.4)Payments — (0.6)Lapses in statutes of limitations and settlements (3.8) (2.3)Acquired tax positions: Additions related to reserves acquired from acquisitions — 3.7Balance as of the end of the fiscal year $137.0 $121.8The Company’s policy is to include accrued interest and penalties related to unrecognized tax benefits and income tax liabilities, when applicable, inincome tax expense. As of September 27, 2014 and September 28, 2013, gross accrued interest was $8.3 million and $3.6 million, respectively. AtSeptember 27, 2014, no significant penalties have been accrued.The Company and its subsidiaries are subject to various federal, state, and foreign income taxes. The Company’s U.S. Federal income tax returns are nolonger subject to examination prior to fiscal year 2011. State income tax returns are generally no longer subject to examination prior to fiscal year 2010. TheInternal Revenue Service commenced its examination of the Company’s consolidated federal income tax return for fiscal 2011 in July 2013. The Company isalso undergoing a tax examination in Germany for fiscal years 2008 through 2010. In September 2014, the Internal Revenue Service commenced itsexamination of Gen-Probe’s consolidated federal income tax returns for calendar years 2010 through the 2012 acquisition date. The Company has a taxholiday in Costa Rica that currently does not materially impact its effective tax rate and is scheduled to expire in 2015.The Company intends to reinvest, indefinitely, approximately $61.9 million in unremitted foreign earnings. It is not practical to estimate the additionaltaxes that may be payable upon repatriation.9. Stockholders' Equity and Stock-Based CompensationStockholder Rights AgreementOn November 20, 2013, the Company’s Board of Directors declared a dividend of one preferred share purchase right (a “Right”) for each outstandingshare of common stock, par value $0.01 per share, of the Company, to purchase from the Company one ten-thousandth of a share of newly designated SeriesA Junior Participating Preferred Stock, par value $0.01 per share, of the Company (the “Preferred Stock”) at a price of $107.00 per one ten-thousandth of ashare of Preferred Stock, subject to adjustment as provided in the Rights Agreement. The dividend was payable to stockholders of record at the close ofbusiness on December 2, 2013 (the “Record Date”). The Rights Agreement became effective on November 21, 2013.On June 24, 2014, the Company entered into Amendment No. 1 (the “Amendment”) to the Rights Agreement by and between the Company andAmerican Stock Transfer & Trust Company, LLC, as rights agent. The Amendment accelerated the expiration of the Rights from November 20, 2014 toJune 24, 2014, and had the effect of terminating the Rights Agreement on that date. At the time of the termination of the Rights Agreement, all of the Rightsdistributed to holders of the Company’s common stock pursuant to the Rights Agreement expired.Stock Repurchase ProgramOn November 11, 2013, the Company announced that its Board of Directors authorized the repurchase of up to $250 million of the Company’soutstanding common stock over a three-year period. Under the stock repurchase program, the Company is authorized to repurchase, from time-to-time, sharesof its outstanding common stock on the open market or in privately negotiated transactions in the United States. As of September 27, 2014, the Company hadnot repurchased any shares under this program.F-41Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStock-Based CompensationEquity Compensation PlansThe Company has one share-based compensation plan pursuant to which awards are currently being made—the 2008 amended and restated EquityIncentive Plan (“2008 Equity Plan”). The Company has four share-based compensation plans pursuant to which outstanding awards have been made, butfrom which no further awards can or will be made—i) the 1995 Combination Stock Option Plan; ii) the 1997 Employee Equity Incentive Plan; iii) the 1999Equity Incentive Plan; and iv) the 2000 Acquisition Equity Incentive Plan.The purpose of the 2008 Equity Plan is to provide stock options, restricted stock units and other equity interests in the Company to employees, officers,directors, consultants and advisors of the Company and any other person who is determined by the Board of Directors to have made (or is expected to make)contributions to the Company. The 2008 Equity Plan is administered by the Board of Directors of the Company, and a total of 31.5 million shares werereserved for issuance under this plan. As of September 27, 2014, the Company had 10.7 million shares available for future grant under the 2008 Equity Plan.The following presents stock-based compensation expense in the Company’s Consolidated Statements of Operations in fiscal 2014, 2013 and 2012: 2014 2013 2012Cost of revenues $7.3 $7.0 $5.7Research and development 8.4 7.2 5.3Selling and marketing 8.2 8.9 7.4General and administrative 19.5 20.2 18.7Restructuring and divestiture 6.6 9.0 3.5 $50.0$52.3$40.6Grant-Date Fair ValueThe Company uses a binomial model to determine the fair value of its stock options. The Company considers a number of factors to determine the fairvalue of options including the assistance of an outside valuation adviser. Information pertaining to stock options granted during fiscal 2014, 2013 and 2012and related assumptions are noted in the following table: Years endedSeptember 27, 2014 September 28, 2013 September 29, 2012Options granted (in millions) 2.4 2.6 2.3Weighted-average exercise price $22.01 $20.29 $17.21Weighted-average grant date fair value $7.67 $7.03 $6.48Assumptions: Risk-free interest rates 1.2% 0.5% 0.7%Expected life (in years) 4.4 4.4 4.3Expected volatility 41.4% 43.7% 46.9%Dividend yield — — —The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of the stock options. In projecting expectedstock price volatility, the Company uses a combination of historical stock price volatility and implied volatility from observable market prices of similarequity instruments. The Company estimated the expected life of stock options based on historical experience using employee exercise and option expirationdata.In connection with appointing Stephen P. MacMillan as its new President and Chief Executive Officer in December 2013, the Company grantedapproximately 0.1 million market stock units ("MSUs"). The MSUs vest in three separate tranches in an amount of 1/3rd of the total amount of the awardbased on the Company’s stock price meeting certain defined average stock prices for 30 consecutive trading days. These MSUs were valued at an average of$18.65 per share using the Monte Carlo simulation model and each tranche has its own derived service period. The Company is recognizing compensationexpense under the accelerated method as prescribed by ASC 718. In addition, per the terms of his employment agreement, the Company granted 0.2 millionrestricted stock units ("RSUs") to match Mr. MacMillan’s purchase of 0.2 million shares of the Company’s common stock on the open market in the secondquarter of fiscal 2014. The RSUs cliff vest three years from the date of grant, and the Company is accounting for this grant as a liability award pursuant toASC 718 because this RSU award contains anF-42Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsadditional vesting condition (the requirement that Mr. MacMillan retain the matching shares during the vesting period) that is not service, performance ormarket based.Stock-Based Compensation Expense AttributionThe Company uses the straight-line attribution method to recognize stock-based compensation expense for stock options and RSUs. The vesting termof stock options is generally five years with annual vesting of 20% per year on the anniversary of the grant date, and RSUs generally vest over four years withannual vesting at 25% per year on the anniversary of the grant date. The amount of stock-based compensation recognized during a period is based on thevalue of the portion of the awards that are ultimately expected to vest. ASC 718 requires forfeitures to be estimated at the time granted and revised, ifnecessary, in subsequent periods if actual forfeitures differ from those estimates. Based on an analysis of historical forfeitures, the Company has determined aspecific forfeiture rate for certain employee groups and has applied forfeiture rates ranging from 0% to 6.5% as of September 27, 2014 depending on thespecific employee group. This analysis is re-evaluated annually and the forfeiture rate will be adjusted as necessary. Ultimately, the actual stock-basedcompensation expense recognized will only be for those stock options and RSUs that vest.Stock-based compensation expense related to stock options was $16.3 million, $23.7 million, and $18.7 million in fiscal 2014, 2013 and 2012,respectively. Stock compensation expense related to stock units, including RSUs, performance stock units ("PSUs") and MSUs, was $30.6 million, $26.0million, and $21.4 million in fiscal 2014, 2013 and 2012, respectively. The related tax benefit recorded in the Consolidated Statements of Operations was$15.3 million, $17.2 million and $12.2 million in fiscal 2014, 2013 and 2012, respectively. Included within stock-based compensation expense in fiscal2014, 2013 and 2012 is $6.6 million, $7.9 million and $3.5 million, respectively, related to modification accounting, the acceleration of vesting of certainretention RSUs provided under their original terms upon termination, and the acceleration of vesting for certain options assumed in the Gen-Probeacquisition related to employees who were terminated in connection with the Company’s restructuring action to consolidate its Diagnostics operations. Theoriginal terms of the stock options assumed in the Gen-Probe acquisition provided for acceleration upon a change-in-control and termination within 18months of the change-in-control. At September 27, 2014, there was $24.4 million and $62.1 million of unrecognized compensation expense related to stockoptions and RSUs, respectively, to be recognized over a weighted average period of 3.0 years and 2.6 years, respectively.Share Based Payment ActivityThe following table summarizes all stock option activity under the Company’s stock option plans for the year ended September 27, 2014: Numberof Shares (inmillions) Weighted-AverageExercise Price Weighted-AverageRemainingContractual Life(in Years) AggregateIntrinsicValue (in millions)Options outstanding at September 28, 2013 14.9 $18.92 3.9 $55.0Granted 2.4 22.01 Canceled/ forfeited (2.8) 22.27 Exercised (4.7) 15.03 $34.7Options outstanding at September 27, 2014 9.8 $20.59 4.1 $46.4Options exercisable at September 27, 2014 4.8 $21.49 2.9 $23.1Options vested and expected to vest at September 27, 2014 (1) 9.3 $20.65 4.0 $44.0 (1)This represents the number of vested stock options as of September 27, 2014 plus the unvested outstanding options at September 27, 2014 expectedto vest in the future, adjusted for estimated forfeitures.During fiscal 2013 and 2012, the total intrinsic value of options exercised (i.e., the difference between the market price on the date of exercise and theprice paid by the employee to exercise the options) was $37.6 million and $20.4 million, respectively.F-43Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsA summary of the Company’s RSU activity during the year ended September 27, 2014 is presented below: Non-vested Shares Number ofShares(in millions) Weighted-AverageGrant-Date FairValueNon-vested at September 28, 2013 3.5 $18.51Granted 2.5 22.00Vested (1.2) 18.13Forfeited (0.7) 19.29Non-vested at September 27, 2014 4.1 $20.67The number of RSUs vested includes shares withheld on behalf of employees to satisfy minimum statutory tax withholding requirements. TheCompany pays the minimum statutory tax withholding requirement on behalf of its employees. During fiscal 2014, 2013 and 2012 the total fair value ofRSUs vested was $22.6 million, $27.3 million and $15.7 million, respectively.The Company also granted approximately 0.5 million PSUs during fiscal 2014 to members of its senior management team, which have a weighted-average grant date fair value of $21.69. Each recipient of the PSUs is eligible to receive between zero and 200% of the target number of shares of theCompany’s common stock at the end of three years provided the Company’s defined Return on Invested Capital metrics are achieved. The Company isrecognizing compensation expense ratably over the required service period based on its estimate that it is probable the targeted number of shares will vest. Ifthere is a change in the estimate of the number of shares that are probable of vesting, the Company will cumulatively adjust compensation expense in theperiod that the change in estimate is made.Employee Stock Purchase PlanIn March 2012, the Company’s stockholders approved the Hologic, Inc. 2012 Employee Stock Purchase Plan (“2012 ESPP”), which provides for thegranting of up to 2.5 million shares of the Company’s common stock to eligible employees. The 2012 ESPP plan period is semi-annual and allowsparticipants to purchase the Company’s common stock at 85% of the lower of (i) the market value per share of the common stock on the first day of theoffering period or (ii) the market value per share of the common stock on the purchase date. The first plan period began on July 1, 2012. Stock-basedcompensation expense in fiscal 2014, 2013 and 2012 was $3.1 million, $2.7 million and $0.4 million, respectively.The Company uses the Black-Scholes model to estimate the fair value of shares to be issued as of the grant date using the following weighted averageassumptions: September 27, 2014 September 28, 2013 September 29, 2012Assumptions: Risk-free interest rates 0.08% 0.11% 0.16%Expected life (in years) 0.5 0.5 0.5Expected volatility 30.0% 32.0% 35.0%Dividend yield — — —10. Profit Sharing 401(k) PlanThe Company has a qualified profit sharing plan covering substantially all of its employees. The Company made contributions of $13.3 million, $13.4million and $9.4 million for fiscal 2014, 2013 and 2012, respectively.11. Nonqualified Deferred Compensation PlanEffective March 15, 2006, the Company adopted its DCP to provide non-qualified retirement benefits to a select group of executive officers, seniormanagement and highly compensated employees of the Company. Eligible employees may elect to contribute up to 75% of their annual base salary and100% of their annual bonus to the DCP and such employee contributions are 100% vested. In addition, the Company may elect to make annual discretionarycontributions on behalf of participants in the DCP. Each Company contribution is subject to a three-year vesting schedule, such that each contribution vestsone third annually. Employee contributions are recorded within accrued expenses.F-44Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsUpon enrollment into the DCP, employees make investment elections for both their voluntary contributions and discretionary contributions, if any,made by the Company. Earnings and losses on contributions based on these investment elections are recorded as a component of compensation expense inthe period earned.Annually, the Compensation Committee of the Board of Directors has approved a discretionary cash contribution to the DCP for each year.Discretionary contributions by the Company to the DCP are held in a Rabbi Trust. The Company is recording compensation expense for the DCPdiscretionary contributions ratably over the three-year vesting period of each annual contribution, which totaled $3.7 million, $2.7 million and $2.6 millionin fiscal 2014, 2013 and 2012, respectively. The full amount of the discretionary contribution, net of forfeitures, along with employee deferrals and thedeferred compensation liability assumed from the Gen-Probe acquisition is recorded within accrued expenses and totaled $35.8 million and $38.6 million atSeptember 27, 2014 and September 28, 2013, respectively.The Company has purchased Company-owned group life insurance contracts, in which both voluntary and discretionary Company DCP contributionsare invested, to partially fund payment of the Company’s obligation to the DCP participants. The total amount invested at September 27, 2014 andSeptember 28, 2013 was $22.4 million and $33.9 million, respectively. The values of these life insurance contracts are recorded in other long-term assets.Changes in the cash surrender value of life insurance contracts, which were not significant in fiscal 2014, 2013 and 2012, are recorded within other income(expense), net. In addition, the Company had an additional $15.4 million and $6.9 million of investments in mutual funds to fund the DCP at September 27,2014 and September 28, 2013, respectively. The mutual funds are classified as trading and the gains and losses in these investments are recorded in otherincome (expense), net.12. Commitments and Contingencies(a) Contingent Earn-Out PaymentsIn connection with certain of its acquisitions, the Company incurred obligations to make contingent earn-out payments tied to performance criteria,principally revenue growth of the acquired businesses over a specified period.These contingent consideration arrangements are recorded as either additional purchase price or compensation expense if continuing employment isrequired to receive such payments. Pursuant to ASC 805, contingent consideration that is deemed to be part of the purchase price is recorded as a liabilitybased on the estimated fair value of the consideration the Company expects to pay to the former shareholders of the acquired business as of the acquisitiondate. This liability is re-measured each reporting period with the changes in fair value recorded through a separate line item within the Company’sConsolidated Statements of Operations. Increases or decreases in the fair value of contingent consideration liabilities can result from accretion of the liabilityfor the passage of time, changes in discount rates, and changes in the timing, probabilities and amount of revenue estimates. Contingent considerationarrangements from acquisitions completed prior to the adoption of ASC 805 (effective in fiscal 2010 for the Company) that are deemed to be part of thepurchase price of the acquisition are not subject to the fair value measurement requirements of ASC 805 and are recorded as additional purchase price togoodwill.In connection with the acquisition of Adiana, Inc., the Company was obligated to the former Adiana shareholders to make contingent payments basedon worldwide sales of the Adiana Permanent Contraception System in the first year following FDA approval and on annual incremental sales growththereafter through December 31, 2012. FDA approval of the Adiana system occurred on July 6, 2009, and the Company began accruing contingentconsideration in the fourth quarter of fiscal 2009 based on the defined percentage of worldwide sales of the product. Since this contingent considerationobligation arose from an acquisition prior to the adoption of ASC 805, the amounts accrued were recorded as additional purchase price to goodwill. TheCompany made payments of $16.8 million and $8.8 million in fiscal 2013 and 2012, respectively, to the former Adiana shareholders, net of amountswithheld for the legal indemnification provision. No additional amounts are due to the former shareholders of Adiana. The Company had been in litigationwith Conceptus, Inc. regarding certain intellectual property matters related to the Adiana system. On October 17, 2011, the jury returned a verdict in theConceptus litigation matter in favor of Conceptus awarding damages in the amount of $18.8 million. On April 29, 2012, the Company entered into a licenseand settlement agreement with Conceptus in which Conceptus agreed to forgo the jury award in consideration of the Company agreeing to a permanentinjunction against the manufacture, sale and distribution of the Adiana product.In connection with the Company’s acquisition of Interlace in fiscal 2011, the Company had an obligation to the former Interlace stockholders to makecontingent payments over a two-year period. Pursuant to ASC 805, the Company recorded its estimate of the fair value of the contingent considerationliability based on future revenue projections of the Interlace business. The fair value of the contingent consideration for the first and second measurementperiods was $51.8 million and $93.8 million, respectively. Payments were disbursed in the second quarter of fiscal 2013 and 2012, respectively, of which$39.0 million and $47.6 million, respectively, was reflected in the Consolidated Statements of Cash Flows as cash used in financing activities, representingthe liability recognized at fair value for the first measurement period as of the acquisition date. The remainder, which is related to changes in the fair value ofthe liability, is reflected within cash provided by operating activities.F-45Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe second and final measurement period ended during the second quarter of fiscal 2013, resulting in a contingent consideration liability of $93.8 million.Of this amount, $86.9 million was paid to the former Interlace stockholders in the second quarter of fiscal 2013. The remainder was withheld for legalindemnification provisions and is being used to pay qualifying legal expenses. At September 27, 2014, the Company had accrued $3.3 million related to thelegal indemnification provision.In connection with the Company’s acquisition of TCT in June 2011, the Company had an obligation to certain of the former TCT shareholders, basedon future employment, to make contingent payments over a two year period provided certain revenue milestones were met. These earnouts were recorded ascompensation expense ratably over the required service periods. The second and final earn-out period was completed in the third quarter of fiscal 2013, andthe Company paid $87.4 million of this earn-out in the fourth quarter of fiscal 2013. The remaining $31.1 million of this earn-out was paid in the first quarterof fiscal 2014.The Company also had an obligation to the former shareholders of Beijing Healthcome Technology Company, Ltd. for contingent payments that wereaccounted for as compensation expense. As of September 27, 2014, the Company had accrued $0.7 million.There was no contingent consideration expense recorded in fiscal 2014. A summary of amounts recorded to the Consolidated Statements of Operationsis as follows:Statement of Operations Line Item – Fiscal 2013 Interlace TCT TotalContingent consideration—compensation expense $— $80.0 $80.0Contingent consideration—fair value adjustments 11.3 — 11.3 $11.3 $80.0 $91.3 Statement of Operations Line Item – Fiscal 2012 SentinelleMedical Interlace TCT Healthcome TotalContingent consideration—compensation expense $— $— $75.5 $5.5 $81.0Contingent consideration—fair value adjustments (3.3) 41.8 — — 38.5 $(3.3)$41.8$75.5$5.5$119.5Finance Lease ObligationsThe Company has two non-cancelable lease agreements for buildings that are primarily used for manufacturing. The Company was responsible for asignificant portion of the construction costs, and in accordance with ASC 840, Leases, Subsection 40-15-5, the Company was deemed to be the owner of therespective buildings during the construction period. The Company recorded the fair market value of the buildings and land aggregating $28.3 million withinproperty and equipment on its Consolidated Balance Sheets. At September 27, 2014, the Company has recorded $3.0 million in accrued expenses and $34.1million in other long-term liabilities related to these obligations. The term of the leases is for a period of approximately 10 and 12 years, respectively, withthe option to extend for two consecutive 5-year terms. At the completion of the construction period, the Company reviewed the lease for potential sale-leaseback treatment in accordance with ASC 840, Subsection 40, Sale-Leaseback Transactions. Based on its analysis, the Company determined that the leasedid not qualify for sale-leaseback treatment. Therefore, the building, leasehold improvements and associated liabilities remain on the Company’s financialstatements throughout the lease term, and the building and leasehold improvements are being depreciated on a straight line basis over their estimated usefullives of 35 years.F-46Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsFuture minimum lease payments, including principal and interest, under these leases were as follows at September 27, 2014: Fiscal 2015$2.9Fiscal 20163.1Fiscal 20173.1Fiscal 20182.9Fiscal 20190.3Total minimum payments12.3Less-amount representing interest(2.4)Total$9.9Non-cancelable Purchase and Royalty CommitmentsThe Company has certain non-cancelable purchase obligations primarily related to inventory purchases and diagnostics instruments, primarily theTigris and Panther systems, and to a lesser extent other operating expense commitments. These obligations are not recorded in the Consolidated BalanceSheet. For reasons of quality assurance, sole source availability or cost effectiveness, certain key components and raw materials and instruments are availableonly from a sole supplier and the Company has certain long-term supply contracts to assure continuity of supply. At September 27, 2014, purchasecommitments are as follows: Fiscal 2015$53.7Fiscal 20163.3Fiscal 20173.1Fiscal 20180.8Total$60.9In connection with its R&D efforts, the Company has various license agreements with unrelated parties that provide the Company with rights todevelop and market products using certain technology and patent rights. Terms of the various license agreements require the Company to pay royaltiesranging from less than 1% up to 35% of future sales on products using the specified technology. Such agreements generally provide for a term thatcommences upon execution and continues until expiration of the last patent covering the licensed technology. Under certain of these agreements, theCompany is required to pay minimum annual royalty payments regardless of the level of sales. In addition, the Company has commitments for minimumpayments under certain collaboration agreements. At September 27, 2014, minimum commitments for these agreements are as follows: Fiscal 2015$0.9Fiscal 20161.4Fiscal 20170.8Fiscal 20180.6Fiscal 20190.6Thereafter4.0Total$8.3Concentration of SuppliersThe Company purchases certain components of its products from a single or small number of suppliers. A change in or loss of these suppliers couldcause a delay in filling customer orders and a possible loss of sales, which could adversely affect results of operations; however, management believes thatsuitable replacement suppliers could be obtained in such an event.F-47Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOperating LeasesThe Company conducts its operations in leased facilities under operating lease agreements that expire through fiscal 2035. Substantially all of theCompany’s lease agreements require the Company to maintain the facilities during the term of the lease and to pay all taxes, insurance, utilities and othercosts associated with those facilities. The Company makes customary representations and warranties and agrees to certain financial covenants andindemnities. In the event the Company defaults on a lease, typically the landlord may terminate the lease, accelerate payments and collect liquidateddamages. As of September 27, 2014, the Company was not in default of any covenants contained in its lease agreements. Certain of the Company’s leaseagreements provide for renewal options. Such renewal options are at rates similar to the current rates under the agreements.Future minimum lease payments under all of the Company’s operating leases at September 27, 2014 are as follows: Fiscal 2015$18.9Fiscal 201615.1Fiscal 201712.5Fiscal 201811.2Fiscal 20197.3Thereafter24.7Total$89.7Rent expense, net of sublease income from these locations, was $21.1 million, $19.9 million, and $18.3 million for fiscal 2014, 2013 and 2012,respectively.The Company subleases a portion of a building it owns and some of its facilities and has received aggregate rental income of $1.8 million, $1.9 millionand $3.2 million in fiscal 2014, 2013 and 2012, respectively, which has been recorded as an offset to rent expense. The future minimum annual rental incomepayments under these sublease agreements at September 27, 2014 are as follows: Fiscal 2015$2.1Fiscal 20162.2Fiscal 20172.1Fiscal 20182.1Fiscal 20192.1Thereafter2.1Total$12.713. Litigation and Related MattersOn June 9, 2010, Smith & Nephew, Inc. ("Smith & Nephew") filed suit against Interlace, which the Company acquired on January 6, 2011, in the UnitedStates District Court for the District of Massachusetts. The complaint alleged that the Interlace MyoSure hysteroscopic tissue removal device infringed U.S.patent 7,226,459. On November 22, 2011, Smith & Nephew filed suit against the Company in the United States District Court for the District ofMassachusetts. The complaint alleged that use of the MyoSure hysteroscopic tissue removal system infringed U.S. patent 8,061,359. Both complaints soughtpermanent injunctive relief and unspecified damages. On September 4, 2012, following a two week trial, the jury returned a verdict of infringement of boththe ‘459 and ‘359 patents and assessed damages of $4.0 million. A bench trial regarding the Company’s assertion of inequitable conduct on the part ofSmith & Nephew with regard to the ‘359 patent was held on December 9, 2012 and oral arguments on the issue of inequitable conduct were presented onFebruary 27, 2013. On June 27, 2013, the Court denied the Company’s motions related to inequitable conduct and allowed Smith & Nephew’s request forinjunction, but ordered that enforcement of the injunction be stayed until final resolution, including appeal, of the current re-examinations of both patents atthe United States Patent and Trademark Office (“USPTO”). The Court also rejected the jury’s damage award and ordered the parties to identify a mechanismfor resolving the damages issue. On September 12, 2013, a status conference was held, and the Court invited the parties to submit briefs on the relevance ofrecent activity in the re-examinations at the USPTO. A hearing on this topic was held on October 29, 2013, and the parties are awaiting the Court’s ruling.The Company intends to file post-trial motions seeking to reverse the jury’s verdict. On January 14, 2014, the USPTO issued a final decision that the claimsof the ‘459 patent asserted as part of the litigation are not patentable. On February 13, 2014, Smith & Nephew appealed this decision to the U.S. Patent Trialand Appeal Board. The re-examination of the ‘359 patentF-48Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsis on-going. It is expected that patentability decisions made by the USPTO for both patents will proceed to appeal. At this time, based on availableinformation regarding this litigation, the Company is unable to reasonably assess the ultimate outcome of this case or determine an estimate, or a range ofestimates, of potential losses.On March 6, 2012, Enzo Life Sciences, Inc. (“Enzo”) filed suit against the Company in the United States District Court for the District of Delaware. Thecomplaint alleged that certain of the Company’s molecular diagnostics products, including without limitation products based on its proprietary Invaderchemistry, such as Cervista HPV HR and Cervista HPV 16/18, infringe Enzo’s U.S. patent 6,992,180. The complaint seeks permanent injunctive relief andunspecified damages. The Company was formally served with the complaint on July 3, 2012, and a trial is tentatively scheduled for the fall of 2015. InJanuary 2012, Enzo filed suit against Gen-Probe in the United States District Court for the District of Delaware. The Gen-Probe complaint alleged that certainof Gen-Probe’s diagnostics products, including products that incorporate Gen-Probe’s patented hybridization protection assay technology, such as theAptima Combo 2 and Aptima HPV assays, infringe Enzo’s U.S. patent 6,992,180. On September 30, 2013, Enzo amended its list of accused products toinclude Prodesse, MilliPROBE, PACE and Procleix assays. The complaint seeks permanent injunctive relief and unspecified damages. Enzo has asserted the‘180 patent claims against six other companies. The defendant companies jointly argued issues related to claim construction on August 14, 2014 andcurrently await the Court's ruling. The trials are tentatively scheduled to begin in the fall of 2015. At this time, based on available information regarding thislitigation, the Company is unable to reasonably assess the ultimate outcome of this case or determine an estimate, or a range of estimates, of potential losses.On October 29, 2013, the Interlace stockholder representatives filed a complaint in the Delaware Court of Chancery alleging breach of contract forissues related to the payment of contingent consideration under the Interlace acquisition agreement, and are seeking $14.7 million in additional payments.The Company believes that Interlace has been paid all amounts due under the acquisition agreement. On October 20, 2014, a trial was held in Delaware. Theparties are preparing post trial briefings. At this time, given the uncertainty of litigation, the Company is unable to reasonably assess the ultimate outcome ofthis case, however, the Company does not believe the outcome will be material to its financial position or results of operations.The Company is a party to various other legal proceedings and claims arising out of the ordinary course of its business. The Company believes thatexcept for those matters described above there are no other proceedings or claims pending against it of which the ultimate resolution would have a materialadverse effect on its financial condition or results of operations. In all cases, at each reporting period, the Company evaluates whether or not a potential lossamount or a potential range of loss is probable and reasonably estimable under ASC 450, Contingencies. Legal costs are expensed as incurred.14. Grifols Collaboration AgreementUnder its collaboration agreement with Grifols, the Company manufactures blood screening products, while Grifols is responsible for marketing, salesand service of those products, which Grifols sells under its trademarks. The Company is entitled to recover 50% of its manufacturing costs incurred inconnection with the collaboration and will receive a percentage of the blood screening assay revenue generated under the collaboration. The Company’sshare of revenue from any assay that includes a test for HCV is as follows: 2012-2013, 47%; 2014, 48%; and 2015 through the remainder of the term of thecollaboration, 50%. The Company’s share of blood screening assay revenue from any assay that does not test for HCV is 50%. Grifols is obligated to purchaseall of the quantities of assays specified on a 90-day demand forecast, due 90 days prior to the date Grifols intends to take delivery, and certain quantitiesspecified on a rolling 12-month forecast.The Company recognizes product revenue, and collaborative research and license revenue, which is included within services and other revenues, underthis collaboration agreement. The Company recognized $223.3 million and $197.9 million under this collaboration agreement in fiscal 2014 and fiscal 2013,respectively.15. Business Segments and Geographic InformationThe Company reports segment information in accordance with ASC 280, Segment Reporting. Operating segments are identified as components of anenterprise about which separate, discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, inmaking decisions about how to allocate resources and assess performance. The Company’s chief operating decision maker is the chief executive officer, andthe Company’s reportable segments have been identified based on the types of products manufactured and the end markets to which the products are sold.Each reportable segment generates revenue from either the sale of medical equipment and related services and/or sale of disposable supplies, primarily usedfor diagnostic testing and surgical procedures. The Company has four reportable segments: Diagnostics, Breast Health, GYN Surgical and Skeletal Health.Certain reportable segments represent an aggregation of operating units within each segment. The Company measures and evaluates its reportable segmentsbased on segment revenuesF-49Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsand operating income (loss) adjusted to exclude the effect of non-cash charges, such as intangible asset amortization expense, intangible asset impairmentcharges, contingent consideration charges, restructuring and divestiture charges, and other one-time or unusual items, and related tax effects.Identifiable assets for the four principal reportable segments consist of inventories, intangible assets, goodwill, and property, plant and equipment. TheCompany fully allocates depreciation expense to its four reportable segments. The Company has presented all other identifiable assets as corporate assets.There were no intersegment revenues. Segment information for fiscal 2014, 2013, and 2012 was as follows: Years ended September 27, 2014 September 28, 2013 September 29, 2012Total revenues: Diagnostics $1,186.8 $1,189.8 $718.1Breast Health 944.7 905.1 875.8GYN Surgical 307.9 307.1 313.1Skeletal Health 91.3 90.3 95.6 $2,530.7$2,492.3 $2,002.6Operating income (loss): Diagnostics $48.7 $(1,149.1) $(32.8)Breast Health 187.6 216.1 186.1GYN Surgical 30.3 19.7 (51.9)Skeletal Health 13.1 7.1 12.3 $279.7 $(906.2) $113.7Depreciation and amortization: Diagnostics $376.0 $369.8 $197.3Breast Health 41.7 40.1 42.9GYN Surgical 104.6 105.2 103.8Skeletal Health 0.9 0.9 1.8 $523.2$516.0 $345.8Capital expenditures: Diagnostics $52.2 $51.6 $44.9Breast Health 10.0 16.4 9.8GYN Surgical 8.0 9.1 12.2Skeletal Health 0.4 0.6 0.2Corporate 9.6 12.4 11.6 $80.2$90.1 $78.7 September 27, 2014 September 28, 2013 September 29, 2012Identifiable assets: Diagnostics $4,383.5 $4,667.9 $6,170.5Breast Health 859.8 932.2 956.1GYN Surgical 1,748.2 1,849.5 1,944.4Skeletal Health 26.1 33.5 32.8Corporate 1,397.1 1,517.7 1,373.3 $8,414.7 $9,000.8 $10,477.1In fiscal 2013, the Company recorded a goodwill impairment charge of $1.1 billion related to its Molecular Diagnostics reporting unit, which is in itsDiagnostics segment. In fiscal 2012, the Company recorded a goodwill impairment charge of $5.8 million related to its MammoSite reporting unit, which isin its Breast Health segment.F-50Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe Company operates in the following major geographic areas as noted in the below chart. Revenue data is based upon customer location. Other thanthe United States, no single country accounted for more than 10% of consolidated revenues. The Company’s sales in Europe are predominantly derived fromFrance, Germany and the United Kingdom. The Company’s sales in Asia-Pacific are predominantly derived from China, Australia and Japan. The “All others”designation includes Canada, Latin America and the Middle East.Revenues by geography as a percentage of total revenues were as follows: Years ended September 27, 2014 September 28, 2013 September 29, 2012United States 75% 75% 74%Europe 13% 13% 12%Asia-Pacific 8% 8% 8%All others 4% 4% 6% 100% 100% 100%The Company’s property, plant and equipment, net are geographically located as follows: September 27, 2014 September 28, 2013 September 29, 2012United States $366.8 $386.0 $405.1Costa Rica 27.9 29.3 30.5Europe 56.0 61.5 59.9All other countries 11.2 14.7 12.5 $461.9 $491.5 $508.016. Accrued Expenses and Other Long-Term LiabilitiesAccrued expenses and other long-term liabilities consisted of the following: September 27, 2014 September 28, 2013Accrued Expenses Compensation and employee benefits $157.6 $127.5Interest 18.0 23.8Income and other taxes 9.8 17.4Contingent consideration — 38.1Other 76.7 65.2 $262.1 $272.0 September 27, 2014 September 28, 2013Other Long-Term Liabilities Reserve for income tax uncertainties $131.4 $115.4Accrued lease obligation—long-term 34.1 33.5Pension liabilities 10.8 9.7Other 7.1 9.4 $183.4 $168.017. Pension and Other Employee BenefitsThe Company has certain defined benefit pension plans covering the employees of its Hitec Imaging German subsidiary (the “Pension Benefits”). As ofSeptember 27, 2014 and September 28, 2013, the Company’s pension liability was $10.3 million and $10.1 million, respectively, which is primarily recordedas a component of long-term liabilities in the ConsolidatedF-51Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsBalance Sheets. Under German law, there are no rules governing investment or statutory supervision of the pension plan. As such, there is no minimumfunding requirement imposed on employers. Pension benefits are safeguarded by the Pension Guaranty Fund, a form of compulsory reinsurance thatguarantees an employee will receive vested pension benefits in the event of insolvency.The tables below provide a reconciliation of benefit obligations, plan assets, funded status, and related actuarial assumptions of the Company’s GermanPension Benefits.Change in Benefit Obligation Years endedSeptember 27, 2014 September 28, 2013 September 29, 2012Benefit obligation at beginning of year $(10.1) $(9.7) $(8.0)Service cost — — —Interest cost (0.3) (0.4) (0.4)Plan participants’ contributions — — —Actuarial (loss) gain (0.8) 0.2 (2.0)Foreign exchange gain (loss) 0.6 (0.5) 0.4Benefits paid 0.3 0.3 0.3Benefit obligation at end of year (10.3)(10.1)(9.7)Plan assets — — —Benefit obligation at end of year$(10.3)$(10.1)$(9.7)The tables below outline the components of the net periodic benefit cost and related actuarial assumptions of the Company’s German Pension Benefits.Components of Net Periodic Benefit Cost Years endedSeptember 27, 2014 September 28, 2013 September 29, 2012Service cost $— $— $—Interest cost 0.3 0.4 0.4Expected return on plan assets — — —Amortization of prior service cost — — —Recognized net actuarial gain — — —Net periodic benefit cost $0.3$0.4$0.4 Weighted-Average Net Periodic Benefit Cost Assumptions 2014 2013 2012Discount rate 2.95% 3.60% 3.52%Expected return on plan assets —% —% —%Rate of compensation increase —% —% —%The projected benefit obligation for the German Pension Benefits with projected benefit obligations in excess of plan assets was $10.3 million and$10.1 million at September 27, 2014 and September 28, 2013, respectively, and the accumulated benefit obligation for the German Pension Benefits was$10.3 million and $10.1 million at September 27, 2014 and September 28, 2013, respectively.The Company is also obligated to pay long-term service award benefits under the German Pension Benefits. The projected benefit obligation for long-term service awards was $0.2 million and $0.6 million at September 27, 2014 and September 28, 2013, respectively.F-52Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe table below reflects the total Pension Benefits expected to be paid for the German Pension Benefits each fiscal year as of September 27, 2014: 2015$0.42016$0.42017$0.42018$0.42019$0.42020 to 2024$2.3The Company also maintains additional contractual pension benefits for its top German executive officers in the form of a defined contribution plan.These contributions were insignificant in fiscal 2014, 2013 and 2012. Additionally, the Company has Swiss pension plans, which were insignificant in fiscal2014, 2013, and 2012.18. Quarterly Statement of Operations Information (Unaudited)The following table presents a summary of quarterly results of operations for fiscal 2014 and 2013: 2014FirstQuarter SecondQuarter ThirdQuarter FourthQuarterTotal revenue $612.4 $625.0 $632.6 $660.6Gross profit 305.6 282.1 312.8 345.0Net income (loss) (1) (5.4) (16.8) 11.3 28.2Diluted net income (loss) per common share $(0.02) $(0.06) $0.04 $0.10 2013FirstQuarter SecondQuarter ThirdQuarter FourthQuarterTotal revenue $631.4 $612.7 $626.1 $622.1Gross profit 281.7 279.3 309.8 290.6Net income (loss) (2) 3.1 (51.1) (11.0) (1,113.9)Diluted net income (loss) per common share $0.01 $(0.19) $(0.04) $(4.11) (1)Net loss in the first quarter of fiscal 2014 included restructuring charges of $18.4 million and debt extinguishment loss of $2.9 million. Net loss in thesecond quarter of fiscal 2014 included an impairment charge related to the MRI breast coils product line of $28.6 million, restructuring charges of$11.6 million and a debt extinguishment loss of $4.4 million. Net income in the third quarter of fiscal 2014 included restructuring charges of $6.7million. Net income in the fourth quarter of fiscal 2014 included restructuring and divestiture charges of $15.1 million and a $5.1 million IPR&Dcharge.(2)Net income in the first quarter of fiscal 2013 included a gain on the sale of intellectual property of $53.9 million. Net loss in the second quarter offiscal 2013 included restructuring charges of $12.5 million and a debt extinguishment loss of $3.2 million. Net loss in the third quarter of fiscal 2013included restructuring charges of $6.7 million. Net loss in the fourth quarter of fiscal 2013 included a goodwill impairment charge of $1.1 billion,restructuring charges of $9.7 million and a debt extinguishment loss of $6.0 million.F-53Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents19. Supplemental Guarantor Condensed Consolidating FinancialsThe Company’s Senior Notes are fully and unconditionally and jointly and severally guaranteed by Hologic, Inc. (“Parent/Issuer”) and certain of itsdomestic subsidiaries, which are 100% owned by Hologic, Inc. The following represents the supplemental condensed financial information of Hologic, Inc.and its guarantor and non-guarantor subsidiaries, as of September 27, 2014 and September 28, 2013 and for each of the three years ended September 27,2014, September 28, 2013, and September 29, 2012.F-54Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsSUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONSFor the Year Ended September 27, 2014 Parent/Issuer GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations ConsolidatedRevenues: Product$480.1 $1,612.4 $489.3 $(486.9) $2,094.9Service and other354.0 82.1 51.2 (51.5) 435.8 834.1 1,694.5 540.5 (538.4) 2,530.7Costs of revenues: Product246.3 630.6 341.3 (486.9) 731.3Amortization of intangible assets5.6 299.3 9.7 — 314.6Impairment of intangible assets— — 26.6 — 26.6Service and other161.2 62.0 41.0 (51.5) 212.7Gross Profit421.0 702.6 121.9 — 1,245.5Operating expenses: Research and development30.7 164.1 8.4 — 203.2Selling and marketing74.5 169.7 87.5 — 331.7General and administrative61.3 155.9 42.6 — 259.8Amortization of intangible assets3.1 104.7 6.0 — 113.8Impairment of intangible assets— 5.1 0.5 — 5.6Restructuring and divestiture charges8.4 17.0 26.3 — 51.7 178.0 616.5 171.3 — 965.8Income (loss) from operations243.0 86.1 (49.4) — 279.7Interest income0.4 3.6 1.0 (3.7) 1.3Interest expense(220.6) (1.3) (2.4) 3.7 (220.6)Debt extinguishment loss(7.4) — — — (7.4)Other (expense) income, net172.9 (167.4) 0.3 (10.7) (4.9)Income (loss) before income taxes188.3 (79.0) (50.5) (10.7) 48.1Provision for income taxes3.3 24.1 3.4 — 30.8Equity in earnings (losses) of subsidiaries(167.7) (0.8) — 168.5 —Net income (loss)$17.3 $(103.9) $(53.9) $157.8 $17.3F-55Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsSUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONSFor the Year Ended September 28, 2013 Parent/Issuer GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations ConsolidatedRevenues: Product$416.9 $1,569.6 $477.2 $(362.8) $2,100.9Service and other326.7 71.7 46.6 (53.6) 391.4 743.6 1,641.3 523.8 (416.4) 2,492.3Costs of revenues: Product212.9 636.7 331.4 (362.8) 818.2Amortization of intangible assets5.4 298.4 4.1 — 307.9Impairment of intangible assets— — 1.7 — 1.7Service and other157.4 59.9 39.4 (53.6) 203.1Gross profit367.9 646.3 147.2 — 1,161.4Operating expenses: Research and development29.8 157.8 10.0 — 197.6Selling and marketing78.0 176.0 88.1 — 342.1General and administrative68.9 124.0 34.8 — 227.7Amortization of intangible assets3.0 104.8 4.8 — 112.6Contingent consideration – compensationexpense80.0 — — — 80.0Contingent consideration – fair valueadjustments11.3 — — — 11.3Impairment of goodwill— 1,117.4 — — 1,117.4Gain on sale of intellectual property— (53.9) — — (53.9)Restructuring and divestiture charges4.9 21.6 6.3 — 32.8 275.9 1,647.7 144.0 — 2,067.6(Loss) income from operations92.0 (1,001.4) 3.2 — (906.2)Interest income0.6 0.3 0.4 — 1.3Interest expense(277.8) (1.3) (2.0) — (281.1)Debt extinguishment loss(9.2) — — — (9.2)Other income (expense), net193.3 (184.6) (6.4) — 2.3(Loss) income before income taxes(1.1) (1,187.0) (4.8) — (1,192.9)(Benefit) provision for income taxes30.8 (59.2) 8.3 — (20.1)Equity in earnings (losses) of subsidiaries(1,140.9) 13.9 — 1,127.0 —Net (loss) income$(1,172.8) $(1,113.9) $(13.1) $1,127.0 $(1,172.8)F-56Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsSUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONSFor the Year Ended September 29, 2012 Parent/Issuer GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations ConsolidatedRevenues: Product$421.0 $1,089.5 $431.7 $(284.5) $1,657.7Service and other307.1 63.3 32.5 (58.0) 344.9 728.1 1,152.8 464.2 (342.5) 2,002.6Costs of revenues: Product211.7 396.7 292.9 (284.5) 616.8Amortization of intangible assets5.2 192.4 4.3 — 201.9Service and other155.6 61.3 30.6 (58.0) 189.5Gross Profit355.6 502.4 136.4 — 994.4Operating expenses: Research and development28.1 91.2 11.7 — 131.0Selling and marketing67.9 170.4 84.0 — 322.3General and administrative52.6 136.2 31.7 — 220.5Amortization of intangible assets2.7 64.3 5.0 — 72.0Contingent consideration – compensationexpense81.0 — — — 81.0Contingent consideration – fair valueadjustments38.5 — — — 38.5Impairment of goodwill— 5.8 — — 5.8Gain on sale of intellectual property— (12.4) — — (12.4)Acquired in-process research anddevelopment— 4.5 — — 4.5Restructuring and divestiture charges— 16.2 1.3 — 17.5 270.8 476.2 133.7 — 880.7Income from operations84.8 26.2 2.7 — 113.7Interest income2.0 0.2 0.7 (0.6) 2.3Interest expense(137.2) (1.2) (1.9) — (140.3)Debt extinguishment loss(42.3) — — — (42.3)Other income, net3.1 0.7 0.5 0.6 4.9(Loss) income before income taxes(89.6) 25.9 2.0 — (61.7)Provision (benefit) for income taxes9.7 (3.1) 5.3 — 11.9Equity in earnings (losses) of subsidiaries25.7 8.4 0.6 (34.7) —Net (loss) income$(73.6) $37.4 $(2.7) $(34.7) $(73.6)F-57Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsSUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE LOSSFor the Year Ended September 27, 2014 Parent/Issuer GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations ConsolidatedNet income (loss)$17.3 $(103.9) $(53.9) $157.8 $17.3Changes in foreign currency translationadjustment— — (13.3) — (13.3)Changes in unrealized holding gains onavailable-for-sale securities— (3.2) — — (3.2)Changes in pension plans, net of taxes— — (1.3) — (1.3)Comprehensive (loss) income$17.3 $(107.1)$(68.5) $157.8 $(0.5)For the Year Ended September 28, 2013 Parent/Issuer GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations ConsolidatedNet (loss) income$(1,172.8) $(1,113.9) $(13.1) $1,127.0 $(1,172.8)Changes in foreign currency translationadjustment— 0.7 0.7 — 1.4Changes in unrealized holding gain onavailable-for-sale securities— 12.1 — — 12.1Changes in pension plans, net of taxes— — 0.1 — 0.1Comprehensive (loss) income$(1,172.8) $(1,101.1) $(12.3) $1,127.0 $(1,159.2)For the Year Ended September 29, 2012 Parent/Issuer GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations ConsolidatedNet (loss) income$(73.6) $37.4 $(2.7) $(34.7) $(73.6)Changes in foreign currency translationadjustment0.8 (0.5) 5.9 — 6.2Changes in unrealized holding gain onavailable-for-sale securities— 0.1 — — 0.1Changes in pension plans, net of taxes— — (1.5) — (1.5)Comprehensive (loss) income$(72.8) $37.0 $1.7 $(34.7) $(68.8)F-58Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsSUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETSeptember 27, 2014 Parent/Issuer GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations ConsolidatedASSETS Current assets: Cash and cash equivalents$288.1 $287.8 $160.2 $— $736.1Restricted cash— — 5.5 — 5.5Accounts receivable, net128.4 182.5 85.1 — 396.0Inventories88.6 190.1 51.9 — 330.6Deferred income tax assets26.2 12.1 1.1 — 39.4Prepaid income taxes20.3 3.2 — (1.1) 22.4Prepaid expenses and other current assets16.2 11.0 8.6 — 35.8Intercompany receivables— 2,702.1 18.1 (2,720.2) —Total current assets567.8 3,388.8 330.5 (2,721.3) 1,565.8Property, plant and equipment, net29.7 337.1 95.1 — 461.9Intangible assets, net25.1 3,377.3 41.9 (10.7) 3,433.6Goodwill282.4 2,390.9 137.5 — 2,810.8Other assets88.4 52.7 1.5 — 142.6Long term intercompany receivables— — 13.0 (13.0) —Investment in subsidiaries8,526.0 221.7 — (8,747.7) —Total assets$9,519.4 $9,768.5 $619.5 $(11,492.7) $8,414.7LIABILITIES AND STOCKHOLDERS’EQUITY Current liabilities: Current portion of long-term debt$114.5 $— $— $— $114.5Accounts payable34.8 46.1 11.2 — 92.1Accrued expenses139.4 69.5 54.3 (1.1) 262.1Deferred revenue113.5 7.4 30.0 — 150.9Intercompany payables2,676.2 — 44.2 (2,720.4) —Total current liabilities3,078.4 123.0 139.7 (2,721.5) 619.6Long-term debt, net of current portion4,153.2 — — — 4,153.2Deferred income tax liabilities90.9 1,279.1 5.4 — 1,375.4Deferred service obligations – long-term8.3 3.6 8.2 — 20.1Long-term intercompany payables13.0 — — (13.0) —Other long-term liabilities112.6 34.3 36.5 — 183.4Total stockholders’ equity2,063.0 8,328.5 429.7 (8,758.2) 2,063.0Total liabilities and stockholders’ equity$9,519.4 $9,768.5 $619.5 $(11,492.7) $8,414.7F-59Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsSUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETSeptember 28, 2013 Parent/Issuer GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations ConsolidatedASSETS Current assets: Cash and cash equivalents$321.6 $387.4 $113.5 $— $822.5Restricted cash— — 6.9 — 6.9Accounts receivable, net126.1 174.4 108.8 — 409.3Inventories81.9 146.7 60.8 — 289.4Deferred income tax assets— 19.0 0.5 (19.5) —Prepaid income taxes47.1 2.3 — (4.7) 44.7Prepaid expenses and other current assets16.3 21.1 11.0 — 48.4Intercompany receivables— 2,442.6 31.9 (2,474.5) —Other current assets – assets held-for-sale— — 3.0 — 3.0Total current assets593.0 3,193.5 336.4 (2,498.7) 1,624.2Property, plant and equipment, net29.3 356.7 105.5 — 491.5Intangible assets, net19.9 3,785.0 101.8 — 3,906.7Goodwill283.0 2,390.9 140.6 — 2,814.5Other assets103.6 58.4 1.9 — 163.9Investments in subsidiaries8,667.6 129.0 2.3 (8,798.9) —Total assets$9,696.4 $9,913.5 $688.5 $(11,297.6) $9,000.8LIABILITIES AND STOCKHOLDERS’EQUITY Current liabilities: Current portion of long-term debt$563.8 $— $— $— $563.8Accounts payable27.9 42.6 10.0 — 80.5Accrued expenses153.0 79.6 44.4 (5.0) 272.0Deferred revenue93.3 8.0 31.0 — 132.3Deferred income tax liabilities59.3 — — (19.5) 39.8Intercompany payables2,418.1 — 64.4 (2,482.5) —Total current liabilities3,315.4 130.2 149.8 (2,507.0) 1,088.4Long-term debt, net of current portion4,242.1 — — — 4,242.1Deferred income tax liabilities89.1 1,435.5 10.7 — 1,535.3Deferred service obligations – long-term11.3 3.5 12.9 (2.2) 25.5Other long-term liabilities97.0 37.6 33.4 — 168.0Total stockholders’ equity1,941.5 8,306.7 481.7 (8,788.4) 1,941.5Total liabilities and stockholders’ equity$9,696.4 $9,913.5 $688.5 $(11,297.6) $9,000.8F-60Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsCONSOLIDATING STATEMENT OF CASH FLOWSFor the Year Ended September 27, 2014 Parent/Issuer GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations ConsolidatedOPERATING ACTIVITIES Net cash provided by (used in) operatingactivities$500.4 $(52.7) $60.7 $— $508.4INVESTING ACTIVITIES Proceeds from sale of business, net— — 10.1 — 10.1Purchase of property and equipment(13.8) (22.5) (8.0) — (44.3)Increase in equipment under customer usageagreements(0.5) (20.9) (14.5) — (35.9)Net sales of insurance contracts13.8 — — — 13.8Purchases of mutual funds(29.7) — — — (29.7)Sales of mutual funds22.4 — — — 22.4(Increase) decrease in other assets(1.0) (3.5) 1.1 — (3.4)Net cash used in investing activities(8.8) (46.9) (11.3) — (67.0)FINANCING ACTIVITIES Repayment of long-term debt(595.0) — — — (595.0)Payment of debt issuance costs(2.4) — — — (2.4)Payment of deferred acquisition consideration(5.0) — — — (5.0)Net proceeds from issuance of common stockpursuant to employee stock plans81.4 — — — 81.4Excess tax benefit related to equity awards5.7 — — — 5.7Payment of minimum tax withholdings on netshare settlement of equity awards(9.8) — — — (9.8)Net cash used in financing activities(525.1) — — — (525.1)Effect of exchange rate changes on cash and cashequivalents— — (2.7) — (2.7)Net (decrease) increase in cash and cash equivalents(33.5) (99.6) 46.7 — (86.4)Cash and cash equivalents, beginning of period321.6 387.4 113.5 — 822.5Cash and cash equivalents, end of period$288.1 $287.8 $160.2 $— $736.1F-61Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsCONSOLIDATING STATEMENT OF CASH FLOWSFor the Year Ended September 28, 2013 Parent/Issuer GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations ConsolidatedOPERATING ACTIVITIES Net cash provided by operating activities$237.4 $205.0 $51.4 $— $493.8INVESTING ACTIVITIES Acquisition of a business(6.1) — (0.2) — (6.3)Payment of additional acquisition consideration(16.8) — — — (16.8)Proceeds from sale of business, net of cashtransferred— 83.6 1.5 — 85.1Purchase of property and equipment(15.5) (23.4) (10.1) — (49.0)Increase in equipment under customer usageagreements(0.4) (24.4) (16.3) — (41.1)Purchase of insurance contracts(4.0) — — — (4.0)Proceeds from sale of intellectual property— 60.0 — — 60.0Purchase of cost-method investments(3.5) (0.2) — — (3.7)Sale of cost-method investments2.1 — — — 2.1Investment in subsidiaries— 1.8 (1.8) — —Increase in other assets(2.0) (4.2) (1.3) — (7.5)Net cash provided by (used in) investingactivities(46.2) 93.2 (28.2) — 18.8FINANCING ACTIVITIES Repayment of long-term debt(265.0) — — — (265.0)Payment of debt issuance cost(9.4) — — — (9.4)Payment of contingent consideration(43.0) — — — (43.0)Payment of deferred acquisition consideration(1.6) — — — (1.6)Net proceeds from issuance of common stockpursuant to employee stock plans75.1 — — — 75.1Excess tax benefit related to equity awards7.4 — — — 7.4Payment of minimum tax withholdings on netshare settlements of equity awards(12.3) — — — (12.3)Intercompany dividend169.2 (175.0) 5.8 — —Net cash used in financing activities(79.6) (175.0) 5.8 — (248.8)Effect of exchange rate changes on cash and cashequivalents— (5.2) 3.5 — (1.7)Net increase in cash and cash equivalents111.6 118.0 32.5 — 262.1Cash and cash equivalents, beginning of period210.0 269.4 81.0 — 560.4Cash and cash equivalents, end of period$321.6 $387.4 $113.5 $— $822.5F-62Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsCONSOLIDATING STATEMENT OF CASH FLOWSFor the Year Ended September 29, 2012 Parent/Issuer GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations ConsolidatedOPERATING ACTIVITIES Net cash provided by operating activities$236.1 $104.1 $30.0 $— $370.2INVESTING ACTIVITIES Acquisition of a business, net(3,972.0) 196.8 12.8 — (3,762.4)Payment of additional acquisition consideration(8.9) — (0.9) — (9.8)Proceeds from sale of intellectual property— 12.5 — — 12.5Purchase of property and equipment(13.2) (12.4) (7.5) — (33.1)Increase in equipment under customer usageagreements— (30.7) (14.9) — (45.6)Acquisition of in-process research anddevelopment(4.5) — — — (4.5)Purchase of cost-method investments— (0.3) — — (0.3)Increase in other assets(0.6) (2.2) (4.8) — (7.6)Net cash provided by (used in) investingactivities(3,999.2) 163.7 (15.3) — (3,850.8)FINANCING ACTIVITIES Proceeds from long-term debt3,476.3 — — — 3,476.3Payment of debt issuance cost(81.4) — — — (81.4)Payment of contingent consideration(51.7) — — — (51.7)Payment of deferred acquisition consideration(44.2) — — — (44.2)Net proceeds from issuance of common stockpursuant to employee stock plans28.6 — — — 28.6Excess tax benefit related to equity awards6.2 — — — 6.2Payment of minimum tax withholdings on netshare settlements of equity awards(5.7) — — — (5.7)Net cash used in financing activities3,328.1 — — — 3,328.1Effect of exchange rate changes on cash and cashequivalents0.3 1.6 (1.3) — 0.6Net increase in cash and cash equivalents(434.7) 269.4 13.4 — (151.9)Cash and cash equivalents, beginning of period644.7 — 67.6 — 712.3Cash and cash equivalents, end of period$210.0 $269.4 $81.0 $— $560.4F-63Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsExhibit Index Incorporated byReferenceExhibitNumber Exhibit Description Form Filing Date/Period EndDate 2.1 Agreement and Plan of Merger, dated April 29, 2012, by and among Hologic, GoldAcquisition Corp. and Gen-Probe Incorporated. 8-K 05/01/2012 3.1 Certificate of Incorporation of Hologic. S-1 01/24/1990 3.2 Certificate of Amendment to Certificate of Incorporation of Hologic. 10-Q 03/30/1996 3.3 Certificate of Amendment to Certificate of Incorporation of Hologic. 10-K 09/24/2005 3.4 Certificate of Amendment to Certificate of Incorporation of Hologic. 8-K 10/22/2007 3.5 Certificate of Amendment to Certificate of Incorporation of Hologic. 8-K 03/11/2008 3.6 Certificate of Designation of Series A Junior Participating Preferred Stock of Hologic. 8-K 11/21/2013 3.7 Certificate of Elimination of Series A Junior Participating PreferredStock of Hologic. 8-K 06/25/2014 3.8 Fourth Amended and Restated By-laws, as amended of Hologic. 10-Q 12/28/2013 4.1 Specimen Certificate for Shares of Hologic’s Common Stock. 8-A 01/31/1990 4.2 Description of Capital Stock (Contained in Hologic’s Certificate of Incorporation, asamended, filed as Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5 hereto). 4.3 Indenture, dated December 10, 2007, by and between Wilmington Trust Company, as Trustee,and Hologic. 8-K 12/10/2007 4.4 Second Supplemental Indenture, dated November 23, 2010, by and between WilmingtonTrust Company, as Trustee, and Hologic. 10-K 09/25/2010 4.5 Form of 2.00% Convertible Exchange Senior Note due 2037 (included in Exhibit 4.4). 10-K 09/25/2010 4.6 Third Supplemental Indenture, dated March 5, 2012, by and between Wilmington TrustCompany, as Trustee, and Hologic. 8-K 03/08/2012 4.7 Form of 2.00% Convertible Senior Note due 2042 (included in Exhibit 4.6). 8-K 03/08/2012 4.8 Fourth Supplemental Indenture, dated February 21, 2013, by and between Wilmington TrustCompany, as Trustee, and Hologic. 8-K 02/21/2013 4.9 Form of 2.00% Convertible Senior Note due 2043 (included in Exhibit 4.8). 8-K 02/21/2013 4.10 Indenture, dated August 1, 2012, by and among Wells Fargo Bank, National Association, asTrustee, Hologic and certain subsidiaries of Hologic party thereto. 8-K 08/01/2012 4.11 Form of 6.25% Senior Note due 2020 (included in Exhibit 4.10). 8-K 08/01/2012 10.1* Second Amended and Restated 1999 Equity Incentive Plan. 10-Q 03/25/2006 10.2* Amendment No. 1 to Second Amended and Restated 1999 Equity Incentive Plan. S-8 10/23/2007 10.3* Amendment No. 2 to Second Amended and Restated 1999 Equity Incentive Plan. 8-K 10/22/2007 10.4* Amendment No. 3 to Second Amended and Restated 1999 Equity Incentive Plan. 8-K 12/12/2008 10.5* 2000 Acquisition Equity Incentive Plan. 10-K 09/29/2001Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Incorporated byReferenceExhibitNumber Exhibit Description Form Filing Date/Period EndDate 10.6* Cytyc Corporation 2004 Omnibus Stock Plan S-8 10/23/2007 10.7* The 2003 Incentive Award Plan of Gen-Probe Incorporated as amended and restated. S-8 08/02/2012 10.8* Hologic Amended and Restated 2008 Equity Incentive Plan. 8-K 03/11/2013 10.9* Form of Stock Option Award Agreement Under 2008 Equity Incentive Plan (adopted fiscal2014). 8-K 11/12/2013 10.10* Form of Stock Option Award Agreement Under 2008 Equity Incentive Plan (adopted fiscal2015). 8-K 11/05/2014 10.11* Form of Restricted Stock Unit Award Agreement Under 2008 Equity Incentive Plan (adoptedfiscal 2014). 8-K 11/12/2013 10.12* Form of Performance Stock Unit Award Agreement Under 2008 Equity Incentive Plan(adopted fiscal 2014). 8-K 11/12/2013 10.13* Form of Performance Stock Unit Award Agreement Under 2008 Equity Incentive Plan(adopted fiscal 2015). 8-K 11/05/2014 10.14* Form of Cumming Stock Option Award Agreement Under 2008 Equity Incentive Plan (fiscal2013). 8-K 08/05/2013 10.15* Form of Cumming Restricted Stock Unit Award Agreement Under 2008 Equity Incentive Plan(fiscal 2013). 8-K 08/05/2013 10.16* Form of Independent Director Stock Option Award Agreement Under 2008 Equity IncentivePlan (annual grant, adopted fiscal 2014). 10-K 09/28/2013 10.17*† Form of Independent Director Stock Option Award Agreement Under 2008 Equity IncentivePlan (annual grant, adopted fiscal 2015). 10.18* Form of Independent Director Restricted Stock Unit Award Agreement Under 2008 EquityIncentive Plan (annual grant). 10-K 09/28/2013 10.19* Form of Independent Director Stock Option Award Agreement Under 2008 Equity IncentivePlan (initial grant, adopted fiscal 2014). 10-K 09/28/2013 10.20*† Form of Independent Director Stock Option Award Agreement Under 2008 Equity IncentivePlan (initial grant, adopted fiscal 2015). 10.21* Form of Independent Director Restricted Stock Unit Award Agreement Under 2008 EquityIncentive Plan (initial grant). 10-K 09/28/2013 10.22* Hologic 2012 Employee Stock Purchase Plan. 8-K 03/08/2012 10.23* Hologic 2014 Short-Term Incentive Plan. 8-K 11/12/2013 10.24* Hologic 2015 Short-Term Incentive Plan. 8-K 11/10/2014 10.25* Amended and Restated Non-qualified Deferred Compensation Plan. 8-K 11/12/2013 10.26* Rabbi Trust Agreement. 10-K 09/28/2013 10.27* Form of Indemnification Agreement (as executed with each director of Hologic). # 8-K 03/06/2009 10.28* Form of Senior Vice President Change of Control Agreement. # 10-Q 12/29/2012 10.29* Form of Senior Executive Officer Change of Control Agreement. # 8-K 11/17/2009 10.30* Form of Senior Vice President Severance Agreement. # 10-K 09/28/2013 Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Incorporated byReferenceExhibitNumber Exhibit Description Form Filing Date/Period EndDate10.31* Transition Agreement dated November 5, 2009, by and between John W. Cumming and Hologic. 8-K 11/09/2009 10.32* Employment Letter dated July 18, 2013 by and between John W. Cumming and Hologic. 8-K 07/19/2013 10.33* Separation Agreement and General Release of All Claims dated December 11, 2013 by andbetween John W. Cumming and Hologic. 10-Q 12/28/2013 10.34* Severance and Change of Control Agreement dated March 5, 2013 by and between Mark J.Casey and Hologic. 8-K 03/11/2013 10.35* Separation Agreement and General Release of All Claims dated November 10, 2014 by andbetween Mark J. Casey and Hologic. 8-K 11/10/2014 10.36* Transition and Separation Agreement and General Release of All Claims dated July 18, 2013 byand between Robert A. Cascella and Hologic. 8-K 07/19/2013 10.37* Separation and Release Agreement dated January 22, 2013 by and between Carl W. Hull andHologic. 8-K 01/22/2013 10.38* Consulting Agreement dated January 22, 2013 by and between Carl W. Hull and Hologic. 8-K 01/22/2013 10.39* Employment Agreement dated December 6, 2013 by and between Stephen P. MacMillan andHologic. 8-K 12/09/2013 10.40* Form of Price Targets Performance Stock Unit Award Agreement. 8-K 12/09/2013 10.41* Form of Matching Restricted Stock Unit Award Agreement. 8-K 12/09/2013 10.42* Change of Control Agreement dated December 6, 2013 by and between Stephen P. MacMillanand Hologic. 8-K 12/09/2013 10.43* Retention Agreement dated July 31, 2012 by and between Rohan F. Hastie and Hologic. 10-Q 12/28/2013 10.44* Separation and Release Agreement dated September 2, 2014 by and between Rohan F. Hastieand Hologic. 8-K 09/08/2014 10.45* Offer Letter dated March 9, 2014 by and between Eric B. Compton and Hologic. 8-K 03/14/2014 10.46* Severance and Change of Control Agreement dated March 9, 2014 by and between Eric B.Compton and Hologic. 8-K 03/14/2014 10.47* Transition Agreement dated March 13, 2014 by and between Glenn P. Muir and Hologic. 8-K 03/14/2014 10.48* Transition and Severance Agreement dated May 1, 2014 by and between David P. Harding andHologic. 10-Q 03/29/2014 10.49* Settlement and Release Agreement dated May 1, 2014 by and between David P. Harding andHologic. 10-Q 03/29/2014 10.50* Offer Letter dated May 8, 2014 by and between Robert W. McMahon and Hologic. 8-K 05/13/2014 10.51* Severance and Change of Control Agreement dated May 8, 2014 by and between Robert W.McMahon and Hologic. 8-K 05/13/2014 10.52* Offer Letter dated May 4, 2014 by and between Peter J. Valenti and Hologic. 10-Q 06/28/2014 10.53*† Senior Vice President Severance Agreement dated May 26, 2014 by and between Peter J. Valentiand Hologic. Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Incorporated byReferenceExhibitNumber Exhibit Description Form Filing Date/Period EndDate10.54*† Offer Letter dated August 21, 2014 by and between Thomas A. West and Hologic. 10.55*† Senior Vice President Severance Agreement dated October 3, 2014 by and between Thomas A.West and Hologic. 10.56*† Letter of Intent dated February 27, 2014 and Terms and Conditions of Employment dated March10, 2014 by and between Claus Egstrand and Hologic. 10.57*† Severance and Change of Control Agreement dated September 18, 2014 by and between ClausEgstrand and Hologic. 10.58 Facility Lease (Danbury) dated December 30, 1995 by and among Melvin J. Powers and Mary P.Powers D/B/A M&N Realty and Lorad. Trex MedicalCorporationS-1 03/29/1996 10.59 Lease Agreement (Danbury and Bedford) by and between BONE (DE) QRS 15-12, INC., andHologic dated August 28, 2002. 10-K 09/28/2002 10.60 First Amendment to Lease Agreement (Danbury and Bedford) by and between BONE (DE) QRS15-12, INC., and Hologic dated October 29, 2007. 10-K 09/29/2007 10.61 Office Lease dated December 31, 2003 between Cytyc and Marlborough Campus LimitedPartnership. CytycCorporation10-K 12/31/2003 10.62 Lease Agreement by and between Zona Franca Coyol S.A. and Cytyc Surgical Products CostaRica S.A. dated April 23, 2007. 10-K 09/29/2007 10.63 Lease Agreement by and between 445 Simarano Drive, Marlborough LLC and Cytyc dated July11, 2006. 10-K 09/29/2007 10.64 Lease Guaranty dated October 22, 2007 between Bel Marlborough I LLC and Hologic, asguarantor thereunder. 8-K 10/22/2007 10.65 Form of Exchange Agreement. 8-K 02/15/2013 10.66 Credit and Guaranty Agreement, dated August 1, 2012, by and among Hologic, the guarantorsparty thereto, Goldman Sachs Bank USA, as Administrative Agent and Collateral Agent, and thelenders party thereto. ‡ 8-K/A 10/15/2012 10.67 Refinancing Amendment No. 1 dated March 20, 2013 by and among Hologic, the guarantorsparty thereto, Goldman Sachs Bank USA, and the lenders party thereto. 8-K 03/20/2013 10.68 Refinancing Amendment No. 2 dated August 2, 2013 by and among Hologic, the guarantorsparty thereto, Goldman Sachs Bank USA, and the lenders party thereto. 8-K 08/02/2013 10.69 Refinancing Amendment No. 3 dated February 26, 2014 by and among Hologic, the guarantorsparty thereto, Goldman Sachs Bank USA, and the lenders party thereto. 8-K 02/26/2014 10.70 Pledge and Security Agreement, dated August 1, 2012, by and among the grantors party theretoand Goldman Sachs Bank USA, as Collateral Agent. 8-K/A 10/15/2012 10.71 Restated Agreement dated July 24, 2009 by and between Gen-Probe Incorporated and NovartisVaccines and Diagnostics, Inc. ‡ Gen-Probe10-Q/A 09/30/2009 10.72 First Amendment to Restated Agreement dated November 8, 2013 by and between Gen-ProbeIncorporated and Novartis Vaccines and Diagnostics, Inc. 10-K 09/28/2013 Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Incorporated byReferenceExhibitNumber Exhibit Description Form Filing Date/Period EndDate10.73 Supply Agreement for Panther Instrument System effective November 22, 2006 between Gen-Probe Incorporated and STRATEC Biomedical Systems AG. ‡ Gen-Probe10-Q 09/30/2007 10.74 Nomination and Standstill Agreement dated December 8, 2013 by and among Hologic, IcahnPartners Master Fund LP, Icahn Partners Master Fund II LP, Icahn Partners Master Fund III LP,Icahn Partners LP, Icahn Onshore LP, Icahn Offshore LP, Icahn Capital LP, IPH GP LLC, IcahnEnterprises Holdings LP, Icahn Enterprises G.P. Inc., Beckton Corp., High River LimitedPartnership, Hopper Investments LLC, Barberry Corp., Carl C. Icahn, Jonathan Christodoro andSamuel Merksamer. 8-K 12/09/2013 10.75 Confidentiality Agreement dated December 8, 2013 by and among Hologic, Icahn PartnersMaster Fund LP, Icahn Partners Master Fund II LP, Icahn Partners Master Fund III LP, IcahnPartners LP, Icahn Onshore LP, Icahn Offshore LP, Icahn Capital LP, IPH GP LLC, IcahnEnterprises Holdings LP, Icahn Enterprises G.P. Inc., Beckton Corp., High River LimitedPartnership, Hopper Investments LLC, Barberry Corp., Carl C. Icahn, Jonathan Christodoro andSamuel Merksamer. 8-K 12/09/2013 12.1† Ratio of Earnings to Fixed Charges. 21.1† Subsidiaries of Hologic. 23.1† Consent of Independent Registered Public Accounting Firm. 31.1† Certification of Hologic’s CEO pursuant to Item 601(b)(31) of Regulation S-K, as adoptedpursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2† Certification of Hologic’s CFO pursuant to Item 601(b)(31) of Regulation S-K, as adoptedpursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1*** Certification of Hologic’s CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002. 32.2*** Certification of Hologic’s CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002. 101.INS† XBRL Instance Document. 101.SCH† XBRL Taxonomy Extension Schema Document. 101.CAL† XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF† XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB† XBRL Taxonomy Extension Label Linkbase Document. 101.PRE† XBRL Taxonomy Extension Presentation Linkbase Document. ______________* Indicates management contract or compensatory plan, contract or arrangement.† Filed herewith.*** Furnished herewith.# List of officers or directors, as applicable, to whom provided filed herewith.‡ Confidential treatment has been granted with respect to certain portions of this exhibit. A complete version of this exhibit has been filed separately withthe U.S. Securities and Exchange Commission.Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 10.17Notice of Grant of Stock OptionsAnd Option AgreementHologic, Inc.ID: 04-290244935 Crosby DriveBedford, MA 01730 Participant NamePlan: 2008 Equity Incentive Plan (the “Plan”) Effective GRANT DATE, you have been granted a Non-Qualified Stock Option (the “Option”) to buy SHARES GRANTED shares of Hologic, Inc. (the“Company”) common stock at GRANT PRICE. The Option is granted pursuant to the terms and conditions of the Plan, referenced above, and the optionagreement (the “Option Agreement”) provided herewith.Subject to the terms and conditions of the Option Agreement and the Plan, the Option will vest in full on the first anniversary of the grant date. Unless soonerterminated pursuant to the terms of the Option Agreement or the Plan the Option will expire on EXPIRATION DATE [10 YARS AFTER GRANT DATE].By your signature and the Company's signature below, you and the Company agree that the Option is granted under and governed by the terms andconditions of the Plan and the Option Agreement.________________________________________ ___________________________Hologic, Inc. Date________________________________________ ___________________________Electronic Signature Acceptance DateSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HOLOGIC, INC. NON-QUALIFIED STOCK OPTION AGREEMENT Non Qualified Stock Option Agreement (the “Option Agreement”) pursuant to the Hologic, Inc. 2008 Equity Incentive Plan, as it may be amended fromtime to time (the “Plan”). W I T N E S S E T H: WHEREAS, the Company and the Optionee desire to enter into an agreement whereby the Company will grant the Optionee an option (the “Option”)to purchase shares of the Company’s Common Stock, $.01 par value per share (the “Common Stock”), as set forth in the Notice of Grant of Stock Options towhich this Award Agreement is attached (the “Award Notice”); and WHEREAS, this Option is intended to qualify as a “Non-Qualified Stock Option”, which is a stock option which does not qualify as an incentive stockoption under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Optioneeagree as follows: 1. Grant of Option. Pursuant to the terms and conditions of this Option Agreement and the Plan (which is incorporated herein by reference), the Company hereby grants tothe Optionee an Option to purchase shares of Common Stock (the “Option Shares”) as provided in the Award Notice. The exercise price at which the OptionShares may be purchased (the “Option Exercise Price”) and the vesting schedule of the Option are set forth in the Award Notice. The number and class ofsecurities, vesting schedule and exercise price per share subject to this Option are subject to adjustment as set forth in the Plan. In the event of a conflictbetween the terms and conditions of the Plan and this Option Agreement, the terms and conditions of the Plan shall prevail. Capitalized terms used herein andnot otherwise defined shall have the meanings set forth in the Plan. 2. Vesting of Option. Subject to the provisions of the Plan, Section 3 of this Option Agreement and the right of the Company to accelerate the date upon which any or all ofthis Option would otherwise become exercisable, the Optionee shall be entitled to exercise this Option with respect to all or a portion of the percentage ornumber of the Option Shares provided in the Award Notice. Notwithstanding the foregoing, (a) in the event that the Optionee’s Service (as defined below) isterminated as a result of the death or Permanent Disability (as defined in Section 23(e)(3) of the Code) of the Optionee or (b) there shall occur a Change ofControl (as defined in the Plan) prior to the termination of Optionee’s Service, the Option shall become fully vested upon such termination or Change ofControl, as applicable. For purposes of this Agreement, the term “Service” shall mean service as a Service Provider to the Company, and the term “ServiceProvider” shall mean an employee, officer or director of the Company or an Affiliate of the Company, or a consultant currently providing services to theCompany or an Affiliate of the Company. Whether a termination of Service shall have occurred for purposes of this Agreement shall be determined by theCompany, which determination shall be final, binding and conclusive. Notwithstanding any provision of this Option Agreement to the contrary, in no event may this Option be exercised after the Expiration Date set forth inthe Award Notice. 3. Termination of Service. If the Optionee’s Service is terminated (a “Termination”), then unless otherwise provided in this Option Agreement or the Plan, this Option may beexercised as to all shares with respect to which Optionee could exercise this Option on the date of Termination, and which shares have not been previouslypurchased, until the earlier of the Expiration Date, or:(i)in the case of a Termination by reason of death or Permanent Disability, one year after such Termination; and(ii)in all other cases, one (1) year after the Termination; orsuch other date as determined by the Company, and there shall be no further vesting of the Option after such Termination.Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Notwithstanding the foregoing, in the case of a Termination for cause, the ability to exercise this Option may be terminated on such earlier date as theCompany may specify, and such date may be set so as to prevent the Optionee from further exercising any portion of this Option. 4. Nontransferability; Persons Able to Exercise. The Option may not be transferred other than by will or the laws of descent and distribution. During the life of the Optionee, only the Optionee mayexercise this Option. If the Optionee dies while still employed by the Company, or the periods specified in Section 3, this Option may be exercised by theOptionee’s executors, administrators, legatees or distributees, provided that such person or persons comply with the provisions of this Option applicable tothe Optionee. 5. Method of Exercising Option. The Option may be exercised, in whole or in part, by written notice to the Company, containing an executed Notice of Exercise in the form ofAttachment A, provided that the Company, in its discretion, may modify or augment these requirements as provided in Section 7 of this Option Agreement, orwhere appropriate because a person other than the Optionee is exercising the Option pursuant to Section 4. The written notice specified in this Section mustbe accompanied by payment of the Option Exercise Price for the shares being purchased. Payment shall be made in cash, unless the Company, in its solediscretion, authorizes payment to be made in shares of Common Stock of the Company, a combination of such shares and cash. As soon as practical afterreceipt of this notice and payment, the Company shall deliver the purchased Option Shares. In the event this Option is exercised by any person other than theOptionee, the notice shall be accompanied by appropriate proof of the right of such person to exercise this Option. 6. No Rights Other Than Those Expressly Created. Neither this Option, the Option Agreement nor any action taken hereunder shall be construed as (i) giving the Optionee any right to be retained inthe Service of, or continue to be affiliated with, the Company, (ii) giving the Optionee any equity or interest of any kind in any assets of the Company, or (iii)creating a trust of any kind or a fiduciary relationship of any kind between the Optionee and the Company. As to any claim for any unpaid amounts underthis Option, any person having a claim for payments shall be an unsecured creditor. The Optionee shall not have any of the rights of a stockholder withrespect to any Option Shares until such time as this Option has been exercised and Option Shares have been issued.7. Compliance with Laws. (a) Withholding of Taxes. Pursuant to applicable federal, state, local or foreign laws, the Company may be required to collect or withhold incomeor other taxes from Optionee upon the grant of this Option, the exercise of this Option, or at some other time. The Company may require, as a condition to theexercise of this Option, or demand, at such other time as it may consider appropriate, that the Optionee pay the Company the amount of any taxes which theCompany may determine is required to be collected or withheld, and the Optionee shall comply with the requirement or demand of the Company. (b) Securities Law Compliance. Upon exercise (or partial exercise) of this Option, the Optionee shall make such representations and furnish suchinformation as may, in the opinion of counsel for the Company, be appropriate to permit the Company to issue or transfer the Option Shares in compliancewith the provisions of applicable federal or state securities laws. The Company, in its discretion, may postpone the issuance and delivery of Option Sharesupon any exercise of this Option until completion of such registration or other qualification of such shares under any federal or state laws, or stock exchangelisting, as the Company may consider appropriate. In addition, the Company may require that prior to the issuance or transfer of Option Shares upon exerciseof this Option, the Optionee enter into a written agreement to comply with any restrictions on subsequent disposition that the Company deems necessary oradvisable under any applicable federal and state securities laws. The Option Shares issued hereunder may be legended to reflect such restrictions. (c) General. No Option Shares shall be issued upon exercise of this Option unless and until the Company is satisfied, in its sole discretion, thatthere has been compliance with all legal requirements applicable to the issuance of such Option Shares. 8. Miscellaneous. Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(a) Non-Qualified Option. The Option hereby granted is not intended to be an “incentive stock option” as that term is defined in Section 422 of theInternal Revenue Code. (b) Discretion of the Committee. Unless otherwise explicitly provided herein, the Board of Directors of the Company, or an authorized committeethereof, shall make all determinations required to be made hereunder, including determinations required to be made by the Company, and shall interpret allprovisions of this Option and Option Agreement, as it deems necessary or desirable, in its sole and unfettered discretion. Such determinations andinterpretations shall be binding on and conclusive to the Company and the Optionee. (c) Amendment. This Option may only be modified or amended by a writing signed by both parties.(d) Notices. Any notices required to be given under this Option shall be sufficient if in writing and if sent by certified mail, return receipt requested,and addressed as follows: if to the Company: Hologic, Inc.35 Crosby Dr.Bedford, MA 01730Attention: Chief Financial Officer if to the Optionee: As set forth in the records of the Company or to such other address as either party may designate under the provisions hereof. (e) Entire Agreement. This Option Agreement shall supersede in its entirety all prior undertakings and agreements of the Company and Optionee,whether oral or written, with respect to this option.(f) Successors and Assigns. The rights and obligations of the Company under this Option Agreement shall inure to the benefit of and be bindingupon the successors and assigns of the Company. (g) Applicable Law; Severability. All rights and obligations under this Option Agreement shall be governed by the laws of the State of Delaware. Inthe event that any court of competent jurisdiction shall determine that any provision, or any portion thereof, contained in this Option Agreement shall beunenforceable in any respect, then such provision shall be deemed limited to the extent that such court deems it enforceable, and as so limited shall remain infull force and effect. In the event that such court shall deem any such provision, or portion thereof, wholly unenforceable, the remaining provisions of thisOption Agreement shall nevertheless remain in full force and effect. (h) Paragraph Headings; Rules of Construction. The paragraph headings used in this Option Agreement are for convenience of reference, and arenot to be construed as part of this Option or Option Agreement. The parties hereto acknowledge and agree that the rule of construction to the effect that anyambiguities are resolved against the drafting party shall not be employed in the interpretation of this Option Agreement.(i) Electronic Copies. The Company may choose to deliver certain materials relating to the Plan in electronic form. By accepting this option, youconsent and agree that the Company may deliver the Plan prospectus and the Company’s annual report to you in an electronic format. If at any time youwould prefer to receive paper copies of these documents, as you are entitled to, the Company would be pleased to provide you with such copies upon request.(j) No Waiver of Rights, Powers and Remedies. No failure or delay by a party hereto in exercising any right, power or remedy under this OptionAgreement, and no course of dealing between the parties hereto, shall operate as a waiver of any such right, power or remedy of the party, unless explicitlyprovided for herein. No single or partial exercise of any right, power or remedy under this Option Agreement by a party hereto, nor any abandonment ordiscontinuance of steps to enforce any such right, power or remedy, shall preclude such party from any other or further exercise thereof or the exercise of anyother right, power or remedy hereunder. Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(k) Counterparts. The Award Notice to which this Option Agreement is attached and incorporated by reference may be executed in multiplecounterparts, including by electronic or facsimile signature, each of which shall be deemed in original but all of which together shall constitute one and thesame instrument.Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 10.20Notice of Grant of Stock OptionsAnd Option AgreementHologic, Inc.ID: 04-290244935 Crosby DriveBedford, MA 01730 Participant NamePlan: 2008 Equity Incentive Plan (the “Plan”) Effective GRANT DATE, you have been granted a Non-Qualified Stock Option (the “Option”) to buy SHARES GRANTED shares of Hologic, Inc. (the“Company”) common stock at GRANT PRICE. The Option is granted pursuant to the terms and conditions of the Plan, referenced above, and the optionagreement (the “Option Agreement”) provided herewith.Subject to the terms and conditions of the Option Agreement and the Plan, the Option will vest one-third on each of the first three anniversaries of the grantdate, such that the Option will be fully vested on the third anniversary of the grant date. Unless sooner terminated pursuant to the terms of the OptionAgreement or the Plan the Option will expire on EXPIRATION DATE [10 YARS AFTER GRANT DATE].By your signature and the Company's signature below, you and the Company agree that the Option is granted under and governed by the terms andconditions of the Plan and the Option Agreement.________________________________________ ___________________________Hologic, Inc. Date________________________________________ ___________________________Electronic Signature Acceptance DateSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HOLOGIC, INC. NON-QUALIFIED STOCK OPTION AGREEMENT Non Qualified Stock Option Agreement (the “Option Agreement”) pursuant to the Hologic, Inc. 2008 Equity Incentive Plan, as it may be amended fromtime to time (the “Plan”). W I T N E S S E T H: WHEREAS, the Company and the Optionee desire to enter into an agreement whereby the Company will grant the Optionee an option (the “Option”)to purchase shares of the Company’s Common Stock, $.01 par value per share (the “Common Stock”), as set forth in the Notice of Grant of Stock Options towhich this Award Agreement is attached (the “Award Notice”); and WHEREAS, this Option is intended to qualify as a “Non-Qualified Stock Option”, which is a stock option which does not qualify as an incentive stockoption under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Optioneeagree as follows: 1. Grant of Option. Pursuant to the terms and conditions of this Option Agreement and the Plan (which is incorporated herein by reference), the Company hereby grants tothe Optionee an Option to purchase shares of Common Stock (the “Option Shares”) as provided in the Award Notice. The exercise price at which the OptionShares may be purchased (the “Option Exercise Price”) and the vesting schedule of the Option are set forth in the Award Notice. The number and class ofsecurities, vesting schedule and exercise price per share subject to this Option are subject to adjustment as set forth in the Plan. In the event of a conflictbetween the terms and conditions of the Plan and this Option Agreement, the terms and conditions of the Plan shall prevail. Capitalized terms used herein andnot otherwise defined shall have the meanings set forth in the Plan. 2. Vesting of Option. Subject to the provisions of the Plan, Section 3 of this Option Agreement and the right of the Company to accelerate the date upon which any or all ofthis Option would otherwise become exercisable, the Optionee shall be entitled to exercise this Option with respect to all or a portion of the percentage ornumber of the Option Shares provided in the Award Notice. Notwithstanding the foregoing, (a) in the event that the Optionee’s Service (as defined below) isterminated as a result of the death or Permanent Disability (as defined in Section 23(e)(3) of the Code) of the Optionee or (b) there shall occur a Change ofControl (as defined in the Plan) prior to the termination of Optionee’s Service, the Option shall become fully vested upon such termination or Change ofControl, as applicable. For purposes of this Agreement, the term “Service” shall mean service as a Service Provider to the Company, and the term “ServiceProvider” shall mean an employee, officer or director of the Company or an Affiliate of the Company, or a consultant currently providing services to theCompany or an Affiliate of the Company. Whether a termination of Service shall have occurred for purposes of this Agreement shall be determined by theCompany, which determination shall be final, binding and conclusive. Notwithstanding any provision of this Option Agreement to the contrary, in no event may this Option be exercised after the Expiration Date set forth inthe Award Notice. 3. Termination of Service. If the Optionee’s Service is terminated (a “Termination”), then unless otherwise provided in this Option Agreement or the Plan, this Option may beexercised as to all shares with respect to which Optionee could exercise this Option on the date of Termination, and which shares have not been previouslypurchased, until the earlier of the Expiration Date, or:(i)in the case of a Termination by reason of death or Permanent Disability, one year after such Termination; and(ii)in all other cases, one (1) year after the Termination; orsuch other date as determined by the Company, and there shall be no further vesting of the Option after such Termination.Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Notwithstanding the foregoing, in the case of a Termination for cause, the ability to exercise this Option may be terminated on such earlier date as theCompany may specify, and such date may be set so as to prevent the Optionee from further exercising any portion of this Option. 4. Nontransferability; Persons Able to Exercise. The Option may not be transferred other than by will or the laws of descent and distribution. During the life of the Optionee, only the Optionee mayexercise this Option. If the Optionee dies while still employed by the Company, or the periods specified in Section 3, this Option may be exercised by theOptionee’s executors, administrators, legatees or distributees, provided that such person or persons comply with the provisions of this Option applicable tothe Optionee. 5. Method of Exercising Option. The Option may be exercised, in whole or in part, by written notice to the Company, containing an executed Notice of Exercise in the form ofAttachment A, provided that the Company, in its discretion, may modify or augment these requirements as provided in Section 7 of this Option Agreement, orwhere appropriate because a person other than the Optionee is exercising the Option pursuant to Section 4. The written notice specified in this Section mustbe accompanied by payment of the Option Exercise Price for the shares being purchased. Payment shall be made in cash, unless the Company, in its solediscretion, authorizes payment to be made in shares of Common Stock of the Company, a combination of such shares and cash. As soon as practical afterreceipt of this notice and payment, the Company shall deliver the purchased Option Shares. In the event this Option is exercised by any person other than theOptionee, the notice shall be accompanied by appropriate proof of the right of such person to exercise this Option. 6. No Rights Other Than Those Expressly Created. Neither this Option, the Option Agreement nor any action taken hereunder shall be construed as (i) giving the Optionee any right to be retained inthe Service of, or continue to be affiliated with, the Company, (ii) giving the Optionee any equity or interest of any kind in any assets of the Company, or (iii)creating a trust of any kind or a fiduciary relationship of any kind between the Optionee and the Company. As to any claim for any unpaid amounts underthis Option, any person having a claim for payments shall be an unsecured creditor. The Optionee shall not have any of the rights of a stockholder withrespect to any Option Shares until such time as this Option has been exercised and Option Shares have been issued.7. Compliance with Laws. (a) Withholding of Taxes. Pursuant to applicable federal, state, local or foreign laws, the Company may be required to collect or withhold incomeor other taxes from Optionee upon the grant of this Option, the exercise of this Option, or at some other time. The Company may require, as a condition to theexercise of this Option, or demand, at such other time as it may consider appropriate, that the Optionee pay the Company the amount of any taxes which theCompany may determine is required to be collected or withheld, and the Optionee shall comply with the requirement or demand of the Company. (b) Securities Law Compliance. Upon exercise (or partial exercise) of this Option, the Optionee shall make such representations and furnish suchinformation as may, in the opinion of counsel for the Company, be appropriate to permit the Company to issue or transfer the Option Shares in compliancewith the provisions of applicable federal or state securities laws. The Company, in its discretion, may postpone the issuance and delivery of Option Sharesupon any exercise of this Option until completion of such registration or other qualification of such shares under any federal or state laws, or stock exchangelisting, as the Company may consider appropriate. In addition, the Company may require that prior to the issuance or transfer of Option Shares upon exerciseof this Option, the Optionee enter into a written agreement to comply with any restrictions on subsequent disposition that the Company deems necessary oradvisable under any applicable federal and state securities laws. The Option Shares issued hereunder may be legended to reflect such restrictions. (c) General. No Option Shares shall be issued upon exercise of this Option unless and until the Company is satisfied, in its sole discretion, thatthere has been compliance with all legal requirements applicable to the issuance of such Option Shares. 8. Miscellaneous. Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(a) Non-Qualified Option. The Option hereby granted is not intended to be an “incentive stock option” as that term is defined in Section 422 of theInternal Revenue Code. (b) Discretion of the Committee. Unless otherwise explicitly provided herein, the Board of Directors of the Company, or an authorized committeethereof, shall make all determinations required to be made hereunder, including determinations required to be made by the Company, and shall interpret allprovisions of this Option and Option Agreement, as it deems necessary or desirable, in its sole and unfettered discretion. Such determinations andinterpretations shall be binding on and conclusive to the Company and the Optionee. (c) Amendment. This Option may only be modified or amended by a writing signed by both parties.(d) Notices. Any notices required to be given under this Option shall be sufficient if in writing and if sent by certified mail, return receipt requested,and addressed as follows: if to the Company: Hologic, Inc.35 Crosby Dr.Bedford, MA 01730Attention: Chief Financial Officer if to the Optionee: As set forth in the records of the Company or to such other address as either party may designate under the provisions hereof. (e) Entire Agreement. This Option Agreement shall supersede in its entirety all prior undertakings and agreements of the Company and Optionee,whether oral or written, with respect to this option.(f) Successors and Assigns. The rights and obligations of the Company under this Option Agreement shall inure to the benefit of and be bindingupon the successors and assigns of the Company. (g) Applicable Law; Severability. All rights and obligations under this Option Agreement shall be governed by the laws of the State of Delaware. Inthe event that any court of competent jurisdiction shall determine that any provision, or any portion thereof, contained in this Option Agreement shall beunenforceable in any respect, then such provision shall be deemed limited to the extent that such court deems it enforceable, and as so limited shall remain infull force and effect. In the event that such court shall deem any such provision, or portion thereof, wholly unenforceable, the remaining provisions of thisOption Agreement shall nevertheless remain in full force and effect. (h) Paragraph Headings; Rules of Construction. The paragraph headings used in this Option Agreement are for convenience of reference, and arenot to be construed as part of this Option or Option Agreement. The parties hereto acknowledge and agree that the rule of construction to the effect that anyambiguities are resolved against the drafting party shall not be employed in the interpretation of this Option Agreement.(i) Electronic Copies. The Company may choose to deliver certain materials relating to the Plan in electronic form. By accepting this option, youconsent and agree that the Company may deliver the Plan prospectus and the Company’s annual report to you in an electronic format. If at any time youwould prefer to receive paper copies of these documents, as you are entitled to, the Company would be pleased to provide you with such copies upon request.(j) No Waiver of Rights, Powers and Remedies. No failure or delay by a party hereto in exercising any right, power or remedy under this OptionAgreement, and no course of dealing between the parties hereto, shall operate as a waiver of any such right, power or remedy of the party, unless explicitlyprovided for herein. No single or partial exercise of any right, power or remedy under this Option Agreement by a party hereto, nor any abandonment ordiscontinuance of steps to enforce any such right, power or remedy, shall preclude such party from any other or further exercise thereof or the exercise of anyother right, power or remedy hereunder. Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(k) Counterparts. The Award Notice to which this Option Agreement is attached and incorporated by reference may be executed in multiplecounterparts, including by electronic or facsimile signature, each of which shall be deemed in original but all of which together shall constitute one and thesame instrument.Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 10.27 Schedule to Indemnification Agreement The following is a list of our directors who are party to the Company’s Indemnification Agreement, the form of which was filed as an exhibit to theCompany’s Current Report on Form 8-K filed on 3/6/2009:Jonathan ChristodoroSally W. CrawfordScott T. GarrettDavid R. LaVance, Jr.Nancy L. LeamingLawrence M. LevyStephen P. MacMillanSamuel MerksamerChristiana StamoulisElaine S. UllianWayne WilsonSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 10.28 Schedule to Senior Vice President Change of Control Agreement The following is a list of our officers who are party to the Company’s Senior Vice President Change of Control Agreement, the form of which was filedas an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ending 12/29/2012: Arthur FriedmanDavid HardingZhenxue JingRoger MillsDavid RudzinskyPeter J. ValentiThomas A. WestSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 10.29 Schedule to Senior Executive Officer Change of Control Agreement The following is a list of our officers who are party to the Company’s Executive Officer Change of Control Agreement, the form of which was filed as anexhibit to the Company’s Current Report on Form 8-K filed on November 17, 2009:Glenn MuirJay SteinSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 10.30 Schedule to Senior Vice President Severance Agreement The following is a list of our officers who are party to the Company’s Senior Vice President Severance Agreement, the form of which was filed as anexhibit to the Company’s Annual Report on Form 10-K for the period ending 9/28/2013:Arthur FriedmanDavid HardingRohan Hastie, Ph.D.Carter HoughtonZhenxue JingRoger MillsDavid RudzinskyJay SteinSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 10.53SENIOR VICE PRESIDENT SEVERANCE AGREEMENTTHIS AGREEMENT made as of the 26th day of May, 2014, by and betweenHologic, Inc., a Delaware corporation, and Peter J. Valenti (the "Executive").WHEREAS, the Board of Directors (the "Board") of the Company (as hereinafter defined) recognizes that the possibility of atermination without Cause (as hereinafter defined), can create significant distractions for its key management personnel because of theuncertainties inherent in such situations;WHEREAS, the Board has determined that it is essential and in the best interest of the Company and its stockholders to retainthe services of the Executive, in general, and particularly in the event of a threat or the occurrence of a change in control and to ensurehis or her continued and full attention, dedication and efforts in such event without undue concern for his or her personal financial andemployment security; andWHEREAS, in order to induce the Executive to remain in the employ of the Company, in general, and particularly in the eventof a threat or the occurrence of a change in control, the Company desires to enter into this Agreement with the Executive to provide theExecutive with severance benefits in the event his or her employment is terminated in certain circumstances in accordance with theterms and conditions set forth herein.NOW, THEREFORE, in consideration of the respective agreements of the parties contained herein, it is agreed as follows:l. TERM OF AGREEMENT. This Agreement shall commence as of the date hereof, and shall continue in effect until Executive'semployment with Company terminates.2. DEFINITIONS.2.1 ACCRUED COMPENSATION. For purposes of this Agreement, "AccruedCompensation" shall mean an amount which shall include all amounts earned or accruedthrough the "Termination Date" (as hereinafter defined) but not paid as of the Termination Date, including (i) base salary, (ii)reimbursement for reasonable and necessary business expenses incurred by the Executive on behalf of the Company, pursuant to theCompany's expense reimbursement policy in effect at such time, during the period ending on the Termination Date, and (iii) vacationpay.2.2 BASE SALARY. For purposes of this Agreement, "Base Salary" shall mean the greater of the Executive's annual base salary (a) atthe rate in effect on the Termination Date or (b) at the highest rate in effect at any time during the ninety (90) day period prior to theTermination Date, and shall include all amounts of his or her Base Salary that are deferred at the election of the Executive under thequalified and non-qualified employee benefit plans of the Company or any other agreement or arrangement. For avoidance of doubt,Base Salary shall not include any bonus or portion thereof deferred under the Company's Bonus Deferral Program.2.3 BONUS AMOUNT. For purposes of this Agreement, "Bonus Amount" shall mean the average of the annual bonuses (excludingany bonuses deferred under the Company's Bonus Deferral Program or under any special bonus program) paid or that has been earnedand accrued but unpaid, in each case under the Company’s Short Term Incentive Plan, during the three full fiscal years ended prior tothe Date of Termination. Notwithstanding the foregoing sentence, any bonus electively deferred by the Executive pursuant to aqualified or non-qualified plan shall be included in the Bonus Amount. For purposes of this Agreement, Bonus Deferral Program shallbe any deferral Plan or Program adopted by the Company's Board of Directors that provides for a non-elective deferral of theExecutive's Annual Bonus.Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.2.4 CAUSE. The Company may terminate the Executive's employment during the Term of this Agreement for "Cause". For purposesof this Agreement, "Cause" means (i) an act or acts of personal dishonesty taken by the Executive and intended to result in substantialpersonal enrichment of the Executive at the expense of the Company; (ii) material violation of the Company's Code of Conduct, andother Company Codes of Conduct or policies and procedures that are applicable to the Executive; or (iii) the conviction of theExecutive of a felony involving moral turpitude. The Company shall provide the Executive with 30 days written notice of anydetermination of Cause and provide the Executive, for a period of 30 days following such notice, with the opportunity to appear beforethe Board, with or without legal representation, to present arguments and evidence on his or her behalf and following such presentationto the Board, the Executive may only be terminated for Cause if the Board (excluding the Executive if he is a member of the Board), bya vote of not less than 75% of the independent directors (determined in accordance with the corporate li sting standards of the NasdaqNational Market and the applicable rules and regulations of the Commission) determining that his or her actions did, in fact, constitutefor Cause.2.5 COMPANY. For purposes of this Agreement, "Company" shall mean Hologic, Inc. and shall include its "Successors and Assigns"(as hereinafter defined).2.6 DISABILITY. For purposes of this Agreement, "Disability" shall mean a physical or mental infirmity which impairs theExecutive's ability to substantially perform his or her duties with the Company for a period of ninety (90) consecutive days, and theExecutive has not returned to his or her full time employment prior to the Termination Date as stated in the "Notice of Termination" (ashereinafter defined).2.7 GOOD REASON. For purposes of this Agreement, "Good Reason" shall mean:a. Material diminution in the Executive's offices, titles and reporting requirements, authority, duties or responsibilities as ineffect at any time in the ninety (90) days prior to Notice of Termination;b. Reduction in the Executive's Base Salary or bonus opportunity, unless such reduction is part of a company-wide reductionin salary and bonus opportunities for all similarly situated executives;c. The Company requiring the Executive to be based at any office or location more than fifty (50) miles from the Company'sheadquarters as of the date hereof;d. Any purported termination by the Company of the Executive's employment otherwise than for Cause; ore. Any failure by the Company to comply with and satisfy Section 6 hereof.2.8 NOTICE OF TERMINATION. For purposes of this Agreement, "Notice of Termination" shall mean (i) a written notice from theCompany of termination of the Executive's employment which indicates the specific termination provision in this Agreement reliedupon, if any, and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of theExecutive's employment under the provision so indicated; or (ii) a written notice from the Executive of his or her resignation for GoodReason, which indicates the specific provision in Section 2.7 herein.2.9 PRO RATA BONUS. For purposes of this Agreement, "Pro Rata Bonus" shall mean an amount equal to the Bonus Amountmultiplied by a fraction the numerator of which is the number of months worked in the fiscal year through the Termination Date and thedenominator of which is 12. Any partial months shall be rounded to the nearest whole number using normal mathematical convention.2.l0 SUCCESSORS AND ASSIGNS. For purposes of this Agreement, "Successors and Assigns" shall mean a corporation or otherentity acquiring all or substantially all the assets and business of the Company (including this Agreement) whether by operation of lawor otherwise.Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.2.11 TERMINATION DATE. For purposes of this Agreement, "Termination Date" shall mean in the case of the Executive's death,his or her date of death, in the case of Good Reason, the last day of his or her employment, and in all other cases, the date specified inthe Notice of Termination; provided, however, that if the Executive's employment is terminated by the Company for Cause or due toDisability or by the Executive for Good Reason, the date specified in the Notice of Termination shall be at least 30 days from the datethe Notice of Termination is given to the Executive, provided that in the case of Disability the Executive shall not have returned to thefull-time performance of his or her duties during such period of at least 30 days.3. TERMINATION OF EMPLOYMENT. If, during the term of this Agreement, the Executive's employment with the Company isterminated, then the Executive shall be entitled to the following compensation and benefits:a. If the Executive's employment with the Company shall be terminated (1) by the Company for Cause or Disability, (2) byreason of the Executive's death, or (3) by the Executive other than for Good Reason, the Company shall pay to the Executive theAccrued Compensation only.b. If the Executive's employment with the Company shall be terminated by Company without Cause or by the Executive forGood Reason (as defined in Section 2.7. then the Executive shall be entitled to each and all of the following:i.The Company shall pay the Executive all Accrued Compensation;ii.The Company shall pay the Executive a Pro Rata Bonus;iii.The Company shall continue to pay the Executive his or her Base Salary for the period of fifteen (15) monthsfrom the Termination Date in accordance with its normal payroll practices and subject to applicable taxwithholding; provided, however, that if the Company determines that such payments would constitute deferredcompensation within the meaning of Section 409A of the Code, then the Executive agrees to the modificationswith respect to timing of such payments in accordance with Section 10 hereof; andc. The Amounts provided for in Sections 3(a) and 3(b)(i) (shall be paid in a single lump sum cash payment within five (5)business days after the Executive's Termination Date (or earlier, if required by applicable law).3.2 MITIGATION. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement byseeking other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefitsprovided to the Executive in any subsequent employment.3.3 OTHER SEVERANCE BENEFITS. The severance pay and benefits provided for in this Section 3 shall be in lieu of any otherseverance or termination pay to which the Executive may be entitled under any Company severance or termination plan, program,practice or arrangement. The Executive's entitlement to any other compensation or benefits shall be determined in accordance with theCompany's employee benefit plans and other applicable programs, policies and practices then in effect.3.4 DIVESTITURE OR SALE OF DIVISION. Notwithstanding any other provision of this Agreement to the contrary, thetermination of the Executive's employment with the Company in connection with the sale, divestiture or other disposition of aSubsidiary or "Division" (as hereinafter defined) (or part thereof) shall not be deemed to be a termination of employment of theExecutive for purposes of this Agreement provided, in the event such sale, divestiture or other disposition of a Subsidiary or Division,the Company obtains an agreement from such purchaser or acquiror as contemplated in Section 6(c). The Executive shall not be entitledto benefits from the Company under this Agreement as a result of such sale, divestiture, or other disposition, except in the event of asubsequentSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.termination of employment entitling Executive to a payment hereunder. "Division” shall mean a business unit or other substantialbusiness operation within the Company that is operated as a separate profit center.4. NOTICE OF TERMINATION. Any purported termination of the Executive's employment by the Company and/or the Employershall be communicated by Notice of Termination to the Executive. For purposes of this Agreement, no-such purported termination shallbe effective without such Notice of Termination.5. EXCISE TAX PAYMENTSa. Notwithstanding anything contained in this Agreement to the contrary, to the extent that the payments and benefitsprovided under this Agreement and benefits provided to, or for the benefit of, the Executive under any other Company plan oragreement (such payments or benefits are collectively referred to as the "Payments") would be subject to the excise tax (the "ExciseTax") imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), the Payments shall be reduced (butnot below zero) if and to the extent necessary so that no Payment to be made or benefit to be provided to the Executive shall be subjectto the Excise Tax (such reduced amount is hereinafter referred to as the "Limited Payment Amount"). Unless the Executive shall havegiven prior written notice specifying a different order to theCompany to effectuate the Limited Payment Amount, the Company shall reduce or eliminate the Payments, by first reducing oreliminating those payments or benefits which are not payable in cash and then by reducing or eliminating cash payments, in each casein reverse order beginning with payments or benefits which are to be paid the farthest in time from the "Determination" (as hereinafterdefined). Any notice given by the Executive pursuant to the preceding sentence shall take precedence over the provisions of any otherplan, arrangement or agreement governing the Executive's rights and entitlements to any benefits or compensation.b. An initial determination as to whether the Payments shall be reduced to the Limited Payment Amount pursuant to the Planand the amount of such Limited Payment Amount shall be made by an accounting firm at the Company's expense selected by theCompany which is designated as one of the six largest accounting firms in the United States (the "Accounting Firm"). The AccountingFirm shall provide its determination (the "Determination"), together with detailed supporting calculations and documentation, to theCompany and the Executive within five (5) days of the Termination Date, if applicable, or such other time as requested by theCompany or by the Executive (provided the Executive reasonably believes that any of the Payments may be subject to the Excise Tax),and if the Accounting Firm determines that no Excise Tax is payable by the Executive with respect to a Payment or Payments, it shallfurnish the Executive with an opinion, at the Company's expense, reasonably acceptable to the Executive that no Excise Tax will beimposed with respect to any such Payment or Payments. Within ten (10) days of the delivery of the Determination to the Executive, theExecutive shall have the right to dispute the Determination (the "Dispute"). If there is no Dispute, the Determination shall be binding,final and conclusive upon the Company and the Executive subject to the application of Section 5(c) below.c. As a result of the uncertainty in the application of Sections 4999 and 2800 of the Code, it is possible that the Payments to bemade to, or provided for the benefit of, the Executive either have been made or will not be made by the Company which, in either case,will be inconsistent with the limitations provided in Section 5(a) (hereinafter referred to as an "Excess Payment" or "Underpayment",respectively). If it is established pursuant to a final determination of a court, or an Internal Revenue Service (the "IRS") proceedingwhich has been finally and conclusively resolved, that an Excess Payment has been made, such Excess Payment shall be deemed for allpurposes to be a loan to the Executive made on the date the Executive received the Excess Payment and the Executive shall repay theExcess Payment to the Company, on demand (but not less than thirty (30) days after written notice is received by the Executive),together with interest on the Excess Payment at the "Applicable Federal Rate" (as defined in Section 1274(d) of the Code) from the dateof the Executive's receipt of such Excess Payment until the date of such repayment. In the event that it is determined by (i) theAccounting Firm, the Company (which shall include the position taken by the Company, or together with its consolidated group, on itsfederal income tax return) or the IRS, (ii) pursuant to a determination by a court, or (iii) upon the resolution to the Executive'ssatisfaction of the Dispute, that an underpayment has occurred, the Company shall pay an amount equal to the Underpayment to theExecutive within thirty (30) days of such determination or resolution, together withSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.interest on such amount at the Applicable Federal Rate from the date such amount would have been paid to the Executive until the dateof payment.d. Notwithstanding anything contained in this Agreement to the contrary, in the event that, according to the Determination, anExcise Tax will be imposed on any Payment or Payments, the Company shall pay to the applicable government taxing authorities, asExcise Tax withholding, the amount of the Excise Tax that the Company has actually withheld from the Payment or Payments.6. SUCCESSORS: BINDING AGREEMENT.a. This Agreement shall be binding upon and shall inure to the benefit of the Company, and its Successors and Assigns, andthe Company shall require any Successors and Assigns to expressly assume and agree to perform this Agreement in the same mannerand to the same extent that the Company would be required to perform it if no such succession or assignment had taken place.b. Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive, his or herbeneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefitof and be enforceable by the Executive's personal representative.c. In the event that a Subsidiary or Division (or part thereof) is sold, divested, or otherwise disposed of by the Companysubsequent to or in connection with a Change in Control and the Executive is offered employment by the purchaser or acquirer thereof,the Company shall require such purchaser or acquiror to assume, and agree to perform, the Company's obligations under thisAgreement, in the same manner, and to the same extent, that the Company would be required to perform if no such acquisition orpurchase had taken place.7. ARBITRATION. Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination orinvalidity hereof, (collectively, a "Claim") shall be settled by arbitration pursuant to the rules of the American Arbitration Association.Any such arbitration shall be conducted by one arbitrator, with experience in the matters covered by this Agreement, mutuallyacceptable to the parties. If the parties are unable to agree on the arbitrator within thirty (30) days of one party giving the other partywritten notice of intent to arbitrate a Claim, the American Arbitration Association shall appoint an arbitrator with such qualifications toconduct such arbitration. The decision of the arbitrator in any such arbitration shall be conclusive and binding on the parties. Any sucharbitration shall be conducted in Boston, Massachusetts, unless the Executive consents to a different location.8. NOTICE. For the purposes of this Agreement, notices and all other communications provided for in the Agreement (including theNotice of Termination) shall be in writing and shall be (i) delivered by hand, ii) transmitted by facsimile or electronic mail with receiptconfirmed, (iii) delivered by overnight courier service with confirmed receipt or (iv) mailed by first class U.S. mail postage pre-paid andregistered or certified, return receipt requested and addressed to the respective addresses last given by each party to the other, providedthat all notices to the Company shall be directed to the attention of the Board with a copy to the General Counsel of the Company. Allnotices and communications shall be deemed to have been received on the date of delivery thereof or on the third business day after themailing thereof, except that notice of change of address shall be effective only upon receipt.9. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Executive's continuing or futureparticipation in any benefit, bonus, incentive or other plan or program provided by the Company (except for any severance ortermination policies, plans, programs or practices) and for which the Executive may qualify, nor shall anything herein limit or reducesuch rights as the Executive may have under any other agreements with the Company (except for any severance or terminationagreement). Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of theCompany shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement.10. 409A COMPLIANCE. Notwithstanding any other provision herein to the contrary, the Company shall make the paymentsrequired hereunder in compliance with the requirements of Section 409A of the Code and anySource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.interpretative guidance issued thereunder. The Company may, in its sole and absolute discretion, delay payments hereunder or makesuch other modifications with respect to the timing of payments as it deems necessary to comply with Section 409A of the Code.11. RELEASE. The Executive agrees that, with the exception of the AccruedCompensation due to him in accordance with the terms hereunder, that the payment of any severance under Sections 3(b)(ii) and (iii) issubject to and conditioned upon the execution and delivery by the Executive to the Company of a Settlement and Release Agreement(the "Release Agreement") in favor of the Company, its affiliates and their respective officers, directors, employees and agents inrespect to the Executive's employment with the Company and the termination thereof in a form suitable to the Company and theexpiration of any revocation period provided for under the Release Agreement.12. NO EMPLOYMENT RIGHT. This Agreement does not constitute, and shall not be construed to provide, any assurance ofcontinuing employment. Executive's employment with the Company and of its Successors or Assigns is "at will" and, subject to theterms and conditions of this Agreement, may be terminated by Executive or the Company at any time.13. OTHER CHANGE IN CONTROL AGREEMENT. Notwithstanding anything herein to the contrary, if the Executive is a partyto a Change of Control Agreement with the Company and such Agreement results in the payment of benefits to the Executive as theresult of a change in control then the Executive shall receive no compensation hereunder.14. MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modificationor discharge is agreed to in writing, specifying such modification, waiver or discharge, and signed by the Executive and the Company.No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provisionof this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at thesame or at any prior or subsequent time.15. GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of theCommonwealth of Massachusetts without giving effect to the conflict of laws principles thereof. Any action brought by any party to thisAgreement to enforce any decision of an arbitrator made as contemplated in Section 8 above shall be brought and maintained in a courtof competent jurisdiction in the Commonwealth of Massachusetts.16. SEVERABILITY. The provisions of this Agreement shall be deemed severable, and the invalidity or unenforceability of anyprovision shall not affect the validity or enforceability of the other provisions hereof.17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties hereto and supersedes all priorseverance agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to the subjectmatter hereof, provided, however, that any Change of Control Agreement, option agreement, Assignment of Intellectual Property andNon-Competition Agreement shall remain in full force and effect.IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Executive hasexecuted this Agreement as of the day and year first above written.Hologic, Inc.By:/s/ Holly Lynch Date:April 29, 2014 Title: SVP, Human ResourcesSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Executive/s/ Peter J. Valenti Peter J. Valenti Date:May 9, 2014 Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 10.54August 13, 2014Dear Tom,I am delighted to welcome you to Hologic. You are joining a company with a tradition of excellence in providing innovative solutionsto the field of women’s health. I am pleased to offer you the position of Division President, Diagnostics reporting to Eric Compton,Chief Operating Officer. Please note that all offers are contingent based upon successful completion of references and a backgroundcheck. Start DateYour start date will be on October 3, 2014.SalaryYour biweekly base salary for this position will be $16,346.15 (equivalent to $425,000 on an annualized basis).Benefit Plans and ProgramsYou will be eligible to participate in Hologic’s benefit programs. Please note that all insurance plans, benefits, as well as Companypolicies and procedures are subject to change without notice. You will have five (5) weeks of vacation time per year. You will have acar allowance of $500 per month. Details on all benefit programs will be provided during your first week of employment. Each yearyou will be eligible for additional Long Term Incentive Awards commensurate with your role as Division President, Diagnostics, asdetermined by the Board of Directors.Stock OptionsAs part of Hologic’s Long Term Incentive Program, you will be granted an option to purchase shares of currently authorized Companystock which will be subject to the terms and conditions set forth in Hologic’s standard stock option agreement. In 2014, you will begranted the option to purchase shares with a value of $400,000 as a new hire benefit. The stock option grant, which we believe willrepresent a valuable equity position in Hologic, will have a grant price based on Hologic’s closing price (listed on the NASDAQ) onyour first day of employment (grant date). This option will vest at a rate of 20% per year, the first 20% vesting one year from the grantdate (100% vested five years from the grant date). A detailed stock option agreement will be provided to you following the start of youremployment.Restricted Stock UnitsAs part of Hologic’s Long Term Incentive Program, you will be awarded Restricted Stock Units. In 2014, the grant will have a value of$400,000 as a new hire benefit. This grant will be subject to the terms and conditions set forth in Hologic’s standard RSU agreement.The RSU grant, which we believe will represent a valuable equity position in Hologic, will vest at a rate of 25% per year, the firstvesting one year from the award data (100% vested 4 years from your first day of employment). A detailed RSU agreement will beprovided to you following the start of your employment.Short-Term Incentive Plan (STIP)You are eligible to participate in Hologic’s Short-Term Incentive Plan, with a target incentive opportunity beginning in fiscal year 2015of 75% of base salary. Plan funding is based on company financial performance, and payouts are based on a combination of companyfinancial achievement, division financial achievement and individual achievement. A threshold level of corporate financial achievementis required for any payments to be made. The Short-term Incentive Plan is measured and paid at the conclusion of the fiscal year. Anypayout for the current fiscal year will be pro-rated to reflect your tenure in this position. Please note that all compensation plans andprograms are subject to change or cancellation without notice, and any Short-term Incentive payment will be subject to the terms andconditions of the Plan.Deferred Compensation Plan (DCP)Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.You will be eligible for participation in the company’s DCP. You will receive a summary of this benefit as well as online account set upinstructions directly from Fidelity shortly. You may enroll during the annual enrollment period in the late fall to defer from your regularbase salary and/or annual bonus during the following calendar year. In the meantime, you should elect your desired distribution optionfor any Employer Retention Contribution that you may be eligible to receive. This election should be made within 30 days of becomingeligible (hire/promotion date).RelocationYou will be eligible for relocation assistance package for your core move expenses at or near $175,000 based upon need and ourexecutive relocation policy. Home sale issues will be determined and discussed. The required relocation assistance will be agreed uponprior to finalizing your offer. As part of your relocation benefits, we will provide you with an additional $50,000 relocation payment tobe paid on or about October 3, 2014, above your core relocation package for incidentals. The total relocation benefit of the corepackage and the advance for incidentals will be approximately $225,000. Our relocation coordinator will work with you very soon tofully understand the details of your move and we will structure your assistance accordingly.Proof of Right to WorkIn accordance with federal immigration law, you will be required to provide to the Company documentary evidence of your identityand eligibility for employment in the United States. Such documentation must be provided to the Company within three (3) businessdays of your hire date. Hologic, Inc. utilizes E-Verify, an internet-based program operated by the Department of Homeland Security inpartnership with Social Security Administration to verify every employee’s eligibility to work.At Will EmploymentYour relationship with Hologic will be one of employment at will; employment is not for any specific term and may be terminated byeither you or Hologic at any time, for any reason with or without prior notice. Additionally, the Company requires you to verify thatyour employment at Hologic does not and will not breach any agreements entered into by you prior to employment with the Company(i.e., you have not entered into any agreements with previous employers that are in conflict with your obligations to the Company). Please provide us with a copy of any such agreements. Severance and Change in Control (CiC)You are eligible for Senior Vice President-level severance and CiC benefits contingent upon your execution of the attached Senior VicePresident Severance and CiC Agreements.Non-Solicitation/Confidentiality/Proprietary AgreementsYou also agree that to the best of your knowledge, you are not under any formal non-compete, confidentiality, or proprietary agreementwith your previous employer that would preclude you from working for Hologic.By signing below you acknowledge that this letter does not constitute a contractual agreement. Your employment with Hologic iscontingent upon you signing the enclosed Employee Intellectual Property Rights and Non-Solicitation Agreement and DisputeResolution Agreement as well as the securing of satisfactory reference and background checks.This offer is valid through August 25, 2014 and requires a response on or before that date.We believe that joining Hologic is truly an ideal opportunity for you to move to the next step in your career. You will be in a position tosignificantly influence Hologic’s growth and success. We are confident you will find working at Hologic an exciting and worthwhileventure.Congratulations!Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Sincerely, Accepted:/s/ Thomas A. West Thomas A. West/s/ Holly Lynch Holly Lynch Date:August 21, 2014Senior Vice President, Human Resources Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 10.55SENIOR VICE PRESIDENT SEVERANCE AGREEMENTTHIS AGREEMENT made as of the 3rd day of October, 2014, by and betweenHologic, Inc., a Delaware corporation, and Thomas A. West (the "Executive").WHEREAS, the Board of Directors (the "Board") of the Company (as hereinafter defined) recognizes that the possibility of atermination without Cause (as hereinafter defined), can create significant distractions for its key management personnel because of theuncertainties inherent in such situations;WHEREAS, the Board has determined that it is essential and in the best interest of the Company and its stockholders to retainthe services of the Executive, in general, and particularly in the event of a threat or the occurrence of a change in control and to ensurehis or her continued and full attention, dedication and efforts in such event without undue concern for his or her personal financial andemployment security; andWHEREAS, in order to induce the Executive to remain in the employ of the Company, in general, and particularly in the eventof a threat or the occurrence of a change in control, the Company desires to enter into this Agreement with the Executive to provide theExecutive with severance benefits in the event his or her employment is terminated in certain circumstances in accordance with theterms and conditions set forth herein.NOW, THEREFORE, in consideration of the respective agreements of the parties contained herein, it is agreed as follows:l. TERM OF AGREEMENT. This Agreement shall commence as of the date hereof, and shall continue in effect until Executive'semployment with Company terminates.2. DEFINITIONS.2.1 ACCRUED COMPENSATION. For purposes of this Agreement, "AccruedCompensation" shall mean an amount which shall include all amounts earned or accruedthrough the "Termination Date" (as hereinafter defined) but not paid as of the Termination Date, including (i) base salary, (ii)reimbursement for reasonable and necessary business expenses incurred by the Executive on behalf of the Company, pursuant to theCompany's expense reimbursement policy in effect at such time, during the period ending on the Termination Date, and (iii) vacationpay.2.2 BASE SALARY. For purposes of this Agreement, "Base Salary" shall mean the greater of the Executive's annual base salary (a) atthe rate in effect on the Termination Date or (b) at the highest rate in effect at any time during the ninety (90) day period prior to theTermination Date, and shall include all amounts of his or her Base Salary that are deferred at the election of the Executive under thequalified and non-qualified employee benefit plans of the Company or any other agreement or arrangement. For avoidance of doubt,Base Salary shall not include any bonus or portion thereof deferred under the Company's Bonus Deferral Program.2.3 BONUS AMOUNT. For purposes of this Agreement, "Bonus Amount" shall mean the average of the annual bonuses (excludingany bonuses deferred under the Company's Bonus Deferral Program or under any special bonus program) paid or that has been earnedand accrued but unpaid, in each case under the Company’s Short Term Incentive Plan, during the three full fiscal years ended prior tothe Date of Termination. Notwithstanding the foregoing sentence, any bonus electively deferred by the Executive pursuant to aqualified or non-qualified plan shall be included in the Bonus Amount. For purposes of this Agreement, Bonus Deferral Program shallbe any deferral Plan or Program adopted by the Company's Board of Directors that provides for a non-elective deferral of theExecutive's Annual Bonus.Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.2.4 CAUSE. The Company may terminate the Executive's employment during the Term of this Agreement for "Cause". For purposesof this Agreement, "Cause" means (i) an act or acts of personal dishonesty taken by the Executive and intended to result in substantialpersonal enrichment of the Executive at the expense of the Company; (ii) material violation of the Company's Code of Conduct, andother Company Codes of Conduct or policies and procedures that are applicable to the Executive; or (iii) the conviction of theExecutive of a felony involving moral turpitude. The Company shall provide the Executive with 30 days written notice of anydetermination of Cause and provide the Executive, for a period of 30 days following such notice, with the opportunity to appear beforethe Board, with or without legal representation, to present arguments and evidence on his or her behalf and following such presentationto the Board, the Executive may only be terminated for Cause if the Board (excluding the Executive if he is a member of the Board), bya vote of not less than 75% of the independent directors (determined in accordance with the corporate li sting standards of the NasdaqNational Market and the applicable rules and regulations of the Commission) determining that his or her actions did, in fact, constitutefor Cause.2.5 COMPANY. For purposes of this Agreement, "Company" shall mean Hologic, Inc. and shall include its "Successors and Assigns"(as hereinafter defined).2.6 DISABILITY. For purposes of this Agreement, "Disability" shall mean a physical or mental infirmity which impairs theExecutive's ability to substantially perform his or her duties with the Company for a period of ninety (90) consecutive days, and theExecutive has not returned to his or her full time employment prior to the Termination Date as stated in the "Notice of Termination" (ashereinafter defined).2.7 GOOD REASON. For purposes of this Agreement, "Good Reason" shall mean:a. Material diminution in the Executive's offices, titles and reporting requirements, authority, duties or responsibilities as ineffect at any time in the ninety (90) days prior to Notice of Termination;b. Reduction in the Executive's Base Salary or bonus opportunity, unless such reduction is part of a company-wide reductionin salary and bonus opportunities for all similarly situated executives;c. The Company requiring the Executive to be based at any office or location more than fifty (50) miles from the Company'sheadquarters as of the date hereof;d. Any purported termination by the Company of the Executive's employment otherwise than for Cause; ore. Any failure by the Company to comply with and satisfy Section 6 hereof.2.8 NOTICE OF TERMINATION. For purposes of this Agreement, "Notice of Termination" shall mean (i) a written notice from theCompany of termination of the Executive's employment which indicates the specific termination provision in this Agreement reliedupon, if any, and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of theExecutive's employment under the provision so indicated; or (ii) a written notice from the Executive of his or her resignation for GoodReason, which indicates the specific provision in Section 2.7 herein.2.9 PRO RATA BONUS. For purposes of this Agreement, "Pro Rata Bonus" shall mean an amount equal to the Bonus Amountmultiplied by a fraction the numerator of which is the number of months worked in the fiscal year through the Termination Date and thedenominator of which is 12. Any partial months shall be rounded to the nearest whole number using normal mathematical convention.2.l0 SUCCESSORS AND ASSIGNS. For purposes of this Agreement, "Successors and Assigns" shall mean a corporation or otherentity acquiring all or substantially all the assets and business of the Company (including this Agreement) whether by operation of lawor otherwise.Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.2.11 TERMINATION DATE. For purposes of this Agreement, "Termination Date" shall mean in the case of the Executive's death,his or her date of death, in the case of Good Reason, the last day of his or her employment, and in all other cases, the date specified inthe Notice of Termination; provided, however, that if the Executive's employment is terminated by the Company for Cause or due toDisability or by the Executive for Good Reason, the date specified in the Notice of Termination shall be at least 30 days from the datethe Notice of Termination is given to the Executive, provided that in the case of Disability the Executive shall not have returned to thefull-time performance of his or her duties during such period of at least 30 days.3. TERMINATION OF EMPLOYMENT. If, during the term of this Agreement, the Executive's employment with the Company isterminated, then the Executive shall be entitled to the following compensation and benefits:a. If the Executive's employment with the Company shall be terminated (1) by the Company for Cause or Disability, (2) byreason of the Executive's death, or (3) by the Executive other than for Good Reason, the Company shall pay to the Executive theAccrued Compensation only.b. If the Executive's employment with the Company shall be terminated by Company without Cause or by the Executive forGood Reason (as defined in Section 2.7. then the Executive shall be entitled to each and all of the following:i.The Company shall pay the Executive all Accrued Compensation;ii.The Company shall pay the Executive a Pro Rata Bonus;iii.The Company shall continue to pay the Executive his or her Base Salary for the period of fifteen (15) monthsfrom the Termination Date in accordance with its normal payroll practices and subject to applicable taxwithholding; provided, however, that if the Company determines that such payments would constitute deferredcompensation within the meaning of Section 409A of the Code, then the Executive agrees to the modificationswith respect to timing of such payments in accordance with Section 10 hereof; andc. The Amounts provided for in Sections 3(a) and 3(b)(i) (shall be paid in a single lump sum cash payment within five (5)business days after the Executive's Termination Date (or earlier, if required by applicable law).3.2 MITIGATION. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement byseeking other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefitsprovided to the Executive in any subsequent employment.3.3 OTHER SEVERANCE BENEFITS. The severance pay and benefits provided for in this Section 3 shall be in lieu of any otherseverance or termination pay to which the Executive may be entitled under any Company severance or termination plan, program,practice or arrangement. The Executive's entitlement to any other compensation or benefits shall be determined in accordance with theCompany's employee benefit plans and other applicable programs, policies and practices then in effect.3.4 DIVESTITURE OR SALE OF DIVISION. Notwithstanding any other provision of this Agreement to the contrary, thetermination of the Executive's employment with the Company in connection with the sale, divestiture or other disposition of aSubsidiary or "Division" (as hereinafter defined) (or part thereof) shall not be deemed to be a termination of employment of theExecutive for purposes of this Agreement provided, in the event such sale, divestiture or other disposition of a Subsidiary or Division,the Company obtains an agreement from such purchaser or acquiror as contemplated in Section 6(c). The Executive shall not be entitledto benefits from the Company under this Agreement as a result of such sale, divestiture, or other disposition, except in the event of asubsequentSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.termination of employment entitling Executive to a payment hereunder. "Division” shall mean a business unit or other substantialbusiness operation within the Company that is operated as a separate profit center.4. NOTICE OF TERMINATION. Any purported termination of the Executive's employment by the Company and/or the Employershall be communicated by Notice of Termination to the Executive. For purposes of this Agreement, no-such purported termination shallbe effective without such Notice of Termination.5. EXCISE TAX PAYMENTSa. Notwithstanding anything contained in this Agreement to the contrary, to the extent that the payments and benefitsprovided under this Agreement and benefits provided to, or for the benefit of, the Executive under any other Company plan oragreement (such payments or benefits are collectively referred to as the "Payments") would be subject to the excise tax (the "ExciseTax") imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), the Payments shall be reduced (butnot below zero) if and to the extent necessary so that no Payment to be made or benefit to be provided to the Executive shall be subjectto the Excise Tax (such reduced amount is hereinafter referred to as the "Limited Payment Amount"). Unless the Executive shall havegiven prior written notice specifying a different order to the Company to effectuate the Limited Payment Amount, the Company shallreduce or eliminate the Payments, by first reducing or eliminating those payments or benefits which are not payable in cash and then byreducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid thefarthest in time from the "Determination" (as hereinafter defined). Any notice given by the Executive pursuant to the preceding sentenceshall take precedence over the provisions of any other plan, arrangement or agreement governing the Executive's rights andentitlements to any benefits or compensation.b. An initial determination as to whether the Payments shall be reduced to the Limited Payment Amount pursuant to the Planand the amount of such Limited Payment Amount shall be made by an accounting firm at the Company's expense selected by theCompany which is designated as one of the six largest accounting firms in the United States (the "Accounting Firm"). The AccountingFirm shall provide its determination (the "Determination"), together with detailed supporting calculations and documentation, to theCompany and the Executive within five (5) days of the Termination Date, if applicable, or such other time as requested by theCompany or by the Executive (provided the Executive reasonably believes that any of the Payments may be subject to the Excise Tax),and if the Accounting Firm determines that no Excise Tax is payable by the Executive with respect to a Payment or Payments, it shallfurnish the Executive with an opinion, at the Company's expense, reasonably acceptable to the Executive that no Excise Tax will beimposed with respect to any such Payment or Payments. Within ten (10) days of the delivery of the Determination to the Executive, theExecutive shall have the right to dispute the Determination (the "Dispute"). If there is no Dispute, the Determination shall be binding,final and conclusive upon the Company and the Executive subject to the application of Section 5(c) below.c. As a result of the uncertainty in the application of Sections 4999 and 2800 of the Code, it is possible that the Payments to bemade to, or provided for the benefit of, the Executive either have been made or will not be made by the Company which, in either case,will be inconsistent with the limitations provided in Section 5(a) (hereinafter referred to as an "Excess Payment" or "Underpayment",respectively). If it is established pursuant to a final determination of a court, or an Internal Revenue Service (the "IRS") proceedingwhich has been finally and conclusively resolved, that an Excess Payment has been made, such Excess Payment shall be deemed for allpurposes to be a loan to the Executive made on the date the Executive received the Excess Payment and the Executive shall repay theExcess Payment to the Company, on demand (but not less than thirty (30) days after written notice is received by the Executive),together with interest on the Excess Payment at the "Applicable Federal Rate" (as defined in Section 1274(d) of the Code) from the dateof the Executive's receipt of such Excess Payment until the date of such repayment. In the event that it is determined by (i) theAccounting Firm, the Company (which shall include the position taken by the Company, or together with its consolidated group, on itsfederal income tax return) or the IRS, (ii) pursuant to a determination by a court, or (iii) upon the resolution to the Executive'ssatisfaction of the Dispute, that an underpayment has occurred, the Company shall pay an amount equal to the Underpayment to theExecutive within thirty (30) days of such determination or resolution, together withSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.interest on such amount at the Applicable Federal Rate from the date such amount would have been paid to the Executive until the dateof payment.d. Notwithstanding anything contained in this Agreement to the contrary, in the event that, according to the Determination, anExcise Tax will be imposed on any Payment or Payments, the Company shall pay to the applicable government taxing authorities, asExcise Tax withholding, the amount of the Excise Tax that the Company has actually withheld from the Payment or Payments.6. SUCCESSORS: BINDING AGREEMENT.a. This Agreement shall be binding upon and shall inure to the benefit of the Company, and its Successors and Assigns, andthe Company shall require any Successors and Assigns to expressly assume and agree to perform this Agreement in the same mannerand to the same extent that the Company would be required to perform it if no such succession or assignment had taken place.b. Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive, his or herbeneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefitof and be enforceable by the Executive's personal representative.c. In the event that a Subsidiary or Division (or part thereof) is sold, divested, or otherwise disposed of by the Companysubsequent to or in connection with a Change in Control and the Executive is offered employment by the purchaser or acquirer thereof,the Company shall require such purchaser or acquiror to assume, and agree to perform, the Company's obligations under thisAgreement, in the same manner, and to the same extent, that the Company would be required to perform if no such acquisition orpurchase had taken place.7. ARBITRATION. Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination orinvalidity hereof, (collectively, a "Claim") shall be settled by arbitration pursuant to the rules of the American Arbitration Association.Any such arbitration shall be conducted by one arbitrator, with experience in the matters covered by this Agreement, mutuallyacceptable to the parties. If the parties are unable to agree on the arbitrator within thirty (30) days of one party giving the other partywritten notice of intent to arbitrate a Claim, the American Arbitration Association shall appoint an arbitrator with such qualifications toconduct such arbitration. The decision of the arbitrator in any such arbitration shall be conclusive and binding on the parties. Any sucharbitration shall be conducted in Boston, Massachusetts, unless the Executive consents to a different location.8. NOTICE. For the purposes of this Agreement, notices and all other communications provided for in the Agreement (including theNotice of Termination) shall be in writing and shall be (i) delivered by hand, ii) transmitted by facsimile or electronic mail with receiptconfirmed, (iii) delivered by overnight courier service with confirmed receipt or (iv) mailed by first class U.S. mail postage pre-paid andregistered or certified, return receipt requested and addressed to the respective addresses last given by each party to the other, providedthat all notices to the Company shall be directed to the attention of the Board with a copy to the General Counsel of the Company. Allnotices and communications shall be deemed to have been received on the date of delivery thereof or on the third business day after themailing thereof, except that notice of change of address shall be effective only upon receipt.9. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Executive's continuing or futureparticipation in any benefit, bonus, incentive or other plan or program provided by the Company (except for any severance ortermination policies, plans, programs or practices) and for which the Executive may qualify, nor shall anything herein limit or reducesuch rights as the Executive may have under any other agreements with the Company (except for any severance or terminationagreement). Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of theCompany shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement.10. 409A COMPLIANCE. Notwithstanding any other provision herein to the contrary, the Company shall make the paymentsrequired hereunder in compliance with the requirements of Section 409A of the Code and anySource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.interpretative guidance issued thereunder. The Company may, in its sole and absolute discretion, delay payments hereunder or makesuch other modifications with respect to the timing of payments as it deems necessary to comply with Section 409A of the Code.11. RELEASE. The Executive agrees that, with the exception of the AccruedCompensation due to him in accordance with the terms hereunder, that the payment of any severance under Sections 3(b)(ii) and (iii) issubject to and conditioned upon the execution and delivery by the Executive to the Company of a Settlement and Release Agreement(the "Release Agreement") in favor of the Company, its affiliates and their respective officers, directors, employees and agents inrespect to the Executive's employment with the Company and the termination thereof in a form suitable to the Company and theexpiration of any revocation period provided for under the Release Agreement.12. NO EMPLOYMENT RIGHT. This Agreement does not constitute, and shall not be construed to provide, any assurance ofcontinuing employment. Executive's employment with the Company and of its Successors or Assigns is "at will" and, subject to theterms and conditions of this Agreement, may be terminated by Executive or the Company at any time.13. OTHER CHANGE IN CONTROL AGREEMENT. Notwithstanding anything herein to the contrary, if the Executive is a partyto a Change of Control Agreement with the Company and such Agreement results in the payment of benefits to the Executive as theresult of a change in control then the Executive shall receive no compensation hereunder.14. MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modificationor discharge is agreed to in writing, specifying such modification, waiver or discharge, and signed by the Executive and the Company.No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provisionof this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at thesame or at any prior or subsequent time.15. GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of theCommonwealth of Massachusetts without giving effect to the conflict of laws principles thereof. Any action brought by any party to thisAgreement to enforce any decision of an arbitrator made as contemplated in Section 8 above shall be brought and maintained in a courtof competent jurisdiction in the Commonwealth of Massachusetts.16. SEVERABILITY. The provisions of this Agreement shall be deemed severable, and the invalidity or unenforceability of anyprovision shall not affect the validity or enforceability of the other provisions hereof.17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties hereto and supersedes all priorseverance agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to the subjectmatter hereof, provided, however, that any Change of Control Agreement, option agreement, Assignment of Intellectual Property andNon-Competition Agreement shall remain in full force and effect.IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Executive hasexecuted this Agreement as of the day and year first above written.Hologic, Inc.Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.By:/s/ Holly Lynch Date:August 12, 2014 Title:SVP, Human Resources Executive /s/ Thomas A. West Thomas A. West Date:August 21, 2014 Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 10.56Claus Egstrand24-February-2014Re: Letter of IntentDear Claus,I am very pleased to offer you the position as Senior Vice President and General Manager, International at Hologic (the "Company") reporting to me, SteveMacMillan, President and CEO for Hologic. Your first day with Hologic will be Monday, April 14, 2014. We look forward to you joining our team.Details of your offer as follows:RemunerationYour basic annual salary will be £270,000, less appropriate deductions for income tax and national insurance contributions.You will be entitled to participate in the Company's discretionary STIP scheme subject to its rules from time to time in force. At target, the annual STIPscheme will equal an amount of 75% of your annual basic salary. For FY2014, you will be eligible to participate in the program on a prorated basis based onyour start date with Hologic. Any entitlement to STIP which the Company decides you may have is not a contractual entitlement, but is given at the absolutediscretion of the Company.Car AllowanceThe Company shall provide you with a monthly car allowance of £850 per month.EquityAs of the Effective Date, the Executive shall receive a grant under the Company’s 2008 Amended and Restated Equity Incentive Plan (as it may be amendedfrom time to time, the “Equity Plan”), you will be offered a new hire grant with an approximate value of $450,000 (based on closing price of the Company’scommon stock on the Effective Date of hire), which (i) thirty-three and one-third percent (33.3%) of the value shall consist of restricted stock units, subject tofour (4) year annual vesting, (ii) thirty-three and one-third percent (33.3%) of the value shall consist of performance stock units, subject to achievement ofthree (3) year cliff vesting at pre-determined ROIC targets (0-200%); and (iii) thirty-three and one-third percent (33.3%) of the value shall be an option topurchase the Company’s common stock, subject to 5 year annual vesting. Additional details outlining the terms and conditions as well as the required onlineacceptance of your grants will be sent to you shortly.BenefitsEffective 1-April-2014, you will be eligible for the following benefits:•Company paid life insurance: 4 times annual basic salary up to a maximum of £564,000.•Income protection- 66.7% of basic salary for long term disability.•Pension- up to 6% match of basic salary.Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.•Participation in an employee paid, company sponsored group health plan.Separation and Change in ControlThe Company will provide you with fifteen (15) month’s salary protection in the event of an involuntary separation from the Company which is our standardSenior Vice President arrangement. Additional details regarding this protection will be provided to you in a more detailed contract prior to your start with theCompany. In addition, you will be provided Change in Control protection which would provide 100% vesting of your equity upon termination inconnection to such an event, along with one times salary plus the average of prior three annual short-term incentive bonuses. Further documentation on thisprotection will also be forthcoming.VacationYou shall be entitled to annual vacation of twenty-five (25) working days.Your contract of employment is terminable by you or the Company on six (6) months' notice.Official details regarding your employment with the Company would be established via terms set out in a Terms and Conditions of Employment document tobe provided to you prior to your start with Hologic. Where there is any dispute between the terms of this letter and the Terms and Conditions of Employment,the provisions of the Terms and Conditions of Employment shall take precedence.This offer is subject to and conditional upon:•You sending a copy of your original passport (inside and outside cover pages) prior to your first day of you commencing work with the Companyand then bringing along your original passport for the Company to verify on your commencement date. If you do not hold a UK passport, a passportfrom a country within the European Economic Area (EEA), or a passport from a non-EEA country which gives you the right to work in the UK, theCompany will need to see one or more additional documents. If this applies, you should contact Holly Lynch, Senior Vice President HumanResourcesl to find out which documents you will need to provide.This offer will be withdrawn with immediate effect if any of the above conditions are not satisfied.Please return a signed copy of this letter to my attention. This offer is valid until and requires a response no later than 07-March-2014, at which point itwill be deemed to be withdrawn. We hope that this letter shall serve as a basis for further discussions to agree on employment terms with the Company.All at Hologic look forward to you joining us.Yours sincerely,/s/ Steve MacMillanSteve MacMillan, President and CEO, HologicSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.For and on behalf of HologicI agree with the Terms and Conditions of my Employment as set out or referred to above.Signed/s/ Claus EgstrandDatedFebruary 27, 2014 Claus Egstrand Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.5 March 2014Dear Claus,TERMS AND CONDITIONS OF EMPLOYMENTThe following Terms and Conditions of Employment apply to your employment with Hologic ("the Company") as at the date of issue. They are given to youpursuant to s.1 Employment Rights Act 1996.1.Date of Commencement1.1Your employment with the Company will commence on 14 April 2014, and will continue until terminated in accordance with paragraph 16 below.1.2Your period of continuous employment will likewise commence on 14 April 2014. This does not include any period of service with a previousemployer.2.Duties2.1You are employed as a Senior Vice President and General Manager, International, in which capacity you shall devote all your time, attention andskill to your duties of employment. You shall faithfully and diligently perform such duties and exercise such powers consistent with them as mayfrom time to time be assigned to you by the Company.2.2You will perform all acts, duties and obligations and comply with such orders as may be designated by the Company and which are reasonablyconsistent with your job title. The Company may require you to undertake the duties of another position, either in addition to or instead of theabove duties, it being understood that you will not be required to perform duties which are not reasonably within your capabilities.2.3The Company may require you (as part of your duties of employment) to perform duties or services not only for the Company but also for anyAssociated Company where such duties or services are of a similar status to or consistent with your position with the Company. The Company mayat its sole discretion assign your employment to any Associated Company on the same terms and conditions as set out, or referred to, in this letter.3.Hours of Work3.1Your basic hours of work are 35 per week. Normal working hours are Monday to Friday 9.00am to 5.00pm including one hour for lunch. However,the Company reserves the right to change your start and finish times and the days upon which you work.3.2You may also be required to work additional hours by way of overtime either as and when requested to do so by the Company or when the properperformance of your work so requires. You will not be entitled to be paid extra remunerationSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.for any such additional hours worked in excess of your basic weekly hours. The Company may, in its absolute discretion, give you time off in lieufor overtime worked.4.Place of Work4.1Your position will be field based. However you may be required to work at and from any premises which the Company currently has or may lateracquire within the United Kingdom.4.2You may also be required to travel within the UK and abroad for the performance of your duties.5.Remuneration, Expenses and Deductions5.1Your basic salary is £270,000 per annum (or such higher sum as the Company may subsequently determine and notify to you) payable by credittransfer monthly, less tax and NI contributions. Although the Company will review your basic salary annually, you have no entitlement to a salaryincrease in any year.5.2You will be paid or reimbursed for any reasonable expenses properly incurred by you while performing your duties on behalf of the Company,subject to your producing receipts in respect of such expenses when requested by the Company, and subject to your compliance with the Company'srules and policies relating to expenses.5.3The Company shall be entitled at any time during your employment, or in any event on termination, to deduct from your remuneration hereunderany monies due from you to the Company including but not limited to any outstanding loans, advances, training costs, any sums to be deductedunder the Company's car policy the cost of repairing any damage or loss to the Company's property caused by you (and of recovering the same), anysums due from you under paragraph 7.2 below and any other monies owed by you to the Company.5.4You may also, in the absolute discretion of the Company, be eligible to participate in the Company's discretionary incentive schemes (the"Schemes"), subject to their rules from time to time in force. Details of the Schemes will be supplied to you separately if applicable. You have nocontractual entitlement to participate in, or receive any award under, any Scheme; the Company retains absolute discretion not to make an awardand as to the size of any awards made. Awards are subject to a number of factors including employee performance and Company performance. TheCompany reserves the right to end or amend any aspect of any or all of the Schemes at any time at its sole discretion without replacement orcompensation. For the avoidance of doubt all awards are subject to you not serving notice on or before the date the award would have been made.Receipt of an award in one year is not an indication of what you may receive in any other year, nor a guarantee that you will receive any award in thefuture.6.Motor Car6.1You will be required to use a motor car for the purposes of your employment. The Company’s car policy from time to time in force (a copy of whichis supplied) forms part of your contract of employment. Under the current policy you areSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.currently eligible to an “employee car allowance” of £850.00 per month less appropriate deductions for income tax and National Insurancecontributions. The car policy may be amended from time to time at the sole discretion of the Company.6.2You warrant that you hold a valid driving licence to drive motor cars in the UK and agree that if you cease to hold a driving licence the Companymay end your employment immediately without notice or payment in lieu of notice.6.3ou warrant that you are responsible for insuring the motor car for business use and that you will provide the Company with a copy of the insurancecertification annually to confirm this cover and agree that if you cease to hold such cover the Company may end your employment immediatelywithout notice or payment in lieu of notice.6.4You shall immediately inform the Company:-6.4.1 if you are prosecuted or are to be prosecuted for any road traffic offence: or6.4.2 if your driving licence is endorsed: or6.4.3 if you are disqualified from holding a driving licence: or6.4.4 if your driving licence is suspended due to medical reasons.7.Holidays7.1In addition to the Public holidays normally applicable in England, you are also entitled to 25 working days’ paid holiday in each complete calendaryear. The Company's holiday year is from 1 January to 31 December.7.2On the commencement and termination of your employment, you will be treated as having accrued holiday on a pro rata basis of 2 days’ holiday foreach complete month of service in that holiday year calculated by reference to your first or last date at work (as appropriate). If, on the termination ofyour employment, you have exceeded your accrued holiday entitlement, this excess will be deducted from any sums due to you. If you have holidayentitlement still owing the Company may, at its sole discretion, require you to take all or part of your outstanding holiday during your notice periodor to pay you a sum in lieu of accrued holiday. A day’s holiday pay for the purposes of this paragraph 7.2 is 1/30th of your net monthly salary.7.3You must obtain the prior approval of your line manager before booking holiday dates. Not more than two weeks may be taken at any one time, saveat the Company's discretion. The Company may, in its absolute discretion, reject any holiday request where it unreasonable conflicts with the needsand requirements on the business, for example, quarter end, month end etc.7.4Holiday entitlement must be taken by the end of that holiday year. Holiday not taken in that holiday year will be forfeited and will not be carriedover unless the prior approval in conjunction with your line manager and the HR department is obtained. In any event, no more than 5 days’ holidaymay be carried over to the following holiday year.Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.8.Sickness8.1If you are absent from work due to sickness or other medical incapacity, the Company will continue to pay your normal salary (" Company sickpay") for the periods set out below, subject to your compliance with any Company policy and rules on sickness absence in place from time to time.Your entitlement to Company sick pay increases with length of service and is subject to paragraphs 8.3 to 8.7 below. Company sick pay entitlementin any period of 12 months is as follows:Length of ServiceCompany Sick Pay Entitlement (working days)Under 6 months5 daysLess than 1 year10 daysMore than 1 but less than 5 years20 days5 years and above30 daysCompany sick pay is inclusive of any Statutory Sick Pay ("SSP") to which you may be entitled, and will be based on your basic salary lessany State benefits claimable by you on account of your sickness or injury, less normal deductions for tax and NI contributions etc. . For thesepurposes your length of continuous service will be determined as at the first day of the relevant period of absence.8.2After your Company sick pay is exhausted, you will continue to receive SSP when you qualify for it under the prevailing legislation. WhereCompany sick pay and SSP are payable for the same day of sickness, you will receive the higher of the two sums. Further details of the SSP Schemeare available from the HR Department.8.3In all cases of absence you must notify the Company (line manager and HR Department) as soon as possible on the first morning of your absence,giving the reason for the absence and its anticipated duration. If you are sick or otherwise medically incapacitated for more than seven consecutivedays, then a medical certificate (signed by a doctor) must be produced to the Company. Thereafter medical certificates should be submitted regularlyto cover the full period of absence. On each occasion a medical certificate expires and you do not anticipate you will be returning to work, you mustnotify the Company on the first morning following the expiry of the medical certificate.8.4You are also required to complete the Company's Absence Notification Form for all absences (regardless of duration) and submit it to the HRdepartment.8.5The Company reserves the right to require you to undergo a medical examination by a doctor or consultant nominated by it, in which event theCompany will bear the cost thereof. You agree that an examination report may be provided to the Company.8.6The Company reserves the right to withdraw benefit entitlements (Clauses 9.1 - 9.2) on or after the expiry of the relevant period of Company sickpay entitlement referred to in paragraph 8.1 above (or withdrawal of Company sick pay, if, inSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.its absolute discretion, the Company chooses to continue Company sick pay beyond the periods set out in paragraph 8.1 above).8.7Your entitlement to Company sick pay and SSP are subject to the Company’s right to terminate your employment in accordance with paragraph 16below and the Company shall not be liable to provide, or compensate for the loss of any benefit(s).9.Pension and other benefits9.1Subject always to the rules of the scheme from time to time in force and from HMRC limits from time to time in force, the Company will make acontribution of an amount equal to your yearly personal pension contributions (to a maximum total contribution by the Company of 6% of yourgross annual salary) to the company’s Group Stakeholder Plan. (“Plan”). The Company reserves the right to change the provider of the Plan.9.2The Company will provide you with individual private medical insurance coverage as part of a company-sponsored group health plan. Spouseand/or Family coverage can be arranged at your expense. Such insurance programmes are subject to taxes in line with HMRC guidelines.9.3Any actual or prospective loss of entitlement to pension contributions and private medical insurance benefits shall not limit or prevent the Companyfrom exercising its right to terminate your employment in accordance with paragraph 16 below, or otherwise, and the Company shall not be liable toprovide, or compensate for the loss of, such benefit(s). The Company shall not be liable to provide, or compensate you for the failure of any benefitprovider pursuant to paragraphs 9.1 - 9.2 above to provide you with any benefit of to take steps (other than an initial application to the benefitprovider) to procure such benefits.9.4The Company may from time to time and without compensation amend, replace or withdraw any benefit scheme, or your right to participate in anybenefit scheme, in which you participate, including but not limited to the schemes set out in paragraphs 9.1 and 9.2 above and notwithstanding anyadverse impact that such amendment, replacement or withdrawal may have on any current or prospective benefits claimed or received by you undersuch schemes.9.5If any third party benefit provider refuses for any reason to provide benefits to or in respect of you under any benefit scheme the Company will notbe liable to provide such benefits or compensate you for the loss of such benefits. The Company will not be under any duty to take steps tochallenge any such refusal by a scheme provider.10.Confidential Information10.1You shall neither during your employment (except in the proper performance of your duties) nor at any time (without limit) after its termination directlyor indirectly(a) use for your own purposes or those of any other person, company, business entity or other organisation whatsoever; orSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(b) disclose to any person, company, business entity or other organisation whatsoever;any trade secrets or confidential information relating or belonging to the Company or any of its Associated Companies including but notlimited to any such information relating to customers, customer lists or requirements, price lists or pricing structures, marketing and salesinformation, business plans or dealings, employees or officers, financial information and plans, designs, formulae, product lines, prototypes, services,research activities, source codes and computer systems, software any document marked "Confidential" (or with a similar expression), or anyinformation which you have been told is confidential or which you might reasonably expect the Company would regard as confidential, or anyinformation which has been given to the Company or any Associated Company in confidence by customers, suppliers and other persons.10.2You shall not at any time during the continuance of your employment with the Company make any notes or memoranda relating to any matter within thescope of the Company's or any Associated Company's business, dealings or affairs otherwise than for the benefit of the Company or anyAssociated Company.10.3The obligations contained in paragraph 10.1 shall not apply to any disclosures required by law, and shall cease to apply to any information orknowledge which may subsequently come into the public domain after the termination of your employment, other than by way of unauthoriseddisclosure.11.Exclusivity of Service11.1You are required to devote your full time, attention and abilities to your job duties during working hours, and to act in the best interests of theCompany and its Associated Companies at all times.11.2ou must not, without the written consent of the Company, in any way directly or indirectly (i) be engaged or employed in, or (ii) concerned with (inany capacity whatsoever) or (iii) provide services to, any other business or organisation where this is, or is likely to be, in conflict with the interestsof the Company or its Associated Companies or where this may adversely affect the efficient discharge of your duties. However this does notpreclude your holding up to 3% of any class of securities in any company which is quoted on a recognised Stock Exchange.12.Receipt of Payments and Benefits from Third PartiesSubject to any written regulations issued by the Company which may be applicable, neither you nor your Immediate Relatives, nor any company orbusiness entity in which you or they have an interest, are entitled to receive or obtain directly or indirectly any payment, discount, rebate,commission or other benefit from third parties in respect of any business transacted (whether or not by you) by or on behalf of the Company or anyAssociated Company and if you, your Immediate Relatives or any company or business entity in which you or they have an interest, directly orindirectly obtain any such payment, discount, rebate, commission or other benefit you will forthwith account to the Company or the relevantAssociated Company for the amount received or the value of the benefit so obtained.Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.13.Copyright, Inventions and Patents13.1You shall provide the Company with full written details of all:(a) inventions, ideas and improvements, whether or not patentable, and whether or not recorded in any medium ("Inventions"); and(b) patents, rights to Inventions, copyright and related rights, trade marks, trade names and domain names, rights in get-up, rights ingoodwill or to sue for passing off, rights in designs, rights in computer software, database rights, rights in confidential information (including knowhow and trade secrets) and any other intellectual property rights, in each case where registered or unregistered and including all application (orrights to apply) for, and renewals or extension of rights and all similar or equivalent rights or forms of protection which may now or in the futuresubsist anywhere in the world, created or acquired by you, wholly or partially, in the course of your employment (whether or not during workinghours or using Company premises or resources and whether or not recorded in any medium) ("Employment IPRs"), promptly upon creation.13.2To the fullest extent permitted by law:(a) all Employment IPRs shall automatically belong to the Company; and(b) to the extent that the Employment IPRs do not vest in the Company automatically, you shall assign such Employment IPRs on requestof the Company; and(c) to the extent that the Employment IPRs do not vest in the Company automatically and/or pending any assignment of such EmploymentIPRs under paragraph (b) above, you shall hold them on trust for the Company,and you agree to execute promptly all documents and do all acts, in the opinion of the Company, that may be necessary to give effect tothis paragraph 13.2.13.3You hereby irrevocably and unconditionally waive all rights that arise under Chapter IV of Part I of the Copyright, Designs and Patents Act 1988(whether before, on or after the date hereof) in connection with your authorship of any works mentioned in paragraph 13.1, and to any similar rightswherever in the world enforceable, including without limitation the right to be identified as the author of any such works and the right not to haveany such works subjected to derogatory treatment.13.4Both you and the Company acknowledge the provisions of Sections 39 to 43 of the Patents Act 1977 ("the Act") relating to the ownership ofemployees' inventions and the compensation of employees for certain inventions respectively.13.5At the request and cost of the Company (whether during your employment or after its termination) you agree to execute and do all such deeds,documents, acts and things as the Company may from time to time reasonably require in order to vest any of the Employment IPRs in the Companyor to record such assignments with any local registry or other authority.Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.13.6The Company will decide, in its sole discretion, when and whether to apply for patent, registered design or other protection in respect of theEmployment IPRs and reserves the right to work any of the Employment IPRs as a secret process in which event you agrees to observe theobligations relating to confidential information which are contained in paragraph 10 of this Agreement.14.Disciplinary and Grievance Procedures14.1The Company's disciplinary procedure may be obtained from the HR department. These procedures are non-contractual and do not form part of yourterms and conditions of employment.14.2If you are unhappy about any aspect of your employment with the Company you should raise the matter at first instance with your line manager,unless the issue concerns your Manager, in which case you should raise it with another Manager. If you are still unhappy you should take up thegrievance with his/her manager whose decision shall be final within the Company.15.Collective AgreementsThere are no collective agreements applicable to your employment.16.Termination of Employment16.1The first 6 months of your employment will be on a probationary basis. This period is known as the "Probationary Period". During the ProbationaryPeriod your employment will be terminable by yourself or the Company on two weeks' written notice, subject to paragraphs 16.3 below.16.2Subject to paragraphs 16.3 below, after completion of your Probationary Period, your contract of employment is terminable by you or the Companyon 6 months’ notice, subject to paragraphs 16.3 below.16.3The Company reserves the right to terminate your contract without notice, or pay in lieu of notice, if it has reasonable grounds to believe you areguilty of gross misconduct, gross negligence or in material breach of one of the terms of your employment. Examples of gross misconduct can beobtained from the HR Department.16.4You agree that the Company may at its absolute discretion make a payment or payments (which may, at the Company's absolute discretion, be paidin instalments) representing salary in lieu of any notice of termination of employment which you are or the Company is required to give, subject toany reduction under paragraph 16.5 below. For the avoidance of doubt, such payment or payments shall be less deductions for tax and NIcontributions and shall not include the value of any benefits, bonus/incentive, commission, or holiday entitlement which would have accrued toyou had you been employed until the expiry of your notice entitlement under paragraphs 16.1 or 16.2 above. Further, you shall have no entitlementto such payment, or payments unless and until the Company notifies you in writing of its decision to make such payment(s) to you.Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.16.5Where the Company decides to exercise its power under paragraph 16.4 to make any such payment(s) to you, then you undertake to take allreasonable and necessary steps to find alternative employment to commence within a period equivalent to the notice period (or where notice hasbeen served, the un-expired period of notice) referred to in paragraph 16.2 commencing on the Termination Date. The Company may, in its absolutediscretion, reduce the amount or amounts of any such payment(s) by such an amount as it shall determine to reflect your actual mitigation, orprospective, or potential to mitigate. For the avoidance of doubt, such reduction may result in the cessation of instalment payments, or you beingentitled to no payment.16.6The Company reserves the right to require you not to attend at work and/or not to undertake all or any of your duties of employment during all orany part of any period of notice (whether given by you or the Company), provided always that the Company shall continue to pay your salary andcontractual benefits whilst you remain employed by the Company.16.7On termination of your employment, you must immediately return to the Company in accordance with its instructions all equipment,correspondence, records, specifications, software, disks, models, notes, reports and other documents and any copies thereof and any other propertybelonging to the Company or its Associated Companies (including but not limited to the Company car, keys, credit cards, equipment and passes)which are in your possession or under your control. You must, if so required by the Company, confirm in writing that you have complied with yourobligations under this paragraph 16.7.The Company shall have the right to suspend you on full pay and benefits pending any investigation into potential dishonesty, grossmisconduct or other circumstances which (if proved) would entitle the Company to dismiss you summarily.17.Restrictions on Termination of Employment17.1You hereby agree that you shall not (without the prior consent in writing of the Company) for the Relevant Period immediately following theTermination Date within the UK and whether on your own behalf or in conjunction with or on behalf of any other person, firm, company or otherorganisation, (and whether as an employee, director, principal, agent, consultant or in any other capacity whatsoever), in competition with theCompany directly or indirectly (a) be employed or engaged in, or (b) perform services in respect of, or (c) be otherwise concerned with:-17.1.1the research into, development, manufacture, supply or marketing of any product which is of the same or similar type to any productresearched, or developed, or manufactured, or supplied, or marketed by the Company during the 12 months immediately preceding theTermination Date;17.1.2the development or provision of any services (including but not limited to technical and product support, or consultancy or customerservices) which are of the same or similar type to any services provided by the Company during the 12 months preceding the TerminationDate.Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.PROVIDED ALWAYS that the provisions of this paragraph 17.1 shall apply only in respect of products or services with which you wereeither personally concerned or for which you were responsible whilst employed by the Company during the 12 months immediately preceding theTermination Date.17.2You hereby agree that you will not for the Relevant Period immediately following the Termination Date, whether on your own behalf or inconjunction with or on behalf of any other person, company, business entity or other organisation, (and whether as an employee, director, principal,agent, consultant or in any other capacity whatsoever), directly or indirectly (a) solicit, or (b) assist in soliciting, or (c) accept, or (d) facilitate theacceptance of, or (e) deal with, in competition with the Company the custom or business of any Customer or Prospective Customer :-17.2.1with whom you have had personal contact or dealings on behalf of the Company during the 12 months immediately preceding theTermination Date;17.2.2for whom you were, in a client management capacity on behalf of the Company, directly responsible during the 12 months immediatelypreceding the Termination Date.17.3You hereby agree that you will not for the Relevant Period immediately following the Termination Date, whether on your own behalf or inconjunction with or on behalf of any other person, company, business entity or other organisation whatsoever, directly or indirectly :-17.3.1(a) induce, or (b) solicit, or (c) entice or (d) procure, any person who is a Company Employee to leave the Company's employment; or17.3.2be personally involved to a material extent in (a) accepting into employment or (b) otherwise engaging or using the services of any personwho is a Company Employee.17.4You hereby agree that you will not, whether on your own behalf or in conjunction with or on behalf of any other person, company, business entity orother organisation (and whether as an employee, director, agent, principal, consultant or in any other capacity whatsoever), directly or indirectly, (i)for the Relevant Period, and (ii) in relation to any contract or arrangement which the Company has with any Supplier for the exclusive supply ofgoods and services to the Company and/or to any Associated Company, for the duration of such contract or arrangement:17.4.1interfere with the supply of goods or services to the Company from any Supplier;17.4.2induce any Supplier of goods or services to the Company to cease or decline to supply such goods or services in the future.17.5Paragraphs 17.1 to 17.4 above and 17.7 below will also apply as though references to each Associated Company were substituted for references tothe Company. These paragraphs will, with respect to each Associated Company, constitute a separate and distinct covenant and the invalidity orunenforceability of any such covenant shall not affect the validity or enforceability of the covenants in favour of the Company or any otherAssociated Company. The provisions of thisSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.paragraph 17 shall only apply in respect of those Associated Companies (i) with whom you have given your services, or (ii) for whom you have beenresponsible, or (iii) with whom you have otherwise been concerned, in the 12 months immediately preceding the Termination Date.17.6In relation to each Associated Company referred to in paragraph 17.5 above, the Company contracts as trustee and agent for the benefit of each suchAssociated Company. You agree that, if required to do so by the Company, you will enter into covenants in the same terms as those set out inparagraphs 17.1 to 17.4 and 17.7 hereof directly with all or any of such Associated Companies, mutatis mutandis. If you fail within 7 days ofreceiving such a request from the Company, to sign the necessary documents to give effect to the foregoing, the Company shall be entitled, and ishereby irrevocably and unconditionally authorised by you, to execute all such documents as are required to give effect to the foregoing, on yourbehalf.17.7The following words and expressions referred to above shall have the meanings set out below:"Company Employee" means any person who was employed by (i) the Company or (ii) any Associated Company, for at least 3 months priorto and on the Termination Date and(a) with whom you have had material contact or dealings in performing your duties of employment; and(b) who had material contact with customers or suppliers of the Company in performing his or her duties of employment with the Company or anyAssociated Company (as applicable); or(c) who was a member of the management team of the Company or any Associated Company as applicable."Customer" shall mean any person, firm, company or other organisation whatsoever to whom the Company has supplied goods or services."Prospective Customer" shall mean any person, firm, company or other organisation whatsoever to whom the Company has had anynegotiations or material discussions regarding the possible supply of goods or services by the Company. "Relevant Period" shall mean 6 months."Supplier" means any person, company, business entity or other organisation whatsoever who (i) has supplied to goods or services to theCompany during any part of the 12 months immediately preceding the Termination Date; or (ii) has agreed prior to the Termination Date to supplygoods or services to the Company to commence at any time in the 12 months following the Termination Date; or (iii) as at the Termination Date,supplies goods or services to the Company under an exclusive contract or arrangement between that Supplier and the Company."Termination Date" means the date when your employment terminates.Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.18.Right of SearchThe Company reserves the right to ask to search you, your vehicle and belongings, while at work and when arriving at or leaving the Company’s orcustomers’ and suppliers’ premises.19.Warranty and Undertaking19.1You represent and warrant that you are not subject to any agreement, arrangement, contract, understanding, Court Order or otherwise, which in anyway directly or indirectly restricts or prohibits you from fully performing the duties of your employment, or any of them, in accordance with theterms and conditions of this letter.19.2You agree that in the event of receiving from any person, company, business entity or other organisation an offer of employment either during thecontinuance of the terms and conditions of this letter or during the continuance in force of any of the restrictions set out in paragraph 17 above, youwill forthwith provide to such person, company, business entity or other organisation a full and accurate copy of this letter.20.DefinitionsIn this Agreement, the following expressions shall have the meaning given to them in this paragraph 20:20.1"Associated Company" means any firm, company, corporation or other organisation:-20.1.1 which is directly or indirectly controlled by the Company; or20.1.2 which directly or indirectly controls the Company; or20.1.3 which is directly or indirectly controlled by a third party who also directly or indirectly controls the Company; or20.1.4 of which the Company or any other Associated Company owns or has a beneficial interest in 20% or more of the issued share capital or 20%or more of its capital assets; or20.1.5 which is the successor in title or assign of the firms, companies, corporations or other organisations referred to above.20.2"Company" shall include the successors in title and assigns of the Company.20.3"Control" shall have the meaning set out in S.416 Taxes Act 1988 (as amended).20.4"Immediate Relatives" shall include husband, wife, common law spouse, children, brothers, sisters, cousins, aunts, uncles, parents, grandparents, andthe aforesaid relatives by marriage.Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.21.Miscellaneous21.1This letter cancels and is in substitution for all previous letters of engagement, agreements and arrangements whether oral or in writing relating tothe subject matter hereof between the Company and yourself, all of which shall be deemed to have been terminated by mutual consent. This lettermade between you and the Company constitutes the entire agreement between you and the Company of the terms upon which you are employed.21.2The various provisions and sub-provisions of this letter are severable and if any provision or sub-provision or identifiable part thereof is held to beinvalid or unenforceable by any court of competent jurisdiction then such invalidity or unenforceability will not affect the validity or enforceabilityof the remaining provisions or sub-provisions or identifiable parts thereof in this letter.21.3This letter is governed by and construed in accordance with the laws of England, and you and the Company submit to the exclusive jurisdiction ofthe English courts.21.4Paragraph headings are inserted for convenience only and will not affect the construction of this letter.Please will you sign both copies of this letter and return the top copy to me.Yours sincerely,/s/ Carmel O'Kane Carmel O'Kane European HR Director For and on behalf of HOLOGIC I agree with the Terms and Conditions of my Employment as set out or referred to above.Signed/s/ Claus Egstrand DatedMarch 10, 2014 Claus Egstrand Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 10.57SEVERANCE ANDCHANGE OF CONTROL AGREEMENTCHANGE OF CONTROL AGREEMENT by and between HOLOGIC, INC., a Delaware corporation (the "Company"), and Mr. Claus Egstrand with hisaddress on record an which is in the United Kingdom (the "Executive"), dated as of September 18, 2014. WHEREAS, the Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholdersto assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat, or occurrence of a Change of Control(as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personaluncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Companycurrently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upona Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those ofother corporations;WHEREAS, the Executive serves as Group President International and;WHEREAS, the Company and Executive now desire to enter into this Severance and Change of Control Agreement, which is consistent with thechange of control and severance protection provided to the Company’s most senior officers (the “Agreement”).NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, the parties hereto, each intending to be legallybound, do hereby agree as follows:1. Certain Definitions.(a) The "Effective Date" shall be the first date during the "Change of Control Period" (as defined in Section 1(b)) on which a Change of Controloccurs. Anything in this Agreement to the contrary notwithstanding, if the Executive's employment with the Company is terminated or the Executive ceasesto be an officer of the Company prior to the date on which a Change of Control occurs, and it is reasonably demonstrated that such termination ofemployment (1) was at the request of a third party who has taken steps reasonably calculated to effect the Change of Control or (2) otherwise arose inconnection with or in anticipation of the Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediatelyprior to the date of such termination of employment. If prior to the Effective Date, the Executive’s employment with the Company terminates, then theExecutive shall have no further rights under this Agreement, except with respect to benefits under Section 6(e), if applicable, or unless such termination ofEmployment was in anticipation of the Change of Control in which case the termination shall be deemed to have occurred after the consummation of theChange of Control.(b) The "Change of Control Period" is the period commencing on the date hereof and ending on December 31,2016; provided, that commencing onDecember 31, 2015 and each December 31 thereafter (each such date to be referred to as the “Renewal Date”), the term of this Agreement shall automaticallybe extended, without any further action by the Company or the Executive, so as to terminate three years from such Renewal Date; provided, however that ifthe Company shall give notice in writing to the Executive at least thirty (30) days prior to a Renewal Date (the “Pending Renewal Date”), stating that theChange of Control Period shall not be extended, then the Change of Control Period shall expire two years from the Pending Renewal Date.2. Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean:(a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934under United States Law, as amended (the “Exchange Act”)) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the ExchangeAct) of 30% or more of the Voting Stock of the Company; provided, however, that any acquisition by the Company or its subsidiaries, or any employeebenefit plan (or related trust) of the Company or its subsidiaries of 30% or more of Voting Stock shall not constitute a Change in Control; and provided,further, that any acquisition by a corporation with respect to which, following such acquisition, more than 50% of the Voting Stock of such corporation, isthen beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficialSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.owners of the Voting Stock immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to suchacquisition, of the Voting Stock, shall not constitute a Change in Control; or(b) Any transaction which results in the Continuing Directors (as defined in the Certificate of Incorporation of the Company) constituting less thana majority of the Board of Directors of the Company (the “Board”); or(c) The consummation of (i) a Merger with respect to which all or substantially all of the individuals and entities who were the beneficial owners ofthe Voting Stock immediately prior to such Merger do not, following such Merger, beneficially own, directly or indirectly, more than 50% of the VotingStock of the corporation resulting from the Merger (the “Resulting Corporation”) as a result of the individuals’ and entities’ shareholdings in the Companyimmediately prior to the consummation of the Merger, (ii) a complete liquidation or dissolution of the Company or (iii) the sale or other disposition of all orsubstantially all (as as defined under United States Delaware General Corporation Law) of the assets of the Company excluding a sale or other disposition ofassets to a subsidiary of the Company. For purposes of this Agreement “Merger” means a reorganization, merger or consolidation involving the Company,including without limitation as a parent of a direct or indirect subsidiary of the Company effecting such transactionAnything in this Agreement to the contrary notwithstanding, if an event that would, but for this paragraph, constitute a Change of Control resultsfrom or arises out of a purchase or other acquisition of the Company, directly or indirectly, by a corporation or other entity in which the Executive has agreater than ten percent (10%) direct or indirect equity interest, such event shall not constitute a Change of Control.3. Employment Period. Subject to the terms and conditions hereof, the Company hereby agrees to continue the Executive in its employ, and the Executivehereby agrees to remain in the employ of the Company, for the period commencing on the Effective Date and ending on the last day of the thirty-sixth monthfollowing the month in which the Effective Date occurs (the "Employment Period").4. Terms of Employment.(a) Position and Duties.(i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority,duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned atany time during the 90-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the locationwhere the Executive was employed immediately preceding the Effective Date or any office or location less than 35 miles from such location.(ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, theExecutive agrees to devote his full business time to the business and affairs of the Company and, to the extent necessary to discharge theresponsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently suchresponsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic orcharitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personalinvestments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of theCompany in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conductedby the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scopethereto) subsequent to the Effective Date.(b) Compensation.(i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall bepaid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable to the Executive by the Company and itsaffiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs. During theEmployment Period, the Annual Base Salary shall be reviewed at least annually and shall be increased at any time and from time to time as shall besubstantially consistent with increases in base salary awarded in the ordinary course of business to other peer executives of the Company and itsaffiliated companies. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under thisAgreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall referto Annual Base Salary as so increased. As used in this Agreement,Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.the term "affiliated companies" includes any company controlled by, controlling or under common control with the Company.(ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year during the Employment Period, an annual cashbonus (the "Annual Bonus"; which shall include, without limitation, any other annual cash bonus plan or program provided to Executive such as, Short TermIncentive Plan or any other similar plan) in cash at least equal to the greater of (a) the average (annualized for any fiscal year consisting of less than twelvefull months or with respect to which the Executive has been employed by the Company for less than twelve full months) bonus (the "Average AnnualBonus") paid or that has been earned and accrued, but unpaid to the Executive by the Company and its affiliated companies in respect of the three fiscal yearsimmediately preceding the fiscal year in which the Effective Date occurs, (b) the Annual Bonus paid for the fiscal year immediately preceding the EffectiveDate, or (c) the maximum target bonus if the Company achieves target as determined in accordance with the terms of the Company’s bonus plans for seniorexecutives for the fiscal year immediately preceding the Effective Date (the “Target Bonus”; the greater of clauses (a), (b) or (c) to be referred to as the“Highest Annual Bonus”) and shall not be reduced for the application of the Compensation Committee’s discretion to reduce such bonus or bonus funding,or increased to reflect additional amounts that may be paid or payable if the Company exceeds target. Each such Annual Bonus shall be paid no later than the15th day of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to deferthe receipt of such Annual Bonus pursuant to any nonqualified plan of the Company. Notwithstanding anything herein to the contrary, any portion ofAnnual Base Salary or Annual Bonus electively deferred by the Executive pursuant to a qualified or a non-qualified plan including, but not limited to, theHologic, Inc. Deferred Compensation Plan or any successor thereto (“DCP”) shall be included in determining the Annual Base Salary, Annual Bonus and theAverage Annual Bonus. If the fiscal year of any successor to this Agreement, as described by Section 11(c) herein, is different than the Company’s fiscal yearat the time of the Change of Control, then the Executive shall be paid (i) the Annual Bonus that would have been paid upon the end of Company’s fiscal yearending after the Change of Control, and (ii) a pro-rata Annual Bonus for any months of service performed following the end of the Company’s fiscal year, butprior to the first day of the successor’s fiscal year immediately following the Change of Control. The Annual Bonuses thereafter shall be based on thesuccessor’s first full fiscal year beginning after the Change of Control and successive fiscal years thereafter. “Pro Rata Bonus" shall mean an amount equal tothe Bonus Amount (average of the Annual Bonuses paid or that has been earned and accrued, but unpaid during the three full fiscal years ended prior to theDate of Termination) multiplied by a fraction the numerator of which is the number of months worked in the fiscal year through the Date of Termination andthe denominator of which is 12. Any partial months shall be rounded to the nearest whole number using normal mathematical convention.(iii) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonableexpenses incurred by the Executive upon submission of appropriate accountings in accordance with the most favorable policies, practices andprocedures of the Company and its affiliated companies in effect at any time during the one-year period immediately preceding the Effective Dateor, if more favorable to the Executive, as in effect at any time thereafter with respect to other peer executives of the Company and its affiliatedcompanies.(iv) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits in accordance with the mostfavorable plans, practices, programs and policies of the Company and its affiliated companies in effect at any time during the one-year periodimmediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other peerexecutives of the Company and its affiliated companies.(vii) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and withfurnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoingprovided to the Executive by the Company and its affiliated companies at any time during the one-year period immediately preceding the EffectiveDate or, if more favorable to the Executive, as provided at any time thereafter with respect to other peer executives of the Company and its affiliatedcompanies.(viii) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorableplans, policies, programs and practices of the Company and its affiliated companies as in effect at any time during the one-year period immediatelypreceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other peer incentives of theCompany and its affiliated companies.5. Termination of Employment.(a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. Ifthe Company determines in good faith that the Disability of the Executive has occurred duringSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.the Employment Period (pursuant to the definition of "Disability" set forth below), it may give to the Executive written notice in accordance with Section13(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shallterminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after suchreceipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" means theabsence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due tomental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to theExecutive or the Executive's legal representative (such agreement as to acceptability not to be withheld unreasonably).(b) Cause. The Company may terminate the Executive's employment during the Employment Period for "Cause". For purposes of this Agreement,"Cause" means (i) an act or acts of personal dishonesty taken by the Executive and intended to result in substantial personal enrichment of the Executive atthe expense of the Company, (ii) repeated violations by the Executive of the Executive's obligations under Section 4(a) of this Agreement (other than as aresult of incapacity due to physical or mental illness) which are demonstrably willful and deliberate on the Executive's part, which are committed in bad faithor without reasonable belief that such violations are in the best interests of the Company and which are not remedied in a reasonable period of time afterreceipt of written notice from the Company or (iii) the conviction of the Executive of a felony involving moral turpitude. The Company shall provide theExecutive with 30 days written notice of any determination of Cause and provide the Executive, for a period of 30 days following such notice, with theopportunity to appear before the Board, with or without legal representation, to present arguments and evidence on his behalf and following suchpresentation to the Board, the Executive may only be terminated for Cause if the Board (excluding the Executive if he is a member of the Board), byunanimous consent reasonably determines in good faith that his actions did, in fact, constitute for Cause.(c) Good Reason. The Executive's employment may be terminated during the Employment Period by the Executive for Good Reason. For purposesof this Agreement, "Good Reason" means:(i) A material diminution in the Executive’s base compensation;(ii) A material diminution in the Executive’s authority, duties and responsibilities as in effect immediately prior to the Change of Controlor, if applicable, the Date of Termination;(iii) A material diminution in the authority, duties and responsibilities of the supervisor to whom the Executive is required to report as ineffect immediately prior to the Change of Control or, if applicable, the Date of Termination;(iv) A material change in the geographic location in which Executive’s principal office was located immediately prior to the Change ofControl or, if applicable, the Date of Termination;(v) A material diminution in the budget over which the Executive had authority immediately prior to the of the Change of Control or, ifapplicable, the Date of Termination;(vi) Any other action or inaction that constitutes a material breach by the Company of this Agreement or any other agreement under whichthe Executive provides services;provided, however, that Good Reason shall not exist unless the Executive has given written notice to the Company within ninety (90) days of theinitial existence of the Good Reason event or condition(s) giving specific details regarding the event or condition; and unless the Company has hadat least thirty (30) days to cure such Good Reason event or condition after the delivery of such written notice and has failed to cure such event orcondition within such thirty (30) day cure period.(d) Notice of Termination. Any termination by the Company for Cause or by the Executive for Good Reason shall be communicated by Notice ofTermination to the other party hereto given in accordance with Section 13(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination"means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth inreasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and(iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not morethan fifteen days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact orcircumstance which contributes to a showing of Good Reason or Cause shall not waive any right ofSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive's orthe Company’s rights hereunder.(e) Date of Termination. "Date of Termination" means the date of receipt of the Notice of Termination or any later date (taking into account anyapplicable notice and cure period) specified therein, as the case may be; provided however, that (i) if the Executive's employment is terminated by theCompany other than for Cause, death or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of suchtermination, and (ii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of theExecutive or the Disability Effective Date, as the case may be.6. Obligations of the Company upon Termination.(a) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shallterminate without further obligations to the Executive's legal representatives under this Agreement, other than for (i) payment of the sum of the followingamounts: (A) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (B) the product of (I) the Highest AnnualBonus and (II) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator ofwhich is 365, and (C) any accrued and unpaid Annual Bonus amounts, compensation or vacation pay, in each case, to the extent not yet paid by theCompany (the amounts described in subparagraphs (A), (B) and (C) are hereafter referred to as "Accrued Obligations" and shall be paid to the Executive’sestate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination), (ii) any other benefits or compensation payable underany employee benefit plan in accordance with the applicable plans’ terms, including, without limitation, any non-qualified plan or DCP; (iii) for theremainder of the Employment Period, or such longer period as any plan, program, practice or policy may provide, the Company shall continue benefits to theExecutive and/or the Executive's family at least equal to those which would have been provided in accordance with the applicable plans, programs, practicesand policies described in Section 4(b)(v) and (vi) of this Agreement as if the Executive's employment had not been terminated in accordance with the mostfavorable plans, practices, programs or policies of the Company and its affiliated companies as in effect and applicable generally to other peer executives andtheir families during the one year period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafterwith respect to other peer executives of the Company and its affiliated companies and their families (such continuation of such benefits for the applicableperiod herein set forth and such transfer of the Individual Policy shall be hereinafter referred to as “Welfare Benefit Continuation”; for purposes ofdetermining eligibility of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered tohave remained employed until the end of the Employment Period and to have retired on the last day of such period), and (iv) payment to the Executive’sestate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination of an amount equal to the sum of the Executive’s AnnualBase Salary and the Highest Annual Bonus. Subject to the provisions of Section 9 hereof, but, otherwise, anything herein to the contrary notwithstanding, theExecutive's family shall be entitled to receive benefits at least equal to the most favorable benefits provided by the Company and any of its affiliatedcompanies to surviving families of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relatingto family death benefits, if any, as in effect with respect to other peer executives and their families at any time during the one year period immediatelypreceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect on the date of the Executive's death with respectto other peer executives of the Company and its affiliated companies and their families.(b) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreementshall terminate without further obligations to the Executive, other than for (i) payment of the Accrued Obligations (which shall be paid in a lump sum in cashwithin 30 days of the Date of Termination), (ii) the timely payment and provision of the Welfare Benefit Continuation, and (iii) payment to the Executive in alump sum in cash within 30 days of the Date of Termination of an amount equal to the sum of the Executive’s Annual Base Salary and the Highest AnnualBonus. Subject to the provisions of Section 9 hereof, but, otherwise, anything herein to the contrary notwithstanding, the Executive shall be entitled after theDisability Effective Date to receive disability and other benefits at least equal to the most favorable of those provided by the Company and its affiliatedcompanies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as ineffect with respect to other peer executives and their families at any time during the one year period immediately preceding the Effective Date or, if morefavorable to the Executive and/or the Executive's family, as in effect at any time thereafter with respect to other peer executives of the Company and itsaffiliated companies and their families.(c) Cause, Other than for Good Reason. If the Executive's employment shall be terminated by the Company for Cause or by the Executive otherthan for Good Reason (and other than by reason of his death or disability) during the Employment Period, this Agreement shall terminate without furtherobligations to the Executive other than the obligation to pay to the Executive Annual Base Salary through the Date of Termination. In such case, suchamounts shall be paid to the Executive in a lump sumSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.in cash within 30 days of the Date of Termination. The Executive shall, in such event, also be entitled to any benefits required by law that are not otherwiseprovided by this Agreement.(d) Termination Following a Change of Control by the Company without Cause or by the Executive for Good Reason. Following a Change ofControl if the Executive is terminated by the Company without Cause or he resigns for Good Reason, then the Company shall pay the Executive thefollowing:(i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination all Accrued Obligations;and(iii) the Company shall pay to the Executive a lump sum amount in cash within 30 days after the Date of Termination equal to the (suchamount shall be hereinafter referred to as the “Change of Control Payment”) to the product of (X) two point ninety nine (2.99) multiplied by the sumof (i) (Y) the Annual Base Salary for the fiscal year immediately preceding the Date of Termination and (ii) Highest Annual Bonus; and(iv) notwithstanding any other provisions to the contrary contained herein or in any option agreement, restricted stock agreement or otherequity compensation agreement, between the Company and the Executive, or any stock option, restricted stock or other equity compensation planssponsored by the Company, unless such agreement or plan expressly references and supersedes this Agreement, then all unvested options, restrictedstock or stock appreciation rights which Executive then holds to acquire securities from the Company shall be immediately and automaticallyexercisable as of the Effective Date, and the Executive shall have the right to exercise any such options or stock appreciation rights for the shorter ofone year after the Date of Termination or the remaining term of the applicable equity award.(e) Termination by the Company Without Cause or by Executive for Good Reason. If the Executive's employment with the Company shall beterminated by the Company without Cause or by the Executive for Good Reason (as defined in Section 5(c) without regard to whether a Change of Controlhas occurred) at any time prior to the Effective Date, then the Executive shall be entitled to each and all of the following:(i)The Company shall pay the Executive all Accrued Obligations;(ii)The Company shall pay the Executive a Pro Rata Bonus;(iii)The Company shall continue to pay the Executive his Base Salary and an amount equal to the Average Annual Bonus dividedby the number of payroll periods during the one year severance period for the period of one (1) year from the Date of Termination in accordance withits normal payroll practices and subject to applicable tax withholding; and(iv)Continue to provide the Executive with medical and dental benefits on the same terms and conditions provided to otherexecutives of the Company for a period of one (1) year from the Date of Termination; and(f) Mitigation. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking otheremployment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Executive in anysubsequent employment.(g) Other Severance Benefits. The severance pay and benefits provided for in Section 6(e) shall be in lieu of any other severance or termination payto which the Executive may be entitled under any Company, including any subsidiary or affiliated entity of the Company, severance or termination plan ,program, practice or arrangement. The Executive's entitlement to any other compensation or benefits shall be determined in accordance with the Company'semployee benefit plans and other applicable programs, policies and practices then in effect.7. Non-exclusivity of Rights. Except as provided in Section 6, nothing in this Agreement shall prevent or limit the Executive's continuing or futureparticipation in any benefit, bonus, incentive or other plans, programs, policies or practices, provided by the Company or any of its affiliated companies andfor which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any other agreementswith the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under anyplan, policy, practice or program of the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable inaccordance with such plan, policy, practice or program except as explicitly modified by this Agreement.8. Full Settlement.(a) The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not beaffected by any set-off, counterclaim, recoupment, defense or other claim, right or action whichSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action byway of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, except as provided in Section 6(d)(ii), suchamounts shall not be reduced whether or not the Executive obtains other employment.(b) Prior to the occurrence of a Change of Control, the Company agrees to reimburse the Executive for all legal fees and expenses which theExecutive may reasonably incur as a result of any contest by the Company, the Executive or others of the validity or enforceability of, or liability under, anyprovision of this Agreement or any guarantee of performance thereof, if the Executive prevails in such contest. Following a Change of Control, the Companyagrees to pay promptly as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result ofany contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provisionof this Agreement or any guarantee of performance thereof.(c) If there shall be any dispute between the Company and the Executive (i) in the event of any termination of the Executive’s employment by theCompany, whether such termination was for Cause, or (ii) in the event of any termination of employment by the Executive, whether Good Reason existed,then, unless and until there is a final, nonappealable judgment by a court of competent jurisdiction declaring that such termination was for Cause or that thedetermination by the Executive of the existence of Good Reason was not made in good faith, the Company shall pay all amounts, and provide all benefits, tothe Executive and/or the Executive’s family or other beneficiaries, as the case may be, that the Company would be required to pay or provide pursuant toSection 6(d) as though such termination were by the Company without Cause, or by the Executive with Good Reason; provided, however, that the Companyshall not be required to pay any disputed amount pursuant to this paragraph except upon receipt of an undertaking by or on behalf of the Executive to repayall such amounts to which the Executive is ultimately adjudged by such court not to be entitled.9. Tax Withholding. The Company may withhold from any amounts payable under this Agreement such taxes (including any amounts of employee social security contributions)as shall be required to be withheld pursuant to any applicable law or regulation10. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information,knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by theExecutive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (otherthan by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with theCompany, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate ordivulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of theprovisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement.11. Successors.(a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executiveotherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legalrepresentatives.(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially allof the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that theCompany would be required to perform it if no such succession had taken place. The Company shall provide written evidence to the Executive to documentcompliance with the foregoing sentence within ten (10) business days of the Effective Date. As used in this Agreement, "Company" shall mean the Companyas hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law,or otherwise. In addition, the Executive shall be entitled, upon exercise of any outstanding stock options or stock appreciation rights of the Company, toreceive in lieu of shares of the Company’s stock, shares of such stock or other securities of such successor as the holders of shares of the Company’s stockreceived pursuant to the terms of the merger, consolidation or sale.Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.12. 13. Release. The Executive agrees that, with the exception of the Accrued Obligations due to him in accordance with the terms hereunder, that the paymentof any severance under this Agreement to the Executive by the Company, is subject to and conditioned on Executive executing a general release of theCompany in a form and scope determined by the Company in its sole discretion (the “Release Agreement”), without Executive revoking such ReleaseAgreement within fifty-two (52) days of the Date of Termination (the “Consideration Period”) and provided that (a) if the Date of Termination occurs in onecalendar year and the Consideration Period (including the payment date) expires during the following calendar year, then notwithstanding anything herein tothe contrary, the payments of severance under Section 6(e) will be paid by the Company to the Executive in the second calendar year; (b) the Executivecontinues to comply with the provisions of the Non-Competition Agreement; and (c) prior to the expiration of the Consideration Period (i) Executiveprovides satisfactory evidence to the Company that he has returned all Company property, confidential information and documentation to the Company, and(ii) provides the Company with a signed written resignation of Executive’s status as an officer of the Company or any of its affiliates, if applicable.14. Miscellaneous.(a) This Agreement shall be governed by and construed in accordance with the laws of England and Wales and the Executive and the Companyagree to the exclusive jurisdiction of the English Court. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors andlegal representatives.(b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered orcertified mail, return receipt requested, postage prepaid, addressed as follows:If to the Executive:____________ (at the last known address on file with the Company)If to the Company:Hologic, Inc.35 Crosby DriveBedford, Massachusetts 01730-1401Attention: Chief Executive Officeror to such other address as either party shall have furnished to the other in writing in accordance herewith. Notices and communications shall be effectivewhen actually received by the addressee.(c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision ofthis Agreement.(d) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to bewithheld pursuant to any applicable law or regulation.(e) The Executive's or the Company’s failure to insist upon strict compliance with any provision hereof shall not be deemed to be a waiver of suchprovision or any other provision thereof.(f) This Agreement contains the entire understanding of the Company and the Executive with respect to the rights and other benefits that theExecutive shall be entitled during the Employment Period, and in connection therewith shall supersede all prior oral and written communications with theExecutive with respect thereto, including without limitation any and all rights and benefits the Executive may have under the Original Change of ControlAgreement; provided, however, that the Employee Intellectual Property Rights and Non-Competition Agreement, option or other equity agreements or otheremployment agreement by and between the Company and Executive shall remain in full force and effect and if the Company’s separation policy wouldprovide greater benefits to the Executive than this Agreement, then the Executive may elect to receive benefits under the Company’s separation policy inlieu of the benefits provided hereunder. Nothing herein shall affect the application of the Company’s separation policy in lieu of the benefits providedhereunder. Nothing herein shall affect the application of the Company’s separation policy prior to the Effective Date.(g) The Executive and the Company acknowledge that, except as may otherwise be provided under this Agreement or any other written agreementbetween the Executive and the Company, prior to the Effective Date, the employment of theSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Executive by the Company is “at will” and may be terminated by either the Executive or the Company at any time. Notwithstanding anything containedherein, if during or prior to the Employment Period, the Executive shall terminate employment with the Company other than for Good Reason, then theExecutive shall have no liability to the Company.IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors, the Company hascaused these presents to be executed in its name on its behalf, all as of the day and year first above written. HOLOGIC, INC. By:/s/ Mark J Casey Name:Mark J Casey Title:SVP, General Counsel, Secretary EXECUTIVE /s/ Claus Egstrand Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 12.1COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGESThe following table presents the computation of our ratio of earnings to fixed charges for each of the periods indicated (in millions, except ratio). Fiscal Year Ended September 27,2014 September 28,2013 September 29,2012 September 24,2011 September 25,2010Earnings: Income (loss) before provision forincome taxes$48.1 $(1,192.9) $(61.7) $227.4 $(55.0)Fixed charges226.2 287.2 146.4 121.5 133.6Amortization of capitalized interest0.1 0.1 0.1 0.1 —Total earnings (losses)$274.4 $(905.6) $84.8 $349 $78.6Fixed charges: Interest expense$220.6 $281.1 $140.3 $114.8 $127.1Estimate of interest within rentalexpense5.6 6.1 6.1 6.6 6.5Total fixed charges$226.2 $287.2 $146.4 $121.4 $133.6Ratio of earnings to fixed charges(a)1.21 — — 2.87 —For the purpose of calculating the ratio of earnings to fixed charges, earnings consist of our income (loss) before provision for income taxes plus our fixedcharges. Fixed charges consist of interest expense, amortization of debt discount and debt issuance costs and an estimate of the interest portion of rentalexpense. Interest expense recorded on uncertain tax positions has been recorded in the provision for income taxes and therefore has been excluded from thecalculation.(a)In fiscal 2013, 2012 and 2010, we incurred losses from pre-tax continuing operations, and as a result, ourearnings were insufficient to cover our fixed charges by $1.19 billion, $61.5 million and $55.0 million,respectively.Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 21.1Subsidiaries of Hologic Jurisdiction of Incorporation or OrganizationBeijing Hologic Technology Co., Ltd. ChinaBioLucent, LLC DelawareCytyc Corporation DelawareDirect Radiography Corp. DelawareGen-Probe Incorporated DelawareHologic Asia, Limited Hong KongHologic (China) Enterprise Management Consulting Co., Ltd. ChinaHologic Hitec-Imaging GmbH GermanyHologic International Holdings B.V. NetherlandsHologic Latin America Ltda. BrazilInterlace Medical, Inc. DelawareNavigation Three Limited Hong KongR2 Technology Canada, Inc. CanadaSentinelle Medical Inc. CanadaSuros Surgical Systems, Inc. DelawareThird Wave Technologies, Inc. DelawareTCT International Co., Ltd. British Virgin IslandsHologic España S.A. SpainHologic France S.A. FranceHologic N.V. BelgiumThird Wave Agbio, Inc. DelawareHologic Japan, Inc. JapanHologic Medical Technologies (Beijing) Co., Ltd. ChinaCruiser, Inc. DelawareCytyc Limited Liability Company DelawareCytyc International, Inc. DelawareCytyc Prenatal Products Corp. DelawareHologic Limited Partnership MassachusettsCytyc Surgical Products, Limited Partnership MassachusettsCytyc Surgical Products II, Limited Partnership MassachusettsHologic Surgical Products Costa Rica, S.A. Costa RicaCytyc Cayman Limited Cayman IslandsHologic Asia Pacific Limited Hong KongHologic Netherlands B.V. NetherlandsHologic Canada Limited CanadaHologic (Australia) Pty Ltd. AustraliaHologic Deutschland, GmbH GermanyHologic Europe Middle East and Africa, S.A. SwitzerlandHologic France SARL FranceHologic Iberia, S.L. SpainHologic Italia S.r.l. ItalyHologic (UK) Limited England and WalesHologic Suisse SA SwitzerlandGen-Probe Prodesse, Inc. WisconsinSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Subsidiaries of Hologic Jurisdiction of Incorporation or OrganizationGen-Probe Sales & Service, Inc. DelawareGen-Probe Australia Pty Ltd. AustraliaGen-Probe Czech Republic s.r.o. Czech RepublicHologic Denmark ApS DenmarkHologic Ltd. United KingdomHologic Sweden AB SwedenGen-Probe UK Limited United KingdomFood DNA Services Limited United KingdomTepnel Biosystems Limited United KingdomTepnel Diagnostics Limited United KingdomTepnel Medical Limited United KingdomTepnel Scientific Services Limited United KingdomWildlife DNA Services Limited United KingdomMolecular Light Technology Limited United KingdomBioanalysis Limited United KingdomGen-Probe Cardiff Ltd. United KingdomBeijing TCT Jinbai Technologies Co., Ltd. ChinaJiangsu Kang Ke Medical Devices Co., Ltd. ChinaZheng Zhou Yong Run Medical Devices Co., Ltd. ChinaTCT Medical (Beijing) Clinical Test Institute ChinaHangzhou Zuanbai Technology Co., Ltd ChinaMingwood Biotechnology Co., Ltd. ChinaCentury Likang (Beijing) Co., Ltd. ChinaBeijing TCT Medical Technology Co., Ltd. ChinaSource: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 23.1Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the following Registration Statements: (1)Registration Statement (Form S-8 No. 333-34003) pertaining to the Hologic, Inc. 1997 Employee EquityIncentive Plan, (2)Registration Statement (Form S-8 No. 333-79167) pertaining to the Hologic, Inc. 1997 Employee EquityIncentive Plan and the Hologic, Inc. Amended and Restated 1999 Equity Incentive Plan, (3)Registration Statement (Form S-8 No. 333-34634) pertaining to the Hologic, Inc. 1997 Employee EquityIncentive Plan, (4)Registration Statement (Form S-8 No. 333-60046) pertaining to the Hologic, Inc. Amended and Restated1999 Equity Incentive Plan, and the Hologic, Inc. 2000 Acquisition Equity Incentive Plan, (5)Registration Statement (Form S-8 No. 333-112222) pertaining to the Hologic, Inc. Amended and Restated1999 Equity Incentive Plan, (6)Registration Statement (Form S-8 No. 333-121111) pertaining to the Hologic, Inc. Amended and Restated1999 Equity Incentive Plan, (7)Registration Statement (Form S-8 No. 333-130170) pertaining to the Hologic, Inc. Amended and Restated1999 Equity Incentive Plan, (8)Registration Statement (Form S-8 No. 333-139341) pertaining to the Hologic, Inc. Second Amended andRestated 1999 Equity Incentive Plan, (9)Registration Statement (Form S-8 No. 333-146887) pertaining to the Cytyc Corporation 1995 Stock Plan,the Cytyc Corporation 1995 Non-Employee Director Stock Option Plan, the Cytyc Corporation 2004Omnibus Stock Plan, and the Hologic, Inc. Second Amended and Restated 1999 Equity Incentive Plan, (10)Registration Statement (Form S-3ASR No. 333-192544) pertaining to Hologic, Inc.’s shelf registrationstatement for common stock, preferred stock, debt securities, rights, warrants, purchase contracts, units orany combination of the foregoing, (11)Registration Statement (Form S-8 No. 333-150796) pertaining to the Hologic, Inc. 2008 Equity IncentivePlan, Hologic, Inc.’s two-for-one stock split in the form of a dividend of one share of common stock foreach share of common stock outstanding as of March 21, 2008 and the adjustment of shares registeredunder Hologic, Inc.’s Stock Plans, (12)Registration Statement (Form S-8 No. 333-152577) pertaining to the Third Wave Technologies, Inc. 1999Incentive Stock Option Plan and the Third Wave Technologies, Inc. 2000 Stock Plan, as amended, (13)Registration Statement (Form S-8 No. 333-181126) pertaining to the Hologic, Inc. 2012 Employee StockPurchase Plan, (14)Registration Statement (Form S-8 No. 333-183019) pertaining to the 2003 Incentive Award Plan of Gen-Probe Incorporated, (15)Registration Statement (Form S-8 No. 333-188468) pertaining to the Hologic, Inc. Amended and Restated2008 Equity Incentive Plan.of our reports dated November 20, 2014, with respect to the consolidated financial statements of Hologic, Inc. and the effectiveness of internal control overfinancial reporting of Hologic, Inc., included in this Annual Report (Form 10-K) of Hologic, Inc. for the year ended September 27, 2014./s/ Ernst & Young LLPBoston, MassachusettsNovember 20, 2014Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 31.1CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Stephen P. MacMillan, certify that:1.I have reviewed this annual report on Form 10-K of Hologic, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting.Date: November 20, 2014 /s/ Stephen P. MacMillan Stephen P. MacMillan President and Chief Executive Officer Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 31.2CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Robert W. McMahon, certify that:1.I have reviewed this annual report on Form 10-K of Hologic, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting.Date: November 20, 2014 /s/ Robert W. McMahon Robert W. McMahon Chief Financial Officer Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 32.1CertificationPursuant to Section 906 of the Sarbanes-Oxley Act of 2002(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)I, Stephen P. MacMillan, Chief Executive Officer of Hologic, Inc., a Delaware corporation (the “Company”), do hereby certify, pursuant to Section 906of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), that:(1)The Annual Report on Form 10-K for the year ended September 27, 2014 (the “Form 10-K”) of the Company fully complies with the requirementsof Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of theCompany. Dated: November 20, 2014/s/ Stephen P. MacMillan Stephen P. MacMillan President and Chief Executive OfficerA SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 HAS BEENPROVIDED TO HOLOGIC, INC. AND WILL BE RETAINED BY HOLOGIC, INC. AND FURNISHED TO THE SECURITIES AND EXCHANGECOMMISSION OR ITS STAFF UPON REQUEST.Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 32.2CertificationPursuant to Section 906 of the Sarbanes-Oxley Act of 2002(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)I, Robert W. McMahon, Chief Financial Officer of Hologic, Inc., a Delaware corporation (the “Company”), do hereby certify, pursuant to Section 906 ofthe Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), that:(1)The Annual Report on Form 10-K for the year ended September 27, 2014 (the “Form 10-K”) of the Company fully complies with the requirementsof Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of theCompany. Dated: November 20, 2014/s/ Robert W. McMahon Robert W. McMahon Chief Financial OfficerA SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 HAS BEENPROVIDED TO HOLOGIC, INC. AND WILL BE RETAINED BY HOLOGIC, INC. AND FURNISHED TO THE SECURITIES AND EXCHANGECOMMISSION OR ITS STAFF UPON REQUEST.Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: HOLOGIC INC, 10-K, November 20, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.

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