Hologic
Annual Report 2015

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KHOLOGIC INC - HOLXFiled: November 19, 2015 (period: September 26, 2015)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 26, 2015or ¨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.)250 Campus Drive, Marlborough, Massachusetts 01752(Address of Principal Executive Offices) (Zip Code)Registrant’s Telephone Number, Including Area Code (508) 263-2900Securities 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 28, 2015 was $9,098,955,240 basedon the price of the last reported sale on Nasdaq Global Select Market on that date.As of November 13, 2015, 282,905,150 shares of the registrant’s Common Stock, $0.01 par value, were outstanding.Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 26, 2015 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 19, 2015Powered 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 26, 2015TABLE OF CONTENTS PagePART I Item 1.Business4 Item 1A.Risk Factors15 Item 1B.Unresolved Staff Comments33 Item 2.Properties34 Item 3.Legal Proceedings34 Item 4.Mine Safety Disclosures35 PART II Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities36 Item 6.Selected Financial Data38 Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations39 Item 7A.Quantitative and Qualitative Disclosures About Market Risk68 Item 8.Financial Statements and Supplementary Data69 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure69 Item 9A.Controls and Procedures69 Item 9B.Other Information72 PART III Item 10.Directors, Executive Officers and Corporate Governance73 Item 11.Executive Compensation73 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters73 Item 13.Certain Relationships and Related Transactions, and Director Independence73 Item 14.Principal Accounting Fees and Services74 PART IV Item 15.Exhibits and Financial Statement Schedules75 2Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 and the guidelines, recommendations, and studies published by variousorganizations 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 our ability to attract, motivate and retain key employees;•the impact and anticipated benefits of completed 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 related to such actions;•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 the terms of our indebtedness;•anticipated trends relating to our financial condition or results of operations, including the impact of interest rates and foreign currency exchangefluctuations; 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: 3D, 3D Mammography, Affirm, Aptima, Aptima Combo 2, ATEC, Celero,Cervista, Contura, C-View, Cytyc, Dimensions, DirectRay, Discovery, Eviva, Fluoroscan, Genius, Gen-Probe, Healthcome, Horizon, Interlace, Invader,MultiCare, MyoSure, NovaSure, Panther, PreservCyt, Progensa, SecurView, Selenia, StereoLoc, TCT, ThinPrep, Tigris, TLI IQ, and TMA.3Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 with an emphasis onwomen's health. The Company operates in four segments: Diagnostics, Breast Health, GYN Surgical and Skeletal Health. We sell and service our productsthrough a combination of direct sales and service personnel 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 andplasma. Our primary diagnostics products include our Aptima family of assays, which run on our advanced instrumentation systems (Panther and Tigris), ourThinPrep system, the Rapid Fetal Fibronectin Test and our Procleix blood screening assays. The Aptima family of assays is used to detect the infectiousmicroorganisms that cause the common sexually transmitted diseases, or STDs, chlamydia and gonorrhea, certain high-risk strains of human papillomavirus,or HPV, and Trichomonas vaginalis, the parasite that causes trichomoniasis. The ThinPrep System is primarily used in cytology applications, such as cervicalcancer screening, and the Rapid Fetal Fibronectin Test assists physicians in assessing the risk of pre-term birth. In blood screening, we develop andmanufacture the Procleix family of assays, which are used to detect various infectious diseases. These blood screening products are marketed worldwide byour 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, and breast biopsy guidancesystems. Our most advanced breast imaging platform, Dimensions, utilizes a technology called tomosynthesis to produce 3D images that show multiplecontiguous slice images of the breast, which we refer to as the Genius 3D Mammography exam, as well as conventional 2D full field digital mammographyimages. Our clinical results for FDA approval demonstrated that conventional 2D digital mammography with the addition of 3D tomosynthesis is superior to2D digital mammography alone for both screening and diagnostics.Our GYN Surgical products include our NovaSure Endometrial Ablation System and our MyoSure Hysteroscopic Tissue Removal System. TheNovaSure system involves a trans-cervical procedure for the treatment of abnormal uterine bleeding. The MyoSure system is a tissue removal device that isdesigned to provide incision-less removal of fibroids, polyps, and other pathology within the uterus.Our Skeletal Health segment offers Discovery and Horizon X-ray bone densitometers that assess the bone density of fracture sites; and mini C-armimaging systems that assist in performing minimally invasive surgical procedures on a patient's extremities, such as the hand, wrist, knee, foot, and ankle.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 andCompliance.” The contents of our websites are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report ordocument we file with the SEC, and any references to our websites are intended to be inactive textual references only.4Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 14 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 magnetic separation to concentrate the target by drawing the magnetic beads to the sides of the sample tube, whilethe remainder of the sample is washed away and removed. When used in conjunction with our patented amplification methods, target capture techniquesconcentrate 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 19, 2015Powered 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 Parvo/HAV assay,which detects the Parvovirus and hepatitis A virus, or HAV, 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 capable of servingboth high- and low-volume laboratories, and our semi-automated direct tube sampling, or DTS, instruments which are used to run a number of infectiousdisease assays. In the fourth quarter of fiscal 2014, we also introduced our Tomcat instrument, a fully-automated general purpose instrument designed to easethe strain of pre-analytical sample processing by eliminating the inefficient and error-prone activities associated with manually aliquoting samples.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.The 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, locates and highlights areas of interest for review. By directing the cytotechnologist to areas of interest on a slide, the system may increase acytology laboratory’s screening productivity and diagnostic accuracy. In Europe, where laboratories tend to be smaller and process fewer tests, we also offer alower throughput 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).6Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 ContentsRapid 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. The first of these quantitative viral load assays, the Aptima HIV Dx Quantassay, was CE-marked in December 2014.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 andtomosynthesis image acquisition and display. When operating in tomosynthesis mode, the system acquires a series of low dose x-ray images taken in ascanning motion at various angles. The images are mathematically processed into a series of small slices, allowing for visualization of the breast in multiplecontiguous slices. We believe by revealing the internal structure of the breast, the more subtle architecture of various types of suspicious lesions may be ableto be better interpreted, which may ultimately increase cancer detection and reduce unnecessary patient callbacks. Our clinical results for FDA approvaldemonstrated that conventional 2D digital mammography with the addition of our Genius 3D Mammography is superior to 2D digital mammography alonefor both screening and diagnostics.C-View SystemOur C-View product provides a 2D image that is mathematically synthesized from the data within a 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 tomosynthesis data, without the need for anactual 2D exposure. Elimination of the 2D exposure reduces the breast compression time and patient dose compared to the current combo exam. Our C-Viewsoftware is approved for sale throughout the European Economic Area and in other countries recognizing the CE-mark. In May 2013, the FDA approved theuse of the C-View software with our Dimensions tomosynthesis system.SeleniaThe Selenia product family is our original full field digital mammography platform. The Selenia product family includes the Selenia base configuration,the Selenia Value (a lower cost alternative to the Selenia base configuration) and a remanufactured Selenia system, each of which offer customers varyingperformance capabilities.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-7Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentsdirectional 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 systems. The Affirm upright attachment is employed with our Dimensions2D and tomosynthesis systems. These breast biopsy systems provide an alternative to open surgical biopsy and can be performed as an outpatient procedureunder local anesthesia, allowing shorter recovery times. The Affirm tomosynthesis option provides faster lesion targeting and reduced patient procedure timecompared to traditional stereotactic biopsy procedures. The Affirm system is pre-programmed for use with our Eviva and ATEC vacuum-assisted breastbiopsy 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 our 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 beendesigned to accommodate 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.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.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.8Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 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.Mini 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 assist in performing 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 2015, 2014, and 2013, no customer accounted for more than 10% of our consolidated revenues. In fiscal 2015, 2014, and 2013,revenues under our blood screening collaboration agreement, which is currently with Grifols, accounted for 20.9%, 18.8% and 16.6% of our Diagnosticssegment revenue, respectively. No other customer accounted for more than 10% of our revenues in any other business segment in fiscal 2015, 2014, or 2013.In fiscal 2015, 2014, and 2013, international revenues accounted for 25.4%, 26.4% and 26.1% of our product sales, respectively. See Note 14 to ourconsolidated financial statements 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 certain of our products.Internationally, our products are marketed and sold through a combination of a direct sales force and a network of distributors. We maintain direct salesoperations 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.9Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 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 clinicaland operational attributes that are most important and cost-effective to customers. These attributes include, but are not limited to, superiority in efficacy, easeof use, reliability, accuracy, quality and cost. We believe our continued success depends in large part upon our ability to invest in product enhancements andtechnologies that will help us distinguish ourselves from our competitors.Diagnostics. 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 Medix Biochemical. However, this product couldexperience competition from companies that manufacture and market pregnancy-related diagnostic products and services. In addition, healthcare providersuse diagnostic techniques such as clinical examination and ultrasound to diagnose the likelihood of pre-term birth and may choose these techniques ratherthan use 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. For example,in the U.S., our Aptima Combo 2 tests compete against BD and Roche Diagnostics Corporation, or 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.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 breast tomosynthesis system, and Siemens received FDAapproval for its tomosynthesis system in April 2015. In addition, we believe that other competitors, including Fuji, are developing tomosynthesis systems forcommercial use in the U.S. Our Dimensions tomosynthesis systems also compete in certain countries outside of the U.S. with tomosynthesis systemsdeveloped by GE, Siemens, Fuji, and I.M.S.The primary competitor for our breast biopsy product line is Devicor Medical Products, Inc., part of Danaher Corporation's Leica Biosystems division.In addition, other competitors include CareFusion, a BD Company, 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,The Cooper Companies, Inc., or CooperSurgical, and Minerva Surgical, Inc., or Minerva, each of which currently markets an FDA approved endometrialablation device for the treatment of abnormal uterine bleeding. In addition to these devices, we also compete with alternative treatments to our NovaSuresystem, such as drug therapy, intrauterine devices, hysterectomy, dilation and curettage and rollerball ablation. Because drug therapy is an alternative to ourNovaSure procedure, NovaSure’s competitors also include many major pharmaceutical companies that manufacture hormonal drugs for women.10Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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, such as Smith & Nephew’s TruClear device and Boston Scientific'sSymphion device. The MyoSure product also competes with alternative therapeutic techniques such as hysteroscopic resection with a monopolar or bipolarloop, which is currently the most common technique 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 purchase many of the components, subassemblies, and raw materials used in our products from numerous suppliers worldwide. For reasons of qualityassurance, scarcity and/or cost effectiveness, certain components, subassemblies, and raw materials of our products are available only from one or a limitednumber of suppliers. We work closely with our suppliers to develop contingency plans to ensure continuity of high quality and reliable supply. We haveestablished long-term supply contracts with many of our suppliers and in other instances, we have developed in-house capability to offset potential shortagescaused by sole source suppliers. Due to the high standards and FDA requirements applicable to manufacturing our products, such as the FDA's Quality SystemRegulation and Good Manufacturing Practices, we may not be able to quickly establish additional or replacement sources for certain components ormaterials. In the event that we are unable to obtain sufficient quantities of raw materials or components or subassemblies on commercially reasonable terms orin a timely manner, our ability to manufacture our products on a timely and cost-competitive basis may be compromised, which may have a material adverseeffect on our business, financial condition and results of operations.Our current supplier of certain key raw materials for certain of our amplified NAT diagnostic assays, pursuant to a fixed-price contract, is RocheDiagnostics Corporation. In addition, we have a supply and purchase agreement for oligonucleotides for HPV with Roche Molecular Systems, Inc. The parentcompany of both Roche Diagnostics Corporation and Roche Molecular Systems, Inc. is F. Hoffmann-La Roche Ltd, a direct competitor of our Diagnosticsbusiness. We also have a supply agreement with GE Healthcare Bio-Sciences Corp., an affiliate of GE, for membranes used in connection with our ThinPrepproduct line. GE is a director competitor with our Breast Health and Skeletal Health businesses.We have sole-source third-party manufacturers for each of our molecular diagnostics instrument product lines. KMC Systems, Inc., or KMC Systems, isthe only manufacturer of the Tigris instrument and Stratec Biomedical AG, or Stratec, is the only manufacturer of the Panther instrument. We are dependenton these sole source third-party manufacturers, and this dependence exposes us to increased risks associated with production delays, delivery schedules,manufacturing capability, quality control, quality assurance and costs. We have no firm long-term volume commitments with either KMC Systems or Stratec.If KMC Systems, Stratec, or any of our other third-party manufacturers experiences delays, disruptions, capacity constraints or quality control problems in itsdevelopment or manufacturing operations or becomes insolvent or otherwise fails to supply us with products in sufficient quantities, instrument shipments toour customers could be delayed, which would decrease our revenues and harm our competitive position and reputation. Further, because we place orders withour manufacturers based on forecasts of expected demand for our instruments, if we inaccurately forecast demand we may be unable to obtain adequatemanufacturing capacity or adequate quantities of components to meet our customers' delivery requirements.We and our contract manufacturers manufacture our products at a limited number of different facilities located in the United States and throughout theworld. In most cases, the manufacturing of each of our products is concentrated in one or a few locations. An interruption in manufacturing capabilities at anyof these facilities, as a result of equipment failure or other reasons, could reduce, delay or prevent the production of our products. Some of our manufacturingoperations are located outside of the U.S., including in Costa Rica and the United Kingdom. Those manufacturing operations are also subject to additionalchallenges 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. During fiscal 2015, we decided to shut downour Bedford, Massachusetts facility and outsource the manufacturing of certain of our Skeletal Health products to a third party and transfer certain othermanufacturing operations for our Breast Health segment to our Danbury, Connecticut and Marlborough, Massachusetts facilities. In addition, research anddevelopment, sales and service support and administrative functions will be moved to Danbury and Marlborough. This full transition is expected to becompleted by the end of fiscal 2016. During fiscal 2014, we completed the process of consolidating our Madison, Wisconsin molecular diagnosticsoperations into our Diagnostics facilities in San Diego, California. During fiscal 2013, we moved our selenium panel coating production line from Germanyinto our digital detector manufacturing facility in Newark, Delaware, and completed the consolidation of our breast biopsy operations, includingmanufacturing, research and development and sales support to our Costa Rica manufacturing facility and facilities in Massachusetts. We may experienceunexpected problems and expenses associated with our consolidation of operations and facilities that could materially harm11Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 and prospects.From 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, result in additional costs or have other similar effects.BacklogOur backlog as of October 25, 2015 and October 26, 2014 totaled $408.9 million and $377.0 million, respectively. Backlog consists of customer ordersfor which a delivery schedule within the next twelve months has been specified. Orders included in backlog may be canceled or rescheduled by customerswithout 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 $214.9 million, $203.2 million and $197.6 million in fiscal 2015, 2014, and 2013, respectively.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.12Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 12 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 classifies medical devices into 3 classes based on risk. The FDA generally must clear the commercial sale of new medical devices in Classes IIand III. Commercial sales of our Class II and III medical devices within the U.S. must be preceded by either a pre-market notification filing pursuant toSection 510(k) of the FD&C Act (Class II) or the granting of a pre-market approval application, or PMA (Class III). Our Class I medical devices must followHologic’s internal Quality System processes prior to commercialization. A 510(k) pre-market notification filing must contain information establishing thatthe device to be sold is substantially equivalent to a device commercially distributed prior to May 28, 1976. The PMA procedure involves a complex andlengthy testing and review process by the FDA and may require several years to 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 to obtain the necessary clinical data for submission to the FDA. The FDA willgrant a PMA only if after evaluating clinical data it finds that the safety and effectiveness of the product has been sufficiently demonstrated. This approvalmay 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.13Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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, as with other Class I products, may be sold without 510(k) clearance or PMA approval.However, ASR products are subject to significant restrictions. The manufacturer may not make clinical or analytical performance claims for the ASR product,may not promote their use with additional laboratory equipment and may only sell the ASR product to clinical laboratories that are qualified to run highcomplexity 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 2012, the European Commission proposed two new regulations, one each for medical devices and In-vitro Diagnostics (IVD). The adoption of theseregulations may impact our international operations through a broadened scope of medical device and IVD oversight and/or regulatory reach. Compliancewith 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.Under current CMS policies and regulations, varying payment levels have been established for tests and procedures14Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentsperformed using our products. Coverage policies for Medicare patients may vary by regional Medicare contractor in the absence of a national coveragedetermination and payment rates for procedures will vary based on the geographic price index. Coverage and reimbursement for patients with privateinsurance is dependent on the individual private payor’s decisions and may not follow the policies and rates established by CMS. Moreover, privateinsurance carriers may choose not to follow the CMS coverage policies or payment rates. The use of our products outside of the U.S. is similarly affected byreimbursement policies adopted by foreign regulatory authorities and insurance carriers.Healthcare reform proposals and medical cost containment measures are being adopted in the U.S. and in many foreign countries. The ability of ourcustomers to obtain appropriate reimbursement for our products and services from private and governmental third-party payors is critical to the success ofmedical technology companies because it affects which products customers purchase and the prices they are willing to pay. Reimbursement and coveragevaries by country and can significantly impact acceptance of new products and technologies. Even if we develop a promising new product, we may findlimited demand for the product unless reimbursement approval and coverage is obtained from private and governmental third-party payors. Furtherlegislative or administrative reforms to the reimbursement system in the United States and other countries in a manner that significantly reducesreimbursement for procedures using our medical products or denies coverage for those procedures facilitated by our products, including price regulation,competitive bidding and tendering, coverage and payment policies, comparative effectiveness of therapies, technology assessments and managed-carearrangements, could have a material adverse effect on our business, financial condition or results of operations.EmployeesAs of September 26, 2015, we had approximately 5,290 full-time employees, including 1,483 in manufacturing operations, 806 in research anddevelopment, 2,390 in marketing, sales and support services, and 611 in general administration. The non-management employees of our Hitec-Imagingsubsidiary located in Germany are represented by a union. Hitec-Imaging’s 66 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 within our Diagnostics segment is also subject to significant seasonal and year-over-year fluctuations. In addition, the summer months, which occur during our fiscal fourth quarter, typically have had lower order rates internationally for mostof 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.Risks Relating to our BusinessOur long-term success will depend upon our ability to successfully develop and commercialize new products and treatments and enhance our existingproducts and treatments.Our growth potential depends in large part on our ability to identify and develop new products or new indications for or enhancements of existingproducts that address unmet medical needs and receive reimbursement from payors, either through internal research and development or throughcollaborations, acquisitions, joint ventures or licensing or other arrangements with third parties. However, balancing current growth and investment for thefuture remains a challenge. The development of new products and enhancement of existing products requires significant investment in research anddevelopment, clinical trials15Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 regulatory approvals. Our ongoing investments in new product introductions and in research and development for new products and existing productenhancements could exceed corresponding sales growth. This could produce higher costs without a proportional increase in revenues.Additionally, the results of our product development efforts may be affected by a number of factors, including our ability to anticipate customer needs,innovate and develop new products, complete clinical trials, obtain regulatory approvals and reimbursement in the United States and abroad, manufactureproducts in a cost-effective manner, obtain appropriate intellectual property protection for our products, gain and maintain market approval of our productsand access capital. There can be no assurance that any products now in development or that we may seek to develop in the future will achieve technologicalfeasibility, obtain regulatory approval or gain market acceptance. If we are unable to develop and launch new products and enhanced products, our ability tomaintain or expand our market position in the markets in which we participate may be materially adversely impacted.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.International expansion is a key component of our growth strategy, although our international operations and foreign acquisitions expose us toadditional operational challenges that we might not otherwise face.We are focused on international expansion as a key component of our growth strategy and have identified specific areas of opportunity in variousinternational markets. In fiscal 2015, 24.0% of our revenue came from outside of the U.S. If we fail to capitalize in the opportunities we have identified, ourfuture growth may be materially adversely affected.In addition, even if we do succeed in our plans to grow internationally, our future and existing international operations may subject us to a number ofadditional risks and expenses. Any of these risks or expenses 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;•political and economic changes and disruptions, export/import controls and tariff regulations;•the inability to effectively obtain or enforce intellectual property rights, reduced protection for intellectual property rights in some countries,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.16Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 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.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. Over the last two years, we have 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.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.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.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 product17Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentsenhancements could harm our business and prospects. The process of obtaining clearances and approvals can be costly and time-consuming. In addition,there is a risk that any approvals or clearances, once obtained, may be withdrawn or modified.Most medical devices cannot be marketed in the U.S. without 510(k) clearance or premarket approval by the FDA. Any modifications to a device thathas received a pre-market approval that affect the safety or effectiveness of the device require a pre-market approval supplement or possibly a separate pre-market approval, 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-marketapproval supplements or new pre-market approvals for any modification to a previously approved device, we may be required to cease marketing or to recallthe modified device until we obtain approval, and we may be subject to significant criminal and/or civil sanctions, including, but not limited to, regulatoryfines or penalties.Medical 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 2012, the European Commission proposed two new regulations,one each for medical devices and In-vitro Diagnostics (IVD). The adoption of these regulations may impact our international operations through a broadenedscope of medical device and IVD oversight and/or regulatory reach. Compliance with the new European Commission regulations, if and when adopted, mayimpose additional administrative and financial burdens on us.The 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.The failure of third-party payors to provide appropriate levels of coverage and reimbursement for the use of our products and treatments facilitated byour products could harm our business and prospects.Sales and market acceptance of our medical products and the treatments facilitated by our products is dependent upon the coverage decisions andreimbursement policies established by government healthcare programs and private health insurers. The ability of customers to obtain appropriatereimbursement for their products and services from private and governmental third-party payors is critical to the success of medical technology companiesbecause it affects which products customers purchase and the prices they are willing to pay. Reimbursement varies by country and can significantly impactthe acceptance of new products and technologies. Even if we develop a promising new product, we may find limited demand for the product unlessreimbursement approval is obtained from private and governmental third-party payors. Further legislative or administrative reforms to the reimbursementsystems in the United States and other countries in a manner that significantly reduces reimbursement for procedures using our medical products or deniescoverage for those procedures facilitated by our products, including price regulation, competitive bidding and tendering, coverage and payment policies,comparative effectiveness of therapies, technology assessments and managed-care arrangements, could have a material adverse effect on our business,financial condition or results of operations.Healthcare policy changes, including healthcare reform legislation and the uncertainty surrounding the implementation of any such legislation, couldharm our business and prospects.The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (collectively, “theHealthcare Reform Act”) was enacted into law in the United States in March 2010. As a U.S. headquartered company with significant sales in the UnitedStates, the medical device tax included in this law has18Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentsmaterially affected us. The law imposed on medical device manufacturers a 2.3 percent excise tax on U.S. sales of Class I, II and III medical devices beginningin January 2013. We expect that this excise tax will continue to apply to the majority, if not all, of our products sold in the U.S. In addition, the judgments wemake regarding which of our products are subject to the excise tax based on our interpretations of the law, related Internal Revenue Service, or IRS,regulations and the underlying factors used to calculate the amount 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 74.6% and 73.6% of our net product revenues for the yearsended September 26, 2015 and September 27, 2014, respectively. The Company incurred $23.6 million and $21.9 million of excise tax expense related to thedomestic sales of its medical device products for the years ended September 26, 2015 and September 27, 2014, respectively.The 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 one provision of the law, 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 this healthcare legislation, including with these reporting requirements and the excise tax, has imposed significant additionaladministrative and financial burdens on us. Various healthcare reform proposals have also emerged at the state level in the U.S. The Healthcare Reform Actand these proposals could reduce medical procedure volumes and impact the demand for our products or the prices at which we sell our products. Thesereforms include a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, qualityand efficiency of certain healthcare services through bundled payment models. In addition, the excise tax has increased our costs of doing business. Theimpact of this healthcare reform legislation, and practices including price regulation, competitive pricing, comparative effectiveness of therapies, technologyassessments, and managed care arrangements could harm our business and prospects, results of operations and/or financial condition. Healthcare reformproposals and medical 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. We cannot predict the specific healthcare programs and regulations that will be ultimately implemented by regional andnational governments globally. However, any changes that lower reimbursements for our products and/or procedures using our products, reduce medicalprocedure volumes or increase cost containment pressures on us or others in the healthcare sector could adversely affect our business and results ofoperations.We operate in a highly regulated industry, and changes in healthcare-related laws and regulations could adversely affect our revenues andprofitability.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.19Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 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. In addition, on October20, 2015, the American Cancer Society issued new guidelines recommending that women start annual mammograms at age 45 instead of 40 and have amammogram every two years instead of annually. This recommendation could result in a decrease in purchases of our mammography systems.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.If we cannot maintain our current corporate collaborations and enter into new corporate collaborations, our product development could be delayedand our revenue could be adversely impacted. In particular, any failure by us to successfully maintain our blood screening collaboration could have amaterial adverse effect on our business.With respect to certain of our products we have relied, to a significant extent, on corporate collaborators for funding development and marketing as wellas distribution. For example, in our Diagnostics business we are dependent on Grifols to distribute the blood screening products we manufacture. Commercialblood screening product sales to Grifols accounted for 20.9% and 18.8% of our Diagnostics segment revenue in fiscal 2015 and 2014, respectively. If ourblood screening relationship with Grifols is terminated and not replaced, our revenues could be adversely affected. In addition, we expect to rely on ourcorporate collaborators for the commercialization of certain products. If any of our corporate collaborators were to breach or terminate its agreement with usor otherwise fail to conduct its collaborative activities successfully and in a timely manner, the development or commercialization and subsequent marketingof the products contemplated by the collaboration could be delayed or terminated. We cannot control the amount and timing of resources our corporatecollaborators 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. In some instances we have entered into corporate collaborations, including alliances and jointventures, with certain partners or companies that could make it more difficult for us to enter into advantageous business transactions or relationships withothers.20Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 ContentsFailing to manage a collaboration effectively, failing to comply with the obligations associated with a collaboration, or entering into a disadvantageouscorporate 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.In 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.Interruptions, delays, shutdowns or damage at our manufacturing facilities could harm our business.We and our contract manufacturers manufacture our products at a limited number of different facilities located in the United States and throughout theworld. In most cases, the manufacturing of each of our products is concentrated in one or a few locations. An interruption in manufacturing capabilities at anyof these facilities, as a result of equipment failure or other reasons, could reduce, delay or prevent the production of our products. Our manufacturing facilitiesand those of our contract manufacturers are subject to the risk of catastrophic loss due to unanticipated events, such as fires, earthquakes, explosions, floodsor weather conditions. Manufacturing facilities may experience plant shutdowns, strikes or other labor disruptions, or periods of reduced production as aresult of equipment failures, loss of power, gray outs, delays in deliveries or extensive damage, which could harm our business and prospects. Some of ourmanufacturing operations are located outside the U.S., including in Costa Rica and the United Kingdom. Those manufacturing operations are also subject toadditional challenges and risks associated with international operations described herein.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 policies21Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentsmandate compliance with these anti-bribery laws. However, despite meaningful measures that we undertake to facilitate lawful conduct, which includetraining and compliance programs and internal control policies and procedures, we may not always prevent unauthorized, reckless or criminal acts by ouremployees or agents, or employees or agents of businesses or operations we may acquire. It is possible that our practices might be challenged under federal orstate 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, or allegations of such violations, could disrupt our operations, involve significant management distraction and have a materialadverse effect on our business, financial condition and results of operations. We also could be subject to adverse publicity, severe penalties, includingcriminal and civil penalties, disgorgement, further changes or enhancements to our procedures, policies and controls, personnel changes and other remedialactions. Moreover, our failure to comply with domestic or foreign laws could result in various adverse consequences, including possible delay in approval orrefusal to approve a product, recalls, seizures, and withdrawal of an approved product from the market.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;•failure to successfully oversee international sales efforts and inability to prevent FCPA violations;22Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 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.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 19, 2015Powered 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 our patents or patents we exclusivelylicense be deemed non-patentable subject matter 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 19, 2015Powered 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.We 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 for20.9% and 18.8% of our Diagnostics segment revenue in fiscal 2015 and 2014, 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 in Costa Rica and the United Kingdom, and conduct businessworldwide. The expenses of our international offices are denominated in local currencies, except at our Costa Rica subsidiary, where the majority of businessis conducted in U.S. dollars. Our foreign sales may be denominated in local currencies, or the 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,however, we have begun to hedge a portion of foreign currency denominated sales in fiscal 2016 although there can be no assurance we will continue tohedge in the future. There is a risk that any hedging activities will not be successful in mitigating our foreign exchange risk exposure and may adverselyimpact 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 sole-source third-partymanufacturers for each of our molecular diagnostics instruments. KMC Systems, Inc., or KMC Systems, is the only manufacturer of the Tigris instrument andStratec Biomedical AG, or Stratec, is the only manufacturer of the Panther instrument. We have no firm long-term volume commitments with either KMCSystems or Stratec. If KMC Systems, Stratec or any of our other third-party manufacturers experiences delays, disruptions, capacity constraints or qualitycontrol problems in its development or manufacturing operations or becomes insolvent or otherwise fails to supply us with25Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentsgoods in sufficient quantities, then instrument shipments to our customers could be delayed, which would decrease our revenues and harm our competitiveposition and reputation. Further, because we place orders with our manufacturers based on forecasts of expected demand for our products, if we inaccuratelyforecast demand we may be unable to obtain adequate manufacturing capacity or adequate quantities of components to meet our customers' deliveryrequirements. Similarly, we rely on one or a limited number of suppliers for some key raw materials for our products. For example, our current supplier ofcertain key raw materials for certain of our amplified NAT diagnostic assays, pursuant to a fixed-price contract, is Roche Diagnostics Corporation and wehave a supply and purchase agreement for oligonucleotides for HPV with Roche Molecular Systems, Inc. The parent company of both Roche DiagnosticsCorporation and Roche Molecular Systems, Inc. is F. Hoffmann-LaRoche Ltd, a direct competitor of our Diagnostics business. We also have a supplyagreement with GE Healthcare Bio-Sciences Corp., an affiliate of GE, for membranes used in connection with our ThinPrep product line. GE is a directcompetitor with our Breast Health and Skeletal Health businesses.We 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, during fiscal 2015, we decided toshut down our Bedford, Massachusetts facility and outsource the manufacturing of certain of our Skeletal Health products to a third party and transfer certainother manufacturing operations for our Breast Health segment to our Danbury, Connecticut and Marlborough, Massachusetts facilities. In addition, researchand development, sales and service support and administrative functions will be moved to Danbury and Marlborough. This full transition is expected to becompleted by the end of fiscal 2016. Uncertainty is inherent within the consolidation process, and unforeseen circumstances, costs and expenses could offsetthe anticipated 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 healthcare26Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentsreform measures, may put additional competitive pressure on us, 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.Our 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 20.9% and 18.8% of our Diagnostics segment revenue in fiscal 2015 and 2014, respectively. In fiscal2015, our blood screening collaboration was largely dependent on three significant customers, The American Red Cross, The Japanese Red Cross andCreative Testing Solutions, although we did not receive any revenues directly from those entities. We anticipate that our operating results in our Diagnosticssegment will continue to depend, to a significant extent, upon revenues from a small number of customers. The loss of any of these key customers, or asignificant reduction 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.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;•debt refinancing charges and expenses; and•seasonality of sales of certain of our products.27Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.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.New 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.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.28Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 are subject to environmental, health and safety laws and regulations, including related to our use and recycling of hazardous materials and thecomposition of our products. Our research and development and manufacturing processes involve the controlled use of hazardous materials, such as toxic and carcinogenicchemicals and various radioactive compounds, and the risk of contamination or injury from these materials cannot be eliminated. In such event, we could beheld liable for any resulting damages, and any such liability could be extensive. From time to time new regulations are enacted, and it is difficult toanticipate how such regulations will be implemented and enforced. We continue to evaluate the necessary steps for compliance with regulations as they areenacted. These regulations include, for example, regulations enacted in the European Union such as the Registration, Evaluation, Authorization andRestriction of Chemical Substances, or REACH, which requires the registration of and regulates use of certain chemicals, the Restriction on the Use of CertainHazardous Substances in Electrical and Electronic Equipment Directive, or RoHS, which regulates the use of certain hazardous substances in certain productswe manufacture, and the Waste Electrical and Electronic Equipment Directive, or WEEE, which requires the collection, reuse and recycling of waste fromcertain products we manufacture. These and similar legislation that has been or is in the process of being enacted in Japan, China and various states of theU.S. may require us to re-design our products to ensure compliance with the applicable standards, for example by requiring the use of different types ofmaterials. These redesigns or the use of alternative materials may detrimentally impact the performance of our products, add greater testing lead-times forproduct introductions, result in additional costs or have other similar effects. We are also subject to other substantial regulation relating to environmental,health and safety matters, including occupational health and safety, environmental protection, hazardous substance control, and waste management anddisposal. The failure to comply with such regulations could subject us to, among other things, fines and criminal liability. We may also be required to incursignificant costs to comply with these and future regulations, which may result in a material adverse effect upon our business, financial condition and resultsof operation.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.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.All of our reporting units passed Step 1 of the goodwill impairment test in fiscal 2015. For illustrative purposes, had the fair value of each of thereporting units been lower by 10%, all of the reporting units would still have passed Step 1 of the goodwill impairment test. Although we believe that 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 2016.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 noassurance29Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentsthat 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 in fiscal 2012, which may limit our operating flexibility, andcould adversely affect our operations and financial results and prevent us from fulfilling our obligations.As of September 26, 2015, we had approximately $3.72 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 4 “Borrowings and Credit Agreements” in the accompanying notes to the consolidated financial statements included in Item 15 of thisAnnual Report. Our ability to comply with these covenants may be adversely affected by general economic conditions, industry conditions and other eventsbeyond 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 to borrowadditional amounts under the credit facilities and may result in the acceleration of the maturity of our outstanding indebtedness under the facilities. If thematurities 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.Further, 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, repurchase our common 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; and30Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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•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 defaulted debt could cause all amountsoutstanding with respect to that debt to be due and payable immediately and may be cross-defaulted to other debt, including our senior notes. Our assets orcash flow may not be sufficient to fully repay borrowings under our outstanding debt instruments if accelerated upon an event of default or a change ofcontrol, and there is no guarantee that we would be able to repay, refinance or restructure the payments on such debt. See “Management’s Discussion andAnalysis of Financial Condition 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 26, 2015, approximately $1.66 billion aggregate principal ofour indebtedness, which represents the outstanding principal under our Term Loan and Revolver under our Credit Agreement, was subject to floating interestrates. We currently have limited hedging arrangements in place to mitigate the impact of higher interest rates.Risks 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 may develop involving our common stock.The hedging or arbitrage could, in turn, affect the trading price of our convertible notes, or any common stock that note holders receive upon conversion oftheir 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 equity31Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentssecurities senior to our common stock in the future for a number of reasons, including to finance our operations and business strategy, to adjust our ratio ofdebt 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.The 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 26, 2015, we had not repurchased any shares of our common stock under this stock repurchase program.32Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 convertible notes may adversely affect our earnings per share. Any conversion of the convertible notes could cause dilution to our stockholders and to our earnings per share in the event the Company decided tosettle such conversion in shares. In addition, because of the type of instrument and our accounting policy for settling the principal in cash, for any period inwhich we have reported net income, if the average trading price of our common stock for that period exceeds the conversion price of any of our convertiblenotes, the convertible notes of that class will increase our diluted share count and may result in lower reported diluted earnings per share. Our outstandingconvertible notes in the principal amount of $150 million, $500 million and $370 million, respectively, have conversion prices of $23.03, $31.175 and$38.59, respectively.Item 1B. Unresolved Staff CommentsNone.33Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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) 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 (d) Administrative, research and development,and manufacturing operations 207,000 sq. ft. 2022 4, five-yr. periodsDanbury, CT Manufacturing facility 62,000 sq. ft. 2022 4, five-yr. periodsDanbury, CT Manufacturing operations and research anddevelopment 60,000 sq. ft. 2018 1, five-yr. periodMarlborough, MA Headquarters, including research anddevelopment, manufacturing anddistribution operations 216,000 sq. ft. 2019 2, five-yr. periodsMarlborough, MA Manufacturing operations 146,000 sq. ft. 2019 2, five-yr. periodsAlajuela, 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.(d)During fiscal 2015, we decided to shut down our Bedford, Massachusetts facility and outsource the manufacturing of certain of our Skeletal Healthproducts to a third party and transfer certain other manufacturing operations for our Breast Health segment to our Danbury, Connecticut andMarlborough, Massachusetts facilities. In addition, research and development, sales and service support and administrative functions will be movedto Danbury and Marlborough. This transition is expected to be completed by the end of fiscal 2016.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 26, 2015, please see Note 12 to our consolidated financial statements entitled “Litigation and RelatedMatters,” which is incorporated by reference into this item.34Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 4. Mine Safety DisclosuresNot Applicable.35Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 26, 2015 High LowFirst Quarter $27.35 $22.70Second Quarter 33.33 25.60Third Quarter 38.55 32.12Fourth Quarter 43.00 35.80Fiscal Year Ended September 27, 2014 High LowFirst Quarter $23.07 $19.25Second Quarter 22.72 19.91Third Quarter 26.18 20.24Fourth Quarter 26.75 24.07Number of Holders. As of November 13, 2015, there were approximately 1,189 holders of record of our common stock, including multiple beneficialholders at depositories, banks and brokers listed as a single holder in the street name of each respective depositary, bank or broker.Dividend Policy. We have never declared or paid cash dividends on our capital stock, and we currently have no plans to do so. Our current policy is toretain all of our earnings to finance future growth, pay down our existing indebtedness and repurchase our common stock. The existing covenants under ourdebt instruments also place limits on our ability to issue dividends and repurchase stock.Recent Sales of Unregistered Securities. We did not sell unregistered equity securities during the fourth quarter of fiscal 2015.Issuer's Purchases of Equity SecuritiesPeriod of RepurchaseTotal Number ofShares Purchased(#) (1) Average PricePaid Per Share($) (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 28, 2015 – July 25, 2015898 $38.21 — $250.0July 26, 2015 – August 22, 20151,661 40.95 — 250.0August 23, 2015 – September 26, 20155,122 41.25 — 250.0Total7,681 $40.83 — $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 26, 2015, we had not repurchased any shares of our common stock under this program.36Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 25, 2010 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 25, 2010 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.37Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Incorporated. In fiscal 2011, weacquired Interlace Medical, Inc., TCT International Co. Ltd., and Beijing Healthcome Technology Company, Ltd. Results of operations for each of thesebusinesses are included in our consolidated financial statements from the dates of acquisition. Fiscal Years Ended September 26,2015 (5) September 27,2014 (4) September 28,2013 (3) September 29,2012 (2) September 24,2011 (1) (In millions, except per share data)Consolidated Statement of Operations Data Total revenues $2,705.0 $2,530.7 $2,492.3 $2,002.6 $1,789.3Total operating costs and expenses $2,249.9 $2,251.0 $3,398.5 $1,888.9 $1,414.9Net income (loss) $131.6 $17.3 $(1,172.8) $(73.6) $157.2Basic net income (loss) per common share $0.47 $0.06 $(4.36) $(0.28) $0.60Diluted net income (loss) per common share $0.45 $0.06 $(4.36) $(0.28) $0.59Consolidated Balance Sheet Data Working capital $322.4 $946.2 $535.8 $901.7 $833.5Total assets $7,670.1 $8,414.7 $9,000.8 $10,477.1 $6,008.8Long-term debt obligations, less currentportion (6) $3,254.3 $4,162.6 $4,254.4 $4,986.3 $1,506.4Total stockholders’ equity $2,079.2 $2,063.0 $1,941.5 $2,961.0 $2,936.9____________(1)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.(2)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.(3)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.(4)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.(5)Fiscal 2015 total operating costs and expenses include restructuring and divestiture charges of $28.5 million. Included in net income was a debtextinguishment loss of $62.7 million and related transaction costs of $9.3 million.(6)Long-term obligations are net of unamortized debt discounts of $68.7 million, $121.3 million, $157.1 million, $188.8 million and $236.4 million forfiscal years 2015, 2014, 2013, 2012 and 2011, respectively.38Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 with an emphasis onwomen's health. We operate in four segments: Diagnostics, Breast Health, GYN Surgical and Skeletal Health. We sell and service our products through acombination of direct sales and service personnel 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 andplasma. Our primary diagnostics products include our Aptima family of assays, which run on our advanced instrumentation systems (Panther and Tigris), ourThinPrep system, the Rapid Fetal Fibronectin Test and Procleix blood screening assays. The Aptima family of assays is used to detect the infectiousmicroorganisms that cause the common sexually transmitted diseases, or STDs, chlamydia and gonorrhea, certain high-risk strains of human papillomavirus,or HPV, and Trichomonas vaginalis, the parasite that causes trichomoniasis. The ThinPrep System is primarily used in cytology applications, such as cervicalcancer screening, and the Rapid Fetal Fibronectin Test assists physicians in assessing the risk of pre-term birth. In blood screening, we develop andmanufacture the Procleix family of assays, which are used to detect various infectious diseases. These blood screening products are marketed worldwide byour 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 that show multiple contiguous slice images of the breast, which we refer to as the Genius 3D Mammography exam, aswell 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 segment offers Discovery and Horizon X-ray bone densitometers that assess the bone density of fracture sites; and mini C-armimaging systems that assist in performing minimally invasive surgical procedures on a patient's extremities, such as the hand, wrist, knee, foot, and ankle.Unless the context otherwise requires, references to we, us, Hologic or our company refer to Hologic, Inc. and its consolidated subsidiaries.39Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 ContentsRECENT DEVELOPMENTSThe 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.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 which could result indecreased reimbursement or use of our products. For instance, on October 20, 2015, the American Cancer Society issued new guidelines recommending thatwomen start annual mammograms at age 45 instead of 40 and that women have a mammogram every two years instead of annually. This recommendationcould result in a decrease in purchases of our mammography systems. In addition, in November 2012, the American Congress of Obstetrics andGynecologists, known as the ACOG, released updates in which they have recommended less frequent cervical cancer screening similar to guidelines releasedin March 2012 by the U.S. Preventative Services Task Force, known as the USPSTF, and the American Cancer Society. However, the USPSTFrecommendations now also include HPV co-testing for certain patient populations, an update from their draft guidelines in October 2011. Overall, we believethat these guidelines may have contributed to an increase in testing intervals in the U.S. for cervical cancer screening, resulting in fewer such tests beingperformed.Over the last few years, there have been periodic significant fluctuations in foreign currencies relative to the U.S. dollar. In fiscal 2015, there was asignificant strengthening of the U.S. dollar versus the Euro, UK Pound and other currencies we transact in, which resulted in lower reported revenues of over$50 million compared to fiscal 2014. The ongoing fluctuations of the value of the U.S. dollar may cause our products to be less competitive in internationalmarkets and may impact sales and profitability over time. A majority of our international sales are denominated in foreign currencies. Given the uncertaintyin the worldwide financial markets, foreign currency fluctuations may be significant in the future and we may experience a material adverse effect on ourinternational revenues and operating results. RESULTS 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. 40Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Fiscal Years Ended September 26, 2015 September 27, 2014 September 28, 2013Revenues: Product 83.9 % 82.8 % 84.3 %Service and other 16.1 % 17.2 % 15.7 % 100.0 % 100.0 % 100.0 %Costs of revenues: Product 27.9 % 28.9 % 32.8 %Amortization of intangible assets 11.1 % 12.4 % 12.3 %Impairment of intangible assets — % 1.1 % 0.1 %Service and other 8.0 % 8.4 % 8.2 %Gross Profit 53.0 % 49.2 % 46.6 %Operating expenses: Research and development 7.9 % 8.0 % 7.9 %Selling and marketing 13.4 % 13.1 % 13.7 %General and administrative 9.7 % 10.3 % 9.1 %Amortization of intangible assets 4.1 % 4.5 % 4.5 %Impairment of intangible assets — % 0.2 % — %Contingent consideration—compensation expense — % — % 3.2 %Contingent consideration—fair value adjustments — % — % 0.5 %Impairment of goodwill — % — % 44.8 %Gain on sale of intellectual property — % — % (2.2)%Restructuring and divestiture charges 1.1 % 2.0 % 1.3 % 36.2 % 38.2 % 83.0 %Income (loss) from operations 16.8 % 11.1 % (36.4)%Interest income — % 0.1 % 0.1 %Interest expense (7.6)% (8.7)% (11.3)%Debt extinguishment loss (2.3)% (0.3)% (0.4)%Other (expense) income, net (0.4)% (0.2)% 0.1 %Income (loss) before income taxes 6.6 % 1.9 % (47.9)%Provision (benefit) for income taxes 1.7 % 1.2 % (0.8)%Net income (loss) 4.9 % 0.7 % (47.1)%41Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 26, 2015 Compared to Fiscal Year Ended September 27, 2014Product Revenues. Years Ended September 26, 2015 September 27, 2014 Change Amount % of TotalRevenue Amount % of TotalRevenue Amount %Product Revenues Diagnostics $1,184.1 43.8% $1,136.9 44.9% $47.2 4.2%Breast Health 685.1 25.3% 587.9 23.2% 97.2 16.5%GYN Surgical 334.6 12.4% 306.6 12.1% 28.0 9.1%Skeletal Health 66.6 2.5% 63.5 2.5% 3.1 4.9% $2,270.4 83.9% $2,094.9 82.7% $175.5 8.4%We generated an increase in product revenues in fiscal 2015 compared to fiscal 2014. The growth was across all four of our business segments on both adomestic and worldwide basis. Product revenues increased 8.4% in the current fiscal year compared to the prior fiscal year, as reported growth was partiallyoffset by the negative foreign currency exchange impact of the strengthening U.S. dollar against a number of currencies, most notably the Euro, UK Poundand Renminbi.Diagnostics product revenues increased 4.2% in fiscal 2015 compared to fiscal 2014 primarily due to increases in Molecular Diagnostics of $32.3million and Blood Screening of $27.1 million. These increases were partially offset by a decrease of $12.1 million in our Cytology & PeriNatal business.The increase in Molecular Diagnostics products, and in particular our Aptima family of assays was primarily due to increased volumes due to ourincreased installed base of Panther instruments, and increased sales volumes of our HPV screening assay, which was FDA approved for use on our Panthersystem in the fourth quarter of fiscal 2013. These increases were partially offset by a reduction in Cervista HPV revenues as customers transition to ourPanther system and Aptima HPV assay and lower instrumentation sales due to the significant purchases made by Quest Diagnostics Incorporated, or Quest, inthe first quarter of fiscal 2014. In addition, we have experienced slightly lower average selling prices. Our Blood Screening revenues increased in fiscal 2015compared to fiscal 2014 primarily due to volume increases related to the agreement between Grifols, our blood screening partner, and the Japanese Red Cross,and restocking of certain assays for Grifols to normalize its inventory levels. The decrease in our Cytology & PeriNatal revenues in fiscal 2015 compared tofiscal 2014 was primarily related to the negative foreign currency exchange impact of the strengthening U.S. dollar on our sales denominated in foreigncurrencies, lower instrument sales and slightly lower average selling prices in China. ThinPrep Pap Test volumes domestically increased slightly in thecurrent fiscal year compared to the prior fiscal year, and have increased more modestly internationally. In the U.S., we believe the negative impact onThinPrep Pap test volumes resulting from interval expansion for cervical cancer screening was largely negated by our increased market share gains.Breast Health product revenues increased 16.5% in fiscal 2015 compared to fiscal 2014. Our digital mammography systems and related productsrevenue increased $116.1 million in fiscal 2015 compared to fiscal 2014 primarily due to the increase in 3D Dimensions units sold on a worldwide basis,which was principally driven by domestic sales. This increase was partially offset by slightly lower average selling prices and a product mix shift within the3D offerings to systems with less features. In addition, we also had higher sales of 3D upgrades and related products primarily driven by our C-View product.As expected, we continue to experience a decline in the number of 2D systems sold as customers transition to the 3D Dimensions systems, which is occurringprimarily in the United States. The increase in revenue was also partially offset by the negative foreign currency exchange impact of the strengthening U.S.dollar on our sales denominated in foreign currencies, lower MRI breast coils product line revenue of $6.9 million as a result of the divestiture of this productline in the fourth quarter of fiscal 2014, and a decline of $10.2 million related to our Hitec-Imaging business primarily as a result of the completed shutdownof its organic photoconductor production line in fiscal 2014.GYN Surgical product revenues increased 9.1% in fiscal 2015 compared to fiscal 2014 primarily due to an increase in MyoSure system sales of $29.1million partially offset by lower NovaSure device sales of $1.3 million. The MyoSure system continues to gain strong market acceptance as unit salesincrease globally, partially offset by a product mix shift and slightly lower average sales prices. NovaSure revenues were slightly lower in fiscal 2015compared to fiscal 2014 primarily due to the negative foreign currency exchange impact of the strengthening U.S. dollar on our sales denominated in foreigncurrencies and slightly lower domestic volume, partially offset by higher international volume.42Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 product revenues increased 4.9% in fiscal 2015 compared to fiscal 2014 primarily due to volume increases in our Horizon osteoporosisassessment product sales on worldwide basis, which were partially offset by lower volumes of our older Discovery products, the negative foreign currencyexchange impact of the strengthening U.S. dollar on our sales denominated in foreign currencies, and lower average selling prices.In fiscal 2015, 74.6% of product revenues were generated in the United States, 12.4% in Europe, 9.3% in Asia-Pacific, and 3.7% in other internationalmarkets. 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 otherinternational markets. The increase in the percentage of U.S. revenues was primarily due to increased sales of our 3D Dimensions system and related productsand the negative impact of the strengthening U.S. dollar against the Euro and UK Pound, which resulted in lower European revenues.Service and Other Revenues. Years Ended September 26, 2015 September 27, 2014 Change Amount % ofTotalRevenue Amount % ofTotalRevenue Amount %Service and Other Revenues $434.6 16.1% $435.8 17.2% $(1.2) (0.3)%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 decreased 0.3% infiscal 2015 compared to fiscal 2014 as fiscal 2014 service and other revenues included $20.1 million of non-recurring revenue related to executing a licenseamendment with Roka Bioscience, Inc. in the fourth quarter of fiscal 2014, which is included in our Diagnostics segment. Excluding this impact, service andother revenues increased by $18.9 million or 4.5% in fiscal 2015 due to a favorable shift in service contract pricing and higher installation and trainingrevenues related to our increased sales of our 3D Dimensions systems. The increase was also driven to a lesser extent by an increase in the number of servicecontracts in our Breast Health business as our installed base of our digital mammography systems continues to grow.Cost of Product Revenues. Years Ended September 26, 2015 September 27, 2014 Change Amount % of ProductSales Amount % of ProductSales Amount %Cost of Product Revenues $755.5 33.3% $731.3 34.9% $24.2 3.3 %Amortization of Intangible Assets 299.7 13.2% 314.6 15.0% (14.9) (4.7)%Impairment of Intangible Assets — —% 26.6 1.3% (26.6) (100.0)% $1,055.2 46.5% $1,072.5 51.2% $(17.3) (1.6)%Product gross margin increased to 53.5% in fiscal 2015 compared to 48.8% in fiscal 2014.Cost of Product Revenues. Cost of product revenues as a percentage of product revenues in the current fiscal year decreased in Diagnostics and BreastHealth, and increased in GYN Surgical and Skeletal Health compared to the prior fiscal year, resulting in the overall improvement in gross margins.Diagnostics’ product costs as a percentage of revenue decreased in fiscal 2015 compared to fiscal 2014 primarily due to an increase in product revenuerelated to the increase in Aptima assay sales and related volumes resulting in favorable manufacturing variances, higher blood screening revenues, lowerproduction costs at our manufacturing facilities, lower royalty expenses primarily for ThinPrep due to the expiration of a royalty obligation during fiscal2014, lower Cervista HPV sales, and lower molecular diagnostics instrumentation sales, which have very low gross margins. Partially offsetting theseimprovements was the negative foreign currency exchange impact of the strengthening U.S. dollar on our sales denominated in foreign currencies.Breast Health’s product costs as a percentage of revenue decreased in fiscal 2015 compared to fiscal 2014 primarily due to the favorable product mixshift to our higher margin 3D Dimensions system. Our 3D Dimensions systems have higher average sales prices than our 2D systems and sales in the U.S. havehigher average sales prices than those sold internationally, resulting in higher gross margins. In addition, we had higher software sales for 3D upgrades andour C-View product, which43Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentshave higher gross margins than capital equipment sales, while we had lower revenues from our Hitec-Imaging business, which has lower gross margins thanthe majority of our Breast Health products. Partially offsetting these improvements was the negative foreign currency exchange impact of the strengtheningU.S. dollar on our sales denominated in foreign currencies.GYN Surgical’s product costs as a percentage of revenue increased in fiscal 2015 compared to fiscal 2014 primarily due to an increase in sales volumesfor our MyoSure system and product mix shift. The MyoSure system has slightly lower gross margins than our NovaSure system. In addition, in the currentfiscal year we recorded a $4.0 million charge to write-off certain inventory that will not be utilized.Skeletal Health’s product costs as a percentage of revenue increased in fiscal 2015 compared to fiscal 2014 primarily due to decreases in the averageselling prices for both our Horizon and legacy Discovery products principally due to the negative foreign currency exchange impact of the strengthening U.S.dollar on our sales denominated in foreign currencies.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 decrease inamortization expense in fiscal 2015 compared to fiscal 2014 was primarily due to lower amortization expense from intangible assets from the CytycCorporation acquisition, which are being amortized based on the pattern of economic use, and the write-down in the second quarter of fiscal 2014 and theeventual write-off of the MRI breast coils developed technology asset as a result of the divestiture of this product line in the fourth quarter of fiscal 2014.Amortization expense in fiscal 2014 from the MRI breast coil product line was $9.1 million. Partially offsetting these decreases was an increase due to certainin-process R&D projects from our Gen-Probe acquisition being completed in 2014 and reclassified to developed technology. The value assigned to theseprojects is now being amortized.Impairment of Intangible Assets. There was no impairment of intangible assets in fiscal 2015. In the second quarter of fiscal 2014, we evaluated ourMRI breast coils product line asset group, which is within our Breast Health segment, for impairment due to our expectation that it would be sold or disposedof significantly before the end of its previously estimated useful life. The undiscounted cash flows expected to be generated by this asset group over itsestimated remaining life were not sufficient to recover its carrying value. At that time, we estimated the fair value of the asset group resulting in an aggregateimpairment charge of $28.6 million, comprised of $27.1 million of intangible assets and $1.5 million of property and equipment. The impairment charge wasallocated to the long-lived assets, resulting in $26.6 million being allocated to developed technology. The MRI breast coils product line was sold in thefourth quarter of fiscal 2014.Cost of Service and Other Revenues. Years Ended September 26, 2015 September 27, 2014 Change Amount % of Serviceand OtherRevenues Amount % of Serviceand OtherRevenues Amount %Cost of Service and Other Revenues $217.1 50.0% $212.7 48.8% $4.4 2.1%Service and other revenues gross margin was 50.0% in fiscal 2015 compared to 51.2% in fiscal 2014. Gross margin in fiscal 2015 was lower than theprevious year as fiscal 2014 service and other revenues included $20.1 million of revenue from the Roka Bioscience, Inc. license amendment transaction,which did not have any corresponding costs. Excluding this transaction, gross margin would have improved by 1.2% in fiscal 2015. Within our Breast Healthsegment, gross margin improved primarily due to a favorable shift in service contract pricing and higher installation and training revenues related to ourincreased sales of 3D Dimensions systems. The increase was also driven to a lesser extent by the continued conversion of a high percentage of our domesticinstalled base of digital mammography systems to service contracts upon expiration of the warranty period improving leverage of our service infrastructure.44Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 26, 2015 September 27, 2014 Change Amount % of TotalRevenue Amount % of TotalRevenue Amount %Operating Expenses Research and development $214.9 7.9% $203.2 8.0% $11.7 5.8 %Selling and marketing 363.0 13.4% 331.7 13.1% 31.3 9.4 %General and administrative 261.0 9.7% 259.8 10.3% 1.2 0.5 %Amortization of intangible assets 110.2 4.1% 113.8 4.5% (3.6) (3.2)%Impairment of intangible assets — —% 5.6 0.2% (5.6) (100.0)%Restructuring and divestiturecharges 28.5 1.1% 51.7 2.0% (23.2) (44.9)% $977.6 36.2% $965.8 38.1% $11.8 1.2 %Research and Development Expenses. Research and development expenses increased 5.8% in fiscal 2015 compared to fiscal 2014 primarily due to anincrease in compensation from higher headcount and variable compensation due to improved operating results, primarily in our Diagnostics and GYNSurgical segments, and additional program spend for our virology product line within our molecular diagnostics business, including increased clinicalspending and higher spend for prototype materials. Partially offsetting these increases was lower spend of $3.5 million from our MRI breast coils product lineas a result of the divestiture of this business in the fourth quarter of fiscal 2014. At any point in time, we have a number of different research projects andclinical trials being conducted and the timing of these projects and related costs can vary from period to period.Selling and Marketing Expenses. Selling and marketing expenses increased 9.4% in fiscal 2015 compared to fiscal 2014 primarily due to increasedcommissions as a result of higher sales, an increase in spending on marketing initiatives primarily for our breast cancer awareness, Genius 3D mammographyand cervical cancer awareness campaigns and higher training costs. These increases were partially offset by lower spend of $4.4 million from our MRI breastcoils product line as a result of the divestiture of this business in the fourth quarter of fiscal 2014, lower international headcount from restructuring actions,and lower travel expenses.General and Administrative Expenses. General and administrative expenses increased 0.5% in fiscal 2015 compared to fiscal 2014 primarily due tohigher variable compensation due to improved operating results and higher stock-based compensation, increased consulting expenses for a number ofcorporate initiatives and higher medical device excise taxes from increased U.S. product sales. These increases were partially offset by decreases in credit cardfees related to customer sales, lower spend related to our MRI breast coils line as a result of the divestiture in the fourth quarter of fiscal 2014, decreases incertain non-income tax expenses, a reduction of bad debt expense, reduced legal and consulting fees related to shareholder activism, and lower headcountprimarily internationally from restructuring actions.Amortization of Intangible Assets. Amortization of intangible assets results from customer relationships, trade names, and business licenses from ouracquisitions. These intangible assets are generally amortized over their estimated useful lives of between 2 and 30 years using a straight-line method or, ifreliably determinable, based on the pattern in which the economic benefits of the assets are expected to be consumed utilizing expected undiscounted futurecash flows. The decrease in fiscal 2015 compared to fiscal 2014 was primarily due to lower amortization from intangibles acquired in the Cytyc Corporationacquisition in fiscal 2008 as the pattern of economic benefits decreases, partially offset by the shortening the remaining life of certain corporate trade namesin the second quarter of fiscal 2014 as we decided to phase out their use.Impairment of Intangible Assets. There was no impairment of intangible assets in fiscal 2015. In fiscal 2014, we recorded a $5.1 million impairmentcharge for our existing in-process research and development, or IPR&D, projects from our Gen-Probe acquisition primarily due to a reduction in estimatedfuture revenues from these products. Additionally, in the second quarter of fiscal 2014, we recorded an impairment charge for a trade name intangible assetrelated to our MRI breast coils product line as previously discussed.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 and45Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentstransferring our legacy molecular diagnostics operations in Madison, Wisconsin. We also finalized our decision to transfer production of our interventionalbreast products from our Indianapolis facility to our Costa Rica facility. In fiscal 2013 and in the first quarter of fiscal 2014, we implemented costcontainment measures that primarily resulted in headcount reductions. In the second, third and fourth quarters of fiscal 2014, we terminated certain personnelat our Hitec Imaging operation in Germany, and as part of ongoing management changes and structural refinement, we terminated certain executives andemployees on a worldwide basis. Certain of these actions and related charges continued into fiscal 2015 and additional actions were taken in fiscal 2015 forexecutive management changes and to further consolidate operations. Pursuant to U.S. generally accepted accounting principles, the related severance andbenefit charges are being recognized either ratably over the respective required employee service periods or when benefits become probable for contractualand statutory benefits, and other charges are being recognized as incurred. In fiscal 2015 and 2014, we recorded aggregate charges of $28.5 million and $51.7million, respectively, from these actions, primarily for severance and benefits and to a lesser extent facility closure costs. Included in the fiscal 2015 chargeswas a $9.6 million charge to write-off the cumulative translation adjustment related to the divestiture of our MRI breast coils product line. This subsidiarywas deemed to be substantially liquidated in the third quarter of fiscal 2015 as operations fully ceased. The charges recorded in fiscal 2014 primarily relatedto severance 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, the fiscal 2014 charges included a loss on divestiture of $5.3 million related to the sale of our MRI breast coils product line in the fourthquarter of fiscal 2014. For additional information, please refer to Note 3 contained in Item 15 of this Annual Report.Interest Expense. Years Ended September 26, 2015 September 27, 2014 Change Amount Amount Amount %Interest Expense $(205.5) $(220.6) $15.1 (6.8)%Interest expense consists primarily of the cash interest costs and the related amortization of the debt discount and deferred issuance costs on ourconvertible notes, senior notes and amounts borrowed under our Credit Agreement and Prior Credit Agreement. The decrease in interest expense in fiscal2015 compared to fiscal 2014 was primarily due to lower outstanding balances as a result of principal payments, prepayments and extinguishments and lowerinterest rates as a result of debt restructurings, partially offset by the increase in interest expense for transaction fees that were expensed related to executingthe new Credit Agreement and our 5.250% Senior Notes due 2022. See below for additional discussion, including “Management’s Discussion and Analysisof Financial Condition and Results of Operations-Liquidity and Capital Resources” for definitions of “Credit Agreement” and “Prior Credit Agreement".Debt Extinguishment Loss. Years Ended September 26, 2015 September 27, 2014 Change Amount Amount Amount %Debt Extinguishment Loss $(62.7) $(7.4) $(55.3) 747.3%In the fourth quarter of fiscal 2015, we completed a private placement of $1.0 billion aggregate principal amount of our 5.250% Senior Notes due 2022(the "2022 Senior Notes"). We used the net proceeds of the 2022 Senior Notes, plus available cash to discharge the outstanding 6.25% Senior Notes due 2020at an aggregate redemption price of $1.03 billion, reflecting a redemption premium payment of $31.25 million. As a result of this transaction, we recorded adebt extinguishment loss of $22.3 million for the write-off of the pro-rata share of the redemption premium and debt issuance costs for extinguished lenders.Also in the fourth quarter of fiscal 2015, on various dates, we entered into privately negotiated transactions and repurchased $300 million principalamount of our 2010 Notes for a total payment of $543.7 million, which includes the conversion premium resulting from our stock price on the date oftransaction being in excess of the conversion price of $23.03. In connection with these transactions, we recorded a debt extinguishment loss of $15.5 millionrelated to the difference between the fair value of the liability component of the 2010 Notes and their respective carrying value at the redemption date. Theremaining cash payments were allocated to the reacquisition of the equity component and recorded within additional paid-in-capital within stockholders'equity.In the third quarter of fiscal 2015, we entered into a new Credit Agreement with Bank of America, N.A. The initial net proceeds under the new CreditAgreement were used to refinance our obligations under our Prior Credit Agreement with46Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 ContentsGoldman Sachs Bank USA. In connection with this transaction, we recorded a debt extinguishment loss of $18.2 million for the write-off of the pro-rata shareof the debt discount and deferred issuance costs under the existing facility.In the first quarter of fiscal 2015, we voluntarily pre-paid $300.0 million of our Term Loan B facility under the Prior Credit Agreement. In connectionwith this transaction, we recorded a debt extinguishment loss of $6.7 million to write-off the pro-rata amount of unamortized debt discount and deferredissuance costs related to this voluntary pre-payment.In the second quarter of fiscal 2014, we refinanced the Term Loan B facility of our Prior Credit Agreement and voluntarily prepaid $25.0 million ofprincipal. 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 debtdiscount and deferred issuance costs. In the first quarter of fiscal 2014, we made a $100.0 million voluntary pre-payment on our Term Loan B facility underthe Prior Credit Agreement. As a result, the pro-rata share of the debt discount and deferred issuance costs aggregating $2.9 million related to this prepaymentwas recorded as a debt extinguishment loss.Other Expense, net. Years Ended September 26, 2015 September 27, 2014 Change Amount Amount Amount %Other Expense, net $(11.0) $(4.9) $(6.1) 124.5%In fiscal 2015, this account was primarily comprised of an other-than-temporary impairment charge of $7.8 million on a marketable security, net foreigncurrency exchange losses of $2.9 million, and $1.0 million of losses on cash surrender value of life insurance contracts and mutual funds related to ourdeferred compensation plan.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. Provision for Income Taxes. Years Ended September 26, 2015 September 27, 2014 Change Amount Amount Amount %Provision for Income Taxes $45.6 $30.8 $14.8 48.1%Our effective tax rate for fiscal 2015 was 25.8% compared to 63.9% in fiscal 2014. For fiscal 2015, the effective tax rate was lower than the statutoryrate primarily due to the domestic production activities deduction benefit.For fiscal 2014, the effective tax rate was higher than the statutory rate primarily due to unbenefited foreign losses partially offset by the domesticproduction activities deduction benefit.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 26, 2015 September 27, 2014 Change Amount Amount Amount %Total Revenues $1,211.8 $1,186.8 $25.0 2.1%Operating Income $109.5 $48.7 $60.8 124.8%Operating Income as a % of Segment Revenue 9.0% 4.1% Diagnostics revenues increased in fiscal 2015 compared to fiscal 2014 primarily due to the increase in product revenues discussed above.47Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 income for this business segment increased in fiscal 2015 compared to fiscal 2014 primarily due to increased gross profit in absolute dollarsand lower operating expenses. Gross profit increased primarily due to increased Aptima sales, higher blood screening revenues as a result of a full year ofrevenue from the agreement between Grifols and the Japanese Red Cross, favorable manufacturing variances and lower royalty expense, partially offset by adecrease in Cervista HPV volume, lower instrumentation sales and the negative foreign currency exchange impact of the strengthening U.S. dollar on oursales denominated in foreign currencies. In addition, also offsetting gross profit dollar and margin in fiscal 2015, fiscal 2014 included $20.1 million of non-recurring revenue related to executing a license amendment with Roka Bioscience, Inc. with no corresponding costs. Overall, the gross margin improved to49.3% in fiscal 2015 from 46.8% in fiscal 2014.Operating expenses decreased in fiscal 2015 compared to fiscal 2014 primarily due to a reduction in headcount in general and administrative functionsand sales and marketing, lower restructuring charges, and a decrease in the amortization of intangible assets. There was also lower bad debt expense and adecrease in non-income tax expense. These decreases were partially offset by an increase in spending on research and development for additional headcountand project spending, primarily for our virology product line, higher spend for various marketing initiatives and increased variable compensation fromimproved operating results.Breast Health. Years Ended September 26, 2015 September 27, 2014 Change Amount Amount Amount %Total Revenues $1,063.4 $944.7 $118.7 12.6%Operating Income $296.3 $187.6 $108.7 57.9%Operating Income as a % of Segment Revenue 27.9% 19.9% Breast Health revenues increased in fiscal 2015 compared to fiscal 2014 primarily due to the $97.1 million increase in product revenues discussedabove and a $21.6 million increase in service revenues.Operating income for this business segment increased in fiscal 2015 compared to fiscal 2014 primarily due to an increase in gross profit from higherrevenue, partially offset by an increase in operating expenses. Gross profit in absolute dollars increased primarily due to the increase in 3D Dimensions sales,on both a unit basis and as a percentage of total digital mammography systems, compared to our 2D systems, an increase in software related sales, which havehigher gross margins, and lower amortization expense primarily due to the divestiture of our MRI breast coils product in fiscal 2014, partially offset by thenegative foreign currency exchange impact of the strengthening U.S. dollar on our sales denominated in foreign currencies. In addition, fiscal 2014 includeda $26.6 million impairment charge for developed technology assets related to our MRI breast coils product line discussed above. Service revenues alsoimproved in fiscal 2015 compared to fiscal 2014 primarily due to an increase in service contracts from our higher installed base. As a result, overall grossmargin increased to 56.4% in fiscal 2015 compared to 50.1% in fiscal 2014.Operating expenses increased in fiscal 2015 compared to fiscal 2014 primarily due to an increase in commissions from higher revenues, highermarketing expenditures primarily for our breast cancer awareness and Genius 3D campaigns, the $9.6 million charge to write-off the cumulative translationadjustment related to the divestiture of our MRI breast coils product line discussed above, and increased variable compensation from improved operatingresults. These expense increases were partially offset by lower intangible asset amortization expense, lower restructuring expenses, and lower MRI breast coilsproduct line expenses (excluding restructuring) of $11.9 million as a result of its divestiture.GYN Surgical. Years Ended September 26, 2015 September 27, 2014 Change Amount Amount Amount %Total Revenues $335.8 $307.9 $27.9 9.1%Operating Income $38.6 $30.3 $8.3 27.4%Operating Income as a % of Segment Revenue 11.5% 9.9% GYN Surgical revenues increased in fiscal 2015 compared to fiscal 2014 due to the increase in product revenues discussed above.48Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 income for this business segment increased in fiscal 2015 compared to fiscal 2014 primarily due to an increase in gross profit in absolutedollars, partially offset by an increase in operating expenses. Gross margin increased to 57.3% in fiscal 2015 from 56.9% in fiscal 2014 primarily due to thebenefit of higher sales volume partially offset by a $4.0 million charge to write-off inventory that will not be utilized, a product mix shift to higher salesvolume of MyoSure systems and the negative foreign currency exchange impact of the strengthening U.S. dollar on our sales denominated in foreigncurrencies.Operating expenses increased in fiscal 2015 primarily due to an increase in sales force headcount, higher commissions, increased costs associated withinternational sales initiatives, and increased research and development expenses as we develop next generation devices. These increases were partially offsetby lower litigation fees.Skeletal Health. Years Ended September 26, 2015 September 27, 2014 Change Amount Amount Amount %Total Revenues $94.0 $91.3 $2.7 3.0 %Operating Income $10.7 $13.1 $(2.4) (18.3)%Operating Income as a % of Segment Revenue 11.4% 14.3% Skeletal Health revenues increased in fiscal 2015 compared to fiscal 2014 primarily due to the increase in product revenues of $3.1 million discussedabove which was partially offset by a slight decrease in service and other revenue.Operating income decreased in fiscal 2015 compared to the prior year primarily due to higher operating expenses. Operating expenses increased infiscal 2015 primarily due to higher compensation from improved operating results and additional investment in research and development projects.49Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Revenues. 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 attributed 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 fiscal 2014 related to our Aptima family of assays was primarily due to increased volumes from our strategic alliance withQuest Diagnostics Incorporated, or Quest, entered into in the third quarter of fiscal 2013, our increased installed base of Panther instruments, and increasedsales volumes of our HPV screening assay, which was FDA approved for use on our Panther system in the fourth quarter of fiscal 2013. These increases werepartially offset by slightly lower average sales prices for our Aptima products due to increased competitive pressures, and a reduction in Cervista HPVrevenues as our larger customers transition to our Panther system and Aptima HPV assay. The reduction in instruments sales was primarily due to the ramp upof unit sales to Quest in the fourth quarter of fiscal 2013. Prodesse revenues decreased in the fiscal 2014 primarily due to a milder flu season this yearcompared 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 fiscal 2013 was $23.5 million. We also experienced increasedvolume due to the agreement between Grifols, our current blood screening partner, and the Japanese Red Cross. These increases were partially offset by lowerWest Nile Virus assay sales compared to the corresponding period in fiscal 2013 as 2013 had a higher incidence of the West Nile Virus resulting in higherdonation testing.Breast Health product revenues increased 2.0% in fiscal 2014 compared to fiscal 2013. Our digital mammography systems revenue increased $22.8million in fiscal 2014 compared to fiscal 2013 primarily due to the increase in our 3D Dimensions units sold on a worldwide basis and higher workstationsand workflow product revenue driven by our C-View product. We also experienced a decline in the number of 2D systems sold as customers transitioned tothe 3D Dimensions systems, which occurred primarily in the United States. In addition, our breast biopsy products revenue increased $2.3 million in fiscal2014 compared to fiscal 2013 primarily due to the increase in the number of Eviva biopsy devices sold worldwide. These increases were partially offset bydeclines in our analog mammography systems and Hitec Imaging products.GYN 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 continued to gain strong market acceptance as unit salesincreased globally, partially offset by product mix. We experienced a50Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentsdecrease in the number of NovaSure devices sold in the United States, which we believed was primarily attributable to patients delaying surgery or opting forlower cost and generally less effective alternatives, partially offset by higher international 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 sales 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 sales were generated in the United States, 13.6% in Europe, 8.9% in Asia-Pacific, and 3.6% in other internationalmarkets.Service and Other Revenues. Years Ended September 27, 2014 September 28, 2013 Change Amount % of TotalRevenue Amount % of TotalRevenue Amount %Service and Other Revenues $435.8 17.2% $391.4 15.7% $44.4 11.3%Service and other revenues increased 11.3% in fiscal 2014 compared to fiscal 2013 primarily due to an increase in the number of service contracts inour Breast Health business driven by an increase in the installed base of our digital mammography systems, an increase in services not covered by servicecontracts and higher installation and training revenues related to our 3D Dimensions systems. In addition, within our Diagnostics' segment, we executed alicense amendment with Roka Bioscience, Inc. and received $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 ProductRevenue Amount % of ProductRevenue 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. Cost of product revenues as a percentage of product revenues in fiscal 2014 decreased in Diagnostics, Breast Health, andSkeletal Health and remained relatively consistent in GYN Surgical compared to fiscal 2013, 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 fiscal 2013 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 fiscal 2014 that we were not able to recognize in fiscal2013 due to a purchase accounting adjustment. We also had lower Tigris and Panther sales in fiscal 2014 and these instrument sales are typically low margintransactions. Furthermore, we experienced favorable manufacturing variances across many of our products and lower royalty costs for ThinPrep, partiallyoffset by unfavorable pricing on ThinPrep and Aptima sales and increased service costs for placed instruments.Breast 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.51Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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’s product costs as a percentage of revenue in fiscal 2014 was relatively consistent with fiscal 2013. While we experienced lower domesticNovaSure volumes and a change in MyoSure product mix, this trend was offset by the increased utilization at our Costa Rica facility in fiscal 2014 as a resultof 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. The increase in amortization expense in fiscal 2014 compared to fiscal 2013 was primarily due to certain in-processresearch and development projects recorded in the Gen-Probe acquisition receiving FDA approval in fiscal 2013. As a result, these approved projects arebeing amortized. In addition, we adjusted the estimated life of the MRI breast coils developed technology assets in the third quarter of fiscal 2014 resultingin 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 was 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 such contracts resulted in higher gross margins. In addition, the $20.1 million of revenue from the RokaBioscience, Inc. license amendment transaction, which did not have any corresponding costs, increased gross margin.52Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 toincreased 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.Amortization of Intangible Assets. The increase in amortization expense in fiscal 2014 compared to fiscal 2013 was primarily due to shortening theremaining life of certain corporate trade names as we decided to phase out their use during the second quarter of fiscal 2014 partially offset by loweramortization from intangibles acquired in the Cytyc Corporation acquisition in fiscal 2008 as the pattern of economic benefits decreased.53Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 ContentsImpairment 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 Molecular Diagnostics reporting unit is primarily comprised of our Aptimabusiness acquired in the Gen-Probe acquisition and the molecular diagnostics business acquired in the acquisition of Third Wave Technologies, Inc. Theupdated forecast, which reflected pricing pressures, for revenue and profitability were lower than those expected at the time of the Gen-Probe acquisition. Assuch, the fair value of this reporting unit declined. As a result of performing Step 2 of the goodwill impairment test, which requires the completion of ahypothetical purchase price allocation to determine the fair value of the implied goodwill, we recorded a $1.1 billion goodwill impairment charge. Foradditional information, refer to Note 2— “Intangible Assets and Goodwill” to the consolidated financial statements contained in Item 15 of this AnnualReport.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 6 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 transferring our legacy molecular diagnostics operations inMadison, Wisconsin. We also finalized our decision to transfer production of our interventional breast products from our Indianapolis facility to our CostaRica facility. In fiscal 2013 and in the first quarter of fiscal 2014, we implemented cost containment measures that primarily resulted in headcount reductions.In the 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 sale of our Lifecodes business in the second quarter of fiscal 2013. For additional information, please refer to Note 3 contained in Item 15 of thisAnnual Report.Interest Expense. Years Ended September 27, 2014 September 28, 2013 Change Amount Amount Amount %Interest Expense $(220.6) $(281.1) $60.5 (21.5)%54Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 decrease in interest expense in fiscal 2014 compared to fiscal 2013 was primarily due to principal payments in fiscal 2013 and 2014, whichincluded $325.0 million of voluntary pre-payments, of amounts borrowed under our Prior Credit Agreement, lower weighted-average interest rates due torefinancing both the Term Loan A and Term Loan B facilities under the Prior Credit Agreement, and the redemption of $405.0 million in principal amount ofour 2007 Notes in December 2013. These decreases were partially offset by additional interest expense from the accretion of principal on our 2.00%Convertible Senior 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 Prior Credit Agreement and voluntarily prepaid $25.0 million ofprincipal. 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 debtdiscount and deferred issuance costs. In the first quarter of fiscal 2014, we made a $100.0 million voluntary pre-payment on the Term Loan B facility of ourPrior Credit Agreement. As a result, the pro-rata share of the debt discount and deferred issuance costs aggregating $2.9 million related to this prepaymentwas recorded as a debt extinguishment loss.In the fourth quarter of fiscal 2013, we refinanced the Term Loan B facility of the Prior 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 Prior Credit Agreement andcertain existing creditors opted not to participate in such refinancing. In connection with this transaction, we recorded a debt extinguishment loss of $3.2million for the 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 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.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.55Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 ContentsSegment Results of OperationsDiagnostics. 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 Segment Revenue 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 fiscal 2013 of fair value adjustments of $52.4 million for acquired Gen-Probeinventory that did not recur in fiscal 2014. In addition, we were able to record contingent revenue under our blood screening collaboration in fiscal 2014 thathad previously been recorded as unbilled accounts receivable in purchase accounting as described above. Furthermore, we experienced favorablemanufacturing variances across many of our products, lower royalty costs for ThinPrep, and lower instrumentation sales, partially offset by lower ThinPrepvolumes and slightly lower pricing on ThinPrep and Aptima sales. As a result, the gross margin improved to 46.8% in fiscal 2014 from 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, fiscal 2013 included a $53.9 million gain related to the settlement with KV for the saleof our rights to Makena.Breast 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 fiscal 2014 compared to fiscal 2013 primarily due to the $28.0 million increase in service revenues and the $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, partiallyoffset by an increase in gross profit in absolute dollars. Gross profit in absolute dollars increased primarily due to the increase in product and service revenuesand the favorable product mix between 3D Dimensions and our 2D systems partially offset by a $24.9 million increase in developed technology assetimpairment charges related to our impairment assessment of the MRI breast coils product line in the second quarter of fiscal 2014 discussed above and higherintangible asset 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, higher56Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentscompensation and an increase in the medical device excise tax of $2.6 million and intangible asset and property impairment charges related to the MRIbreast 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 fiscal 2013. 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.Skeletal 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 fiscal 2013 primarily due to the increase in gross profit in absolute dollars as a result of highersales of our higher margin Horizon product and lower operating expenses. The decrease in operating expenses was primarily driven by a decrease inrestructuring charges.LIQUIDITY AND CAPITAL RESOURCESAt September 26, 2015, we had $322.4 million of working capital, and our cash and cash equivalents totaled $491.3 million. Our cash and cashequivalents balance decreased by $244.8 million during fiscal 2015 principally due to principal payments on our outstanding debt, repurchases of certain ofour convertible notes and capital expenditures, partially offset by an increase in operating cash flows and proceeds from equity plans.In fiscal 2015, our operating activities provided us with $786.1 million of cash, which included net income of $131.6 million, non-cash charges fordepreciation and amortization aggregating $491.4 million, non-cash interest expense of $63.8 million related to our outstanding debt, stock-basedcompensation expense of $59.3 million, debt extinguishment losses of $62.7 million, and a $9.6 million charge related to writing off the cumulativetranslation adjustment of our MRI breast coils product line that was deemed to be substantially liquidated. These adjustments to net income were partiallyoffset by a decrease in net deferred tax liabilities of $148.8 million, primarily from the amortization of intangible assets. Cash provided by operationsincluded a net cash inflow of $98.5 million from changes in our operating assets and liabilities. Changes in our operating assets and liabilities were drivenprimarily by a decrease in inventory of $43.9 million as a result of increased sales in both the Diagnostics and Breast Health segments, an overall effort toreduce inventory levels and the divestiture of the MRI breast coils product line, an increase in accrued expenses of $36.9 million primarily due to the accrualof higher annual bonuses, commissions and project spend, partially offset by payments for restructuring actions and litigation, an increase in accountspayable of $25.5 million due to the timing of payments, and an increase in deferred revenue of $16.1 million primarily57Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentsdue to an increase in our installed base of digital mammography systems. These cash flow increases were partially offset by an increase in accounts receivableof $30.3 million primarily driven by an increase in revenues.In fiscal 2015, our investing activities utilized $86.1 million of cash primarily for capital expenditures of $89.4 million, which consisted primarily ofthe placement of equipment under customer usage agreements and purchases of manufacturing equipment and computer hardware, partially offset by netsales of mutual funds and insurance contracts of $3.6 million to pay participant withdrawals from our deferred compensation plan due to employeeterminations.In fiscal 2015, our financing activities used cash of $936.7 million, primarily due to net payments related to our Credit Agreement and Prior CreditAgreement (each as defined below) of $393.6 million in the aggregate, which included $300.0 million in voluntary prepayments under the Prior CreditAgreement, and $105.0 million of scheduled principal payments under our Credit Agreement and Prior Credit Agreement, partially offset by a $16.3 millionincrease in borrowing when we refinanced the Prior Credit Agreement with the new Credit Agreement. We also made a net payment of $31.25 million for theredemption premium related to refinancing our 6.25% Senior Notes due 2020 ("Prior Senior Notes") with our new 5.250% Senior Notes due 2022 ("2022Senior Notes"). In addition, we repurchased $300 million principal amount of our 2.00% Convertible Exchange Senior Notes due 2037, or the 2010 Notes, fora total payment of $543.7 million, which includes the conversion premium resulting from our stock price on the date of transaction being in excess of theconversion price of $23.03. Other cash outflows included $22.7 million of debt issuance costs related to our various refinancing activities, $12.9 million foremployee-related taxes withheld for the net share settlement of vested restricted stock units, and $13.2 million for the purchase of interest rate caps to hedgethe variable interest rate on amounts outstanding under our Credit Agreement and Prior Credit Agreement. Partially offsetting these uses of cash wereproceeds of $70.0 million from our equity plans, primarily from the exercise of stock options.DebtWe had total recorded debt outstanding of $3.6 billion at September 26, 2015, which is comprised of amounts outstanding under our Credit Agreementof $1.65 billion (principal $1.66 billion), our 2022 Senior Notes of $1.0 billion and our convertible notes of $1.00 billion (principal $1.02 billion).Credit AgreementOn May 29, 2015, we and certain of our domestic subsidiaries entered into a Credit and Guaranty Agreement, or the Credit Agreement, with Bank ofAmerica, N.A., in its capacity as Administrative Agent, Swing Line Lender and L/C Issuer, and certain other lenders party thereto (collectively, the "Lenders").This Credit Agreement replaced our existing senior secured credit facility with Goldman Sachs Bank USA, in its capacity as administrative agent andcollateral agent and the lenders party thereto ("Prior Credit Agreement") entered into on August 1, 2012, and the proceeds under the Credit Agreement of$1.68 billion were used to pay off the amounts outstanding under the Prior Credit Agreement.The credit facilities under the Credit Agreement consist of:•A $1.5 billion secured term loan to Hologic with a final maturity date of May 29, 2020 or the Term Loan; and•A secured revolving credit facility under which the Borrowers (as defined below) may borrow up to $1 billion, subject to certain sublimits, with afinal maturity date of May 29, 2020 or the Revolver.Hologic and one of its subsidiaries, Hologic GGO 4 Ltd (“Hologic U.K.”) are the initial borrowers (the “Borrowers”) under the Credit Agreement.Hologic’s obligations under the Credit Agreement are guaranteed by certain of Hologic’s domestic subsidiaries (the “Subsidiary Guarantors”). Hologic U.K.’sobligations under the Credit Agreement are guaranteed by Hologic and the Subsidiary Guarantors.In addition to the Term Loan, we borrowed $175.0 million under the Revolver. Borrowings under the Revolver may be made in certain alternativecurrencies pursuant to the terms of the Credit Agreement. We have the ability, subject to the terms of the Credit Agreement, to designate any additionalwholly-owned foreign subsidiary as a Designated Borrower (as defined in the Credit Agreement) to receive loans up to a $100 million sublimit. Theobligations of any Designated Borrower under such sublimit would be guaranteed by us and our Subsidiary Guarantors.As of September 26, 2015, the interest rate under the Term Loan and Revolver was 1.95% on the outstanding amounts, which is reflective of theEurocurrency Rate (i.e., Libor) plus the applicable margin of 1.75% per annum as set forth in the Credit Agreement. The applicable margin is subject tospecified changes depending on the total net leverage ratio as defined in the Credit Agreement.We are required to make scheduled principal payments under the Term Loan in increasing amounts ranging from $18.75 million per three-month periodcommencing with the three-month period ending on September 25, 2015 to $37.5 million per three-month period commencing with the three-month periodending on September 28, 2018. The remaining balance of the58Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 ContentsTerm Loan is due at maturity. Any amounts outstanding under the Revolver are due at maturity. In addition, subject to the terms and conditions set forth inthe Credit Agreement, we are required to make certain mandatory prepayments from specified excess cash flows from operations (to the extent our net seniorsecured leverage ratio exceeds a certain ratio) and from the net proceeds of specified types of asset sales (subject to certain reinvestment rights), debtissuances and insurance recoveries (subject to certain reinvestment rights) (“Mandatory Prepayments”). Mandatory Prepayments are required to be applied byus, first, to the Term Loan, second, to any outstanding amount under the swing line sublimit, third, to the Revolver, and fourth to any outstanding amountunder a letter of credit sublimit. Subject to certain limitations, we may voluntarily prepay any of the credit facilities under the Credit Agreement withoutpremium or penalty.The Credit Agreement contains affirmative and negative covenants customarily applicable to senior secured credit facilities, including covenantsrestricting our ability and that of the Subsidiary Guarantors, subject to negotiated exceptions, to incur additional indebtedness and additional liens on ourassets, 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 our businesses. The Credit Agreementalso contains customary representations and warranties and events of default, including payment defaults, breach of representations and warranties, covenantdefaults, cross defaults and an event of default upon a change of control of the company.Borrowings are secured by first-priority liens on, and a first-priority security interest in, substantially all of our assets, with certain exceptions. TheCredit Agreement contains total net leverage ratio and interest coverage ratio financial covenants measured as of the last day of each fiscal quarter. The totalnet leverage ratio is 5.50:1.00 beginning on our fiscal quarter ended September 26, 2015, and then decreases over time to 4.00:1.00 for the quarter endingMarch 28, 2020. The interest coverage ratio is 3.75:1.00 beginning on our fiscal quarter ending September 26, 2015, and will remain as such for each quarterthereafter. The total net leverage ratio is defined as the ratio of our consolidated net debt as of the quarter end to our consolidated adjusted EBITDA (asdefined in the Credit Agreement) for the four-fiscal quarter period ending on each measurement date. The interest coverage ratio is defined as the ratio of ourconsolidated adjusted EBITDA for the prior four-fiscal quarter period ending on each measurement date to adjusted consolidated cash interest expense for thesame measurement period. These terms, and the calculation thereof, are defined in further detail in the Credit Agreement. As of September 26, 2015, we werein compliance with these covenants.Senior NotesOn July 2, 2015, we completed a private placement of $1.0 billion aggregate principal amount of our 2022 Senior Notes. The 2022 Senior Notes are ourgeneral senior unsecured obligations and are guaranteed on a senior unsecured basis by certain of our domestic subsidiaries (the "Guarantors"). The 2022Senior Notes mature on July 15, 2022 and bear interest at the rate of 5.250% per year, payable semi-annually on January 15 and July 15 of each year,commencing on January 15, 2016. We used the net proceeds of the 2022 Senior Notes, plus available cash to discharge our outstanding $1.0 billionaggregate principal amount of our Prior Senior Notes and we redeemed such Prior Senior Notes on August 1, 2015 at an aggregate redemption price of $1.03billion, reflecting a premium payment of $31.25 million.The 2022 Senior Notes indenture contains covenants which limit, among other things, our ability and the ability of the Guarantors to incur additionalindebtedness and additional liens on our assets, to engage in mergers or acquisitions or dispose of assets, to pay dividends or make other distributions, toenter into certain transactions with affiliated persons and to make certain investments. These covenants are subject to a number of exceptions andqualifications, including the suspension of certain of these covenants upon the 2022 Senior Notes receiving an investment grade credit rating. We are notrequired to maintain any financial covenants with respect to the 2022 Senior Notes.We may redeem the 2022 Senior Notes at any time prior to July 15, 2018 at a price equal to 100% of the aggregate principal amount so redeemed, plusaccrued and unpaid interest, if any, to the redemption date and a make-whole premium set forth in the indenture. We may also redeem up to 35% of theaggregate principal amount of our 2022 Senior Notes with the net cash proceeds of certain equity offerings at any time and from time to time before July 15,2018, at a redemption price equal to 105.250% of the aggregate principal amount so redeemed, plus accrued and unpaid interest, if any, to the redemptiondate. We also have the option to redeem the 2022 Senior Notes on or after: July 15, 2018 through July 14, 2019 at 102.625% of par; July 15, 2019 throughJuly 14, 2020 at 101.313% of par; and July 15, 2020 and thereafter at 100% of par. In addition, if we undergo a change of control, as provided in theindenture, we will be required to make an offer to purchase each holder’s 2022 Senior Notes at a price equal to 101% of their principal amount, plus accruedand unpaid interest, if any, to the repurchase date.Convertible NotesAt September 26, 2015, our convertible notes, in the aggregate principal amount of $1.02 billion, are recorded at $1.00 billion, which is net of theunamortized debt discount attributed to the embedded conversion feature of the convertible notes. These notes consist of:•$150 million of our 2.00% Convertible Exchange Senior Notes due 2037 issued in November 2010 (2010 Notes);59Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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•$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 December 15, 2017, and 2.00% per year thereafter. All other notes bearinterest 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 accrete principalat the rate of 2.00% per year. In addition, under certain circumstances contingent interest may be payable under the convertible notes after each of their firstput date.The 2010 Notes, 2012 Notes and 2013 Notes have conversion prices of approximately $23.03, $31.175 and $38.59, respectively, and are subject ineach case to adjustment. Holders of the 2010 Notes, 2012 Notes and 2013 Notes may convert their convertible notes at the applicable conversion price undercertain circumstances, including without limitation (x) if the last reported sale price of our common stock exceeds 130% of the applicable conversion pricefor at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding calendar quarter and (y) if the applicable seriesof convertible notes has been called for redemption. It is our current intent and policy to settle any conversion of the convertible notes as if we had elected tomake either a net share settlement or all cash election, such that upon conversion, we intend to pay the holders in cash for the principal amount of theconvertible notes and, if applicable shares of our common stock or cash to satisfy the premium based on a calculated daily conversion value.During the fourth quarter of fiscal 2015, the closing price of our common stock exceeded 130% of the applicable conversion price of our 2010 Notes onat least 20 of the last 30 consecutive trading days of the quarter. Therefore holders of the 2010 Notes are able to convert their notes during the first quarter offiscal 2016. As such, we classified the $142.2 million carrying value of our 2010 Notes (which have a principal value of $150.0 million) as a current debtobligation. In the event the closing price conditions are met in the first quarter of fiscal 2016 or a future fiscal quarter, the 2010 Notes will be convertible at aholder's option during the immediately following fiscal quarter. As of September 26, 2015, the if-converted value of the 2010 Notes exceeded the aggregateprincipal amount by approximately $114.1 million.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. As discussed above, holders of the convertible notes may elect to convert their notes prior to redemption. We may redeem all or a portion of the2010 Notes, 2012 Notes and 2013 Notes (i.e., in cash or a combination of cash and shares of our common stock) at a redemption price equal to 100% of theirprincipal amount, plus accrued and unpaid interest to, but excluding, the applicable redemption date.We have recorded deferred tax liabilities related to our convertible notes original issuance discount, representing the spread between the stated cashcoupon rate and the higher interest rate that is deductible for tax purposes based on the type of security. When our convertible notes are extinguished, we arerequired to recapture the original issuance discount previously deducted for tax purposes. The tax recapture, however, decreases as the fair market value ofthe convertible notes and the amount paid on settlement increases.Stock Repurchase ProgramOn November 11, 2013, we announced that our Board of Directors authorized the repurchase of up to $250.0 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 26, 2015 we had not repurchased any shares of ourcommon stock under this program.60Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 26, 2015: Payments Due by PeriodContractual Obligations Less than1 year 1-3 years 3-5 years More than5 years TotalLong-Term Debt Obligations (1) $400.0 $1,116.8 $1,200.0 $1,000.0 $3,716.8Interest on Long-Term Debt Obligations 97.2 180.6 147.0 95.9 520.7Operating Leases 16.3 27.0 13.9 21.8 79.0Financing Leases (2) 3.1 6.0 0.3 — 9.4Purchase Obligations (3) 34.6 7.0 0.8 — 42.4Royalty and Collaborative Commitments (4) 1.3 1.3 1.2 3.3 7.1Pension Obligations (5) 0.3 0.7 0.8 8.2 10.0Total Contractual Obligations $552.8$1,339.4$1,364.0$1,129.2$4,385.4 (1)Included within long-term debt obligations are our 2010 Notes which are convertible by their respective holders in the first quarter of fiscal 2016 asfurther discussed above. In addition, we have two other issuances (2012 Notes and 2013 Notes) of convertible notes which can first be put to us onMarch 1, 2018 ($500 million principal), and December 15, 2017 ($370 million principal) and we have assumed for purposes of the above table thatthe 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 alsohave principal accretion of 4.00% annually, which is included in the principal amount in the 1-3 years column above. The amounts in the table do notinclude 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 11 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 $29.4 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 $145.1 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 7 to our consolidated financial statements contained in Item 15 of this Annual Report formore information on our unrecognized tax benefits.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 Revolver willprovide us with sufficient funds in order to fund our expected normal operations, and debt payments, including interest over the next twelve months. Ourlonger-term liquidity is contingent upon future operating performance. We may also require additional capital in the future to fund capital expenditures,repayment of debt, acquisitions or other investments, or to repay our convertible notes and related deferred tax liabilities. As described above, we havesignificant indebtedness outstanding under our Credit Agreement, 2022 Senior Notes and convertible notes. These capital requirements could be substantial.Our operating performance may also be affected by matters discussed under the above-referenced Risk Factors set forth elsewhere in this report. These risks,trends and uncertainties may also adversely affect our long-term liquidity.61Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 ContentsLegal 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, fair values of equity investments, valuations, purchase price allocations and contingentconsideration related to business combinations, expected future cash flows including growth rates, discount rates, terminal values and other assumptions usedto evaluate the recoverability 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 andrecoverability of our net deferred tax assets and related valuation allowances. We base our estimates on historical experience and various other assumptionsthat are believed to be reasonable under the circumstances. Actual results could differ from these estimates if past experience or other assumptions do not turnout 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 and diagnostic test kits, we may be exposed to a number of economic and industry factors that could result in portions ofour inventory becoming either obsolete or in excess of anticipated usage. These factors include, but are not limited to, technological changes in our markets,our ability to meet changing customer requirements, competitive pressures on products and prices, and reliability and replacement of and the availability ofkey components 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 for estimated credit losses based upon our historicalexperience and any specific customer collection issues that we have identified. While such credit losses have historically been within our expectations andthe provisions established, we cannot guarantee that62Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 will continue to experience the same credit loss rates in the future. If the financial condition of our customers were to deteriorate, additional allowancesmay 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.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 review our intangible assets subject to amortization to determine if any adverse conditionsexist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. If the carrying value of an assetexceeds its undiscounted cash flows, we will write-down the carrying value of the intangible asset to its fair value in the period identified. In assessing fairvalue, we must make assumptions regarding estimated future cash flows and discount rates. If these estimates or related assumptions change in the future, wemay be required to record impairment charges. We generally determine fair value based on the present value of estimated future cash flows to be generated bythe asset using a risk-adjusted discount rate. If the estimate of an intangible asset’s remaining useful life is changed, we will amortize the remaining carryingvalue of the intangible asset prospectively over the revised remaining 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.63Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 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 price 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 2015 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 28, 2015 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 reporting unitsbeen lower by 10%, all of our reporting units would still have passed Step 1 of the goodwill impairment test.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 a reporting unit.At September 26, 2015, we believe that all reporting units with goodwill aggregating $2.8 billion were not at risk of failing Step 1 of the goodwillimpairment test based on our current forecasts.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.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.In 2013, as a result of our company-wide annual budgeting and strategic planning process and a full re-evaluation of our existing productdevelopment efforts and cost structure performed in the fourth quarter, 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.In 2013, 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 theprocedures described above, and recorded a goodwill impairment charge of $1.1 billion. The basis of fair value for Molecular Diagnostics assumed thereporting unit would be purchased or sold in a taxable transaction, and the discount rate of 10% applied to the after-tax cash flows was relatively consistentwith that used in our purchase accounting for the Gen-Probe acquisition. For illustrative purposes, had the fair value of Molecular Diagnostics been lower by10%, the Company would have recorded an additional impairment charge of $195.4 million.64Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 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 will generally establish the selling price using ESP to allocate arrangementconsideration. 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 isdetermined by considering a number of factors including our pricing policies, internal costs and gross margin objectives, method of distribution, informationgathered from experience in customer negotiations, market research 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, 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 revenues65Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentsrecognized is 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 anadditional corresponding net payment to us which we record as revenue at that time. This payment combined with the transfer price revenues previouslyrecognized represents 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 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 7.0% as of September 26, 2015 depending on the specific employee group. This analysis is re-evaluated periodically and the forfeiture rate is adjusted as necessary. Ultimately, the actual expense recognized over the vesting period will only be for thoseawards that vest.We granted performance stock units to members of our senior management team during fiscal 2014 and 2015. Each recipient of a performance stockunit is eligible to receive between zero and 200% of the target number of shares of our common stock at the end of three years provided our defined Returnon Invested Capital, or ROIC, metrics are achieved. We recognize compensation expense ratably over the required service period based on an estimate of theprobability that the measurement criteria will be achieved for a targeted number of shares. Our estimate of the number of shares that are probable of vesting isbased on our estimate of ROIC over the respective time periods using our internal forecasts and projections. If there is a change in the estimate of the numberof shares that are probable of vesting, we will cumulatively adjust compensation expense in the period that the change in estimate is made.We recognized $59.3 million, $50.0 million and $52.3 million of stock-based compensation expense for employee equity awards in fiscal years 2015,2014 and 2013, respectively. As of September 26, 2015, there was $22.8 million and $73.6 million66Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 unrecognized compensation expense related to stock options and stock units, respectively, that we expect to recognize over a weighted-average period of3.4 years and 2.5 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 $1.16 billion in net deferred tax liabilities at September 26, 2015 and $1.34 billion at September 27, 2014. 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 $154.7 million in gross unrecognized tax benefits, excluding interest, at September 26, 2015 and $137.0 million at September 27, 2014. AtSeptember 26, 2015, $74.9 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 $2.0 to $4.0 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 July 2015, the Financial Accounting Standards Board (FASB) issued guidance under Accounting Standards Codification (ASC) 330, Simplifyingthe Measurement of Inventory. The new guidance requires inventory to be measured at the lower of cost and net realizable value, which is defined as theestimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. This new guidance iseffective for our first quarter of fiscal year 2018 and early adoption is permitted. The guidance must be applied prospectively. We are currently evaluating theimpact of the adoption of this requirement on our consolidated financial statements. In April 2015, the FASB issued Accounting Standards Update (ASU) No. 2015-03, Presentation of Debt Issuance Costs. This guidance intends tosimplify the presentation of debt issuance costs and more closely align the presentation of debt issuance costs under U.S. GAAP to IFRS standards. Thisguidance is effective for annual periods beginning after December 15, 2015, and is applicable to us in fiscal 2017. Early adoption is permitted. We arecurrently evaluating this guidance, but do not anticipate that adoption of this guidance will have a material impact on our consolidated financial statements. In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. This guidancefocuses on a reporting company’s consolidation evaluation to determine whether certain legal entities should be consolidated. This guidance is effective forannual periods beginning after December 15, 2015, and is applicable to us in fiscal 2017. Early adoption is permitted, including adoption in an interimperiod. We are currently evaluating this guidance, but do not anticipate that adoption of this guidance will have a material impact on our consolidatedfinancial statements.In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. ASU2014-15 requires management to evaluate, at each annual or interim reporting period, whether there are conditions or events that exist that raise substantialdoubt about an entity's ability to continue as a going concern within one year after the date the financial statements are issued and provide relateddisclosures. ASU 2014-15 is effective for annual67Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentsperiods ending after December 15, 2016 and is applicable to us in fiscal 2018. Earlier application is permitted. The adoption of ASU 2014-15 is not expectedto have a material effect on our consolidated financial statements or disclosures.In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 660), which provides guidance for revenuerecognition. This ASU is applicable to any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for thetransfer of nonfinancial assets. ASU 2014-09 will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in anamount that reflects the consideration to which the company expects to be entitled to receive in exchange for those goods or services. In doing so, companieswill need to use more judgment and make more estimates than under current U.S. GAAP. These judgments may include identifying performance obligationsin the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separateperformance obligation. On July 9, 2015, the FASB voted in favor of delaying the effective date of the new standard by one year, with early adoptionpermitted as of the original effective date. ASU 2014-09 is effective prospectively for fiscal years, and interim reporting periods within those years, beginningafter December 15, 2017, which is our fiscal 2019. We are currently evaluating the impact of the adoption of ASU 2014-09 on our consolidated financialposition and results of operations.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, interest rate cap agreements, insurance contracts andrelated deferred compensation plan liabilities, accounts payable and debt obligations. Except for our outstanding convertible notes and 2022 Senior Notes,the fair value of these financial instruments approximates their carrying amount. As of September 26, 2015, we have $1.02 billion of principal of convertiblenotes outstanding, which are comprised of our 2010 Notes with a principal of $150.0 million, our 2012 Notes with a principal of $500.0 million, and our2013 Notes with a principal of $370.0 million. The convertible notes are recorded net of the unamortized discount on our consolidated balance sheets. Thefair value of our 2010 Notes, 2012 Notes and 2013 Notes as of September 26, 2015 was approximately $264.1 million, $688.2 million and $471.8 million,respectively. The fair value of our 2022 Senior Notes was approximately $1.03 billion. Amounts outstanding under our Credit Agreement aggregating $1.66billion aggregate principal as of September 26, 2015 are subject to variable rates of interest based on current market rates, and as such, we believe thecarrying 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, 2022 Senior Notes and Credit Agreement. The convertible notes and 2022 SeniorNotes have fixed interest rates. Borrowings under our Credit Agreement currently bear interest at the Eurocurrency Rate (i.e., Libor) plus the applicablemargin of 1.75% per annum.As of September 26, 2015, there was $1.66 billion of aggregate principal outstanding under the Credit Agreement comprised of $1.49 billion under theTerm Loan and $175.0 million under the Revolver. Since these debt obligations are variable rate instruments, our interest expense associated with theseinstruments is subject to change. A 10% adverse movement (increase in Libor rate) would increase annual interest expense by less than $1 million due to thelow current interest rate environment. During fiscal 2015, we entered into multiple interest rate cap agreements to help mitigate the interest rate volatilityassociated with the variable rate interest on the amounts outstanding. The critical terms of the interest rate caps were designed to mirror the terms of the Libor-based borrowings under the Credit Agreement and Prior Credit Agreement, and therefore the interest rate caps are highly effective at offsetting the cash flowsbeing hedged. We designated these derivatives as cash flow hedges of the variability of the Libor-based interest payments on $1.0 billion of principal over a3-year period, which ends on December 31, 2017.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.We conduct business worldwide and maintain sales and service offices outside the United States as well as manufacturing facilities in Costa Rica andthe United Kingdom. Our international sales are denominated in a number of currencies, primarily the Euro, U.S. dollar, UK Pound and Renminbi. Theexpenses of our international offices are denominated in local currencies, except at our Costa Rica subsidiary, where the majority of the business is conductedin U.S. dollars. Fluctuations in the foreign68Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentscurrency rates could affect our sales, cost of goods and operating margins and could result in exchange losses. In addition, currency devaluations can result ina 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. We do not believe a hypothetical 10% increase or decrease in foreign currencies that we transact in would not have a material adverse impact onour financial condition or results of operations. During fiscal 2015, 2014 and 2013, we incurred net foreign exchange gains (losses) of $(3.0) million,$(1.8) million and $0.5 million, 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 26, 2015, 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.69Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 26, 2015. In making this assessment, weused the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (COSO) in Internal Control-Integrated Framework.Subject to the foregoing, based on management’s assessment, we believe that, as of September 26, 2015, 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.70Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 26, 2015, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Hologic,Inc.’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 26, 2015, based onthe COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balancesheets of Hologic, Inc. as of September 26, 2015 and September 27, 2014 and the related consolidated statements of operations, comprehensive income (loss),stockholders’ equity and cash flows for each of the three years in the period ended September 26, 2015 of Hologic, Inc. and our report dated November 19,2015 expressed an unqualified opinion thereon./s/ Ernst & Young LLP Boston, MassachusettsNovember 19, 201571Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 26, 2015, 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.72Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 26, 2015 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) 10,952,419 $22.21 9,460,950Equity compensation plans not approved by security holders — $— —Total 10,952,419 $22.21 9,460,950___________(1)Includes 4,258,563 shares that are issuable upon restricted stock units (RSUs), and performance stock units (PSUs) vesting. The remaining balanceconsists of outstanding stock option grants.(2)The weighted average exercise price does not take into account the shares issuable upon vesting of outstanding RSUs and PSUs, which have no exerciseprice.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.73Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 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.74Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 26, 2015, September 27, 2014 and September 28, 2013Consolidated Statements of Comprehensive Income (Loss) for the years ended September 26, 2015, September 27, 2014 andSeptember 28, 2013Consolidated Balance Sheets as of September 26, 2015 and September 27, 2014Consolidated Statements of Stockholders’ Equity for the years ended September 26, 2015, September 27, 2014 and September 28, 2013Consolidated Statements of Cash Flows for the years ended September 26, 2015, September 27, 2014 and September 28, 2013Notes 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 Preferred Stock 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 75Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 July 2, 2015, by and among Hologic, the guarantors party thereto and WellsFargo Bank, National Association, as Trustee. 8-K 07/02/2015 4.11 Form of 5.250% Senior Note due 2022 (included in Exhibit 4.10). 8-K 07/02/2015 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* The 2003 Incentive Award Plan of Gen-Probe Incorporated as amended and restated. S-8 08/02/2012 10.6* Hologic Amended and Restated 2008 Equity Incentive Plan. 8-K 03/11/2013 10.7* Form of Stock Option Award Agreement Under 2008 Equity Incentive Plan (adopted fiscal2014). 8-K 11/12/2013 10.8* Form of Stock Option Award Agreement Under 2008 Equity Incentive Plan (adopted fiscal2015). 8-K 11/05/2014 10.9* Form of Stock Option Award Agreement Under 2008 Equity Incentive Plan (adopted fiscal2016). 8-K 10/14/2015 10.10* Form of Restricted Stock Unit Award Agreement Under 2008 Equity Incentive Plan (adoptedfiscal 2014). 8-K 11/12/2013 10.11* Form of Restricted Stock Unit Award Agreement Under 2008 Equity Incentive Plan (adoptedfiscal 2016). 8-K 10/14/2015 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 Performance Stock Unit Award Agreement Under 2008 Equity Incentive Plan(adopted fiscal 2016). 8-K 11/06/2015 10.15* Form of Independent Director Stock Option Award Agreement Under 2008 Equity IncentivePlan (annual grant, adopted fiscal 2014). 10-K 09/28/2013 76Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 EndDate10.16* Form of Independent Director Stock Option Award Agreement Under 2008 Equity IncentivePlan (annual grant, adopted fiscal 2015). 10-K 09/27/2014 10.17* Form of Independent Director Restricted Stock Unit Award Agreement Under 2008 EquityIncentive Plan (annual grant). 10-K 09/28/2013 10.18* Form of Independent Director Stock Option Award Agreement Under 2008 Equity IncentivePlan (initial grant, adopted fiscal 2014). 10-K 09/28/2013 10.19* Form of Independent Director Stock Option Award Agreement Under 2008 Equity IncentivePlan (initial grant, adopted fiscal 2015). 10-K 09/27/2014 10.20* Form of Independent Director Restricted Stock Unit Award Agreement Under 2008 EquityIncentive Plan (initial grant). 10-K 09/28/2013 10.21* Hologic 2012 Employee Stock Purchase Plan. 8-K 03/08/2012 10.22* Hologic 2015 Short-Term Incentive Plan. 8-K 11/10/2014 10.23* Hologic Short-Term Incentive Plan. 8-K 11/06/2015 10.24* Hologic Amended and Restated Deferred Compensation Program. 8-K 09/21/2015 10.25* Hologic Deferred Equity Plan. 8-K 09/21/2015 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. (1) 10-Q 12/29/2012 10.29* Form of Senior Executive Officer Change of Control Agreement. (1) 8-K 11/17/2009 10.30* Form of Senior Vice President Severance Agreement. (1) 10-K 09/28/2013 10.31* Separation Agreement and General Release of All Claims dated December 11, 2013 by andbetween John W. Cumming and Hologic. 10-Q 12/28/2013 10.32* Separation Agreement and General Release of All Claims dated November 10, 2014 by andbetween Mark J. Casey and Hologic. 8-K 11/10/2014 10.33* Employment Agreement dated December 6, 2013 by and between Stephen P. MacMillan andHologic. 8-K 12/09/2013 10.34* Amended and Restated Employment Agreement by and between the Company and Stephen P.MacMillan, dated September 18, 2015. 8-K 09/21/2015 10.35* Form of Price Targets Performance Stock Unit Award Agreement. 8-K 12/09/2013 10.36* Form of Matching Restricted Stock Unit Award Agreement. 8-K 12/09/2013 10.37* Change of Control Agreement dated December 6, 2013 by and between Stephen P.MacMillan and Hologic. 8-K 12/09/2013 10.38* Separation and Release Agreement dated September 2, 2014 by and between Rohan F. Hastieand Hologic. 8-K 09/08/2014 10.39* Offer Letter dated March 9, 2014 by and between Eric B. Compton and Hologic. 8-K 03/14/2014 10.40* Severance and Change of Control Agreement dated March 9, 2014 by and between Eric B.Compton and Hologic. (2) Filed herewith 77Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 EndDate10.41* Transition Agreement dated March 13, 2014 by and between Glenn P. Muir and Hologic. 8-K 03/14/2014 10.42* Transition and Severance Agreement dated May 1, 2014 by and between David P. Harding andHologic. 10-Q 03/29/2014 10.43* Settlement and Release Agreement dated May 1, 2014 by and between David P. Harding andHologic. 10-Q 03/29/2014 10.44* Offer Letter dated May 8, 2014 by and between Robert W. McMahon and Hologic. 8-K 05/13/2014 10.45* Severance and Change of Control Agreement dated May 8, 2014 by and between Robert W.McMahon and Hologic. (2) Filed herewith 10.46* Offer Letter dated May 4, 2014 by and between Peter J. Valenti and Hologic. 10-Q 06/28/2014 10.47* Senior Vice President Severance Agreement dated May 26, 2014 by and between Peter J. Valentiand Hologic. 10-K 09/27/2014 10.48* Offer Letter dated August 21, 2014 by and between Thomas A. West and Hologic. 10-K 09/27/2014 10.49* Senior Vice President Severance Agreement dated October 3, 2014 by and between Thomas A.West and Hologic. 10-K 09/27/2014 10.50* Letter of Intent dated February 27, 2014 and Terms and Conditions of Employment dated March10, 2014 by and between Claus Egstrand and Hologic. 10-K 09/27/2014 10.51* Severance and Change of Control Agreement dated September 18, 2014 by and between ClausEgstrand and Hologic. 10-K 09/27/2014 10.52* Offer Letter dated January 6, 2015 by and between John M. Griffin and Hologic. 10-Q 03/28/2015 10.53* Severance and Change of Control Agreement dated February 2, 2015 by and between John M.Griffin and Hologic. 10-Q 03/28/2015 10.54 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 10.55 Lease Agreement (Danbury and Bedford) by and between BONE (DE) QRS 15-12, INC., andHologic dated August 28, 2002. 10-K 09/28/2002 10.56 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 10.57 Office Lease dated December 31, 2003 between Cytyc and Marlborough Campus LimitedPartnership. CytycCorporation10-K 12/31/2003 10.58 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 10.59 Lease Agreement by and between 445 Simarano Drive, Marlborough LLC and Cytyc dated July11, 2006. 10-K 09/29/2007 10.60 Lease Guaranty dated October 22, 2007 between Bel Marlborough I LLC and Hologic, asguarantor thereunder. 8-K 10/22/2007 10.61 Form of Exchange Agreement. 8-K 02/15/2013 78Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 EndDate10.62 Credit and Guaranty Agreement, dated May 29, 2015, among Hologic, Hologic GGO 4 Ltd, eachDesignated Borrower from time to time party thereto, the Guarantors from time to time partythereto, each Lender from time to time party thereto and Bank of America, N.A., asAdministrative Agent, Swing Line Lender and L/C Issuer. 8-K 05/29/2015 10.63 Pledge and Security Agreement, dated May 29, 2015, among the grantors party thereto and Bankof America, N.A. as Collateral Agent 10-Q 06/27/2015 10.64 Restated Agreement dated July 24, 2009 by and between Gen-Probe Incorporated and NovartisVaccines and Diagnostics, Inc. ‡ Gen-Probe10-Q/A 09/30/2009 10.65 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 10.66 Second Amendment to Restated Agreement by and between Gen-Probe Incorporated and GrifolsDiagnostic Solutions Inc.‡ 10-Q 06/27/2015 10.67 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 10.68 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 10.69 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. Filed herewith 21.1 Subsidiaries of Hologic. Filed herewith 23.1 Consent of Independent Registered Public Accounting Firm. Filed herewith 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. Filed herewith 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. Filed herewith 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. Furnishedherewith 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. Furnishedherewith 101.INS XBRL Instance Document. Filed herewith 101.SCH XBRL Taxonomy Extension Schema Document. Filed herewith 79Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 EndDate101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. Filed herewith 101.DEF XBRL Taxonomy Extension Definition Linkbase Document. Filed herewith 101.LAB XBRL Taxonomy Extension Label Linkbase Document. Filed herewith 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. Filed herewith ______________* Indicates management contract or compensatory plan, contract or arrangement.‡ Confidential treatment has been granted with respect to certain portions of this exhibit. A complete version of this exhibithas been filed separately with the U.S. Securities and Exchange Commission.(1) List of executive officers to whom provided filed herewith.(2) Corrected version of a previously filed exhibit.80Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Chairman, President and Chief Executive OfficerDate: November 19, 2015Pursuant 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 Chairman, President and ChiefExecutive Officer (Principal ExecutiveOfficer) November 19, 2015STEPHEN P. MACMILLAN /S/ ROBERT W. MCMAHON Chief Financial Officer (PrincipalFinancial Officer) November 19, 2015ROBERT W. MCMAHON /S/ KARLEEN M. OBERTON Corporate Vice President, Finance andAccounting, Chief Accounting Officer(Principal Accounting Officer) November 19, 2015KARLEEN M. OBERTON /S/ ELAINE S. ULLIAN Lead Independent Director November 19, 2015ELAINE S. ULLIAN /S/ JONATHAN CHRISTODORO Director November 19, 2015JONATHAN CHRISTODORO /S/ SALLY W. CRAWFORD Director November 19, 2015SALLY W. CRAWFORD /S/ SCOTT T. GARRETT Director November 19, 2015SCOTT T. GARRETT /S/ DAVID R. LAVANCE, JR. Director November 19, 2015DAVID R. LAVANCE, JR. /S/ NANCY L. LEAMING Director November 19, 2015NANCY L. LEAMING /S/ LAWRENCE M. LEVY Director November 19, 2015LAWRENCE M. LEVY /S/ SAMUEL MERKSAMER Director November 19, 2015SAMUEL MERKSAMER /S/ CHRISTIANA STAMOULIS Director November 19, 2015CHRISTIANA STAMOULIS /S/ WAYNE WILSON Director November 19, 2015WAYNE WILSON Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 26, 2015, September 27, 2014 and September 28, 2013Contents Report of Independent Registered Public Accounting Firm F-2 Consolidated Financial Statements Consolidated Statements of Operations F-3 Consolidated Statements of Comprehensive Income (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 19, 2015Powered 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 26, 2015 and September 27, 2014 and the relatedconsolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period endedSeptember 26, 2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on thesefinancial statements 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Hologic, Inc. atSeptember 26, 2015 and September 27, 2014, and the consolidated results of its operations and its cash flows for each of the three years in the period endedSeptember 26, 2015, 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 26, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission (2013 framework) and our report dated November 19, 2015 expressed an unqualified opinionthereon. /s/ Ernst & Young LLP Boston, MassachusettsNovember 19, 2015F-2Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 26, 2015 September 27, 2014 September 28, 2013Revenues: Product $2,270.4 $2,094.9 $2,100.9Service and other 434.6 435.8 391.4 2,705.0 2,530.7 2,492.3Costs of revenues: Product 755.5 731.3 818.2Amortization of intangible assets 299.7 314.6 307.9Impairment of intangible assets — 26.6 1.7Service and other 217.1 212.7 203.1Gross Profit 1,432.7 1,245.51,161.4Operating expenses: Research and development 214.9 203.2 197.6Selling and marketing 363.0 331.7 342.1General and administrative 261.0 259.8 227.7Amortization of intangible assets 110.2 113.8 112.6Impairment of intangible assets — 5.6 —Contingent consideration – compensation expense — — 80.0Contingent consideration – fair value adjustments — — 11.3Impairment of goodwill — — 1,117.4Gain on sale of intellectual property — — (53.9)Restructuring and divestiture charges 28.5 51.7 32.8 977.6 965.8 2,067.6Income (loss) from operations 455.1 279.7(906.2)Interest income 1.3 1.3 1.3Interest expense (205.5) (220.6) (281.1)Debt extinguishment loss (62.7) (7.4) (9.2)Other (expense) income, net (11.0) (4.9) 2.3Income (loss) before income taxes 177.2 48.1(1,192.9)Provision (benefit) for income taxes 45.6 30.8 (20.1)Net income (loss) $131.6 $17.3$(1,172.8)Net income (loss) per common share: Basic $0.47 $0.06 $(4.36)Diluted $0.45 $0.06 $(4.36)Weighted average number of shares outstanding: Basic 280,566 275,499 268,704Diluted 289,537 278,360 268,704See accompanying notes.F-3Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Income (Loss)(In millions) Years ended September 26, 2015 September 27, 2014 September 28, 2013Net income (loss) $131.6 $17.3 $(1,172.8)Changes in foreign currency translation adjustment (11.0) (13.3) 1.4Changes in unrealized holding gains and losses on available-for-salesecurities (2.0) (3.2) 12.1Changes in pension plans, net of taxes of $0.3 in 2015, $0.2 in 2014,and $0.1 in 2013 (0.2) (1.3) 0.1Changes in value of hedged interest rate caps, net of tax of $2.5 in2015 (3.9) — —Other comprehensive (loss) income (17.1) (17.8)13.6Comprehensive income (loss) $114.5 $(0.5)$(1,159.2)See accompanying notes.F-4Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 26, 2015 September 27, 2014ASSETS Current assets: Cash and cash equivalents$491.3 $736.1Restricted cash1.4 5.5Accounts receivable, less reserves of $11.1 and $12.0, respectively416.1 396.0Inventories283.1 330.6Deferred income tax assets19.0 39.4Prepaid income taxes21.7 22.4Prepaid expenses and other current assets33.8 35.8Total current assets1,266.4 1,565.8Property, plant and equipment, net457.1 461.9Intangible assets, net3,023.2 3,433.6Goodwill2,808.2 2,810.8Other assets115.2 142.6Total assets$7,670.1 $8,414.7LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current portion of long-term debt$391.8 $114.5Accounts payable117.0 92.1Accrued expenses272.1 262.1Deferred revenue163.1 150.9Total current liabilities944.0 619.6Long-term debt, net of current portion3,248.0 4,153.2Deferred income tax liabilities1,178.4 1,375.4Deferred revenue19.6 20.1Other long-term liabilities200.9 183.4Commitments and contingencies (Note 11) 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; 282,495 and 277,972 shares issued,respectively2.8 2.8Additional paid-in-capital5,559.9 5,658.2Accumulated deficit(3,469.0) (3,600.6)Accumulated other comprehensive income (loss)(14.5) 2.6Total stockholders’ equity2,079.2 2,063.0Total liabilities and stockholders’ equity$7,670.1 $8,414.7See accompanying notes.F-5Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 29,2012 265,635 2.6 5,396.7 (2,443.6) 6.8 219 (1.5) 2,961.0Exercise of stockoptions 4,786 0.1 65.6 — — — — 65.7Issuance of commonstock to employees uponvesting of restrictedstock units, net of shareswithheld for employeetaxes 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 — — — — 70.6Issuance of commonstock to employees uponvesting of restrictedstock units, net of shareswithheld for employeetaxes 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 277,9722.85,658.2(3,600.6)2.6——2,063.0Exercise of stockoptions 3,036 — 57.3 — — — — 57.3Issuance of commonstock to employees uponvesting of restrictedstock units, net of shareswithheld for employeetaxes 949 — (12.9) — — — — (12.9)Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 under theemployee stockpurchase plan 538 — 12.0 — — — — 12.0Stock-basedcompensation expense — — 54.6 — — — — 54.6Excess tax benefit fromemployee equity awards — — 7.6 — — — — 7.6Reacquisition of equitycomponent fromconvertible notesrepurchase, net of taxes — — (216.9) — — — — (216.9)Net income — — — 131.6 — — — 131.6Foreign currencytranslation adjustment — — — — (20.6) — — (20.6)Amounts reclassified outof cumulative translationadjustment — — — — 9.6 — — 9.6Adjustment to minimumpension liability, net — — — — (0.2) — — (0.2)Unrealized losses onderivatives, net of taxes — — — — (3.9) — — (3.9)Other-than-temporaryimpairment ofmarketable securityreclassified out ofaccumulated othercomprehensive income(loss) — — — — 7.8 — — 7.8Unrealized losses onmarketable securities — — — — (9.8) — — (9.8)Balance at September26, 2015 282,495 $2.8 $5,559.9 $(3,469.0) $(14.5) — $— $2,079.2See accompanying notes.F-6Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 26, 2015 September 27, 2014 September 28, 2013OPERATING ACTIVITIES Net income (loss)$131.6 $17.3 $(1,172.8)Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation81.5 94.7 95.5Amortization409.9 428.5 420.5Non-cash interest expense63.8 68.7 81.2Stock-based compensation expense59.3 50.0 52.3Excess tax benefit related to equity awards(10.7) (5.7) (7.4)Deferred income taxes(148.8) (243.1) (198.0)Gain on sale of intellectual property— — (53.9)Fair value adjustments to contingent consideration— — 11.3Fair value write-up of inventory sold— — 52.4Impairment of goodwill— — 1,117.4Asset impairment charges— 38.4 9.4Debt extinguishment losses62.7 7.4 9.2Equity investment impairment charges7.8 6.9 6.4Loss on disposal of property and equipment6.6 7.1 4.9Loss on sale of businesses9.6 5.5 —Other adjustments and non-cash items14.3 (11.8) 0.9Changes in operating assets and liabilities: Accounts receivable(30.3) 7.9 4.1Inventories43.9 (44.7) 25.2Prepaid income taxes0.7 22.4 25.1Prepaid expenses and other assets5.7 17.3 0.9Accounts payable25.5 11.8 (6.4)Accrued expenses and other liabilities36.9 14.7 2.3Deferred revenue16.1 15.1 13.3Net cash provided by operating activities786.1 508.4493.8INVESTING ACTIVITIES Acquisition of businesses, net of cash acquired— — (6.3)Payment of additional acquisition consideration— — (16.8)Net proceeds from sale of business— 10.1 85.1Purchase of property and equipment(48.1) (44.3) (49.0)Increase in equipment under customer usage agreements(41.3) (35.9) (41.1)Net (purchases) sales of insurance contracts(6.4) 13.8 (4.0)Purchases of mutual funds— (29.7) —Sales of mutual funds10.0 22.4 —Proceeds from sale of intellectual property— — 60.0(Purchase) sale of a cost-method equity investment— — (1.6)Increase in other assets(0.3) (3.4) (7.5)Net cash (used in) provided by investing activities(86.1) (67.0) 18.8FINANCING ACTIVITIES Proceeds from long-term debt2,495.1 — —Repayment of long-term debt(3,095.0) (595.0) (265.0)Payments to extinguish convertible notes(543.7) — —Proceeds from revolving credit line358.0 — —Repayment from revolving credit line(183.0) — —Payment of debt issuance costs(22.7) (2.4) (9.4)Purchase of interest rate caps(13.2) — —Payment of contingent consideration— — (43.0)Payment of deferred acquisition consideration— (5.0) (1.6)Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 plans70.0 81.4 75.1Excess tax benefit related to equity awards10.7 5.7 7.4Payment of minimum tax withholdings on net share settlements of equity awards(12.9) (9.8) (12.3)Net cash used in financing activities(936.7) (525.1)(248.8)Effect of exchange rate changes on cash and cash equivalents(8.1) (2.7) (1.7)Net (decrease) increase in cash and cash equivalents(244.8) (86.4)262.1Cash and cash equivalents, beginning of period736.1 822.5 560.4Cash and cash equivalents, end of period$491.3 $736.1$822.5See accompanying notes.F-7Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 supplies premium diagnostics products, medical imaging systems and surgicalproducts with an emphasis on women's health. The Company operates in four segments: 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 2015, 2014 and 2013 ended onSeptember 26, 2015, September 27, 2014 and September 28, 2013, respectively.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.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 19, 2015Powered 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 belowcarrying value, 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 carrying value; the underlying factors contributingto a decline in the price of the security; how long the market value of the investment has been less than its carrying value; any market conditions that impactliquidity; the views of external investment analysts; the financial condition and near-term prospects of the investee; any news or financial information thathas been released specific to the investee; and the outlook for the overall industry in which the investee operates. In the fourth quarter of fiscal 2015, theCompany concluded that the decline in fair value of one of its marketable securities was other-than-temporary based on the length of time the security'smarket value was significantly below its carrying value and recorded an impairment charge of $7.8 million.The following reconciles cost basis to fair market value. Cost Gross UnrealizedGains Gross UnrealizedLosses Other ThanTemporaryImpairment Fair ValueAs of September 26, 2015 $16.1 $7.2 $(0.3) $(7.8) $15.2As of September 27, 2014 $15.5 $10.2 $(1.3) $— $24.4As of September 28, 2013 $5.9 $12.2 $— $— $18.1Concentrations 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 26, 2015. 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 26, 2015 and September 27, 2014, or any customersthat represented greater than 10% of consolidated revenues for fiscal years 2015, 2014 and 2013.Supplemental Cash Flow Statement Information Years endedSeptember 26, 2015 September 27, 2014 September 28, 2013Cash paid during the period for income taxes $168.7 $231.8 $79.9Cash paid during the period for interest $143.0 $155.7 $192.8InventoriesInventories 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:F-9Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 September 26, 2015 September 27, 2014Raw materials $98.3 $115.6Work-in-process 58.7 57.1Finished goods 126.1 157.9 $283.1 $330.6Property, 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: September 26, 2015 September 27, 2014Equipment and software $365.9 $342.5Equipment under customer usage agreements 305.7 285.2Buildings and improvements 182.1 176.9Leasehold improvements 59.2 63.2Land 51.4 51.6Furniture and fixtures 17.3 16.3 981.6 935.7Less - accumulated depreciation and amortization (524.5) (473.8) $457.1 $461.9Property, 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 imaging equipment located at customer sites butowned by the Company. Generally, the customer has the right to use it for a period of time provided they meet certain agreed to conditions. The Companyrecovers 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 19, 2015Powered 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 was within its Breast Health segment,for impairment due to the Company’s expectation that it would be sold or disposed of significantly before the end of its previously estimated useful life. Atthis time, 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 subtopic 10-35-28, the impairment charge was allocated to the long-livedassets with $27.1 million to intangible assets and $1.5 million to property and equipment. The property and equipment charge was recorded to cost ofproduct revenues and general and administrative expenses in the amounts of $0.3 million and $1.2 million, respectively. The Company believes thisadjustment falls within Level 3 of the fair value hierarchy. The Company completed the sale of this product line in the fourth quarter of fiscal 2014 (see Note3).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 3).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.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.The 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.F-11Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 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.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.Intangible assets consisted of the following: September 26, 2015 September 27, 2014Description GrossCarryingValue AccumulatedAmortization GrossCarryingValue AccumulatedAmortizationDeveloped technology $3,979.1 $1,698.5 $3,965.6 $1,399.4In-process research and development 3.7 — 17.9 —Customer relationships and contracts 1,101.1 467.5 1,102.4 384.7Trade names 236.4 131.5 236.5 105.3Business licenses 2.5 2.1 2.6 2.0 $5,322.8$2,299.6$5,325.0$1,891.4Amortization 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.F-12Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 estimated amortization expense at September 26, 2015 for each of the five succeeding fiscal years was as follows: Fiscal 2016$377.0Fiscal 2017$365.6Fiscal 2018$355.1Fiscal 2019$343.5Fiscal 2020$332.3GoodwillIn 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 market approachconsiders comparable market data based on multiples of revenue or earnings before interest, taxes, depreciation and amortization (“EBITDA”) and isprimarily 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 2015 impairment test on the first day of the fourth quarter, and as noted above used DCF and market approaches toestimate the fair value of its reporting units as of June 28, 2015, and ultimately used the fair value determined by the DCF approach in making its impairmenttest conclusions. The Company believes it 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 Company's reporting units had fair values exceeding their carryingvalues, and as such, Step 2 of the impairment test was not required. For illustrative purposes, had the fair value of each of the reporting units that passed Step1 been lower than 10%, all of the reporting units would still have passed Step 1 of the goodwill impairment test.At September 26, 2015, the Company believes that each reporting unit, with goodwill aggregating 2.81 billion, was not at risk of failing Step 1 of thegoodwill impairment test based on the current forecasts.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 asF-13Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 the measurement date. As a result of completing Step 1, all of the Company’s reporting units had fair values exceeding their carrying values, and as such,Step 2 of the impairment test was not required.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, was 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.A rollforward of goodwill activity by reportable segment from September 27, 2014 to September 26, 2015 is as follows: Diagnostics Breast Health GYN Surgical Skeletal Health TotalBalance at September 27, 2014$1,154.1 $631.7 $1,016.8 $8.2 $2,810.8Tax adjustments0.6 0.7 — — 1.3Foreign currency and other(2.4) (0.6) (0.8) (0.1) (3.9)Balance at September 26, 2015$1,152.3$631.8$1,016.0$8.1 $2,808.2Other AssetsOther assets consisted of the following: September 26, 2015 September 27, 2014Other Assets Deferred financing costs $27.0 $44.9Life insurance contracts 27.5 22.4Derivative asset 6.2 —Mutual funds 5.6 15.4Marketable securities 15.2 24.4Manufacturing access fees 11.6 14.1Cost-method equity investments 4.2 5.2Other 17.9 16.2 $115.2 $142.6Deferred financing costs are related to the Company’s Convertible Notes, Credit Agreement, Prior Credit Agreement and Senior Notes (see Note 4 forfurther discussion). The Company amortizes amounts related to each debt issuance using the effective interest rate method over the period of earliestredemption or the term of such debt. Life insurance contracts were purchased in connection with the Company’s Nonqualified Deferred Compensation Plan(“DCP”) and are recorded at their cash surrender value (see Note 10 for further discussion). The manufacturing access fees are related to a manufacturingsupply and purchase agreement for our Aptima 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 identifiedF-14Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentsthat would significantly harm the fair value of the investment. The primary indicators the Company utilizes to identify these events and circumstances are theinvestee’s ability to remain in business, such as the investee’s liquidity and rate of cash use, and the investee’s ability to secure additional funding and theinvestee valuation as determined by that additional funding. In the event a decline in fair value is judged to be other-than-temporary, the Company willrecord an other-than-temporary impairment charge in other income (expense), net in the Consolidated Statements of Operations. During fiscal 2014 and fiscal2013, the Company recorded other-than-temporary impairment charges of $6.9 million and $6.4 million, respectively, related to certain of its cost-methodequity investments to adjust their carrying amounts to fair value. No such charges were recorded in fiscal 2015 for cost method investments. However, theCompany recorded a $7.8 million other-than-temporary impairment charge related to one of its marketable securities in fiscal 2015. In the third quarter offiscal 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. The deferred costs are expensed as therelated 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 Income (Loss)Other comprehensive income (loss) includes certain transactions that have generally been reported in the statement of stockholders’ equity. Thecomponents of accumulated other comprehensive income (loss) consisted of the following: September 26, 2015 September 27, 2014Foreign currency translation adjustment $(15.7) $(4.7)Unrealized gains on available-for-sale securities 6.9 8.9Minimum pension liability, net of tax of $0.3 and $0.2, respectively (1.8) (1.6)Hedged Interest Rate Caps, net of tax of $2.5 in 2015 (3.9) — $(14.5) $2.6F-15Source: HOLOGIC INC, 10-K, November 19, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe following tables summarize the changes in accumulated balances of other comprehensive income for the periods presented: Year Ended September 26, 2015 Year Ended September 27, 2014 ForeignCurrencyTranslation MarketableSecurities Pension Plans HedgedInterest RateCaps Total ForeignCurrencyTranslation MarketableSecurities Pension Plans TotalBeginningBalance$(4.7) $8.9 $(1.6) $— $2.6 $8.6 $12.1 $(0.3) $20.4Othercomprehensiveloss beforereclassifications(20.6) (9.8) (0.2) (3.9) (34.5) (13.3) (3.2) (1.3) (17.8)Amountsreclassified tostatement ofoperations9.6 7.8 — — 17.4 — — — —Ending Balance$(15.7) $6.9 $(1.8) $(3.9) $(14.5) $(4.7) $8.9 $(1.6) $2.6During fiscal 2015, the Company reclassified $9.6 million out of accumulated other comprehensive income to restructuring and divestiture chargesrelated to writing off the cumulative translation adjustment in connection with its substantial liquidation of the MRI breast coils product line (see Note 3). Inaddition, during fiscal 2015 the Company reclassified $7.8 million out of accumulated other comprehensive income to other (expense) income, net for theother-than-temporary impairment of a marketable security.DerivativesInterest Rate Cap - Cash Flow HedgeThe Company is exposed to certain risks arising from both its business operations and economic conditions. The Company manages its exposure tosome of its interest rate risk through the use of interest rate caps, which are derivative financial instruments. The Company does not use derivatives forspeculative purposes. For a derivative that is designated as a cash flow hedge, changes in the fair value of the derivative are recognized in accumulated othercomprehensive income ("AOCI") to the extent the derivative is effective at offsetting the changes in the cash flows being hedged until the hedged item affectsearnings. To the extent there is any hedge ineffectiveness, changes in fair value relating to the ineffective portion are immediately recognized in earnings inother income (expense) in the Consolidated Statements of Operations.During fiscal 2015, the Company entered into separate interest rate cap agreements with multiple counter-parties to help mitigate the interest ratevolatility associated with the variable rate interest on its credit facilities under its Prior Credit Agreement, which has been replaced by the new CreditAgreement (see Note 4). Interest rate cap agreements provide the right to receive cash if the reference interest rate rises above a contractual rate. The aggregatepremium paid by the Company for the interest rate cap agreements was $6.1 million, and $7.1 million, respectively, which was the initial fair value of theinstruments recorded in the Company's financial statements.The critical terms of the interest rate caps were designed to mirror the terms of the Company’s LIBOR-based borrowings under the Prior CreditAgreement. The terms in the new Credit Agreement are consistent with the Prior Credit Agreement, and therefore the interest rate caps continue to be highlyeffective at offsetting the cash flows being hedged. The Company designated these derivatives as cash flow hedges of the variability of the LIBOR-basedinterest payments on $1.0 billion of principal over a three-year period, which ends on December 30, 2017.As of September 26, 2015, the Company determined that the existence of hedge ineffectiveness, if any, was immaterial and all changes in the fair valueof the interest rate caps were recorded in AOCI.The aggregate fair value of these interest rate caps was $6.9 million at September 26, 2015 and is included in both Prepaid expenses and other currentassets and Other assets on the Company’s Consolidated Balance Sheet. Refer to Note 5 “Fair Value Measurements” below for related fair value disclosures.F-16Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 tables below present the location of the Company’s derivative financial instruments on the Consolidated Balance Sheets and the unrealized lossrecognized in AOCI related to the interest rate caps for the following reporting periods (in millions): Balance Sheet Location September 26, 2015Assets: Derivative instruments designated as a cash flow hedge: Interest rate cap agreementsPrepaid expenses and othercurrent assets $0.7Interest rate cap agreementsOther Assets 6.2 $6.9 Year EndedSeptember 26, 2015 Year EndedSeptember 27, 2014Amount of loss recognized in other comprehensive income, net of taxes: Interest rate cap agreements$(3.9) $—During fiscal 2015, an immaterial amount was reclassified from AOCI to the Company’s Consolidated Statements of Operations related to the derivativefinancial instruments. The Company expects to similarly reclassify approximately $3.9 million from AOCI to the Consolidated Statements of Operations inthe next twelve months.Revenue 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, training and support and maintenance, and multiple products. Based on the terms andconditions of the product arrangements, the Company believes that these services and undelivered products can be accounted for separately from thedelivered product element as the Company’s delivered products have value to its customers on a stand-alone basis. Accordingly, revenue for services not yetperformed at the time of product delivery, depending on shipment terms, are deferred and recognized as such services are performed. The relative selling priceof any undelivered products is also deferred at the time of shipment and recognized as revenue when these products are delivered. There is no customer rightof 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.F-17Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 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 will generally establish the selling priceusing ESP to allocate arrangement consideration. The objective of ESP is to determine the price at which the Company would typically transact a stand-alonesale of the product or service. ESP is determined by considering a number of factors including Company 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.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 ensure it meets the Company’s specifications and FDAregulations, and is shipped fully assembled. Customer acceptance of the Company’s clinical diagnostic instrument systems requires installation and trainingby the Company’s technical service personnel. Installation is a standard process consisting principally of uncrating, calibrating and testing theinstrumentation. The Company sells its instruments to Grifols for use in blood screening and records these instrument sales upon delivery since Grifols isresponsible for the placement, 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.F-18Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 ContentsAccounts receivable reserve activity for fiscal 2015, 2014 and 2013 was as follows: Balance atBeginningof Period Charged toCosts andExpenses Write-offs andPayments Balance atEnd ofPeriodPeriod Ended: September 26, 2015 $12.0 $1.6 $(2.5) $11.1September 27, 2014 $8.8 $4.4 $(1.2) $12.0September 28, 2013 $6.4 $4.3 $(1.9) $8.8Cost 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 the conversion price of the convertible notes, provided there is a premium. As such, dilution related to the conversionpremium on the 2010 Notes, 2012 Notes and 2013 Notes is included in the calculation of diluted weighted-average shares outstanding in fiscal 2015. Infiscal 2014, only the dilution of the conversion premium on the 2010 Notes is included in diluted weighted-average shares outstanding.A reconciliation of basic and diluted share amounts for fiscal 2015, 2014, and 2013 was as follows: September 26, 2015 September 27, 2014 September 28, 2013Basic weighted average common shares outstanding 280,566 275,499 268,704Weighted average common stock equivalents from assumed exercise ofstock options and restricted stock units 2,898 2,368 —Incremental shares from Convertible Notes premium 6,073 493 —Diluted weighted average common shares outstanding 289,537 278,360 268,704Weighted-average anti-dilutive shares related to: Outstanding stock options 1,502 5,033 8,445Restricted stock units 49 20 1,109In 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 greaterF-19Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentsthan the average stock price for the period. In those reporting periods in which the Company has a net loss, anti-dilutive shares and common stockequivalents are comprised of the number of shares and common stock equivalents that would be anti-dilutive had the Company reported 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 2015 and 2014 was as follows: Balance atBeginning ofPeriod Provisions Settlements/Adjustments Balance at Endof PeriodPeriod ended: September 26, 2015 $6.3 $6.1 $(7.0) $5.4September 27, 2014 $9.3 $7.1 $(10.1) $6.3Advertising 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 $14.4 million, $14.1 million and $14.1 million for fiscal 2015, 2014 and 2013, respectively, and wereincluded in selling and marketing expense in the Consolidated Statements of Operations.Recently Issued Accounting PronouncementsIn July 2015, the Financial Accounting Standards Board (FASB) issued guidance under ASC 330, Simplifying the Measurement of Inventory. Thenew guidance requires inventory to be measured at the lower of cost and net realizable value, which is defined as the estimated selling price in the ordinarycourse of business less reasonably predictable costs of completion, disposal and transportation. This new guidance is effective for the Company's first quarterof fiscal 2018 and early adoption is permitted. The guidance must be applied prospectively. The Company is currently evaluating the impact of the adoptionof this requirement on its consolidated financial statements but does not anticipate that adoption of this guidance will have a material impact on itsconsolidated financial statements. In April 2015, the FASB issued Accounting Standards Update (ASU) No. 2015-03, Presentation of Debt Issuance Costs. This guidance intends tosimplify the presentation of debt issuance costs and more closely align the presentation of debt issuance costs under U.S. GAAP to IFRS standards. Thisguidance is effective for annual periods beginning after December 15, 2015, and is applicable to the Company in fiscal 2017. Early adoption is permitted.The Company is currently evaluating this guidance, but does not anticipate that adoption of this guidance will have a material impact on its consolidatedfinancial statements. In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. This guidancefocuses on a reporting company’s consolidation evaluation to determine whether certain legal entities should be consolidated. This guidance is effective forannual periods beginning after December 15, 2015, and is applicable to the Company in fiscal 2017. Early adoption is permitted, including adoption in aninterim period. The Company is currently evaluating this guidance, but does not anticipate that adoption of this guidance will have a material impact on itsconsolidated financial statements.In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. ASU 2014-15 requires management to evaluate, at each annual or interim reporting period, whether there are conditions or events that exist that raise substantial doubtabout an entity's ability to continue as a going concern within one year after the date the financial statements are issued and provide related disclosures. ASU2014-15 is effective for annual periods ending after December 15, 2016 and is applicable to us in fiscal 2018. Earlier application is permitted. The adoptionof ASU 2014-15 is not expected to have a material effect on the Company's consolidated financial statements or disclosures.F-20Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 No. 2014-09, Revenue from Contracts with Customers (Topic 660), which provides guidance for revenuerecognition. This ASU is applicable to any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for thetransfer of nonfinancial assets. ASU 2014-09 will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in anamount that reflects the consideration to which the company expects to be entitled to receive in exchange for those goods or services. In doing so, companieswill need to use more judgment and make more estimates than under current U.S. GAAP. These judgments may include identifying performance obligationsin the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separateperformance obligation. On July 9, 2015, the FASB voted in favor of delaying the effective date of the new standard by one year, with early adoptionpermitted as of the original effective date. ASU 2014-09 is effective prospectively for fiscal years, and interim reporting periods within those years, beginningafter December 15, 2017, which is fiscal 2019 for the Company. The Company is currently evaluating the impact of the adoption of ASU 2014-09 on itsconsolidated financial position and results of operations.F-21Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contents3. 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 2015, 2014 and 2013 and a rollforward of thecharges to the accrued balances as of September 26, 2015: Consolidation ofDiagnosticsOperations Closure ofIndianapolisFacility Fiscal 2015Actions Fiscal 2014Actions Fiscal 2013Actions Other OperatingCost Reductions Total Restructuring andDivestiture Charges Fiscal 2013 charges: Workforcereductions$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: Workforcereductions$2.9 $0.2 $— $29.5 $0.9 $8.7 $42.2Non-cash impairmentcharge— — — — — 3.1 3.1Facility closure costs— 0.5 — — — 0.1 0.6Other0.1 — — — — 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 $51.7Fiscal 2015 charges: Workforcereductions0.1 — 10.0 6.0 — 0.2 $16.3Facility closure costs0.5 — — 2.0 — 0.1 2.6Fiscal 2015 restructuringcharges$0.6 $— $10.0 $8.0 $— $0.3 $18.9Divestiture net charges 9.6Fiscal 2015 restructuringand divestiture charges $28.5F-22Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Consolidation ofDiagnosticsOperations Closure ofIndianapolisFacility Fiscal 2015Actions Fiscal 2014Actions Fiscal 2013Actions Other OperatingCost Reductions Total Rollforward of AccruedRestructuring Balance as of September29, 2012$8.4 $1.8 $— $— $— $0.6 $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— (0.6) — — — (1.1) (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 $16.9 Fiscal 2015 restructuringcharges$0.6 $— $10.0 $8.0 $— $0.3 $18.9Stock-based compensation— — (4.1) — — — (4.1)Severance payments(3.0) — (2.8) (16.2) (0.1) (1.8) (23.9)Other payments(0.5) — — (1.3) — (0.3) (2.1)Balance as of September26, 2015$0.1 $— $3.1 $2.5 $— $— $5.7Consolidation of Diagnostics OperationsIn connection with its acquisition of Gen-Probe in fiscal 2012, the Company implemented restructuring actions to consolidate its Diagnosticsoperations, including streamlining product development initiatives, reducing overlapping functional areas in sales, marketing and general and administrativefunctions, and consolidating manufacturing resources, field services and support. As a result, the Company terminated certain employees from Gen-Probe andits legacy diagnostics business in research and development, sales, marketing, and general and administrative functions. The Company recorded severanceand benefit charges in fiscal 2012 of $13.3 million related to this action pursuant to ASC 420, Exit or Disposal Cost Obligations (ASC 420). The majority ofthese employees ceased working in the fourth quarter of fiscal 2012, and their full severance charge was recorded in the fourth quarter of fiscal 2012. Inaddition, certain of the terminated Gen-Probe employees had unvested stock options, which were accelerated at termination pursuant to the stock options’original terms. As such, the severance charges in fiscal 2012 include $3.5 million of stock-based compensation expense. In fiscal 2013, the Companyrecorded $10.8 million of severance charges, including $6.3 million for stock-based compensation. Included in these charges was $9.7 million recorded inthe second quarter of fiscal 2013 related to the termination of certain Gen-Probe executives, including Carl Hull, Gen-Probe’s former Chairman, President andChief Executive Officer. The charge was for the acceleration of certain retention payments and equity awards pursuant to the original terms of the relatedagreements. No additional charges were recorded in fiscal 2014 or 2015 under this portion of the action.In addition, under this plan, the Company completed moving its legacy molecular diagnostics operations from Madison, Wisconsin to Gen-Probe’sfacilities in San Diego, California. This transfer was completed at the end of fiscal 2014, and as a result, many of the employees in Madison were terminated.The Company recorded severance and benefit charges pursuant to ASC 420 beginning in fiscal 2012 through the third quarter of fiscal 2015 as charges wererecorded over requisite service periods. The Company recorded $0.1 million, $3.0 million, $3.2 million and $0.9 million for severance and benefits in fiscal2015, 2014, 2013 and 2012, respectively, and $0.5 million for facility closure costs in fiscal 2015. The Company also recordedF-23Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentsnon-cash charges 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 additionalcharges will 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 was completed in fiscal 2014 and no additional charges were recorded in fiscal 2015.Fiscal 2015 ActionsDuring each quarter of fiscal 2015, the Company continued to make executive management changes resulting in the termination of certain executivesand employees on a worldwide basis. In addition, the Company continued to consolidate and close certain international offices to improve operationalefficiency and reduce costs. Severance and benefit charges under these actions have been recorded pursuant to ASC 712, Compensation-NonretirementPostemployment Benefits (ASC 712), and ASC 420 depending on the employees terminated, and the Company recorded severance and benefit charges of$10.0 million in fiscal 2015. Included in the charge is $4.1 million of stock-based compensation in the twelve month period.In connection with its review of operations, the Company decided to shut-down its manufacturing operation in China, which manufacturedmammography systems for the Chinese market. As a result, the Company will terminate manufacturing and research and development personnel located inChina, and the severance charge was insignificant.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, depending on the employee terminated. The Company recorded $6.3 million of severanceand benefit charges in the first quarter of fiscal 2014, which included $0.4 million of stock-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 certain international offices. Severance and benefit charges under these actions were recorded pursuant toASC 420 and ASC 712 depending on the employees terminated, and the Company recorded severance and benefit charges of $16.6 million in fiscal 2014.Included in the charge was $1.8 million of stock-based compensation for the modification of the terms of equity awards to certain employees. For thoseemployees who continued to be employed beyond the minimum retention period, charges were recorded ratably over the estimated service period of theaffected employees.During fiscal 2015, the Company recorded $6.0 million for severance and benefits costs and $2.0 million for facility closure costs related to this action.The facility closure costs primarily relate to lease obligation charges for three office locations that were vacated and the Company had met the cease-use datecriteria. This action was completed in fiscal 2015.F-24Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 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 recorded severanceand benefit charges pursuant to ASC 420 and began notifying the affected employees in the second quarter of fiscal 2014. The Company recorded charges of$0.3 million and $8.7 million in fiscal 2015 and 2014, respectively 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.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 also provided certain transition services through April 2015, including the manufacturing and sale of inventory to the buyer. Since alloperations had ceased during the third quarter of fiscal 2015, the Company concluded that this subsidiary had been substantially liquidated and recorded a$9.6 million charge in the third quarter of fiscal 2015 related to writing off the cumulative translation adjustment related to the subsidiary.Subsequent Events - Fiscal 2016 ActionsDuring the third quarter of fiscal 2015, the Company decided to close its Bedford, Massachusetts facility where it manufactures its Skeletal Healthproducts as well as certain support manufacturing services for its Breast Health segment. The manufacturing of the Skeletal Health products will beoutsourced to a third-party and the Breast Health manufacturing services will be moved to the Company's Danbury, Connecticut and Marlborough,Massachusetts facilities. In addition, research and development, sales and services support and administrative functions will be moved to both Marlboroughand Danbury. The transition is expected to be completed by the end of fiscal 2016. In connection with this plan, certain employees, primarily inmanufacturing, will be terminated. The employees were notified of termination and related benefits in the first quarter of fiscal 2016, and the Company willaccount for these charges pursuant to ASC 420. Employees will be required to remain employed during this transition period and charges will be recordedratably over the required service period. The Company estimates the severance benefits will be approximately $3.0 million.During the first quarter of fiscal 2016, the Company began implementing a second plan to consolidate and improve operational efficiency of itsinternational sales and marketing and field services operations and certain support functions. As aF-25Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentsresult, the Company will terminate certain employees. Severance benefits will be recorded pursuant to ASC 420 and ASC 712, depending on the employeesterminated. The Company is in process of finalizing the plan and estimating severance benefits that will commence in the first quarter of fiscal 2016.4. Borrowings and Credit AgreementsThe Company’s borrowings consisted of the following: September 26, 2015 September 27, 2014Current debt obligations, net of debt discount: Term Loan$74.6 $—Revolver175.0 —Term Loan A— 99.6Term Loan B— 14.9Convertible Notes142.2 —Total current debt obligations391.8 114.5Long-term debt obligations, net of debt discount: Term Loan1,399.8 —Term Loan A— 796.7Term Loan B— 1,120.9Senior Notes— 1,000.02022 Senior Notes986.7 —Convertible Notes861.5 1,235.6Total long-term debt obligations3,248.0 4,153.2Total debt obligations$3,639.8 $4,267.7The debt maturity schedule for the Company’s obligations as of September 26, 2015 is as follows: 2016 2017 2018 2019 2020 2021 andThereafter TotalTerm Loan $75.0 $84.4 $121.9 $150.0 $1,050.0 — $1,481.3Revolver 175.0 — — — — — $175.02022 Senior Notes — — — — — 1,000.0 1,000.0Convertible Notes (1) 150.0 — 910.5 — — — 1,060.5 $400.0$84.4$1,032.4$150.0$1,050.0 $1,000.0$3,716.8 (1)Classified based on the earliest date of redemption for each respective issuance with the exception of the 2010 Notes which are convertible by theirrespective holders as further discussed below. In addition, the balance in fiscal 2018 reflects accretion on the 2013 Notes through September 26, 2015.Credit AgreementOn May 29, 2015, the Company and certain of its domestic subsidiaries entered into a Credit and Guaranty Agreement (the “Credit Agreement”) withBank of America, N.A., in its capacity as Administrative Agent, Swing Line Lender and L/C Issuer, and certain other lenders party thereto (collectively, the"Lenders"). This Credit Agreement replaced the Company's existing senior secured credit facility with Goldman Sachs Bank USA, in its capacity asadministrative agent and collateral agent and the lenders party thereto ("Prior Credit Agreement") entered into on August 1, 2012, and the proceeds under theCredit Agreement of $1.68 billion were used to pay off the amounts outstanding under the Prior Credit Agreement.F-26Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 credit facilities ("Credit Facilities") under the Credit Agreement consist of:•A $1.5 billion secured term loan to the Company with a final maturity date of May 29, 2020 (the “Term Loan”); and•A secured revolving credit facility under which the Borrowers (as defined below) may borrow up to $1 billion, subject to certain sublimits, with afinal maturity date of May 29, 2020 (the “Revolver”).The Company and one of its subsidiaries, Hologic GGO 4 Ltd ("Hologic U.K.") are the initial borrowers (the “Borrowers”) under the Credit Agreement.The Company's obligations under the Credit Agreement are guaranteed by certain of its domestic subsidiaries (the "Subsidiary Guarantors"). Hologic U.K.’sobligations under the Credit Agreement are guaranteed by the Company and the Subsidiary Guarantors.In addition to the Term Loan, the Company borrowed $175.0 million under the Revolver. Borrowings under the Revolver may be made in certainalternative currencies pursuant to the terms of the Credit Agreement. The Company has the ability, subject to the terms of the Credit Agreement, to designateany additional wholly-owned foreign subsidiary of the Company as a Designated Borrower (as defined in the Credit Agreement) to receive loans up to a $100million sublimit. The obligations of any Designated Borrower under such sublimit would be guaranteed by the Company and the Subsidiary Guarantors.Borrowings under the Credit Facilities bear interest, at the Company's option and in each case plus an applicable margin, as follows:•Term Loan: the Base Rate (as defined in the Credit Agreement) or the Eurocurrency Rate (i.e., the Libor rate); and•Revolver: if funded in U.S. dollars, the Base Rate or the Eurocurrency Rate, and, if funded in an alternative currency, the Eurocurrency Rate; and ifrequested under the swing line sublimit, the Base Rate.The applicable margin to the Base Rate and the Eurocurrency Rate is subject to specified changes depending on the total net leverage ratio as definedin the Credit Agreement. Current borrowings outstanding under the Credit Agreement bear interest at the Eurocurrency Rate plus the applicable margin of1.75% per annum. The Company is also required to pay a quarterly commitment fee on the undrawn committed amount available under the Revolver.The Company is required to make scheduled principal payments under the Term Loan in increasing amounts ranging from $18.75 million per three-month period commencing with the three-month period ending on September 25, 2015 to $37.5 million per three-month period commencing with the three-month period ending on September 28, 2018. The remaining balance of the Term Loan is due at maturity. Any amounts outstanding under the Revolver aredue at maturity. In addition, subject to the terms and conditions set forth in the Credit Agreement, the Company is required to make certain mandatoryprepayments from specified excess cash flows from operations (to the extent the Company’s net senior secured leverage ratio exceeds a certain ratio) and fromthe net proceeds of specified types of asset sales (subject to certain reinvestment rights), debt issuances and insurance recoveries (subject to certainreinvestment rights) (“Mandatory Prepayments”). Mandatory Prepayments are required to be applied by the Company, first, to the Term Loan, second, to anyoutstanding amount under the swing line sublimit, third, to the Revolver, and fourth to any outstanding amount under a letter of credit sublimit. Subject tocertain limitations, the Company may voluntarily prepay any of the credit facilities under the Credit Agreement without premium or penalty.Borrowings outstanding under either the Credit Agreement or the Prior Credit Agreement in fiscal 2015 had a weighted-average interest rate of 2.43%.The interest rate on the amounts outstanding at September 26, 2015 was 1.95%. Interest expense in fiscal 2015 under the Credit Agreement and the PriorCredit Agreement aggregated $54.7 million, which includes non-cash interest expense of $9.0 million, related to the amortization of the deferred issuancecosts and 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 Borrowers and the Subsidiary Guarantors, subject to negotiated exceptions, to incur additional indebtedness and additional lienson their assets, engage in mergers or acquisitions or dispose of assets, enter into sale-leaseback transactions, pay dividends or make other distributions,voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments, and change the nature of their businesses. The CreditAgreement also contains customary representations and warranties and events of default, including payment defaults, breach of representations andwarranties, covenant defaults, cross defaults and an event of default upon a change of control of the Company.F-27Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 ContentsBorrowings are secured by first-priority liens on, and a first-priority security interest in, substantially all of the assets of the Company, with certainexceptions. The Credit Agreement contains total net leverage ratio and interest coverage ratio financial covenants measured as of the last day of each fiscalquarter. The total net leverage ratio is 5.50:1.00 beginning on the Company's fiscal quarter ended September 26, 2015, and then decreases over time to4.00:1.00 for the quarter ending March 28, 2020. The interest coverage ratio is 3.75:1.00 beginning on the Company's fiscal quarter ended September 26,2015, and will remain as such for each quarter thereafter. The total net leverage ratio is defined as the ratio of the Company's consolidated net debt as of thequarter end to its consolidated adjusted EBITDA (as defined in the Credit Agreement) for the four-fiscal quarter period ending on the measurement date. Theinterest coverage ratio is defined as the ratio of the Company's consolidated adjusted EBITDA for the prior four-fiscal quarter period ending on themeasurement date to adjusted consolidated cash interest expense for the same measurement period. These terms, and the calculation thereof, are defined infurther detail in the Credit Agreement. The Company was in compliance with these covenants as of September 26, 2015.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 a 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 26, 2015.Pursuant to ASC 470, Debt (ASC 470), the accounting for the Credit Agreement was evaluated on a creditor-by-creditor basis with regard to the PriorCredit Agreement to determine whether each transaction should be accounted for as a modification or extinguishment. Certain creditors under the PriorCredit Agreement did not participate in this refinancing transaction and ceased being creditors of the Company. As a result, the Company recorded a debtextinguishment loss of $18.2 million in the third quarter of fiscal 2015 to write-off the pro-rata amount of unamortized debt discount and deferred issuancecosts related to these creditors. For the remainder of the creditors, this transaction has been accounted for as a modification because on a creditor-by-creditorbasis the present value of the cash flows between the two debt instruments before and after the transaction was less than 10%. Pursuant to ASC 470, subtopic50-40, third-party costs of $4.6 million related to this transaction were recorded as interest expense and $3.8 million were recorded as deferred issuance coststo be amortized over the term of the agreement. In addition, fees paid directly to the Lenders of $4.9 million were recorded as a debt discount.Prior Credit AgreementOn August 1, 2012, the Company and certain domestic subsidiaries (the “Guarantors”) entered into the Prior Credit Agreement with Goldman SachsBank USA, in its capacity as administrative and collateral agent, and the lenders party thereto (collectively, the “Prior Lenders”).The credit facilities under the Prior 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 Prior Credit Agreement, the Prior Lenders committed to provide senior secured financing in an aggregateamount of up to $2.8 billion. As of the closing of the Gen-Probe Incorporated acquisition on August 1, 2012, the Company borrowed $2.5 billion aggregateprincipal under the term loans of the Prior Credit Agreement. Net proceeds to the Company were $2.41 billion, after issuing the term loans at a discount anddeducting associated fees and expenses, all of which will be amortized to interest expense over the respective maturity dates of the debt. The proceeds wereused to fund a portion of the purchase price for the Gen-Probe acquisition.On March 20, 2013, the Company, the Guarantors, Goldman Sachs, and the Prior Lenders entered into Refinancing Amendment No. 1 (the “Prior CreditAgreement Amendment”) to the Prior Credit Agreement. The Prior Credit Agreement Amendment (i) refinanced the Company’s original Term Loan A with anew senior secured tranche A term loan facility with the same principal amount, maturity date and amortization schedule but with an applicable margin1.00% less than the original Term Loan A (at each margin level), (ii) refinanced the Company’s original Revolving Facility with a new senior securedrevolving credit facility with the same principal amount and maturity date, but with an applicable margin 1.00% less than the original Revolving Facility (ateach margin level), and (iii) amended certain covenants and terms of the Prior Credit Agreement.Effective as of the date of the Prior Credit Agreement Amendment, amounts outstanding under the new Term Loan A and the new Revolving Facilitybore 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., the Libor rate) plus 2.00% perannum. The applicable margin with respect to the new Term Loan A and the new Revolving Facility were subject to specified changes depending on theCompany’s total net leverage ratio, as defined in the Prior Credit Agreement.F-28Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 ContentsPursuant to ASC 470, the accounting for this refinancing was evaluated on a creditor by creditor basis to determine whether each transaction should beaccounted for as a modification or extinguishment. Certain creditors under the Prior Credit Agreement did not participate in this refinancing transaction andceased being creditors of the Company. As a result, the Company recorded a debt extinguishment loss of $3.2 million to write-off the pro-rata amount ofunamortized debt discount and deferred issuance costs related to these creditors for the initial borrowings under the Term Loan A facility. For the remainderof the creditors, this transaction was accounted for as a modification because the present value of the cash flows on a creditor by creditor basis between thetwo debt instruments was less than 10%. Pursuant to ASC 470, subtopic 50-40, third-party costs incurred directly related to the exchange were expensed asincurred. As such, the Company recorded issuance costs related to the refinancing of $2.4 million to interest expense in the second quarter of fiscal 2013.On August 2, 2013, the Company, the Guarantors, Goldman Sachs, and the Prior Lenders entered into Refinancing Amendment No. 2 (the “Prior CreditAgreement Amendment 2”) to the Prior Credit Agreement. The Prior Credit Agreement Amendment 2 (i) refinanced the Company’s original Term Loan Bwith a new senior secured tranche B term loan facility with the same principal amount (subject to the prepayment referenced below), maturity date andamortization schedule but with an applicable margin 0.75% less than the original Term Loan B, and (ii) amended certain covenants and terms of the PriorCredit Agreement. Effective as of the date of the Prior Credit Agreement Amendment 2, amounts outstanding under the new Term Loan B bore interest, at theCompany’s option: (A) at the Base Rate with a floor of 2.00%, plus 1.75% per annum, or (B) at the Adjusted Eurodollar Rate (i.e., the Libor rate) with a floorof 1.00%, plus 2.75% per annum. In connection with this refinancing, the Company voluntarily prepaid $200.0 million of principal of the Term Loan Bfacility.Pursuant to ASC 470, the accounting for this refinancing was consistent with that described above for the Prior Credit Agreement Amendment. As aresult, the Company recorded a debt extinguishment loss of $6.0 million to write-off the pro-rata amount of unamortized debt discount and deferred issuancecosts related to the voluntary prepayment of the Term Loan B facility. The Company expensed direct third-party costs of $1.1 million to interest expense inthe fourth quarter of fiscal 2013.On October 31, 2013, the Company voluntarily prepaid $100.0 million of its Term Loan B facility. Pursuant to ASC 470, the Company recorded a debtextinguishment loss of $2.9 million in the first quarter of fiscal 2014 to write-off the pro-rata amount of unamortized debt discount and deferred issuancecosts related to this voluntary prepayment.On February 26, 2014, the Company, the Guarantors, Goldman Sachs, and the Prior Lenders entered into Refinancing Amendment No. 3 to the PriorCredit Agreement and reduced the applicable interest rates. In connection with this refinancing, the Company voluntarily prepaid $25.0 million of the newsenior secured tranche B term loan facility. Pursuant to ASC 470, the accounting for this refinancing was evaluated on a creditor-by-creditor basis todetermine whether each transaction should be accounted for as a modification or extinguishment. Certain creditors under the Prior Credit Agreement did notparticipate in this refinancing transaction and ceased being creditors of the Company. As a result, the Company recorded a debt extinguishment loss of $4.4million in the second quarter of fiscal 2014 to write-off the pro-rata amount of unamortized debt discount and deferred issuance costs related to thesecreditors. For the remainder of the creditors, this transaction was accounted for as a modification because on a creditor-by-creditor basis the present value ofthe cash flows between the two debt instruments before and after the transaction was less than 10%. Pursuant to ASC 470, subtopic 50-40, third-party costsof $1.0 million related to this transaction were recorded to interest expense.On December 24, 2014, the Company voluntarily prepaid $300.0 million of its Term Loan B facility. Pursuant to ASC 470, the Company recorded adebt extinguishment loss of $6.7 million in the first quarter of fiscal 2015 to write-off the pro-rata amount of unamortized debt discount and deferred issuancecosts related to this voluntary prepayment.Borrowings outstanding under the Prior Credit Agreement in fiscal 2014 and 2013 had weighted-average interest rates of 2.89% and 3.70%,respectively. Interest expense under the Prior Credit Agreement totaled $75.3 million and $107.6 million for fiscal 2014 and 2013, respectively, whichincludes non-cash interest expense of $12.7 million and $14.5 million, respectively, related to the amortization of the deferred financing costs and accretionof the debt discount.The Prior Credit Agreement contained affirmative and negative covenants customarily applicable to senior secured credit facilities, includingcovenants restricting the ability of the Company and the guarantors, subject to negotiated exceptions, to: incur additional indebtedness and additional lienson their assets; engage in mergers or acquisitions or dispose of assets; enter into sale-leaseback transactions; pay dividends or make other distributions;voluntarily prepay other indebtedness; enter into transactions with affiliated persons; make investments; and change the nature of their business.The Prior Credit Agreement also contained total net leverage ratio and interest coverage ratio financial covenants measured as of the last day of eachfiscal quarter consistent with that described above under the Credit Agreement.F-29Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 ContentsSenior Notes2022 Senior NotesOn July 2, 2015, the Company completed a private placement of $1.0 billion aggregate principal amount of its 5.250% Senior Notes due 2022 (the“2022 Senior Notes”) at an offering price of 100% of the aggregate principal amount of the 2022 Senior Notes. The 2022 Senior Notes mature on July 15,2022 and bear interest at the rate of 5.250% per year, payable semi-annually on January 15 and July 15 of each year, commencing on January 15, 2016. TheCompany used the net proceeds of the 2022 Senior Notes, plus available cash to discharge the outstanding 6.25% Senior Notes due 2020 (the "Senior Notes")and redeemed such Senior Notes, in the aggregate principal amount of $1.0 billion on August 1, 2015 at an aggregate redemption price of $1.03 billion,reflecting a premium payment of $31.25 million. In addition, the Company made a final interest payment in the amount of $31.25 million for interest accruedto August 1, 2015, to holders of record of the Senior Notes as of July 15, 2015. As a result of this transaction, the Company recorded a debt extinguishmentloss in the fourth quarter of fiscal 2015 of $22.3 million, which included the pro rata premium payment and pro-rata debt issuance costs. The Companyevaluated the accounting under ASC 470 at the creditor-by-creditor level to determine modification versus extinguishment accounting.The Company recorded interest expense related to the 2022 Senior Notes and Senior Notes of $67.2 million, $64.0 million and $63.9 million in fiscal2015, 2014 and 2013, respectively, which includes non-cash interest expense of $2.1 million, $1.7 million and $1.6 million in fiscal 2015, 2014 and 2013,respectively, related to the amortization of the deferred financing costs.The 2022 Senior Notes were not registered, and will be not registered, under the Securities Act of 1933, as amended (the “Securities Act”), or any statesecurities laws, and were offered only to qualified institutional buyers in reliance on Rule 144A under the Securities Act and outside the United States inaccordance with Regulation S under the Securities Act. The 2022 Senior Notes are general senior unsecured obligations of the Company and are guaranteedon a senior unsecured basis by certain domestic subsidiaries of Hologic (the “Domestic Guarantors”).The 2022 Senior Notes were issued pursuant to an indenture (the "Indenture"), dated as of July 2, 2015, among the Company, the Domestic Guarantorsand Wells Fargo Bank, National Association, as trustee. The Indenture contains covenants which limit, among other things, the ability of the Company andthe Domestic Guarantors to incur additional indebtedness and additional liens on their assets, engage in mergers or acquisitions or dispose of assets, paydividends or make other distributions, enter into certain transactions with affiliated persons and to make certain investments. These covenants are subject to anumber of exceptions and qualifications, including the suspension of certain of these covenants upon the 2022 Senior Notes receiving an investment gradecredit rating. The Indenture does not require the Company to maintain any financial covenants.The Company may redeem the 2022 Senior Notes at any time prior to July 15, 2018 at a price equal to 100% of the aggregate principal amount soredeemed, plus accrued and unpaid interest, if any, to the redemption date and a make-whole premium set forth in the Indenture. The Company may alsoredeem up to 35% of the aggregate principal amount of the 2022 Senior Notes with the net cash proceeds of certain equity offerings at any time and from timeto time before July 15, 2018, at a redemption price equal to 105.250% of the aggregate principal amount so redeemed, plus accrued and unpaid interest, ifany, to the redemption date. The Company also has the option to redeem the 2022 Senior Notes on or after: July 15, 2018 through July 14, 2019 at 102.625%of par; July 15, 2019 through July 14, 2020 at 101.313% of par; and July 15, 2020 and thereafter at 100% of par. In addition, if the Company undergoes achange of control, as provided in the Indenture, the Company will be required to make an offer to purchase each holder’s 2022 Senior Notes at a price equalto 101% of their principal amount, plus accrued and unpaid interest, if any, to the repurchase date.The Company has evaluated the 2022 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.Senior NotesOn August 1, 2012, the Company completed a private placement of $1.0 billion aggregate principal amount of its Senior Notes at an offering price of100% of the aggregate principal amount of the Senior Notes. Net proceeds to the Company were $987.4 million after deducting underwriting fees andoffering expenses, which were being amortized to interest expense over the term of the Senior Notes. The Senior Notes bore interest at the rate of 6.25% peryear, payable semi-annually on February 1 and August 1 of each year, commencing on February 1, 2013. The Senior Notes were registered under theSecurities Act of 1933 in fiscal 2013. The Senior Notes were general senior unsecured obligations of the Company and were guaranteed on a senior unsecuredbasis by the Domestic Guarantors. The proceeds were used to fund a portion of the Gen-Probe acquisition.The indenture contained 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 additionalF-30Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentsindebtedness; pay dividends or repurchase or redeem capital stock; make certain investments; incur liens; enter into certain types of transactions with theCompany’s affiliates; and sell assets or consolidate or merge with or into other companies. The Company was not required to maintain any financialcovenants with respect to the Senior Notes.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”). On February 29, 2012, the Company entered intoseparate, privately-negotiated exchange agreements under which it retired $500.0 million in aggregate principal of the 2007 Notes for $500.0 million inaggregate principal of new 2.00% Convertible Senior Notes due March 1, 2042 (“2012 Notes”). 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 aggregateprincipal of new 2.00% Convertible Senior Notes due December 15, 2043 (“2013 Notes”). This exchange transaction was accounted for as a modification andno debt extinguishment loss 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 2013 Notes at any time on or after December 15, 2017. If, prior to maturity, a holder requires theCompany to repurchase the Convertible Notes or the Company elects to redeem the Convertible Notes, the repurchase or redemption price of eachConvertible Note will equal 100% of its principal amount, plus accrued and unpaid interest to, but excluding, the redemption or repurchase date, asapplicable.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 either a net sharesettlement or all cash election, such that upon conversion, the Company intends to pay the holders in cash for the principal amount of the Convertible Notesand, if applicable shares of its common stock or cash to satisfy the premium based on a calculated daily conversion value.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, subject to prior redemption or repurchase of the2010 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 2010 Notes havebeen called for redemption; orF-31Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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(4) upon the occurrence of specified corporate events. At the option of the holder, regardless of the foregoing circumstances, holders may convert theirrespective 2010 Notes at any time on or after September 15, 2037 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.During the fourth quarter of fiscal 2015, the closing price of the Company's common stock exceeded 130% of the applicable conversion price of its2010 Notes on at least 20 of the last 30 consecutive trading days of the quarter. Therefore holders of the 2010 Notes are able to convert their notes during thefirst quarter of fiscal 2016. As such, the Company classified the $142.2 million carrying value of its 2010 Notes (which have a principal value of $150.0million) as a current debt obligation. In the event the closing price conditions are met in the first quarter of fiscal 2016 or a future fiscal quarter, the 2010Notes will be convertible at a holder's option during the immediately following fiscal quarter. As of September 26, 2015, the if-converted value of the 2010Notes exceeded the aggregate principal amount by approximately $114.1 million. It is the Company's current intent and policy to settle any conversion ofthe 2010 Notes as if the Company had elected to make either a net share settlement or all cash election, such that upon conversion, the Company intends topay the holders in cash for the principal amount of the 2010 Notes and, if applicable shares of its common stock or cash to satisfy the premium based on acalculated daily conversion value.On various dates during the fourth quarter of fiscal 2015, the Company entered into privately negotiated repurchase transactions and extinguished$300.0 million principal of the 2010 Notes for a total payment of $543.7 million, which includes the conversion premium resulting from the Company'sstock price on the date of the transaction being in excess of the conversion price of $23.03. Under ASC 470, this transaction was accounted for as anextinguishment and derecognition of the 2010 Notes and resulted in a debt loss extinguishment of $15.5 million.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 December 1, 2041, subject to prior redemption or repurchase ofthe 2012 Notes, under any of the following circumstances: (1) during any calendar quarter if the last reported sale price of the Company’s common stockexceeds 130% 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 calendarquarter; (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 periodwas less than 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 2012Notes have been called for redemption; or (4) upon the occurrence of specified corporate events. None of these triggering events had occurred as ofSeptember 26, 2015. At the option of the holder, regardless of the foregoing circumstances, holders may convert their respective 2012 Notes at any time on orafter December 1, 2041 through the close of business on the second scheduled trading day immediately preceding the maturity date. The conversion rate willnot be adjusted for accrued interest or accreted principal in excess of the original $1,000 principal amount, as accrued interest and accreted principal will notbe convertible into common stock. None of these triggering events has occurred as of September 26, 2015.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, subject to priorredemption or repurchase of the 2013 Notes, under any of the following circumstances: (1) during any calendar quarter if the last reported sale price of theCompany’s common stock exceeds 130% of the conversion price for at least 20 trading days in the 30 consecutive trading days ending on the last tradingday 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 notefor each day of such period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on eachsuch 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 ofthe foregoingF-32Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentscircumstances, holders may convert their respective 2013 Notes at any time on or after September 15, 2043 through the close of business on the secondscheduled trading day immediately preceding the maturity date. The conversion rate will not be adjusted for accrued interest or accreted principal in excessof the original $1,000 principal amount, as accrued interest and accreted principal will not be convertible into common stock. None of these triggering eventshad occurred as of September 26, 2015.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 common stock. If the Company elects to satisfy its conversion obligation ina combination of cash and shares of the Company’s common stock, the Company is required to deliver up to a specified dollar amount of cash per $1,000original principal amount of Convertible Notes, and will settle the remainder of its conversion obligation in shares of its common stock, in each case basedon the daily conversion value calculated as provided in the respective indentures for the Convertible Notes. This net share settlement election is in theCompany’s sole discretion and does not require the consent of holders of the Convertible Notes. It is the Company’s current intent and policy to settle anyconversion of the Convertible Notes as if the Company had elected to make the net share settlement 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 over the expected life of the liability component (typically thedate of the earliest redemption) using the effective interest method. The liability component is initially recorded at its fair value, which is calculated using adiscounted cash flow technique. Key inputs used to estimate the fair value of the liability component included the Company’s estimated nonconvertible debtborrowing rate as of the measurement date (i.e., the date the Convertible Notes are issued), the amount and timing of cash flows, and the expected life of theConvertible Notes. The effective interest rate is estimated by comparing other companies’ debt issuances that had features similar to the Company’s debtexcluding the conversion feature and who had similar credit ratings during the same annual period as the Company. In addition, third-party transaction costsare required to be allocated to the liability and equity components based on their relative values. The original issuance of the 2007 Notes and both exchangetransactions for the 2010 Notes and 2012 Notes, which each included a derecognition and re-recognition, were accounted for under this accounting guidance.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.The Company accounted for the 2010 Notes extinguishment in fiscal 2015, discussed above, under the derecognition provisions of subtopic ASC 470-20-40, which requires the allocation of the fair value of the consideration transferred and transaction costs incurred to the extinguishment of the liabilitycomponent and the reacquisition of the equity component. In connection with this transaction, the Company recorded a debt extinguishment loss of $15.5million in the fourth quarter fiscal 2015. This debt extinguishment loss was comprised of the loss on the debt itself of $14.4 million, the write-off of the pro-rataF-33Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 debt issuance costs of $0.7 million allocated to the notes retired, and allocated third party costs of $0.4 million. The loss on the debt itself wascalculated as the difference between the fair value of the liability component of the 2010 Notes amount retired immediately before the respective exchangesand its related carrying value immediately before the repurchases. The fair value of the liability component was calculated using a discounted cash flowtechnique as described above, and the Company used an effective interest rate of 2.71% representing the estimated rate for non-convertible debt (with similarfeatures as the 2010 Notes excluding the conversion feature) issued by a company with a credit rating similar to the Company. 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 extinguishment. As aresult, on a gross basis, $246.1 million was allocated to the reacquisition of the equity component of the original instrument, which was recorded net ofdeferred taxes of $29.2 million within additional paid-in-capital.As of September 26, 2015 and September 27, 2014, the Convertible Notes and related equity components (recorded in additional paid-in-capital, net ofdeferred taxes) consisted of the following: 2015 20142010 Notes principal amount $150.0 $450.0Unamortized discount (7.8) (41.5)Net carrying amount $142.2 $408.5Equity component, net of taxes $20.0 $60.12012 Notes principal amount $500.0 $500.0Unamortized discount (19.7) (27.3)Net carrying amount $480.3 $472.7Equity component, net of taxes $49.2 $49.22013 Notes principal amount $370.0 $370.0Principal accretion 40.5 24.5Unamortized discount (29.3) (40.1)Net carrying amount $381.2 $354.4Equity component, net of taxes $131.5 $131.5Interest expense under the Convertible Notes is as follows: Years Ended September 26, 2015 September 27, 2014 September 28, 2013Amortization of debt discount$34.9 $37.1 $52.7Amortization of deferred financing costs1.7 1.9 3.0Principal accretion15.9 15.3 9.2Non-cash interest expense52.5 54.3 64.92.00% accrued interest (cash)18.2 22.3 34.4 $70.7 $76.6 $99.3If 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 26, 2015 and September 27, 2014.As of September 26, 2015, upon conversion, including the potential premium that could be payable on a fundamental change (as defined), theCompany would issue a maximum of approximately 44.3 million shares of common stock to the holders of the Convertible Notes.5. Fair Value MeasurementsF-34Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 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, and investments in interest rate cap derivative instruments, which are valued using analyses obtained from independent thirdparty valuation specialists based on market observable inputs, representing Level 2 assets. The fair values of the Company's interest rate cap derivativeinstruments represent the estimated amounts the Company would receive to terminate the contracts. Refer to Note 2 for further discussion and information onboth the equity investments and the interest rate cap derivative instruments.The Company has a payment obligation to the participants under its Nonqualified Deferred Compensation Plan (“DCP”). This liability is recorded atfair value based on the underlying value of certain hypothetical investments under the DCP as designated by each participant for their benefit. Since thevalue of the DCP obligation is based on market prices, the liability is classified within Level 1. In addition, in fiscal 2013, the Company had a contingentconsideration liability related 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 19, 2015Powered 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 26, 2015 Carrying Value Quoted Prices inActive Market forIdentical Assets(Level 1) SignificantOtherObservableInputs (Level 2) SignificantUnobservableInputs (Level 3)Assets: Marketable securities: Equity securities$15.2 $15.2 $— $—Mutual funds5.6 5.6 — —Interest rate cap - derivative6.9 — 6.9 —Total$27.7 $20.8 $6.9 $—Liabilities: Deferred compensation liabilities$29.4 $29.4 $— $—Total$29.4 $29.4 $— $— 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 $— $—There were no Level 3 assets or liabilities outstanding during fiscal 2015. Changes in the fair value of recurring fair value measurements usingsignificant unobservable inputs (Level 3), which solely consisted of contingent consideration liabilities, during the years ended September 27, 2014, andSeptember 28, 2013 were as follows: 2014 2013Balance at beginning of period$3.8 $86.4Contingent consideration recorded at acquisition— 0.5Fair value adjustments— 11.3Payments / Accruals(3.8) (94.4)Balance at end of period$— $3.8Assets 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, the Companyrecorded goodwill impairment charges of $1.1 billion related to its Molecular Diagnostics reporting unit. This adjustment falls within Level 3 of the fairvalue hierarchy due to the use of significant unobservable inputs to determine fair value. The fair value measurement was determined using a DCF analysis,and the amount and timing of future cash flows within the analysis were based on the Company’s most recent operational budgets, long-range strategic plansand other estimates at the time such remeasurements were made.In 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.F-36Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 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 its 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 $4.2 million and $5.2 million atSeptember 26, 2015 and September 27, 2014, 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 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)The above fair value amounts represent only those individual assets remeasured and not the consolidated balances. Refer to Note 4 for disclosure of thenonrecurring fair value measurement related to the debt extinguishment losses recorded in fiscal 2015, 2014 and 2013.Disclosure of Fair Value of Financial InstrumentsThe Company’s financial instruments mainly consist of cash, accounts receivable, marketable securities, cost-method equity investments, insurancecontracts, interest rate cap agreements, DCP liability, accounts payable and debt obligations. The carrying amounts of the Company’s cash, accountsreceivable and accounts payable approximate their fair value due to the short-term nature of these instruments. The Company’s marketable securities andinterest rate cap agreements are recorded at fair value. The carrying amount of the insurance contracts are recorded at the cash surrender value, as required byU.S. GAAP, which approximates fair value, and the related DCP liability 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 $1.66 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 as of both September 26, 2015 and September 27, 2014 based on their trading price, representing a Level 1measurement. The fair value of theF-37Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 ContentsCompany’s Convertible Notes is based on the trading prices of the respective notes and represents a Level 1 measurement. Refer to Note 4 for the carryingamounts of the various components of the Company’s debt.The estimated fair values of the Company’s Convertible Notes at September 26, 2015 and September 27, 2014 are as follows: 2015 20142010 Notes264.1 536.62012 Notes688.2 531.72013 Notes471.8 401.1 $1,424.1 $1,469.46. 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.7. Income TaxesThe Company’s income (loss) before income taxes consisted of the following: Years endedSeptember 26, 2015 September 27, 2014 September 28, 2013Domestic $158.3 $95.1 $(1,184.6)Foreign 18.9 (47.0) (8.3) $177.2 $48.1 $(1,192.9)F-38Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 contained the following components: Years endedSeptember 26, 2015 September 27, 2014 September 28, 2013Federal: Current $185.2 $242.2 $154.9Deferred (137.0) (212.5) (182.7) 48.229.7(27.8)State: Current 3.5 22.1 15.3Deferred (11.0) (24.7) (16.7) (7.5) (2.6) (1.4)Foreign: Current 5.7 9.6 7.7Deferred (0.8) (5.9) 1.4 4.9 3.7 9.1 $45.6 $30.8 $(20.1)The income tax provision (benefit) differed from the tax provision computed at the U.S. federal statutory rate due to the following: Years endedSeptember 26, 2015 September 27, 2014 September 28, 2013Income tax provision (benefit) at federal statutory rate 35.0 % 35.0 % (35.0)%Increase (decrease) in tax resulting from: Goodwill impairment — — 32.8Domestic production activities deduction (10.1) (30.6) (1.2)State income taxes, net of federal benefit 1.2 4.3 (0.2)Tax credits (3.8) (5.2) (1.2)Unrecognized tax benefits (1.8) 2.5 0.3Contingent consideration — — 2.6Cumulative translation adjustment write-off 1.9 — —Non-deductible compensation 1.9 5.5 0.2Foreign rate differential (1.6) 10.7 0.1Change in valuation allowance 1.0 35.4 (0.8)Other 2.1 6.3 0.7 25.8 % 63.9 % (1.7)%The Company's effective tax rate in fiscal 2015 was lower than the statutory rate primarily due to the domestic production activities deduction benefit.The Company’s effective tax rate in fiscal 2014 was higher than the statutory rate primarily due to unbenefited foreign losses partially offset by the domesticproduction 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 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.F-39Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 significant deferred tax assets and liabilities were as follows: September 26, 2015 September 27, 2014Deferred tax assets Net operating loss carryforwards $45.4 $54.2Capital losses 25.7 22.3Non-deductible accruals 16.3 16.8Non-deductible reserves 26.8 27.1Stock-based compensation 24.3 25.0Research and other credits 14.5 12.3Nonqualified deferred compensation plan 11.3 13.7Other temporary differences 10.2 11.6 174.5 183.0Less: valuation allowance (60.9) (62.8) $113.6 $120.2Deferred tax liabilities Depreciation and amortization $(1,171.5) $(1,314.6)Debt discounts and deferrals (100.1) (120.9)Debt issuance costs (1.4) (6.8)Investment in subsidiary — (13.9) $(1,273.0) $(1,456.2) $(1,159.4) $(1,336.0)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 decreased $1.9 million in fiscal 2015 from fiscal 2014 primarily due to foreignexchange rate fluctuations offset by unrealized capital losses from investment write-downs.At September 26, 2015, the Company had $17.3 million, $91.5 million and $56.6 million in gross federal, state, and foreign net operating losses,respectively, and $4.7 million, $13.0 million and $1.5 million in federal, state, and foreign credit carryforwards, respectively. These losses and credits expirebetween 2016 and 2035, except for $54.9 million in losses and $9.0 million in credits that have unlimited carryforward periods. The federal, state, andforeign net operating losses exclude $4.5 million, $180.5 million and $49.0 million, respectively, in net operating losses, that the Company expects willexpire unutilized.The Company had $154.7 million in gross unrecognized tax benefits, excluding interest, at September 26, 2015 and $137.0 million at September 27,2014. At September 26, 2015, $74.9 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 $2.0 to $4.0 million due to statutes oflimitations expiring and potential favorable settlements with taxing authorities.F-40Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 2015 and 2014 was as follows: 2015 2014Balance at beginning of fiscal year $137.0 $121.8Tax positions related to current year: Additions 11.0 10.8Reductions — —Tax positions related to prior years: Additions related to change in estimate 21.1 10.9Reductions (10.3) (2.7)Payments (0.8) —Lapses in statutes of limitations and settlements (3.7) (3.8)Acquired tax positions: Additions related to reserves acquired from acquisitions 0.4 —Balance as of the end of the fiscal year $154.7 $137.0The 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 26, 2015 and September 27, 2014, gross accrued interest was $9.9 million and $8.3 million, respectively. AtSeptember 26, 2015, 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 2011. State income tax returns are generally no longer subject to examination prior to fiscal year 2011. TheInternal Revenue Service commenced its fiscal 2011 federal income tax return examination in July 2013. The Company is also undergoing tax examinationsin China and Germany for calendar 2004 through 2013, and fiscal 2008 through 2010, respectively. Massachusetts is scheduled to begin a state taxexamination for fiscal 2012 through 2013 in fiscal 2016.The Company intends to reinvest, indefinitely, approximately $60.9 million in unremitted foreign earnings. It is not practicable to estimate theadditional taxes that may be payable upon repatriation.8. Stockholders' Equity and Stock-Based CompensationStock 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 26, 2015, the Company hadnot repurchased any shares under this program.Stock-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 two share-based compensation plans pursuant to which outstanding awards have been made, but fromwhich no further awards can or will be made—i) the 1995 Combination Stock Option Plan and ii) the 1999 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 26, 2015, the Company had 9.5 million shares available for future grant under the 2008 Equity Plan.F-41Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 following presents stock-based compensation expense in the Company’s Consolidated Statements of Operations in fiscal 2015, 2014 and 2013: 2015 2014 2013Cost of revenues $8.7 $7.3 $7.0Research and development 8.6 8.4 7.2Selling and marketing 8.8 8.2 8.9General and administrative 29.1 19.5 20.2Restructuring and divestiture 4.1 6.6 9.0 $59.3$50.0$52.3Grant-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 2015, 2014 and 2013and related assumptions are noted in the following table: Years endedSeptember 26, 2015 September 27, 2014 September 28, 2013Options granted (in millions) 1.3 2.4 2.6Weighted-average exercise price $27.68 $22.01 $20.29Weighted-average grant date fair value $9.95 $7.67 $7.03Assumptions: Risk-free interest rates 1.7% 1.2% 0.5%Expected life (in years) 5.3 4.4 4.4Expected volatility 38.6% 41.4% 43.7%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 recognized compensationexpense under the accelerated method as prescribed by ASC 718, and all tranches have vested due to the defined average stock prices being met for therequired period. In addition, per the terms of his employment agreement, the Company granted 0.2 million restricted stock units ("RSUs") to matchMr. MacMillan’s purchase of 0.2 million shares of the Company’s common stock on the open market in the second quarter of fiscal 2014. The RSUs cliff vestthree years from the date of grant, and the Company is accounting for this grant as a liability award pursuant to ASC 718 because this RSU award contains anadditional vesting condition (the requirement that Mr. MacMillan retain the matching shares during the vesting period) that is not service, performance ormarket based. As such, this award is marked-to-market at each reporting period, and at September 26, 2015, $4.6 million has been recorded as a liability forthis award.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 7.0% as of September 26, 2015 depending on thespecific employee group. This analysis is re-evaluated annually and theF-42Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentsforfeiture rate will be adjusted as necessary. Ultimately, the actual stock-based compensation expense recognized will only be for those stock options andRSUs that vest.Stock-based compensation expense related to stock options was $12.2 million, $16.3 million, and $23.7 million in fiscal 2015, 2014 and 2013,respectively. Stock compensation expense related to stock units, including RSUs, performance stock units ("PSUs") and MSUs, was $43.7 million, $30.6million, and $26.0 million in fiscal 2015, 2014 and 2013, respectively. The related tax benefit recorded in the Consolidated Statements of Operations was$17.7 million, $15.3 million and $17.2 million in fiscal 2015, 2014 and 2013, respectively. Included within stock-based compensation expense in fiscal2015, 2014 and 2013 is $4.1 million, $6.6 million and $7.9 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 26, 2015, there was $22.8 million and $73.6 million of unrecognized compensation expense related to stockoptions and RSUs, respectively, to be recognized over a weighted average period of 3.4 years and 2.5 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 26, 2015: Numberof Shares (inmillions) Weighted-AverageExercise Price Weighted-AverageRemainingContractual Life(in Years) AggregateIntrinsicValue (in millions)Options outstanding at September 27, 2014 9.8 $20.59 4.1 $46.4Granted 1.3 27.68 Canceled/ forfeited (1.4) 23.36 Exercised (3.0) 18.89 $42.0Options outstanding at September 26, 2015 6.7 $22.21 4.9 $119.1Options exercisable at September 26, 2015 3.0 $21.05 3.2 $56.6Options vested and expected to vest at September 26, 2015 (1) 6.6 $22.18 4.8 $118.1 (1)This represents the number of vested stock options as of September 26, 2015 plus the unvested outstanding options at September 26, 2015 expectedto vest in the future, adjusted for estimated forfeitures.During fiscal 2014 and 2013, 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 $34.7 million and $37.6 million, respectively.A summary of the Company’s RSU activity during the year ended September 26, 2015 is presented below: Non-vested Shares Number ofShares(in millions) Weighted-AverageGrant-Date FairValueNon-vested at September 27, 2014 4.1 $20.67Granted 1.6 27.19Vested (1.3) 20.40Forfeited (0.7) 21.37Non-vested at September 26, 2015 3.7 $24.54The 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 2015, 2014 and 2013 the total fair value ofRSUs vested was $27.2 million, $22.6 million and $27.3 million, respectively.F-43Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 granted approximately 0.3 million and 0.5 million PSUs during fiscal 2015 and 2014, respectively, to members of its seniormanagement team, which have a weighted-average grant date fair value of $26.58 and $21.69, respectively. Each recipient of the PSUs is eligible to receivebetween zero and 200% of the target number of shares of the Company’s common stock at the end of three years provided the Company’s defined Return onInvested Capital metrics are achieved. The Company is recognizing compensation expense ratably over the required service period based on its estimate thatit is probable that the measurement criteria will be achieved and the targeted number of shares will vest. If there is a change in the estimate of the number ofshares that are probable of vesting, the Company will cumulatively adjust compensation expense in the period 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 2015, 2014 and 2013 was $3.4 million, $3.1 million and $2.7 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 26, 2015 September 27, 2014 September 28, 2013Assumptions: Risk-free interest rates 0.10% 0.08% 0.11%Expected life (in years) 0.5 0.5 0.5Expected volatility 27.4% 30.0% 32.0%Dividend yield — — —9. Profit Sharing 401(k) PlanThe Company has a qualified profit sharing plan covering substantially all of its employees. The Company made contributions of $14.4 million, $13.3million and $13.4 million for fiscal 2015, 2014 and 2013, respectively.10. Deferred Compensation PlansNonqualified 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.Upon 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 $1.8 million, $3.7 million and $2.7 millionin fiscal 2015, 2014 and 2013, respectively. The full amount of the discretionary contribution, net of forfeitures, along with employee deferrals is recordedwithin accrued expenses and totaled $29.4 million and $35.8 million at September 26, 2015 and September 27, 2014, 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 26, 2015 andSeptember 27, 2014 was $27.5 million and $22.4 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 2015, 2014 and 2013, are recorded within other income(expense), net.F-44Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 addition, the Company had an additional $5.6 million and $15.4 million of investments in mutual funds to fund the DCP at September 26, 2015 andSeptember 27, 2014, respectively. The mutual funds are classified as trading and the gains and losses in these investments are recorded in other income(expense), net.Deferred Equity PlanEffective September 17, 2015, the Company adopted the Hologic, Inc. Deferred Equity Plan (the “DEP”). The DEP is designed to allow executives andnon-employee Directors to accumulate Company stock in a tax-efficient manner to meet their long-term equity accumulation goals and shareholderownership guidelines. Under the DEP, eligible participants may elect to defer the settlement of RSUs and PSUs granted under the 2008 Equity Plan untilseparation from service or separation from service plus a fixed number of years. Participants may defer settlement by vesting tranche. Although the equity willvest on schedule, if deferral of settlement is elected, no shares will be issued until the settlement date. The settlement date will be the earlier of death,disability, change in control of the Company or separation from service plus the number of years of deferral elected by the participant.11. Commitments and ContingenciesContingent 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.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. The second and final measurement period ended during the second quarter of fiscal2013, resulting in a contingent consideration liability of $93.8 million. Of this amount, $86.9 million was paid to the former Interlace stockholders in thesecond quarter of fiscal 2013. The remainder was withheld for legal indemnification provisions and is being used to pay qualifying legal expenses. OnOctober 29, 2013, the Interlace stockholder representatives filed a complaint in the Delaware Court of Chancery alleging breach of contract for issues relatedto the payment of contingent consideration under the Interlace acquisition agreement, and sought $14.7 million in additional payments. On October 20,2014, a trial was held in Delaware. The parties executed a settlement agreement in January 2015 for an amount less than that sought. The effect of thissettlement was not material to the Company's financial statements.In connection with the Company’s acquisition of TCT International Co. Ltd. in June 2011, the Company had an obligation to certain of the former TCTshareholders, based on future employment, to make contingent payments over a two year period provided certain revenue milestones were met. Theseearnouts were recorded as compensation expense ratably over the required service periods. The second and final earn-out period was completed in the thirdquarter of fiscal 2013, and the Company paid $87.4 million of this earn-out in the fourth quarter of fiscal 2013. The remaining $31.1 million of this earn-outwas paid in the first quarter of 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. The remaining $0.7 million was paid out in the second quarter of fiscal 2015.F-45Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 ContentsThere was no contingent consideration expense recorded in fiscal 2015 or fiscal 2014. A summary of amounts recorded to the Consolidated Statementsof Operations is 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 $91.3Finance 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 26, 2015, the Company has recorded $3.1 million in accrued expenses and $33.8million 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.Future minimum lease payments, including principal and interest, under these leases were as follows at September 26, 2015: Fiscal 2016$3.1Fiscal 20173.1Fiscal 20182.9Fiscal 20190.3Total minimum payments9.4Less-amount representing interest(1.4)Total$8.0Non-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 BalanceSheets. 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 26, 2015, purchasecommitments are as follows: Fiscal 2016$34.6Fiscal 20174.0Fiscal 20183.0Fiscal 20190.8Total$42.4In 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 forF-46Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contentsminimum payments under certain collaboration agreements. At September 26, 2015, minimum commitments for these agreements are as follows: Fiscal 2016$1.3Fiscal 20170.7Fiscal 20180.6Fiscal 20190.6Fiscal 20200.6Thereafter3.3Total$7.1Concentration 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.Operating 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 26, 2015, 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 26, 2015 are as follows: Fiscal 2016$16.3Fiscal 201714.5Fiscal 201812.5Fiscal 20197.9Fiscal 20206.0Thereafter21.8Total$79.0Rent expense, net of sublease income from these locations, was $19.2 million, $21.1 million, and $19.9 million for fiscal 2015, 2014 and 2013,respectively.The Company subleases a portion of a building it owns and some of its facilities and has received aggregate rental income of $2.0 million, $1.8 millionand $1.9 million in fiscal 2015, 2014 and 2013, respectively, which has been recorded as an offset to rent expense. The future minimum annual rental incomepayments under these sublease agreements at September 26, 2015 are as follows: Fiscal 2016$2.0Fiscal 20172.0Fiscal 20181.9Fiscal 20191.9Fiscal 20201.3Thereafter1.2Total$10.3F-47Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contents12. 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. The Company intends to file post-trial motions seeking to reverse the jury’s verdict. The USPTO has issued final decisionsthat the claims of the ‘459 and the '359 patents asserted as part of the litigation are not patentable. Smith & Nephew has appealed these decisions to the U.S.Patent Trial and Appeal Board. At this time, based on available information regarding this litigation, the Company is unable to reasonably assess the ultimateoutcome of this case or determine an estimate, or a range of estimates, of potential losses.In January 2012 , Enzo filed suit against Gen-Probe in the United States District Court for the District of Delaware. The Gen-Probe complaint allegedthat certain of Gen-Probe’s diagnostics products, including products that incorporate Gen-Probe’s patented hybridization protection assay technology, suchas the Aptima Combo 2 and Aptima HPV assays, infringe Enzo’s U.S. patent 6,992,180. On March 6, 2012, Enzo Life Sciences, Inc. (“Enzo”) filed suit againstthe Company in the United States District Court for the District of Delaware. The complaint alleged that certain of the Company’s molecular diagnosticsproducts, including without limitation products based on its proprietary Invader chemistry, such as Cervista HPV HR and Cervista HPV 16/18, infringeEnzo’s U.S. patent 6,992,180. The complaint seeks permanent injunctive relief and unspecified damages. On September 30, 2013, Enzo amended its list ofaccused products to include 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 court issued a Markman order on July 7, 2015 construing the claims, and it isexpected that summary judgment motions will be heard in the fall of 2016. At this time, based on available information regarding this litigation, theCompany is unable to reasonably assess the ultimate outcome of this case or determine an estimate, or a range of estimates, of potential losses.On March 27, 2015, Enzo filed an additional suit against the Company in the United States District Court for the District of Delaware, The complaintalleged that certain additional Company molecular diagnostic products, including, inter alia, the Procleix Parvo/HAV assays and coagulation products,including the Invader Factor II test and the Invader Factor V test, also infringe U.S. Patent 6,992,180. The complaint further alleged that certain of theCompany’s molecular diagnostic products, including Hologic’s Progensa PCA3 products, all Aptima products and all Procleix products infringe Enzo’s U. S.Patent 7,064,197. On June 11, 2015, this matter was stayed pending the resolution of summary judgment motions in the 2012 case referenced above. At thistime, based on available information regarding this litigation, the Company is unable to reasonably assess the ultimate outcome of this case or determine anestimate, 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 sought $14.7 million in additional payments. OnOctober 20, 2014, a trial was held in Delaware. The parties executed a settlement agreement in January 2015 for an amount less than that sought. The effect ofthis settlement was not material to the Company's financial statements.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.F-48Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Contents13. 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 $253.1 million, $223.3 million and $197.9 million under this collaboration agreement in fiscal2015, 2014, and 2013 respectively.14. 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 its 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 revenues and operating income (loss) adjusted to exclude the effect of non-cash charges, such as intangible asset amortization expense,intangible asset impairment charges, contingent consideration charges, restructuring and divestiture charges, and other one-time or unusual items, and relatedtax effects.F-49Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 ContentsIdentifiable 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 2015, 2014, and 2013 was as follows: Years ended September 26, 2015 September 27, 2014 September 28, 2013Total revenues: Diagnostics $1,211.8 $1,186.8 $1,189.8Breast Health 1,063.4 944.7 905.1GYN Surgical 335.8 307.9 307.1Skeletal Health 94.0 91.3 90.3 $2,705.0$2,530.7 $2,492.3Operating income (loss): Diagnostics $109.5 $48.7 $(1,149.1)Breast Health 296.3 187.6 216.1GYN Surgical 38.6 30.3 19.7Skeletal Health 10.7 13.1 7.1 $455.1 $279.7 $(906.2)Depreciation and amortization: Diagnostics $358.7 $376.0 $369.8Breast Health 28.6 41.7 40.1GYN Surgical 102.7 104.6 105.2Skeletal Health 1.4 0.9 0.9 $491.4$523.2 $516.0Capital expenditures: Diagnostics $55.6 $52.2 $51.6Breast Health 12.8 10.0 16.4GYN Surgical 9.5 8.0 9.1Skeletal Health 0.4 0.4 0.6Corporate 11.1 9.6 12.4 $89.4$80.2 $90.1 September 26, 2015 September 27, 2014 September 28, 2013Identifiable assets: Diagnostics $4,055.8 $4,383.5 $4,667.9Breast Health 815.4 859.8 932.2GYN Surgical 1,658.1 1,748.2 1,849.5Skeletal Health 25.3 26.1 33.5Corporate 1,115.5 1,397.1 1,517.7 $7,670.1 $8,414.7 $9,000.8The 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.F-50Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 ContentsRevenues by geography as a percentage of total revenues were as follows: Years ended September 26, 2015 September 27, 2014 September 28, 2013United States 76.0% 75.1% 74.9%Europe 11.8% 13.3% 13.2%Asia-Pacific 8.5% 7.7% 8.1%All others 3.7% 3.9% 3.8% 100.0% 100.0% 100.0%The Company’s property, plant and equipment, net are geographically located as follows: September 26, 2015 September 27, 2014 September 28, 2013United States $369.1 $366.8 $386.0Costa Rica 27.7 27.9 29.3Europe 50.8 56.0 61.5All other countries 9.5 11.2 14.7 $457.1 $461.9 $491.515. Accrued Expenses and Other Long-Term LiabilitiesAccrued expenses and other long-term liabilities consisted of the following: September 26, 2015 September 27, 2014Accrued Expenses Compensation and employee benefits $173.2 $157.6Interest 14.6 18.0Income and other taxes 13.3 9.8Other 71.0 76.7 $272.1 $262.1 September 26, 2015 September 27, 2014Other Long-Term Liabilities Reserve for income tax uncertainties $145.1 $131.4Accrued lease obligation—long-term 34.0 34.1Pension liabilities 10.1 10.8Other 11.7 7.1 $200.9 $183.416. 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 26, 2015 and September 27, 2014, the Company’s pension liability was $10.0 million and $10.3 million, respectively, which is primarily recordedas a component of long-term liabilities in the Consolidated Balance Sheets. Under German law, there are no rules governing investment or statutorysupervision of the pension plan. As such, there is no minimum funding requirement imposed on employers. Pension benefits are safeguarded by the PensionGuaranty Fund, a form of compulsory reinsurance that guarantees an employee will receive vested pension benefits in the event of insolvency. The pensionplans were closed on December 31, 1997 and only eligible employees at that date could participate in the plans prior to closing to new participants.The tables below provide a reconciliation of benefit obligations, plan assets, funded status, and related actuarial assumptions of the Company’s GermanPension Benefits.F-51Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 ContentsChange in Benefit Obligation Years endedSeptember 26, 2015 September 27, 2014 September 28, 2013Benefit obligation at beginning of year $(10.3) $(10.1) $(9.7)Service cost — — —Interest cost (0.3) (0.3) (0.4)Plan participants’ contributions — — —Actuarial (loss) gain (0.9) (0.8) 0.2Foreign exchange gain (loss) 1.2 0.6 (0.5)Benefits paid 0.3 0.3 0.3Benefit obligation at end of year (10.0)(10.3)(10.1)Plan assets — — —Benefit obligation at end of year$(10.0)$(10.3)$(10.1)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 26, 2015 September 27, 2014 September 28, 2013Service cost $— $— $—Interest cost 0.3 0.3 0.4Expected return on plan assets — — —Amortization of prior service cost — — —Recognized net actuarial gain — — —Net periodic benefit cost $0.3$0.3$0.4 Weighted-Average Net Periodic Benefit Cost Assumptions 2015 2014 2013Discount rate 2.05% 2.95% 3.60%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 $10.0 million and$10.3 million at September 26, 2015 and September 27, 2014, respectively, and the accumulated benefit obligation for the German Pension Benefits was$10.0 million and $10.3 million at September 26, 2015 and September 27, 2014, 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 $0.1 million and $0.2 million at September 26, 2015 and September 27, 2014, respectively.F-52Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 26, 2015: 2016$0.32017$0.32018$0.42019$0.42020$0.42021 to 2025$2.0The 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 2015, 2014 and 2013. Additionally, the Company has Swiss pension plans, which were insignificant in fiscal2015, 2014, and 2013.17. Quarterly Statement of Operations Information (Unaudited)The following table presents a summary of quarterly results of operations for fiscal 2015 and 2014: 2015FirstQuarter SecondQuarter ThirdQuarter FourthQuarterTotal revenue $652.8 $655.5 $693.9 $702.8Gross profit 338.6 336.0 378.7 379.4Net income (1) 29.2 47.8 29.4 25.2Diluted net income per common share $0.10 $0.17 $0.10 $0.09 2014FirstQuarter SecondQuarter ThirdQuarter FourthQuarterTotal revenue $612.4 $625.0 $632.6 $660.6Gross profit 305.6 282.1 312.8 345.0Net income (loss) (2) (5.4) (16.8) 11.3 28.2Diluted net income (loss) per common share $(0.02) $(0.06) $0.04 $0.10 (1)Net income in the first quarter of fiscal 2015 included restructuring charges of $8.0 million and a debt extinguishment loss of $6.7 million. Netincome in the third quarter of fiscal 2015 included restructuring and divestiture charges of $11.9 million and a debt extinguishment loss of $18.2million. Net income in the fourth quarter of fiscal 2015 included restructuring charges of $6.5 million, a debt extinguishment loss of $37.8 million,and an other-than-temporary impairment charge of $7.8 million related to a marketable security.(2)Net loss in the first quarter of fiscal 2014 included restructuring charges of $18.4 million and a debt extinguishment loss of $2.9 million. Net loss inthe second 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.F-53Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 Preferred Stock 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 July 2, 2015, by and among Hologic, the guarantors party thereto and WellsFargo Bank, National Association, as Trustee. 8-K 07/02/2015 4.11 Form of 5.250% Senior Note due 2022 (included in Exhibit 4.10). 8-K 07/02/2015 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 F-54Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 EndDate10.5* The 2003 Incentive Award Plan of Gen-Probe Incorporated as amended and restated. S-8 08/02/2012 10.6* Hologic Amended and Restated 2008 Equity Incentive Plan. 8-K 03/11/2013 10.7* Form of Stock Option Award Agreement Under 2008 Equity Incentive Plan (adopted fiscal2014). 8-K 11/12/2013 10.8* Form of Stock Option Award Agreement Under 2008 Equity Incentive Plan (adopted fiscal2015). 8-K 11/05/2014 10.9* Form of Stock Option Award Agreement Under 2008 Equity Incentive Plan (adopted fiscal2016). 8-K 10/14/2015 10.10* Form of Restricted Stock Unit Award Agreement Under 2008 Equity Incentive Plan (adoptedfiscal 2014). 8-K 11/12/2013 10.11* Form of Restricted Stock Unit Award Agreement Under 2008 Equity Incentive Plan (adoptedfiscal 2016). 8-K 10/14/2015 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 Performance Stock Unit Award Agreement Under 2008 Equity Incentive Plan(adopted fiscal 2016). 8-K 11/06/2015 10.15* Form of Independent Director Stock Option Award Agreement Under 2008 Equity IncentivePlan (annual grant, adopted fiscal 2014). 10-K 09/28/2013 10.16* Form of Independent Director Stock Option Award Agreement Under 2008 Equity IncentivePlan (annual grant, adopted fiscal 2015). 10-K 09/27/2014 10.17* Form of Independent Director Restricted Stock Unit Award Agreement Under 2008 EquityIncentive Plan (annual grant). 10-K 09/28/2013 10.18* Form of Independent Director Stock Option Award Agreement Under 2008 Equity IncentivePlan (initial grant, adopted fiscal 2014). 10-K 09/28/2013 10.19* Form of Independent Director Stock Option Award Agreement Under 2008 Equity IncentivePlan (initial grant, adopted fiscal 2015). 10-K 09/27/2014 10.20* Form of Independent Director Restricted Stock Unit Award Agreement Under 2008 EquityIncentive Plan (initial grant). 10-K 09/28/2013 10.21* Hologic 2012 Employee Stock Purchase Plan. 8-K 03/08/2012 10.22* Hologic 2015 Short-Term Incentive Plan. 8-K 11/10/2014 10.23* Hologic Short-Term Incentive Plan. 8-K 11/06/2015 10.24* Hologic Amended and Restated Deferred Compensation Program. 8-K 09/21/2015 10.25* Hologic Deferred Equity Plan. 8-K 09/21/2015 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. (1) 10-Q 12/29/2012 10.29* Form of Senior Executive Officer Change of Control Agreement. (1) 8-K 11/17/2009 Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 EndDate10.30* Form of Senior Vice President Severance Agreement. (1) 10-K 09/28/2013 10.31* Separation Agreement and General Release of All Claims dated December 11, 2013 by andbetween John W. Cumming and Hologic. 10-Q 12/28/2013 10.32* Separation Agreement and General Release of All Claims dated November 10, 2014 by andbetween Mark J. Casey and Hologic. 8-K 11/10/2014 10.33* Employment Agreement dated December 6, 2013 by and between Stephen P. MacMillan andHologic. 8-K 12/09/2013 10.34* Amended and Restated Employment Agreement by and between the Company and Stephen P.MacMillan, dated September 18, 2015. 8-K 09/21/2015 10.35* Form of Price Targets Performance Stock Unit Award Agreement. 8-K 12/09/2013 10.36* Form of Matching Restricted Stock Unit Award Agreement. 8-K 12/09/2013 10.37* Change of Control Agreement dated December 6, 2013 by and between Stephen P. MacMillanand Hologic. 8-K 12/09/2013 10.38* Separation and Release Agreement dated September 2, 2014 by and between Rohan F. Hastieand Hologic. 8-K 09/08/2014 10.39* Offer Letter dated March 9, 2014 by and between Eric B. Compton and Hologic. 8-K 03/14/2014 10.40* Severance and Change of Control Agreement dated March 9, 2014 by and between Eric B.Compton and Hologic. (2) Filed herewith 10.41* Transition Agreement dated March 13, 2014 by and between Glenn P. Muir and Hologic. 8-K 03/14/2014 10.42* Transition and Severance Agreement dated May 1, 2014 by and between David P. Harding andHologic. 10-Q 03/29/2014 10.43* Settlement and Release Agreement dated May 1, 2014 by and between David P. Harding andHologic. 10-Q 03/29/2014 10.44* Offer Letter dated May 8, 2014 by and between Robert W. McMahon and Hologic. 8-K 05/13/2014 10.45* Severance and Change of Control Agreement dated May 8, 2014 by and between Robert W.McMahon and Hologic. (2) Filed herewith 10.46* Offer Letter dated May 4, 2014 by and between Peter J. Valenti and Hologic. 10-Q 06/28/2014 10.47* Senior Vice President Severance Agreement dated May 26, 2014 by and between Peter J. Valentiand Hologic. 10-K 09/27/2014 10.48* Offer Letter dated August 21, 2014 by and between Thomas A. West and Hologic. 10-K 09/27/2014 10.49* Senior Vice President Severance Agreement dated October 3, 2014 by and between Thomas A.West and Hologic. 10-K 09/27/2014 10.50* Letter of Intent dated February 27, 2014 and Terms and Conditions of Employment dated March10, 2014 by and between Claus Egstrand and Hologic. 10-K 09/27/2014 10.51* Severance and Change of Control Agreement dated September 18, 2014 by and between ClausEgstrand and Hologic. 10-K 09/27/2014 Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 EndDate10.52* Offer Letter dated January 6, 2015 by and between John M. Griffin and Hologic. 10-Q 03/28/2015 10.53* Severance and Change of Control Agreement dated February 2, 2015 by and between John M.Griffin and Hologic. 10-Q 03/28/2015 10.54 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 10.55 Lease Agreement (Danbury and Bedford) by and between BONE (DE) QRS 15-12, INC., andHologic dated August 28, 2002. 10-K 09/28/2002 10.56 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 10.57 Office Lease dated December 31, 2003 between Cytyc and Marlborough Campus LimitedPartnership. CytycCorporation10-K 12/31/2003 10.58 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 10.59 Lease Agreement by and between 445 Simarano Drive, Marlborough LLC and Cytyc dated July11, 2006. 10-K 09/29/2007 10.60 Lease Guaranty dated October 22, 2007 between Bel Marlborough I LLC and Hologic, asguarantor thereunder. 8-K 10/22/2007 10.61 Form of Exchange Agreement. 8-K 02/15/2013 10.62 Credit and Guaranty Agreement, dated May 29, 2015, among Hologic, Hologic GGO 4 Ltd, eachDesignated Borrower from time to time party thereto, the Guarantors from time to time partythereto, each Lender from time to time party thereto and Bank of America, N.A., asAdministrative Agent, Swing Line Lender and L/C Issuer. 8-K 05/29/2015 10.63 Pledge and Security Agreement, dated May 29, 2015, among the grantors party thereto and Bankof America, N.A. as Collateral Agent 10-Q 06/27/2015 10.64 Restated Agreement dated July 24, 2009 by and between Gen-Probe Incorporated and NovartisVaccines and Diagnostics, Inc. ‡ Gen-Probe10-Q/A 09/30/2009 10.65 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 10.66 Second Amendment to Restated Agreement by and between Gen-Probe Incorporated and GrifolsDiagnostic Solutions Inc.‡ 10-Q 06/27/2015 10.67 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 10.68 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 Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 EndDate10.69 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. Filed herewith 21.1 Subsidiaries of Hologic. Filed herewith 23.1 Consent of Independent Registered Public Accounting Firm. Filed herewith 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. Filed herewith 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. Filed herewith 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. Furnishedherewith 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. Furnishedherewith 101.INS XBRL Instance Document. Filed herewith 101.SCH XBRL Taxonomy Extension Schema Document. Filed herewith 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. Filed herewith 101.DEF XBRL Taxonomy Extension Definition Linkbase Document. Filed herewith 101.LAB XBRL Taxonomy Extension Label Linkbase Document. Filed herewith 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. Filed herewith ______________* Indicates management contract or compensatory plan, contract or arrangement.‡ Confidential treatment has been granted with respect to certain portions of this exhibit. A complete version of thisexhibit has been filed separately with the U.S. Securities and Exchange Commission.(1) List of executive officers to whom provided filed herewith.(2) Corrected version of a previously filed exhibit.Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 10.28Schedule to Senior Vice President Change of Control AgreementThe following is a list of our executive officers who are party to the Company’s Senior Vice President Change of ControlAgreement, the form of which was filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ended12/29/2012:Peter J. Valenti, IIIThomas A. WestSource: HOLOGIC INC, 10-K, November 19, 2015Powered 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 10.29Schedule to Senior Executive Officer Change of Control AgreementThe following is a list of our executive officers who are party to the Company’s Senior Executive Officer Change of ControlAgreement, the form of which was filed as an exhibit to the Company’s Current Report on Form 8-K filed on November 17, 2009:Jay SteinSource: HOLOGIC INC, 10-K, November 19, 2015Powered 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 10.30Schedule to Senior Vice President Severance AgreementThe following is a list of our executive officers who are party to the Company’s Senior Vice President Severance Agreement,the form of which was filed as an exhibit to the Company’s Annual Report on Form 10-K for the period ended 9.28.2013:Jay SteinSource: HOLOGIC INC, 10-K, November 19, 2015Powered 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 10.40SEVERANCE ANDCHANGE OF CONTROL AGREEMENTCHANGE OF CONTROL AGREEMENT by and between HOLOGIC, INC., a Delaware corporation (the "Company"),and Eric Compton (the "Executive"), dated as of March 9, 2014. WHEREAS, the Board of Directors of the Company (the "Board"), has determined that it is in the best interests of theCompany and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding thepossibility, threat, or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative todiminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatenedChange of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of anythreatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Changeof Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitivewith those of other corporations;WHEREAS, the Executive was hired as Chief Operating Officer of the Company with a start date of April 14, 2014;WHEREAS, in recognition of the Executive’s hiring as Chief Operating Officer, the Company and Executive now desire toenter into this Severance and Change of Control Agreement, which is consistent with the change of control and severance protectionprovided 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, eachintending to be legally bound, 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 aChange of Control occurs. Anything in this Agreement to the contrary notwithstanding, if the Executive's employment with theCompany is terminated or the Executive ceases to 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 of employment (1) was at the request of a third party who has taken stepsreasonably calculated to effect the Change of Control or (2) otherwise arose in connection with or in anticipation of the Change ofControl, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of suchtermination 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 unlesssuch termination of Employment was in anticipation of the Change of Control in which case the termination shall be deemed to haveoccurred after the consummation of the Change of Control.1Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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) The "Change of Control Period" is the period commencing on the date hereof and ending on December 31, 2016;provided, that commencing on December 31, 2014 and each December 31 thereafter (each such date to be referred to as the “RenewalDate”), the term of this Agreement shall automatically be extended, without any further action by the Company or the Executive, so asto terminate three years from such Renewal Date; provided, however that if the Company shall give notice in writing to the Executiveat least thirty (30) days prior to a Renewal Date (the “Pending Renewal Date”), stating that the Change of Control Period shall not beextended, 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 SecuritiesExchange Act of 1934, as amended (the “Exchange Act”)) of beneficial ownership (within the meaning of Rule 13d-3 promulgatedunder the Exchange Act) of 30% or more of the Voting Stock of the Company; provided, however, that any acquisition by theCompany or its subsidiaries, or any employee benefit plan (or related trust) of the Company or its subsidiaries of 30% or more ofVoting Stock shall not constitute a Change in Control; and provided, further, that any acquisition by a corporation with respect towhich, following such acquisition, more than 50% of the Voting Stock of such corporation, is then beneficially owned, directly orindirectly, by all or substantially all of the individuals and entities who were the beneficial owners of the Voting Stock immediatelyprior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the VotingStock, 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 than a 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 werethe beneficial owners of the Voting Stock immediately prior to such Merger do not, following such Merger, beneficially own, directlyor indirectly, more than 50% of the Voting Stock of the corporation resulting from the Merger (the “Resulting Corporation”) as a resultof the individuals’ and entities’ shareholdings in the Company immediately prior to the consummation of the Merger, (ii) a completeliquidation or dissolution of the Company or (iii) the sale or other disposition of all or substantially all (as defined under DelawareGeneral Corporation Law) of the assets of the Company excluding a sale or other disposition of assets to a subsidiary of the Company.For purposes of this Agreement “Merger” means a reorganization, merger or consolidation involving the Company, including withoutlimitation 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 Changeof Control results from or arises out of a purchase or other acquisition of the Company, directly or indirectly, by a corporation or otherentity in which the Executive has a greater than ten percent (10%) direct or indirect equity interest, such event shall not constitute aChange of Control.-2-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.3. Employment Period. Subject to the terms and conditions hereof, the Company hereby agrees to continue the Executive in itsemploy, and the Executive hereby agrees to remain in the employ of the Company, for the period commencing on the Effective Dateand ending on the last day of the thirty-sixth month following the month in which the Effective Date occurs (the "EmploymentPeriod").4. Terms of Employment.(a) Position and Duties.(i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reportingrequirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the mostsignificant of those held, exercised and assigned at any time during the 90-day period immediately preceding the Effective Dateand (B) the Executive's services shall be performed at the location where the Executive was employed immediately precedingthe 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 isentitled, the Executive agrees to devote his full business time to the business and affairs of the Company and, to the extentnecessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts toperform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of thisAgreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfillspeaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities donot significantly interfere with the performance of the Executive's responsibilities as an employee of the Company inaccordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have beenconducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activitiessimilar in nature and scope thereto) subsequent to the Effective Date.(b) Compensation.(i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary ("Annual BaseSalary"), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable tothe Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding themonth in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed at leastannually and shall be increased at any time and from time to time as shall be substantially consistent with increases in basesalary awarded in the ordinary course of business to other peer executives of the Company and its affiliated companies. Anyincrease in Annual Base Salary shall not serve to limit or reduce-3-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increaseand the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in thisAgreement, the term "affiliated companies" includes any company controlled by, controlling or under common control with theCompany.(ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year during the EmploymentPeriod, an annual cash bonus (the "Annual Bonus"; which shall include, without limitation, any other annual cash bonus plan orprogram provided to Executive such as the Short Term Incentive Plan or any other similar plan, but shall not include any cash sign-on,relocation, retention or other special bonus or payments) in cash at least equal to the greater of (a) the average (annualized for any fiscalyear consisting of less than twelve full months or with respect to which the Executive has been employed by the Company for less thantwelve full months) bonus (the "Average Annual Bonus") paid or that has been earned and accrued, but unpaid to the Executive by theCompany and its affiliated companies in respect of the three fiscal years immediately preceding the fiscal year in which the EffectiveDate occurs, (b) the Annual Bonus paid for the fiscal year immediately preceding the Effective Date, or (c) the target bonus associatedwith the Company achieving its 100 percent target payout level as determined in accordance with the terms of the Company’s bonusplans for senior executives 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 CompensationCommittee’s discretion to reduce such bonus or bonus funding, or increased to reflect additional amounts that may be paid or payableif the Company exceeds target. Each such Annual Bonus shall be paid no later than the 15th day of the third month of the fiscal yearnext following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of suchAnnual 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, the Hologic, Inc. Deferred Compensation Plan or any successor thereto (“DCP”) shall be included in determiningthe Annual Base Salary, Annual Bonus and the Average Annual Bonus. If the fiscal year of any successor to this Agreement, asdescribed by Section 11(c) herein, is different than the Company’s fiscal year at the time of the Change of Control, then the Executiveshall be paid (i) the Annual Bonus that would have been paid upon the end of Company’s fiscal year ending after the Change ofControl, 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 shallbe based on the successor’s first full fiscal year beginning after the Change of Control and successive fiscal years thereafter. “Pro RataBonus" shall mean an amount equal to the 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 the Date of Termination) multiplied by a fraction the numerator of which isthe number of months worked in the fiscal year through the Date of Termination and the denominator of which is 12. Any partialmonths shall be rounded to the nearest whole number using normal mathematical convention.(iii) Incentive, Savings and Retirement Plans. In addition to Annual Base Salary and Annual Bonus payable as hereinabove provided, the Executive shall be entitled to-4-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.participate during the Employment Period in all incentive, savings and retirement plans, practices, policies and programsapplicable to other peer executives of the Company and its affiliated companies, but in no event shall such plans practices,policies and programs provide the Executive with incentive, savings and retirement benefits opportunities, in each case, lessfavorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for theExecutive under such plans, practices, policies and programs as in effect at any time during the one-year immediately precedingthe Effective Date, or, if more favorable to the Executive, those provided generally at any time after the Effective Date to otherpeer executives of the Company and its affiliated companies.(iv) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's family, as the casemay be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies andprograms provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental,disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) andapplicable to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices,policies and programs provide benefits which are less favorable, in the aggregate, than the most favorable of such plans,practices, policies and programs in effect at any time during the one-year period immediately preceding the Effective Date, or,if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of theCompany and its affiliated companies.(v) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for allreasonable expenses incurred by the Executive upon submission of appropriate accountings in accordance with the mostfavorable policies, practices and procedures of the Company and its affiliated companies in effect at any time 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.(vi) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits in accordancewith the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect at anytime during the one-year period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect atany time thereafter with respect to other peer executives 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 ofa size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal tothe most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time duringthe one-year period immediately preceding the Effective Date or, if more favorable to the Executive, as provided at any timethereafter with respect to other peer executives of the Company and its affiliated companies.-5-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.(viii) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation of at least five (5)weeks and in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliatedcompanies as in effect at any time during the one-year period immediately preceding the Effective Date or, if more favorable tothe Executive, as in effect at any time thereafter with respect to other peer incentives of the Company and its affiliatedcompanies.5. Termination of Employment.(a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during theEmployment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the EmploymentPeriod (pursuant to the definition of "Disability" set forth below), it may give to the Executive written notice in accordance withSection 13(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employmentwith the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability EffectiveDate"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of theExecutive's duties. For purposes of this Agreement, "Disability" means the absence of the Executive from the Executive's duties withthe Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which isdetermined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or theExecutive'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". Forpurposes of this Agreement, "Cause" means (i) an act or acts of personal dishonesty taken by the Executive and intended to result insubstantial personal enrichment of the Executive at the expense of the Company, (ii) repeated violations by the Executive of theExecutive's obligations under Section 4(a) of this Agreement (other than as a result of incapacity due to physical or mental illness)which are demonstrably willful and deliberate on the Executive's part, which are committed in bad faith or without reasonable beliefthat such violations are in the best interests of the Company and which are not remedied in a reasonable period of time after receipt ofwritten notice from the Company or (iii) the conviction of the Executive of a felony involving moral turpitude. The Company shallprovide the Executive with 30 days written notice of any determination of Cause and provide the Executive, for a period of 30 daysfollowing such notice, with the opportunity to appear before the Board, with or without legal representation, to present arguments andevidence on his behalf and following such presentation 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), by unanimous consent reasonably determines in good faith that his actionsdid, in fact, constitute for Cause.(c) Good Reason. The Executive's employment may be terminated during the Employment Period by the Executive for GoodReason. For purposes of this Agreement, "Good Reason" means:-6-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.(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 theChange of Control or, if applicable, the Date of Termination;(iii) A material diminution in the authority, duties and responsibilities of the supervisor to whom the Executive isrequired to report as in effect 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 priorto the Change of Control 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 theChange of Control or, if applicable, the Date of Termination;(vi) Any other action or inaction that constitutes a material breach by the Company of this Agreement or any otheragreement under which the Executive provides services;provided, however, that Good Reason shall not exist unless the Executive has given written notice to the Company withinninety (90) days of the initial existence of the Good Reason event or condition(s) giving specific details regarding the event orcondition; and unless the Company has had at least thirty (30) days to cure such Good Reason event or condition after thedelivery of such written notice and has failed to cure such event or condition to the reasonable satisfaction of the Executivewithin such thirty (30) day cure period. The Executive’s separation from service must occur not more than one year followingthe initial existence of one or more of the conditions constituting Good Reason.(d) Notice of Termination. Any termination by the Company for Cause or by the Executive for Good Reason shall becommunicated by Notice of Termination to the other party hereto given in accordance with Section 13(b) of this Agreement. Forpurposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision inthis Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide abasis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as definedbelow) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than fifteen daysafter 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 of the Executive or the Companyhereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive's or theCompany’s rights hereunder.-7-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.(e) Date of Termination. "Date of Termination" means the date of receipt of the Notice of Termination or any later date(taking into account any applicable notice and cure period) specified therein, as the case may be; provided however, that (i) if theExecutive's employment is terminated by the Company other than for Cause, death or Disability, the Date of Termination shall be thedate on which the Company notifies the Executive of such termination, and (ii) if the Executive's employment is terminated by reasonof death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the casemay 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, thisAgreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for (i)payment of the sum of the following amounts: (A) the Executive's Annual Base Salary through the Date of Termination to the extentnot theretofore paid, (B) the product of (I) the Highest Annual Bonus and (II) a fraction, the numerator of which is the number of daysin the current fiscal year through the Date of Termination, and the denominator of which is 365, and (C) any accrued and unpaidAnnual Bonus amounts, compensation or vacation pay, in each case, to the extent not yet paid by the Company (the amounts describedin subparagraphs (A), (B) and (C) are hereafter referred to as "Accrued Obligations" and shall be paid to the Executive’s estate orbeneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination), (ii) any other benefits or compensationpayable under any employee benefit plan in accordance with the applicable plans’ terms, including, without limitation, any non-qualified plan or DCP; (iii) for the remainder of the Employment Period, or such longer period as any plan, program, practice or policymay provide, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which wouldhave been provided in accordance with the applicable plans, programs, practices and policies described in Section 4(b)(v) and (vi) ofthis Agreement as if the Executive's employment had not been terminated in accordance with the most favorable plans, practices,programs or policies of the Company and its affiliated companies as in effect and applicable generally to other peer executives and theirfamilies during the one year period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at anytime thereafter with respect to other peer executives of the Company and its affiliated companies and their families (such continuationof such benefits for the applicable period herein set forth and such transfer of the Individual Policy shall be hereinafter referred to as“Welfare Benefit Continuation”; for purposes of determining eligibility of the Executive for retiree benefits pursuant to such plans,practices, programs and policies, the Executive shall be considered to have remained employed until the end of the Employment Periodand to have retired on the last day of such period), and (iv) payment to the Executive’s estate or beneficiary, as applicable, in a lumpsum 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 theHighest Annual Bonus. Subject to the provisions of Section 9 hereof, but, otherwise, anything herein to the contrary notwithstanding,the Executive's family shall be entitled to receive benefits at least equal to the most favorable benefits provided by the Company andany of its affiliated companies to surviving families of peer executives of the Company and such affiliated companies under such plans,programs, practices and policies relating to family death benefits, if any, as in effect with respect to other peer executives and theirfamilies at any time during the one year period immediately preceding the Effective Date or, if more-8-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.favorable to the Executive and/or the Executive's family, as in effect on the date of the Executive's death with respect to other peerexecutives 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 EmploymentPeriod, this Agreement shall terminate without further obligations to the Executive, other than for (i) payment of the AccruedObligations (which shall be paid in a lump sum in cash within 30 days of the Date of Termination), (ii) the timely payment andprovision of the Welfare Benefit Continuation, and (iii) payment to the Executive in a lump sum in cash within 30 days of the Date ofTermination of an amount equal to the sum of the Executive’s Annual Base Salary and the Highest Annual Bonus. Subject to theprovisions 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 Companyand its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policiesrelating to disability, if any, as in effect with respect to other peer executives and their families at any time during the one year periodimmediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any timethereafter with respect to other peer executives of the Company and its affiliated 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 bythe Executive other than for Good Reason (and other than by reason of his death or disability) during the Employment Period, thisAgreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive Annual BaseSalary through the Date of Termination. In such case, such amounts shall be paid to the Executive in a lump sum in cash within 30days of the Date of Termination. The Executive shall, in such event, also be entitled to any benefits required by law that are nototherwise provided by this Agreement.(d) Termination Following a Change of Control by the Company without Cause or by the Executive for Good Reason. Ifduring the Employment Period the Executive is terminated by the Company without Cause or he resigns for Good Reason, then theCompany shall pay the Executive the following:(i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination allAccrued Obligations; and(ii) provide the Executive and his family with the Welfare Benefit Continuation for a period of one (1) year from theDate of Termination; and(iii) the Company shall pay to the Executive a lump sum amount in cash within 30 days after the Date of Terminationequal to the (such amount shall be hereinafter referred to as the “Change of Control Payment”) to the product of (X) two pointninety nine (2.99) multiplied by the sum of (i) (Y) the Annual Base Salary for the fiscal year immediately preceding the Date ofTermination and (ii) Highest Annual Bonus; and-9-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.(iv) notwithstanding any other provisions to the contrary contained herein or in any option agreement, restricted stockagreement, performance stock unit or other equity compensation agreement, between the Company and the Executive, or anystock option, restricted stock or other equity compensation plans sponsored by the Company, unless such agreement or planexpressly references and supersedes this Agreement, then all such unvested equity awards which Executive holds as of theEffective Date shall be immediately and automatically exercisable and/or vested, and the Executive shall have the right toexercise any such equity awards (to the extent applicable) for the longer of (A) the period of time provided for in the applicableequity award agreement or plan, or (B) the shorter of one year after the Date of Termination or the remaining term of theapplicable equity award.(e) Termination by the Company Without Cause or by Executive for Good Reason. If the Executive's employment with theCompany shall be terminated by the Company without Cause or by the Executive for Good Reason (as defined in Section 5(c) withoutregard to whether a Change of Control has occurred) at any time prior to the Effective Date, then the Executive shall be entitled to eachand all of the following:(i) the Company shall pay the Executive all Accrued Obligations;(ii) the Company shall continue to pay the Executive his Base Salary and an amount equal to the Average AnnualBonus divided by the number of payroll periods during the one year severance period for the period of one (1) year from theDate of Termination in accordance with its normal payroll practices and subject to applicable tax withholding; and(iii) provide the Executive and his family with the Welfare Benefit Continuation for a period of one (1) year from theDate of Termination.(f) 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.(g) Other Severance Benefits. The severance pay and benefits provided for in Section 6(e) 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.7. Non-exclusivity of Rights. Except as provided in Section 6, nothing in this Agreement shall prevent or limit the Executive'scontinuing or future participation in any benefit, bonus, incentive or other plans, programs, policies or practices, provided by theCompany or any of its affiliated companies and for which the Executive may qualify, nor shall anything herein limit or-10-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.otherwise affect such rights as the Executive may have under any other agreements with the Company or any of its affiliatedcompanies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practiceor 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 obligationshereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Companymay have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any otheraction by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, except asprovided in Section 6(d)(ii), such amounts 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 andexpenses which the Executive may reasonably incur as a result of any contest by the Company, the Executive or others of the validityor enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof, if the Executiveprevails in such contest. Following a Change of Control, the Company agrees to pay promptly as incurred, to the full extent permittedby law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcomethereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreementor 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’semployment by the Company, whether such termination was for Cause, or (ii) in the event of any termination of employment by theExecutive, whether Good Reason existed, then, unless and until there is a final, nonappealable judgment by a court of competentjurisdiction declaring that such termination was for Cause or that the determination by the Executive of the existence of Good Reasonwas not made in good faith, the Company shall pay all amounts, and provide all benefits, to the Executive and/or the Executive’sfamily or other beneficiaries, as the case may be, that the Company would be required to pay or provide pursuant to Section 6(d) asthough such termination were by the Company without Cause, or by the Executive with Good Reason; provided, however, that theCompany shall not be required to pay any disputed amount pursuant to this paragraph except upon receipt of an undertaking by or onbehalf of the Executive to repay all such amounts to which the Executive is ultimately adjudged by such court not to be entitled.9. 280G Protection.(a) In the event that the Executive shall become entitled to payment and/or benefits provided by this Agreement or any otheramounts in the “nature of compensation” (whether pursuant-11-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whose actions result in achange of ownership or effective control covered by Section 280G(b)(2) of the Internal Revenue Code (the “Code”) or any personaffiliated with the Company or such person) as a result of such change in ownership or effective control (collectively the “CompanyPayments”), and such Company Payments will be subject to the tax (the “Excise Tax”) imposed by Section 4999 of the Code (and anysimilar tax that may hereafter be imposed by any taxing authority) the Company shall pay to the Executive the greater of the following,whichever gives the Executive the highest net after-tax amount (after taking into account federal, state, local and social security taxes atthe maximum marginal rates) (x) the Company Payments or (y) one dollar less than the amount of the Company Payments that wouldsubject the Executive to the Excise Tax. In the event that the Company Payments are required to be reduced pursuant to the foregoingsentence, then the Company Payments shall be reduced as mutually agreed between the Company and the Executive or, in the eventthe parties cannot agree, in the following order (1) any lump sum severance based on Base Salary or Annual Bonus, (2) any other cashamounts payable to the Executive, (3) any benefits valued as parachute payments; and (4) acceleration of vesting of any equity.(b) For purposes of determining whether any of the Company Payments will be subject to the Excise Tax and the amount ofsuch Excise Tax, (x) the Company Payments shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) ofthe Code, and all “parachute payments” in excess of the “base amount” (as defined under Code Section 280G(b)(3) of the Code) shallbe treated as subject to the Excise Tax, unless and except to the extent that, in the opinion of the Company’s independent certifiedpublic accountants appointed prior to any change in ownership (as defined under Section 280G(b)(2) of the Code) or tax counselselected by such accountants or the Company (the “Accountants”) such Company Payments (in whole or in part) either expressly donot constitute “parachute payments,” represent reasonable compensation for services actually rendered within the meaning of Section280G(b)(4) of the Code in excess of the “base amount” or are otherwise not subject to the Excise Tax, and (y) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Accountants. All determinations hereunder shall be madeby the Accountants which shall provide detailed supporting calculations both to the Company and the Executive at such time as it isrequested by the Company or the Executive. If the Accountants determine that payments under this Agreement must be reducedpursuant to this paragraph, they shall furnish the Executive with a written opinion to such effect. The determination of the Accountantsshall be final and binding upon the Company and the Executive.(c) In the event of any controversy with the Internal Revenue Service (or other taxing authority) with regard to the ExciseTax, the Executive shall permit the Company to control issues related to the Excise Tax (at its expense), provided that such issues donot potentially materially adversely affect the Executive, but the Executive shall control any other issues. In the event the issues areinterrelated, the Executive and the Company shall in good faith cooperate so as not to jeopardize resolution of either issue, but if theparties cannot agree the Executive shall make the final determination with regard to the issues. In the event of any conference with anytaxing authority regarding the Excise Tax or associated income taxes, the Executive shall permit the representative of the Company toaccompany the Executive, and the Executive and the Executive’s representative shall cooperate with the Company and itsrepresentative.-12-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.10. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret orconfidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses,which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliatedcompanies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of theExecutive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not,without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulgeany such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an assertedviolation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to theExecutive 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 assignableby the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and beenforceable by the Executive's legal representatives.(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) toall or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in thesame manner and to the same extent that the Company would be required to perform it if no such succession had taken place. TheCompany shall provide written evidence to the Executive to document compliance with the foregoing sentence within ten (10)business days of the Effective Date. As used in this Agreement, "Company" shall mean the Company as herein before defined and anysuccessor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, orotherwise. In addition, the Executive shall be entitled, upon exercise of any outstanding stock options or stock appreciation rights of theCompany, to receive in lieu of shares of the Company’s stock, shares of such stock or other securities of such successor as the holdersof shares of the Company’s stock received pursuant to the terms of the merger, consolidation or sale.12. Compliance With Section 409A of the Internal Revenue Code. To the extent applicable, it is intended that this Agreementcomply with the provisions of Section 409A of the Code (hereinafter referred to as “Section 409A”). This Agreement shall beadministered in a manner consistent with its intent, and any provision that would cause the Agreement to fail to satisfy Section 409Ashall have no force and effect until amended to comply with Section 409A. Notwithstanding any provision of this Agreement to thecontrary, in the event any payment or benefit hereunder is determined to constitute non-qualified deferred compensation subject toSection 409A, then to the extent necessary to comply with Section 409A, such payment or benefits shall not be made, provided-13-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.or commenced until six (6) months after the Executive’s “separation from service” as such phrase is defined for the purposes of Section409A.13. Release. The Executive agrees that, with the exception of the Accrued Obligations due to him in accordance with the termshereunder, that the payment of any severance under this Agreement to the Executive by the Company, is subject to and conditioned onExecutive executing a general release of the Company in a form and scope determined by the Company in its sole discretion (the“Release Agreement”), without Executive revoking such Release Agreement within fifty-two (52) days of the Date of Termination(the “Consideration Period”) and provided that (a) if the Date of Termination occurs in one calendar year and the Consideration Period(including the payment date) expires during the following calendar year, then notwithstanding anything herein to the contrary, thepayments 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) Executive provides satisfactory evidence to the Company that he has returned all Company property, confidential information anddocumentation to the Company, and (ii) provides the Company with a signed written resignation of Executive’s status as an officer ofthe 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 the Commonwealth of Massachusetts,without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall haveno force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the partieshereto or their respective successors and legal representatives.(b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other partyor by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:If to the Executive:Eric Compton(at the address on record with the company) Copy to:Robin Bond, Esq.Transition Strategies, LLC88 Militia Hill DriveWayne, PA 19087robin@transition-strategies.com-14-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.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 andcommunications shall be effective when actually received by the addressee.(c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of anyother provision of this Agreement.(d) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shallbe required to be withheld 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 deemedto be a waiver of such provision or any other provision thereof.(f) This Agreement contains the entire understanding of the Company and the Executive with respect to the rights and otherbenefits that the Executive shall be entitled during the Employment Period, and in connection therewith shall supersede all prior oraland written communications with the Executive with respect thereto,; provided, however, that the Offer Letter, and EmployeeIntellectual Property Rights and Non-Competition Agreement, option or other equity agreements or other employment agreement byand between the Company and Executive shall remain in full force and effect and if the Company’s separation policy would providegreater benefits to the Executive than this Agreement, then the Executive may elect to receive benefits under the Company’s separationpolicy in lieu of the benefits provided hereunder. Nothing herein shall affect the application of the Company’s separation policy in lieuof the benefits provided hereunder. Nothing herein shall affect the application of the Company’s separation policy prior to the EffectiveDate.(g) The Executive and the Company acknowledge that, except as may otherwise be provided under this Agreement or anyother written agreement between the Executive and the Company, prior to the Effective Date, the employment of the Executive by theCompany 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 GoodReason, then the Executive shall have no liability to the Company.[Signature page follows]-15-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board ofDirectors, the Company has caused 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/ Steve MacMillan Name: Steve MacMillan Title: ChiefExecutive Officer EXECUTIVE/s/ Eric Compton Eric Compton-16-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 10.45SEVERANCE ANDCHANGE OF CONTROL AGREEMENTCHANGE OF CONTROL AGREEMENT by and between HOLOGIC, INC., a Delaware corporation (the “Company”), and Robert W. McMahon (the“Executive”), dated as of May 8, 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 shareholders toassure 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 was hired as Chief Financial Officer of the Company with a start date of May 26, 2014;WHEREAS, in recognition of the Executive’s hiring as Chief Financial Officer, the Company and Executive now desire to enter into this Severance andChange of Control Agreement, which is consistent with the change 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 Control occurs.Anything in this Agreement to the contrary notwithstanding, if the Executive’s employment with the Company is terminated or the Executive ceases to be anofficer of the Company prior to the date on which a Change of Control occurs, and it is reasonably demonstrated that such termination of employment (1) wasat the request of a third party who has taken steps reasonably calculated to effect the Change of Control or (2) otherwise arose in connection with or inanticipation of the Change of Control, then for all purposes of this Agreement the “Effective Date” shall mean the date immediately prior to the date of suchtermination of employment. If prior to the Effective Date, the Executive’s employment with the Company terminates, then the Executive shall have no furtherrights under this Agreement, except with respect to benefits under Section 6(e), if applicable, or unless such termination of Employment was in anticipationof the Change of Control in which case the termination shall be deemed to have occurred after the consummation of the Change of Control.Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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) The “Change of Control Period” is the period commencing on the date hereof and ending on December 31, 2016; provided, that commencingon December 31, 2014 and each December 31 thereafter (each such date to be referred to as the “Renewal Date”), the term of this Agreement shallautomatically be extended, without any further action by the Company or the Executive, so as to terminate three years from such Renewal Date;provided, however that if the Company shall give notice in writing to the Executive at least thirty (30) days prior to a Renewal Date (the “PendingRenewal Date”), stating that the Change of Control Period shall not be extended, then the Change of Control Period shall expire two years from thePending 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 1934, asamended (the “Exchange Act”)) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of theVoting Stock of the Company; provided, however, that any acquisition by the Company or its subsidiaries, or any employee benefit plan (or related trust) ofthe 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 acorporation with respect to which, following such acquisition, more than 50% of the Voting Stock of such corporation, is then beneficially owned, directly orindirectly, by all or substantially all of the individuals and entities who were the beneficial owners of the Voting Stock immediately prior to such acquisitionin substantially the same proportion as their ownership, immediately prior to such acquisition, 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 than amajority 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 of theVoting Stock immediately prior to such Merger do not, following such Merger, beneficially own, directly or indirectly, more than 50% of the Voting Stock ofthe 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 defined under Delaware General Corporation Law) of the assets of the Company excluding a sale or other disposition of assets to asubsidiary of the Company. For purposes of this Agreement “Merger” means a reorganization, merger or consolidation involving the Company, includingwithout 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 results fromor 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 a greaterthan ten percent (10%) direct or indirect equity interest, such event shall not constitute a Change of Control. -2-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.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 andresponsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the90-day period immediately preceding the Effective Date and (B) the Executive’s services shall be performed at the location where the Executive wasemployed 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, the Executive agrees todevote his full business time to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to theExecutive hereunder, to use the Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Periodit shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfillspeaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere withthe performance of the Executive’s responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood andagreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities(or the conduct of activities similar in nature and scope thereto) 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 be paid at amonthly rate, at least equal to twelve times the highest monthly base salary paid or payable to the Executive by the Company and its affiliated companies inrespect of the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual BaseSalary shall be reviewed at least annually and shall be increased at any time and from time to time as shall be substantially consistent with increases in basesalary awarded in the ordinary course of business to other peer -3-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.executives of the Company and its affiliated companies. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to theExecutive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in thisAgreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term “affiliated companies” includes any company controlledby, 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 the ShortTerm Incentive Plan or any other similar plan, but shall not include any cash sign-on, relocation, retention or other special bonus or payments) in cash at leastequal to the greater of (a) the average (annualized for any fiscal year consisting of less than twelve full months or with respect to which the Executive hasbeen employed by the Company for less than twelve full months) bonus (the “Average Annual Bonus”) paid or that has been earned and accrued, but unpaidto the Executive by the Company and its affiliated companies in respect of the three fiscal years immediately preceding the fiscal year in which the EffectiveDate occurs, (b) the Annual Bonus paid for the fiscal year immediately preceding the Effective Date, or (c) the target bonus associated with the Companyachieving its 100 percent target payout level as determined in accordance with the terms of the Company’s bonus plans for senior executives for the fiscalyear 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”) andshall not be reduced for the application of the Compensation Committee’s discretion to reduce such bonus or bonus funding, or increased to reflectadditional amounts that may be paid or payable if the Company exceeds target. Each such Annual Bonus shall be paid no later than the 15th day of the thirdmonth of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of suchAnnual Bonus pursuant to any nonqualified plan of the Company. Notwithstanding anything herein to the contrary, any portion of Annual Base Salary orAnnual Bonus electively deferred by the Executive pursuant to a qualified or a non-qualified plan including, but not limited to, the Hologic, Inc. DeferredCompensation Plan or any successor thereto (“DCP”) shall be included in determining the Annual Base Salary, Annual Bonus and the Average AnnualBonus. If the fiscal year of any successor to this Agreement, as described by Section 11(c) herein, is different than the Company’s fiscal year at the time of theChange of Control, then the Executive shall be paid (i) the Annual Bonus that would have been paid upon the end of Company’s fiscal year ending after theChange of Control, and (ii) a pro-rata Annual Bonus for any months of service performed following the end of the Company’s fiscal year, but prior to the firstday of the successor’s fiscal year immediately following the Change of Control. The Annual Bonuses thereafter shall be based on the successor’s first fullfiscal year beginning after the Change of Control and successive fiscal years thereafter. “Pro Rata Bonus” shall mean an amount equal to the 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 the Date 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 and the denominator ofwhich is 12. Any partial months shall be rounded to the nearest whole number using normal mathematical convention. -4-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.(iii) Incentive, Savings and Retirement Plans. In addition to Annual Base Salary and Annual Bonus payable as herein above provided, the Executiveshall be entitled to participate during the Employment Period in all incentive, savings and retirement plans, practices, policies and programs applicable toother peer executives of the Company and its affiliated companies, but in no event shall such plans practices, policies and programs provide the Executivewith incentive, savings and retirement benefits opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by theCompany and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the one-yearimmediately preceding the Effective Date, or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peerexecutives of the Company and its affiliated companies.(iv) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive’s family, as the case may be, shall be eligible forparticipation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliatedcompanies (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travelaccident insurance plans and programs) and applicable to other peer executives of the Company and its affiliated companies, but in no event shall suchplans, practices, policies and programs provide benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policiesand programs in effect at any time during the one-year period immediately preceding the Effective Date, or, if more favorable to the Executive, thoseprovided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies.(v) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred bythe Executive upon submission of appropriate accountings in accordance with the most favorable policies, practices and procedures of the Company and itsaffiliated companies in effect at any time during the one-year period immediately preceding the Effective Date or, if more favorable to the Executive, as ineffect at any time thereafter with respect to other peer executives of the Company and its affiliated companies.(vi) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits in accordance with the most favorable plans,practices, programs and policies of the Company and its affiliated companies in effect at any time during the one-year period immediately preceding theEffective Date or, 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.(vii) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings andother appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to theExecutive by the Company and its affiliated companies at any time during the one-year period immediately preceding the Effective Date or, if morefavorable to the Executive, as provided at any time thereafter with respect to other peer executives of the Company and its affiliated companies. -5-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.(viii) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation of at least five (5) weeks and in accordance with themost favorable plans, policies, programs and practices of the Company and its affiliated companies as 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 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. If theCompany determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of “Disability”set forth below), it may give to the Executive written notice in accordance with Section 13(b) of this Agreement of its intention to terminate the Executive’semployment. In such event, the Executive’s employment with the Company shall terminate effective on the 30th day after receipt of such notice by theExecutive (the “Disability Effective Date”), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-timeperformance of the Executive’s duties. For purposes of this Agreement, “Disability” means the absence of the Executive from the Executive’s duties with theCompany on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total andpermanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal representative (such agreement asto 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. -6-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.(c) Good Reason. The Executive’s employment may be terminated during the Employment Period by the Executive for Good Reason. Forpurposes of 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 Control or, ifapplicable, 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 in effectimmediately 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 of Control or, ifapplicable, 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, if applicable, theDate of Termination;(vi) Any other action or inaction that constitutes a material breach by the Company of this Agreement or any other agreement under which theExecutive provides services; provided, however, that Good Reason shall not exist unless the Executive has given written notice to the Company withinninety (90) days of the initial existence of the Good Reason event or condition(s) giving specific details regarding the event or condition; and unless theCompany has had at least thirty (30) days to cure such Good Reason event or condition after the delivery of such written notice and has failed to cure suchevent or condition to the reasonable satisfaction of the Executive within such thirty (30) day cure period. The Executive’s separation from service mustoccur not more than one year following the initial existence of one or more of the conditions constituting Good Reason.(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 of the Executive or the Company hereunder or preclude theExecutive or the Company from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder. -7-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.(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 ofthe Executive 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 -8-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.most favorable benefits provided by the Company and any of its affiliated companies to surviving families of peer executives of the Company and suchaffiliated companies under such plans, programs, practices and policies relating to family death benefits, if any, as in effect with respect to other peerexecutives and their families at any time during the one year period immediately preceding the Effective Date or, if more favorable to the Executive and/orthe Executive’s family, as in effect on the date of the Executive’s death with respect to other peer executives of the Company and its affiliated companies andtheir families.(b) Disability. If the Executive’s employment is terminated by reason of the Executive’s Disability during the Employment Period, this Agreement shallterminate 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 other than forGood Reason (and other than by reason of his death or disability) during the Employment Period, this Agreement shall terminate without further obligationsto the Executive other than the obligation to pay to the Executive Annual Base Salary through the Date of Termination. In such case, such amounts shall bepaid to the Executive in a lump sum in cash within 30 days of the Date of Termination. The Executive shall, in such event, also be entitled to any benefitsrequired by law that are not otherwise provided by this Agreement.(d) Termination Following a Change of Control by the Company without Cause or by the Executive for Good Reason. If during the Employment Periodthe Executive is terminated by the Company without Cause or he resigns for Good Reason, then the Company shall pay the Executive the following:(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(ii) provide the Executive and his family with the Welfare Benefit Continuation for a period of one (1) year from the Date of Termination; and -9-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.(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 (such amount shallbe hereinafter referred to as the “Change of Control Payment”) to the product of (X) two point ninety nine (2.99) multiplied by the sum of (i) (Y) the AnnualBase 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, performance stockunit or other equity compensation agreement, between the Company and the Executive, or any stock option, restricted stock or other equity compensationplans sponsored by the Company, unless such agreement or plan expressly references and supersedes this Agreement, then all such unvested equity awardswhich Executive holds as of the Effective Date shall be immediately and automatically exercisable and/or vested, and the Executive shall have the right toexercise any such equity awards (to the extent applicable) for the longer of (A) the period of time provided for in the applicable equity award agreement orplan, or (B) the shorter of one 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 continue to pay the Executive his Base Salary and an amount equal to the Average Annual Bonus divided by the number ofpayroll periods during the one year severance period for the period of one (1) year from the Date of Termination in accordance with its normal payrollpractices and subject to applicable tax withholding; and(iii) provide the Executive and his family with the Welfare Benefit Continuation for a period of one (1) year from the Date of Termination.(f) Mitigation. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employmentor otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Executive in any subsequentemployment.(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 pay towhich the Executive may be entitled under any Company severance or termination plan, program, practice or arrangement. The Executive’s entitlement toany other compensation or benefits shall be determined in accordance with the Company’s employee benefit plans and other applicable programs, policiesand practices then in effect. -10-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.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 which the Company may have against the Executive or others. In noevent shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executiveunder any of the provisions of this Agreement and, except as provided in Section 6(d)(ii), such amounts shall not be reduced whether or not the Executiveobtains 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 the Executivemay reasonably incur as a result of any contest 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, if the Executive prevails in such contest. Following a Change of Control, the Company agrees topay promptly as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest(regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of thisAgreement 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. -11-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.9. 280G Protection.(a) In the event that the Executive shall become entitled to payment and/or benefits provided by this Agreement or any other amounts in the “nature ofcompensation” (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whose actionsresult in a change of ownership or effective control covered by Section 280G(b)(2) of the Internal Revenue Code (the “Code”) or any person affiliated withthe Company or such person) as a result of such change in ownership or effective control (collectively the “Company Payments”), and such CompanyPayments will be subject to the tax (the “Excise Tax”) imposed by Section 4999 of the Code (and any similar tax that may hereafter be imposed by anytaxing authority) the Company shall pay to the Executive the greater of the following, whichever gives the Executive the highest net after-tax amount (aftertaking into account federal, state, local and social security taxes at the maximum marginal rates) (x) the Company Payments or (y) one dollar less than theamount of the Company Payments that would subject the Executive to the Excise Tax. In the event that the Company Payments are required to be reducedpursuant to the foregoing sentence, then the Company Payments shall be reduced as mutually agreed between the Company and the Executive or, in theevent the parties cannot agree, in the following order (1) any lump sum severance based on Base Salary or Annual Bonus, (2) any other cash amounts payableto the Executive, (3) any benefits valued as parachute payments; and (4) acceleration of vesting of any equity.(b) For purposes of determining whether any of the Company Payments will be subject to the Excise Tax and the amount of such Excise Tax, (x) theCompany Payments shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) of the Code, and all “parachute payments” in excessof the “base amount” (as defined under Code Section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax, unless and except to the extentthat, in the opinion of the Company’s independent certified public accountants appointed prior to any change in ownership (as defined underSection 280G(b)(2) of the Code) or tax counsel selected by such accountants or the Company (the “Accountants”) such Company Payments (in whole or inpart) either expressly do not constitute “parachute payments,” represent reasonable compensation for services actually rendered within the meaning ofSection 280G(b)(4) of the Code in excess of the “base amount” or are otherwise not subject to the Excise Tax, and (y) the value of any non-cash benefits orany deferred payment or benefit shall be determined by the Accountants. All determinations hereunder shall be made by the Accountants which shall providedetailed supporting calculations both to the Company and the Executive at such time as it is requested by the Company or the Executive. If the Accountantsdetermine that payments under this Agreement must be reduced pursuant to this paragraph, they shall furnish the Executive with a written opinion to sucheffect. The determination of the Accountants shall be final and binding upon the Company and the Executive.(c) In the event of any controversy with the Internal Revenue Service (or other taxing authority) with regard to the Excise Tax, the Executive shallpermit the Company to control issues related to the Excise Tax (at its expense), provided that such issues do not potentially materially adversely affect theExecutive, but the Executive shall control any other issues. In the event the issues are interrelated, the Executive and the. Company shall in good faithcooperate so as not to jeopardize resolution of either issue, but if the parties cannot agree the Executive shall -12-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.make the final determination with regard to the issues. In the event of any conference with any taxing authority regarding the Excise Tax or associatedincome taxes, the Executive shall permit the representative of the Company to accompany the Executive, and the Executive and the Executive’srepresentative shall cooperate with the Company and its representative.10. 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 all of thebusiness 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 the Companywould 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 herein before 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.12. Compliance With Section 409A of the Internal Revenue Code. To the extent applicable, it is intended that this Agreement comply with the provisionsof Section 409A of the Code (hereinafter referred to as “Section 409A”). This Agreement shall be administered in a manner consistent with its intent, and anyprovision that would cause the Agreement to fail to -13-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.satisfy Section 409A shall have no force and effect until amended to comply with Section 409A. Notwithstanding any provision of this Agreement to thecontrary, in the event any payment or benefit hereunder is determined to constitute non-qualified deferred compensation subject to Section 409A, then to theextent necessary to comply with Section 409A, such payment or benefits shall not be made, provided or commenced until six (6) months after the Executive’s“separation from service” as such phrase is defined for the purposes of Section 409A.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 the Commonwealth of Massachusetts, without reference toprinciples of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may notbe amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal 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:Robert W. McMahon (at the address on record with the company)If to the Company:Hologic, Inc.35 Crosby DriveBedford, Massachusetts 01730-1401Attention: Chief Executive Officer -14-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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.or 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 of thisAgreement.(d) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheldpursuant 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 the Executiveshall be entitled during the Employment Period, and in connection therewith shall supersede all prior oral and written communications with the Executivewith respect thereto; provided, however, that the Offer Letter, and Employee Intellectual Property Rights and Non-Competition Agreement, option or otherequity agreements or other employment agreement by and between the Company and Executive shall remain in full force and effect and if the Company’sseparation policy would provide greater benefits to the Executive than this Agreement, then the Executive may elect to receive benefits under the Company’sseparation policy in lieu of the benefits provided hereunder. Nothing herein shall affect the application of the Company’s separation policy in lieu of thebenefits provided hereunder. 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 the Executive by the Company is “at will” and may be terminatedby either the Executive or the Company at any time. Notwithstanding anything contained herein, if during or prior to the Employment Period, the Executiveshall terminate employment with the Company other than for Good Reason, then the Executive shall have no liability to the Company.[Signature page follows] -15-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 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/ Steve MacMillanName: Steve MacMillanTitle: Chief Executive Officer EXECUTIVE /s/ Robert W. McMahon Robert W. McMahon -16-Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 26,2015 September 27,2014 September 28,2013 September 29,2012 September 24,2011Earnings: Income (loss) before provision forincome taxes$177.2 $48.1 $(1,192.9) $(61.7) $227.4Fixed charges210.5 226.2 287.2 146.4 121.5Amortization of capitalized interest0.1 0.1 0.1 0.1 0.1Total earnings (losses)$387.8 $274.4 $(905.6) $84.8 $349.0Fixed charges: Interest expense$205.5 $220.6 $281.1 $140.3 $114.8Estimate of interest within rentalexpense5.0 5.6 6.1 6.1 6.6Total fixed charges$210.5 $226.2 $287.2 $146.4 $121.4Ratio of earnings to fixed charges (a)1.84 1.21 — — 2.87For 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 and 2012, we incurred losses from pre-tax continuing operations, and as a result, our earningswere insufficient to cover our fixed charges by $1.19 billion and $61.5 million, respectively.Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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. ChinaBeijing TCT Jinbai Technologies Co., Ltd. ChinaBeijing TCT Medical Technology Co., Ltd. ChinaBioanalysis Limited United KingdomBioLucent, LLC DelawareCentury Likang (Beijing) Co., Ltd. ChinaCytyc Cayman Limited Cayman IslandsCytyc Corporation DelawareCytyc Prenatal Products Corp. DelawareCytyc Surgical Products II, LLC MassachusettsCytyc Surgical Products, LLC MassachusettsDirect Radiography Corp. DelawareGen-Probe Australia Pty Ltd. AustraliaGen-Probe Cardiff Ltd. United KingdomGen-Probe Czech Republic s.r.o. Czech RepublicGen-Probe Incorporated DelawareGen-Probe Prodesse, Inc. WisconsinGen-Probe Sales & Service, Inc. DelawareGen-Probe UK Limited United KingdomHangzhou Zuanbai Technology Co., Ltd ChinaHologic (Australia) Pty Ltd. AustraliaHologic (China) Enterprise Management Consulting Co., Ltd. ChinaHologic (MA), LLC MassachusettsHologic (UK) Limited England and WalesHologic Asia Pacific Limited Hong KongHologic Asia, Limited Hong KongHologic Canada Limited CanadaHologic Denmark ApS DenmarkHologic Deutschland, GmbH GermanyHologic España S.A. SpainHologic Europe Middle East and Africa, S.A. SwitzerlandHologic Finance Ltd. BermudaHologic France SARL FranceHologic GGO 1, LLC DelawareHologic GGO 2, LLC DelawareHologic GGO 3 LLP United KingdomHologic GGO 4 Ltd United KingdomHologic GGO 5, LLC DelawareHologic Hitec-Imaging GmbH GermanyHologic Hub Ltd United KingdomHologic Iberia, S.L. SpainHologic International Holdings B.V. NetherlandsHologic IP Ltd United KingdomHologic Italia S.r.l. ItalySource: HOLOGIC INC, 10-K, November 19, 2015Powered 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 OrganizationHologic Japan, Inc. JapanHologic Latin America (Servicos Em Marketing E Negocios)Ltda. BrazilHologic Ltd. United KingdomHologic Medical Technologies (Beijing) Co., Ltd. ChinaHologic N.V. BelgiumHologic Netherlands B.V. NetherlandsHologic S.A. FranceHologic Suisse SA SwitzerlandHologic Surgical Products Costa Rica, S.R.L. Costa RicaHologic Sweden AB SwedenInterlace Medical, Inc. DelawareJiangsu Kang Ke Medical Devices Co., Ltd. ChinaMingwood Biotechnology Co., Ltd. ChinaMolecular Light Technology Limited United KingdomNavigation Three Limited Hong KongR2 Technology Canada, Inc. CanadaSentinelle Medical Inc. CanadaSuros Surgical Systems, Inc. DelawareTCT International Co., Ltd. British Virgin IslandsTCT Medical (Beijing) Clinical Test Institute ChinaThird Wave Agbio, Inc. DelawareThird Wave Technologies, Inc. DelawareZheng Zhou Yong Run Medical Devices Co., Ltd. ChinaSource: HOLOGIC INC, 10-K, November 19, 2015Powered 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. 333-79167) pertaining to the Hologic, Inc. 1997 Employee EquityIncentive Plan and the Hologic, Inc. Amended and Restated 1999 Equity Incentive Plan, (2)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, (3)Registration Statement (Form S-8 No. 333-112222) pertaining to the Hologic, Inc. Amended and Restated1999 Equity Incentive Plan, (4)Registration Statement (Form S-8 No. 333-121111) pertaining to the Hologic, Inc. Amended and Restated1999 Equity Incentive Plan, (5)Registration Statement (Form S-8 No. 333-130170) pertaining to the Hologic, Inc. Amended and Restated1999 Equity Incentive Plan, (6)Registration Statement (Form S-8 No. 333-139341) pertaining to the Hologic, Inc. Second Amended andRestated 1999 Equity Incentive Plan, (7)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, (8)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, (9)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, (10)Registration Statement (Form S-8 No. 333-181126) pertaining to the Hologic, Inc. 2012 Employee StockPurchase Plan, (11)Registration Statement (Form S-8 No. 333-183019) pertaining to the 2003 Incentive Award Plan of Gen-Probe Incorporated, (12)Registration Statement (Form S-8 No. 333-188468) pertaining to the Hologic, Inc. Amended and Restated2008 Equity Incentive Plan.of our reports dated November 19, 2015, 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 26, 2015./s/ Ernst & Young LLPBoston, MassachusettsNovember 19, 2015Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 19, 2015 /s/ Stephen P. MacMillan Stephen P. MacMillan Chairman, President and Chief Executive Officer Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 19, 2015 /s/ Robert W. McMahon Robert W. McMahon Chief Financial Officer Source: HOLOGIC INC, 10-K, November 19, 2015Powered 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 26, 2015 (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 19, 2015/s/ Stephen P. MacMillan Stephen P. MacMillan Chairman, 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 19, 2015Powered 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 26, 2015 (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 19, 2015/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 19, 2015Powered 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 19, 2015Powered 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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