Hologic
Annual Report 2017

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KHOLOGIC INC - HOLXFiled: November 21, 2017 (period: September 30, 2017)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 30, 2017or ¨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, smaller reporting company, or anemerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of theExchange Act (Check one).Large accelerated filer ý Accelerated filer ¨Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company ¨ Emerging growth company ¨If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with anynew or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.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 April 1, 2017 was $11,852,439,894 based onthe price of the last reported sale on Nasdaq Global Select Market on that date.As of November 14, 2017, 275,683,548 shares of the registrant’s Common Stock, $0.01 par value, were outstanding.__________________________________________________________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 30, 2017 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 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 30, 2017TABLE OF CONTENTS PagePART I Item 1.Business5 Item 1A.Risk Factors18 Item 1B.Unresolved Staff Comments35 Item 2.Properties36 Item 3.Legal Proceedings36 Item 4.Mine Safety Disclosures36 PART II Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities37 Item 6.Selected Financial Data39 Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations40 Item 7A.Quantitative and Qualitative Disclosures About Market Risk70 Item 8.Financial Statements and Supplementary Data71 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure71 Item 9A.Controls and Procedures71 Item 9B.Other Information74 PART III Item 10.Directors, Executive Officers and Corporate Governance75 Item 11.Executive Compensation75 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters75 Item 13.Certain Relationships and Related Transactions, and Director Independence75 Item 14.Principal Accounting Fees and Services76 PART IV Item 15.Exhibits and Financial Statement Schedules77 Item 16.Form 10-K Summary822Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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, including the United Kingdom’s decision to leave the European Union, on ourbusiness and results of operations;•the coverage and reimbursement decisions of third-party payors and the guidelines, recommendations, and studies published by various organizationsrelating 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 impact to our results of operations from the disposal of our blood screening business to Grifols S.A., or Grifols, and the operational challenges ofseparating this business unit from our molecular diagnostics business;•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, including our acquisition of Cynosure, Inc., or Cynosure, in the second quarter of fiscal2017, 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 and toachieve anticipated cost synergies related to such actions;•our goal of expanding our market positions;•the development of new competitive technologies and products;•regulatory approvals and clearances for our products;•production schedules for our products;•the anticipated development of markets into which we sell our products 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 the agreements governing our indebtedness;•anticipated trends relating to our financial condition or results of operations, including the impact of interest rate and foreign currency exchangefluctuations; and•our anticipated use of proceeds, and 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.3Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsTRADEMARK 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: 3Dimensions, 3D Mammography, Accolade, Accuprobe, Affirm, Affirm Prone,Apogee, Aptima, Aptima Combo 2, ATEC, Brevera, C-View, Celero, Cellulaze, Cervista, Cynergy, Cynosure, Dimensions, Discovery, DTS, Elite, Eviva,Fluoroscan, Gen-Probe, Genius, Genius 3D, Genius 3D Mammography, Horizon, Invader, Medicor, MedLite, MonaLisa Touch, MultiCare, MyoSure,NovaSure, Panther, PicoSure, PrecisionTx, PreservCyt, Prodesse, Progensa, RevLite, SculpSure, SecurView, Selenia, Sertera, SmartLipo Triplex, StereoLoc,Synthesized 2D, ThinPrep, Tigris, TLI IQ, Tomcat, TMA, and Vectus.Procleix, Ultrio, and Ultrio Plus are trademarks of Grifols Worldwide Operations Limited.4Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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. On March 22, 2017, we acquired Cynosure, Inc., or Cynosure. Cynosure is a developer, manufacturer and supplier of a broad array of light-based aesthetic and medical treatment systems. The products are used to provide a diverse range of treatment applications such as non-invasive bodycontouring, hair removal, tattoo removal, skin revitalization and scar reduction, as well as the treatment of vascular lesions. The Cynosure business is referredto as Medical Aesthetics and operates as a separate business segment. As a result of our acquisition of Cynosure, we operate in five segments: Diagnostics,Breast Health, Medical Aesthetics, GYN Surgical and Skeletal Health. We sell and service our products through a combination of direct sales and servicepersonnel 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 through January 31, 2017, weoffered products that screen donated human blood and plasma. Our primary diagnostics products include our Aptima family of assays, which run on ouradvanced instrumentation systems (Panther and Tigris), our ThinPrep System, the Rapid Fetal Fibronectin Test and, through January 31, 2017, the Procleixblood screening assays. The Aptima family of assays is used to detect, among other things, the infectious microorganisms that cause the common sexuallytransmitted diseases, or STDs, chlamydia and gonorrhea, certain high-risk strains of human papillomavirus, or HPV, and Trichomonas vaginalis, the parasitethat causes trichomoniasis. The ThinPrep System is primarily used in cytology applications, such as cervical cancer screening, and the Rapid FetalFibronectin Test assists physicians in assessing the risk of pre-term birth. In blood screening, we developed and manufactured the Procleix family of assays,which are used to detect various infectious diseases. The Procleix blood screening assays also run on our Panther and Tigris systems. These blood screeningproducts were marketed worldwide by our former blood screening collaborator, Grifols S.A., or Grifols, to whom we sold the blood screening business onJanuary 31, 2017. Following the closing of this disposition, we no longer operate our blood screening business, except to the limited extent we have agreedto support Grifols.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 Medical Aesthetics segment offers a portfolio of aesthetic treatment systems, including SculpSure, PicoSure and MonaLisa Touch that enableplastic surgeons, dermatologists and other medical practitioners to perform non-invasive and minimally invasive procedures to remove hair, treat vascularand benign pigmented lesions, remove multi-colored tattoos, revitalize the skin, reduce fat through laser lipolysis, reduce cellulite, clear nails infected by toefungus, ablate sweat glands and improve gynecologic health. This segment also markets radio frequency, or RF, energy sourced medical devices for precisionsurgical applications such as facial plastic and general surgery, gynecology, ear, nose, and throat procedures, back and thigh procedures, ophthalmology, oraland maxillofacial surgery, podiatry and proctology.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.5Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsAvailable InformationOur Internet website address is http://www.hologic.com. Through our website, we make available, free of charge, our annual report on Form 10-K,quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as well as proxy statements, and, from time to time, otherdocuments as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission, or SEC.These SEC reports can be accessed through the investor relations section of our website. The information found on our website is not part of this or any otherreport we file with or furnish to the SEC.Investors and others should note that we announce material financial information to our investors using our investor relations website(http://investors.hologic.com), SEC filings, press releases, public conference calls and webcasts. We use these channels as well as social media tocommunicate with our members and the public about our company, our services and other issues. It is possible that the information we post on social mediacould be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our company to review the information wepost on the social media channels listed on our investor relations website. Hologic has used, and intends to continue to use, our investor relations website, aswell as our Twitter account (@Hologic), as means of disclosing material non-public information and for complying with its disclosure obligations underRegulation FD. Further corporate governance information, including our certificate of incorporation, bylaws, governance guidelines, board committeecharters, and code of business conduct and ethics, is also available on our investor relations website under the heading “Corporate Governance.” Thecontents of our websites are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we filewith the SEC, and any references to our websites are intended to be inactive textual references only.You 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 five principal reporting segments: Diagnostics, Breast Health, Medical Aesthetics, GYN Surgicaland Skeletal Health. Financial information concerning these segments is provided in Note 14 to our audited consolidated financial statements contained inItem 15 of this Annual Report. The following describes our principal products in each of our segments.Diagnostics ProductsAptima Family of AssaysThe Aptima family of assays is used to detect, among other things, the infectious microorganisms 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 causestrichomoniasis. In addition, we also offer viral load assays for the quantitation of hepatitis B virus, or HBV, hepatitis C virus, or HCV, and humanimmunodeficiency virus, or HIV-1 for use on our Panther instrument system. All three of these viral load assays are CE-marked and are currently marketed inEurope. In addition, our HCV and HIV-1 viral load assays are approved for sale and marketing in the U.S., and we are seeking FDA approval of our HBV viralload assay. Our Aptima products integrate a proprietary number of core 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 highlysensitive amplification assays that increase assay performance, improve laboratory efficiency and reduce laboratory costs. Each of these technologies isdescribed in greater 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 binds to the beadand to the target nucleic acid. We use magnetic separation to concentrate the target by drawing the magnetic beads to the sides of a sample tube, while theremainder of the sample is removed from the tube. When used in conjunction with our amplification procedures, target capture techniques concentrate thenucleic acid target(s) and also remove materials in the sample that might otherwise interfere with amplification.6Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsTranscription-Mediated Amplification (TMA) Technology. The goal of amplification technologies is to increase the copy number of a target nucleicacid sequences that may be present in samples in small numbers. These copies can then be detected using nucleic acid probes. Amplification technologiescan yield results in only a few hours versus the several days or weeks required for traditional culture methods. TMA is a transcription-based amplificationsystem that uses two different enzymes to drive the process. The first enzyme is a reverse transcriptase that creates a double-stranded DNA copy from an RNAor DNA template. The second enzyme, an RNA polymerase, makes thousands of copies of the complementary RNA sequence, known as the “RNA amplicon,”from the double-stranded DNA template. Each RNA amplicon serves as a new target for the reverse transcriptase and the process repeats automatically,resulting in an 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 HPA technology, we have simplified testing, furtherincreased 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 that can be differentiated from each other-one that “flashes” and another one that “glows.” By using DKAtechnology, we have created nucleic acid test, or NAT, assays that can detect two separate targets simultaneously.InstrumentationWe have developed and continue to develop instrumentation and software designed specifically for use with certain of our assays, including the Aptimafamily of assays. We also provide technical support and instrument service to maintain these instrument systems in the field. By placing our proprietaryinstrumentation in laboratories and hospitals, we can establish a platform for future sales of our 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 assays, the Panther instrument system, an integrated, fully-automated testing instrument capable of serving both high- andlow-volume laboratories, and our semi-automated direct tube sampling, or DTS, instruments which are used to run a number of infectious disease assays. Inthe fourth quarter of fiscal 2014, we also introduced our Tomcat instrument, a fully-automated general purpose instrument designed to improve pre-analyticalsample processing by eliminating the inefficient and error-prone activities associated with manually transferring samples from one tube to another. In thethird quarter of fiscal 2017, we received a CE-mark for our new Panther Fusion system and related Fusion assays for flu and respiratory testing, all of whichare currently available in Europe. The Panther Fusion system extends the capabilities of the existing Panther system by adding the flexibility of polymerasechain reaction, or PCR, functionality to our existing TMA-based technology, all as a modular in-lab upgrade to the existing Panther system. We also receivedclearance from the FDA in October 2017 to market and sell the Panther Fusion system and related Fusion assays in the U.S.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 cardiovascular risk and other diseases.ThinPrep SystemThe ThinPrep System is the most widely used method for cervical cancer screening in the U.S. The ThinPrep System consists of any one or more of thefollowing: the ThinPrep 2000 Processor, ThinPrep 5000 Processor, ThinPrep5000 Processor with Autoloader, ThinPrep Imaging System, and related reagents,filters and other supplies, such as the ThinPrep Pap Test and our ThinPrep PreservCyt Solution.7Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe ThinPrep Process. The ThinPrep process begins with the patient’s cervical sample being obtained by the physician using a cervical samplingdevice that, rather than being smeared on a microscope slide as in a conventional Pap smear, is inserted into a vial filled with our proprietary ThinPrepPreservCyt Solution. This enables most of the patient’s cell samples to be preserved before the cells can be damaged by air drying. The ThinPrep specimenvial is then labeled and sent to a laboratory equipped with a ThinPrep Processor for slide preparation. At the laboratory, the ThinPrep specimen vial isinserted into a ThinPrep Processor, a proprietary sample preparation device, which automates the process of preparing cervical slides for staining andmicroscopic examination.In the case of manual screening, the cytotechnologist screens each Pap test slide with a microscope to first determine the adequacy of the slide and thento examine the entire slide to differentiate diseased or abnormal cells from normal cells. With the ThinPrep Imaging System, the screening process has beenautomated to combine the power of computer imaging technology and human interpretive skills. Prior to human review, the ThinPrep Imaging Systemrapidly scans, 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.Additional Applications. In addition to serving as a replacement for the conventional Pap smear, the ThinPrep System can also be used for non-gynecological cytology screening applications including fine-needle aspiration specimens (e.g., breast, thyroid, lung or liver), body fluids (e.g., urine, pleuralfluid, ascitic fluid or pericardial fluid), respiratory specimens (e.g., sputum or brushing of respiratory tracts) and ancillary testing (e.g., cell blocks,immunocytochemistry or special stains).Rapid Fetal Fibronectin TestThe Rapid Fetal Fibronectin Test is a patented single-use disposable test used to determine a woman’s risk of pre-term birth by detecting the presence ofa specific protein, fetal fibronectin, in vaginal secretions during pregnancy. The test utilizes a single-use, disposable cassette and is analyzed on our patentedinstrument, the TLI IQ System.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 Tomosynthesis Our Dimensions platform includes the Selenia Dimensions gantry and the 3Dimensions gantry incorporating our DirectRay digital detector capable ofperforming both 2D and tomosynthesis image acquisition and display. When operating in tomosynthesis mode, each system acquires a series of low dose x-ray images taken in a scanning motion at various angles. The images are mathematically processed into a series of small slices, allowing for visualization ofthe breast in multiple contiguous slices. We believe by revealing the internal structure of the breast, the more subtle architecture of various types ofsuspicious lesions may be able to be better interpreted, which may ultimately increase cancer detection and reduce unnecessary patient callbacks. Ourclinical results for FDA approval demonstrated that conventional 2D digital mammography with the addition of our Genius 3D Mammography is superior to2D digital mammography alone for both screening and diagnostics. The new 3Dimensions system, which was released for commercial shipment in Europeduring the fourth quarter of fiscal 2017, is designed to be our most advanced 3D mammography system. In the U.S., the 3Dimensions system has beenapproved by the FDA, although we are awaiting FDA approval of certain hardware and software features.Synthesized 2D SystemOur Synthesized 2D product has two offerings: C-View and Intelligent 2D. These software products provide a 2D image that is mathematicallysynthesized from the data within a tomosynthesis exam. Our current recommended clinical practice involves what we refer to as a “combo” exam involving atomosynthesis exam and a conventional digital 2D exam, but performed under the same breast compression. The C-View product allows for the mathematicalconstruction of a 2D image in standard resolution format from the tomosynthesis data, without the need for an actual 2D exposure. Elimination of the 2Dexposure reduces the breast compression time and patient dose compared to the current combo exam. The new Intelligent 2D product, which was released inEurope during the fourth quarter of fiscal 2017, allows for the mathematical construction of a 2D image in high resolution format.8Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsSeleniaThe 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. We discontinued the Selenia system in fiscal 2016.SecurView WorkstationThe images captured by digital mammography systems are typically transmitted electronically for review by a radiologist at a work station. To this end,we developed the SecurViewDX breast imaging softcopy workstation, approved for interpretation of digital mammograms from most vendors as well asimages from other diagnostic breast modalities. To complement this product, we also developed the SecurViewRT workstation, a technologist workstationenabling bi-directional exchange of electronic communications between the reviewer and the technologist.CAD (Computer Aided Detection) SystemsWe have developed CAD software tools for our mammography products and visualization tools for magnetic resonance imaging, or MRI.Mammography CAD is used by radiologists as “a second pair of eyes” when reading a woman’s mammogram. Use of this technology provides reviewers withthe potential to detect findings that might otherwise be overlooked during the review process, thus potentially increasing cancer detection. We also marketan MRI visualization product, which manages the data set from an MRI procedure, designed to improve data workflow for the physician and provideanalytical tools to aid in the identification and evaluation of the extent of disease.Stereotactic Breast Biopsy Systems We 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 and Affirm Prone dedicated, prone breast biopsy table, the StereoLoc II upright attachment, and theAffirm upright attachment. The StereoLoc II attachment is used in conjunction with our Selenia systems. The Affirm upright attachment is employed with ourDimensions systems. These breast biopsy systems provide an alternative to open surgical biopsy and can be performed as an outpatient procedure under localanesthesia, allowing shorter recovery times. The Affirm tomosynthesis option provides faster lesion targeting and reduced patient procedure time comparedto traditional stereotactic biopsy procedures. The Affirm system is pre-programmed for use with our Brevera, Eviva and ATEC vacuum-assisted breast biopsydevices.Breast Biopsy Products We offer a wide range of minimally invasive products for breast biopsy and biopsy site marking. Our breast biopsy portfolio includes three types oftethered vacuum-assisted breast biopsy products, the Brevera, ATEC, and Eviva devices. Each tethered device is powered by a console and utilizes ourpatented fluid management system. The ATEC device can be used under all standard imaging guidance modalities (stereotactic x-ray, ultrasound, MRI andmolecular breast imaging) whereas our Brevera and Eviva devices are used exclusively under stereotactic x-ray guidance. We also offer the Celero and Serterabiopsy devices, both of which are non-tethered (no separate console), spring-loaded, disposable core biopsy devices, which are used exclusively underultrasound-guidance.Medical AestheticsSculpSureOur SculpSure laser system is a hyperthermic laser treatment for non-invasive body contouring. Utilizing a 1060 nanometer (nm) diode laser, SculpSureis designed to reduce fat non-invasively by eliminating subcutaneous fat cells. Over time, the body naturally eliminates the fat cells that were disrupted bythe SculpSure treatment. The hands-free device features a flexible applicator system to treat multiple anatomical areas of the body. SculpSure is currentlyapproved for treatment on flanks, abdomen and back as well as inner and outer thighs. We recently received FDA 510(k) clearance for use of SculpSure in thesubmental, or below the chin, area. The SculpSure system requires the use of a Patented Applicator for Contouring, or PAC, to activate each applicatorhandpiece used in a treatment cycle.PicoSure, MedLite and RevLiteOur PicoSure system uses a 755 nm wavelength laser for the removal of tattoos and benign pigmented lesions, as well as the reduction of wrinkles.PicoSure uses short bursts of energy which are measured in picoseconds (trillionths of a second) in contrast to nanosecond technology, used in our MedLiteand RevLite products, which delivers pulses in billionths of a9Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentssecond. The bursts of energy cause the tattoo ink or other damage to break apart into tiny particles which are eliminated by the body. MedLite and RevLiteare used for the removal of benign pigmented lesions and multi-colored tattoos. We also offer PicoSure 532 nm wavelength and the PicoSure 1064 nmwavelength to more effectively treat certain colors in tattoos.MonaLisa TouchThe MonaLisa Touch is a CO2 laser for vaginal rejuvenation for postmenopausal women, breast cancer survivors and women who have undergonehysterectomies and who may suffer from changes to their gynecologic health, including vaginal dryness, soreness and itching as well as painful urination andintercourse. Delivering short CO2 ablative laser pulses to the vaginal wall, the MonaLisa Touch is designed to stimulate and promote the regeneration ofcollagen fibers and the restoration of hydration and elasticity within the vaginal mucosa. We distribute and market the MonaLisa Touch in North Americapursuant to an exclusive distribution agreement with El.En. S.p.A., or El.En. We and El.En. have agreed to market and distribute the MonaLisa Touch underseparate distribution agreements with our respective wholly-owned subsidiaries in the United Kingdom, Germany and Spain.Other Products.Other product offerings in our Medical Aesthetics business include, among others:•the Icon aesthetic system for hair removal, wrinkle reduction and scar and stretch mark treatment;•the Vectus diode laser for high volume hair removal;•the Cellulaze laser device for the treatment of cellulite;•the Cynergy product line for the treatment of vascular lesions;•the Elite product line for hair removal and treatment of facial and leg veins and pigmentations; and•the SmartLipo product line for Laser Body Sculpting for the minimally invasive removal of unwanted fat.System Components.Each of our Medical Aesthetics systems consists of a control console and one or more handpieces. Some of our systems consist of RF-based controlconsoles where energy is transferred through a handpiece or electrode. Our control consoles are each comprised of a graphical user interface, control systemsoftware and high voltage electronics. Depending on the system, the laser or other light source may be within the control console or the handpiece. Thegraphical user interface allows the practitioner to set the appropriate laser or flashlamp parameters, such as energy and pulse duration, to meet therequirements of a particular application for each particular patient. The control system software communicates the operator’s instructions from the graphicaluser interface to the system’s components and manages system performance and calibration.For many applications, practitioners use cooling to protect the skin. The cooling system may be a separate system or integrated into the laser or intensepulsed light system itself. When not integrated, we offer our customers the SmartCool treatment cooling system, which we purchase from a third-partysupplier and sell as a private label product under the SmartCool brand. The SmartCool handpiece, which is specially designed for use with our laser systems,interlocks with the laser handpiece.GYN Surgical ProductsNovaSureThe NovaSure endometrial ablation system allows physicians to treat women suffering from abnormal uterine bleeding. The system consists of adisposable device and a controller that delivers radio frequency, or RF, energy to ablate the endometrial lining of the uterus in order to eliminate or reducethe patient’s abnormal bleeding. The NovaSure disposable device is a hand-held, single-use device that incorporates a flexible gold-plated mesh electrodeused to deliver the RF energy to the endometrial tissue. The NovaSure RF Controller generates and delivers the RF energy customized for each patient,monitors several critical treatment and safety parameters, and automatically controls the endpoint of the procedure. In the second quarter of fiscal 2017, wereleased a new NovaSure ADVANCED device with slimmer diameter designed to improve patient comfort and physician ease-of-use while maintaining theclinical efficacy of the NovaSure system.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.10Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 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. During the procedure, the tissue removal device is insertedthrough the MyoSure hysteroscope. This tissue removal device is powered by a control unit, which features a simple user interface and is foot pedal activated.Skeletal Health ProductsDiscovery and Horizon X-Ray Bone DensitometersBone densitometry is the measurement of bone density to assist in the diagnosis and monitoring of osteoporosis and other metabolic bone diseases thatcan lead to debilitating bone fractures. Osteoporosis is a disease that is most prevalent in post-menopausal women. Our proprietary Discovery x-ray bonedensitometers incorporate dual-energy x-ray technology to precisely assess bone density of the most important fracture sites, the spine and hip. Our Horizonline of x-ray bone densitometers incorporates advanced features and performance characteristics. We offer a range of bone densitometers with various featuresand options to address the requirements of our diverse customer base.Mini C-arm ImagingOur Fluoroscan mini C-arm imaging systems provide low intensity, real-time x-ray imaging, with high-resolution images at radiation levels and at a costbelow those of conventional x-ray and fluoroscopic equipment. Mini C-arm systems are used primarily by orthopedic surgeons to assist in performingminimally 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 2017, 2016, and 2015, no customer accounted for more than 10% of our consolidated revenues. In fiscal 2017, 2016, and 2015,revenues generated from Grifols, to whom we sold our blood screening business, accounted for 11.7%, 18.8%, and 20.9% of our Diagnostics segmentrevenue, respectively. In addition, in fiscal 2017, revenues from another customer accounted for 12.8% of our Diagnostics segment revenue. No othercustomer accounted for more than 10% of our revenues in any other business segment in fiscal 2017, 2016, or 2015. In fiscal 2017, 2016, and 2015,international revenues accounted for 22.4%, 21.1%, and 24.0% of our consolidated revenues, respectively. See Note 14 to our consolidated financialstatements contained in Item 15 of this Annual Report for geographical information.Our U.S. sales force is structured to specifically target the customers in each of our business segments. We maintain distinct teams focused on theDiagnostics, Breast Health, Medical Aesthetics, GYN Surgical, and Skeletal Health markets. Our end customers include clinical laboratories, hospitals,healthcare providers and surgeons in both hospital and office settings, and we target various specialists at healthcare entities who use our products, such asob-gyns, dermatologists, radiologists and breast surgeons.A critical element of our strategy in the U.S. for our Diagnostics, Breast and Skeletal Health and GYN Surgical divisions has been to utilize the resultsof our clinical trials and expanded FDA labeling to demonstrate safety, efficacy and productivity improvements to our target customers. Our U.S. sales effortsfor these divisions also include the use of national account managers focused on obtaining purchasing contracts from large purchasing entities, such asmanaged care organizations, integrated delivery networks and government healthcare facilities. In addition, in certain regions of the U.S., we use a limitednumber of independent dealers or distributors to sell and service certain of our products. Internationally, our products in all divisions are marketed and soldthrough a combination of a direct sales force and a network of distributors.In our Medical Aesthetics division, we target potential customers through office visits, trade shows and trade journals. We also conduct clinicalworkshops and webinars featuring recognized expert panelists and opinion leaders to promote existing and new treatment techniques using our products. Webelieve that these workshops and webinars enhance customer loyalty and provide us with new sales opportunities. We also use direct mail programs to targetspecific segments of the market that we seek to access, such as members of medical societies and attendees at meetings sponsored by medical societies orassociations. We actively maintain a public relations program to promote coverage of our products on daytime television shows in the U.S. and Europe andwe are active on popular social media outlets.Our service organization is responsible for installing our products and providing warranty and repair services, applications training and biomedicaltraining. In our Medical Aesthetics business, we also provide business and practice development consulting. Products sold by our direct sales force typicallycarry limited warranties covering parts and labor for twelve months. Products sold through dealers also carry limited warranties that typically last for twelvemonths and cover only parts and components. We also offer service contracts that generally last one to five years after the original warranty period. Weprovide both repair services and routine maintenance services under these arrangements, and also offer repair and11Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsmaintenance services on a time and materials basis to customers that do not have service contracts. Internationally, we primarily use distributors, salesrepresentatives and third parties to provide maintenance service for our products.El.En. Commercial RelationshipWe have several distribution agreements with El.En. S.p.A. Under one of these agreements, we purchase from El.En. its SmartLipo MPX system and itsproprietary SLT II laser system. The SLT II laser system is an essential component of our SmartLipo Triplex, Cellulaze, and PrecisionTx systems, which alsoincorporate our proprietary software and delivery systems. We have exclusive worldwide rights under this agreement to sell the SmartLipo MPX system andour products containing the SLT II laser system. Under another distribution agreement with El.En. and under separate distribution agreements with certain ofour wholly-owned subsidiaries in the United Kingdom, Germany and Spain, we purchase from El.En. its MonaLisa Touch laser system.The prices at which we purchase these laser systems from El.En. are specified in the agreements; however, they may be changed by El.En. at itsdiscretion upon 30 days’ notice. El.En. is required to provide us with training for the products we distribute under these agreements, as well as marketing andother sales support for such products as we and El.En. may agree. We are required to use commercially reasonable efforts to sell and promote our systemscontaining these laser systems, and we are responsible for obtaining and maintaining regulatory approvals for such products. We or El.En. may terminatethese agreements at any time based upon material uncured breaches by, or the insolvency of, the other party. In addition, El.En. may terminate eachagreement if we do not meet annual minimum purchase obligations specified in the agreement and we may terminate if El.En. rejects a purchase order that isin line with our forecast.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 changes toindustry standards or guidelines or advances in technology. We can give no assurance that we will be able to compete successfully with existing or newcompetitors.In the current environment of managed care, economically-motivated buyers, consolidation among healthcare providers, increased competition anddeclining reimbursement rates, we have been increasingly required to compete on the basis of price, value, reliability and efficiency. We believe the currentglobal economic conditions and healthcare reform measures are putting additional competitive pressure on us, including on our average selling prices,overall procedure rates and market sizes.We believe that the success of our products depends on our ability to differentiate ourselves and to demonstrate that our products deliver the 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.12Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsClinical laboratories also may offer testing services that are competitive with our products and may use reagents purchased from us or others to develop theirown 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 test competes against BD and Roche Diagnostics Corporation, or Roche, and our Aptima HPV and Cervista HPV testscompete with tests marketed by Qiagen and Roche.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, Carestream Health, Inc.,FUJIFILM Holdings Corporation, or Fuji, I.M.S., and Toshiba Corporation. In the U.S., our full field digital mammography systems compete with digitalmammography systems from GE, Siemens, Fuji, I.M.S., Philips and Planmed. Our digital mammography systems also compete with Fuji’s and CarestreamHealth’s Computed Radiography, or CR mammography systems, and other lower-priced alternatives to 2D digital mammography and analog mammographysystems. In the U.S., GE, Siemens and Fuji have received FDA approval for their breast tomosynthesis systems, and we believe that other competitors aredeveloping tomosynthesis systems for commercial use in the U.S. Our Dimensions tomosynthesis systems also compete in certain countries outside of theU.S. with tomosynthesis systems developed by GE, Siemens, Fuji, and I.M.S.The primary competitor for our breast biopsy product line is Devicor Medical Products, Inc., part of Danaher Corporation's Leica Biosystems division.In addition, other competitors include CareFusion, a BD Company, Sanarus Technologies, LLC and Intact Medical Corporation.Medical Aesthetics. Our Medical Aesthetics products compete against laser and other energy-based products offered by companies such as Cutera, Inc.,Syneron Medical Ltd. and ZELTIQ Aesthetics, Inc. (acquired by Allergan plc in April 2017), as well as several smaller specialized companies, such as AlmaLasers Inc. (acquired in May 2013 by Shanghai Fosun Pharmaceutical) and Lumenis Inc. Some of these competitors have strong financial and humanresources and have established reputations, as well as established worldwide distribution channels and sales and marketing capabilities. Additionalcompetitors may enter the Medical Aesthetics market, and we are likely to compete with new Medical Aesthetics companies in the future. Our MedicalAesthetics products also compete against non-laser and non-light-based medical products, such as BOTOX and collagen injections, and surgical and non-surgical aesthetic procedures, such as face lifts, chemical peels, abdominoplasty, liposuction, microdermabrasion, sclerotherapy and electrolysis.GYN Surgical. Our NovaSure system currently faces direct competition from Boston Scientific Corporation, or Boston Scientific, The CooperCompanies, Inc., or CooperSurgical, and Minerva Surgical, Inc., or Minerva, each of which currently markets an FDA approved endometrial ablation devicefor the treatment of abnormal uterine bleeding. In addition to these devices, we also compete with alternative treatments to our NovaSure system, such as drugtherapy, intrauterine devices, hysterectomy, dilation and curettage and rollerball ablation. Because drug therapy is an alternative to our NovaSure procedure,NovaSure’s competitors also include many major pharmaceutical companies that manufacture hormonal drugs for women.Our MyoSure product competes directly with hysteroscopic loop resection, as well as hysteroscopic tissue removal systems such as Medtronic’sTruClear device and Boston Scientific's Symphion device. The MyoSure product also competes with alternative therapeutic techniques such as hysteroscopicresection with a monopolar or bipolar loop, 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 ofquality assurance, scarcity and/or cost effectiveness, certain components, subassemblies, and raw materials used in our products are available only from oneor a limited number of suppliers. We work closely with our suppliers to develop contingency plans to ensure continuity of quality and reliable supply. Weestablished long-term supply contracts with many of our suppliers and in other instances, we 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.13Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 current supplier of certain key raw materials for certain of our amplified NAT diagnostic assays is Roche Diagnostics Corporation. The parentcompany of Roche Diagnostics Corporation is F. Hoffmann-La Roche Ltd, a direct competitor of our Diagnostics business. Our Diagnostic business has twosupply agreements with GE Healthcare Bio-Sciences Corp., an affiliate of GE, for membranes used in connection with our ThinPrep product line and forprimers used in the manufacture of Aptima, Fusion, Cervista, Progensa and AccuProbe product lines. GE is a direct competitor with our Breast Health andSkeletal Health businesses.We have sole-source third-party contract manufacturers for each of our molecular diagnostics instrument product lines and for our Skeletal Healthproducts. KMC Systems, Inc., or KMC Systems, is the only manufacturer of the Tigris instrument spare parts, Stratec Biomedical AG, or Stratec, is the onlymanufacturer of the Panther instrument and Flextronics International, LTD, or Flextronics, is the only manufacturer of our Skeletal Health finished goodsproducts. We are dependent on these sole source third-party manufacturers, and this dependence exposes us to increased risks associated with productiondelays, delivery schedules, manufacturing capability, quality control, quality assurance and costs. We have no firm long-term volume commitments witheither KMC Systems, Stratec or Flextronics. If KMC Systems, Stratec, Flextronics or any of our other third-party manufacturers experiences delays,disruptions, capacity constraints or quality control problems in its development or manufacturing operations or becomes insolvent or otherwise fails tosupply us with products in sufficient quantities, instrument and equipment shipments to our customers could be delayed, which would decrease our revenuesand may harm our competitive position and reputation. Further, because we place orders with our manufacturers based on forecasts of expected demand forour instruments and Skeletal Health products, if we inaccurately forecast demand we may be unable to obtain adequate manufacturing capacity or adequatequantities of components to meet our customers' delivery requirements.In our Medical Aesthetics business, we use Alexandrite rods in the lasers for our Elite+, Apogee+, and PicoSure systems and our sole source supplier isNorthrop Grumman SYNOPTICS. We are aware of no alternative supplier of Alexandrite rods meeting our quality standards. We also offer our SmartCoolcooling systems for use with our laser aesthetic treatment systems, and our sole source supplier is Zimmer Elektromedizin GmbH. We use diode laser barsfrom Coherent, Inc. to manufacture our Vectus diode laser, and we use diode laser modules from Dilas Diode Laser Inc. to manufacture our SculpSure lasersystem. Although alternative suppliers exist for the diode laser bars, they could take months to qualify and implement. We also have El.En. as our sole sourcesupplier for the MonaLisa Touch, as well as the SLT II laser system that we integrate with our own proprietary software and delivery systems for ourSmartLipo Triplex, Cellulaze and PrecisionTx systems. We use one third-party to assemble and test many of the components and subassemblies for ourCynergy, Accolade, MedLite, RevLite, and PicoSure product families. We also utilize one third-party to assemble and test Elite+, Apogee+, Icon, Vectus, andthe SculpSure finished devices.We, and our contract manufacturers, manufacture our products at a limited number of different facilities located in the U.S. and throughout the world. Inmost cases, the manufacturing of each of our products is concentrated in one or a few locations. An interruption in manufacturing capabilities at any of thesefacilities, as a result of equipment failure or other reasons, could reduce, delay or prevent the production of our products. 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” set forth in Part I, Item 1A of this annual report onForm 10-K.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 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 disclose and report whether or not such minerals originate from the Democratic Republic of Congo oran adjoining country. The conflict minerals rule could affect sourcing at competitive prices and availability in sufficient quantities of certain minerals usedin the manufacture of our products, including tantalum, tin, gold and tungsten. The number of suppliers who provide conflict-free minerals may be limited. Inaddition, there may be material costs associated with complying with the disclosure requirements, such as costs related to determining the source of certainminerals used in our products, as well as costs of possible changes to products, processes, or sources of supply as a consequence of such verification activities.Since our supply chain is complex, we may not be able to sufficiently verify the origins of the relevant minerals used in our products through the duediligence procedures that we implement, which may harm our reputation. In addition, we may encounter challenges to satisfy those customers who requirethat all of the components of our products be certified as conflict-free, which could place us at a competitive disadvantage if we are unable 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 Electronic14Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsEquipment Directive, or WEEE, enacted in the European Union which require the registration of and regulate the use of certain hazardous substances andchemicals 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 28, 2017 and October 23, 2016 totaled $294.1 million and $345.5 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 $232.8 million, $232.1 million and $214.9 million in fiscal 2017, 2016, and 2015, respectively.Patents and Proprietary RightsWe rely primarily on a combination of trade secrets, patents, copyrights, trademarks and confidentiality procedures to protect our products andtechnology. Due to the rapid technological changes that characterize the markets we operate in, we believe that trade secrets and other unpatented know-howrelied upon in connection with the development of new products and the enhancement of existing products are generally as important as patent protection inestablishing and maintaining a competitive advantage. Nevertheless, we have obtained patents and will continue to make efforts to obtain patents, whenavailable, in connection with our product development programs. We do not consider our business to be materially dependent upon any individual patent.We 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. Thirdparties may infringe, misappropriate or otherwise violate our intellectual property rights, or copy or reverse engineer portions of our technology. Ourcompetitors may independently develop similar or superior technology that our patents do not cover. In addition, because patent applications in the U.S. arenot generally publicly disclosed until eighteen months after the application is filed, applications may have been filed by third parties that relate to ourtechnology. Moreover, there is a risk that foreign intellectual property laws will not protect our intellectual property rights to the same extent as intellectualproperty 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 inthe U.S. and abroad which may allow third parties to exploit those technologies. In the absence of significant patent protection, we may be vulnerable tocompetitors who 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 as may also be described herein, and we may be notified in the future of claims that we may be infringing, misappropriating or otherwiseviolating the intellectual property rights of third-parties. In connection with any such claims, we may seek to enter into settlement and/or licensingarrangements. There is a risk in these situations that no license will be available or that a license will not be available on reasonable terms. Alternatively, wemay decide or be required to litigate such claims. A successful claim by a third-party may require us to remove the alleged15Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsinfringing product from the market or to design around the patented technology, potentially resulting in less market demand for the 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 three classes based on risk. Regulatory control increases from Class I (lowest risk) to Class III (highest risk). TheFDA generally must clear or approve the commercial sale of new medical devices in Classes II and III. Commercial sales of our Class II (except for Class IIexempt devices) and III medical devices within the U.S. must be preceded by either a pre-market notification filing pursuant to Section 510(k) of the FD&CAct (Class II) or the granting of a pre-market approval, or PMA (Class III). Our Class I and Class II exempt medical devices must follow Hologic’s internalQuality System processes prior to commercialization. All classes of devices must meet FDA's quality system (QS), establishment registration, medical devicelisting, labeling and medical device reporting (MDR) regulations.A 510(k) pre-market notification filing must contain information establishing that the device to be sold is substantially equivalent to a devicecommercially distributed prior to May 28, 1976 or to a device that has been determined by the FDA to be substantially equivalent. The PMA procedureinvolves a complex and lengthy testing process that is subject to review by the FDA and may require several years to obtain. We may need to first obtain aninvestigational device exemption (for significant risk devices), known as an IDE, in order to conduct extensive clinical testing of the device to obtain thenecessary clinical data for submission to the FDA. The FDA will approve a PMA only if after evaluating the supporting technical data it finds that the PMAcontains sufficient, valid scientific evidence to assure that the device is safe and effective for its intended use(s). This approval may be granted with post-approval requirements including inspection of manufacturing facilities and/or 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.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 specific 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,16Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsmanufacturing practices, environmental protection, fire hazard control and disposal of hazardous or potentially hazardous substances, among others. We maybe required to incur significant costs to comply with these laws and regulations in the future, and complying with these laws may result in a material adverseeffect upon our business, 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, Quality System certification,complying with European directives and in some cases receiving specific marketing authorization from the appropriate foreign regulatory authorities.Foreign registration is an 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 Europeanregulators have now reached consensus on the texts for both new regulations and they became official in May of 2017. There will be a three-year transitionperiod for medical devices and a five-year transition period for IVDs. The adoption of these regulations may impact our international operations through abroadened scope of medical device and IVD oversight and/or regulatory reach. Compliance with the new European Commission regulations may imposeadditional 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, other than for our Medical Aesthetics products, the reimbursement of patients’ medicalexpenses by government healthcare programs, private insurers or other healthcare payors. In the U.S., the Centers for Medicare & Medicaid Services, knownas CMS, establishes coverage policies and payment rates for Medicare beneficiaries. CMS publishes payment rates for physician, hospital, laboratory andambulatory surgical center services on an annual basis. Under current CMS policies and regulations, varying payment levels have been established for testsand procedures performed using our products. Coverage policies for Medicare patients may vary by regional Medicare contractor in the absence of a nationalcoverage determination and payment rates for procedures will vary based on the geographic price index. Coverage policies and reimbursement rates forMedicaid patients are dependent on each State Medicaid plan and will vary. Coverage policies and reimbursement rates for patients with private insurance isdependent on the individual private payor’s decisions and may not follow the policies and rates established by CMS. Moreover, private insurance carriersmay choose not to follow the CMS coverage policies or payment rates. The use of our products outside of the U.S. is similarly affected by reimbursementpolicies adopted by foreign regulatory authorities and insurance carriers.Healthcare policy and payment reform proposals and medical cost containment measures are being adopted in the U.S. and in many foreign countries.The ability of our customers to obtain appropriate reimbursement for our products and services from private and governmental third-party payors is critical tothe success of medical technology companies because it affects which products customers purchase and the prices they are willing to pay. Reimbursementand coverage varies by country and can significantly impact acceptance of new products and technologies. Even if we develop a promising new product, wemay find limited 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 U.S. and other countries in a manner that significantly reduces reimbursement forprocedures using our medical products or denies coverage for those procedures facilitated by our products, including price regulation, competitive biddingand tendering, coverage and payment policies, comparative effectiveness of therapies, technology assessments and managed-care arrangements, could have amaterial adverse effect on our business, financial condition or results of operations.EmployeesAs of September 30, 2017, we had 6,233 full-time employees, including 1,552 in manufacturing operations, 761 in research and development, 3,205 inmarketing, sales and support services, and 715 in general administration. The 60 non-17Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsmanagement employees of our Hitec-Imaging subsidiary located in Germany are represented by a union and are subject to collective bargaining agreements.In addition, Hitec-Imaging’s German employees are represented by a works council, a Betriebsrat, with respect to various shop agreements for social mattersand working conditions. We believe that our relationship with our employees is good. Except as described herein, none of our other employees arerepresented 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. Our respiratory infectious disease product line within ourDiagnostics segment is also subject to significant seasonal and year-over-year fluctuations. In addition, the summer months, which occur during our fiscalfourth quarter, typically have had lower order rates internationally for most of our products.Item 1A. Risk FactorsIn evaluating our business, the risks described below, as well as other information contained in this Annual Report on Form 10-K and in our otherfilings with the Securities and Exchange Commission should be considered carefully. Additional risks not presently known to us or that we currently deemimmaterial may also adversely affect our business. The occurrence of any of these events or circumstances could individually or in the aggregate have amaterial adverse effect on our business, financial condition, cash flow or results of operations. This report contains forward-looking statements; pleaserefer to the cautionary statements made under the heading "Special Note Regarding Forward-Looking Statements" for more information on thequalifications and limitations on forward-looking statements.Risks Relating to our BusinessSuccessful execution of the revenue growth plan for all of our divisions, but particularly for our newly-acquired Medical Aesthetics division, is essentialto achieving our growth objectives and involves risk.Our successful execution of the growth plan for our Medical Aesthetics business, which is essential to achieving our growth objectives, involves anumber of risks. Among other things:•we may not be able to successfully commercialize our Medical Aesthetics product pipeline on a timely basis or at all;•we may be unable to drive increased disposable utilization of our SculpSure or other future products; and•we face competition from well-established companies operating in the Medical Aesthetics field, some of whom are much larger than we are andhave more resources to devote to promoting the business.Competition in the Medical Aesthetics device industry is intense. Our Medical Aesthetics products compete against products offered by companiessuch as Cutera, Syneron Medical, and ZELTIQ Aesthetics (which was acquired by Allergan in 2017), as well as several smaller specialized companies, such asAlma Lasers (acquired in 2013 by Shanghai Fosun Pharmaceutical) and Lumenis. We also face competition against non-laser and non-light-based medicalproducts, such as BOTOX and collagen injections, and surgical and non-surgical aesthetic procedures, such as face lifts, chemical peels, abdominoplasty,liposuction, microdermabrasion, sclerotherapy and electrolysis. We may also face competition from manufacturers of pharmaceutical and other products thathave not yet been developed. Additional competitors may enter the market, and we are likely to compete with new companies in the future.In addition, Medical Aesthetics is a new type of business for the Company, requiring understanding of a new market as well as new products andprocedures that are not subject to reimbursement. As noted in a subsequent risk factor, the elective nature of the Medical Aesthetics procedures subjects ourbusiness to increased volatility due to macroeconomic conditions. We market our aesthetic treatment systems to physicians and other practitioners as well asto end-users directly. We believe, and our growth expectations assume, that we and other companies selling lasers and other aesthetic treatment systems havenot fully penetrated these markets and that we will receive a significant percentage of our revenues from selling to these markets. In addition, the commercialsuccess of the Medical Aesthetics products and technology we develop will depend upon the acceptance of these products by providers of aestheticprocedures and their patients and clients. It is difficult for us to predict how successful recently introduced products, or products we are currently developing,will be over the long term. If our expectations as to the size of these markets and our ability to sell our products to participants in these markets are notcorrect, our revenues will suffer and our business will be harmed.Additionally, as our Medical Aesthetics business is newly-acquired, we face risks relating to integration, including, among others:•sales force and other employee turnover (including rebuilding the sales force of our Medical Aesthetics business);•unforeseen internal control, regulatory or compliance issues;•diversion of management’s attention from day-to-day operations;•difficulties or delays establishing, integrating or combining operations and systems (including accounting systems); and•adverse effects on existing business relationships with suppliers or customers.Finally, the aesthetic laser and light-based treatment system industry is subject to continuous technological development and product innovation. If wedo not continue to innovate and develop new products and applications within our Medical Aesthetics business, our competitive position will likelydeteriorate as other companies successfully design and commercialize18Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsnew products and applications. Accordingly, the success of our Medical Aesthetics business depends in part on developing or acquiring new and innovativeapplications of laser and other light-based technology and identifying new markets for and applications of existing products and technology.Any or all of these factors could impact our ability to successfully execute our Medical Aesthetics revenue growth plan, which could have a materialadverse effect on our business and financial results.Our long-term success will depend upon our ability to successfully develop and commercialize new products and treatments and enhance our existingproducts and treatments; the internal research and development and external business development activities necessary to do so involve risk.The markets for our products have been characterized by rapid technological change, frequent product introductions and evolving customerrequirements. Our growth potential depends in large part on our ability to identify and develop new products or new indications for or enhancements ofexisting products, either through internal research and development or through collaborations, acquisitions, joint ventures or licensing or other arrangementswith third parties. The development of new products and enhancement of existing products requires significant investment in research and development,clinical trials and regulatory approvals.The results of our product development efforts may be affected by a number of factors, including our ability to anticipate customer needs, innovate anddevelop new products, complete clinical trials, obtain regulatory approvals and reimbursement in the U.S. and abroad, manufacture products in a cost-effective manner, obtain, maintain, protect and enforce appropriate intellectual property protection for our products, gain and maintain market approval ofour products and access capital. If we are not able to successfully enhance existing products or develop new products, our products may be rendered obsoleteor uncompetitive by new industry standards or changing technology. We cannot assure that any products now in development or that we may seek todevelop in the future will achieve technological feasibility, obtain regulatory approval or gain market acceptance, and we may be unable to recover all or ameaningful part of our investment in such products and technologies.Additionally, as part of our long-term strategy, we are engaged in business development activities including evaluating acquisitions, joint developmentopportunities, technology licensing arrangements and other opportunities to further expand our presence in or diversify into priority growth areas byaccessing new products and technologies. We may not be able to identify appropriate acquisition candidates, consummate transactions or obtain agreementswith favorable terms. Further, once we acquire a business, such as Cynosure, for example, any inability to successfully integrate the business, decreases incustomer loyalty or product orders, failure to retain and develop the acquired workforce, failure to establish and maintain appropriate controls or unknown orcontingent liabilities could adversely affect our ability to realize the anticipated benefits of any acquisition. The integration of an acquired business such asCynosure or any other acquired business, whether or not successful, requires significant efforts which may result in additional expenses and divert theattention of our management and technical personnel from other projects. These transactions are inherently risky, and there can be no assurance that any pastor future transaction will be successful.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 be adversely affected, and we may be more vulnerable to economicdownturns and competitive pressures. We cannot guarantee that we will be able to finance additional acquisitions or that we will realize any anticipatedbenefits from acquisitions that we complete.If we fail to develop and successfully manufacture and launch new products, enhance existing products and identify, acquire and integratecomplementary businesses, technologies and products, our business, results of operations and/or financial condition could be adversely affected.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 2017, 22.4% of our revenue came from outside of the U.S. If we fail to capitalize on 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;19Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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•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 required regulatory approvals or favorable third-party reimbursement;•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, maintain, protect or enforce intellectual property rights, reduced protection for intellectual property rights insome countries, and the inability to 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 U.S. Foreign Corrupt Practices Act of 1977, as amended ("FCPA"), Chinese anti-corruption andsimilar 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 ofthese laws, we could suffer civil and criminal sanctions.Additionally, the regulatory environment in China is evolving, and officials in the Chinese government exercise broad discretion in deciding how tointerpret and apply regulations. It is possible that the Chinese government’s current or future interpretation and application of existing or new regulationswill negatively impact our China operations, result in regulatory investigations or lead to fines or penalties.Further, the June 2016 referendum in the United Kingdom ("UK") in which voters approved a withdrawal from the European Union, commonly referredto as “Brexit,” has created uncertainty. Subsequent to the referendum, in March 2017, the UK formally initiated its withdrawal from the European Union bytriggering Article 50 of the Treaty of Lisbon. As a result of the triggering of Article 50, the process of negotiating the terms of the UK’s exit from theEuropean Union, which is expected to take two years, has commenced. Although it is unknown what those terms will be, it is possible that there will begreater restrictions on imports and exports between the UK and the European Union and increased regulatory complexities. We have a manufacturing facilityin the UK. As a result of Brexit, we may face new regulatory costs and challenges that may have a material adverse effect on us and our operations. Forexample, depending on the terms of Brexit, we could become subject to export tariffs and regulatory restrictions that could increase the costs and time relatedto doing business in Europe. Additionally, Brexit could result in the UK or the European Union significantly altering its regulations affecting the clearanceor approval of our products that are developed or manufactured in the UK. Any new regulations could add time and expense to the conduct of our business, aswell as the process by which our products receive regulatory approval in the UK, the European Union and elsewhere. Given the lack of comparable precedent,it is unclear what economic, financial, trade and legal implications the withdrawal of the UK from the European Union would have and how such withdrawalmay affect us.Changes in currency exchange rates may reduce the reported value of our revenues outside the U.S., net of expenses, and cash flows. We cannot predictchanges in currency exchange rates, the impact of exchange rate changes, nor the degree to which we will be able to manage the impact of currency exchangerate changes. We currently have limited hedging arrangements in place to mitigate some of the impact of lower exchange rates.Our success depends on our ability to attract and retain 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 the keypersonnel that we believe are essential to our long-term success. Over the last four 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.Additionally, facilitating seamless leadership transitions for key positions is a critical factor in sustaining the success of an organization. If our successionplanning efforts are not effective, it could adversely impact our business.20Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsMoreover, 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.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 and our business 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.Medical diagnostic and surgical device products are regulated by the FDA as well as other foreign medical regulatory bodies. In some cases, such as inthe U.S. and the EU, certain products may also require individual lot release testing. Maintaining compliance with multiple regulators, and multiple centerswithin the FDA, adds complexity and cost to our manufacturing processes. In addition, our manufacturing facilities and those of our contract manufacturersare subject to periodic regulatory inspections by the FDA and other regulatory agencies, and these facilities are subject to the FDA's Quality SystemRegulation and Good Manufacturing Practices. We or our contractors may fail to satisfy these regulatory requirements in the future, and any failure to do somay prevent us from selling our products.If, despite internal testing and testing by customers, any of our products contain errors or defects or fail to meet applicable specifications, then we maybe required to enhance 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 atconsiderable expense.Additionally, the FDA and similar governmental bodies in other countries have the authority to require the recall of medical products in the event ofmaterial deficiencies 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 product enhancements could harm our business and prospects. The process ofobtaining clearances and approvals can be costly and time-consuming. In addition, there is a risk that any approvals or clearances, once obtained, may bewithdrawn or modified.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 are21Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsrequired to comply with FDA regulations relating to investigational research and labeling. States may also regulate the manufacture, sale and use of medicaldevices, particularly those that employ x-ray technology. 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.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.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, the reimbursement of patients’ medical expenses by government healthcareprograms and third-party payors and, for our Medical Aesthetics business, individual economic health. The continuing uncertainty surrounding worldfinancial markets and continuing weak worldwide macroeconomic conditions have caused and may continue to cause the purchasers of medical equipmentto decrease their medical equipment purchasing and procurement activities. Economic uncertainty as well as increasing health insurance premiums and co-payments may continue to result in cost-conscious consumers making fewer elective trips to their physicians and specialists, which in turn would adverselyaffect demand for our products and procedures. Job losses or slow improvement in the unemployment rate in the U.S. may result in a smaller percentage of ourpatients being 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.Additionally, the aesthetic laser and energy-based treatment system industry in which our Medical Aesthetics business operates is particularlyvulnerable to economic trends. Most procedures performed using our aesthetic treatment systems are elective procedures that are not reimbursable throughgovernment or private health insurance. The cost of these elective procedures must be borne by the patient. As a result, the decision to undergo a procedurethat uses our products may be influenced by the cost. Consumer demand, and therefore our Medical Aesthetics business, is sensitive to a number of factorsthat affect consumer spending, including political and macroeconomic conditions, health of credit markets, disposable consumer income levels, consumerdebt levels, interest rates, consumer confidence and other factors. If there is not sufficient consumer demand for the procedures performed with our MedicalAesthetics products, practitioner demand for our Medical Aesthetics products would decline, and our Medical Aesthetics business would suffer.In the event of deterioration of general business conditions or the availability of credit, the financial strength and stability of our Medical Aestheticscustomers and potential customers may deteriorate over time, which may cause them to cancel or delay their purchase of our products. In addition, we may besubject to increased risk of non-payment of our accounts receivables for our Medical Aesthetics business. We may also be adversely affected by bankruptciesor other business failures of our customers and potential customers. A significant delay in the collection of funds or a reduction of funds collected may impactour liquidity or result in bad debts. If the current adverse macroeconomic conditions continue, our business and prospects may be negatively impacted.22Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 failure of third-party payors to provide appropriate levels of coverage and reimbursement for the use of our diagnostics, breast and skeletal healthand surgical products and treatments facilitated by our products could harm our business and prospects.Sales and market acceptance of our diagnostics, breast and skeletal health and surgical products and the treatments facilitated by these products isdependent upon the coverage decisions and reimbursement policies established by government healthcare programs and private health insurers. The abilityof customers to obtain appropriate reimbursement for the products and services they use from private and governmental third-party payors is critical to thesuccess of medical technology companies because it affects which products customers purchase and the prices they are willing to pay. Reimbursement variesby country and can significantly impact the acceptance of new products and technologies. Even if we develop a promising new product, we may find limiteddemand for the product unless appropriate reimbursement approval is obtained from private and governmental third-party payors. Further legislative oradministrative reforms to the reimbursement systems in the U.S. and other countries in a manner that significantly reduces reimbursement for proceduresusing our diagnostics, breast and skeletal health and surgical products or denies coverage for those procedures facilitated by our products, including priceregulation, competitive bidding and tendering, coverage and payment policies, comparative effectiveness of therapies, technology assessments andmanaged-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 U.S. in March 2010. As a U.S. headquartered company with significant sales in the U.S., the medicaldevice tax included in this law has materially 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 beginning in January 2013. As such, this excise tax applied to the majority, if not all of our products sold in the U.S. EffectiveJanuary 1, 2016, the implementation of the medical device tax was suspended for calendar years 2016 and 2017. The status of the tax for sales after December31, 2017 will be reinstated unless there is legislative efforts to temporarily suspend or permanently repeal.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, 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, while the excise tax was in effect, it increased our costs of doingbusiness. The impact of this healthcare reform legislation, and practices including price regulation, competitive pricing, comparative effectiveness oftherapies, technology assessments, and managed care arrangements could harm our business and prospects, results of operations and/or financial condition.Healthcare reform proposals 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 could23Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsadversely affect our business and results of operations. In addition, the draft Clinical Laboratory Fee Schedule (CLFS) published by CMS under theProtecting Access to Medicare Act of 2014 (PAMA), may impact our diagnostic laboratory customers. This impact could in turn, over time, put pressure onthe prices at which we sell our diagnostic assays and instruments to these customers.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.We anticipate that governmental authorities will continue to scrutinize the healthcare industry closely and that additional regulation by governmentalauthorities may cause increased compliance costs, exposure to litigation and other adverse effects to our operations.Guidelines, recommendations and studies published by various organizations may reduce the use of our products.Professional societies, government agencies, practice management groups, private health/science foundations, and organizations involved inhealthcare issues may publish guidelines, recommendations or studies to the healthcare and patient communities. Recommendations of government agenciesor these other groups/organizations may relate to such matters as usage, cost-effectiveness, and use of related therapies. Organizations like these have in thepast made recommendations about our products and those of our competitors. Recommendations, guidelines or studies that are followed by healthcareproviders and insurers could result in decreased use of our products. For example, 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, or the USPSTF, and the American Cancer Society. We believe that these recommendations andguidelines may have contributed to increased screening intervals for cervical cancer, which we believe has and may continue to adversely affect our ThinPreprevenues. Further, in September 2017, the USPSTF released draft recommendations that excluded HPV and Pap co-testing for women, which could alsoadversely affect our HPV test and ThinPrep revenues if these guidelines were to become final. In addition, on October 20, 2015, the American Cancer Societyissued new guidelines recommending that women start annual mammograms at age 45 instead of 40 and have a mammogram every two years instead ofannually. 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 customers. We expect that market demand, government regulation, third-party reimbursement policies, government contracting requirements, andsocietal pressures will continue to change the worldwide healthcare industry, resulting in further business consolidations and alliances among our customersand competitors, which may reduce competition and continue to exert further downward pressure on the prices of our products and adversely impact ourbusiness, financial condition or results of operations. In particular, we are dependent upon a relatively small number of large clinical laboratory customers inthe U.S. for a significant portion of our sales of diagnostics products. Due in part to a trend toward consolidation of clinical laboratories in recent years andthe relative size of the largest U.S. laboratories, it is likely that a significant portion of these sales will continue to be concentrated among a relatively smallnumber of large clinical laboratories.Interruptions, delays, shutdowns or damage at our manufacturing facilities could harm our business.24Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 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.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 inour Diagnostics segment comes from a limited number of customers, one of whom accounted for more than 12.8% of our Diagnostics segment revenue infiscal 2017. Blood screening product sales to Grifols accounted for 11.5% of our Diagnostics segment product revenue in fiscal 2017. We anticipate that ouroperating results in our Diagnostics segment will continue to depend, to a significant extent, upon revenues from a small number of customers. Contracts withtwo of our key Diagnostics customers are up for renewal in the next two years. The loss of any of these key customers, or a significant reduction in salesvolume or pricing to these customers, could significantly reduce our Diagnostics segment revenues or profitability.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.With respect to certain of our products we have relied, to a significant extent, on corporate collaborators for funding development and marketing aswell as distribution. We also expect to rely on our corporate collaborators for the commercialization of certain products. If any of our corporate collaboratorswere to breach or terminate its agreement with us or otherwise fail to conduct its collaborative activities successfully and in a timely manner, thedevelopment or commercialization and subsequent marketing of the products contemplated by the collaboration could be delayed or terminated. We cannotcontrol the amount and timing of resources our corporate collaborators devote to our programs or potential products.The continuation of any of these collaboration agreements depends upon their periodic renewal by us and our collaborators. If any of our currentcollaboration agreements are terminated, or if we are unable to renew those collaborations on acceptable terms, we may be required to devote additionalinternal resources to product development or marketing or to terminate some development programs or seek alternative corporate collaborations. In addition,in the event of a dispute under our current or any future collaboration agreements, a court or arbitrator may not rule in our favor and our rights or obligationsunder an agreement subject to a dispute may be adversely affected, which may have an adverse effect on our business or operating results. Any corporatecollaboration may divert management time and resources. 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.Failing 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.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, our international 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 influencing25Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsany act or decision of such official in his or her official capacity, inducing the official to do any act in violation of his or her lawful duty, or to secure anyimproper advantage in obtaining or retaining business. In many countries, the healthcare professionals we regularly interact with may meet the definition of aforeign official for purposes of the FCPA. In addition to the FCPA, our international operations are also subject to various other international anti-briberylaws such as the UK Anti-Bribery Act. Our policies mandate compliance with these anti-bribery laws. However, despite meaningful measures that weundertake to facilitate lawful conduct, which include training and compliance programs and internal policies and procedures, we may not always preventunauthorized, reckless or criminal acts by our employees or agents, or employees or agents of businesses or operations we may acquire. It is possible that ourpractices might be challenged under federal or state anti-kickback, FCPA or similar laws due to the breadth of the statutory provisions and the absence ofextensive guidance regarding compliance. Violations of these laws, or allegations of such violations, could disrupt our operations, involve significantmanagement distraction and have a material adverse effect on our business, financial condition and results of operations. We also could be subject to adversepublicity, severe penalties, including criminal and civil penalties, disgorgement, further changes or enhancements to our procedures, policies and controls,personnel changes and other remedial actions. Moreover, our failure to comply with domestic or foreign laws could result in various adverse consequences,including possible delay in approval or refusal to approve a product, recalls, seizures, and withdrawal of an approved product from the market.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 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.26Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 decisions, the full impact of which is not yet known. For example, in March 2012 in MayoCollaborative Services, DBA Mayo Medical Laboratories, et al. v. Prometheus Laboratories, Inc., the Court held that several claims drawn to measuring drugmetabolite levels from patient samples and correlating them to drug doses were not patentable subject matter. The decision appears to impact diagnosticspatents that merely apply a law of nature via a series of routine steps and has created uncertainty around the patentability of certain biomarker-related methodclaims. Additionally, in June 2013 in Association for Molecular Pathology v. Myriad Genetics, Inc., the Court held that claims to isolated genomic DNA arenot patentable, but claims to complementary DNA, or cDNA, molecules were held to be valid. The effect of the decision on patents for other isolated naturalproducts is uncertain and we may lose competitive advantages should the subject matter of our patents or patents we exclusively license 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, trademarks and confidentiality procedures to protect our products andtechnology. Despite these precautions, unauthorized third parties may infringe, misappropriate or otherwise violate our intellectual property, or copy orreverse engineer portions of our technology. The pursuit 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 beissued with the full scope of the claims sought, if at all, or whether any patents that do issue will be challenged or invalidated. The patents that we own orlicense could also be subjected to invalidation proceedings or similar disputes, and an unfavorable outcome could require us to cease using the relatedtechnology or to attempt to license rights to the technology from the prevailing party. In addition, the laws governing patentability and the scope of patentcoverage continue to evolve, particularly in the field of biotechnology. As a result, patents might not issue from certain of our patent applications or fromapplications licensed to 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.27Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsFinally, within our Medical Aesthetics business, we jointly own certain patents and patent applications with third parties. In the absence of anagreement with each co-owner of jointly owned patent rights, we will be subject to default rules pertaining to joint ownership. Some countries require theconsent of all joint owners to exploit, license or assign jointly owned patents, and if we are unable to obtain that consent from the joint owners, we may beunable to exploit the invention or to license or assign our rights under these patents and patent applications in those countries.Our 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. If any of our strategic relationships areterminated and not replaced or if our strategic partners fail to perform their contractual obligations, our revenues and/or ability to service our products in theterritories serviced by these distributors could be adversely affected. If any of our distribution or marketing agreements are terminated or if we elect todistribute new products directly, we will have to invest in additional sales and marketing resources, including additional field sales personnel, which wouldsignificantly increase future selling, general and administrative expenses. We may not be able to enter into new distribution or marketing agreements onsatisfactory 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. In addition, we cannot be sure that our distributors will agree with our interpretation of the terms of the agreements or that we will receivepayments under the agreements. The third-party distributors with which we do not have written distributor agreements may also disagree with the terms of ourrelationship. 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 as difficultiesmaintaining 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. We do not control our distributors,and these parties may not be successful in marketing our products. These parties may fail to commit the necessary resources to market and sell our products tothe level of our expectations. Currently, we have written distributor agreements in place with most of our third-party distributors.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-party manufacturers for each of our molecular diagnostics instruments and for our Skeletal Health products.KMC Systems, Inc., or KMC Systems, is the only manufacturer of the Tigris instrument, Stratec Biomedical AG, or Stratec, is the only manufacturer of thePanther instrument and Flextronics International LTD, or Flextronics, is the only manufacturer of our Skeletal Health finished goods products. We have nofirm long-term volume commitments with either KMC Systems or Stratec. If KMC Systems, Stratec, Flextronics or any of our other third-party manufacturersexperiences delays, disruptions, capacity constraints or quality control problems in its development or manufacturing operations or becomes insolvent orotherwise fails to supply us with goods in sufficient quantities, then instrument shipments to our customers could be delayed, which would decrease ourrevenues and harm our competitive position and reputation. Further, because we place orders with our manufacturers based on forecasts of expected demandfor our products, if we inaccurately forecast demand we may be unable to obtain adequate manufacturing capacity or adequate quantities of components tomeet our customers' delivery requirements.28Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsSimilarly, we rely on one or a limited number of suppliers for some key raw materials for our products and some of these suppliers are competitors. Forexample, 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 and 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-LaRoche 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 direct competitor with our Breast Health and Skeletal Health businesses. In our Medical Aesthetics business, we use Alexandrite rods inthe lasers for our Elite and PicoSure systems. We depend exclusively on Northrop Grumman SYNOPTICS to supply the Alexandrite rods to us, and we areaware of no alternative supplier of Alexandrite rods meeting our quality standards. We offer our SmartCool cooling systems for use with our laser aesthetictreatment systems, and we depend exclusively on Zimmer Elektromedizin GmbH to supply SmartCool systems to us. We use diode laser bars from Coherent,Inc. to manufacture our Vectus diode laser, and we use diode laser modules from Dilas Diodenlaser GmbH to manufacture our SculpSure laser system.Although alternative suppliers exist for the diode laser bars, they could take months to qualify and implement. We also depend on El.En. for the SLT II lasersystem that we integrate with our own proprietary software and delivery systems into our SmartLipo Triplex, Cellulaze and PrecisionTx systems. El.En.markets, sells, promotes and licenses other products that compete with our products.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 face intense competition from other companies and may not be able to compete successfully.A number of companies have developed, or are expected to develop, products that compete or will compete with our products. In addition, somecompanies may have significant competitive advantages over us, which may make them more attractive to hospitals, radiology clients, group purchasingorganizations, laboratories, and physicians, including:•greater brand recognition;•larger or more established distribution networks and customer bases;•a broader product portfolio, resulting in the ability to offer rebates or bundle products to offer discounts or incentives to gain a competitiveadvantage;•higher levels of automation and greater installed bases of such equipment;•more extensive research, development, sales, marketing, and manufacturing capabilities and greater financial resources; and•greater technical resources positioning them to continue to improve their technology in order to compete in an evolving industry.The markets in which we sell our products are intensely competitive, subject to rapid technological change and may be significantly affected by newproduct introductions and other market activities of industry participants, and these competitive pressures may reduce our gross margins. Other companiesmay develop products that are superior to and/or less expensive than our products. Improvements in existing competitive products or the introduction of newcompetitive products may reduce our ability to compete for sales, particularly if those competitive products demonstrate better safety or effectiveness,clinical results, ease of use or lower costs.The current environment of managed care, economically-motivated buyers, consolidation among healthcare providers, increased competition anddeclining reimbursement rates, together with current global economic conditions and healthcare reform measures, may put additional competitive pressure onus, including on our average selling prices, overall procedure rates and market sizes.If we are unable to compete effectively against existing and future competitors and existing and future alternative products and treatments, our businessand prospects could be harmed.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;29Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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•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.Customers 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 ruleincreases the requirements applicable to some of our businesses. Failure to maintain the confidentiality of sensitive personal information in accordance withthe applicable regulatory requirements, or to abide by electronic health data transmission standards, could expose us to breach of contract claims, fines andpenalties, costs for remediation and harm to our reputation.We are subject to the risk of product liability claims relating to our products.Our business involves the risk of product liability and other claims inherent to the medical device business. If even one of our products is found to havecaused or contributed to injuries or deaths, we could be held liable for substantial damages. We maintain product liability insurance subject to deductiblesand exclusions. There is a risk that the insurance coverage will not be sufficient to protect us from product and other liability claims, or that product liabilityinsurance will not be available to us at a reasonable cost, if at all. An under-insured or uninsured claim could harm our business and prospects. In addition,claims could adversely affect the reputation of the related product, which could damage that product’s competitive position in the market.30Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 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.Because we do not require training for users of our non-invasive Medical Aesthetics products, and we sell these products to non-physicians, there existsan increased potential for misuse of these products, which could harm our reputation and our business.Federal regulations allow us to sell our Medical Aesthetics products to or on the order of practitioners licensed by law to use or order the use of aprescription device. The definition of “licensed practitioners” varies from state to state. As a result, our products may be purchased or operated by physicianswith varying levels of training and, in many states, by non-physicians, including nurse practitioners, chiropractors and technicians. Outside the U.S., manyjurisdictions do not require specific qualifications or training for purchasers or operators of our products. We do not supervise the procedures performed withour products, nor can we require that direct medical supervision occur. We and our distributors offer product training sessions, but neither we nor ourdistributors require purchasers or operators of our non-invasive products to attend training sessions. The lack of required training and the purchase and use ofour non-invasive products by non-physicians may result in product misuse and adverse treatment outcomes, which could harm our reputation and expose usto costly product liability litigation.Regulations related to “conflict minerals” may cause us to incur additional expenses and could limit the supply and increase the cost of certain metalsused in manufacturing our products.In August 2012, the SEC adopted a rule requiring disclosures of specified minerals, known as conflict minerals, that are necessary to the functionality orproduction of products manufactured or contracted to be manufactured by public companies. The conflict minerals rule requires companies annually todiligence, disclose and report whether or not such minerals originate from the Democratic Republic of Congo and other specified countries. The rule couldaffect 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 material costs associated withcomplying with the disclosure requirements, such as costs related to determining the source of certain minerals used in our products, as well as costs ofpossible changes to products, processes, or sources of supply as a consequence of such verification activities. Since our supply chain is complex, we may notbe able to sufficiently verify the origins of the relevant minerals used in our products through the due diligence procedures that we implement, which mayharm our reputation. In addition, we may encounter challenges to satisfy those customers who require that all of the components of our products be certifiedas conflict-free, which could place us at a competitive disadvantage if we are unable to do so.We 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.31Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsWe may 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.Charges to earnings resulting from the application of the purchase method of accounting may adversely affect our operating results following theacquisition of Cynosure.We have accounted for the acquisition of Cynosure using the purchase method of accounting, resulting in charges to our earnings that adversely affectour results of operations as determined in accordance with U.S. GAAP. Under the purchase method of accounting, we allocated the total purchase price to theassets acquired and liabilities assumed from Cynosure based on their estimated fair values as of the acquisition date, and recorded the excess of the purchaseprice over those fair values as goodwill. For certain intangible assets, recording their fair values as of the acquisition date results in incurring significantadditional amortization expense that exceeds the amounts recorded by Cynosure prior to the acquisition. This increased expense is recorded over theestimated useful lives of the underlying assets. In addition, to the extent the carrying value of goodwill, acquired in-process research and development, orother intangible assets post-acquisition were to become impaired, including without limitation as a result of a change in our anticipated future cash flows,terminal value growth rates and discount rates of those assets or related reporting unit, we may be required to record charges relating to the impairment ofthose assets.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.Based on performing a quantitative analysis, all of our reporting units passed Step 1 of the annual goodwill impairment test in fiscal 2017. Forillustrative purposes, had the fair value of each of the reporting units been lower by 10%, all of the reporting units would still have passed Step 1 of thegoodwill impairment test, except our Medical Aesthetics reporting unit. This reporting unit had a fair value as of the measurement date that exceeded itscarrying value by 2% with goodwill of $683.5 million. We acquired Cynosure, which is the sole business in Medical Aesthetics, on March 22, 2017. Inconnection with our annual strategic planning process and annual goodwill impairment test, we have lowered our estimated financial projections for thisbusiness as a result of its current operating performance being below expectations, which we primarily attribute to the significant turnover in the U.S. salesforce in 2017. In the event, future operating performance is below our forecasted projections, or there are negative changes to long-term growth rates or ifdiscount rates increase, these factors could result in a decline in the fair value of the reporting unit and we may be required to record a goodwill impairmentcharge.Although we believe that we use reasonable methodologies for developing assumptions and estimates underlying the fair value calculations used in ourimpairment tests, these estimates are uncertain by nature and can vary from actual results. Any significant adverse change regarding the amount and timing offuture cash flows, terminal value growth rates and discount rates used in valuing our reporting units could require us to record an impairment charge, whichcould have an adverse effect on our operating results. In addition to the higher risk of impairment for our Medical Aesthetics reporting unit, it is possible thatthe continuation of the current global financial and economic uncertainty could negatively affect our anticipated future cash flows, or the discount rates usedto value the cash flows for each of our reporting units to such an extent that we could be required to perform an interim impairment test during fiscal 2018.Our effective tax rate may fluctuate and we may incur obligations in tax jurisdictions in excess of amounts that have been accrued.As a global company, we are subject to taxation in numerous countries, states and other jurisdictions. In preparing our financial statements, we recordthe amount of tax payable in each of the countries, states and other jurisdictions in which we operate. Our future effective tax rate, however, may be lower orhigher than prior years due to numerous factors, including a32Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 our geographic earnings mix, changes in the measurement of our deferred taxes, and recently enacted and future tax law changes in jurisdictions inwhich we operate. We are also subject to ongoing tax audits in various jurisdictions, and tax authorities may disagree with certain positions we have takenand assess additional taxes. Any of these factors could cause us to experience an effective tax rate significantly different from previous periods or our currentexpectations, which could adversely affect our business, results of operations, and cash flows. U.S. lawmakers are evaluating proposals for substantial changesto U.S. fiscal and tax policies, which could include comprehensive tax reform. A variety of tax reform proposals that would significantly impact U.S. taxationof corporations are under consideration, including elimination of the interest deduction, taxation of previously unrepatriated foreign earnings and reductionsin the U.S. corporate tax rate. We cannot predict which, if any, of these proposals will be enacted into law or the resulting impact any such enactment willhave on our financial results. However, if new legislation were enacted, it could have a material adverse effect on our financial condition and results ofoperations.Risks Relating to our IndebtednessWe have a significant amount of indebtedness outstanding, which limits our operating flexibility, and could adversely affect our operations andfinancial results and prevent us from fulfilling our obligations.As of September 30, 2017, we had approximately $3.36 billion aggregate principal of indebtedness outstanding. We also have other contractualobligations and deferred 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, whichwould reduce the availability of our cash flow to fund working capital, capital expenditures, expansion efforts, strategic transactions and othergeneral 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, expansion efforts, strategic transactions or other generalcorporate purposes.In addition, the terms of our financing obligations contain certain covenants that restrict our ability, and that of our subsidiaries, to engage in certaintransactions and may impair our ability to respond to changing business and economic conditions, including, among other things, limitations on our abilityto:•incur indebtedness or issue certain preferred equity;•pay dividends, repurchase our common stock, repurchase our convertible notes or make other distributions or restricted payments;•make certain investments;•agree to payment restrictions affecting the restricted subsidiaries;•sell or otherwise transfer or dispose of assets, including equity interests of our subsidiaries;•enter into transactions with our affiliates;•create liens;•designate our subsidiaries as unrestricted subsidiaries;•consolidate, merge or sell substantially all of our assets; and•use the proceeds of permitted sales of our assets.Our amended and restated credit facilities also require us to satisfy certain financial covenants. Our ability to comply with these provisions may beaffected by general economic conditions, political decisions, industry conditions and other events beyond our control. Our failure to comply with thecovenants contained in our amended and restated credit facilities, including financial covenants, could result in an event of default, which could materiallyand adversely affect our results of operations and financial condition.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 2022 and 2025 notes. Ourassets or cash flow may not be sufficient to fully repay borrowings under our outstanding debt instruments if accelerated upon an event of default or a changeof control, 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.”33Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsWe may 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 30, 2017, approximately $1.87 billion aggregate principal ofour indebtedness, which represented the outstanding principal under our Term Loan and Revolver under our Credit Agreement and amounts outstandingunder our Accounts Receivable Securitization Program, was subject to floating interest rates. The term loan and revolver under our Amended and RestatedCredit Agreement entered into on October 3, 2017 similarly provide for variable interest rates. We currently have certain hedging arrangements in the form ofinterest rate cap agreements in place to mitigate the impact of higher interest rates. The interest rate cap agreements hedge $1.0 billion of principal under ourCredit Agreement and have a December 2018 termination date.Risks Relating to our Common StockFuture issuances of common stock and hedging activities may depress the trading price of our common stock.Any future issuance of equity securities could dilute the interests of our existing stockholders, including holders who have received shares uponconversion of our convertible notes, and could substantially decrease the trading price of our common stock and our convertible notes. We may issue equitysecurities in the future for a number of reasons, including to finance our operations and business strategy (including in connection with acquisitions, strategiccollaborations or other transactions), to adjust our ratio of debt to equity, to satisfy our obligations upon the exercise of outstanding warrants or options or forother 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.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;34Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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•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 U.S. or 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.In addition, the stock market in general and the markets for shares of “high-tech” and life sciences companies, have historically experienced extremeprice fluctuations which have often been unrelated to the operating performance of affected companies. Any such fluctuations in the future could adverselyaffect the market price of our common stock, and the market price of our common stock may decline.Item 1B. Unresolved Staff CommentsNone.35Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 Diagnostics headquarters, including administrative and manufacturingoperations 262,000 sq. ft.San Diego, CA (b) Diagnostics research and development, administrative and manufacturingoperations 290,000 sq. ft. Principal Properties Leased: Primary Use Floor Space LeaseExpiration(fiscal year) RenewalsBedford, MA (c) 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. 2021 1, five-yr. periodMarlborough, MA Headquarters, including research anddevelopment, manufacturing anddistribution operations 216,000 sq. ft. 2025 2, five-yr. periodsMarlborough, MA Manufacturing operations 146,000 sq. ft. 2024 1, five-yr. periodMethuen, MA Main Distribution facility 38,000 sq. ft. 2023 1, five-yr. periodAlajuela, Costa Rica Manufacturing facility 164,000 sq. ft. 2018 2, five-yr. periodsManchester, England Manufacturing operations and research anddevelopment 66,000 sq. ft. 2035 NoneWestford, MA Administrative, research and development,and manufacturing operations 150,000 sq. ft. 2028 NoneWestford, MA Manufacturing operations 19,000 sq. ft. 2024 1, five-yr. periodHicksville, NY Manufacturing operations 44,000 sq. ft. 2020 4, five-yr. periods____________(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)We currently occupy approximately 221,000 square feet of this building, with the remaining space available to accommodate future growth.(c)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 were moved toDanbury and Marlborough. This transition is primarily completed. We are actively attempting to sublease this space.We lease other facilities utilized for office space and distribution operations across the U.S. and a number of countries worldwide. Item 3. Legal ProceedingsFor a discussion of legal matters as of September 30, 2017, please see Note 12 to our consolidated financial statements entitled “Litigation and RelatedMatters,” which is incorporated by reference into this item.Item 4. Mine Safety DisclosuresNot Applicable.36Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 30, 2017 High LowFirst Quarter $41.01 $35.15Second Quarter 42.97 37.76Third Quarter 46.80 42.12Fourth Quarter 45.61 36.20Fiscal Year Ended September 24, 2016 High LowFirst Quarter $41.66 $36.29Second Quarter 39.94 31.84Third Quarter 38.09 32.64Fourth Quarter 39.35 32.81Number of Holders. As of November 14, 2017, there were approximately 1,077 holders of record of our common stock, including multiple beneficialholders at depositories, banks and brokers listed as a single holder in the street name of each respective depositary, bank or broker.Dividend Policy. We have never declared or paid cash dividends on our capital stock, and we currently have no plans to do so. Our current policy is toretain all of our earnings to finance future growth, pay down our existing indebtedness and repurchase our common stock. The existing covenants undercertain of our debt instruments also place limits on our ability to issue dividends and repurchase stock.Recent Sales of Unregistered Securities. We did not sell unregistered equity securities during the fourth quarter of fiscal 2017.Issuer's Purchases of Equity SecuritiesPeriod of RepurchaseTotal Number ofShares Purchased(#) (1) Average PricePaid Per Share($) (1) Total Number ofShares Purchased AsPart of PubliclyAnnounced Plans orPrograms (#) (2) Average Price PaidPerShare As Part ofPubliclyAnnounced Plans orPrograms ($) (2) MaximumNumber (orApproximate DollarValue) of Shares ThatMay Yet Be PurchasedUnder OurPrograms(in millions)($) (2) July 2, 2017 – July 29, 2017725 $45.26 — $— $500.0July 30, 2017– August 26, 20172,589 41.32 2,195,623 37.87 416.9August 27, 2017 – September 30, 20175,479 37.89 3,075,170 38.00 300.0Total8,793 $39.51 5,270,793 $37.94 $300.0 ___________________________________(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 June 21, 2016, the Board of Directors authorized the repurchase of up to $500.0 million of our outstanding common stock over the next five years.37Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 information shall not be deemed to be "filed" with the SEC nor shall the information be incorporated by reference into any future filingsunder the Securities Act of 1934, as amended, except to the extent that we specifically incorporate it by reference into a document filed under the SecuritiesAct of 1933 or the Securities Exchange Act of 1934.The following graph compares cumulative total shareholder return on our common stock since September 29, 2012 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 29, 2012 in ourcommon stock, the Russell 1000 Index and the S&P Health Care Supplies Index. Measurement points are the last trading day of each respective fiscal year.38Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 second quarter of fiscal 2017, we acquired Cynosure and in the third quarter of fiscal 2017we acquired Medicor. Results of operations for these businesses are included in our consolidated financial statements from the date of acquisition. Fiscal Years Ended September 30,2017 (5) September 24,2016 (4) September 26,2015 (3) September 27,2014 (2) September 28,2013 (1) (In millions, except per share data)Consolidated Statement of Operations Data Total revenues$3,058.8 $2,832.7 $2,705.0 $2,530.7 $2,492.3Total operating costs and expenses$1,688.6 $2,284.1 $2,249.9 $2,251.0 $3,398.5Net income (loss)$755.5 $330.8 $131.6 $17.3 $(1,172.8)Basic net income (loss) per common share$2.70 $1.18 $0.47 $0.06 $(4.36)Diluted net income (loss) per common share$2.64 $1.16 $0.45 $0.06 $(4.36)Consolidated Balance Sheet Data Working capital$(386.9) $424.7 $322.4 $946.2 $535.8Total assets$7,979.6 $7,317.0 $7,642.5 $8,368.7 $8,936.9Long-term debt obligations, less current portion (6)$2,198.9 $3,058.7 $3,227.3 $4,117.7 $4,193.8Total stockholders’ equity$2,784.7 $2,142.7 $2,079.2 $2,063.0 $1,941.5____________(1)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.(2)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.(3)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.(4)Fiscal 2016 total operating costs and expenses include restructuring and divestiture charges of $10.5 million. Included in net income was a gain on thesale of a marketable security of $25.1 million partially offset by a debt extinguishment loss of $5.3 million.(5)Fiscal 2017 total operating costs and expenses include a gain on sale of the blood screening business of $899.7 million, inventory step-up costs of $39.7million, transaction expenses for acquisitions of $23.2 million, restructuring charges of $13.3 million.(6)Long-term obligations are net of unamortized debt discounts and deferred issuance costs aggregating $27.9 million, $62.9 million, $95.7 million, $166.2million, and $217.7 million for fiscal years 2017, 2016, 2015, 2014, and 2013, respectively.39Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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, the information described underthe caption “Risk Factors” in Part I, Item 1A of this report and our Special Note Regarding Forward-Looking Statements at the outset 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. On March 22, 2017, we acquired Cynosure, Inc., a developer, manufacturer and supplier of a broad array of light-based aesthetic and medicaltreatment systems. The products are used to provide a diverse range of treatment applications such as non-invasive body contouring, hair removal, skinrevitalization and scar reduction, as well as the treatment of vascular lesions. The Cynosure business is referred to as Medical Aesthetics and operates as aseparate business segment. As a result of our acquisition of Cynosure, we operate in five segments: Diagnostics, Breast Health, Medical Aesthetics, GYNSurgical and Skeletal Health. We sell and service our products through a combination of direct sales and service personnel and a network of independentdistributors and sales representatives.We offer a wide range of diagnostic products which are used primarily to aid in the diagnosis of human diseases and through January 31, 2017, weoffered products that screened donated human blood and plasma. Our primary diagnostics products include our Aptima family of assays, which run on ouradvanced instrumentation systems (Panther and Tigris), our ThinPrep system, the Rapid Fetal Fibronectin Test and, through January 31, 2017, the Procleixblood screening assays. The Aptima family of assays is used to detect, among other things, the infectious microorganisms that cause the common sexuallytransmitted diseases, or STDs, chlamydia and gonorrhea, certain high-risk strains of human papillomavirus, or HPV, and Trichomonas vaginalis, the parasitethat causes trichomoniasis. The ThinPrep System is primarily used in cytology applications, such as cervical cancer screening, and the Rapid FetalFibronectin Test assists physicians in assessing the risk of pre-term birth. In blood screening, we developed and manufactured the Procleix family of assays,which are used to detect various infectious diseases. These blood screening products were marketed worldwide by our former blood screening collaborator,Grifols, to whom we sold the blood screening business.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, andbreast biopsy guidance systems. Our most advanced breast imaging platform, Dimensions, utilizes a technology called tomosynthesis to produce 3D imagesthat show multiple contiguous slice images of the breast, which we refer to as the Genius 3D Mammography exam, as well as conventional 2D full fielddigital mammography images. Our clinical results for FDA approval demonstrated that conventional 2D digital mammography with the addition of 3Dtomosynthesis is superior to 2D digital mammography alone for both screening and diagnostics.Our Medical Aesthetics segment offers a portfolio of aesthetic treatment systems, including SculpSure, PicoSure and MonaLisa Touch that enableplastic surgeons, dermatologists and other medical practitioners to perform non-invasive and minimally invasive procedures to remove hair, treat vascularand benign pigmented lesions, remove multi-colored tattoos, revitalize the skin, reduce fat through laser lipolysis, reduce cellulite, clear nails infected by toefungus, ablate sweat glands and improve gynecologic health. This segment also markets radio frequency, or RF, energy sourced medical devices for precisionsurgical applications such as facial plastic and general surgery, gynecology, ear, nose, and throat procedures, back and thigh procedures, ophthalmology, oraland maxillofacial surgery, podiatry and proctology.Our GYN Surgical products include our NovaSure endometrial ablation system and our MyoSure hysteroscopic tissue removal system. NovaSureendometrial ablation is a one-time procedure for the treatment of abnormal uterine bleeding. MyoSure tissue removal is a minimally invasive procedure thattargets and removes 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.40Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsAcquisitions and DispositionsCynosure, Inc.On March 22, 2017, we completed the acquisition of Cynosure pursuant to which we acquired all of the outstanding shares of Cynosure. Theacquisition was funded through available cash, and the total purchase price was $1.66 billion.The preliminary allocation of the purchase price is based on estimates of the fair value of assets acquired and liabilities assumed as of March 22, 2017.The Company has not yet obtained all of the information related to the fair value of the acquired assets and liabilities, primarily taxes, to finalize thepurchase price allocation.The purchase price has been allocated to the acquired assets and assumed liabilities based on management’s estimate of their fairvalues.As part of the preliminary purchase price allocation, the Company has determined the identifiable intangible assets are developed technology of$736.0 million, in-process research and development of $107.0 million, trade names of $74.0 million, a distribution agreement of $42.0 million and customerrelationships of $35.0 million. The preliminary fair value of the intangible assets has been estimated using the income approach, specifically the excessearning method and relief from royalty method, and the cash flow projections were discounted using rates ranging from 11% to 12%. The cash flows arebased on estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from thetransaction model and the weighted average cost of capital.The developed technology assets comprise know-how, patents and technologies embedded in Cynosure’s products and relate to currently marketedproducts. In-process research and development projects relate to in-process projects that have not reached technological feasibility as of the acquisition dateand have no alternative future use. The primary basis for determining technological feasibility of these projects is obtaining regulatory approval to marketthe underlying product or expected commercial release depending on the project. We recorded $107.0 million of in-process research and development assetsrelated to three projects, which were expected to be completed during fiscal 2018 and 2019 with a preliminary cost to complete of approximately $18.0million. During the fourth quarter of fiscal 2017, we obtained regulatory approval for two projects with an aggregate fair value of $61.0 million and theseassets were reclassified to developed technology The remaining project is expected to be completed during fiscal 2019 with an estimated cost to complete ofapproximately $4.0 million. Given the uncertainties inherent with product development and introduction, we cannot assure that any of our productdevelopment efforts will be successful, completed on a timely basis or within budget, if at all. All of the in-process research and development assets werevalued using the multiple-period excess earnings method approach using discount rates ranging from 14% to 22%.The excess of the purchase price over the preliminary estimated fair value of the tangible net assets and intangible assets acquired of $683.5 millionwas recorded to goodwill. The factors contributing to the recognition of the amount of goodwill are based on several strategic and synergistic benefits thatare expected to be realized from the Cynosure acquisition. These benefits include the expectation that the Company’s entry into the aesthetics market willsignificantly broaden our offering in women’s health. The Company is expected to benefit from a broader global presence, synergistic utilization ofHologic’s direct sales force, primarily its GYN Surgical sales force, with certain Cynosure products and entry into an adjacent, cash-pay segment. Foradditional information, please refer to Note 3 to our consolidated financial statements contained in Item 15 of this Annual Report.Medicor Medical SupplyOn April 7, 2017, we completed the acquisition of MMS Medicor Medical Supplies GmbH, or Medicor, for a purchase price of approximately$19.0 million, which includes a working capital adjustment of $2.0 million that was paid in the fourth quarter of fiscal 2017, and a holdback of $1.9 millionthat is payable two years from the date of acquisition. Medicor was a long-standing distributor of our Breast and Skeletal Health products in Germany, Austriaand Switzerland. Based on the preliminary valuation, we have allocated $5.4 million of the purchase price to the preliminary value of intangible assets and$9.5 million to goodwill. The allocation of the purchase price is preliminary as we are continuing to gather information supporting the acquired assets andliabilities.Blood Screening BusinessIn the first quarter of fiscal 2017, we entered into a definitive agreement to sell our blood screening business to Grifols for a sales price of $1.85 billionin cash, subject to adjustment based on the closing amount of inventory. The transaction closed on January 31, 2017 and we received $1.865 billion. Thesales price is subject to adjustment based on a finalization of inventory provided to Grifols. The sale resulted in a gain of $899.7 million recorded in thesecond quarter of fiscal 2017. As a result of this disposition and proceeds received, we recorded a tax obligation of $649.5 million, which was paid in fiscal2017. Upon the closing of the transaction, our existing collaboration agreement with Grifols terminated, and a new collaboration41Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsagreement was executed as part of this transaction for us to provide certain research and development services to Grifols. In addition, we have agreed toprovide transition services to Grifols over the next two to three years depending on the nature of the respective service, including the manufacture ofinventory, and we are in effect serving as a contract manufacturer of assays for Grifols for a two to three year period. We have also agreed to sell Pantherinstrumentation and certain supplies to Grifols as part of a long term supply agreement. Revenue, gross profit and operating income of the disposed businesspresented below represents the financial impact of the business as it was operated prior to the date of disposition. The operating expenses include only thosethat were incurred directly by and were retained by the disposed business and are now incurred by Grifols. As noted above, we are performing a number oftransition services and the financial impact from these services is not included in the amounts presented below for the disposed business. For the disposedblood screening business, in fiscal 2017, revenue was $96.5 million, gross profit was $64.8 million, and operating income was $45.8 million. For thedisposed blood screening business, in fiscal 2016, revenue was $235.4 million, gross profit was $163.3 million, and operating income was $99.1 million.Following the closing of this disposition, we no longer operate our blood screening business, except to the limited extent we have agreed to support Grifols.Under the long term supply agreement, transition services agreement to manufacture assays and new collaboration agreement, subsequent to disposing theblood screening business, we recognized revenues of $44.0 million in fiscal 2017.42Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsRESULTS OF OPERATIONSThe following table sets forth, for the periods indicated, the percentage of total revenues represented by items as shown in our Consolidated Statementsof Operations. All dollar amounts in tables are presented in millions. Fiscal Years Ended September 30, 2017 September 24, 2016 September 26, 2015Revenues: Product 83.0 % 84.0 % 83.9 %Service and other 17.0 % 16.0 % 16.1 % 100.0 % 100.0 % 100.0 %Costs of revenues: Product 28.8 % 26.7 % 27.9 %Amortization of intangible assets 9.7 % 10.4 % 11.1 %Impairment of intangible assets — % — % — %Service and other 8.5 % 7.7 % 8.0 %Gross Profit 53.0 % 55.2 % 53.0 %Operating expenses: Research and development 7.6 % 8.2 % 7.9 %Selling and marketing 16.3 % 14.7 % 13.4 %General and administrative 11.2 % 9.4 % 9.7 %Amortization of intangible assets 2.0 % 3.2 % 4.1 %Gain on sale of business (29.4)% — % — %Restructuring and divestiture charges 0.4 % 0.4 % 1.1 % 8.1 % 35.9 % 36.1 %Income from operations 44.8 % 19.4 % 16.8 %Interest income 0.1 % — % — %Interest expense (5.0)% (5.5)% (7.6)%Debt extinguishment loss (0.1)% (0.2)% (2.3)%Other income (expense), net 0.4 % 0.9 % (0.4)%Income before income taxes 40.2 % 14.7 % 6.6 %Provision for income taxes 15.5 % 3.0 % 1.7 %Net income 24.7 % 11.7 % 4.9 %43Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 30, 2017 Compared to Fiscal Year Ended September 24, 2016Product Revenues. Years Ended September 30, 2017 September 24, 2016 Change Amount % of TotalRevenue Amount % of TotalRevenue Amount %Product Revenues Diagnostics $1,165.1 38.1% $1,204.7 42.5% $(39.6) (3.3)%Breast Health 708.1 23.2% 719.7 25.4% (11.6) (1.6)%Medical Aesthetics 178.3 5.8% — —% 178.3 — %GYN Surgical 426.1 13.9% 392.0 13.9% 34.1 8.7 %Skeletal Health 60.4 2.0% 62.6 2.2% (2.2) (3.5)% $2,538.0 83.0% $2,379.0 84.0% $159.0 6.7 %We generated a 6.7% increase in product revenues in fiscal 2017 compared to fiscal 2016 primarily due to our acquisition of Cynosure on March 22,2017 and an increase in GYN Surgical sales. Cynosure's results (after the date of the acquisition) are reported in our new Medical Aesthetics segment.Cynosure is the sole business in this segment. We had decreases in our Diagnostics business as a result of the sale of our blood screening business effectiveJanuary 31, 2017. We also experienced decreases in our Breast Health and Skeletal Health segments. Our Diagnostics revenues, excluding blood screening,increased in the current year. The increase in overall product revenues was reduced partially by the negative foreign currency exchange impact of thestrengthening U.S. dollar against a number of currencies, most notably the Euro and UK Pound. The current year included an extra week as fiscal 2017 is a53-week year.Diagnostics product revenues decreased 3.3% in fiscal 2017 compared to fiscal 2016 primarily due to the decrease in blood screening revenues of$94.6 million in the current year as a result of the divestiture of the business during the second quarter of FY17. In connection with the divestiture agreement,we have committed to providing Grifols manufacturing support through the defined transition services period and long term access to Pantherinstrumentation and certain supplies. As such, we will continue to generate a level of revenues, but much lower than historical trends. For the current year,product revenue under the new long term supply agreement and transition services agreement to manufacture assays for Grifols was $37.1 million. Excludingthe divestiture of the blood screening business, diagnostic product revenues grew driven by increases in Molecular Diagnostics of $57.5 million in thecurrent year, respectively, while Cytology and Perinatal revenues were slightly lower by $2.4 million year over year primarily due to lower Perinatal salesvolume.The increase in Molecular Diagnostics product revenues was primarily due to our increased installed base of Panther instruments, which is drivinghigher volumes of assay testing, in particular our Aptima family of assays, an increase in the number of our virology products, as we have recently receivedregulatory approval for certain of these products, and an additional week in the current year compared to prior year. These increases were partially offset by aslight decline in average selling prices, a reduction in Cervista HPV revenues as our larger customers transition to our Panther system, a reduction in CysticFibrosis revenues as we discontinued the product at the end of the second quarter of fiscal 2016, and the negative foreign currency exchange impact of thestrengthening U.S. dollar on our sales denominated in foreign currencies.Breast Health product revenues decreased 1.6% in fiscal 2017 compared to fiscal 2016 primarily due to lower sales volume of our 3D Dimensionssystems and related components in the U.S., partially offset by an increase in international sales volume and 3D upgrades. The increase in international saleswas partially due to our acquisition of Medicor in the third quarter of fiscal 2017. In addition, the lower revenue reflected a decline in 2D systems primarilydue to discontinuing the Selenia system in fiscal 2016. These decreases were partially offset by the sales volume increase in our recently launched AffirmProne table, an increase in C-view sales and higher volumes of our Eviva and ATEC products, partially offset by slightly lower average selling prices forATEC.Our Medical Aesthetics business was formed in fiscal 2017 by the acquisition of Cynosure effective March 22, 2017. Accordingly, we did not haveany Medical Aesthetics revenues in the prior year period.44Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsGYN Surgical product revenues increased 8.7% in fiscal 2017 compared to fiscal 2016 primarily due to increases in MyoSure system sales of $33.0million as MyoSure continues to gain strong market acceptance with new devices being released, such as the MyoSure REACH, partially offset by a slightdecrease in average selling prices primarily due to product mix. NovaSure revenues were lower by $2.9 million in fiscal 2017 compared to fiscal 2016primarily due to slight decrease in average selling prices. Our GYN Surgical revenues were also adversely affected by the negative foreign currency exchangeimpact of the strengthening U.S. dollar on our sales denominated in foreign currencies.Skeletal Health product revenues decreased 3.5% in fiscal 2017 compared to fiscal 2016 primarily due to a decrease in our mini C-arm sales in the U.S.due to competitive pressures, which was partially offset by increases in Horizon osteoporosis assessment product revenues primarily attributable to highersales volume on a worldwide basis.In fiscal 2017, 76.7% of product revenues were generated in the United States, 10.3% in Europe, 8.5% in Asia-Pacific, and 4.5% in other internationalmarkets. In fiscal 2016, 77.8% of product revenues were generated in the United States, 10.6% in Europe, 8.3% in Asia-Pacific, and 3.3% in otherinternational markets. The slight decrease in the percentage of U.S. revenues was primarily due to lower sales volumes of 3D Dimensions systems and relatedcomponents in the U.S. and higher revenues in other international markets as a result of our Cynosure acquisition.Service and Other Revenues. Years Ended September 30, 2017 September 24, 2016 Change Amount % ofTotalRevenue Amount % ofTotalRevenue Amount %Service and Other Revenues $520.8 17.0% $453.7 16.0% $67.1 14.8%Service and other revenues are primarily comprised of revenue generated from our field service organization to provide ongoing service, installationand repair of our products. The majority of these revenues are generated within our Breast Health segment. Service and other revenues increased 14.8% infiscal 2017 compared to fiscal 2016 primarily due to higher service contract conversion and renewal rates, an additional week in the current year, higher spareparts sales, and the Cynosure acquisition, which contributed $29.2 million in the current year.Cost of Product Revenues. Years Ended September 30, 2017 September 24, 2016 Change Amount % of ProductSales Amount % of ProductSales Amount %Cost of Product Revenues $881.8 34.7% $756.8 31.8% $125.0 16.5%Amortization of Intangible Assets 297.1 11.7% 293.4 12.3% 3.7 1.3% $1,178.9 46.4% $1,050.2 44.1% $128.7 12.3%Product gross margin decreased to 53.6% in fiscal 2017 compared to 55.9% in fiscal 2016.Cost of Product Revenues. The cost of product revenues as a percentage of product revenues was 34.7% in the current year, compared to 31.8% in theprior year. Cost of product revenues as a percentage of product revenues in the current year were higher in Diagnostics and Skeletal Health, relativelyconsistent in GYN Surgical, and decreased in Breast Health compared to the prior year, resulting in the decrease in overall product margins. In addition, thecost of product revenues was higher due the inclusion of Cynosure results partially due to the impact of the step-up in inventory from purchase accounting,which was $39.3 million in the current year, and the Cynosure products have a lower gross margin than our legacy products.Diagnostics’ product costs as a percentage of revenue increased in fiscal 2017 compared to fiscal 2016 primarily due to the divestiture of the highermargin blood screening business that occurred during the second quarter of fiscal 2017. The products that we supply to Grifols under the new supply andcollaboration agreements are at significantly lower gross margins than we earned in the disposed business, and we expect this to continue. The cost as apercentage of revenue also increased due to a shift in sales to lower margin international molecular diagnostic products, a slight decline in Aptima averageselling prices, lower Perinatal sales and the negative impact of the strengthening U.S. dollar on our sales denominated in foreign currencies, partially offset bythe increase in Aptima assay volumes.45Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsBreast Health’s product costs as a percentage of revenue decreased in fiscal 2017 compared to fiscal 2016 primarily due to higher software revenues forour C-View product and 3D upgrades, which have higher gross margins than capital equipment sales, as well as manufacturing efficiencies, increase inaverage sales prices for breast biopsy systems due to increased volume in our Affirm Prone table, and an increase in Eviva and ATEC volumes. Thesedecreases in product costs as a percentage of revenue were partially offset by the volume impact of the decreases in 3D Dimensions systems and relatedcomponent revenue.GYN Surgical’s product costs as a percentage of revenue were relatively consistent in fiscal 2017 compared to fiscal 2016.Skeletal Health’s product costs as a percentage of revenue increased in fiscal 2017 compared to fiscal 2016 primarily due to lower volumes and anincrease in obsolescence charges.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 and 15 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 decrease in amortization expense as a percentage of revenue in fiscal 2017 compared tofiscal 2016 was primarily due to the divestiture of the blood screening business resulting in lower amortization expense of $17.9 million, and the $6.2million acceleration of the discontinued Cystic Fibrosis developed technology asset in the prior year. The decrease was also driven, to a lesser extent, fromlower amortization expense related to the Cytyc acquisition intangibles, which are being amortized based on the pattern of economic benefits. Thesedecreases were partially offset by amortization expense of $33.5 million from intangible assets acquired from Cynosure.Cost of Service and Other Revenues. Years Ended September 30, 2017 September 24, 2016 Change Amount % of Serviceand OtherRevenues Amount % of Serviceand OtherRevenues Amount %Cost of Service and Other Revenues $258.9 49.7% $219.2 48.3% $39.7 18.1%Service and other revenues gross margin was 50.3% in fiscal 2017 compared to 51.7% in fiscal 2016. Slight decrease in gross margin is related to lowermargin Cynosure service business offset by the strength of the Breast Health service margins. The Breast Health business continues to convert a highpercentage of our installed base of digital mammography systems to service contracts upon expiration of the warranty period leveraging our serviceinfrastructure.Operating Expenses. Years Ended September 30, 2017 September 24, 2016 Change Amount % of TotalRevenue Amount % of TotalRevenue Amount %Operating Expenses Research and development $232.8 7.6 % $232.1 8.2% $0.7 0.3 %Selling and marketing 498.6 16.3 % 415.1 14.7% 83.5 20.1 %General and administrative 343.3 11.2 % 267.3 9.4% 76.0 28.4 %Amortization of intangible assets 62.5 2.0 % 89.7 3.2% (27.2) (30.3)%Gain on sale of business (899.7) (29.4)% — —% (899.7) (100.0)%Restructuring and divestiturecharges 13.3 0.4 % 10.5 0.4% 2.8 26.7 % $250.8 8.1 % $1,014.7 35.9% $(763.9) (75.3)%Research and Development Expenses. Research and development expenses increased 0.3% in fiscal 2017 compared to fiscal 2016 primarily due to theinclusion of Cynosure research and development expenses of $15.3 million and increased consulting expenses, partially offset by the divestiture of the bloodscreening business, lower project spend, and a reduction in headcount primarily in Diagnostics. In addition, for fiscal 2017 there was an additional week ofexpenses. At any point in time,46Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 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 increased 20.1% in fiscal 2017 compared to fiscal 2016 primarily due to theinclusion of Cynosure, which contributed $81.0 million. Excluding the impact of Cynosure, expenses related to Hologic’s legacy business increased in thecurrent year compared to the prior year primarily due to increased headcount in GYN Surgical and Breast Health, increased training, meeting and consultingexpenses and higher spend internationally as we invest to expand our presence in targeted geographic markets, partially offset by lower commissions, tradeshows and marketing initiatives. In addition, there was an extra week of spend in the current year.General and Administrative Expenses. General and administrative expenses increased 28.4% in fiscal 2017 compared to fiscal 2016 primarily due tothe inclusion of Cynosure, which contributed $30.4 million, which includes retention and integration related expenses including legal and consultingprofessional fees. Excluding the impact of Cynosure, expenses related to Hologic’s legacy business increased in the current year compared to the prior yearprimarily due to acquisition and divestiture transaction fees of $23.2 million, charges of $35.6 million for non-income tax matters, increased compensationand benefits partially due to higher stock compensation, increased information systems infrastructure and project costs, integration and consolidationcharges, and an additional week of expenses. These increases were partially offset by $12.4 million refund received in fiscal 2017 related to amended medicaldevice excise tax filings, overall lower legal fees as the prior year period included a $6.0 million charge to settle a legal fee dispute, lower consulting and taxfees related to organizational structure changes and improvements and decrease in facilities costs.Amortization of Intangible Assets. Amortization of intangible assets results from customer relationships, trade names, distributor relationships andbusiness licenses related to our acquisitions. These intangible assets are generally amortized over their estimated useful lives of between 2 and 30 years usinga straight-line method or, if reliably determinable, based on the pattern in which the economic benefits of the assets are expected to be consumed utilizingexpected undiscounted future cash flows. Amortization expense decreased 30.3% in fiscal 2017 compared to fiscal 2016 primarily due to lower amortizationexpense from intangible assets related to the blood screening business of $34.5 million that was disposed of during the second quarter of fiscal 2017. Thisdecrease was partially offset by intangible asset amortization expense of $10.1 million as a result of the Cynosure acquisition and an additional week ofexpense in fiscal 2017.Gain on Sale of Business. In the second quarter of fiscal 2017, we completed the sale of our blood screening business to Grifols and recorded a gain of$899.7 million.Restructuring and Divestiture Charges. In fiscal 2015, we decided to shut down our Bedford, Massachusetts facility and transfer production of ourSkeletal Health products to a third-party contract manufacturer and other activities to our Marlborough, Massachusetts and Danbury, Connecticut facilities.We also implemented additional organizational changes to our international operations in fiscal 2016. In fiscal 2017, in connection with our acquisition ofCynosure, we have and will implement certain organizational changes, and we also eliminated certain research and development positions in Breast Healthand manufacturing positions primarily in our Diagnostics division. Pursuant to U.S. generally accepted accounting principles, the related severance andbenefit charges are recognized either ratably over the respective required employee service periods or up-front for contractual benefits, and other charges arebeing recognized as incurred. In fiscal 2017 and 2016, we recorded aggregate charges of $13.3 million and $10.5 million, respectively, from these actions,primarily for severance and benefits and to a lesser extent facility closure costs. The current year charges are for severance benefits primarily related to thetermination of Cynosure executives and employees and lease obligation charges for a vacated section of our Bedford facility. For additional information,please refer to Note 3 to our consolidated financial statements contained in Item 15 of this Annual Report.Interest Expense. Years Ended September 30, 2017 September 24, 2016 Change Amount Amount Amount %Interest Expense $(153.2) $(155.3) $2.1 (1.4)%Interest expense in fiscal 2016 and 2017 consists primarily of the cash interest costs and the related amortization of the debt discount and deferredissuance costs on our Convertible Notes, 2022 Senior Notes, and amounts borrowed under our Credit Agreement, and Accounts Receivable SecuritizationProgram. Interest expense in fiscal 2017 compared to fiscal 2016 was relatively consistent but had offsetting factors. While we lowered outstanding debtbalances as a result of scheduled principal payments, and Convertible Note repurchases in fiscal 2017, this effect on interest was offset by an additional weekin the current year, higher expense from interest rate cap agreements and an increase in the LIBOR rate compared to the prior year period.47Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsDebt Extinguishment Loss. Years Ended September 30, 2017 September 24, 2016 Change Amount Amount Amount %Debt Extinguishment Loss $(3.2) $(5.3) $2.1 (39.6)%On various dates during the third and fourth quarters of fiscal 2017, we entered into privately negotiated repurchase transactions and extinguished$117.9 million and $168.0 million principal amount of our 2012 and 2013 Notes, respectively, for an aggregate payment of $375.1 million, which includes apremium conversion resulting from our stock price on the date of the transactions being in excess of the conversion prices. In connection with thesetransactions, we recorded a debt extinguishment loss of $0.9 million and $2.3 million on the 2012 and 2013 Notes, respectively, related to the differencebetween the fair value of their respective liability components and carrying values at the repurchase dates. The remaining cash payments were allocated tothe reacquisition of the equity component and recorded within additional paid-in capital, a component of stockholders' equity.On various dates during the second and fourth quarters of fiscal 2016, we entered into privately negotiated repurchase transactions and extinguished$137.6 million and $136.6 million principal amount of our 2010 and 2012 Notes, respectively, for an aggregate payment of $392.8 million, which includes apremium conversion resulting from our stock price on the date of the transactions being in excess of the conversion prices. In connection with thesetransactions, we recorded a debt extinguishment loss of $4.6 million and $0.7 million on the 2010 Notes and 2012 Notes, respectively, related to thedifference between the fair value of their respective liability components and carrying values at the repurchase dates. The remaining cash payments wereallocated to the reacquisition of the equity component and recorded within additional paid-in capital, a component of stockholders' equity.Other Income (Expense), net. Years Ended September 30, 2017 September 24, 2016 Change Amount Amount Amount %Other Income (Expense), net $12.9 $26.6 $(13.7) (51.5)%In fiscal 2017, this account primarily consisted of a gain of $4.9 million on the cash surrender value of life insurance contracts related to our deferredcompensation plan, $2.3 million in net foreign currency exchange gains partially due to hedging activities and $5.6 million of net realized gains on the saleof investments.In fiscal 2016, this account was primarily comprised of a $25.1 million realized gain on the sale of a marketable security, and a gain of $3.3 million onthe cash surrender value of life insurance contracts related to our deferred compensation plan. These gains were partially offset by an other-than-temporaryimpairment charge of $1.1 million on a marketable security and net foreign currency exchange losses of $1.0 million.Provision for Income Taxes. Years Ended September 30, 2017 September 24, 2016 Change Amount Amount Amount %Provision for Income Taxes $475.0 $84.5 $390.5 462.1%Our effective tax rate for fiscal 2017 was 38.6% compared to 20.3% in fiscal 2016. Our effective tax rate in fiscal 2017 was higher than the statutory rateprimarily due to non-deductible goodwill related to the sale of the Blood Screening business, partially offset by the release of valuation allowances forcapital losses utilized against the capital gain generated on the sale of the Blood Screening business, earnings in jurisdictions subject to lower tax rates, thedomestic production activities deduction benefit, the release of uncertain tax positions due to statutes of limitations expirations and audit settlements, stockcompensation benefits, and federal and state tax credits.For fiscal 2016, the effective tax rate was lower than the statutory tax rate primarily due to earnings in jurisdictions subject to lower tax rates, thedomestic production activities deduction benefit, and a change in the valuation allowance related to the sale of a marketable security with a higher tax thanbook basis.48Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 OperationsWe report our business as five segments: Diagnostics, Breast Health, Medical Aesthetics, GYN Surgical and Skeletal Health. The accounting policies ofthe segments are the same as those described in the footnotes to the accompanying consolidated financial statements contained in Item 15 of this AnnualReport. We measure segment performance based on total revenues and operating income. Revenues from product sales of each of these segments aredescribed in further detail above. The discussion that follows is a summary analysis of total revenues and the primary changes in operating income or loss bysegment.Diagnostics. Years Ended September 30, 2017 September 24, 2016 Change Amount Amount Amount %Total Revenues $1,197.1 $1,236.9 $(39.8) (3.2)%Operating Income $1,054.2 $126.0 $928.2 736.7 %Operating Income as a % of Segment Revenue 88.1% 10.2% Diagnostics revenues decreased in fiscal 2017 compared to fiscal 2016 primarily due to the decrease in product revenues discussed above. The primarydriver of the reduction in revenues was the divestiture of the blood screening business in the second quarter of fiscal 2017.Operating income for this business segment increased in fiscal 2017 compared to fiscal 2016 primarily due to the gain on the disposition of the bloodscreening business of $899.7 million partially offset by a decrease in gross profit primarily due to the blood screening divestiture. Excluding the impact ofthe gain, operating income increased $28.7 million in the current year compared to the prior year. Gross margin was 47.8% in the current year compared with49.5% in the prior year. The decrease in gross margin was primarily due to lower revenues as a result of the disposition of the higher-margin blood screeningbusiness and the lower margins generated under the new supply and collaboration arrangement, the slight decline in Aptima average selling prices, a shift insales to lower margin international molecular diagnostic products and the negative impact of the strengthening U.S. dollar on our sales denominated inforeign currencies, partially offset by the increase in Aptima assay volumes and lower amortization expense primarily attributable to the divestiture of theblood screening business.Exclusive of the impact of the gain on the sale of the blood screening business, operating expenses decreased in fiscal 2017 compared to fiscal 2016primarily due to lower amortization expense primarily as a result of the blood screening divestiture, lower research and development expenses related to areduction in project spending as well as the divestiture of blood screening, and the refund received related to amended medical device excise tax filings,$5.5 million of which related to Diagnostics. In addition, the current year expenses were lower primarily due to a reduction of legal fees and charges as theprior year period included a $6.0 million settlement of a legal fee dispute, and the prior year period included $2.8 million for the medical device excise tax.These decreases in operating expenses were partially offset by an increase in non-income taxes of $3.7 million recorded in fiscal 2017 and increasedcompensation from higher sales and marketing headcount.Breast Health. Years Ended September 30, 2017 September 24, 2016 Change Amount Amount Amount %Total Revenues $1,138.3 $1,112.8 $25.5 2.3%Operating Income $373.4 $350.5 $22.9 6.5%Operating Income as a % of Segment Revenue 32.8% 31.5% Breast Health revenues increased in fiscal 2017 compared to fiscal 2016 primarily due primarily due to an increase of $37.2 million in service revenue,partially offset by a $11.7 million decrease in product revenue discussed above.Operating income for this business segment increased in fiscal 2017 compared to fiscal 2016 primarily due to an increase in gross profit from higherrevenue partially offset by an increase in operating expenses in the current year. The overall gross margin increased to 60.9% in the current year compared to59.9% in the prior year primarily due to the increase in service revenue and software product sales, which have higher gross margins than capital equipmentsales. The gross margin increases49Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentswere partially offset by the volume impact of the decreases in 3D Dimensions systems and related component revenue in the US.Operating expenses increased in fiscal 2017 compared to fiscal 2016. We experienced an increase in non-income tax charges of $5.8 million recordedin fiscal 2017, an increase in compensation and commissions from increased head count, higher marketing expenditures internationally, increased legal fees,and operating expenses from Medicor. These increases were partially offset by lower marketing initiatives and program spend on Genius 3D, lower meetingand related expenses, lower restructuring costs, and a $4.5 million refund received in the third quarter of fiscal 2017 relating to this business segment fromamending the Company’s medical device excise tax filings. In addition, the prior year period included medical device excise taxes of $2.5 million.Medical Aesthetics. Years Ended September 30, 2017 September 24, 2016 Change Amount Amount Amount %Total Revenues $207.5 $— $207.5 100.0%Operating Income $(115.9) $— $(115.9) 100.0%Operating Income as a % of Segment Revenue (55.9)% —% Medical Aesthetics revenues increased in fiscal 2017 related to the acquisition of Cynosure on March 22, 2017.The operating loss of $115.9 million in the fiscal 2017 was primarily due to amortization of intangible assets of $43.7 million, the step-up to fair valueof inventory sold of $39.3 million, and restructuring, retention and integration expenses, including legal and professional consulting fees and accelerateddepreciation expense, aggregating $25.7 million partially offset by gross profit. Fiscal 2017 also includes acquisition transaction fees of $18.8 million.GYN Surgical. Years Ended September 30, 2017 September 24, 2016 Change Amount Amount Amount %Total Revenues $427.1 $393.1 $34.0 8.6 %Operating Income $65.0 $69.1 $(4.1) (5.9)%Operating Income as a % of Segment Revenue 15.2% 17.6% GYN Surgical revenues increased in fiscal 2017 compared to fiscal 2016 due to the increase in product revenues discussed above.Operating income for this business segment decreased in fiscal 2017 compared to fiscal 2016 primarily due to increase in operating expense related tocharges recorded for non-income tax matters of $26.1 million. Excluding the impact of the non-income tax matter, operating income in fiscal 2017 comparedto fiscal 2016 would have increased due to an increase in gross profit as a result of higher revenues. Gross margin increased to 63.6% in fiscal 2017 periodfrom 62.0% in fiscal 2016 primarily due to higher revenues with improved manufacturing efficiencies, a decrease in amortization expense, and the inclusionin the prior year period of a write-off of inventory that would not be utilized.Operating expenses increased in fiscal 2017 primarily due to charges recorded for non-income tax matters of $26.1 million, increases in compensationfrom additional headcount, higher commissions due to increased sales, increased spend on marketing initiatives and increased product development spend,partially offset by lower amortization expenses.50Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsSkeletal Health. Years Ended September 30, 2017 September 24, 2016 Change Amount Amount Amount %Total Revenues $88.8 $89.9 $(1.1) (1.2)%Operating Income $(6.5) $3.0 $(9.5) (316.7)%Operating Income as a % of Segment Revenue (7.3)% 3.3% Skeletal Health revenues decreased in fiscal 2017 compared to fiscal 2016 primarily due to the decrease in product revenues discussed above.Operating income decreased in fiscal 2017 compared to the prior year primarily due to a decrease in gross profit from lower revenues and increasedobsolescence charges. Gross margin rate was 42.2% in fiscal 2017 compared to 46.3% in fiscal 2016. This business also had higher operating expenses infiscal 2017 primarily related to the facility closure costs incurred for the Bedford facility of $4.8 million.51Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 24, 2016 Compared to Fiscal Year Ended September 26, 2015Product Revenues. Years Ended September 24, 2016 September 26, 2015 Change Amount % of TotalRevenue Amount % of TotalRevenue Amount %Product Revenues Diagnostics $1,204.7 42.5% $1,184.1 43.8% $20.6 1.7 %Breast Health 719.7 25.4% 685.1 25.3% 34.6 5.1 %GYN Surgical 392.0 13.9% 334.6 12.4% 57.4 17.2 %Skeletal Health 62.6 2.2% 66.6 2.5% (4.0) (6.0)% $2,379.0 84.0% $2,270.4 84.0% $108.6 4.8 %We generated an increase in product revenues in fiscal 2016 compared to fiscal 2015. The growth was across our three primary business segments onboth a domestic and worldwide basis, while Skeletal Health experienced a decline domestically and internationally. Product revenues increased 4.8% infiscal 2016 compared to fiscal 2015, as reported growth was partially offset by the negative foreign currency exchange impact of the strengthening U.S. dollaragainst a number of currencies, most notably the Euro, Australian dollar and UK Pound.Diagnostics product revenues increased 1.7% in fiscal 2016 compared to fiscal 2015 primarily due to increases in Molecular Diagnostics of $28.6million and Cytology & PeriNatal of $8.1 million. These increases were partially offset by a decrease of $16.2 million in our Blood Screening business.The increase in Molecular Diagnostics products, and in particular our Aptima family of assays, was primarily due to our increased installed base ofPanther instruments, which is driving higher volumes of assay testing. These increases were partially offset by a slight decline in average selling prices, areduction in Cervista HPV revenues as our larger customers transition to our Panther system, a reduction in Cystic Fibrosis revenues as we discontinued theproduct at the end of the second quarter of fiscal 2016, and a slight negative foreign currency exchange impact from the strengthening U.S. dollar on our salesdenominated in foreign currencies. Overall, we experienced revenue growth both domestically and internationally in our Molecular Diagnostics business.The increase in our Cytology & PeriNatal products was primarily related to increases in instrument sales and Perinatal volumes partially offset by a decreasein our ThinPrep products, where ThinPrep volumes increased slightly domestically and increased more modestly internationally, but international sales werenegatively impacted by the strengthening U.S. dollar on our sales denominated in foreign currencies. As a result, this business experienced an increase indomestic revenues but a decline in international revenues. Blood Screening revenues decreased in fiscal 2016 compared to fiscal 2015 primarily due to areduction in volumes related to the agreement between Grifols, our blood screening partner, and the Japanese Red Cross and lower instrument and ancillaryvolumes as well as the trend of lower blood donations in the U.S. The revenue decrease was partially offset by fluctuations in Grifols' domestic inventorylevels, including increased fulfillment of the West Nile Virus assay. As a result, this business experienced an increase in domestic revenues but a decline ininternational revenues.Breast Health product revenues increased 5.1% in fiscal 2016 compared to fiscal 2015. Our digital mammography systems and related products revenueincreased $56.8 million in fiscal 2016 compared to fiscal 2015 primarily due to higher sales volume of our 3D Dimensions systems on a worldwide basis,principally driven by domestic sales. This resulted in our domestic 3D Dimension systems sales, which have higher average selling prices than internationalsales, increasing as a percentage of our total 3D Dimension system sales. In addition, we also had higher software sales primarily driven by our C-Viewproduct. These increases were partially offset by negative foreign currency exchange impact of the strengthening U.S. dollar on our sales denominated inforeign currencies and decreases in the sales volume of our 2D Selenia product. In addition, we had lower sales of our interventional breast solutions productsof $4.7 million and had no sales from our MRI breast coils product line in fiscal 2016, which was fully disposed during fiscal 2015 and contributed $8.4million in fiscal 2015. Overall, we experienced growth domestically in this business segment but had a decline internationally in our primary product lines.GYN Surgical product revenues increased 17.2% in fiscal 2016 compared to fiscal 2015 primarily due to increases in MyoSure system sales of $38.8million and NovaSure system sales of $19.1 million compared to fiscal 2015 as volumes increased both domestically and internationally for each product.We believe the increase in domestic NovaSure volumes is partially attributable to a competitor's recent withdrawal from the market. The MyoSure systemcontinued to gain strong market acceptance as unit sales increased globally. These increases were partially offset by the negative foreign currency exchangeimpact of the strengthening U.S. dollar on our sales denominated in foreign currencies.52Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 decreased 6.0% in fiscal 2016 compared to fiscal 2015 primarily due to decreases in the sales volume of our olderDiscovery products, lower sales of our mini C-arm product and the negative foreign currency exchange impact of the strengthening U.S. dollar on our salesdenominated in foreign currencies. These decreases were partially offset by an increase in our Horizon osteoporosis assessment product sales volume.In fiscal 2016, 77.8% of product revenues were generated in the United States, 10.6% in Europe, 8.3% in Asia-Pacific, and 3.3% in other internationalmarkets. 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 otherinternational markets. The increase in the percentage of U.S. revenues was primarily due to higher total product revenue in the U.S. in our Surgical, BreastHealth and Molecular Diagnostic product lines. The impact of the U.S. revenue increases, lower overall international revenues, and the negative impact of thestrengthening U.S. dollar, primarily against the Euro, Australian dollar and the UK Pound, resulted in a reduction in the European and Asia-Pacific revenuesas a percentage of consolidated revenues.Service and Other Revenues. Years Ended September 24, 2016 September 26, 2015 Change Amount % of TotalRevenue Amount % of TotalRevenue Amount %Service and Other Revenues $453.7 16.0% $434.6 16.1% $19.1 4.4%Service and other revenues are primarily comprised of revenue generated from our field service organization to provide ongoing service, installationand repair of our products. The majority of these revenues are generated within our Breast Health segment. Service and other revenues increased 4.4% infiscal 2016 compared to fiscal 2015 primarily due to higher service contract conversion and renewal rates and higher installation and training revenuesrelated to increased sales of our 3D Dimensions systems. In addition, other revenue in our Diagnostics segment increased in fiscal 2016 primarily due to $9million of payments received under an agreement to license certain technology.Cost of Product Revenues. Years Ended September 24, 2016 September 26, 2015 Change Amount % of ProductRevenue Amount % of ProductRevenue Amount %Cost of Product Revenues $756.8 31.8% $755.5 33.3% $1.3 0.2 %Amortization of Intangible Assets 293.4 12.3% 299.7 13.2% (6.3) (2.1)% $1,050.2 44.1% $1,055.2 46.5% $(5.0) (0.5)%Product gross margin increased to 55.9% in fiscal 2016 compared to 53.5% in fiscal 2015.Cost of Product Revenues. Cost of product revenues as a percentage of product revenues in fiscal 2016 decreased in our Breast Health and GYNSurgical business segments and increased in Diagnostics and Skeletal Health compared to fiscal 2015, resulting in the overall improvement in gross margins.Diagnostics’ product costs as a percentage of revenue increased slightly in fiscal 2016 compared to fiscal 2015 primarily due to unfavorable absorptionvariances, a mix shift in international sales to a higher percentage of lower margin molecular diagnostic products, inventory related charges for discontinuingthe Cystic Fibrosis product, and the negative impact of the strengthening U.S. dollar on our sales denominated in foreign currencies. These increases werepartially offset by an increase in product revenue related to the increase in Aptima assay sales and related volumes resulting in favorable manufacturingvariances, and lower production costs at our manufacturing facilities as we improve our operational efficiency and renegotiate pricing with certain of ourvendors. In addition, we generated an increase in domestic sales, which have higher average selling prices, while international sales declined in fiscal 2016compared to fiscal 2015.Breast Health’s product costs as a percentage of revenue decreased in fiscal 2016 compared to fiscal 2015 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. In addition, we hadhigher software sales primarily due to our C-View product, which have higher gross margins than capital equipment sales, and we experienced favorablemanufacturing variances. Further, we53Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsgenerated an increase in domestic sales, which have higher average selling prices, while international sales declined in fiscal 2016 compared to fiscal 2015resulting in an improved gross margin. We also had lower sales of our interventional breast solutions disposables and no sales from our MRI breast coilsproduct line, which was fully disposed during fiscal 2015. Both of these product lines have lower gross margins than our digital mammography systems.GYN Surgical’s product costs as a percentage of revenue decreased in fiscal 2016 compared to fiscal 2015 primarily due to an increase in sales volumesfor both our MyoSure and NovaSure products resulting in favorable manufacturing variances, partially offset by product mix shift to our lower marginMyoSure products. In addition, the prior fiscal year included a $4.0 million charge to write-off certain inventory that would not be utilized.Skeletal Health’s product costs as a percentage of revenue increased in fiscal 2016 compared to fiscal 2015 primarily due to an overall decrease inrevenues, partially offset by favorable manufacturing variances as we built additional inventory in anticipation of outsourcing the manufacturing of amajority of the division's products to a third party.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 15 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 2016 compared to fiscal 2015 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 full amortization of assets acquired in our Surosacquisition. These decreases were partially offset due to the acceleration of amortization of the Cystic Fibrosis developed technology asset of $6.2 million infiscal 2016 as a result of discontinuing this product.Cost of Service and Other Revenues. Years Ended September 24, 2016 September 26, 2015 Change Amount % of Serviceand OtherRevenues Amount % of Serviceand OtherRevenues Amount %Cost of Service and Other Revenues $219.2 48.3% $217.1 50.0% $2.1 1.0%Service and other revenues gross margin was 51.7% in fiscal 2016 compared to 50.0% in fiscal 2015. Within our Breast Health segment, the increase ingross margin is related to higher service contract conversion and renewal rates and higher installation and training revenues related to our increased sales of3D Dimensions systems. In addition, we had an increase in other revenue in our Diagnostics segment primarily due to $9 million of royalty payments fromlicensing certain technology, which had no corresponding service costs.Operating Expenses. Years Ended September 24, 2016 September 26, 2015 Change Amount % of TotalRevenue Amount % of TotalRevenue Amount %Operating Expenses Research and development $232.1 8.2% $214.9 7.9% $17.2 8.0 %Selling and marketing 415.1 14.7% 363.0 13.4% 52.1 14.4 %General and administrative 267.3 9.4% 261.0 9.7% 6.3 2.4 %Amortization of intangible assets 89.7 3.2% 110.2 4.1% (20.5) (18.6)%Restructuring and divestiturecharges 10.5 0.4% 28.5 1.1% (18.0) (63.2)% $1,014.7 35.9% $977.6 36.2% $37.1 3.8 %Research and Development Expenses. Research and development expenses increased 8.0% in fiscal 2016 compared to fiscal 2015 primarily due tohigher compensation, primarily in our Breast Health segment from additional headcount. There was also an increase in new product development spend inBreast Health, GYN Surgical and Skeletal Health for prototype54Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsmaterials and consulting. At any point in time, we have a number of different research projects and clinical trials being conducted and the timing of theseprojects and related costs can vary from period to period.Selling and Marketing Expenses. Selling and marketing expenses increased 14.4% in fiscal 2016 compared to fiscal 2015 primarily due to highercompensation from an increase in headcount in Diagnostics, GYN Surgical and Breast Health, increased commissions as a result of higher sales, an increase inspending on a number of marketing initiatives primarily in our Breast Health and Diagnostics businesses, higher medical education spend in GYN Surgicaland higher travel, trade show and meeting expenses.General and Administrative Expenses. General and administrative expenses increased 2.4% in fiscal 2016 compared to fiscal 2015 primarily due to a$6.0 million charge for settling a legal fee dispute in the first quarter of fiscal 2016, and to a lesser extent, due to higher salary and compensation fromincreased headcount, increased consulting and legal expenses for a number of corporate initiatives including organizational structure changes and financeoperational improvements, an increase in information systems infrastructure and project costs, and an increase in stock-based compensation fromimplementing a retirement plan provision in our equity compensation plan in the fourth quarter. Partially offsetting these increases was a decrease in themedical device excise tax of $16.9 million as a result of the Protecting Americans from Tax Hikes Act of 2015 ("PATH"), which went into effect December 15,2015, and provides for a two-year moratorium on the 2.3% excise tax imposed on the sale of medical devices in the United States on or after January 1, 2016through December 31, 2017, and lower tax fees.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. Amortization expense decreased 18.6% in fiscal 2016 compared to fiscal 2015 primarily due to lower amortization expense from intangible assetsfrom the Gen-Probe Incorporated acquisition and the Cytyc acquisition, which are being amortized based on the pattern of economic use.Restructuring and Divestiture Charges. In fiscal 2014, we implemented cost containment measures that primarily resulted in headcount reductions andalso started the process of reorganizing our senior management team and international structure, which led to additional headcount actions in fiscal 2015. Inaddition, in fiscal 2015, we decided to shut down our Bedford, Massachusetts facility and transfer production of our Skeletal Health products to a third-partycontract manufacturer and other activities to our Marlborough, Massachusetts and Danbury, Connecticut facilities. We also implemented additionalorganizational changes to our international operations throughout fiscal 2016 which resulted in additional charges. Pursuant to U.S. generally acceptedaccounting principles, the related severance and benefit charges are recognized either ratably over the respective required employee service periods or up-front for contractual benefits, and other charges are being recognized as incurred. In fiscal 2016 and 2015, we recorded aggregate charges of $10.5 millionand $28.5 million, respectively, from these actions, primarily for severance and benefits and to a lesser extent facility closure costs. Included in the fiscal2015 charges was a $9.6 million charge to write-off the cumulative translation adjustment related to the divestiture of our MRI breast coils product line. Thissubsidiary was deemed to be substantially liquidated in the third quarter of fiscal 2015 as operations fully ceased. For additional information, please refer toNote 3 to our consolidated financial statements contained in Item 15 of this Annual Report.Interest Expense. Years Ended September 24, 2016 September 26, 2015 Change Amount Amount Amount %Interest Expense $(155.3) $(205.5) $50.2 (24.4)%Interest expense consists primarily of the cash interest costs and the related amortization of the debt discount and deferred issuance costs on ourConvertible Notes, 2022 Senior Notes, 6.25% Senior Notes due 2020, and amounts borrowed under our Credit Agreement, our prior senior secured creditfacility with Goldman Sachs Bank USA, in its capacity as administrative and collateral agent, referred to as the Prior Credit Agreement and our AccountsReceivable Securitization Program. The decrease in interest expense in fiscal 2016 compared to fiscal 2015 was primarily due to lower outstanding balancesas a result of scheduled principal payments, a term loan prepayment and extinguishments in fiscal 2015 and, to a lesser extent, Convertible Note repurchasesin fiscal 2016 of $274.2 million principal amount, and lower interest rates in fiscal 2016 as a result of debt refinancings in fiscal 2015.55Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsDebt Extinguishment Loss. Years Ended September 24, 2016 September 26, 2015 Change Amount Amount Amount %Debt Extinguishment Loss $(5.3) $(62.7) $57.4 (91.5)%On various dates during the second and fourth quarters of fiscal 2016, we entered into privately negotiated repurchase transactions and extinguished$137.6 million and $136.6 million principal amount of our 2010 and 2012 Notes, respectively, for an aggregate payment of $392.8 million, which includes apremium conversion resulting from our stock price on the date of the transactions being in excess of the conversion prices. In connection with thesetransactions, we recorded a debt extinguishment loss of $4.6 million and $0.7 million on the 2010 and 2012 Notes, respectively, related to the differencebetween the fair value of their respective liability components and carrying values at the repurchase dates. The remaining cash payments were allocated tothe reacquisition of the equity component and recorded within additional paid-in capital, a component of stockholders' equity.In the fourth quarter of fiscal 2015, we completed a private placement of $1.0 billion aggregate principal amount of our 2022 Senior Notes. We used thenet proceeds of the 2022 Senior Notes, plus available cash to discharge the outstanding 6.25% Senior Notes due 2020 at 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 a debt extinguishment loss of $22.3million 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 included the conversion premium resulting from our stock price on the date oftransaction being in excess of the conversion price. In connection with these transactions, we recorded a debt extinguishment loss of $15.5 million related tothe difference between the fair value of the liability component of the 2010 Notes and their respective carrying value at the redemption date. The remainingcash 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 with Goldman Sachs Bank USA. In connection with this transaction, werecorded a debt extinguishment loss of $18.2 million for the write-off of the pro-rata share of the debt discount and deferred issuance costs under the existingfacility.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.Other Income (Expense), net. Years Ended September 24, 2016 September 26, 2015 Change Amount Amount Amount %Other Income (Expense), net $26.6 $(11.0) $37.6 **** Percentage not meaningfulIn fiscal 2016, this account was primarily comprised of a $25.1 million realized gain on the sale of a marketable security, and a gain of $3.3 million onthe cash surrender value of life insurance contracts related to our deferred compensation plan. These gains were partially offset by an other-than-temporaryimpairment charge of $1.1 million on a marketable security and net foreign currency exchange losses of $1.0 million.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.56Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsProvision for Income Taxes. Years Ended September 24, 2016 September 26, 2015 Change Amount Amount Amount %Provision for Income Taxes $84.5 $45.6 $38.9 85.3%Our effective tax rate for fiscal 2016 was 20.3% compared to 25.8% in fiscal 2015. For fiscal 2016, the effective tax rate was lower than the statutory taxrate primarily due to earnings in jurisdictions subject to lower tax rates, the domestic production activities deduction benefit, and a change in the valuationallowance related to the sale of a marketable security with a higher tax than book basis. For fiscal 2015, the effective tax rate was lower than the statutory rateprimarily due to the domestic production activities deduction benefit.Segment Results of OperationsDiagnostics. Years Ended September 24, 2016 September 26, 2015 Change Amount Amount Amount %Total Revenues $1,236.9 $1,211.8 $25.1 2.1%Operating Income $126.0 $109.5 $16.5 15.1%Operating Income as a % of Segment Revenue 10.2% 9.0% Diagnostics revenues increased in fiscal 2016 compared to fiscal 2015 primarily due to the increase in product revenues discussed above.Operating income for this business segment increased in fiscal 2016 compared to fiscal 2015 primarily due to increased gross profit and lower operatingexpenses. Gross profit increased primarily due to increased Aptima and Cytology & Perinatal product sales, partially offset by lower blood screeningrevenues, as discussed above, and an increase in other revenue primarily due to $9.0 million in payments received in fiscal 2016 under an agreement tolicense certain technology for which there were no corresponding costs. In addition, we had favorable manufacturing variances and lower production costs atour manufacturing facilities as we improve our operational effectiveness and renegotiate pricing with certain of our vendors. Partially offsetting theseimprovements were unfavorable absorption variances, a mix shift in international sales to lower margin molecular diagnostic products, inventory relatedcharges for discontinuing the Cystic Fibrosis product, the negative impact of the strengthening U.S. dollar on our sales denominated in foreign currencies,and the acceleration of amortization of the Cystic Fibrosis developed technology asset of $6.2 million. Overall, the gross margin improved slightly to 49.5%in fiscal 2016 from 49.3% in fiscal 2015.Operating expenses decreased in fiscal 2016 compared to fiscal 2015 primarily due to lower amortization expense of $16.9 million, lower medicaldevice excise taxes of $7.5 million, and lower restructuring charges. These decreases were partially offset by higher sales and marketing expenses related toincreased compensation for additional headcount and commissions, increased marketing initiatives and trade shows and an increase in legal fees related tothe settlement of a fee dispute for $6.0 million.Breast Health. Years Ended September 24, 2016 September 26, 2015 Change Amount Amount Amount %Total Revenues $1,112.8 $1,063.4 $49.4 4.6%Operating Income $350.5 $296.3 $54.2 18.3%Operating Income as a % of Segment Revenue 31.5% 27.9% Breast Health revenues increased in fiscal 2016 compared to fiscal 2015 primarily due to the $34.6 million increase in product revenues discussedabove and a $14.7 million increase in service revenues.Operating income for this business segment increased in fiscal 2016 compared to fiscal 2015 primarily due to an increase in gross profit from higherrevenue, partially offset by an increase in operating expenses. Gross profit increased primarily due57Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsto 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, and anincrease in software related sales, each of which have higher gross margins. We also generated an increase in domestic sales, which have higher averageselling prices, while international sales declined in fiscal 2016 compared to fiscal 2015 resulting in an improved gross margin. In addition, this businessexperienced favorable manufacturing variances. These increases were partially offset by the negative foreign currency impact of the strengthening U.S. dollaron our sales denominated in foreign currencies. As a result, overall gross margin increased to 59.9% in fiscal 2016 compared to 56.4% in fiscal 2015.Operating expenses increased in fiscal 2016 compared to fiscal 2015 primarily due to an increase in compensation and commissions from increasedheadcount and improved operating results, higher marketing expenditures for a number of marketing programs, and increased trade show and meetingexpenses, higher clinical trial and prototype materials expenses, and increased information systems infrastructure costs. These expense increases werepartially offset by lower medical device excise taxes of $5.8 million, lower intangible asset amortization expense of $2.5 million, and lower restructuringexpenses in which the prior year included a $9.6 million charge to write-off the cumulative translation adjustment related to the divestiture of our MRI breastcoils product line.GYN Surgical. Years Ended September 24, 2016 September 26, 2015 Change Amount Amount Amount %Total Revenues $393.1 $335.8 $57.3 17.1%Operating Income $69.1 $38.6 $30.5 79.0%Operating Income as a % of Segment Revenue 17.6% 11.5% GYN Surgical revenues increased in fiscal 2016 compared to fiscal 2015 due to the increase in product revenues discussed above.Operating income for this business segment increased in fiscal 2016 compared to fiscal 2015 primarily due to an increase in revenues and gross profit,partially offset by an increase in operating expenses. Gross margin increased to 62.0% in fiscal 2016 from 57.3% in fiscal 2015 primarily due to increasedsales volumes for both our MyoSure and NovaSure products resulting in favorable manufacturing variances, partially offset by product mix shift to our lowermargin MyoSure products. In addition, intangible asset amortization expense was lower in the current year. Gross margin was also higher in the current yearas the prior year included a $4.0 million charge to write-off inventory that would not be utilized.Operating expenses increased in fiscal 2016 primarily due to an increase in compensation from additional headcount, higher commissions due toincreased sales, increased spend on marketing initiatives, trade shows and medical education, increased research and development expenses and higher legalexpenses.Skeletal Health. Years Ended September 24, 2016 September 26, 2015 Change Amount Amount Amount %Total Revenues $89.9 $94.0 $(4.1) (4.4)%Operating Income $3.0 $10.7 $(7.7) (72.0)%Operating Income as a % of Segment Revenue 3.3% 11.4% Skeletal Health revenues decreased in fiscal 2016 compared to fiscal 2015 primarily due to the decrease in product revenues of $4.0 million discussedabove.Operating income decreased in fiscal 2016 compared to fiscal 2015 primarily due to higher operating expenses for compensation and additionalinvestment in research and development projects, while gross profit increased slightly as a result of higher sales of our higher margin Horizon product andfavorable manufacturing variances as we built up inventory in advance of transitioning production of these products to a third-party manufacturer.58Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsLIQUIDITY AND CAPITAL RESOURCESAt September 30, 2017, we had a negative $(386.9) million of working capital, and our cash and cash equivalents totaled $540.6 million. Our cash andcash equivalents balance decreased by $7.8 million during fiscal 2017 principally due to the purchase of Cynosure, tax payments on the gain on the sale ofthe blood screening business, payments to extinguish certain of our Convertible Notes and repurchase of our common stock, partially offset by cashgenerated through investing activities as a result of the sale of our blood screening business, sales of marketable securities, cash flows from our core operatingactivities and borrowings under our revolving line of credit.In fiscal 2017, our operating activities provided us with $8.3 million of cash, which included tax payments of $649.5 million related to the gain on thesale of our blood screening business. The cash received from the sale of the business is separately classified within cash from investing activities. Cash flowfrom operations, excluding this tax payment, was $657.8 million. Adjustments to net income of $755.5 million included non-cash charges for depreciationand amortization aggregating $449.2 million, stock-based compensation expense of $68.2 million and non-cash interest expense of $49.4 million related toour outstanding debt and $39.7 million related to the step-up in fair value of acquired inventory. These adjustments to net income were partially offset by again on the sale of our blood screening business of $899.7 million, the cash from which was included in investing activities, and a decrease in net deferredtax liabilities of $357.2 million, primarily from the amortization of intangible assets and the reversal of deferred taxes related to blood screening intangibleassets that were sold. Cash provided by operations included a net cash outflow of $103.2 million from changes in our operating assets and liabilities.Changes in our operating assets and liabilities were driven primarily by an increase in accounts receivable of $41.5 million primarily due to a higher portionof revenues occurring in the last month of fiscal 2017 compared to fiscal 2016 resulting in a slight increase in days sales outstanding, a decrease in accruedexpenses of $17.8 million related to the timing of accruals for income and other taxes, and lower accrued compensation, a decrease in accounts payable of$10.6 million primarily due to the timing of payments, a decrease in deferred revenue of $10.6 million primarily due to recognizing amounts previouslydeferred for not meeting the revenue recognition criteria, and an increase in inventory of $11.6 million primarily due to building up inventory to meetanticipated demand and launch of newer products.In fiscal 2017, we generated $285.8 million of cash from investing activities, primarily related to $1.865 billion in proceeds from the sale of our bloodscreening business and $87.1 million in proceeds from the sale of marketable securities. These cash inflows were partially offset by $1.558 billion in net cashused to acquire Cynosure and Medicor and $107.6 million for capital expenditures, which consisted of the placement of equipment under customer usageagreements and purchases of manufacturing equipment and computer hardware.In fiscal 2017, our financing activities used cash of $309.2 million, primarily for payments of $396.2 million to extinguish and redeem certain of ourConvertible Notes, repurchases of common stock of $200.1 million, payments related to our long term debt under our Credit Agreement of $84.4 million andpayments of $19.7 million for employee-related taxes withheld for the net share settlement of vested restricted stock units. Partially offsetting these uses ofcash were proceeds of $345.0 million borrowed under our revolving line of credit and proceeds of $49.0 million from our equity compensation plans.DebtWe had total recorded debt outstanding of $3.3 billion at September 30, 2017, which was comprised of amounts outstanding under our CreditAgreement of $1.66 billion (principal $1.67 billion), our 2022 Senior Notes of $1.0 billion and our convertible notes of $484.5 million (principal $447.4million), which included accretion of principal at 4.0% per annum on the 2013 Notes, and amounts outstanding under the accounts receivable securitizationprogram of $200.0 million.Credit AgreementAs of September 30, 2017, the credit facilities under the Credit Agreement consisted of:•A $1.5 billion secured term loan to the Company with a final maturity date of May 29, 2020 or the Term Loan, of which $1.3 billion wasoutstanding at September 30, 2017; and•A secured revolving credit facility under which the Borrowers (as defined below) could borrow up to $1 billion, subject to certain sublimits, with afinal maturity date of May 29, 2020 or the Revolver, of which $345.0 million was outstanding at September 30, 2017.Borrowings were secured by first-priority liens on, and a first-priority security interest in, substantially all of the assets of our U.S. subsidiaries, withcertain exceptions. For example, borrowings under the Credit Agreement were not secured by those accounts receivable that we transfer to the special purposeentity under our Accounts Receivable Securitization Program. As of September 30, 2017, the interest rate under the Term Loan and Revolver was 2.73% onthe outstanding amounts, which was reflective of the Eurocurrency Rate (i.e., Libor) plus the applicable margin of 1.50% per annum as set forth in the Credit59Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsAgreement. The applicable margin was subject to specified changes depending on the total net leverage ratio as defined in the Credit Agreement.We were required to make scheduled principal payments under the Term Loan in increasing amounts ranging from $18.75 million per three-monthperiod commencing with the three-month period ending on September 25, 2015 to $37.5 million per three-month period commencing with the three-monthperiod ending on September 28, 2018. The remaining balance of the Term Loan was due at maturity. Any amounts outstanding under the Revolver were dueat maturity. In addition, subject to the terms and conditions set forth in the Credit Agreement, we were required to make certain mandatory prepayments fromspecified excess cash flows from operations (to the extent our net senior secured leverage ratio exceeded a certain ratio) and from the net proceeds of specifiedtypes of asset sales (subject to certain reinvestment rights), debt issuances and insurance recoveries (subject to certain reinvestment rights) (“MandatoryPrepayments”). Subject to certain limitations, we could voluntarily prepay any of the credit facilities under the Credit Agreement without premium orpenalty.The Credit Agreement contained 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 contained customary representations and warranties and events of default, including payment defaults, breach of representations and warranties,covenant defaults, cross defaults and an event of default upon a change of control of the company.The Credit Agreement contained total net leverage ratio and interest coverage ratio financial covenants measured as of the last day of each fiscalquarter and an excess cash flow prepayment requirement measured as of the end of each fiscal year. As of September 30, 2017, we were in compliance withthese covenants, and no Mandatory Prepayments were required as of September 30, 2017.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 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 30, 2017, our convertible notes, in the aggregate original principal amount of $447.4 million, are recorded at $484.5 million, whichincludes accretion of principal at 4.0% per annum on the 2013 Notes and is net of the unamortized debt discount attributed to the embedded conversionfeature of the convertible notes and deferred issuance costs. At September 30, 2017, these notes consisted of:•$245.4 million original principal amount of our 2.00% Convertible Senior Notes due 2042 issued in March 2012 (2012 Notes); and•$202.0 million original principal amount of our 2.00% Convertible Senior Notes due 2043 issued in February 2013 (2013 Notes).The 2012 Notes and 2013 Notes are collectively referred to herein as the convertible notes. Interest on the 2013 Notes is currently being accreted toprincipal, from their date of issuance, at a rate of 4.00% per year until December 15, 2017, and 2.00% per year thereafter. The 2012 Notes bear interest at a rateof 2.00% per year on the original principal amount, payable semi-annually in arrears until their first put date and thereafter accrete principal at the rate of2.00% per year. In addition, under certain circumstances contingent interest may be payable under the convertible notes after each of their first put date.60Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 2012 Notes and 2013 Notes have conversion prices of approximately $31.175 and $38.59 of original principal amount, respectively, and aresubject in each case to adjustment. Holders of the 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.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 2012 Notes and 2013 Notes beginning March 6, 2018, and December 15, 2017, respectively. As discussed above, holders ofthe convertible notes may elect to convert their notes prior to redemption. We may redeem all or a portion of the 2012 Notes and 2013 Notes (i.e., in cash or acombination of cash and shares of our common stock) at a redemption price equal to 100% of their principal amount, plus accrued and unpaid interest to, butexcluding, the applicable redemption date. On November 14, 2017, we announced that we had elected to redeem, on December 15, 2017, all of theoutstanding 2013 Notes (those 2013 Notes not surrendered to us for repurchase on December 15, 2017 or validly submitted for conversion prior to December15, 2017) at a redemption price equal to 100% of the accreted principal amount of the 2013 Notes to be redeemed. We also announced on November 14,2017 that as provided in the indenture for the 2013 Notes, we had made an irrevocable election to settle any conversion of the 2013 Notes validly submittedon or after November 14, 2017 in cash.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.Accounts Receivable Securitization ProgramOn April 25, 2016, we entered into a one-year $200.0 million accounts receivable securitization program (the "Securitization Program") with several ofour wholly owned subsidiaries and certain financial institutions. Under the terms of the Securitization Program, we and certain of our wholly-ownedsubsidiaries sell our customer receivables to a bankruptcy remote special purpose entity, which is wholly-owned by us. In addition, we also contributed aportion of our customer receivables to the special purpose entity in connection with its establishment. We retain servicing responsibility. The special purposeentity, as borrower, and we, as servicer, have entered into a Credit and Security Agreement with several lenders pursuant to which the special purpose entitymay borrow from the lenders up to $200.0 million, with the loans secured by the receivables. The amount that the special purpose entity may borrow at agiven point in time is determined based on the amount of qualifying receivables that are present in the special purpose entity at such point in time. The entireamount available of $200.0 million is outstanding at September 30, 2017. Borrowings outstanding under the Securitization Program bear interest at LIBORplus the applicable margin of 0.7% and are included as a component of current liabilities in our consolidated balance sheet, while the accounts receivablesecuring these obligations remain as a component of net receivables in our consolidated balance sheet. As of September 30, 2017, the interest rate under theSecuritization Program was 1.24% on the outstanding amounts. We and the special purpose entity are operated and maintained as separate legal entities. Theassets of the special purpose entity secure the amounts borrowed and cannot be used to pay our other debts or liabilities. The special purpose entity was not aguarantor under our Credit Agreement and is not a guarantor under our Amended and Restated Credit Agreement or of our 2022 and 2025 Senior Notes.Effective April 21, 2017, the Company entered into an amendment to extend the Securitization Program an additional year to April 20, 2018. Theamendment allows the Company to continue to borrow up to $200.0 million and due to structural changes to the terms, the borrowing base has fewerlimitations.The Credit and Security Agreement contains customary representations and warranties and events of default, including payment defaults, breach ofrepresentations and warranties, covenant defaults, and an event of default upon a change of control.61Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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, it contains financial covenants consistent with that of the Credit Agreement. As of September 30, 2017, the Company was in compliance with theCredit and Security Agreement covenants.Subsequent EventsAmended and Restated Credit AgreementOn October 3, 2017, we and certain of our domestic subsidiaries entered into an Amended and Restated Credit and Guaranty Agreement (the "Amendedand Restated Credit Agreement") with Bank of America, N.A. in its capacity as Administrative Agent, Swing Line Lender and L/C Issuer, and certain otherlenders from time to time party thereto. The Amended and Restated Credit Agreement amends and restates our Credit Agreement. The proceeds under theAmended and Restated Credit Agreement of $1.8 billion were used, among other things, to pay off the Term Loan and Revolver outstanding under the CreditAgreement. Borrowings under the Amended and Restated Credit Agreement are secured by first-priority liens on, and a first-priority security interest in,substantially all of the assets of our U.S. subsidiaries, with certain exceptions.The credit facilities (the “Amended and Restated Credit Facilities”) under the Amended and Restated Credit Agreement consist of:•A $1.5 billion secured term loan to the Company (the "Amended Term Loan") with a stated maturity date of October 3, 2022 (which date may springto April 15, 2022 upon the occurrence of certain conditions set forth in the Amended and Restated Credit Agreement); and•A secured revolving credit facility (the "Amended Revolver") under which the Borrowers may borrow up to $1.5 billion, subject to certain sublimits,with a stated maturity date of October 3, 2022 (which date may spring to April 15, 2022 upon the occurrence of certain conditions set forth in theAmended and Restated Credit Agreement).At the closing, we borrowed $345 million under the Amended Revolver, which was subsequently repaid during October 2017.Borrowings under the Amended and Restated Credit Facilities bear interest, at the Company's option and in each case plus an applicable margin asfollows:•Amended Term Loan: the Base Rate (as defined in the Amended and Restated Credit Agreement), at the Eurocurrency Rate (as defined in theAmended and Restated Credit Agreement), or at the LIBOR Daily Floating Rate (as defined in the Amended and Restated Credit Agreement),•Amended Revolver: if funded in U.S. dollars,the Base Rate, Eurocurrency Rate, or LIBOR Daily Floating Rate, and, if funded in an alternativecurrency, the Eurocurrency Rate; and it requested under the swing line sublimit, the Base Rate.The applicable margin to the Base Rate, Eurocurrency Rate, or LIBOR Daily Floating Rate is subject to specified changers depending on the total netleverage ratio as defined in the Amended and Restated Credit Agreement. The borrowings of the Amended Term Loan initially bear interest at an annual rateequal to the Eurocurrency Rate (i.e., the LIBOR rate) plus an Applicable Rate equal to 1.50%. The borrowings of the Amended Revolver initially bear interestat a rate equal to the LIBOR Daily Floating Rate plus an Applicable Rate equal to 1.50%. We are also required to pay a quarterly commitment fee calculatedon the undrawn committed amount available under the Amended Revolver.We are required to make scheduled principal payments under the Amended Term Loan in increasing amounts ranging from $9.375 million per three-month period commencing with the three-month period ending on December 29, 2017 to $37.5 million per three-month period commencing with the three-month period ending on December 23, 2021. The remaining balance of the Amended Term Loan and any amounts outstanding under the Amended Revolverare due at maturity. In addition, subject to the terms and conditions set forth in the Amended and Restated Credit Agreement, we are required to make certainmandatory prepayments from the net proceeds of specified types of asset sales (subject to certain reinvestment rights), debt issuances and insurance recoveries(subject to certain reinvestment rights). These mandatory prepayments are required to be applied by us, first, to the Amended Term Loan, second, to anyoutstanding amount under any Swing Line Loans (as defined in the Amended and Restated Credit Agreement), third, to the Amended Revolver, fourth toprepay any outstanding reimbursement obligations with respect to Letters of Credit (as defined in the Amended and Restated Credit Agreement) and fifth, tocash collateralize any Letters of Credit. Subject to certain limitations, we may voluntarily prepay any of the Amended and Restated Credit Facilities withoutpremium or penalty.The Amended and Restated Credit Agreement contains affirmative and negative covenants customarily applicable to senior secured credit facilities,including covenants restricting the ability of us, subject to negotiated exceptions, to incur62Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsadditional indebtedness and grant additional liens on our 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, andchange the nature of their businesses. In addition, the Amended and Restated Credit Agreement requires the Borrowers to maintain certain financial ratios.The Amended and Restated Credit Agreement also contains customary representations and warranties and events of default, including payment defaults,breach of representations and warranties, covenant defaults, cross defaults and an event of default upon a change of control of the Company.2025 Senior NotesOn October 10, 2017, we completed a private placement of $350 million aggregate principal amount of our 4.375% Senior Notes due 2025 (the “2025Notes”) at an offering price of 100% of the aggregate principal amount of the 2025 Notes. The 2025 Notes mature on October 15, 2025 and bear interest atthe rate of 4.375% per year, payable semi-annually on April 15 and October 15 of each year, commencing on April 15, 2018. The 2025 Notes were notregistered under the Securities Act, or any state securities laws, and were offered only to qualified institutional buyers in reliance on Rule 144A under theSecurities Act and outside the United States in accordance with Regulation S under the Securities Act. The 2025 Notes are general senior unsecuredobligations of the Company and are guaranteed on a senior unsecured basis by certain domestic subsidiaries of Hologic.We may redeem the 2025 Notes at any time prior to October 15, 2020 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 the 2025 Notes with the net cash proceeds of certain equity offerings at any time and from time to time before October 15,2020, at a redemption price equal to 104.375% 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 2025 Notes on or after: October 15, 2020 through October 14, 2021 at 102.188% of par; October 15, 2021through October 14, 2022 at 101.094% of par; and October 15, 2022 and thereafter at 100% of par. In addition, if we undergo a change of control coupledwith a decline in ratings, as provided in the indenture, we will be required to make an offer to purchase each holder’s 2025 Notes at a price equal to 101% oftheir principal amount, plus accrued and unpaid interest, if any, to the repurchase date.We intend to use the net proceeds of the 2025 Notes, plus available cash, which includes amounts available under the Revolver, to redeem or repurchaseall of our outstanding convertible notes, including exercise of our cash settlement election upon any conversion of those notes. Our election to redeem orrepurchase the convertible notes, and/or make an all cash settlement election on conversion of the convertible notes will be in our sole discretion, based uponexisting market and business conditions at the time of such determination.Stock Repurchase ProgramOn June 21, 2016, the Board of Directors authorized the repurchase of up to an additional $500.0 million of the Company's outstanding common stockover the next five years. There were no repurchases of common stock made under this authorization during fiscal 2016. During fiscal 2017, the Companyrepurchased 5.3 million shares of its common stock for total consideration of $200.1 million.63Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 30, 2017: Payments Due by PeriodContractual Obligations Less than1 year 1-3 years 3-5 years More than5 years TotalLong-Term Debt Obligations (1) $1,155.2 $1,200.0 $1,000.0 $— $3,355.2Interest on Long-Term Debt Obligations 103.2 171.7 93.9 — 368.8Operating Leases 20.9 33.2 23.9 27.0 105.0Capital Leases (2) 2.8 5.6 5.9 17.3 31.6Finance Leases (3) 2.9 2.4 2.4 1.7 9.4Purchase Obligations (4) 56.4 5.8 2.2 — 64.4Pension Obligations (5) 0.4 0.8 0.8 7.9 9.9Total Contractual Obligations $1,341.8$1,419.5$1,129.1$53.9$3,944.3 (1)Included within long-term debt obligations are the Term Loan, Revolver, 2022 Senior Notes, borrowings under the Securitization Program, the 2012Notes and 2013 Notes. The 2012 Notes and 2013 Notes can first be put to us on March 1, 2018 ($245.4 million original principal). The 2013 Notescan first be put to us on December 15, 2017 ($202.0 million original principal) and are convertible by their respective holders because we haveelected to redeem such notes in the first quarter of fiscal 2017 as further discussed above. We have assumed for purposes of the above table that theprincipal amounts for each issuance will be paid off when they first can be put to us. The 2013 Notes also have principal accretion of 4.00% annually,which is included in the principal amount in the less than 1 year column above. The amounts in the table do not include deferred tax liabilities for therecapture of the original issuance discount.(2)As a result of the Cynosure acquisition, we have capital leases for the buildings at its primary U.S. operating facility and certain equipment andvehicles.(3)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.(4)Purchase obligations primarily represent minimum purchase commitments for inventory and instruments and, to a lesser extent, other operatingexpense commitments.(5)Pension obligations do not include our obligation under our deferred compensation plans of $43.2 million at September 30, 2017, which is recordedas 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 $88.3 million. Due to the complexity associated with tax uncertainties, we cannot reasonably make a reliable estimate of the period inwhich 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 intend to use the net proceeds from our 2025 Notes, our Amended and Restated Credit Agreement and available cash and borrowings under ourAmended Revolver to redeem or repurchase all of our outstanding convertible notes. We also expect to continue to review and evaluate potential strategictransactions and alliances that we believe will complement our current or future business. Subject to the Risk Factors set forth in Part I, Item 1A of this AnnualReport and the general disclaimers set forth in our Special Note Regarding Forward-Looking Statements at the outset of this Annual Report, we believe thatcash flow from operations and the cash available under our Revolver and permitted accounts receivable securitization program will provide us with sufficientfunds in order to redeem or repurchase all of our outstanding convertible notes and fund our expected normal operations, and debt payments, includinginterest over the next twelve months. Our longer-term liquidity is contingent upon future operating performance. We may also require additional capital inthe future to fund capital expenditures, repayment of debt, acquisitions or other investments, or to repay our convertible notes and related deferred taxliabilities. As described above, we have significant indebtedness outstanding under our Amended and Restated Credit Agreement, 2022 Senior Notes, 2025Senior Notes, convertible notes and accounts receivable securitization program. These capital requirements could be64Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentssubstantial. 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.Legal ContingenciesWe are currently involved in certain legal proceedings and claims. In connection with these legal proceedings and claims, management periodicallyreviews estimates of potential costs to be incurred by us in connection with the adjudication or settlement, if any, of these proceedings. These estimates arebased on an analysis of potential litigation outcomes and settlement strategies. In accordance with ASC 450, Contingencies, loss contingencies are accruedif, in the opinion of management, an adverse outcome is probable and such outcome can be reasonably estimated. It is possible that future results for anyparticular quarter or annual period may be materially affected by changes in our assumptions or the effectiveness of our strategies relating to theseproceedings.CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have beenprepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires us to makeestimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets andliabilities. On an on-going basis, we evaluate our estimates, including those related to revenue recognition for multiple element arrangements, allowance fordoubtful accounts, reserves for excess and obsolete inventories, valuations, purchase price allocations and contingent consideration related to businesscombinations, expected future cash flows including growth rates, discount rates, terminal values and other assumptions used to evaluate the recoverability oflong-lived assets and goodwill, estimated fair values of intangible assets and goodwill, amortization methods and periods, warranty reserves, certain accruedexpenses, restructuring and other related charges, stock-based compensation, contingent liabilities, tax reserves and recoverability of our net deferred taxassets and related valuation allowances. We base our estimates on historical experience and various other assumptions that are believed to be reasonableunder the circumstances. Actual results could differ from these estimates if past experience or other assumptions do not turn out to be substantially accurate.Any differences may have a material impact on our financial condition and results of operations.The following is a discussion of what we believe to be the more significant critical accounting policies and estimates used in the preparation of ourconsolidated financial statements.InventoryOur inventories include material, labor and overhead, and are stated at the lower of cost (first-in, first-out) or market. As a developer and manufacturer ofhigh technology medical equipment 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.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 that65Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 sales in the same period as the related revenues are recorded. Theseestimates are based on the specific facts and circumstances of particular orders, analysis of credit memo data and other known factors. If the data we use tocalculate these estimates do not properly reflect reserve requirements, then a change in the allowances would be made in the period in which such adetermination 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 risk adjusted rate. Quarterly until such contingent amounts are earned, the fair value of theliability is reassessed at each reporting period and adjusted as a component of operating expenses based on changes to the underlying assumptions. Theestimates used to determine the fair value of the contingent consideration liability are subject to significant judgment and actual results are likely to differfrom 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 generally use the income approach in which cash flow projections on an after-tax basis are discounted using a risk adjusted rate to determine theestimated fair value of certain identifiable intangible assets including developed technology, in-process research and development projects, customerrelationships, and trade 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 or income approach as the primary methods in estimating the fair value of land and buildings asthe market approach is less reliable based on potential significant differences between the property being valued and the potentially comparable sales ofsimilar properties.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. In the event an indicator ofimpairment is identified, we perform an analysis comparing the undiscounted cash flows the asset group is expected to generate over its remaining economiclife to its carrying value. The undiscounted cash flows are based on management's assumptions on the asset group's use in the future. If the carrying value ofan asset exceeds its undiscounted cash flows, we will write-down the carrying value of the intangible asset to its fair value in the period identified. Inassessing fair value, we must make assumptions regarding estimated future cash flows and discount rates. If these estimates or related assumptions change inthe future, we may be required to record impairment charges. We generally determine fair value based on the present value of estimated future cash flows tobe generated by the asset using a risk-adjusted discount rate. If the estimate of an intangible asset’s remaining useful life has changed, we will amortize theremaining carrying value 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.66Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 2017 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 July 1, 2017 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 our 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, except our Medical Aesthetics reporting unit, would still have passed Step 1 of the goodwill impairment test.This reporting unit had a fair value as of the measurement date that exceeded its carrying value by 2% with goodwill of $683.5 million. We acquiredCynosure, which is the sole business in Medical Aesthetics, on March 22, 2017. In connection with our annual strategic planning process and annualgoodwill impairment test, we have lowered our estimated financial projections for this business as a result of its current operating performance being belowexpectations, which we primarily attribute to the significant turnover in the U.S. sales force in 2017. In the event, future operating performance is below ourforecasted projections, or there are negative changes to long-term growth rates or if discount rates increase, these factors could result in a decline in the fairvalue of the reporting unit and we may be required to record a goodwill impairment charge.At September 30, 2017, the Company believes that its other reporting units, with goodwill aggregating $2.49 billion, were not at risk of failing Step 1of the goodwill impairment test based on the current forecasts.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.Revenue RecognitionWe generate revenue from the sale of our products, primarily medical imaging systems, aesthetic treatment systems and diagnostic and surgicaldisposable products, and related services, which are primarily support and maintenance services on its 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, and collection of the resulting receivable is reasonably assured. Generally, our product arrangements forcapital equipment sales, primarily in its Breast Health, Medical Aesthetics and Skeletal Health reporting segments, are multiple-element arrangements,including services, such as installation, training and support and maintenance, and multiple products. 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 the deliveredproducts have value to our customers on a stand-alone basis. Accordingly, revenue for services not yet performed at the time of product delivery 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 the Company’s sales agreements for its capital equipment.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. Service and other revenue also includes royalties which are recognized in theperiod the payments are due to the Company.67Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsFor 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 the Company’s control. Some of our products have both software and non-softwarecomponents that function together to deliver the product’s essential functionality. We determined that except for our computer-aided detection (“CAD”)products and C-View and Intelligent 2D products, the software element in its other products is not within the scope of the software revenue recognition rules,ASC 985-605, Software—Revenue Recognition.We determined that given the significance of the software component’s functionality to its CAD, C-View andIntelligent 2D components, which are sold by its Breast Health segment, these products are within the scope of the software revenue recognition rules. Weevaluated the appropriate revenue recognition treatment of it hardware products, including its Dimensions digital mammography systems, which have bothsoftware and non-software components that function together to deliver the products’ essential functionality (i.e., it is a tangible product), and determinedthey are not within the scope of ASC 985-605.We are required to allocate revenue to its 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 prices (“ESP”) and services based on vendor-specific objective evidence ofselling price (“VSOE”). We determine VSOE based on our normal pricing and discounting practices for the specific product or service when 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 a reasonably narrow range.We also consider the class of customer, method of distribution, and the geographies into which its products and services are sold when determining VSOE. IfVSOE cannot be established, which may occur in instances when a product or service has not been sold separately, stand-alone sales are too infrequent, orproduct pricing is not within a relatively narrow range, we will generally establish the selling price using ESP to allocate arrangement consideration. Theobjective of ESP is to determine the price at which we would typically transact a stand-alone sale of the product or service. ESP is determined by consideringa number of factors including our pricing policies, internal costs and gross margin objectives, method of distribution, information gathered from experiencein 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 (“PCS”) has been established, we recognize revenue using the residual method at the time all other revenue recognition criteriahave been met.Within our Diagnostics segment, we manufactured blood screening products according to demand schedules provided by its former collaborationpartner, Grifols, S.A. (“Grifols”). In the second quarter of fiscal 2017, we sold its assets in the blood screening business to Grifols. Upon the closing of thetransaction, our existing collaboration agreement with Grifols terminated, and a new collaboration agreement was executed as part of this transaction for us toprovide certain research and development services to Grifols. In addition, we agreed to provide transition services to Grifols over the next two to three yearsdepending on the nature of the respective service, including the manufacture of inventory, and we are in effect serving as a contract manufacturer of assays toGrifols for a two to three year period. We also agreed to sell Panther instrumentation and certain supplies to Grifols as part of a long term supply agreement.As such, we will generate a level of revenues, but much lower than historical trends. Prior to divestiture, our agreement provided that we would share aportion of Grifols’s revenue from screening blood donations. Upon shipment to Grifols, we recognized product revenue at an agreed upon fixed transfer price,which was not refundable, and recorded the related cost of products sold. Based on the terms of our prior collaboration agreement with Grifols, our ultimateshare of the net revenue from sales to the end user in excess of the transfer price was not known until it was reported to us by Grifols. On a monthly basis,Grifols reported net revenue generated during the prior month and remitted an additional corresponding net payment to us, which was recorded as revenue atthat time. This payment combined with the transfer price revenues previously recognized represented our ultimate share of net revenue under the prioragreement.While the majority of our instruments are placed at customer sites, in certain instances we sell instruments to our clinical diagnostics customers andrecords sales of these instruments upon shipment or delivery, depending on the terms of the arrangement.Within our Diagnostics business, and to a lesser extent, its GYN Surgical business, we provide our instrumentation (for example, the ThinPrep Processor,ThinPrep Imaging System, and the Panther and Tigris systems) and certain other hardware to customers without requiring them to purchase the equipment orenter into a lease. We install the instrumentation or equipment at the customer’s site and recover the cost of providing the instrumentation or equipment inthe amount we charge for its68Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsdiagnostic tests, assays and other disposables. Customers enter into a customer usage agreement and typically commit to purchasing minimum quantities ofdisposable 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 thecustomer usage agreement as tests, assays and other disposable products are shipped or delivered, depending on the customer's arrangement.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% as of September 30, 2017 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 and market-based stock units to members of our senior management team. 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. Each recipient of a market based award is eligible to receive between zero and 200% of the target numberof shares of our common stock at the end of three years based upon achieving a certain total shareholder return relative to a defined peer group. Since bothawards cliff vest, we recognize compensation expense ratably over the required service period, and specifically for performance stock units based on anestimate of the probability that the measurement criteria will be achieved for a targeted number of shares. Our estimate of the number of shares that areprobable of vesting is based on our estimate of ROIC over the respective time periods using our internal forecasts and projections. If there is a change in theestimate of the number of shares that are probable of vesting, we will cumulatively adjust compensation expense in the period that the change in estimate ismade.We recognized $68.2 million, $65.4 million and $59.3 million of stock-based compensation expense for employee equity awards in fiscal years 2017,2016 and 2015, respectively. As of September 30, 2017, there was $21.0 million and $54.6 million of unrecognized compensation expense related to stockoptions and stock units, respectively, that we expect to recognize over a weighted-average period of 2.5 years and 1.8 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 $964.5 million in net deferred tax liabilities at September 30, 2017 and $973.3 million at September 24, 2016. 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 the character of such income in assessing the need for the valuation allowance,69Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 event we determine that we could realize our deferred tax assets in the future in excess of the net recorded amount, an adjustment to the deferred taxassets would increase income in the period such determination is made. Likewise, should we determine that we would not be able to realize all or part of ournet deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination is made.At September 30, 2017, we had $90.3 million in gross unrecognized tax benefits excluding interest, of which $70.3 million, if recognized, wouldreduce our effective tax rate. At September 24, 2016, we had $163.6 million in gross unrecognized tax benefits excluding interest, of which $76.9 million, ifrecognized, would have reduced the Company's effective tax rate. The gross unrecognized tax benefits decreased by $73.3 million from fiscal 2016, of which$64 million was a balance sheet reclassification resulting from the effective settlement in fiscal 2017 of uncertain tax positions related to the convertible debtexchange that occurred in fiscal 2013 and $6.2 million was the result of the effective settlement in fiscal 2017 of other unrecognized tax benefits. In the nexttwelve months it is reasonably possible that the Company will reduce its gross unrecognized tax benefits by up to $2.0 million due to expiring statutes oflimitations.In the ordinary course of business, there are many transactions and calculations where the ultimate tax outcome is uncertain. Judgment is required indetermining our worldwide income tax provision. In our opinion, we have made adequate provisions for income taxes for all years subject to audit. While weconsider our estimates reasonable, no assurance can be given that the final tax outcome will not be different than amounts reflected in our historical incometax provisions and accruals. If our assumptions are incorrect, the differences could have a material impact on our income tax provision and operating resultsin the period in which such determination is made.Recent Accounting PronouncementsSee Note 2 to our consolidated financial statements contained in Item 15 of this Annual ReportItem 7A. Quantitative and Qualitative Disclosures About Market RiskFinancial Instruments, Other Financial Instruments, and Derivative Commodity Instruments. Financial instruments consist of cash and cashequivalents, accounts receivable, cost-method equity investments, interest rate cap agreements, insurance contracts and related deferred compensation planliabilities, accounts payable and debt obligations. Except for our outstanding convertible notes and 2022 Senior Notes, the fair value of these financialinstruments approximate their carrying amount. As of September 30, 2017, we had $447.4 million of principal of convertible notes outstanding, comprised ofour 2012 Notes with a principal of $245.4 million, and our 2013 Notes with a principal of $202.0 million. The fair value of our 2012 Notes and 2013 Notes asof September 30, 2017 was approximately $297.3 million and $244.4 million, respectively. The fair value of our 2022 Senior Notes was approximately $1.05billion. Amounts outstanding under our Credit Agreement and Securitization Program of $1.67 billion and $200.0 million aggregate principal, respectively,as of September 30, 2017 are subject to variable rates of interest based on current market rates, and as such, we believe the carrying amount of theseobligations 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, as well as under our accounts receivablesecuritization program. The Convertible Notes and 2022 Senior Notes have fixed interest rates. Borrowings under our Credit Agreement currently bearinterest at the Eurocurrency Rate (i.e., Libor) plus the applicable margin of 1.50% per annum. Borrowings under our accounts receivable securitizationprogram currently bear interest at Libor plus the applicable margin of 0.7%.As of September 30, 2017, there was $1.67 billion of aggregate principal outstanding under the Credit Agreement, including the Revolver, and $200.0million aggregate principal outstanding under the securitization program. Since these debt obligations are variable rate instruments, our interest expenseassociated with these instruments is subject to change. A 10% adverse movement (increase in LIBOR rate) would increase annual interest expense byapproximately $2.3 million. During fiscal 2015 and fiscal 2017, we entered into multiple interest rate cap agreements to help mitigate the interest ratevolatility associated with the variable rate interest on the amounts outstanding. The critical terms of the interest rate caps were designed to mirror the terms ofour LIBOR-based borrowings under the Credit Agreement, and therefore the interest rate caps are highly effective at offsetting the cash flows being hedged.We designated these derivatives as cash flow hedges of the variability of the Libor-based interest payments on $1.0 billion of principal which ends onDecember 31, 2017 and December 28, 2018, respectively.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.70Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsForeign 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. Themajority of our foreign subsidiaries functional currency is the local currency, although certain foreign subsidiaries functional currency is the U.S. dollar basedon the nature of their operations or functions. Fluctuations in the foreign currency rates could affect our sales, cost of goods and operating margins and couldresult in exchange losses. In addition, currency devaluations can result in a loss if we hold deposits of that currency. We have executed forward foreigncurrency contracts to hedge a portion of results denominated in the Euro, UK Pound, Australian dollar, Japanese Yen and Canadian dollar. These contracts donot qualify for hedge accounting. As a result, we may experience volatility in our Consolidated Statements of Income due to (i) the impact of unrealizedgains and losses reported in other income (expense), net on the mark-to-market of outstanding contracts and (ii) realized gains and losses recognized in otherincome, net, whereas the offsetting economic gains and losses are reported in the line item of the underlying cash flow, for example, revenue.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 foreign currencies areaffected by changes in the relative strength of the U.S. dollar against those currencies. Our expenses, denominated in foreign currencies, are positivelyaffected when the U.S. dollar strengthens against those currencies and adversely affected when the U.S. dollar weakens. However, we believe that the foreigncurrency exchange risk is not significant. We do not believe a hypothetical 10% increase or decrease in foreign currencies that we transact in would not havea material adverse impact on our financial condition or results of operations. During fiscal 2017, 2016 and 2015, we incurred net foreign exchange gains(losses) of $2.3 million, $(1.0) million, and $(3.0) 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 30, 2017, 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.71Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 30, 2017. 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.Management has excluded from our assessment of and conclusion on the effectiveness of internal control over financial reporting the internal controlsof Cynosure Inc. acquired on March 22, 2017, which is included in the consolidated financial statements of Hologic, Inc. as of and for the year endedSeptember 30, 2017 constituting $1.9 billion and $1.4 billion of total assets and net assets, respectively, as of September 30, 2017, and $207.5 million and$96.4 million of revenues and a pre-tax losses, respectively, for the year then ended.Subject to the foregoing, based on management’s assessment, we believe that, as of September 30, 2017, 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.72Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 30, 2017, 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.As indicated in the accompanying Report of Management on Internal Control Over Financial Reporting, management’s assessment of and conclusionon the effectiveness of internal control over financial reporting did not include the internal controls of Cynosure, Inc., which is included in the 2017consolidated financial statements of Hologic, Inc. and constituted $1,876 million and $1,424 million of total and net assets, respectively, as of September 30,2017, and $207.5 million and $96.4 million of revenues and pre-tax loss, respectively, for the year then ended. Our audit of internal control over financialreporting of Hologic, Inc., also did not include an evaluation of the internal control over financial reporting of Cynosure, Inc.In our opinion, Hologic, Inc. maintained, in all material respects, effective internal control over financial reporting as of September 30, 2017, 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 30, 2017 and September 24, 2016 and the related consolidated statements of income, comprehensive income,stockholders’ equity and cash flows for each of the three years in the period ended September 30, 2017 of Hologic, Inc. and our report dated November 21,2017 expressed an unqualified opinion thereon./s/ Ernst & Young LLP Boston, MassachusettsNovember 21, 201773Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 30, 2017, 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.74Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 30, 2017 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) 9,053,180 $28.15 6,783,777Equity compensation plans not approved by security holders — $— —Total 9,053,180 $28.15 6,783,777___________(1)Includes 3,621,422 shares that are issuable upon restricted stock units (RSUs), performance stock units (PSUs) and market stock units (MSUs) vesting.The remaining balance consists of outstanding stock option grants.(2)The weighted average exercise price does not take into account the shares issuable upon vesting of outstanding RSUs, PSUs and MSUs, which have noexercise price.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.75Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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.76Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 Income for the years ended September 30, 2017, September 24, 2016 and September 26, 2015Consolidated Statements of Comprehensive Income for the years ended September 30, 2017, September 24, 2016 and September 26,2015Consolidated Balance Sheets as of September 30, 2017 and September 24, 2016Consolidated Statements of Stockholders’ Equity for the years ended September 30, 2017, September 24, 2016 and September 26, 2015Consolidated Statements of Cash Flows for the years ended September 30, 2017, September 24, 2016 and September 26, 2015Notes 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 2.2 Asset Purchase Agreement, dated December 14, 2016, by and among Hologic, Inc., GrifolsDiagnostic Solutions Inc. and Grifols, S.A. 8-K 12/15/2016 2.3 Agreement and Plan of Merger, dated February 14, 2017, by and among Hologic, Inc.,Cynosure, Inc. and Minuteman Merger Sub, Inc. 8-K 02/14/2017 3.1 Certificate of Incorporation of Hologic, with amendments Filed herewith 3.2 Certificate of Designation of Series A Junior Participating Preferred Stock of Hologic. 8-K 11/21/2013 3.3 Certificate of Elimination of Series A Junior Participating Preferred Stock of Hologic. 8-K 06/25/2014 3.4 Sixth Amended and Restated Bylaws of Hologic, Inc. 8-K 03/09/2017 4.1 Specimen Certificate for Shares of Hologic’s Common Stock (filed in paper format) 8-A 01/31/1990 4.2 Description of Capital Stock (Contained in Hologic’s Certificate of Incorporation, asamended, filed as Exhibit 3.1 hereto). Filed herewith 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 09/25/201077Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 EndDate 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 4.12 Indenture, dated October 10, 2017, by and among Hologic, the Guarantors party thereto andWells Fargo Bank, National Association, as Trustee. 8-K 10/10/2017 4.13 Form of 4.375% Senior Note due 2025 (included in Exhibit 4.12) 8-K 10/10/201710.1* 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 Stock Option Award Agreement Under 2008 Equity Incentive Plan (adopted fiscal2017). 8-K 11/09/2016 10.11* Form of Restricted Stock Unit Award Agreement Under 2008 Equity Incentive Plan (adoptedfiscal 2014). 8-K 11/12/2013 10.12* Form of Restricted Stock Unit Award Agreement Under 2008 Equity Incentive Plan (adoptedfiscal 2016). 8-K 10/14/2015 10.13* Form of Restricted Stock Unit Award Agreement Under 2008 Equity Incentive Plan (adoptedfiscal 2017). 8-K 11/09/2016 10.14* Form of Performance Stock Unit Award Agreement Under 2008 Equity Incentive Plan(adopted fiscal 2015). 8-K 11/05/2014 10.15* Form of Performance Stock Unit Award Agreement Under 2008 Equity Incentive Plan(adopted fiscal 2016). 8-K 11/06/2015 78Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 Performance Stock Unit Award Agreement Under 2008 Equity Incentive Plan (ROIC)(adopted fiscal 2017). 8-K 11/09/2016 10.17* Form of Performance Stock Unit Award Agreement Under 2008 Equity Incentive Plan (relativeTSR) (adopted fiscal 2017). 8-K 11/09/2016 10.18* Form of Performance Stock Unit Award Agreement Under 2008 Equity Incentive Plan (ROIC)(adopted fiscal 2018). 8-K 11/09/2017 10.19* Form of Performance Stock Unit Award Agreement Under 2008 Equity Incentive Plan (relativeTSR) (adopted fiscal 2018). 8-K 11/09/2017 10.20* Form of Independent Director Stock Option Award Agreement Under 2008 Equity IncentivePlan (annual grant, adopted fiscal 2014). 10-K 09/28/2013 10.21* Form of Independent Director Stock Option Award Agreement Under 2008 Equity IncentivePlan (annual grant, adopted fiscal 2015). 10-K 09/27/2014 10.22* Form of Independent Director Restricted Stock Unit Award Agreement Under 2008 EquityIncentive Plan (annual grant). 10-K 09/28/2013 10.23* Form of Independent Director Stock Option Award Agreement Under 2008 Equity IncentivePlan (initial grant, adopted fiscal 2014). 10-K 09/28/2013 10.24* Form of Independent Director Stock Option Award Agreement Under 2008 Equity IncentivePlan (initial grant, adopted fiscal 2015). 10-K 09/27/2014 10.25* Form of Independent Director Restricted Stock Unit Award Agreement Under 2008 EquityIncentive Plan (initial grant). 10-K 09/28/2013 10.26* Hologic, Inc. 2012 Employee Stock Purchase Plan, As Amended 8-K 03/04/2016 10.27* Hologic Short-Term Incentive Plan. 8-K 11/06/2015 10.28* Hologic Amended and Restated Deferred Equity Plan 8-K 12/16/2015 10.29* Rabbi Trust Agreement. 10-K 09/28/2013 10.30* Form of Indemnification Agreement (as executed with each director of Hologic). 8-K 03/06/2009 10.31* Form of Senior Vice President Change of Control Agreement. (1) 10-Q 12/29/2012 10.32* Employment Agreement dated December 6, 2013 by and between Stephen P. MacMillan andHologic. 8-K 12/09/2013 10.33* Amended and Restated Employment Agreement by and between the Company and Stephen P.MacMillan, dated September 18, 2015. 8-K 09/21/2015 10.34* Amendment No. 1 to Amended and Restated Employment Agreement by and between theCompany and Stephen P. MacMillan, dated September 24, 2016. 10-K 11/17/2016 10.35* Form of Matching Restricted Stock Unit Award Agreement 8-K 12/09/2013 10.36* Change of Control Agreement dated December 6, 2013 by and between Stephen P. MacMillanand Hologic. 8-K 12/09/2013 10.37* Offer Letter dated March 9, 2014 by and between Eric B. Compton and Hologic. 8-K 03/14/2014 10.38* Severance and Change of Control Agreement dated March 9, 2014 by and between Eric B.Compton and Hologic. 10-K 11/19/2015 10.39* Offer Letter dated May 8, 2014 by and between Robert W. McMahon and Hologic. 8-K 05/13/2014 79Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 EndDate10.40* Severance and Change of Control Agreement dated May 8, 2014 by and between Robert W.McMahon and Hologic. 10-K 11/19/2015 10.41* Offer Letter dated May 4, 2014 by and between Peter J. Valenti and Hologic. 10-Q 06/28/2014 10.42* Senior Vice President Severance Agreement dated May 26, 2014 by and between Peter J. Valentiand Hologic. 10-K 09/27/2014 10.43* Offer Letter dated August 21, 2014 by and between Thomas A. West and Hologic. 10-K 09/27/2014 10.44* Senior Vice President Severance Agreement dated October 3, 2014 by and between Thomas A.West and Hologic. 10-K 09/27/2014 10.45* Severance and Change of Control Agreement dated September 13 2017 by and between AllisonBebo and Hologic. Filed herewith 10.46* Offer Letter dated January 6, 2015 by and between John M. Griffin and Hologic. 10-Q 03/28/2015 10.47* Severance and Change of Control Agreement dated February 2, 2015 by and between John M.Griffin and Hologic. 10-Q 03/28/2015 10.48 Facility Lease (Danbury) dated December 20, 1995 by and among Melvin J. Powers and Mary P.Powers D/B/A M&N Realty and Lorad (filed in paper format). Trex MedicalCorporationS-1 03/29/1996 10.49 Lease Agreement (Danbury and Bedford) by and between BONE (DE) QRS 15-12, INC., andHologic dated August 28, 2002. 10-K 09/28/2002 10.50 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 10.51 Office Lease dated December 31, 2003 between Cytyc and Marlborough Campus LimitedPartnership. CytycCorporation10-K 12/31/2003 10.52 First Amendment to that Office Lease dated December 31, 2003 between Cytyc andMarlborough Campus Limited Partnership, entered into August 23, 2017, by and between HinesGlobal REIT Marlborough Campus LLC and Hologic, Inc. (2) Filed herewith 10.53 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 10.54 Lease Agreement by and between 445 Simarano Drive, Marlborough LLC and Cytyc dated July11, 2006. 10-K 09/29/2007 10.55 Lease Guaranty dated October 18, 2007 between Bel Marlborough I LLC and Hologic, asguarantor thereunder. 8-K 10/22/2007 10.56 Form of Exchange Agreement. 8-K 02/15/2013 10.57 Amended and Restated Credit and Guaranty Agreement, originally dated May 29, 2015, andamended and restated as of October 3, 2017 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 10/04/2017 10.58 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 10.59 Supply Agreement for Panther Instrument System effective November 22, 2006 between Gen-Probe Incorporated and STRATEC Biomedical Systems AG. (3) Gen-Probe10-Q 09/30/200780Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 EndDate 10.60 Amendment No. 1 dated June 1, 2011 to Supply Agreement for Panther Instrument System. (3) 10-K 09/24/2016 10.61 Amendment No. 2 dated February 28, 2013 to Supply Agreement for Panther Instrument System.(3) 10-K 09/24/2016 10.62 Intellectual Property License, dated as of January 31, 2017, by and among Hologic, Inc., Gen-Probe Incorporated and Grifols Diagnostics Solutions Inc. 8-K 02/02/2017 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.(1) List of executive officers to whom provided filed herewith.(2) Confidential treatment has been requested with respect to certain portions of this exhibit. A complete version of this exhibit has been filed separately with the U.S. Securities and Exchange Commission.(3) Confidential treatment has been granted with respect to certain portions of this exhibit. A complete version of this exhibit has been filed separately with the U.S. Securities and Exchange Commission.81Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Item 16. Form 10-K SummaryNone.SIGNATURESPursuant 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 21, 2017Pursuant 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 21, 2017STEPHEN P. MACMILLAN /S/ ROBERT W. MCMAHON Chief Financial Officer (PrincipalFinancial Officer) November 21, 2017ROBERT W. MCMAHON /S/ KARLEEN M. OBERTON Corporate Vice President, Finance andAccounting, Chief Accounting Officer(Principal Accounting Officer) November 21, 2017KARLEEN M. OBERTON /S/ ELAINE S. ULLIAN Lead Independent Director November 21, 2017ELAINE S. ULLIAN /S/ SALLY W. CRAWFORD Director November 21, 2017SALLY W. CRAWFORD /S/ CHARLES DOCKENDORFF Director November 21, 2017CHARLES DOCKENDORFF /S/ SCOTT T. GARRETT Director November 21, 2017SCOTT T. GARRETT /S/ LAWRENCE M. LEVY Director November 21, 2017LAWRENCE M. LEVY /S/ CHRISTIANA STAMOULIS Director November 21, 2017CHRISTIANA STAMOULIS /S/ AMY M. WENDELL Director November 21, 2017AMY M. WENDELL 82Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 30, 2017, September 24, 2016 and September 26, 2015Contents Report of Independent Registered Public Accounting Firm F-2 Consolidated Financial Statements Consolidated Statements of Income 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 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 30, 2017 and September 24, 2016 and the relatedconsolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended September 30,2017. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financialstatements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Hologic, Inc. atSeptember 30, 2017 and September 24, 2016, and the consolidated results of its operations and its cash flows for each of the three years in the period endedSeptember 30, 2017, 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 30, 2017, 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 21, 2017 expressed an unqualified opinionthereon. /s/ Ernst & Young LLP Boston, MassachusettsNovember 21, 2017F-2Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 Income(In millions, except number of shares, which are reflected in thousands, and per share data) Years ended September 30, 2017 September 24, 2016 September 26, 2015Revenues: Product $2,538.0 $2,379.0 $2,270.4Service and other 520.8 453.7 434.6 3,058.8 2,832.7 2,705.0Costs of revenues: Product 881.8 756.8 755.5Amortization of intangible assets 297.1 293.4 299.7Service and other 258.9 219.2 217.1Gross Profit 1,621.0 1,563.31,432.7Operating expenses: Research and development 232.8 232.1 214.9Selling and marketing 498.6 415.1 363.0General and administrative 343.3 267.3 261.0Amortization of intangible assets 62.5 89.7 110.2Gain on sale of business (899.7) — —Restructuring and divestiture charges 13.3 10.5 28.5 250.8 1,014.7 977.6Income from operations 1,370.2 548.6455.1Interest income 3.8 0.7 1.3Interest expense (153.2) (155.3) (205.5)Debt extinguishment losses (3.2) (5.3) (62.7)Other income (expense), net 12.9 26.6 (11.0)Income before income taxes 1,230.5 415.3177.2Provision for income taxes 475.0 84.5 45.6Net income $755.5 $330.8$131.6Net income per common share: Basic $2.70 $1.18 $0.47Diluted $2.64 $1.16 $0.45Weighted average number of shares outstanding: Basic 279,811 280,213 280,566Diluted 285,653 286,156 289,537See accompanying notes.F-3Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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(In millions) Years ended September 30, 2017 September 24, 2016 September 26, 2015Net income $755.5 $330.8 $131.6Changes in foreign currency translation adjustment 7.6 (10.4) (11.0)Changes in unrealized holding gains and losses on available-for-salesecurities, net of tax of $0.1 in 2017: Loss recognized in accumulated other comprehensive income (loss) 2.3 (1.1) (2.0) Net (gains) losses reclassified from accumulated other comprehensive income to the statement of income (2.4) (6.1) —Changes in pension plans, net of taxes of $1.1 in 2017, $0.3 in 2016,and $0.3 in 2015 0.9 (0.7) (0.2)Changes in value of hedged interest rate caps, net of tax of $0.6 in2017, $2.0 in 2016 and $2.5 in 2015: Loss recognized in other comprehensive income, net 0.8 (3.4) (3.9) Loss reclassified from accumulated other comprehensive income to the statement of operations, net 6.9 3.9 —Other comprehensive income (loss) 16.1 (17.8)(17.1)Comprehensive income $771.6 $313.0$114.5See accompanying notes.F-4Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 30, 2017 September 24, 2016ASSETS Current assets: Cash and cash equivalents$540.6 $548.4Accounts receivable, less reserves of $9.8 and $12.7, respectively533.5 447.0Inventories331.6 274.7Prepaid income taxes22.4 16.9Prepaid expenses and other current assets50.5 39.6Total current assets1,478.6 1,326.6Property, plant and equipment, net491.2 460.2Intangible assets, net2,741.6 2,643.4Goodwill3,171.2 2,803.1Other assets97.0 83.7Total assets$7,979.6 $7,317.0LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current portion of long-term debt$1,150.8 $296.0Accounts payable166.6 156.9Accrued expenses375.3 287.6Deferred revenue171.2 161.4Current portion of capital lease obligations1.6 —Total current liabilities1,865.5 901.9Long-term debt, net of current portion2,172.1 3,049.4Capital lease obligations, net of current portion22.7 —Deferred income tax liabilities973.6 982.6Deferred revenue20.8 15.9Other long-term liabilities140.2 224.5Commitments 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; 287,853 and 285,015 shares issued,respectively2.9 2.9Additional paid-in-capital5,630.8 5,560.3Accumulated deficit(2,382.7) (3,138.2)Treasury stock, at cost – 12,560 and 7,289 shares, respectively(450.1) (250.0)Accumulated other comprehensive loss(16.2) (32.3)Total stockholders’ equity2,784.7 2,142.7Total liabilities and stockholders’ equity$7,979.6 $7,317.0See accompanying notes.F-5Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 27,2014 277,972 2.8 5,658.2 (3,600.6)2.6 — —2,063.0Exercise of stock options 3,036 — 57.3 — — — — 57.3Vesting of restrictedstock units, net of shareswithheld for employeetaxes 949 — (12.9) — — — — (12.9)Common stock issuedunder the employeestock purchase plan 538 — 12.0 — — — — 12.0Stock-basedcompensation expense — — 54.6 — — — — 54.6Excess tax benefit fromequity 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 September 26,2015 282,4952.85,559.9(3,469.0)(14.5)——2,079.2Exercise of stock options 1,233 0.1 24.0 — — — — 24.1Vesting of restrictedstock units, net of shareswithheld for employeetaxes 820 — (16.4) — — — — (16.4)Common stock issuedunder the employeestock purchase plan 467 — 14.4 — — — — 14.4Stock-basedcompensation expense — — 62.3 — — — — 62.3Excess tax benefit fromequity awards — — 10.5 — — — — 10.5Reacquisition of equitycomponent fromconvertible notesrepurchase, net of taxes — — (94.4) — — — — (94.4)Net income — — — 330.8 — — — 330.8Foreign currencytranslation adjustment — — — — (10.4) — — (10.4)Adjustment to minimumpension liability, net — — — — (0.7) — — (0.7)Repurchase of commonstock 7,289 (250.0) (250.0)Unrealized losses onderivatives, net of taxes — — — — (3.4) — — (3.4)Unrealized losses onmarketable securities — — — — (1.1) — — (1.1)Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Interest cost of interestrate cap reclassified tostatement of income 3.9 3.9Net realized gains onmarketable securitiesreclassified out ofaccumulated othercomprehensive income(loss) — — — — (6.1) — — (6.1)Balance at September24, 2016 285,015 2.9 5,560.3 (3,138.2) (32.3) 7,289 (250.0) 2,142.7Exercise of stock options 1,427 — 33.1 — — — — 33.1Vesting of restrictedstock units, net of shareswithheld for employeetaxes 939 — (19.7) — — — — (19.7)Common stock issuedunder the employeestock purchase plan 472 — 15.0 — — — — 15.0Stock-basedcompensation expense — — 68.2 — — — — 68.2Reclassification ofliability award to equity — — 7.8 — — — — 7.8Reacquisition of equitycomponent fromconvertible notesrepurchase, net of taxes — — (33.9) — — — — (33.9)Net income — — — 755.5 — — — 755.5Foreign currencytranslation adjustment — — — — 7.6 — — 7.6Adjustment to minimumpension liability, net — — — — 0.9 — — 0.9Repurchase of commonstock — — — — — 5,271 (200.1) (200.1)Unrealized losses onderivatives, net of taxes — — — — 0.8 — — 0.8Unrealized losses onmarketable securities — — — — 2.3 — — 2.3Interest cost of interestrate cap reclassified tostatement of income — — — — 6.9 — — 6.9Net realized gains onmarketable securitiesreclassified out ofaccumulated othercomprehensive income(loss) — — — — (2.4) — — (2.4)Balance at September30, 2017 287,853$2.9$5,630.8$(2,382.7)$(16.2)12,560$(450.1)$2,784.7See accompanying notes.F-6Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 30, 2017 September 24, 2016 September 26, 2015OPERATING ACTIVITIES Net income$755.5 $330.8 $131.6Adjustments to reconcile net income to net cash provided by operating activities: Depreciation89.6 82.3 81.5Amortization359.6 383.1 409.9Non-cash interest expense49.4 52.1 63.8Stock-based compensation expense68.2 65.4 59.3Deferred income taxes and other non-cash taxes(357.2) (155.8) (148.8)Gain on sale of investments(5.6) (25.1) —Fair value write-up of inventory sold39.7 — —Debt extinguishment losses3.2 5.3 62.7Equity investment impairment charges— 1.1 7.8(Gain) loss on sale of businesses(899.7) — 9.6Other adjustments and non-cash items8.8 2.6 20.9Changes in operating assets and liabilities, excluding the effect of acquisitions and dispositions: Accounts receivable(41.5) (31.8) (30.3)Inventories(11.6) 7.6 43.9Prepaid income taxes(8.7) 4.7 0.7Prepaid expenses and other assets(2.4) (4.9) 5.7Accounts payable(10.6) 40.1 25.5Accrued expenses and other liabilities(17.8) 45.6 36.9Deferred revenue(10.6) (4.9) 16.1Net cash provided by operating activities8.3 798.2796.8INVESTING ACTIVITIES Acquisition of businesses, net of cash acquired(1,558.1) — —Proceeds from sale of business1,865.0 — —Purchase of property and equipment(57.8) (47.3) (48.1)Increase in equipment under customer usage agreements(49.8) (47.2) (41.3)Proceeds from sale of available-for-sale marketable securities87.1 31.1 —Purchases of insurance contracts— (5.2) (6.4)Sales of mutual funds— 5.2 10.0Purchase of intellectual property— (4.0) —Other activity(0.6) (1.0) (0.3)Net cash provided by (used in) investing activities285.8 (68.4) (86.1)FINANCING ACTIVITIES Proceeds from long-term debt— — 2,495.1Repayment of long-term debt(84.4) (75.0) (3,095.0)Payments to extinguish convertible notes(396.2) (392.8) (543.7)Proceeds from amounts borrowed under revolving credit line345.0 50.0 358.0Repayment of amounts borrowed under revolving credit line— (225.0) (183.0)Proceeds from accounts receivable securitization program48.0 200.0 —Repayments under accounts receivable securitization program(48.0) — —Repurchase of common stock(200.1) (250.0) —Payment of debt issuance costs— — (22.7)Purchase of interest rate caps(1.9) — (13.2)Net proceeds from issuance of common stock pursuant to employee stock plans49.0 38.5 70.0Payments under capital lease obligations(0.9) — —Payment of minimum tax withholdings on net share settlements of equity awards(19.7) (16.4) (12.9)Net cash used in financing activities(309.2) (670.7)(947.4)Effect of exchange rate changes on cash and cash equivalents7.3 (2.0) (8.1)Net increase (decrease) in cash and cash equivalents(7.8) 57.1(244.8)Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Cash and cash equivalents, beginning of period548.4 491.3 736.1Cash and cash equivalents, end of period$540.6 $548.4$491.3See accompanying notes.F-7Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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. On March 22, 2017, the Company acquired Cynosure, Inc. ("Cynosure"). Cynosure is a developer,manufacturer and supplier of a broad array of light-based aesthetic and medical treatment systems. The products are used to provide a diverse range oftreatment applications such as non-invasive body contouring, hair removal, skin revitalization and scar reduction, as well as the treatment of vascular lesions.The Cynosure business is referred to as Medical Aesthetics and operates as a separate business segment. As a result of the Cynosure acquisition, the Companyoperates in five segments: Diagnostics, Breast Health, Medical Aesthetics, 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 2017, 2016 and 2015 ended onSeptember 30, 2017, September 24, 2016 and September 26, 2015, respectively. Fiscal 2017 is a 53-week year and fiscal 2016 and 2015 were 52-week years.Subsequent Events ConsiderationThe Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provideadditional evidence for certain estimates or to identify matters that may require additional disclosure. Subsequent events have been evaluated as required.There were no material recognized or unrecognized subsequent events recorded in the consolidated financial statements as of and for the year endedSeptember 30, 2017, except for the Company entering into the Amended and Restated Credit Agreement and issuance of its 2025 Notes in October 2017. Foradditional information, please refer to Note 5.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, management of international activities, protection of proprietary rights, patent and other litigation, dependence on contractmanufacturers and dependence on key individuals.F-8Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsCash 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 as of September 30, 2017 and September 24, 2016 are comprised solely of equity securities and as of September26, 2015 also included mutual funds. The equity securities are investments in the common stock of publicly traded companies, and the mutual funds wereused to fund a portion of the Company's deferred compensation plan. The equity securities are classified as available-for-sale and are recorded at fair valuewith the unrealized gains or losses, net of tax, recorded within accumulated other comprehensive income (loss), which is a component of stockholders’equity. The mutual funds were classified as trading and recorded at fair value with unrealized gains and losses recorded in other income (expense), net in theConsolidated Statements of Income.The 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 infair value, the Company considers factors including: the significance of the decline in value compared to the carrying value; the underlying factorscontributing to a decline in the price of the security; how long the market value of the investment has been less than its carrying value; any marketconditions that impact liquidity; the views of external investment analysts; the financial condition and near-term prospects of the investee; any news orfinancial information that has been released specific to the investee; and the outlook for the overall industry in which the investee operates. In the fourthquarters of fiscal 2016 and 2015, the Company concluded that the decline in fair value of one of its marketable securities was other-than-temporary based onthe length of time the security's market value was significantly below its carrying value and recorded impairment charges of $1.1 million and $7.8 million,respectively. No impairment charges were recorded in fiscal 2017.The following reconciles cost basis to fair market value. Cost Gross UnrealizedGains Gross UnrealizedLosses Other ThanTemporaryImpairment Fair ValueAs of September 30, 2017 $0.7 $— $(0.6) $— $0.1As of September 24, 2016 $2.4 $— $(0.3) $(1.1) $1.0As of September 26, 2015 $16.1 $7.2 $(0.3) $(7.8) $15.2In connection with the acquisition of Cynosure, the Company assumed $82.9 million of short and long-term marketable securities, which wereclassified as available-for-sale and primarily comprised of state and municipal bonds and U.S. treasury notes. During fiscal 2017, the Company liquidatedthese investments. In the first quarter of fiscal 2016, the Company sold all of its shares in one of its marketable securities and recorded a realized gain of $25.1million in other income (expense), net.Concentrations 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 30, 2017. 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 30, 2017 and September 24, 2016, or any customersthat represented greater than 10% of consolidated revenues for fiscal years 2017, 2016 and 2015 (see Note 13).F-9Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsSupplemental Cash Flow Statement Information Years endedSeptember 30, 2017 September 24, 2016 September 26, 2015Cash paid during the period for income taxes $867.8 $184.8 $168.7Cash paid during the period for interest $102.4 $104.0 $143.0InventoriesInventories are valued at the lower of cost or market on a first in, first out basis. Work-in-process and finished goods inventories consist of materials,labor and manufacturing overhead. The valuation of inventory requires management to estimate excess and obsolete inventory. The Company employs avariety of methodologies to determine the net realizable value of its inventory. Provisions for excess and obsolete inventory are primarily based onmanagement’s estimates of forecasted sales, usage levels and expiration dates, as applicable for disposable products. A significant change in the timing orlevel of demand for the Company’s products compared to forecasted amounts may result in recording additional charges for excess and obsolete inventory inthe future. The Company records charges for excess and obsolete inventory within cost of product revenues.Inventories consisted of the following: September 30, 2017 September 24, 2016Raw materials $95.7 $96.4Work-in-process 45.0 51.7Finished goods 190.9 126.6 $331.6 $274.7Property, 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 30, 2017 September 24, 2016Equipment and software $422.4 $381.9Equipment under customer usage agreements 368.7 334.6Buildings and improvements 172.0 186.1Leasehold improvements 60.6 65.6Land 46.3 51.9Furniture and fixtures 20.8 18.4 1,090.8 1,038.5Less - accumulated depreciation and amortization (599.6) (578.3) $491.2 $460.2Property, plant and equipment are depreciated over the following estimated useful lives:Asset Classification Estimated Useful LifeBuilding and improvements 20–35 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 LifeF-10Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsEquipment 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 the equipment for a period of time provided they meet certain agreed to conditions. TheCompany recovers the cost of providing the equipment from the sale of disposables. The depreciation costs associated with equipment under customer usageagreements are charged to cost of product revenues over the estimated useful life of the equipment. The costs to maintain the equipment in the field arecharged to cost of product revenue as incurred.The Company has identified certain software acquired in the Cynosure acquisition that will be discontinued and has shortened the useful life. As such,the Company accelerated depreciation of the asset resulting in an additional $3.0 million of expense recorded in fiscal 2017, and the Company expects torecord $5.9 million of incremental expense in fiscal 2018 at which time the asset will be abandoned.Long-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.Business Combinations and Acquisition of Intangible AssetsThe Company accounts for the acquisition of a business in accordance with ASC 805, Business Combinations (ASC 805). Amounts paid for eachacquisition are allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition. The Company determines the fairvalue of acquired intangible assets based on detailed valuations that use certain information and assumptions provided by management. The Companyallocates any excess purchase price over the fair value of the net tangible and intangible assets acquired to goodwill.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. The value of the in-process projects is based on projects’ stage of completion, the complexityof the work completed as of the acquisition date, the projected costs to complete, the contribution of core technologies and other acquired assets, theexpected introduction date, the estimated cash flows to be generated upon commercial release 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, distribution agreements, trade names and business licenses. Customer relationships represent established relationships withcustomers, which provide a ready channel for the sale of additional products and services. Trade names represent acquired company and product names, anddistribution agreements generally pertain to exclusive distribution of certain products manufactured by third partiesF-11Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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.Intangible assets consisted of the following: September 30, 2017 September 24, 2016Description GrossCarryingValue AccumulatedAmortization GrossCarryingValue AccumulatedAmortizationDeveloped technology $4,528.7 $2,186.8 $3,983.7 $1,991.6In-process research and development 46.0 — 3.7 —Customer relationships 552.8 393.8 1,098.9 546.2Trade names 310.3 156.4 236.2 141.6Distribution agreement 42.0 2.8 — —Non-competition agreements 1.5 0.1 — —Business licenses 2.4 2.2 2.4 2.1 $5,483.7$2,742.1$5,324.9$2,681.5During the second quarter of fiscal 2017, the Company divested its blood screening business and net book value of $154.0 million of developedtechnology and $387.7 million of customer relationship assets were disposed of (see Note 13). In addition, in the second quarter of fiscal 2017, the Companyacquired Cynosure and recorded an aggregate of $994.0 million of intangible assets (see Note 3). In the third quarter of fiscal 2017, the Company acquiredMedicor and recorded $5.4 million of intangible assets. In addition, during the third quarter of fiscal 2017, the Company obtained CE approval for its last in-process research and development project acquired in the Gen-Probe Incorporated acquisition and transferred $3.7 million to developed technology.In the third quarter of fiscal 2016, the Company accelerated the amortization of the Cystic Fibrosis developed technology asset of $6.2 million as aresult of discontinuing this product line. In the second quarter of fiscal 2016, the Company acquired certain intellectual property for $4.8 million, which wasrecorded in developed technology.Amortization expense related to developed technology is classified as a component of cost of product revenues—amortization of intangible assets.Amortization expense related to customer relationships and contracts, trade names, and business licenses is classified as a component of amortization ofintangible assets within operating expenses.The estimated amortization expense at September 30, 2017 for each of the five succeeding fiscal years was as follows: Fiscal 2018$376.6Fiscal 2019$364.9Fiscal 2020$353.6Fiscal 2021$332.2Fiscal 2022$319.8F-12Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsGoodwillIn accordance with ASC 350, Intangibles—Goodwill and Other (ASC 350), the Company tests goodwill for impairment annually at the reporting unitlevel 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 its carryingvalue. Events that could indicate impairment and trigger an interim impairment assessment include, but are not limited to, current economic and marketconditions, 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 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 the impaired reportingunit as of 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 2017 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 July 2, 2017, 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 been lower by10%, all of the reporting units, except the Company's Medical Aesthetics reporting unit, would still have passed Step 1 of the goodwill impairment test. Thisreporting unit had a fair value as of the measurement date that exceeded its carrying value by 2% with goodwill of $683.5 million. The Company acquiredCynosure, which is the sole business in Medical Aesthetics, on March 22, 2017. In connection with the Company's annual strategic planning process andannual goodwill impairment test, it lowered its estimated financial projections for this business as a result of its current operating performance being belowexpectations, which the Company primarily attributes to the significant turnover in the U.S. sales force in 2017. In the event, future operating performance isbelow forecasted projections, or there are negative changes to long-term growth rates or if discount rates increase, these factors could result in a decline in thefair value of the reporting unit and the Company may be required to record a goodwill impairment charge.At September 30, 2017, the Company believes that its other reporting units, with goodwill aggregating $2.49 billion, was not at risk of failing Step 1 ofthe goodwill impairment test based on the current forecasts.The Company conducted its fiscal 2016 and 2015 impairment tests on the first day of the respective year's fourth quarter, and as noted above used DCFand market approaches to estimate the fair value of its reporting units as of June 26, 2016 and June 28, 2015, respectively, and ultimately used the fair valuedetermined by the DCF approach in making its impairment test conclusions. As a result of completing Step 1, all of the Company's reporting units had fairvalues exceeding their carrying values, and as such, Step 2 of the impairment test was not required.F-13Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsA rollforward of goodwill activity by reportable segment from September 24, 2016 to September 30, 2017 is as follows: Diagnostics Breast Health MedicalAesthetics GYN Surgical Skeletal Health TotalBalance at September 24,2016$1,148.2 $631.8 $— $1,015.0 $8.1 $2,803.1Acquisitions— 8.9 683.5 — — 692.4Sale of blood screeningbusiness(325.0) — — — — (325.0)Foreign currency and otheradjustments(0.2) 0.8 — 0.1 — 0.7Balance at September 30,2017$823.0$641.5$683.5 $1,015.1$8.1 $3,171.2Other AssetsOther assets consisted of the following: September 30, 2017 September 24, 2016Other Assets Life insurance contracts $41.0 $36.0Capitalized software 12.3 10.0Manufacturing access fees 7.1 9.6Cost-method equity investments 3.0 3.5Deferred tax assets 9.1 9.3Other 24.5 15.3 $97.0 $83.7Life insurance contracts were purchased in connection with the Company’s Nonqualified Deferred Compensation Plan (“DCP”) and are recorded attheir cash surrender value (see Note 9 for further discussion). Capitalized software relates to development costs incurred related to software embedded in theCompany's products. The manufacturing access fees are related to a manufacturing supply and purchase agreement for our Aptima HPV products and arebeing amortized over the term of the agreement.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. Capitalized softwaredevelopment costs are amortized over their estimate useful life and recorded within cost of revenues - product.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. The functional currency of the Company’s foreign subsidiaries is determined based on the guidance in ASC 830.The majority of the Company's foreign subsidiaries' functional currency is the applicable local currency, although certain of the Company's foreignsubsidiaries' functional currency is the U.S. dollar based on the nature of their operations or functions. Assets and liabilities of subsidiaries whose functionalcurrency is the local currency are translated at the exchange rate in effect at each balance sheet date. Before translation, the Company re-measures foreigncurrency denominated assets and liabilities, including inter-company accounts receivable andF-14Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentspayable, into the functional currency of the respective entity, resulting in unrealized gains or losses recorded in other income (expense), net in theConsolidated Statements of Income. Revenues and expenses are translated using average exchange rates during the respective period. Foreign currencytranslation adjustments are accumulated as a component of other comprehensive income (loss) as a separate component of stockholders’ equity. Gains andlosses arising from transactions denominated in foreign currencies are included in other income (expense), net in the Consolidated Statements of Income andwere 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. Thefollowing tables summarize the components and changes in accumulated balances of other comprehensive income for the periods presented: Year Ended September 30, 2017 Year Ended September 24, 2016 ForeignCurrencyTranslation MarketableSecurities PensionPlans HedgedInterest RateCaps Total ForeignCurrencyTranslation MarketableSecurities Pension Plans HedgedInterest RateCaps TotalBeginning Balance$(26.1) $(0.3) $(2.5) $(3.4) $(32.3) $(15.7) $6.9 $(1.8) $(3.9) $(14.5)Othercomprehensiveloss beforereclassifications7.6 2.3 0.9 0.8 11.6 (10.4) (1.1) (0.7) (3.4) (15.6)(Gains) chargesreclassified tostatement ofincome— (2.4) — 6.9 4.5 — (6.1) — 3.9 (2.2)Ending Balance$(18.5) $(0.4) $(1.6) $4.3 $(16.2) $(26.1) $(0.3) $(2.5) $(3.4) $(32.3)In the first quarter of fiscal 2017, one of the Company's cost-method equity investments became a marketable security, and the Company recorded theincrease in value of $4.0 million to other comprehensive income. In the second quarter of fiscal 2017, the Company sold this marketable security andrecorded a gain of $3.8 million in other income (expense), net.In the first quarter of fiscal 2016, the Company sold all of its shares in one of its marketable securities and recorded a realized gain of $25.1 millionin other income (expense), net and resulted in reclassifying a $7.2 million gain out of other comprehensive income (loss) to other income (expense), net. Inthe fourth quarter of fiscal 2016, the Company recorded a $1.1 million other-than-temporary impairment charge, and this amount was reclassified out of othercomprehensive income (loss) to other income (expense), net.During 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 4). 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 Income.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 was replaced by the Credit Agreement in2015 (see Note 5). Interest rate cap agreements provide the right to receive cash if the reference interest rate rises above a contractual rate. The aggregatepremium paid for the interest rate capF-15Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsagreements was $13.2 million, which was the initial fair value of the instruments recorded in the Company's financial statements. Certain of these capagreements expired during fiscal 2017.During fiscal 2017, the Company entered into new separate interest rate cap agreements with multiple counter-parties to extend the expiration dateof its hedges by an additional year. The aggregate premium paid for the interest rate cap agreements was $1.9 million, 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 2015 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, which ends on December 30, 2018.As of September 30, 2017, 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 the Consolidated Statements of Comprehensive Income as a component of AOCI.During fiscal 2017 and 2016, interest expense of $6.9 million and $3.9 million, respectively, was reclassified from AOCI to the Company'sConsolidated Statements of Income related to the interest rate cap agreements. The Company expects to similarly reclassify approximately $3.6 million fromAOCI to the Consolidated Statements of Income in the next twelve months.The aggregate fair value of these interest rate caps was $4.8 million and $1.4 million at September 30, 2017 and September 24, 2016, respectively, andis included in both Prepaid expenses and other current assets and Other assets on the Company’s Consolidated Balance Sheet. Refer to Note 6 “Fair ValueMeasurements” below for related fair value disclosures.Forward Foreign Currency ContractsThe Company enters into forward foreign currency exchange contracts to mitigate certain operational exposures from the impact of changes in foreigncurrency exchange rates. Such exposures result from the portion of the Company's operations that are denominated in currencies other than the U.S. dollar,primarily the Euro, the UK Pound, the Australian dollar, the Canadian dollar and the Japanese Yen. These foreign currency exchange contracts are enteredinto to support transactions made in the ordinary course of business and are not speculative in nature. The contracts are generally for periods of one year orless. During fiscal 2016, the Company began to execute forward foreign currency contracts in order to mitigate its exposure to fluctuations in variouscurrencies against its reporting currency, the U.S. dollar. The Company executed additional contracts in fiscal 2017. The Company did not elect hedgeaccounting for these forward foreign currency contracts; however, the Company may seek to apply hedge accounting in future scenarios. The change in thefair value of these contracts is recognized directly in earnings as a component of other income (expense), net. During fiscal 2017 and fiscal 2016, theCompany recorded net realized gains of $3.1 million and $1.5 million, respectively from settling forward foreign currency contracts, and net unrealizedlosses of $3.6 million and $1.1 million in fiscal 2017 and fiscal 2016, respectively, on outstanding contracts.As of September 30, 2017, the Company had outstanding forward foreign currency contracts that were not designated for hedge accounting and areused to hedge fluctuations in the U.S dollar of forecasted transactions denominated in the Euro, UK Pound, Australian Dollar, Canadian Dollar and JapaneseYen with a notional amount of $209.0 million.Financial Instrument PresentationThe table below presents the fair value of the Company's derivative financial instruments as well as their classification on the balance sheet as ofSeptember 30, 2017:F-16Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 Balance Sheet Location September 30, 2017 September 24, 2016Assets: Derivative instruments designated as a cash flow hedge: Interest rate cap agreementsPrepaid expenses andother current assets $3.6 $1.0Interest rate cap agreementsOther Assets 1.2 0.4 $4.8 $1.4 Derivatives not designated as hedging instruments: Forward foreign currency contractsPrepaid expenses andother current assets $0.4 $0.2 Liabilities: Derivatives not designated as hedging instruments: Forward foreign currency contractsAccrued expenses $4.0 $1.3The following table presents the unrealized loss recognized in AOCI related to the interest rate caps for the following reporting periods: Year Ended September 30, 2017 Year Ended September 24, 2016Year Ended September 26, 2015Amount of loss recognized in other comprehensive income, net of taxes: Interest rate cap agreements$0.8 $(3.4)$(3.9)The following table presents the adjustment to fair value (realized and unrealized) recorded within the Consolidated Statements of Income forderivative instruments for which the Company did not elect hedge accounting:Derivatives not classified as hedging instruments Location of Gain (Loss) Recognized in Income Year Ended September 30, 2017 Year Ended September 24, 2016 Forward foreign currency contracts $0.5 $0.4 Other income (expense), netRevenue RecognitionThe Company generates revenue from the sale of its products, primarily medical imaging systems, aesthetic treatment systems and diagnostic andsurgical disposable products, and related 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, and collection of the resulting receivable is reasonably assured. Generally, the Company’sproduct arrangements for capital equipment sales, primarily in its Breast Health, Medical Aesthetics and Skeletal Health reporting segments, are multiple-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 are deferred and recognized as such services are performed. The relative selling price of any undelivered products isalso deferred at the time of shipment and recognized as revenue when these products are delivered. There is no customer right of return in the Company’ssales agreements for its capital equipment.F-17Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsService 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. Service and other revenue also includes royalties which are recognized in theperiod the payments are due to the Company.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 and Intelligent 2D products, the software element in its other products is not within the scope of the softwarerevenue recognition rules, ASC 985-605, Software—Revenue Recognition. The Company determined that given the significance of the software component’sfunctionality to its CAD, C-View and Intelligent 2D components, which are sold by its Breast Health segment, these products are within the scope of thesoftware revenue recognition rules. The Company evaluated the appropriate revenue recognition treatment of it hardware products, including its Dimensionsdigital mammography systems, which have both software and non-software components that function together 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.The Company is required to allocate revenue to its multiple element arrangements based on the relative fair value of each element’s selling price. TheCompany typically determines the selling price of its products based on its best estimate of selling prices (“ESP”) and services based on vendor-specificobjective evidence of selling price (“VSOE”). The Company determines VSOE based on its normal pricing and discounting practices for the specific productor service when sold on a stand-alone basis. In determining VSOE, the Company’s policy requires a substantial majority of selling prices for a product orservice to be within a reasonably narrow range. The Company also considers the class of customer, method of distribution, and the geographies into which itsproducts and services are sold when determining VSOE. If VSOE cannot be established, which may occur in instances when a product or service has not beensold separately, stand-alone sales are too infrequent, or product pricing is not within a relatively narrow range, the Company will generally establish theselling price using ESP to allocate arrangement consideration. The objective of ESP is to determine the price at which the Company would typically transacta stand-alone sale of the product or service. ESP is determined by considering a number of factors including Company pricing policies, internal costs andgross margin objectives, method of distribution, information gathered from experience in customer negotiations, market research and information, recenttechnological trends, competitive landscape and geographies.For those arrangements accounted for under the software revenue recognition rules, ASC 985-605 generally requires revenue earned on softwarearrangements involving multiple elements to be allocated to each element based on their relative VSOE of fair value. If VSOE does not exist for a deliveredelement, the residual method is applied in which the arrangement consideration is allocated to the undelivered elements based on their VSOE with theremaining consideration recognized as revenue for the delivered elements. For multiple-element software arrangements where VSOE of fair value of Post-Contract Customer Support (“PCS”) has been established, the Company recognizes revenue using the residual method at the time all other revenuerecognition criteria have been met.Within its Diagnostics segment, the Company manufactured blood screening products according to demand schedules provided by its formercollaboration partner, Grifols, S.A. (“Grifols”). In the second quarter of fiscal 2017, the Company sold its assets in the blood screening business to Grifols.Upon the closing of the transaction, the Company's existing collaboration agreement with Grifols terminated, and a new collaboration agreement wasexecuted as part of this transaction for the Company to provide certain research and development services to Grifols. In addition, the Company agreed toprovide transition services to Grifols over the next two to three years depending on the nature of the respective service, including the manufacture ofinventory, and the Company is in effect serving as a contract manufacturer of assays to Grifols for a two to three year period. The Company also agreed to sellPanther instrumentation and certain supplies to Grifols as part of a long term supply agreement. As such, the Company will generate a level of revenues, butmuch lower than historical trends. Prior to divestiture, the Company’s agreement provided that it would share a portion of Grifols’s revenue from screeningblood donations. Upon shipment to Grifols, the Company recognized product revenue at an agreed upon fixed transfer price, which was not refundable, andrecorded the related cost of products sold. Based on the terms of the Company’s prior collaboration agreement with Grifols, the Company’s ultimate share ofthe net revenue from sales to the end user in excess of the transfer price was not known until it was reported to the Company by Grifols. On a monthly basis,Grifols reported net revenue generated during the prior month and remitted an additional corresponding net payment to the Company, which was recorded asrevenue at that time. This payment combined with the transfer price revenues previously recognized represented the Company’s ultimate share of net revenueunder the prior agreement.F-18Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsWhile 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 shipment or delivery, depending on the terms of the arrangement.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 into a lease. The Company installs the instrumentation or equipment at the customer’s site and recovers the cost of providing theinstrumentation or equipment in the amount it charges for its diagnostic tests, assays and other disposables. Customers enter into a customer usage agreementand typically commit to purchasing minimum quantities of disposable products at a stated price over a defined contract term, which is typically betweenthree and five years. Revenue is recognized over the term of the customer usage agreement as tests, assays and other disposable products are shipped ordelivered, depending on the customer's arrangement.Accounts Receivable and ReservesThe Company records reserves for doubtful accounts based upon a specific review of all outstanding invoices, known collection issues and historicalexperience. The Company regularly evaluates the collectability of its trade accounts receivables and performs ongoing credit evaluations of its customersand adjusts credit limits based upon payment history and its assessment of the customer’s current credit worthiness.Accounts receivable reserve activity for fiscal 2017, 2016 and 2015 was as follows: Balance atBeginningof Period Charged toCosts andExpenses Write-offs andPayments Balance atEnd ofPeriodPeriod Ended: September 30, 2017 $12.7 $1.8 $(4.7) $9.8September 24, 2016 $11.1 $2.0 $(0.4) $12.7September 26, 2015 $12.0 $1.6 $(2.5) $11.1Cost 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 Income based on their fair values on the date of grant.In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements toEmployee Share Based Payment Accounting (ASU 2016-09). This guidance changes how companies account for certain aspects of share-based payments toemployees. The amendments in the update are effective for annual periods beginning after December 15, 2016, and were applicable to the Company in fiscal2018 with early adoption permitted in any interim or annual period. During the first quarter of fiscal 2017, the Company elected to early adopt this standard.The update requires certain changes to presentation of the financial statements as follows:•All excess tax benefits and deficiencies are recognized as a component of the provision for income taxes on a discrete basis in the period in whichthe equity awards vest and/or are settled. Previously, the Company recorded this tax impact directly to additional paid in capital. For fiscal 2017, theCompany recorded a tax benefit of $10.3 million. The standard does not permit retroactive presentation of this benefit to prior fiscal years on theConsolidated Statements of Income.F-19Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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•The tax benefit or deficiency is required to be classified as a cash flow provided by (used in) operating activities. It was previously required to bepresented as a cash flow provided by financing activities in the Consolidated Statements of Cash Flows, with a corresponding adjustment tooperating cash flows. As permitted by ASU 2016-09, the Company has elected to adopt this classification on a retrospective basis, and therefore, theConsolidated Statement of Cash Flows for fiscal 2016 and 2015 have been recast for this provision resulting in an increase cash flows provided byoperations of $11.0 million and $10.7 million, respectively, with a corresponding increase to cash flows used in financing activities.•In the diluted net earnings per share calculation, when applying the treasury stock method for shares that could be repurchased, the assumedproceeds no longer include the amount of excess tax benefit. This provision, which is only applicable on a prospective basis, did not have a materialimpact on the Company's diluted net earnings per share calculation in fiscal 2017.•ASU 2016-09 allows a Company to elect to account for award forfeitures as they occur or to continue to estimate forfeitures. The Company haselected to continue to estimate potential forfeitures. As such, there is no impact from a change in accounting principle within stockholders' equity.Net Income Per ShareBasic net income per share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted net incomeper share is computed by dividing net income by the weighted average number of common shares and the dilutive effect of potential future issuances ofcommon stock from outstanding stock options, restricted stock units and convertible debt determined by applying the treasury stock method. In accordancewith ASC 718, the assumed proceeds under the treasury stock method include the average unrecognized compensation expense of in-the-money stockoptions and restricted stock units. This results in the assumed buyback of additional shares, thereby reducing the dilutive impact of equity awards.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 all years to theextent each issuance is dilutive based on the average stock price during each reporting period being greater than the conversion price of the respective Notes.A reconciliation of basic and diluted share amounts for fiscal 2017, 2016, and 2015 was as follows: September 30, 2017 September 24, 2016 September 26, 2015Basic weighted average common shares outstanding 279,811 280,213 280,566Weighted average common stock equivalents from assumed exercise ofstock options and restricted stock units 2,885 2,631 2,898Incremental shares from convertible notes premium 2,957 3,312 6,073Diluted weighted average common shares outstanding 285,653 286,156 289,537Weighted-average anti-dilutive shares related to: Outstanding stock options 1,677 1,029 1,502Restricted stock units 12 62 49Product 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.F-20Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsProduct warranty activity for fiscal 2017 and 2016 was as follows: Balance atBeginning ofPeriod Acquired Provisions Settlements/Adjustments Balance at Endof PeriodPeriod ended: September 30, 2017 $5.0 $9.9 $15.3 $(13.2) $17.0September 24, 2016 $5.4 $— $7.1 $(7.5) $5.0Advertising 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 $22.5 million, $20.2 million and $14.4 million for fiscal 2017, 2016 and 2015, respectively, and wereincluded in selling and marketing expense in the Consolidated Statements of Income.Recently Issued Accounting PronouncementsIn January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350). This guidance simplifies how companies calculategoodwill impairments by eliminating Step 2 of the impairment test. The guidance requires companies to compare the fair value of a reporting unit to itscarrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. The guidance iseffective for annual periods beginning after December 15, 2019, and is applicable to the Company in fiscal 2020. Early adoption is permitted.In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740). The guidance requires companies to recognize the income tax effects ofintercompany sales and transfers of assets, other than inventory, in the income statement as income tax expense (or benefit) in the period in which the transferoccurs. The guidance is effective for annual periods beginning after December 15, 2017, and is applicable to the Company in fiscal 2019. Early adoption ispermitted as of the beginning of an annual reporting period. The Company is currently evaluating the impact of the adoption of ASU 2016-16 on itsconsolidated financial position and results of operations.In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flow (Topic 230). The guidance reduces diversity in how certain cash receiptsand cash payments are presented and classified in the Statements of Cash Flows. Certain of ASU 2016-15 requirements are as follows: 1) cash payments fordebt prepayment or debt extinguishment costs should be classified as cash outflows for financing activities, 2) contingent consideration payments made soonafter a business combination should be classified as cash outflows for investing activities and cash payment made thereafter should be classified as cashoutflows for financing up to the amount of the contingent consideration liability recognized at the acquisition date with any excess classified as operatingactivities, 3) cash proceeds from the settlement of insurance claims should be classified on the basis of the nature of the loss, 4) cash proceeds from thesettlement of Corporate-Owned Life Insurance (COLI) Policies should be classified as cash inflows from investing activities and cash payments for premiumson COLI policies may be classified as cash outflows for investing activities, operating activities, or a combination of investing and operating activities, and5) cash paid to a tax authority by an employer when withholding shares from an employee's award for tax-withholding purposes should be classified as cashoutflows for financing activities. The guidance is effective for annual periods beginning after December 15, 2017, and is applicable to the Company in fiscal2019. Early adoption is permitted. The adoption of ASU 2016-15 is not expected to have a material effect on the Company's consolidated financialstatements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326). The guidance requires that financial assetsmeasured at amortized cost be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deductedfrom the amortized cost basis. The income statement reflects the measurement of credit losses for newly recognized financial assets, as well as the expectedcredit losses during the period. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable andsupportable forecasts that affect the collectability of the reported amount. Credit losses relating to available-for-sale debt securities will be recorded throughan allowance for credit losses rather than as a direct write-down to the security. The updated guidance is effective for annual periods beginning afterDecember 15, 2019, and is applicable to the Company in fiscal 2021. Early adoption is permitted. The Company is currently evaluating the impact of theadoption of ASU 2016-13 on its consolidated financial position and results of operations. F-21Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The guidance requires an entity to recognize a right-of-use asset and alease liability for virtually all of its leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend onclassification as a finance or operating lease. The amendments also require certain quantitative and qualitative disclosures about leasing arrangements. Theguidance is effective for annual periods beginning after December 15, 2018, and is applicable to the Company in fiscal 2020. Early adoption is permitted.The updated guidance requires a modified retrospective adoption. The Company is currently evaluating the anticipated impact of the adoption of ASU 2016-02 on its consolidated financial position and results of operations. In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement ofFinancial Assets and Financial Liabilities. This guidance changes how entities measure equity investments that do not result in consolidation and are notaccounted for under the equity method. Entities will be required to measure these investments at fair value at the end of each reporting period and recognizechanges in fair value in net income. A practicability exception will be available for equity investments that do not have readily determinable fair values,however; the exception requires the Company to consider relevant transactions that can be reasonably known to identify any observable price changes thatwould impact the fair value. This guidance also changes certain disclosure requirements and other aspects of current U.S. GAAP. This guidance is effective forannual periods beginning after December 15, 2017, and is applicable to the Company in fiscal 2019. Early adoption is permitted. The Company is currentlyevaluating the anticipated impact of the adoption of ASU 2016-01 on its consolidated financial position and results of operations.In July 2015, the FASB issued guidance under ASC 330, Simplifying the Measurement of Inventory. The new guidance requires inventory to bemeasured at the lower of cost and net realizable value, which is defined as the estimated selling price in the ordinary course of business less reasonablypredictable costs of completion, disposal and transportation. This new guidance is effective for the Company's first quarter of fiscal 2018 and early adoptionis permitted. The guidance must be applied prospectively. The Company is currently evaluating the impact of the adoption of this requirement on itsconsolidated financial statements but does not anticipate that adoption of this guidance will have a material impact on its consolidated financial statements.In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), 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 will adopt Topic 606 effective September 30, 2018 and has established across-functional team to evaluate and implement the new revenue recognition rules. The Company will adopt Topic 606 using the modified retrospectivemethod but has not finalized evaluating the anticipated impact of the adoption of ASU 2014-09 on its consolidated financial position and results ofoperations.(3) Business CombinationsCynosure, Inc. On March 22, 2017, the Company completed the acquisition of Cynosure and acquired all of the outstanding shares of Cynosure. Pursuant to theterms and conditions of the merger agreement, each share of common stock of Cynosure outstanding immediately prior to the effective time of the acquisitionwas canceled and converted into the right to receive $66.00 in cash, except for 1.2 million shares the holder of which demanded appraisal rights (the"dissenting shares"). In addition, all outstanding restricted stock units, performance stock units, and stock options were canceled and converted into the rightto receive $66.00 per share in cash less the applicable exercise price, as applicable. The acquisition was funded through available cash, and the total purchaseprice was $1.66 billion. The Company incurred $18.8 million of direct transaction costs recorded within general and administrative expenses.Cynosure, headquartered in Westford, Massachusetts, develops, manufactures, and markets aesthetic treatment systems that enable plastic surgeons,dermatologists and other medical practitioners to perform non-invasive and minimallyF-22Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsinvasive procedures to remove hair, treat vascular and benign pigmented lesions, remove multi-colored tattoos, revitalize the skin, reduce fat through laserlipolysis, reduce cellulite, clear nails infected by toe fungus, ablate sweat glands and improve women’s health. Cynosure also markets radiofrequency (RF)energy-sourced medical devices for precision surgical applications such as facial plastic and general surgery, gynecology, ear, nose, and throat procedures,ophthalmology, oral and maxillofacial surgery, podiatry and proctology. Cynosure's results of operations are reported in the Company's Medical Aestheticsreportable segment from the date of acquisition and the goodwill within this reportable segment is solely related to Cynosure.The total purchase price was allocated to Cynosure’s preliminary tangible and identifiable intangible assets and liabilities based on the estimatedfair values of those assets as of March 22, 2017, as set forth below. The preliminary purchase price allocation is as follows:Cash$107.2Marketable securities82.9Accounts receivable40.2Inventory121.1Property, plant and equipment44.1Other assets and liabilities, net12.2Accounts payable and accrued expenses(75.3)Deferred revenue(11.2)Capital lease obligation(25.2)Identifiable intangible assets: Developed technology736.0 In-process research and development107.0 Distribution agreement42.0 Customer relationships35.0 Trade names74.0Deferred income taxes, net(315.7)Goodwill683.5Purchase Price$1,657.8In performing the preliminary purchase price allocation, the Company considered, among other factors, the intended future use of acquired assets,analysis of historical financial performance and estimates of future performance of Cynosure’s business. The Company has not yet obtained all of theinformation related to the fair value of the acquired assets and liabilities, primarily taxes, to finalize the purchase price allocation. As part of the preliminary purchase price allocation, the Company has determined the identifiable intangible assets are developed technology, in-process research and development ("IPR&D"), a distribution agreement, customer relationships, and trade names. The preliminary fair value of the intangibleassets has been estimated using the income approach, and the cash flow projections were discounted using rates ranging from 11% to 12%, except for theIPR&D assets in which the Company used a range of 14% to 22%. The cash flows are based on estimates used to price the transaction, and the discount ratesapplied were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital.The developed technology assets are comprised of know-how, patents and technologies embedded in Cynosure's products and relate to currentlymarketed products. The developed technology assets comprise the significant product families of Cynosure, primarily SculpSure, Icon, and PicoSure.IPR&D projects relate to in-process projects that have not reached technological feasibility as of the acquisition date and have no alternative futureuse. The primary basis for determining technological feasibility of these projects is obtaining regulatory approval to market the underlying product orexpected commercial release depending on the project. The Company recorded, on a preliminary basis, $107.0 million of IPR&D related to three projects,which were expected to be completed during fiscal 2018 and 2019 with a preliminary cost to complete of approximately $18.0 million. During the fourthquarter ofF-23Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 2017, the Company obtained regulatory approval for two projects with an aggregate fair value of $61.0 million and these assets were reclassified todeveloped technology. The remaining project is expected to be completed during fiscal 2019 with an estimated cost to complete of approximately $4.0million. Given the uncertainties inherent with product development and introduction, there can be no assurance that any of the Company's productdevelopment efforts will be successful, completed on a timely basis or within budget, if at all. All of the IPR&D assets were valued using the multiple-periodexcess earnings method approach.The distribution agreement intangible asset primarily relates to Cynosure's exclusive distribution rights for the MonaLisa Touch device in certaingeographic regions. The customer relationships intangible asset pertains to Cynosure's relationships with its end customers and related service arrangementsand distributors throughout the world. Trade names relate to the Cynosure corporate name and primary product names, and the Company used the Relief-from-Royalty Method to estimate the fair value of this asset.Developed technology, distribution agreement, customer relationships and trade names are being amortized on a straight-line basis over a weightedaverage period of 11.8 years, 8 years, 7.7 years and 8.9 years, respectively.The preliminary calculation of the excess of the purchase price over the estimated fair value of the tangible net assets and intangible assets acquiredwas recorded to goodwill. The factors contributing to the recognition of the preliminary amount of goodwill are based on several strategic and synergisticbenefits that are expected to be realized from the Cynosure acquisition. These benefits include the expectation that the Company's entry into the aestheticsmarket will significantly broaden the Company's offering in women's health. The combined company is expected to benefit from a broader global presence,synergistic utilization of Hologic's direct sales force, primarily its GYN Surgical sales force, with certain Cynosure products, and the Company's entry into anadjacent cash-pay segment. None of the goodwill is expected to be deductible for income tax purposes.Cynosure's revenue and pre-tax loss, which excludes acquisition expenses incurred by the Company, for the period from the acquisition date toSeptember 30, 2017, were $207.5 million and $96.4 million, respectively. The pre-tax loss includes amortization expense, the impact of the step-up ininventory, retention and integration expenses including legal and consulting fees, and restructuring charges. The following unaudited pro forma informationpresents the combined financial results for the Company and Cynosure as if the acquisition of Cynosure had been completed at the beginning of the priorfiscal year, September 26, 2015: Twelve Months EndedTwelve Months Ended September 30, 2017September 24, 2016 (unaudited)(unaudited)Revenue$3,241.4$3,244.6Net income$768.5$252.3Basic earnings per common share$2.75$0.90Diluted earnings per common share$2.69$0.88The unaudited pro forma information for fiscal 2017 and 2016 was calculated after applying the Company's accounting policies and the impact ofacquisition date fair value adjustments. Fiscal 2017 unaudited pro forma net income was adjusted to exclude acquisition-related transaction costs,restructuring and retention costs solely related to the acquisition, and the impact of the fair value step-up to inventory. These expenses have been added tofiscal 2016 unaudited pro forma net income. These pro forma condensed consolidated financial results have been prepared for comparative purposes only andinclude certain adjustments to reflect pro forma results of operations as if the acquisition occurred on September 27, 2015, such as fair value adjustments toinventory and property, plant and equipment, increased expenses for restructuring charges and retention costs, and increased amortization for the fair value ofacquired intangible assets. The pro forma information does not reflect the effect of costs, other than restructuring, or synergies that would have been expectedto result from the integration of the acquisition. The pro forma information does not purport to be indicative of the results of operations that actually wouldhave resulted had the combination occurred at the beginning of each period presented, or of future results of the consolidated entities. F-24Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsMedicor Medical SupplyOn April 7, 2017, the Company completed the acquisition of MMS Medicor Medical Supplies GmbH ("Medicor") for a purchase price ofapproximately $19.0 million, which includes a working capital adjustment of $2.0 million that was paid in the fourth quarter of fiscal 2017, and a holdbackof $1.9 million that is payable two years from the date of acquisition. Medicor was a long-standing distributor of the Company's Breast and Skeletal Healthproducts in Germany, Austria and Switzerland. Based on the Company's preliminary valuation, it has allocated $5.4 million of the purchase price to thepreliminary value of intangible assets, which primarily consist of customer relationships and have a weighted average life of 7.7 years, and $8.9 million togoodwill. The remaining $4.7 million of purchase price has been allocated to the acquired tangible assets and liabilities. The allocation of the purchase priceis preliminary as the Company continues to gather information supporting the acquired assets and liabilities.F-25Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents4. Restructuring and Divestiture ChargesThe Company evaluates its operations for opportunities to improve operational effectiveness and efficiency, including facility and operationsconsolidation, and to better align expenses with revenues. As a result of these assessments, the Company has undertaken various restructuring actions whichare described below. The following table displays charges taken related to restructuring actions in fiscal 2017, 2016 and 2015 and a rollforward of thecharges to the accrued balances as of September 30, 2017: Fiscal 2017Actions Fiscal 2016Actions Fiscal 2015Actions Fiscal 2014Actions Other Charges Total Restructuring and Divestiture Charges Fiscal 2015 charges: Workforce reductions$— $— $10.0 $6.0 $0.3 $16.3Facility closure costs— — — 2.0 0.6 2.6Fiscal 2015 restructuring charges$— $— $10.0 $8.0 $0.9 $18.9Divestiture net charges 9.6Fiscal 2015 restructuring and divestiturecharges $28.5Fiscal 2016 charges: Workforce reductions$— $10.5 $— $— $— $10.5Fiscal 2016 restructuring charges$— $10.5 $— $— $— $10.5Fiscal 2017 charges: Workforce reductions$8.5 $— $— $— $— $8.5Facility closure costs— 4.8 — — — 4.8Other— — — — — —Fiscal 2017 restructuring charges$8.5 $4.8 $— $— $— $13.3 Fiscal 2017Actions Fiscal 2016Actions Fiscal 2015Actions Fiscal 2014Actions Other Charges Total Rollforward of Accrued Restructuring Balance as of September 27, 2014$— $— $— $12.0 $4.9 $16.9 Fiscal 2015 restructuring charges$— $— $10.0 $8.0 $0.9 $18.9Stock-based compensation— — (4.1) — — (4.1)Severance payments— — (2.8) (16.2) (4.9) (23.9)Other payments— — — (1.3) (0.8) (2.1)Balance as of September 26, 2015$— $— $3.1 $2.5 $0.1 $5.7 Fiscal 2016 restructuring charges$— $10.5 $— $— $— $10.5Stock-based compensation— (0.4) — — — (0.4)Severance payments— (4.6) (2.9) (1.4) (0.1) (9.0)Other payments— — — (0.5) — (0.5)Balance as of September 24, 2016$— $5.5 $0.2 $0.6 $— $6.3 Fiscal 2017 restructuring charges$8.5 $4.8 $— $— $— $13.3Severance payments(1.0) (5.4) (0.2) — — (6.6)Other payments— (1.2) — (0.3) — (1.5)Balance as of September 30, 2017$7.5 $3.7 $— $0.3 $— $11.5Fiscal 2017 ActionsF-26Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsDuring the second quarter of fiscal 2017, the Company completed its acquisition of Cynosure. In connection with the acquisition, the Companydecided to terminate certain Cynosure executives in the second quarter of fiscal 2017 and recorded $1.5 million in severance and benefits charges. During thethird and fourth quarters of fiscal 2017, the Company terminated additional executives and employees and recorded $4.3 million and $1.3 million,respectively, in severance and benefits charges. The charges were recorded pursuant to ASC 712, Compensation-Nonretirement Postemployment Benefits(ASC 712) or ASC 420, Exit or Disposal Cost Obligations (ASC 420) depending on the executive. Additional terminations may occur, but the Company doesnot have a formal plan at this time, nor does it expect any resulting charges to be material.During the fourth quarter of fiscal 2017, the decision was made to reduce headcount and related costs in R&D within Breast Health and to eliminatecertain manufacturing personnel, primarily in Diagnostics. The majority of employees were notified of termination and related benefits in the fourth quarterof fiscal 2017, and the Company recorded these charges pursuant to ASC 420 as the benefits qualify as one-time termination benefits. As such, the Companyrecorded a charge for severance and benefits for these employees of $1.4 million in the fourth quarter.Fiscal 2016 ActionsDuring the fourth quarter of fiscal 2016, the Company decided to initiate a cost reduction initiative in part of its Diagnostic's reportable segment,resulting in the termination of certain employees. The majority of employees were notified of termination and related benefits in the fourth quarter of fiscal2016, and the Company recorded these charges pursuant to ASC 420 as the benefits qualify as one-time termination benefits. As such, the Company recordeda charge for severance and benefits of $0.9 million in the fourth quarter. This action was completed and no additional charges were recorded in fiscal 2017.During the third quarter of fiscal 2015, the Company decided to close its Bedford, Massachusetts facility where it manufactured its Skeletal Healthproducts and provided certain support manufacturing services for its Breast Health segment. The manufacturing of the Skeletal Health products wasoutsourced to a third-party, and the Breast Health manufacturing services were moved to the Company's Danbury, Connecticut and Marlborough,Massachusetts facilities. In addition, research and development, sales and services support and administrative functions were moved to both Marlboroughand Danbury. The transition was be substantially completed by the end of calendar year 2016. In connection with this plan, certain employees, primarily inmanufacturing, were terminated. The employees were notified of termination and related benefits in the first quarter of fiscal 2016, and the Company recordedthese charges pursuant to ASC 420. Employees were required to remain employed during this transition period and charges were recorded ratably over therequired service period. The Company recorded $1.7 million in severance and benefits charges related to this action in fiscal 2016. This action wascompleted in the first quarter of fiscal 2017. In connection with shutting down the Bedford location, during the first quarter of fiscal 2017 the Company recorded $3.5 million for leaseobligation charges related to a section of the facility that the Company had determined met the cease-use date criteria. The Company made certainassumptions regarding the time period it would take to obtain a subtenant and the sublease rates it could obtain. During the third quarter of fiscal 2017, theCompany updated its assumption regarding the time period it will take to obtain a subtenant and as a result recorded an additional $1.3 million leaseobligation charge. These estimates may vary from the actual sublease agreements executed, if at all, resulting in an adjustment to the charge. The Companyhas vacated other portions of the building but not the entire facility, and at this time does not meet the cease-use date criteria to record additionalrestructuring charges.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 a result, the Company identified and terminated certainemployees during each quarter in fiscal 2016. Severance and benefits under this action were recorded pursuant to ASC 712, and ASC 420 depending on thecircumstances. The Company recorded severance and benefit charges of $7.9 million in fiscal 2016 related to this plan.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 were recorded pursuant to ASC 712 and ASC 420 depending on the employeesterminated, and the Company recorded severance and benefit charges of $10.0 million in fiscal 2015. Included in the charge was $4.1 million of stock-basedcompensation. No additional charges will be recorded under these actions.F-27Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 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 terminated 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.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.DivestitureIn 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.F-28Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents5. Borrowings and Credit AgreementsThe Company’s borrowings consisted of the following: September 30, 2017 September 24, 2016Current debt obligations, net of debt discount and issuancecosts: Term Loan$121.3 $83.8Revolver345.0 —Securitization Program200.0 200.0Convertible Notes484.5 12.2Total current debt obligations1,150.8 296.0Long-term debt obligations, net of debt discount andissuance costs: Term Loan1,190.5 1,308.22022 Senior Notes981.6 977.7Convertible Notes— 763.5Total long-term debt obligations2,172.1 3,049.4Total debt obligations$3,322.9 $3,345.4The debt maturity schedule for the Company’s obligations as of September 30, 2017 is as follows: 2018 2019 2020 2021 2022 2023 and Thereafter TotalTerm Loan $121.9 $150.0 $1,050.0 $— $— $— $1,321.9Revolver 345.0 — — — — — 345.0Securitization Program 200.0 — — — — — 200.02022 Senior Notes — — — — 1,000.0 — 1,000.0Convertible Notes (1) 488.3 — — — — 488.3 $1,155.2$150.0$1,050.0$—$1,000.0 $—$3,355.2 (1)Classified based on the earliest date of redemption for each respective issuance. In addition, the balance in fiscal 2018 reflects accretion on the 2013Notes through September 30, 2017.As discussed below, in October 2017 the Company refinanced its Credit Agreement and Term Loan which included increasing the amountoutstanding to $1.5 billion, adjusting the principal payments and extending the maturity dates. In addition, the Company issued senior notes for $350million due 2025. The above schedule does not reflect these subsequent changes to the Company's obligations.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.The credit facilities ("Credit Facilities") under the Credit Agreement consisted 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”).In addition to the Term Loan, the Company borrowed $175.0 million under the Revolver upon entering into the Credit Agreement that wassubsequently repaid during fiscal 2016.F-29Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 under the Credit Facilities bore 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 was subject to specified changes depending on the total net leverage ratio as definedin the Credit Agreement. Current borrowings outstanding under the Credit Agreement bore interest at the Eurocurrency Rate plus the applicable margin,which was 1.50% per annum as of September 30, 2017. The Company was also required to pay a quarterly commitment fee on the undrawn committedamount available under the Revolver.The Company was 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 and amounts outstanding under the Revolver were due at maturity. Inaddition, subject to the terms and conditions set forth in the Credit Agreement, the Company could be required to make certain mandatory prepayments fromspecified excess cash flows from operations (to the extent the Company’s net senior secured leverage ratio exceeds a certain ratio) and from the net proceedsof specified types of asset sales (subject to certain reinvestment rights), debt issuances and insurance recoveries (subject to certain reinvestment rights)(“Mandatory Prepayments”). Mandatory Prepayments were required to be applied by the Company, first, to the Term Loan, second, to any outstandingamount under the swing line sublimit, third, to the Revolver, and fourth to any outstanding amount under a letter of credit sublimit. Subject to certainlimitations, the Company could have voluntarily prepaid any of the credit facilities under the Credit Agreement without premium or penalty.Borrowings outstanding under the Credit Agreement in fiscal 2017, 2016 and 2015 had weighted-average interest rates of 2.39%, 2.08% and 2.43% ,respectively. The interest rate on the amounts outstanding at September 30, 2017 was 2.73%. Interest expense in fiscal 2017, 2016 and 2015 aggregated$42.3 million and $40.4 million, and $54.7 million, respectively, which includes non-cash interest expense of $4.2 million, $4.4 million, and $9.0 millionrespectively, related to the amortization of the deferred issuance costs and accretion of the debt discount. The Credit Agreement contained 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 contained 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.Borrowings were secured by first-priority liens on, and a first-priority security interest in, substantially all of the assets of the Company, with certainexceptions. For example, borrowings under the Credit Agreement were not secured by those accounts receivable that are transferred to the special purposeentity under the Company's Accounts Receivable Securitization program. The Credit Agreement contained total net leverage ratio and interest coverage ratiofinancial covenants measured as of the last day of each fiscal quarter and an excess cash flow prepayment requirement measured as of the end of each fiscalyear. The total net leverage ratio was 5.50:1.00 beginning on the Company's fiscal quarter ended September 26, 2015, and then decreased over time to4.00:1.00 for the quarter ending March 28, 2020. The interest coverage ratio was 3.75:1.00 beginning on the Company's fiscal quarter ended September 26,2015, and remained as such for each quarter thereafter. The total net leverage ratio was 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 was 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 (as defined in the Credit Agreement) for the same measurement period. The Company was incompliance with these covenants as of September 30, 2017, and no Mandatory Prepayments were required as of September 30, 2017.The Company evaluated the Credit Agreement for derivatives pursuant to ASC 815, Derivatives and Hedging, and identified embedded derivatives thatrequired bifurcation as the features are not clearly and closely related to the host instrument. The embedded derivatives were a default provision, which couldrequire additional interest payments, and a provision requiring contingent payments to compensate the lenders for changes in tax deductions. The Companydetermined that the fair value of these embedded derivatives was nominal as of September 30, 2017 and September 24, 2016.F-30Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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, 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 was accounted for as a modification because on a creditor-by-creditor basisthe present value of the 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 costs of $4.6 million related to this transaction were recorded as interest expense and $3.8 million were recorded as deferred issuance costs to beamortized over the term of the agreement. In addition, fees paid directly to the Lenders of $4.9 million were recorded as a debt discount.On May 6, 2016, the Company used the proceeds borrowed under the Securitization Program, discussed below, to repay $175.0 million owed under itsRevolver.At various times during fiscal 2017, the Company borrowed $345.0 million under its Revolver in order to repay amounts owed on its convertible debtand to repurchase $200.1 million of its common stock. This amount was outstanding as of September 30, 2017.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.On December 24, 2014, the Company voluntarily prepaid $300.0 million of the 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.Senior 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 redeem the outstanding 6.25% Senior Notes due 2020 (the "Senior Notes") inthe 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 $31.25million. In addition, the Company made a final interest payment in the amount of $31.25 million for interest accrued to August 1, 2015, to holders of recordof the Senior Notes as of July 15, 2015. As a result of this transaction, the Company recorded a debt extinguishment loss 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 Company evaluated the accounting under ASC 470 at thecreditor-by-creditor level to determine modification versus extinguishment accounting.The Company recorded interest expense related to the 2022 Senior Notes and Senior Notes of $57.3 million, $56.0 million, and $67.2 million and infiscal 2017, 2016 and 2015, respectively, which includes non-cash interest expense of $3.9 million, $3.8 million and $2.1 million in fiscal 2017, 2016 and2015, 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”).F-31Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 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 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.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”). On November 18, 2010, the Company entered into separate, privately-negotiated exchange agreements under which it retired $450.0 million inaggregate principal of its 2007 Notes for $450.0 million in aggregate principal of new 2.00% Convertible Exchange Senior Notes due December 15, 2037(“2010 Notes”). On February 29, 2012, the Company entered into separate, privately-negotiated exchange agreements under which it retired $500.0 millionin aggregate principal of the 2007 Notes for $500.0 million in aggregate principal of new 2.00% Convertible Senior Notes due March 1, 2042 (“2012Notes”). On February 14, 2013, the Company entered into separate, privately-negotiated exchange agreements under which it retired $370.0 million inaggregate principal of the 2007 Notes for $370.0 million in aggregate principal of new 2.00% Convertible Senior Notes due December 15, 2043 (“2013Notes”). The remaining 2007 Notes were redeemed in fiscal 2014.On November 9, 2016, the Company announced that pursuant to the terms of the indenture for the 2010 Notes, holders of the 2010 Notes had theoption of requiring the Company to repurchase their 2010 Notes on December 16, 2016 at a repurchase price payable in cash equal to 100% of the originalprincipal amount of the 2010 Notes. None of the 2010 Notes were surrendered for repurchase pursuant to the option. In addition, the Company alsoannounced on November 9, 2016 that, pursuant to the terms of the indenture, it had elected to redeem, on December 19, 2016, all of the then outstanding2010 Notes at a redemption price payable in cash equal to 100% of the accreted principal amount of the 2010 Notes. Holders of the 2010 Notes also had aright to convert their 2010 Notes. During the first quarter of fiscal 2017, all of the outstanding 2010 Notes were either converted or surrendered for conversionin aggregate principal of $12.3 million, which was paid out over the first and second quarters of fiscal 2017. The payouts included an additional $8.7 millionof premium payments due to the Company's stock price exceeding the conversion price.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 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 2012 Notes at any time on or after March 6, 2018 and all or a portion of the 2013 Notes at anytime on or after December 15, 2017. If, prior to maturity, a holder requires the Company to repurchase the Convertible Notes or the Company elects to redeemthe Convertible Notes, the repurchase or redemption price of each Convertible Note will equal 100% of its principal amount, plus accrued and unpaid interestto, but excluding, the redemption or repurchase date, as applicable. On November 14, 2017, the Company announced that it would repurchase, on December15, 2017, all of the outstanding 2013 Notes at a repurchase price in cash equal to 100% of theF-32Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsaccreted principal amount of the 2013 Notes validly surrendered for repurchase and not withdrawn, at the option of the holders of the 2013 Notes. TheCompany also announced on November 14, 2017, that it had elected to redeem, on December 15, 2017, all of the outstanding 2013 Notes (those 2013 Notesnot surrendered to us for repurchase on December 15, 2017 or validly submitted for conversion prior to December 15, 2017) at a redemption price equal to100% of the accreted principal amount of the 2013 Notes to be redeemed.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 Company also announced onNovember 14, 2017 that as provided in the indenture for the 2013 Notes, it had made an irrevocable election to settle any conversion of the 2013 Notesvalidly submitted on or after November 14, 2017 in cash.The 2010 bore interest at 2.00% per year on the principal amount payable semi-annually through December 15, 2016. The 2012, and 2013 Notesoriginally bore interest at a rate of 2.00% per year on the principal amount payable semi-annually on March 1 and September 1, and June 15 and December15, respectively, of each year ending on March 1, 2018 and December 15, 2013, respectively. The 2013 Notes no longer bear interest payable at 2.00%. The2012 Notes will accrete principal from March 1, 2018 at a rate that provides holders with an aggregate annual yield to maturity of 2.00% per year. The 2013Notes accrete principal from their date of issuance at a rate of 4.00% per year until and including December 15, 2017, and 2.00% per year thereafter.Beginning with the six month interest period commencing March 1, 2018 and December 15, 2017, the Company will pay contingent interest during any sixmonth interest period to the holders of 2012 and 2013 Notes, respectively, if the “trading price”, as defined, of the 2012 and 2013 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 and 2013 Notes. The holders of each of the 2012 or 2013 Notes may convert their respective Notes into shares of theCompany’s common stock at a conversion price of approximately $31.175 per share and $38.59 per share, respectively, subject to adjustment, prior to theclose of business on December 1, 2041 and September 15, 2043, respectively, subject to prior redemption or repurchase of the 2012, and 2013 Notes,respectively, 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 noteshave been called for redemption; or (4) upon the occurrence of specified corporate events. At the option of the holder, regardless of the foregoingcircumstances, holders may convert their respective 2012 and 2013 Notes at any time on or after December 1, 2041 and September 15, 2043, respectively,through the close of business on the second scheduled trading day immediately preceding the maturity date. The conversion rate will not be adjusted foraccrued interest or accreted principal in excess of the original $1,000 principal amount, as accrued interest and accreted principal will not be convertible intocommon stock. For the 2013 Notes none of these triggering events have occurred as of September 30, 2017.On various dates during the fourth quarter of fiscal 2017, the Company entered into privately negotiated repurchase transactions and extinguished$17.9 million and $68.0 million principal amount of the 2012 Notes and 2013 Notes, respectively, for total payments of $23.1 million and $82.9 million,respectively. These amounts include the conversion premium resulting from the Company's stock price on the date of the transactions being in excess of theconversion prices of $31.175 and $38.59, respectively, and on the 2013 Notes accreted principal of $13.3 million. Under ASC 470, these transactions wereaccounted for as an extinguishment and derecognition of the 2012 Notes and 2013 Notes and resulted in an aggregate debt loss extinguishment of $0.6million.On various dates during the third quarter of fiscal 2017, the Company entered into privately negotiated repurchase transactions andextinguished $100.0 million principal amount of each of its 2012 Notes and 2013 Notes, for total payments of $269.1 million. This amount includes theconversion premium resulting from the Company's stock price on the date of the transactions being in excess of the conversion prices of $31.175 and $38.59,respectively, and on the 2013 Notes accreted principal of $18.5 million. Under ASC 470, these transactions were accounted for as an extinguishment andderecognition of the 2012 Notes and 2013 Notes and resulted in an aggregate debt loss extinguishment of $2.6 million.On various dates during the fourth quarter of fiscal 2016, the Company entered into privately negotiated repurchase transactions and extinguished$46.3 million principal amount of the 2010 Notes for total payments of $79.2 million. These amounts include the conversion premium resulting from theCompany's stock price on the date of the transactions being in excess of the conversion price of $23.03 for the 2010 Notes. Under ASC 470, thesetransactions were accounted for as an extinguishment and derecognition of the 2010 Notes and resulted in a debt loss extinguishment of $0.8 million. Inaddition, $1.3 million principal was put to the Company during the quarter.F-33Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOn various dates during the second quarter of fiscal 2016, the Company entered into privately negotiated repurchase transactions and extinguished$90.0 million and $136.6 million principal amount of the 2010 Notes and 2012 Notes, respectively, for total payments of $140.1 million and $171.3 million,respectively. These amounts include the conversion premium resulting from the Company's stock price on the date of the transactions being in excess of theconversion price of $23.03 and $31.175 for the 2010 Notes and 2012 Notes, respectively. Under ASC 470, these transactions were accounted for as anextinguishment and derecognition of the 2010 and 2012 Notes and resulted in an aggregate debt loss extinguishment of $4.5 million.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.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 the twodebt instruments were not substantially different.The Company accounted for the 2012 Notes and 2013 Notes extinguishments in fiscal 2017, discussed above, under the derecognition provisions ofsubtopic ASC 470-20-40, which requires the allocations of the fair value of the consideration transferred and transaction costs incurred to the extinguishmentof the liability component and the reacquisition of the equity component. In connection with these transactions, the Company recorded a debtextinguishment loss on the 2012 Notes of $0.9 million and a debt extinguishment loss on the 2013 Notes of $2.3 million, for a total debt extinguishment lossof $3.2 million in fiscal 2017. The loss on the debt was calculated as the difference between the fair value of the liability component immediately before therespective transactions and their related carrying values, which includes any debt discount and deferred issuance costs. The fair value of the liabilitycomponent was calculated using a discounted cash flow technique and incorporates an estimated rate for non-convertible debt (with similar features as the2012 and 2013 Notes excluding the conversion feature) issued by a company with a credit rating similar to the Company. In addition, under this accountingstandard, a portion of theF-34Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsfair value of the consideration transferred is allocated to the reacquisition of the equity component, which is the difference between the fair value of theconsideration transferred and the fair value of the liability component immediately before the extinguishment. As a result, on a gross basis, $58.6 millionrelated to the 2012 and 2013 Notes was allocated to the reacquisition of the equity component of the original instrument, which was recorded net of deferredtaxes of $31.1 million within additional paid-in-capital.The Company accounted for the 2010 Notes and 2012 Notes extinguishments in fiscal 2016, discussed above, under the derecognition provisions ofsubtopic ASC 470-20-40, which requires the allocation of the fair value of the consideration transferred and transaction costs incurred to the extinguishmentof the liability component and the reacquisition of the equity component. In connection with these transactions, the Company recorded a debtextinguishment loss on the 2010 Notes of $4.6 million and a debt extinguishment loss on the 2012 Notes of $0.7 million, for a total debt extinguishment lossof $5.3 million in fiscal 2016. On a gross basis, $122.6 million related to the 2010 and 2012 Notes was allocated to the reacquisition of the equity componentof the original instrument, which was recorded net of deferred taxes of $28.2 million within additional paid-in-capital.The Company also accounted for the 2010 Notes extinguishment in fiscal 2015, discussed above, under the derecognition provisions of subtopic ASC470-20-40. In connection with this transaction, the Company recorded a debt extinguishment loss of $15.5 million in the fourth quarter fiscal 2015. On agross basis, $246.1 million was allocated to the reacquisition of the equity component of the original instrument, which was recorded net of deferred taxes of$29.2 million within additional paid-in-capital.As of September 30, 2017 and September 24, 2016, the Convertible Notes and related equity components (recorded in additional paid-in-capital, net ofdeferred taxes) consisted of the following: 2017 20162010 Notes principal amount $— $12.3Unamortized discount and issuance costs — (0.1)Net carrying amount $— $12.2Equity component, net of taxes $— $1.62012 Notes principal amount $245.4 $363.4Unamortized discount and issuance costs (1.9) (9.5)Net carrying amount $243.5 $353.9Equity component, net of taxes $24.1 $35.82013 Notes principal amount $202.0 $370.0Principal accretion 40.8 57.1Unamortized discount and issuance costs (1.8) (17.5)Net carrying amount $241.0 $409.6Equity component, net of taxes $71.8 $131.5Interest expense under the Convertible Notes is as follows: Years Ended September 30, 2017 September 24, 2016 September 26, 2015Amortization of debt discount$17.9 $22.3 $34.9Amortization of deferred financing costs0.8 1.1 1.7Principal accretion15.6 16.6 15.9Non-cash interest expense34.3 40.0 52.52.00% accrued interest (cash)6.7 10.0 18.2 $41.0 $50.0 $70.7If 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 ConvertibleF-35Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsNotes contain a single embedded derivative, comprising both the contingent interest feature and the filing failure penalty payment, requiring bifurcation asthe features are not clearly and closely related to the host instrument. The Company has determined that the value of this embedded derivative was nominalas of September 30, 2017 and September 24, 2016.As of September 30, 2017, upon conversion, including the potential premium that could be payable on a fundamental change (as defined), theCompany would issue a maximum of approximately 18.0 million shares of common stock to the holders of the Convertible Notes.Accounts Receivable Securitization ProgramOn April 25, 2016, the Company entered into a one-year $200.0 million accounts receivable securitization program (the "Securitization Program") withseveral of its wholly owned subsidiaries and certain financial institutions. Under the terms of the Securitization Program, the Company and certain of itswholly-owned subsidiaries sell their respective customer receivables to a bankruptcy remote special purpose entity, which is also a wholly-owned subsidiaryof the Company. In addition, the Company also contributed a portion of its customer receivables to the special purpose entity in connection with itsestablishment. The Company retains servicing responsibility. The special purpose entity, as borrower, and the Company, as servicer, entered into a Credit andSecurity Agreement with several lenders pursuant to which the special purpose entity may borrow up to $200.0 million from the lenders, with the loanssecured by the receivables. The amount that the special purpose entity may borrow at a given point in time is determined based on the amount of qualifyingreceivables that are present in the special purpose entity at such point in time. The entire amount available was borrowed in the third quarter of fiscal 2016.Borrowings outstanding under the Securitization Program bear interest at LIBOR plus the applicable margin of 0.7% and are included as a component ofcurrent liabilities in the Company's consolidated balance sheet, while the accounts receivable securing these obligations remain as a component of netreceivables in the Company's consolidated balance sheet. The Company and the special purpose entity are operated and maintained as separate legal entities.The assets of the special purpose entity secure the amounts borrowed and cannot be used to pay other debts or liabilities of the Company. The specialpurpose entity was not a guarantor under the Company's Credit Agreement and is not a guarantor under the Company's Amended and Restated CreditAgreement or of the Company's 2022 and 2025 Senior Notes.Effective April 21, 2017, the Company entered into an amendment to extend the Securitization Program an additional year to April 20, 2018. Theamendment allows the Company to continue to borrow up to $200.0 million and due to structural changes to the terms, the borrowing base has fewerlimitations.Borrowings under the Securitization Program for fiscal 2017 had a weighted-average interest rate of 1.47%. Interest expense under the SecuritizationProgram aggregated $3.3 million and $1.0 million for fiscal 2017 and fiscal 2016. The interest rate on the amounts outstanding at September 30, 2017 was1.24%.The Credit and Security Agreement contains customary representations and warranties and events of default, including payment defaults, breach ofrepresentations and warranties, covenant defaults, and an event of default upon a change of control of the Company. In addition, it contains financialcovenants consistent with that of the Credit Agreement. As of September 30, 2017, the Company was in compliance with the Credit and Security Agreementcovenants.Subsequent EventsAmended and Restated Credit AgreementOn October 3, 2017, the Company and certain of its domestic subsidiaries entered into an Amended and Restated Credit and Guaranty Agreement (the"Amended and Restated Credit Agreement") with Bank of America, N.A. in its capacity as Administrative Agent, Swing Line Lender and L/C Issuer, andcertain other lenders from time to time party thereto. The Amended and Restated Credit Agreement amends and restates the Company's Credit Agreement.The proceeds under the Amended and Restated Credit Agreement of $1.8 billion were used, among other things, to pay off the Term Loan and Revolveroutstanding under the Credit Agreement. Borrowings under the Amended and Restated Credit Agreement are secured by first-priority liens on, and a first-priority security interest in, substantially all of the assets of the Company's U.S. subsidiaries, with certain exceptions.The credit facilities (the “Amended and Restated Credit Facilities”) under the Amended and Restated Credit Agreement consist of:F-36Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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•A $1.5 billion secured term loan to the Company ("Amended Term Loan") with a stated maturity date of October 3, 2022 (which date may spring toApril 15, 2022 upon the occurrence of certain conditions set forth in the Amended and Restated Credit Agreement); and•A secured revolving credit facility (the "Amended Revolver") under which the Borrowers may borrow up to $1.5 billion, subject to certain sublimits,with a stated maturity date of October 3, 2022 (which date may spring to April 15, 2022 upon the occurrence of certain conditions set forth in theAmended and Restated Credit Agreement).At the closing, we borrowed $345 million under the Amended Revolver, which was subsequently repaid during October 2017.Borrowings under the Amended and Restated Credit Facilities bear interest, at the Company's option and in each case plus an applicable margin asfollows:•Amended Term Loan: the Base Rate (as defined in the Amended and Restated Credit Agreement), at the Eurocurrency Rate (as defined in theAmended and Restated Credit Agreement), or at the LIBOR Daily Floating Rate (as defined in the Amended and Restated Credit Agreement), •Amended Revolver: if funded in U.S. dollars,the Base Rate, Eurocurrency Rate, or LIBOR Daily Floating Rate, and, if funded in an alternativecurrency, the Eurocurrency Rate; and it requested under the swing line sublimit, the Base Rate.The applicable margin to the Base Rate, Eurocurrency Rate, or LIBOR Daily Floating Rate is subject to specified changers depending on the total netleverage ratio as defined in the Amended and Restated Credit Agreement. The borrowings of the Amended Term Loan initially bear interest at an annual rateequal to the Eurocurrency Rate (i.e., the LIBOR rate) plus an Applicable Rate equal to 1.50%. The borrowings of the Amended Revolver initially bear interestat a rate equal to the LIBOR Daily Floating Rate plus an Applicable Rate equal to 1.50%. The Company is also required to pay a quarterly commitment feecalculated on the undrawn committed amount available under the Amended Revolver.The Company is required to make scheduled principal payments under the Amended Term Loan in increasing amounts ranging from $9.375 million perthree-month period commencing with the three-month period ending on December 29, 2017 to $37.5 million per three-month period commencing with thethree-month period ending on December 23, 2021. The remaining balance of the Amended Term Loan and any amounts outstanding under the AmendedRevolver are due at maturity. In addition, subject to the terms and conditions set forth in the Amended and Restated Credit Agreement, the Company isrequired to make certain mandatory prepayments from the net proceeds of specified types of asset sales (subject to certain reinvestment rights), debt issuancesand insurance recoveries (subject to certain reinvestment rights). These mandatory prepayments are required to be applied by the Company, first, to theAmended Term Loan, second, to any outstanding amount under any Swing Line Loans (as defined in the Amended and Restated Credit Agreement), third, tothe Amended Revolver, fourth to prepay any outstanding reimbursement obligations with respect to Letters of Credit (as defined in the Amended andRestated Credit Agreement) and fifth, to cash collateralize any Letters of Credit. Subject to certain limitations, the Company may voluntarily prepay any ofthe Amended and Restated Credit Facilities without premium or penalty.The Amended and Restated Credit Agreement contains affirmative and negative covenants customarily applicable to senior secured credit facilities,including covenants restricting the ability of the Company, subject to negotiated exceptions, to incur additional indebtedness and grant additional liens onits assets, engage in mergers or acquisitions or dispose of assets, enter into sale-leaseback transactions, pay dividends or make other distributions, voluntarilyprepay other indebtedness, enter into transactions with affiliated persons, make investments, and change the nature of their businesses. In addition, theAmended and Restated Credit Agreement requires the Borrowers to maintain certain financial ratios. The Amended and Restated Credit Agreement alsocontains 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.2025 Senior NotesOn October 10, 2017, the Company completed a private placement of $350 million aggregate principal amount of its 4.375% Senior Notes due 2025(the “2025 Notes”) at an offering price of 100% of the aggregate principal amount of the 2025 Notes. The 2025 Notes were not registered under the SecuritiesAct, or any state securities laws, and were offered only to qualified institutional buyers in reliance on Rule 144A under the Securities Act and outside theUnited States in accordance with Regulation S under the Securities Act. The 2025 Notes are general senior unsecured obligations of the Company and areguaranteed on a senior unsecured basis by certain domestic subsidiaries of Hologic (the “ 2025 Domestic Guarantors”).F-37Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 2025 Notes were issued pursuant to an indenture (the “2025 Indenture”), dated as of October 10, 2017, among the Company, the 2025 DomesticGuarantors and Wells Fargo Bank, National Association, as trustee. The 2025 Notes mature on October 15, 2025 and bear interest at the rate of 4.375% peryear, payable semi-annually on April 15 and October 15 of each year, commencing on April 15, 2018. The 2025 Indenture contains covenants which limit,among other things, the ability of the Company and the Guarantors to create liens and engage in certain sale and leaseback transactions. These covenants aresubject to a number exceptions and qualifications.The Company may redeem the 2025 Notes at any time prior to October 15, 2020 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 2025 Notes with the net cash proceeds of certain equity offerings at any time and from time totime before October 15, 2020, at a redemption price equal to 104.375% 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 2025 Notes on or after: October 15, 2020 through October 14, 2021 at102.188% of par; October 15, 2021 through October 14, 2022 at 101.094% of par; and October 15, 2022 and thereafter at 100% of par. In addition, if theCompany undergoes a change of control coupled with a decline in ratings, as provided in the 2025 Indenture, the Company will be required to make an offerto purchase each holder’s 2025 Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the repurchase date.6. Fair Value MeasurementsThe Company applies the provisions of ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value each reportingperiod and its nonfinancial assets and liabilities that are re-measured and reported at fair value on a non-recurring basis. Fair value is the price that would bereceived from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determiningfair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participantswould use when pricing the asset or liability.Fair Value HierarchyASC 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. Financial assets and liabilities are categorized withinthe valuation hierarchy based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy are definedas follows:•Level 1—Inputs to the valuation methodology are quoted market prices for identical assets or liabilities.•Level 2—Inputs to the valuation methodology are other observable inputs, including quoted market prices for similar assets or liabilities and market-corroborated inputs.•Level 3—Inputs to the valuation methodology are unobservable inputs based on management’s best estimate of inputs market participants would usein pricing the asset or liability at the measurement date, including assumptions about risk.Assets/Liabilities Measured and Recorded at Fair Value on a Recurring BasisThe Company has investments in publicly-traded companies, which are valued using quoted market prices, representing Level 1 assets, andinvestments in derivative instruments comprised of interest rate caps and forward foreign currency contracts, which are valued using analyses obtained fromindependent third party valuation specialists based on market observable inputs, representing Level 2 assets. The fair values of the Company's interest ratecaps and forward foreign currency contracts represent the estimated amounts the Company would receive or pay to terminate the contracts. Refer to Note 2 forfurther discussion and information on the equity investments, the interest rate caps and forward foreign currency contracts.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.F-38Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 30, 2017 Carrying Value Quoted Prices inActive Market forIdentical Assets(Level 1) SignificantOtherObservableInputs (Level 2) SignificantUnobservableInputs (Level 3)Assets: Equity securities$0.1 $0.1 $— $—Interest rate caps - derivative4.8 — 4.8 —Forward foreign currency contracts0.4 — 0.4 —Total$5.3 $0.1 $5.2 $—Liabilities: Deferred compensation liabilities$43.2 $43.2 $— $—Forward foreign currency contracts4.0 — 4.0 —Total$47.2 $43.2 $4.0 $— Fair Value Measurements at September 24, 2016 Carrying Value Quoted Prices inActive Market forIdentical Assets(Level 1) SignificantOtherObservableInputs (Level 2) SignificantUnobservableInputs (Level 3)Assets: Equity securities$1.0 $1.0 $— $—Interest rate caps - derivative1.4 — 1.4 —Forward foreign currency contracts0.2 — 0.2 —Total$2.6 $1.0 $1.6 $—Liabilities: Deferred compensation liabilities$37.0 $37.0 $— $—Forward foreign currency contracts1.3 — 1.3 —Total$38.3 $37.0 $1.3 $—There were no Level 3 assets or liabilities outstanding during fiscal 2017, 2016 and 2015.Assets 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. There were no impairments to assetsmeasured using level 3 inputs in fiscal 2017, 2016 and 2015. Refer to Note 4 for disclosure of the nonrecurring fair value measurement related to the debtextinguishment losses recorded in fiscal 2017, 2016 and 2015.Disclosure of Fair Value of Financial InstrumentsThe Company’s financial instruments mainly consist of cash and cash equivalents, accounts receivable, marketable securities, cost-method equityinvestments, interest rate caps, forward foreign currency contracts, insurance contracts, DCP liability, accounts payable and debt obligations. The carryingamounts of the Company’s cash and cash equivalents, accounts receivable and accounts payable approximate their fair value due to the short-term nature ofthese instruments. The Company’s marketable securities, interest rate caps, and forward foreign currency contracts are recorded at fair value. The carryingamount of the insurance contracts are recorded at the cash surrender value, as required by U.S. GAAP, which approximates fair value, and the related DCPliability is recorded at fair value. The Company believes the carrying amounts of its cost-method equity investments approximate fair value.F-39Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsAmounts outstanding under the Company’s Credit Agreement and Securitization Program of $1.67 billion and $200.0 million aggregate principal,respectively, as of September 30, 2017 are subject to variable rates of interest based on current market rates, and as such, the Company believes the carryingamount of these obligations approximates fair value. The Company’s 2022 Senior Notes had a fair value of approximately $1.05 billion and $1.06 billion asof September 30, 2017 and September 24, 2016, respectively, based on their trading price, representing a Level 1 measurement. The fair value of theCompany’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 30, 2017 and September 24, 2016 are as follows: 2017 20162010 Notes— 20.22012 Notes297.3 481.92013 Notes244.4 458.8 $541.7 $960.97. Income TaxesThe Company’s income before income taxes consisted of the following: Years endedSeptember 30, 2017 September 24, 2016 September 26, 2015Domestic $1,105.8 $310.7 $158.3Foreign 124.7 104.6 18.9 $1,230.5 $415.3 $177.2F-40Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 for income taxes contained the following components: Years endedSeptember 30, 2017 September 24, 2016 September 26, 2015Federal: Current $701.1 $209.0 $185.2Deferred (276.9) (122.7) (137.0) 424.286.348.2State: Current 53.1 16.6 3.5Deferred (15.9) (22.7) (11.0) 37.2 (6.1) (7.5)Foreign: Current 13.9 14.7 5.7Deferred (0.3) (10.4) (0.8) 13.6 4.3 4.9 $475.0 $84.5 $45.6The income tax provision differed from the tax provision computed at the U.S. federal statutory rate due to the following: Years endedSeptember 30, 2017 September 24, 2016 September 26, 2015Income tax provision at federal statutory rate 35.0 % 35.0 % 35.0 %Increase (decrease) in tax resulting from: Domestic production activities deduction (1.7) (5.0) (10.1)State income taxes, net of federal benefit 2.3 2.0 1.2Non-deductible goodwill 9.2 — —Tax credits (0.8) (3.2) (3.8)Unrecognized tax benefits (1.4) 2.4 (1.8)Cumulative translation adjustment write-off — — 1.9Compensation (0.5) 0.1 1.9Foreign rate differential (2.6) (6.1) (1.6)Change in deferred tax rate 0.2 (1.8) —Change in valuation allowance (1.5) (3.4) 1.0Other 0.4 0.3 2.1 38.6 % 20.3 % 25.8 %The Company's effective tax rate in fiscal 2017 was higher than the statutory rate primarily due to non-deductible goodwill related to the sale of theBlood Screening business, partially offset by the release of valuation allowances for capital losses utilized against the capital gain generated on the sale ofthe Blood Screening business, earnings in jurisdictions subject to lower tax rates, the domestic production activities deduction benefit, the release ofuncertain tax positions due to statutes of limitations expirations and audit settlements, stock compensation benefits, and federal and state tax credits.The Company's effective tax rate in fiscal 2016 was lower than the statutory rate primarily due to earnings in jurisdictions subject to lower tax rates, thedomestic production activities deduction benefit, and a change in the valuation allowance related to the sale of a marketable security with a higher tax thanbook basis.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 uses the asset and liability method to account for income taxes in accordance with ASC 740, Income Taxes. Under this method, deferredincome taxes are recognized for the future tax consequences of differences between the tax and financial accounting bases of assets and liabilities at eachreporting period. Deferred income taxes are based on enacted taxF-41Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentslaws and statutory tax rates applicable to the period in which these differences are expected to affect taxable income. A valuation allowance is establishedwhen necessary to reduce deferred tax assets to the amounts expected to be realized.The Company’s significant deferred tax assets and liabilities were as follows: September 30, 2017 September 24, 2016Deferred tax assets Net operating loss carryforwards $50.1 $40.0Capital losses 7.1 19.1Non-deductible accruals 50.6 21.1Non-deductible reserves 30.0 31.1Stock-based compensation 39.3 34.8Research and other credits 13.6 10.7Nonqualified deferred compensation plan 16.4 14.1Other temporary differences 16.5 9.2 223.6 180.1Less: valuation allowance (28.2) (46.2) $195.4 $133.9Deferred tax liabilities Depreciation and amortization $(1,071.5) $(1,030.8)Debt discounts and deferrals (88.4) (76.4) $(1,159.9) $(1,107.2) $(964.5) $(973.3) 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 assets will not be realized. In making this determination, the Company considerednumerous factors including historical profitability, estimated future taxable income and the character of such income. The valuation allowance decreased$18.0 million in fiscal 2017 from fiscal 2016 primarily due to capital loss utilization against the capital gain generated on the sale of the Blood Screeningbusiness.At September 30, 2017, the Company had $64.3 million, $91.4 million and $36.5 million in gross federal, state, and foreign net operating losses,respectively, and $5.2 million, $10.3 million and $5.8 million in federal, state, and foreign credit carryforwards, respectively. These losses and credits expirebetween 2018 and 2037, except for $33.7 million in losses and $2.2 million in credits that have unlimited carryforward periods. The federal, state, andforeign net operating losses exclude $4.5 million, $117.9 million and $45.4 million, respectively, in net operating losses, that the Company expects willexpire unutilized.At September 30, 2017, the Company had $90.3 million in gross unrecognized tax benefits excluding interest, of which $70.3 million, if recognized,would reduce the Company's effective tax rate. At September 24, 2016, the Company had $163.6 million in gross unrecognized tax benefits excludinginterest, of which $76.9 million, if recognized, would have reduced the Company's effective tax rate. The gross unrecognized tax benefits decreased by $73.3million from fiscal 2016, of which $64.0 million was a balance sheet reclassification resulting from the effective settlement in fiscal 2017 of uncertain taxpositions related to the convertible debt exchange that occurred in fiscal 2013 and $9.3 million was the net benefit recorded to the income tax provisionprimarily from audit settlements and expiring statutes of limitations partially offset by current year tax positions. In the next twelve months it is reasonablypossible that the Company will reduce its gross unrecognized tax benefits by up to $2.0 million due to expiring statutes of limitations.F-42Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 2017 and 2016 was as follows: 2017 2016Balance at beginning of fiscal year $163.6 $154.7Tax positions related to current year: Additions 21.8 23.9Reductions — —Tax positions related to prior years: Additions related to change in estimate 1.1 1.1Reductions (77.3) (6.9)Payments (1.6) (6.0)Lapses in statutes of limitations (19.9) (3.2)Acquired tax positions: Additions related to reserves acquired from acquisitions 2.6 —Balance as of the end of the fiscal year $90.3 $163.6The 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 30, 2017 and September 24, 2016, gross accrued interest was $5.3 million and $13.1 million, respectively. AtSeptember 30, 2017, 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 aregenerally no longer subject to examination prior to tax year 2014. During fiscal 2017, the Internal Revenue Service ("IRS") completed its audit for fiscalyears 2013 and 2014. The Company made a cash payment of $1.7 million and recorded an income tax benefit of $10.9 million, including interest, related tothe reversal of unrecognized tax benefits. State income tax returns are generally no longer subject to examination prior to fiscal year 2013. The Company isundergoing tax examinations in California (fiscal years 2011-2013), Massachusetts (fiscal years 2012-2013), and New York (fiscal years 2013-2015).The Company intends to reinvest, indefinitely, $309.5 million in unremitted foreign earnings. It is not practicable to estimate the additional taxes thatmay be payable upon repatriation.Non-Income Tax MattersThe Company is subject to tax examinations for value added, sales-based, payroll and other non-income tax items. A number of these examinations areongoing in various jurisdictions. The Company takes certain non-income tax positions in the jurisdictions in which it operates pursuant to ASC 450. In thenormal course of business, the Company's positions and conclusions related to its non-income tax positions could be challenged, resulting in assessments bygovernmental authorities.In fiscal 2017, based on developments in an ongoing state tax audit, the Company determined that it was probable it had incurred a loss related to anon-income tax issue. The Company estimated the most likely amount of loss to be $35.6 million for all open years and recorded this charge to general andadministrative expenses in fiscal 2017. While the Company believes its estimate is reasonable and appropriate, this matter is still ongoing and additionalcharges could be recorded in the future.During fiscal 2017, the Internal Revenue Service approved and paid refund claims submitted in connection with Medical Device Excise Tax filings forthe January 1, 2013 through December 31, 2015 periods. As a result, the Company recorded a $12.4 million gain in fiscal 2017 within general andadministrative expenses.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. During fiscal 2016, the Company repurchased 7.3 million shares of its common stock for totalconsideration of $250.0 million. This share repurchase authorization was fully utilized.On June 21, 2016, the Company's Board of Directors authorized the repurchase of up to an additional $500.0 million of the Company's outstandingcommon stock over the next five years. There were no repurchases of common stock made underF-43Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsthis authorization during fiscal 2016. During fiscal 2017, the Company repurchased 5.3 million shares of its common stock for total consideration of $200.1million.Stock-Based CompensationEquity Compensation PlansThe Company has one share-based compensation plan pursuant to which awards are currently being issued—the 2008 amended and restated EquityIncentive Plan (“2008 Equity Plan”). The purpose of the 2008 Equity Plan is to provide stock options, restricted stock units and other equity interests in theCompany to employees, officers, directors, consultants and advisors of the Company and any other person who is determined by the Board of Directors tohave 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 atotal of 31.5 million shares were reserved for issuance under this plan. As of September 30, 2017, the Company had 6.8 million shares available for futuregrant under the 2008 Equity Plan.The following presents stock-based compensation expense in the Company’s Consolidated Statements of Operations in fiscal 2017, 2016 and 2015: 2017 2016 2015Cost of revenues $10.7 $10.5 $8.7Research and development 11.2 10.8 8.6Selling and marketing 11.9 10.9 8.8General and administrative 34.4 32.8 29.1Restructuring and divestiture — 0.4 4.1 $68.2$65.4$59.3Grant-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 2017, 2016 and 2015and related assumptions are noted in the following table: Years endedSeptember 30, 2017 September 24, 2016 September 26, 2015Options granted (in millions) 1.0 1.1 1.3Weighted-average exercise price $38.07 $39.32 $27.68Weighted-average grant date fair value $12.33 $12.91 $9.95Assumptions: Risk-free interest rates 1.8% 1.6% 1.7%Expected life (in years) 4.7 4.7 5.3Expected volatility 36.6% 37.8% 38.6%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 had its own derived service period. The Company recognized compensationexpense under the accelerated method as prescribed by ASC 718 in fiscal 2014 through a portion of fiscal 2015, and all tranches vested due to the definedaverage stock prices being met for the required period. In addition, per the terms of his employment agreement, the Company granted 0.2 million restrictedstock units ("RSUs") to match Mr. MacMillan’s purchase of 0.2 million shares of the Company’s common stock on the open market in the second quarter offiscal 2014. The RSUs cliff vest three years from the date of grant, and the Company accounted for this grant as a liability award pursuant to ASC 718 becausethis RSU award contained an additional vesting condition (the requirement that Mr. MacMillan retain the matching shares during the vestingF-44Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsperiod) that was not service, performance or market based. As such, this award was marked-to-market at each reporting period and vested during fiscal 2017 atwhich time the liability of $7.8 million was reclassified to additional paid-in-capital.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 four or five years with annual vesting of 25% and 20% per year, respectively, on the anniversary of the grant date, and RSUsgenerally vest over three or four years with annual vesting at 33% and 25% per year, respectively, on the anniversary of the grant date. Effective in the fourthquarter of fiscal 2016, the Company implemented a retirement provision providing for the continued vesting of equity awards granted after November 6,2015 once an employee meets certain age and years of service criteria and retires from the Company. This provision from an accounting perspective mayresult in a shorter requisite service period for certain employees, resulting in accelerated stock-based compensation expense. Since this provision affectedpreviously granted awards, it was accounted for as a modification and the Company recognized an additional $4.0 million of expense in the fourth quarter offiscal 2016.The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected tovest. ASC 718 requires forfeitures to be estimated at the time granted and revised, if necessary, in subsequent periods if actual forfeitures differ from thoseestimates. Based on an analysis of historical forfeitures, the Company has determined a specific forfeiture rate for certain employee groups and has appliedforfeiture rates ranging from 0% to 7.0% as of September 30, 2017 depending on the specific employee group. This analysis is re-evaluated annually and theforfeiture 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, $10.9 million, and $12.2 million in fiscal 2017, 2016 and 2015,respectively. Stock compensation expense related to stock units, including RSUs, performance stock units ("PSUs") and MSUs, was $51.6 million, $50.5million, and $43.7 million in fiscal 2017, 2016 and 2015, respectively. The related tax benefit recorded in the Consolidated Statements of Income was $22.6million, $23.1 million and $17.7 million in fiscal 2017, 2016 and 2015, respectively. Included within stock-based compensation expense in fiscal 2016 and2015 is $0.4 million and $4.1 million, respectively, related to modification accounting, the acceleration of vesting of certain retention RSUs provided undertheir original terms upon termination, and the acceleration of vesting for certain options assumed in the Gen-Probe acquisition related to employees who wereterminated in connection with the Company’s restructuring action to consolidate its Diagnostics operations. The original terms of the stock options assumedin the Gen-Probe acquisition provided for acceleration upon a change-in-control and termination within 18 months of the change-in-control. AtSeptember 30, 2017, there was $21.0 million and $54.6 million of unrecognized compensation expense related to stock options and RSUs, respectively, to berecognized over a weighted average period of 2.5 years and 1.8 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 30, 2017: Numberof Shares (inmillions) Weighted-AverageExercise Price Weighted-AverageRemainingContractual Life(in Years) AggregateIntrinsicValue (in millions)Options outstanding at September 24, 2016 6.1 $25.37 4.9 $80.1Granted 1.0 38.07 Canceled/ forfeited (0.2) 30.59 Exercised (1.4) 23.25 $25.9Options outstanding at September 30, 2017 5.5 $28.15 5.4 $50.3Options exercisable at September 30, 2017 2.6 $23.31 3.6 $34.8Options vested and expected to vest at September 30, 2017(1) 5.4 $28.09 5.5 $50.0 (1)This represents the number of vested stock options as of September 30, 2017 plus the unvested outstanding options at September 30, 2017 expectedto vest in the future, adjusted for estimated forfeitures.F-45Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsDuring fiscal 2016 and 2015, 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 $21.6 million and $42.0 million, respectively.A summary of the Company’s RSU activity during the year ended September 30, 2017 is presented below: Non-vested Shares Number ofShares(in millions) Weighted-AverageGrant-Date FairValueNon-vested at September 24, 2016 2.8 $29.40Granted 1.0 38.03Vested (1.2) 27.43Forfeited (0.3) 32.21Non-vested at September 30, 2017 2.3 $34.06The 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 2017, 2016 and 2015 the total fair value ofRSUs vested was $38.5 million, $28.4 million and $27.2 million, respectively.The Company also granted 0.2 million and 0.2 million and 0.3 million PSUs during fiscal 2017, 2016, and 2015, respectively, to members of theCompany's senior management team, which have a weighted-average grant date fair value of $38.84 and $39.72,and 26.58, respectively. Each recipient of thePSUs is eligible to receive between zero and 200% of the target number of shares of the Company’s common stock at the end of three year performance periodprovided the Company’s defined Return on Invested Capital metrics are achieved. These awards cliff-vest three years from the date of grant, and theCompany is recognizing compensation expense ratably over the required service period based on its estimate of the number of shares will vest uponachieving the measurement criteria. If there is a change in the estimate of the number of shares that are probable of vesting, the Company will cumulativelyadjust compensation expense in the period that the change in estimate is made. The Company also granted 0.1 million MSUs during fiscal 2017 to its seniormanagement team. Each recipient of MSUs is eligible to receive between zero and 200% of the target number of shares of the Company’s common stock atthe end of three year performance period based upon achieving a certain total shareholder return relative to a defined peer group. The MSUs were valued at$48.98 per share using the Monte Carlo simulation model. These awards cliff-vest three years from the date of grant, and the Company is recognizingcompensation expense for the MSUs ratably over the service period.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. Stock-based compensation expense in fiscal 2017, 2016 and2015 was $4.4 million, $4.0 million and $3.4 million, respectively.The Company uses the Black-Scholes model to estimate the fair value of shares to be issued as of the grant date using the following weighted averageassumptions: September 30, 2017 September 24, 2016 September 26, 2015Assumptions: Risk-free interest rates 0.72% 0.34% 0.10%Expected life (in years) 0.5 0.5 0.5Expected volatility 24.9% 27.2% 27.4%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 $20.2 million, $16.2million and $14.4 million for fiscal 2017, 2016 and 2015, respectively.F-46Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents10. 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, unless the participant meets the plan retirement provisionof reaching a certain age and years of service criteria in which case the expense is accelerated to match the required service period to receive such benefit.Under the DCP, the Company recorded compensation expense related to Company contributions of $3.4 million, $3.1 million and $1.8 million in fiscal2017, 2016 and 2015, respectively. The full amount of the discretionary contribution, net of forfeitures, along with employee deferrals is recorded withinaccrued expenses and totaled $43.2 million and $37.0 million at September 30, 2017 and September 24, 2016, 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 30, 2017 andSeptember 24, 2016 was $41.0 million and $36.0 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 2017, 2016 and 2015, are recorded within 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. While these sharesupon vesting are not distributed to the individuals and are not outstanding, these shares will be included in basic weighted average shares outstanding usedto calculate earnings per share.11. Commitments and ContingenciesFinance 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. 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. The Company recorded the fair market value of the buildings and land aggregating $28.3 million within property and equipment on itsConsolidated Balance Sheets. Depreciation expense related to the buildings and land is recorded within depreciation in the Company's ConsolidatedStatements of Cash Flows. During fiscal 2016, the Company executed an amendment to one of the leases extending the term to 2024, and a renewal optionwas removed. There were no other significant provisions to the terms of the lease agreement. At September 30, 2017, the Company has recorded $3.2 millionin accrued expenses and $34.1 million in other long-term liabilities related to these obligations. The current term of the leases is for a period ofapproximately 10 and 8 years, respectively, with the option to extend for one lease for two consecutive 5-year terms and the other for one 5-year term.F-47Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsFuture minimum lease payments, including principal and interest, under these leases were as follows at September 30, 2017: Fiscal 2018$2.9Fiscal 20191.2Fiscal 20201.2Fiscal 20211.2Fiscal 20221.2Thereafter1.7Total minimum payments9.4Less-amount representing interest(3.0)Total$6.4As a result of the Cynosure acquisition, the Company has capital leases the for the buildings at its primary U.S. operating facility and certain equipmentand vehicles with payments due through May 2028. Future minimum lease payments, including principal and interest, under these leases were as follows atSeptember 30, 2017:Fiscal 2018$2.8Fiscal 20192.8Fiscal 20202.8Fiscal 20212.9Fiscal 20223.0Thereafter17.3Total minimum lease payments$31.6Less-amount representing interest(7.3)Present value of obligations under capitallease$24.3Current portion of capital lease obligations1.6Capital lease obligations, net of currentportion$22.7Non-cancelable Purchase and Royalty CommitmentsThe Company has certain non-cancelable purchase obligations primarily related to inventory purchases and diagnostics instruments, primarily Panthersystems, and to a lesser extent other operating expense commitments. These obligations are not recorded in the Consolidated Balance Sheets. For reasons ofquality assurance, sole source availability or cost effectiveness, certain key components and raw materials and instruments are available only from a solesupplier and the Company has certain long-term supply contracts to assure continuity of supply. At September 30, 2017, purchase commitments are asfollows:Fiscal 2018$56.4Fiscal 20194.7Fiscal 20201.1Fiscal 20211.1Fiscal 20221.1Total$64.4Concentration of SuppliersThe Company purchases certain components of its products from a single or small number of suppliers. A change in or loss of these suppliers couldcause a delay in filling customer orders and a possible loss of sales, which could adversely affect results of operations; however, management believes thatsuitable replacement suppliers could be obtained in such an event.F-48Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOperating LeasesThe Company conducts its operations in leased facilities under operating lease agreements that expire through fiscal 2035. Substantially all of theCompany’s lease agreements require the Company to maintain the facilities during the term of the lease and to pay all taxes, insurance, utilities and othercosts associated with those facilities. The Company makes customary representations and warranties and agrees to certain financial covenants andindemnities. In the event the Company defaults on a lease, typically the landlord may terminate the lease, accelerate payments and collect liquidateddamages. As of September 30, 2017, 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 30, 2017 are as follows: Fiscal 2018$20.9Fiscal 201918.0Fiscal 202015.2Fiscal 202112.5Fiscal 202211.4Thereafter27.0Total$105.0Rent expense, net of sublease income from these locations, was $19.3 million, $17.9 million, and $19.2 million for fiscal 2017, 2016 and 2015,respectively.The Company subleases a portion of a building it owns and some of its rented facilities and has received aggregate rental income of $2.3 million, $2.4million and $2.0 million in fiscal 2017, 2016 and 2015, respectively, which has been recorded as an offset to rent expense. The future minimum annual rentalincome payments under these sublease agreements at September 30, 2017 are as follows: Fiscal 2018$2.3Fiscal 20192.3Fiscal 20201.5Fiscal 20210.4Fiscal 20220.4Thereafter0.7Total$7.612. Litigation and Related MattersOn June 9, 2010, Smith & Nephew, Inc. ("Smith & Nephew") filed suit against Interlace Medical, Inc. ("Interlace"), which the Company acquired onJanuary 6, 2011, in the United States District Court for the District of Massachusetts. The complaint alleged that the Interlace MyoSure hysteroscopic tissueremoval device infringed U.S. patent 7,226,459 (the '459 patent). On November 22, 2011, Smith & Nephew filed suit against the Company in the UnitedStates District Court for the District of Massachusetts. The complaint alleged that use of the MyoSure tissue removal system infringed U.S. patent 8,061,359(the '359 patent). Both complaints sought preliminary and permanent injunctive relief and unspecified damages. On September 4, 2012, following a two weektrial, the jury returned a verdict of infringement of both the '459 and '359 patents and assessed damages of $4.0 million. A two-day bench trial regarding theCompany’s assertion of inequitable conduct on the part of Smith & Nephew with regard to the '359 patent began on December 10, 2012 and oral argumentson the issue of inequitable conduct were presented on February 27, 2013. On June 27, 2013, the Court denied the Company’s motions related to inequitableconduct and allowed Smith & Nephew’s request for injunction, but ordered that enforcement of the injunction be stayed until final resolution, includingappeal, of the current re-examinations of both patents at the United States Patent and Trademark Office (“USPTO”). The Court also rejected the jury’s damageaward and ordered the parties to identify a mechanism for resolving the damages issue. The USPTO issued final decisions that the claims of the '459 and the'359 patents asserted as part of the litigation are not patentable, which decisions Smith & Nephew appealed to the U.S. Patent Trial and Appeal Board. In2016, the U.S. Patent Trial and Appeal Board (i) affirmed the USPTO decision with respect to the '459 patent, holding that the claims at issue are invalid, and(ii) reversed the USPTO decision with respect to the '359 patent, holding thatF-49Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 claims at issue are not invalid. The Company and Smith & Nephew have appealed the decisions by the Patent Trial and Appeal Board on the '359 patentand the '459 patent, respectively, to the U.S. Court of Appeals for the Federal Circuit. Briefing on both appeals was completed on June 7, 2017. Oral argumenton the ‘459 patent took place on October 4, 2017, and oral argument on the ‘359 patent is scheduled for December 7, 2017. At this time, based on availableinformation regarding this litigation, the Company is unable to reasonably assess the ultimate outcome of this case or determine an estimate, or a range ofestimates, of potential losses.On April 11, 2017, Minerva Surgical, Inc. (“Minerva”) filed suit against the Company and Cytyc Surgical Products, LLC (“Cytyc”) in the UnitedStates District Court for the Northern District of California alleging that the Company’s and Cytyc’s NovaSure ADVANCED endometrial ablation deviceinfringes Minerva’s U.S. patent 9,186,208. Minerva is seeking a preliminary and permanent injunction against the Company and Cytyc from selling thisNovaSure device as well as enhanced damages and interest, including lost profits, price erosion and/or royalty. A hearing on Minerva’s motion is scheduledfor December 14, 2017. 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 Life Sciences, Inc. ("Enzo") filed suit against the Company's subsidiary, Gen-Probe Incorporated ("Gen-Probe"), in the UnitedStates District Court for the District of Delaware, alleging that certain of Gen-Probe’s diagnostics products, including products that incorporate Gen-Probe’shybridization protection assay technology (HPA), which include the Aptima line of products, infringe Enzo’s U.S. patent 6,992,180 (the '180 patent). OnMarch 6, 2012, Enzo filed suit against the Company in the United States District Court for the District of Delaware, alleging that products based on theCompany's Invader chemistry platform, such as Cervista HPV HR and Cervista HPV 16/18, infringe the '180 patent. On July 16, 2012, Enzo amended itscomplaint to include additional products that include HPA or TaqMan reagent chemistry, including the Progensa, AccuProbe and Prodesse product lines. TheCompany counter-claimed for non-infringement, invalidity and unenforceability of the '180 patent. On September 30, 2013, Enzo filed its infringementcontentions which added products including "Torch" probes (e.g., MilliPROBE Real-Time Detection System for Mycoplasma), PACE and certain Procleixassays. Both complaints seek preliminary and permanent injunctive relief and unspecified damages. Enzo asserted the '180 patent claims against six othercompanies, three of which have settled with Enzo. Summary judgment and Daubert motions were filed by the parties on December 15, 2016. A hearing on thesummary judgment motions was held on April 4, 2017, and on June 28, 2017, the Court ruled that the '180 patent is invalid for nonenablement. Finaljudgment was entered in the case on July 19, 2017, and on August 18, 2017, Enzo filed a notice of appeal with the Court of Appeals for the Federal Circuit.Enzo’s initial brief in support of its appeal is due on November 28, 2017. At this time, based on available information regarding this litigation, the Companyis 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 complaintalleges 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 the '180 patent. The complaint further alleged that certain of the Company’smolecular diagnostic products, including the Company’s Progensa PCA3, Aptima and Procleix products using target capture technology infringe Enzo’s U.S. Patent 7,064,197 (the '197 patent). On June 11, 2015, this matter was stayed, and remains stayed, pending the resolution of summary judgment motions inother related suits involving the '197 patent. On March 30, 2016, Hologic filed two requests for inter partes review of the ‘197 patent at the USPTO. TheUSPTO instituted the two inter partes reviews on all challenged claims on October 4, 2016. Combined oral arguments for the two inter partes reviews wereheld on June 1, 2017. On September 28 and October 2, 2017, the PTAB issued final written decisions in the two inter partes reviews finding that all of thechallenged claims of the’197 patent are unpatentable. Enzo will have an opportunity to appeal the decisions of the USPTO to the United States Court ofAppeals for the Federal Circuit. At this time, based on available information regarding this litigation and the related inter partes reviews, the Company isunable to reasonably assess the ultimate outcome of this case or determine an estimate, or a range of estimates, of potential losses. On October 3, 2016, Enzo filed an additional suit against the Company in the United States District Court for the District of Delaware. Thecomplaint alleges that all of the Company's Progensa PCA3, Aptima and Procleix products infringe U.S. Patent 6,221,581 (the '581 patent). On November 28,2016, the Company filed an answer and counterclaims of non-infringement, invalidity and unenforceability. On June 30, 2017, Hologic filed its initialinvalidity contentions, which provide support for finding that the asserted claims of the '581 patent are invalid based on anticipation, obviousness, lack ofadequate written description and enablement, and indefiniteness. On August 31, 2017, the Company and Enzo filed supplemental invalidity charts andsupplemental infringement charts, respectively. On October 4, 2017, the Company filed for inter partes review of the ‘581 patent with the USPTO based onEnzo’s asserted claims. A decision on whether to institute inter partes review is expected in April 2018. At this time, based on available information regardingthis litigation and the related requestF-50Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsfor inter partes review, the Company is unable to reasonably assess the ultimate outcome of this case or determine an estimate, or a range of estimates, ofpotential losses. On February 3, 2017, bioMérieux, S.A. and bioMérieux, Inc. (collectively “bioMérieux”) filed suit against the Company in the United States DistrictCourt for the Middle District of North Carolina. The complaint alleges that the Company’s Aptima HIV-1 RNA Qualitative assay and Aptima HIV-1 Quant Dxassay, as well as products manufactured by the Company and sold to Grifols, S.A. and Grifols Diagnostic Solutions Inc. (“Grifols USA”) for resale under thenames Procleix HIV-1/HCV assay, Procleix Ultrio assay, and Procleix Ultrio Plus assay, infringe U.S. Patent Nos. 8,697,352 and 9,074,262. On April 3, 2017,the Company and Grifols USA filed a motion to dismiss asking the Court to dismiss the complaint in its entirety for bioMérieux’s failure to state a claim uponwhich relief can be granted. On June 9, 2017, Hologic and Grifols USA filed a supplemental motion to dismiss for improper venue. bioMérieux filed aresponse to the venue motion on June 30, 2017, and Hologic and Grifols USA responded by filing a brief in further support of their motion to dismiss forimproper venue on July 14, 2017. At this time, based on available information regarding this litigation, the Company is unable to reasonably assess theultimate outcome of this case or determine an estimate, or range of estimates, of potential losses. On July 27, 2016, plaintiff ARcare, Inc., individually and as putative representative of a purported nationwide class, filed a complaint againstCynosure. The plaintiff alleges that Cynosure violated the Telephone Consumer Protection Act by: (i) sending fax advertisements that did not comply withstatutory and Federal Communications Commission requirements that senders provide recipients with certain information about how to opt out fromreceiving faxed advertisements in the future; and (ii) sending unsolicited fax advertisements. The complaint sought damages, declaratory and injunctiverelief, and attorneys’ fees on behalf of a purported class of all recipients of purported fax advertisements that the plaintiff alleges did not receive an adequateopt-out notice. On September 30, 2016, Cynosure answered the complaint and denied liability. On September 7, 2016, the plaintiff sent a demand letterseeking a class settlement for statutory damages under Massachusetts General Laws, Chapter 93A § 9 (“Chapter 93A”). On October 7, 2016, Cynosureresponded denying any liability under Chapter 93A, but offering the plaintiff statutory damages of $25 on an individual basis. In March 2017, Cynosure andARcare entered into a settlement agreement, subject to court approval, which requires Cynosure to pay settlement compensation of $8.5 millionnotwithstanding the number of claims filed. If approved, Cynosure would receive a full release from the settlement class concerning the conduct alleged inthe complaint. A preliminary approval hearing was held on November 6, 2017. As a result of the settlement agreement, Cynosure recorded a charge of $9.2million, in the period ended December 31, 2016, which was accrued on the Company's balance sheet as of September 30, 2017. On March 17, 2017, prior to the consummation of Hologic’s acquisition of Cynosure, Hologic received a written demand for appraisal fromBlueMountain Capital Management LLC and its affiliates with respect to 1,200,000 shares of Cynosure (value of $79.2 million at $66.00 per share). On April17, 2017, the shareholders filed a Petition for Appraisal of Stock in the Court of Chancery of the State of Delaware requesting appraisal and payment of thefair value of their shares. The Company filed a response on May 5, 2017. On August 30, 2017, the shareholders withdrew their Petition, and the matter is fullyresolved. On March 17, 2017, a purported shareholder of Cynosure, Michael Guido, filed an action against Cynosure in the Court of Chancery of the State ofDelaware pursuant to Section 220 of the Delaware General Corporation Law seeking the production of certain books and records, including books andrecords related to the acquisition of Cynosure by Hologic. The action follows Cynosure’s rejection of Mr. Guido’s demand for these books and records on theground that he had not met the requirements of the statute. In addition to books and records, the complaint seeks reasonable attorneys’ fees. The Companyfiled an answer to the complaint on April 10, 2017. On June 29, 2017, the parties agreed to stay all proceedings in the action and to suspend all the currentdeadlines in an attempt to resolve the matter. Hologic has since provided certain board minutes and materials to plaintiff's counsel on a Rule 408 "settlementpurposes only" basis, and plaintiff's counsel is evaluating whether or not they intend to continue to pursue the action. At this time, based on availableinformation regarding this matter, the Company is unable to reasonably assess the ultimate outcome of this case or determine an estimate, or range ofestimates, of potential losses. 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 the ultimate resolution of which could 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-51Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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. DispositionBlood Screening BusinessOn December 14, 2016, the Company entered into a definitive agreement to sell the assets of its blood screening business to its long-timecommercial partner, Grifols for a sales price of $1.85 billion in cash, subject to adjustment based on an estimated closing amount of inventory. Thedivestiture was completed on January 31, 2017, and the Company received $1.865 billion. The sale resulted in a gain of $899.7 million recorded in thesecond quarter of fiscal 2017 within operations in the Consolidated Statements of Income. As a result of this disposition and proceeds received, the Companyrecorded a tax obligation of $649.5 million, which was paid during fiscal 2017. Upon the closing of the transaction, the Company's existing collaborationagreement with Grifols terminated, and a new collaboration agreement was executed as part of this transaction pursuant to which the Company providescertain research and development services to Grifols. In addition, the Company agreed to provide transition services to Grifols over the next two to threeyears depending on the nature of the respective service, including the manufacture of inventory. The Company has also agreed to sell Pantherinstrumentation and certain supplies to Grifols as part of a long term supply agreement. In determining the accounting for the multiple elements of the overallarrangement, the Company allocated $13.1 million of the proceeds to these elements based on their estimated fair values.The Company determined this disposal does not qualify to be reported as a discontinued operation as the blood screening business was deemed notto be strategic to the Company and has not had and will not have a major effect on the Company's operations and financial results. Under the previouscollaboration agreement, the Company performed research and development activities and manufacturing, while Grifols performed the commercial anddistribution activities. The blood screening business was embedded within the Company's molecular diagnostics business, and the Company retainsownership and will continue to use the intellectual property for the underlying technology of its molecular diagnostics assays and instrumentation.Income from operations of the disposed business presented below represents the pretax profit of the business as it was operated prior to the date ofdisposition. The operating expenses include only those that were incurred directly by and were retained by the disposed business and are now incurred byGrifols. As noted above, the Company is performing a number of transition services and the financial impact from these services are not included in theamounts presented below and the Company is in effect serving as a contract manufacturer of assays for Grifols for a two to three year period. Income fromoperations of the disposed business for the years periods ended September 30, 2017 and September 24, 2016 was as follows: Twelve Months Ended September 30, 2017September 24, 2016Income from operations$45.8$99.1Under the long term supply agreement and transition services agreement to manufacture assays, subsequent to disposing the blood screening business,the Company recognized $44.0 million of revenue in fiscal 2017.Prior Collaboration Agreement with GrifolsUnder its prior collaboration agreement with Grifols, the Company manufactured blood screening products, while Grifols was responsible formarketing, sales and service of those products, which Grifols sold under its trademarks. The Company was entitled to recover 50% of its manufacturing costsincurred in connection with the collaboration and received a percentage of the blood screening assay revenue generated under the collaboration. TheCompany’s share of revenue from assays it sold to Grifols was 50%.The Company recognized product revenue, and collaborative research and license revenue, which is included within services and other revenues, underthe prior collaboration agreement. The Company recognized revenue of $96.5 million, $235.4 million and $253.1 million under this collaboration agreementin fiscal 2017, 2016, and 2015 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 ofF-52Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsdisposable supplies, primarily used for diagnostic testing and surgical procedures. The Company has five reportable segments: Diagnostics, Breast Health,Medical Aesthetics, GYN Surgical and Skeletal Health. Certain reportable segments represent an aggregation of operating units within each segment. TheCompany measures and evaluates its reportable segments based on segment revenues and operating income adjusted to exclude the effect of non-cashcharges, such as intangible asset amortization expense, intangible asset impairment charges, transaction and integration expenses for acquisitions,restructuring, consolidation and divestiture charges, litigation charges, and other one-time or unusual items.Identifiable assets for the five reportable segments consist of inventories, intangible assets, goodwill, and property, plant and equipment. The Companyfully allocates depreciation expense to its five reportable segments. The Company has presented all other identifiable assets as corporate assets. There wereno intersegment revenues. Segment information for fiscal 2017, 2016, and 2015 was as follows: Years ended September 30, 2017 September 24, 2016 September 26, 2015Total revenues: Diagnostics $1,197.1 $1,236.9 $1,211.8Breast Health 1,138.3 1,112.8 1,063.4Medical Aesthetics 207.5 — —GYN Surgical 427.1 393.1 335.8Skeletal Health 88.8 89.9 94.0 $3,058.8$2,832.7 $2,705.0Operating income: Diagnostics $1,054.2 $126.0 $109.5Breast Health 373.4 350.5 296.3Medical Aesthetics (115.9) — —GYN Surgical 65.0 69.1 38.6Skeletal Health (6.5) 3.0 10.7 $1,370.2 $548.6 $455.1Depreciation and amortization: Diagnostics $278.9 $341.8 $358.7Breast Health 19.7 22.6 28.6Medical Aesthetics 54.2 — —GYN Surgical 95.7 99.9 102.7Skeletal Health 0.7 1.1 1.4 $449.2$465.4 $491.4Capital expenditures: Diagnostics $50.9 $53.5 $55.6Breast Health 12.0 10.6 12.8Medical Aesthetics 7.3 — —GYN Surgical 15.2 17.7 9.5Skeletal Health 1.2 0.4 0.4Corporate 21.0 12.3 11.1 $107.6$94.5 $89.4 F-53Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 30, 2017 September 24, 2016 September 26, 2015Identifiable assets: Diagnostics $2,621.6 $3,771.9 $4,055.8Breast Health 824.0 809.1 815.4Medical Aesthetics 1,751.2 — —GYN Surgical 1,494.6 1,570.7 1,658.1Skeletal Health 25.5 30.9 25.3Corporate 1,262.7 1,134.4 1,087.9 $7,979.6 $7,317.0 $7,642.5The 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, the United Kingdom and Germany. The Company’s sales in Asia-Pacific are predominantly derived from China, Australia and Japan. The “Rest ofworld” designation includes Canada, Latin America and the Middle East.Revenues by geography as a percentage of total revenues were as follows: Years ended September 30, 2017 September 24, 2016 September 26, 2015United States 77.6% 78.9% 76.0%Europe 10.0% 10.2% 11.8%Asia-Pacific 8.1% 7.6% 8.5%Rest of world 4.3% 3.3% 3.7% 100.0% 100.0% 100.0%The Company’s property, plant and equipment, net are geographically located as follows: September 30, 2017 September 24, 2016 September 26, 2015United States $386.5 $370.7 $369.1Costa Rica 30.1 28.1 27.7Europe 57.1 49.2 50.8Rest of world 17.5 12.2 9.5 $491.2 $460.2 $457.1F-54Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents15. Accrued Expenses and Other Long-Term LiabilitiesAccrued expenses and other long-term liabilities consisted of the following: September 30, 2017 September 24, 2016Accrued Expenses Compensation and employee benefits $176.7 $176.4Income and other taxes 66.9 38.4Other 131.7 72.8 $375.3 $287.6 September 30, 2017 September 24, 2016Other Long-Term Liabilities Reserve for income tax uncertainties $88.3 $167.6Accrued lease obligation—long-term 34.1 34.8Pension liabilities 10.0 11.2Other 7.8 10.9 $140.2 $224.516. 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 30, 2017 and September 24, 2016, the Company’s pension liability was $9.9 million and $11.0 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.Change in Benefit Obligation Years endedSeptember 30, 2017 September 24, 2016 September 26, 2015Benefit obligation at beginning of year $(11.0) $(10.0) $(10.3)Service cost — — —Interest cost (0.1) (0.2) (0.3)Plan participants’ contributions — — —Actuarial gain (loss) 1.5 (1.2) (0.9)Foreign exchange gain (0.6) 0.1 1.2Benefits paid 0.3 0.3 0.3Benefit obligation at end of year (9.9)(11.0)(10.0)Plan assets — — —Benefit obligation at end of year$(9.9)$(11.0)$(10.0)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 30, 2017 September 24, 2016 September 26, 2015Service cost $— $— $—Interest cost 0.1 0.4 0.3Expected return on plan assets — — —Amortization of prior service cost — —Recognized net actuarial gain 0.4 (0.2) —Net periodic benefit cost $0.5$0.2$0.3 Weighted-Average Net Periodic Benefit Cost Assumptions 2017 2016 2015Discount rate 2.15% 1.30% 2.05%Expected return on plan assets —% —% —%Rate of compensation increase —% —% —%F-55Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the 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 projected benefit obligation for the German Pension Benefits with projected benefit obligations in excess of plan assets was $9.9 million and $11.0million at September 30, 2017 and September 24, 2016, respectively, and the accumulated benefit obligation for the German Pension Benefits was $9.9million and $11.0 million at September 30, 2017 and September 24, 2016, 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 at both September 30, 2017 and September 24, 2016, respectively.The table below reflects the total Pension Benefits expected to be paid for the German Pension Benefits each fiscal year as of September 30, 2017: 2018$0.42019$0.42020$0.42021$0.42022$0.42023 to 2027$2.2The 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 2017, 2016 and 2015. Additionally, the Company has Swiss pension plans, which were insignificant in fiscal2017, 2016, and 2015.17. Quarterly Statement of Operations Information (Unaudited)The following table presents a summary of quarterly results of operations for fiscal 2017 and 2016: 2017FirstQuarter SecondQuarter ThirdQuarter FourthQuarterTotal revenue $734.4 $715.4 $806.1 $802.9Gross profit 404.8 388.7 409.6 417.9Net income (1) 86.5 526.8 59.5 82.7Diluted net income per common share $0.30 $1.84 $0.21 $0.29 2016FirstQuarter SecondQuarter ThirdQuarter FourthQuarterTotal revenue $695.2 $693.3 $717.4 $726.8Gross profit 379.1 385.0 393.1 406.1Net income (2) 84.9 68.9 84.8 92.2Diluted net income per common share $0.29 $0.24 $0.30 $0.33 (1)Net income in the first quarter of fiscal 2017 included restructuring charges of $3.2 million and acquisition charges of $2.6 million. Net income in thesecond quarter of fiscal 2017 included a gain on the sale of the blood screening business of $899.7 million, acquisition charges of $19.4 million, andrestructuring charges of $1.6 million. Net income in the third quarter of fiscal 2017 included restructuring charges of $6.0 million and a debtextinguishment loss of $2.6 million. Net income in the fourth quarter of fiscal 2017 included restructuring charges of $2.5 million, and gain on sale ofcost method investment of $2.0 million.(2)Net income in the first quarter of fiscal 2016 included restructuring charges of $2.3 million and a realized gain of $25.1 million related to the sale ofall the shares in a marketable security investment. Net income in the second quarter of fiscal 2016 included restructuring charges of $3.8 million and adebt extinguishment loss of $4.5 million. Net income in the fourth quarter of fiscal 2016 included restructuring charges of $2.9 million, a debtextinguishment loss of $0.8 million, and an other-than-temporary impairment charge of $1.1 million related to a marketable security.F-56Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.CERTIFICATE OF INCORPORATIONOFHOLOGIC, INC.The undersigned, a natural person, for the purposes of organizing a corporation for conducting the business and promotingthe purposes hereinafter stated, under the provisions and subject to the requirements of the laws of the State of Delaware (particularlyChapter 1, Title 8 of the Delaware Code and the acts amendatory thereof and supplemental thereto, and generally known as the“General Corporation Law of the State of Delaware”), hereby certifies that:FIRST: The name of the corporation (hereinafter called the “Corporation”) is Hologic, Inc.SECOND: The address, including street, number, city, and county, of the registered office of the Corporation in the State ofDelaware is 32 Lookerman Square, Suite L-100, Dover, County of Kent, Delaware 19901; and the name of the registered agent of theCorporation in the State of Delaware at such address is Prentice-Hall Corporate Services.THIRD: The nature of the business and the purposes to be conducted and promoted by the Corporation, shall be (a) toengage in the manufacture, sale, research and development of medical products and (b) any lawful business, to promote any lawfulpurpose, and to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law ofthe State of Delaware.FOURTH:(a) The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i)10,000,000 shares of Common Stock, $.01 par value per share (“Common Stock”), and (ii) 1,622,685 shares of Preferred Stock, $.01par value per share (the “Preferred Stock”).(b) The Preferred Stock may be issued and designated by the Board of Directors, in one or more classes or seriesand with such rights, powers, preferences and terms and at such times and for such consideration as the Board of Directors shalldetermine, without further stockholder action. With respect to each class or series of Preferred Stock, prior to issuance, the Board ofDirectors by resolution shall designate that class or series to distinguish it from other classes and series of stock of the Corporation,shall specify the number of shares to be included in the class or series, and shall fix the rights, powers, preferences and terms of theshares of the class or series, including, but without limitation: (i) the dividend rate, which may be fixed or variable, its preference as toany other class or series of capital stock, and whether dividends will be cumulative or noncumulative; (ii) whether the shares are to beredeemable and, if so, at what times and prices (which price or prices may, but need not, vary according to the time or circumstances ofsuch redemption) and on what other terms and conditions; (iii) the terms and amount of any sinking fund provided for the purchase orredemption of the shares; (iv) whether the shares shall be convertible or exchangeable and, if so, the times, prices, rates, adjustmentsand other terms of such conversion or exchange; (v) the voting rights, if any, applicable to the shares in addition to those prescribed bylaw; (vi) the restrictions and conditions, if any, on the issue or reissue of any additional shares of such class or series or of any otherclass or series of Preferred Stock ranking on a parity with or prior to the shares of such class or series; (vii) whether, and the extent towhich, any of the rights, powers, preferences and terms of any such class or series may be made dependent upon facts ascertainableoutside of the Certificate of Incorporation or outside the resolution or resolutions providing for the issuance of such class or series bythe Board of Directors, provided that the manner in which such facts shall operate is clearly set forth in the resolution or resolutionsproviding for the issuance of such class or series adopted by the Board of Directors; and (viii) the rights of the holders of such sharesupon voluntary or involuntary liquidation, dissolution or winding up of the Corporation.FIFTH: The name and the mailing address of the incorporator(s) are as follows: NAME ADDRESS Ann C. Brachman Brown, Rudnick, Freed & Gesmer One Financial Center Boston, MA 02111SIXTH: The name and the mailing address of the directors of the Corporation, each of whom shall serve until the first annualmeeting of shareholders and until his or her successor is elected and qualified, are as follows: NAME ADDRESSSource: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.S. David Ellenbogen 300 Bear Hill Road Waltham MA 02154Jay A. Stein 300 Bear Hill Road Waltham MA 02154 Esther Sharp One Post Office Square Suite 3800 Boston MA 02109SEVENTH: The Corporation shall have perpetual existence.EIGHTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class ofthem and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State ofDelaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the applicationof any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or onthe application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class ofstockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in numberrepresenting three-fourths in value of the creditors or class of creditors, and/or of the creditors or class of creditors, and/or of thestockholders or class of stockholders of this Corporation, as the case may be, agrees to any compromise or arrangement and to anyreorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and thesaid reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or classof creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on thisCorporation.NINTH: For the management of the business and for the conduct of the affairs of the Corporation, and in further definition,limitation and regulation of the powers of the Corporation and of its directors and of its stockholders or any class thereof, as the casemay be, it is further provided that:(a) The business of the Corporation shall be conducted by the officers of the Corporation under the supervision ofthe Board of Directors.(b) The number of directors which shall constitute the whole Board of Directors shall be fixed by, or in themanner provided in, the By-Laws. No election of Directors need be by written ballot.(c) The Board of Directors of the Corporation may adopt, amend or repeal the By-Laws of the Corporation at anytime after the original adoption of the By-Laws according to Section 109 of the General Corporation Law of the State of Delaware;provided, however, that any amendment to provide for the classification of directors of the Corporation for staggered terms pursuant tothe provisions of subsection (d) of Section 141 of the General Corporation Law of the State of Delaware shall be set forth in anamendment to this Certificate of Incorporation, in an initial By-Law, or in a By-Law adopted by the stockholders of the Corporationentitled to vote.TENTH:(a) The Corporation may, to the fullest extent permitted by Section 145 of the General Corporation Law of theState of Delaware, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power toindemnify under said section from and against any and all of the expenses, liabilities or other matters referred to in or covered by saidsection, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which a person indemnifiedmay be entitled under any By-Law, agreement, vote of stockholders or disinterested Directors or otherwise, both as to action in hisofficial capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be aDirector, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.(b) No director shall be personally liable to the Corporation or its stockholders for monetary damages for anybreach of fiduciary duty by such director as a director. Notwithstanding the foregoing sentence, a director shall be liable to the extentprovided by applicable law (i) for breach of the Director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts oromissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of theGeneral Corporation Law of the State of Delaware or (iv) for any transaction from which the director derived an improper personalbenefit. No amendment to or repeal of this paragraph (b) of this Article Tenth shall apply to or have any effect on the liability orSource: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.alleged liability of any director of the Corporation for or with respect to any acts or omissions of such Director occurring prior to suchamendment.ELEVENTH: From time to time, subject to the provisions of this Certificate of Incorporation (including without limitation theprovisions of paragraph (d) of Article Twelfth and of Article Fourteenth), any of the provisions of this Certificate of Incorporation maybe amended, altered or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may beadded or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders ofthe Corporation by this Certificate of Incorporation are granted subject to the provisions of this Article Eleventh.TWELFTH:(a) Any direct or indirect purchase or other acquisition in one or more transactions by the Corporation or anySubsidiary of any of the outstanding Voting Stock of any class from any one or more individuals or entities known by the Corporationto be a Related Person, who has beneficially owned such security or right for less than two years prior to the date of such purchase, at aprice in excess of the Fair Market Value shall, except as hereinafter provided, require the affirmative vote of the holders of at least two-thirds of the shares ofVoting Stock, voting as a single class, excluding any votes cast with respect to shares of Voting Stock beneficially owned by suchRelated Person. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesserpercentage may be specified by law or any agreement with any national securities exchange, or otherwise, but no such affirmative voteshall be required with respect to any purchase or other acquisition of securities made as part of (i) a tender or exchange offer by theCorporation to purchase securities of the same class made on the same terms to all holders of such securities and complying with theapplicable requirements of the Exchange Act and the rules and regulations thereunder, or any successor rule or regulation or (ii)pursuant to an open-market purchase program conducted in accordance with the requirements of Rule 10b-18 promulgated by theSecurities and Exchange Commission pursuant to the Exchange Act or any successor rule or regulation.(b) A majority of the Continuing Directors shall have the power and duty to determine, on the basis ofinformation known to them after reasonable inquiry, all facts necessary to determine compliance with this Article Twelfth including,without limitation, (i) whether a person is a Related Person, (ii) the number of shares of Voting Stock beneficially owned by anyperson and (iii) whether a price is in excess of Fair Market Value.(c) Nothing contained in this Article Twelfth shall be construed to relieve any Related Person from any fiduciaryobligation imposed by law.(d) Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote ofthe holders of at least two-thirds of the outstanding shares of Voting Stock, voting together as a single class, shall be required to alter,change, amend, repeal or adopt any provision inconsistent with this Article Twelfth.THIRTEENTH: The Board of Directors of the Corporation, when evaluating any offer of another Person to (a) purchase orexchange any securities or property for any outstanding equity securities of the Corporation, (b) merge or consolidate the Corporationwith another corporation, or (c) purchase or otherwise acquire all or substantially all of the properties and assets of the Corporation,shall in connection with the exercise of its judgment in determining what is in the best interests of the Corporation and its stockholders,give due consideration not only to the price or other consideration being offered, but also to all other relevant factors, including butwithout limitation, the interests of the Corporation’s employees, suppliers, creditors and customers, the economy of the state, regionand nation, community and societal considerations, and the long-term and short-term interests of the Corporation and its stockholders,including the possibility that these interests may be best served by the continued independence of the Corporation.FOURTEENTH: Except as otherwise provided in this Certificate of Incorporation, the By-laws, any designation of termspursuant to Section 151 of the General Corporation Law of the State of Delaware, any vote required by stockholders pursuant to saidGeneral Corporation Law, other than the election of directors (which shall not be affected by this provision), shall be effective ifrecommended by a majority of the Continuing Directors and the vote of a majority of each class of stock outstanding and entitled tovote thereon; and if not recommended by a majority of the Continuing Directors, then by the vote of 80% of each class of stockoutstanding and entitled to vote thereon.FIFTEENTH: DefinitionsThe following definitions shall apply for the purpose of Articles Twelfth, Thirteenth and Fourteenth only:(a) “Affiliate” shall have the meaning given such term in Rule 12b-2 under the Exchange Act.Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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) “Associate” shall have the meaning given such term in Rule 12b-2 under the Exchange Act.(c) “Continuing Director” shall mean any member of the Board of Directors who is not an Affiliate of anyRelated Person and who was a member of the Board of Directors prior to the time that any such Related Person became a RelatedPerson, and any successor of a Continuing Director who is unaffiliated with any Related Person and is recommended to succeed aContinuing Director by a majority of the Continuing Directors then on the Board of Directors. Notwithstanding the above, a majorityof the then existing Continuing Directors can deem a new director to be a Continuing Director, even though such person is Affiliatedwith a Related Person.(d) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, from time to time.(e) “Fair Market Value” shall mean: (i) in the case of stock, the highest closing sale price during the 30-day periodimmediately preceding the date in question of a share of such stock on the principal United States securities exchange registered underthe Exchange Act on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotationwith respect to a share of such stock during the 30-day period preceding the date in question on the National Association of SecuritiesDealers, Inc. Automated Quotations System or any system then in use or, if no such quotations are available, the fair market value onthe date in question of a share of such stock as determined by the Board of Directors in goodfaith; and (ii) in the case of property other than cash or stock, the fair market value of such property on the date in question asdetermined by the Board of Directors in good faith.(f) “Massachusetts Predecessor” shall mean Hologic, Inc., a Massachusetts corporation.(g) “Merger Date” shall mean the date upon which the Massachusetts predecessor merges with and into theCorporation.(h) “Person” shall mean any individual, firm, corporation or other entity.(i) “Related Person” shall mean any Person (other than the Corporation, any Subsidiary or any individual whowas a stockholder of the Corporation’s Massachusetts Predecessor on December 31, 1985) which, together with its Affiliates andAssociates and with any other Person (other than the Corporation, any Subsidiary or any individual who was a stockholder of theCorporation’s Massachusetts Predecessor on December 31, 1985) with which it or they have entered into, after the Merger Date, anyagreement, arrangement or understanding with respect to acquiring, holding or disposing of Voting Stock, acquires beneficialownership (as defined in Rule 13d-3 of the Exchange Act, except that such term shall include any Voting Stock which such person hasthe right to acquire, whether or not such right may be exercised within 60 days), directly or indirectly of more than 5% of the votingpower of the outstanding Voting Stock after the Merger Date.(j) “Subsidiary” shall mean any corporation in which a majority of the capital stock entitled to vote generally inthe election of directors is owned, directly or indirectly, by the Corporation.(k) “Voting Stock” shall mean all of the then outstanding shares of the capital stock of the Corporation entitled tovote generally in the election of directors.Signed on the 18th day of January, 1990. /s/ Ann C. Brachman -------------------- Ann C. Brachman, IncorporatorCERTIFICATE OF AMENDMENTOFCERTIFICATE OF INCORPORATIONHologic, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State ofDelaware, DOES HEREBY CERTIFY: FIRST: That at a meeting of the Board of Directors of Hologic, Inc., resolutions were duly adopted setting forth a proposedSource: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.amendment to the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting ofthe stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows: RESOLVED: That it is advisable and in the best interests of the corporation to amend the Certificate of Incorporation of thecorporation so that the first paragraph of Article Fourth shall read in its entirety as follows: (a) The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 30,000,000 shares ofCommon Stock, $.01 par value per share (“Common Stock”), and (ii) 1,622,685 shares of Preferred Stock, $.01 par value per share(“Preferred Stock”).SECOND: That thereafter, pursuant to resolution of its Board of Directors, an annual meeting of the stockholders of saidcorporation was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State ofDelaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the GeneralCorporation Law of the State of Delaware. IN WITNESS WHEREOF, said Hologic, Inc. has caused this Certificate to be signed by S. David Ellenbogen, its Chairman,this 27th day of February, 1996.HOLOGIC, INC.By: /s/ S. David Ellenbogen ----------------------------Name: S. David EllenbogenTitle: ChairmanCERTIFICATE OF AMENDMENTOFCERTIFICATE OF INCORPORATION Hologic, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware,DOES HEREBY CERTIFY: FIRST: That at a meeting of the Board of Directors of Hologic, Inc., resolutions were duly adopted setting forth a proposedamendment to the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting ofthe stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows: RESOLVED: That it is advisable and in the best interests of the corporation to amend the Certificate of Incorporation of thecorporation so that the first paragraph of Article Fourth shall read in its entirety as follows: (a) The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 90,000,000shares of Common Stock, $.01 par value per share (“Common Stock”), and (ii) 1,622,685 shares of Preferred Stock, $.01 parvalue per share (“Preferred Stock”), of which 30,000 shares have been designated Series A Junior Participating PreferredStock (“Series A Preferred Stock”). SECOND: That thereafter, pursuant to resolution of its Board of Directors, a special meeting of the stockholders of saidcorporation was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State ofDelaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General CorporationLaw of the State of Delaware. IN WITNESS WHEREOF, said Hologic, Inc. has caused this Certificate to be signed by Glenn P. Muir, its Executive VicePresident, this 15th day of November 2005. Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HOLOGIC, INC. By: /s/ GLENN P. MUIRName: Glenn P. MuirTitle: Vice PresidentCERTIFICATE OF AMENDMENTOFCERTIFICATE OF INCORPORATIONHologic, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware,DOES HEREBY CERTIFY:FIRST: That at a meeting of the Board of Directors of Hologic, Inc. held on May 19, 2007, resolutions were duly adopted settingforth a proposed amendment to the Certificate of Incorporation of said corporation, declaring said amendment to be advisable andcalling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendmentis as follows:RESOLVED: That it is advisable and in the best interests of the corporation to amend the Certificate of Incorporation of thecorporation so that the first paragraph of Article Fourth shall read in its entirety as follows:(a) The total number of shares of all classes of stock which the Corporation shall have authority to issue is(i) 300,000,000 shares of Common Stock, $.01 par value per share (“Common Stock”), and (ii) 1,622,685 shares ofPreferred Stock, $.01 par value per share (“Preferred Stock”), of which 30,000 shares have been designated Series AJunior Participating Preferred Stock (“Series A Preferred Stock”).SECOND: That thereafter, pursuant to resolution of its Board of Directors, a special meeting of the stockholders of saidcorporation was duly called and held, on October 18, 2007, upon notice in accordance with Section 222 of the General CorporationLaw of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of theamendment.THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General CorporationLaw of the State of Delaware.IN WITNESS WHEREOF, said Hologic, Inc. has caused this Certificate to be signed by Glenn P. Muir, its Executive VicePresident, this 22nd day of October, 2007. HOLOGIC, INC. By: /s/ Glenn P. MuirName: Glenn P. MuirTitle: Executive Vice President CERTIFICATE OF AMENDMENTOFCERTIFICATE OF INCORPORATIONHologic, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware,DOES HEREBY CERTIFY:Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.FIRST: That at a meeting of the Board of Directors of Hologic, Inc. held on January 11, 2008, resolutions were duly adoptedsetting forth a proposed amendment to the Certificate of Incorporation of said corporation, declaring said amendment to be advisableand calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposedamendment is as follows:RESOLVED: That it is advisable and in the best interests of the corporation to amend the Certificate of Incorporation of thecorporation so that the first paragraph of Article Fourth shall read in its entirety as follows:(a) The total number of shares of all classes of stock which the Corporation shall have authority to issue is(i) 750,000,000 shares of Common Stock, $.01 par value per share (“Common Stock”), and (ii) 1,622,685 shares ofPreferred Stock, $.01 par value per share (“Preferred Stock”), of which 30,000 shares have been designated Series AJunior Participating Preferred Stock (“Series A Preferred Stock”).SECOND: That thereafter, pursuant to resolution of its Board of Directors, a annual meeting of the stockholders of saidcorporation was duly called and held, on March 11, 2008, upon notice in accordance with Section 222 of the General CorporationLaw of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of theamendment. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General CorporationLaw of the State of Delaware.IN WITNESS WHEREOF, said Hologic, Inc. has caused this Certificate to be signed by Glenn P. Muir, its Executive VicePresident, this 11th day of March, 2008. HOLOGIC, INC. By: /s/ Glenn P. Muir Name: Glenn P. MuirTitle: Executive Vice PresidentSource: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 10.31Schedule 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 Control Agreement, the form ofwhich was filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ended 12/29/2012:Peter J. Valenti, IIIThomas A. WestSource: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 Allison Bebo (the"Executive"), dated as of September 13, 2017.-1-Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 10.45WHEREAS, the Executive serves as a senior executive of the Company; WHEREAS, the Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholdersto assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat, or occurrence of a Change of Control(as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personaluncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Companycurrently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upona Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those ofother corporations;WHEREAS, in recognition of the Executive’s role, the Company and Executive now desire to enter into this Severance and Change of ControlAgreement, which is consistent with the change of control and severance protection provided to the Company’s most senior officers (the “Agreement”); andWHEREAS, this Agreement shall supersede and replace the Executive’s existing Change of Control Agreement, dated as of February 2, 2015, andexisting Severance Agreement dated as of February 2, 2015.NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, the parties hereto, each intending to be legallybound, do hereby agree as follows:1. Certain Definitions.(a) The "Effective Date" shall be the first date during the "Change of Control Period" (as defined in Section 1(b)) on which a Change of Controloccurs. Anything in this Agreement to the contrary notwithstanding, if the Executive's employment with the Company is terminated or the Executive ceasesto be an officer of the Company prior to the date on which a Change of Control occurs, and it is reasonably demonstrated that such termination ofemployment (1) was at the request of a third party who has taken steps reasonably calculated to effect the Change of Control or (2) otherwise arose inconnection with or in anticipation of the Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediatelyprior to the date of such termination of employment. If prior to the Effective Date, the Executive’s employment with the Company terminates, then theExecutive shall have no further rights under this Agreement, except with respect to benefits under Section 6(e), if applicable, or unless such termination ofEmployment was in anticipation of the Change of Control in which case the termination shall be deemed to have occurred after the consummation of theChange of Control.(b) The "Change of Control Period" is the period commencing on the date hereof and ending on December 31, 2020; provided, that commencingon December 31, 2020 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 “Pending Renewal Date”),stating that the Change of Control Period shall not be extended, then the Change of Control Period shall expire two years from the Pending Renewal Date.2. Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean:(a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,as amended (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-2-Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.all of the individuals and entities who were the beneficial owners of the Voting Stock immediately prior to such acquisition in substantially the sameproportion 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 thana majority of the Board of Directors of the Company (the “Board”); or(c) The consummation of (i) a Merger with respect to which all or substantially all of the individuals and entities who were the beneficial owners ofthe Voting Stock immediately prior to such Merger do not, following such Merger, beneficially own, directly or indirectly, more than 50% of the VotingStock of the corporation resulting from the Merger (the “Resulting Corporation”) as a result of the individuals’ and entities’ shareholdings in the Companyimmediately prior to the consummation of the Merger, (ii) a complete liquidation or dissolution of the Company or (iii) the sale or other disposition of all orsubstantially all (as 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 resultsfrom or arises out of a purchase or other acquisition of the Company, directly or indirectly, by a corporation or other entity in which the Executive has agreater than ten percent (10%) direct or indirect equity interest, such event shall not constitute a Change of Control.3. Employment Period. Subject to the terms and conditions hereof, the Company hereby agrees to continue the Executive in its employ, and the Executivehereby agrees to remain in the employ of the Company, for the period commencing on the Effective Date and ending on the last day of the thirty-sixth monthfollowing the month in which the Effective Date occurs (the "Employment Period").4. Terms of Employment.(a) Position and Duties.(i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority,duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned atany time during the 90-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the locationwhere the Executive was employed immediately preceding the Effective Date or any office or location less than 35 miles from such location.(ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, theExecutive agrees to devote her full business time to the business and affairs of the Company and, to the extent necessary to discharge theresponsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently suchresponsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic orcharitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personalinvestments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of theCompany in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conductedby the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scopethereto) subsequent to the Effective Date.-3-Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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) Compensation.(i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall bepaid monthly, having a value at least equal to twelve times the highest monthly base salary paid or payable to the Executive by the Company andits affiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs. During theEmployment Period, the Annual Base Salary shall be reviewed at least annually and shall be increased at any time and from time to time as shall besubstantially consistent with increases in base salary awarded in the ordinary course of business to other peer executives of the Company and itsaffiliated companies. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under thisAgreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall referto Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" includes any company controlled by, controllingor 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 atleast equal 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 Executivehas been employed by the Company for less than twelve full months) bonus (the "Average Annual Bonus") paid or that has been earned and accrued, butunpaid to the Executive by the Company and its affiliated companies in respect of the three fiscal years immediately preceding the fiscal year in which theEffective Date occurs, (b) the Annual Bonus paid for the fiscal year immediately preceding the Effective Date, or (c) the target bonus associated with theCompany achieving its 100 percent target payout level as determined in accordance with the terms of the Company’s bonus plans for senior executives forthe 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 AnnualBonus”); for the avoidance of doubt, the determination of bonus under clause (c) above 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 payable if the Companyexceeds target. Each such Annual Bonus shall be paid no later than the 15th day of the third month of the fiscal year next following the fiscal year for whichthe Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus pursuant to any nonqualified plan of the Company.Notwithstanding anything herein to the contrary, any portion of Annual Base Salary or Annual Bonus electively deferred by the Executive pursuant to aqualified or a non-qualified plan including, but not limited to, the Hologic, Inc. Deferred Compensation Plan or any successor thereto (“DCP”) shall beincluded in determining the 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 Executive shall be paid (i) theAnnual Bonus that would have been paid upon the end of Company’s fiscal year ending after the Change of Control, and (ii) a pro-rata Annual Bonus for anymonths of service performed following the end of the Company’s fiscal year, but prior to the first day of the successor’s fiscal year immediately following theChange of Control. The Annual Bonuses thereafter shall be based on the successor’s first full fiscal year beginning after the Change of Control and successivefiscal 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 andaccrued, 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 ofmonths worked in the fiscal year through the Date of Termination and the denominator of which is 12. Any partial months shall be rounded to the nearestwhole number using normal mathematical convention.(iii) Incentive, Savings and Retirement Plans. In addition to Annual Base Salary and Annual Bonus payable as hereinabove provided, theExecutive shall be entitled to participate during the Employment Period in all incentive, savings and retirement plans, practices, policies andprograms applicable to other peer executives of the Company and its affiliated companies, but in no event shall such plans practices, policies andprograms provide the Executive with incentive, savings and retirement benefits opportunities, in each case, less favorable, in the aggregate, than themost favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programsas in effect at any-4-Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.time during the one-year immediately preceding the Effective Date, or, if more favorable to the Executive, those provided generally at any time afterthe Effective Date to other peer 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 case may be, shall beeligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company andits affiliated companies (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life,accidental death and travel accident insurance plans and programs) and applicable to other peer executives of the Company and its affiliatedcompanies, but in no event shall such plans, practices, policies and programs provide benefits which are less favorable, in the aggregate, than themost favorable of such plans, practices, policies and programs in effect at any time during the one-year period immediately preceding the EffectiveDate, or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Companyand its affiliated companies.(v) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expensesincurred by the Executive upon submission of appropriate accountings in accordance with the most favorable policies, practices and procedures ofthe Company and its affiliated companies in effect at any time during the one-year period immediately preceding the Effective Date or, if morefavorable to the Executive, as in effect 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 mostfavorable plans, practices, programs and policies of the Company and its affiliated companies in effect at any time during the one-year periodimmediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other peerexecutives of the Company and its affiliated companies.(vii) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and withfurnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoingprovided to the Executive by the Company and its affiliated companies at any time during the one-year period immediately preceding the EffectiveDate or, if more favorable to the Executive, as provided at any time thereafter with respect to other peer executives of the Company and its affiliatedcompanies.(viii) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation of at least five (5) weeks and inaccordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect at any timeduring the one-year period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter withrespect to other peer incentives of the Company and its affiliated companies.5. Termination of Employment.(a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. Ifthe Company determines in good faith that the Disability of the Executive has occurred 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 theExecutive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such noticeby the Executive (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).-5-Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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) 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 her 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 her actions did, in fact, constitute for Cause.(c) Good Reason. The Executive's employment may be terminated during the Employment Period by the Executive for Good Reason. For purposesof this Agreement, "Good Reason" means:(i) A material diminution in the Executive’s base compensation;(ii) A material diminution in the Executive’s authority, duties and responsibilities as in effect immediately prior to the Change of Controlor, if applicable, the Date of Termination;(iii) A material diminution in the authority, duties and responsibilities of the supervisor to whom the Executive is required to report as ineffect immediately prior to the Change of Control or, if applicable, the Date of Termination;(iv) A material change in the geographic location in which Executive’s principal office was located immediately prior to the Change ofControl or, if applicable, the Date of Termination;(v) A material diminution in the budget over which the Executive had authority immediately prior to the of the Change of Control or, ifapplicable, the Date of Termination;(vi) Any other action or inaction that constitutes a material breach by the Company of this Agreement or any other agreement under whichthe Executive provides services;provided, however, that Good Reason shall not exist unless the Executive has given written notice to the Company within ninety (90) days of theinitial existence of the Good Reason event or condition(s) giving specific details regarding the event or condition; and unless the Company has hadat least thirty (30) days to cure such Good Reason event or condition after the delivery of such written notice and has failed to cure such event orcondition within such thirty (30) day cure period.(d) Notice of Termination. Any termination by the Company for Cause or by the Executive for Good Reason shall be communicated by Notice ofTermination to the other party hereto given in accordance with Section 13(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination"means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth inreasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and(iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not morethan fifteen days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact orcircumstance which contributes to a showing of Good Reason or Cause shall not waive any right 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.-6-Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 of theExecutive or the Disability Effective Date, as the case may be.6. Obligations of the Company upon Termination.(a) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shallterminate without further obligations to the Executive's legal representatives under this Agreement, other than for (i) payment of the sum of the followingamounts: (A) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (B) the product of (I) the Highest AnnualBonus and (II) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator ofwhich is 365, and (C) any accrued and unpaid Annual Bonus amounts, compensation or vacation pay, in each case, to the extent not yet paid by theCompany (the amounts described in subparagraphs (A), (B) and (C) are hereafter referred to as "Accrued Obligations" and shall be paid to the Executive’sestate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination), (ii) any other benefits or compensation payable underany employee benefit plan in accordance with the applicable plans’ terms, including, without limitation, any non-qualified plan or DCP; (iii) for theremainder of the Employment Period, or such longer period as any plan, program, practice or policy may provide, the Company shall continue benefits to theExecutive and/or the Executive's family at least equal to those which would have been provided in accordance with the applicable plans, programs, practicesand policies described in Section 4(b)(v) and (vi) of this Agreement as if the Executive's employment had not been terminated in accordance with the mostfavorable plans, practices, programs or policies of the Company and its affiliated companies as in effect and applicable generally to other peer executives andtheir families during the one year period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafterwith respect to other peer executives of the Company and its affiliated companies and their families (such continuation of such benefits for the applicableperiod herein set forth and such transfer of the Individual Policy shall be hereinafter referred to as “Welfare Benefit Continuation”; for purposes ofdetermining eligibility of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered tohave remained employed until the end of the Employment Period and to have retired on the last day of such period), and (iv) payment to the Executive’sestate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination of an amount equal to the sum of the Executive’s AnnualBase Salary and the Highest Annual Bonus. Subject to the provisions of Section 9 hereof, but, otherwise, anything herein to the contrary notwithstanding, theExecutive's family shall be entitled to receive benefits at least equal to the most favorable benefits provided by the Company and any of its affiliatedcompanies to surviving families of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relatingto family death benefits, if any, as in effect with respect to other peer executives and their families at any time during the one year period immediatelypreceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect on the date of the Executive's death with respectto other peer executives of the Company and its affiliated companies and their families.(b) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreementshall terminate without further obligations to the Executive, other than for (i) payment of the Accrued Obligations (which shall be paid in a lump sum in cashwithin 30 days of the Date of Termination), (ii) the timely payment and provision of the Welfare Benefit Continuation, and (iii) payment to the Executive in alump sum in cash within 30 days of the Date of Termination of an amount equal to the sum of the Executive’s Annual Base Salary and the Highest AnnualBonus. Subject to the provisions of Section 9 hereof, but, otherwise, anything herein to the contrary notwithstanding, the Executive shall be entitled after theDisability Effective Date to receive disability and other benefits at least equal to the most favorable of those provided by the Company and its affiliatedcompanies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as ineffect with respect to other peer executives and their families at any time during the one year period immediately preceding the Effective Date or, if morefavorable to the Executive and/or the Executive's family, as in effect at any time thereafter with respect to other peer executives of the Company and itsaffiliated companies and their families.-7-Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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) Cause, Other than for Good Reason. If the Executive's employment shall be terminated by the Company for Cause or by the Executive otherthan for Good Reason (and other than by reason of her death or disability) during the Employment Period, this Agreement shall terminate without furtherobligations to the Executive other than the obligation to pay to the Executive Annual Base Salary through the Date of Termination. In such case, suchamounts shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. The Executive shall, in such event, also be entitledto any benefits required 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 EmploymentPeriod the 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) the Company shall pay to the Executive a lump sum amount in cash within 30 days after the Date of Termination equal to the (suchamount shall be hereinafter referred to as the “Change of Control Payment”) to the product of (X) two point ninety nine (2.99) multiplied by the sumof (i) (Y) the Annual Base Salary for the fiscal year immediately preceding the Date of Termination and (ii) Highest Annual Bonus; and(iii) notwithstanding any other provisions to the contrary contained herein or in any option agreement, restricted stock agreement,performance stock unit or other equity compensation agreement, between the Company and the Executive, or any stock option, restricted stock orother equity compensation plans sponsored by the Company, unless such agreement or plan expressly references and supersedes this Agreement,then all such unvested equity awards which Executive holds as of the Effective Date shall be immediately and automatically exercisable and/orvested, and the Executive shall have the right to exercise any such equity awards (to the extent applicable) for the shorter of one year after the Dateof 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 her Base Salary and an amount equal to the Average Annual Bonus divided by thenumber of payroll periods during the one year severance period for the period of one (1) year from the Date of Termination in accordance with itsnormal payroll practices and subject to applicable tax withholding; and(iii) provide the Executive and her 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 otheremployment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Executive in anysubsequent employment.(g) Other Severance Benefits. The severance pay and benefits provided for in Section 6(e) shall be in lieu of any other severance or termination payto which the Executive may be entitled under any Company 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.-8-Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 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 and expenses which theExecutive may reasonably incur as a result of any contest by the Company, the Executive or others of the validity or enforceability of, or liability under, anyprovision of this Agreement or any guarantee of performance thereof, if the Executive prevails in such contest. Following a Change of Control, the Companyagrees to pay promptly as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result ofany contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provisionof this Agreement or any guarantee of performance thereof.(c) If there shall be any dispute between the Company and the Executive (i) in the event of any termination of the Executive’s employment by theCompany, whether such termination was for Cause, or (ii) in the event of any termination of employment by the Executive, whether Good Reason existed,then, unless and until there is a final, nonappealable judgment by a court of competent jurisdiction declaring that such termination was for Cause or that thedetermination by the Executive of the existence of Good Reason was not made in good faith, the Company shall pay all amounts, and provide all benefits, tothe Executive and/or the Executive’s family or other beneficiaries, as the case may be, that the Company would be required to pay or provide pursuant toSection 6(d) as though such termination were by the Company without Cause, or by the Executive with Good Reason; provided, however, that the Companyshall not be required to pay any disputed amount pursuant to this paragraph except upon receipt of an undertaking by or on behalf of the Executive to repayall such amounts to which the Executive is ultimately adjudged by such court not to be entitled.9. 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 of compensation” (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whoseactions result in a change of ownership or effective control covered by Section 280G(b)(2) of the Internal Revenue Code (the “Code”) or any person affiliatedwith the 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-9-Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.cash amounts 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 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 under Section280G(b)(2) of the Code) or tax counsel selected by such accountants or the Company (the “Accountants”) such Company Payments (in whole or in part)either expressly do not 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 anydeferred 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 make the final determination with regard to theissues. In the event of any conference with any taxing authority regarding the Excise Tax or associated income taxes, the Executive shall permit therepresentative of the Company to accompany the Executive, and the Executive and the Executive’s representative shall cooperate with the Company and itsrepresentative.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 allof the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that theCompany would be required to perform it if no such succession had taken place. The Company shall provide written evidence to the Executive to documentcompliance with the foregoing sentence within ten (10) business days of the Effective Date. As used in this-10-Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes andagrees to perform this Agreement by operation of law, or otherwise. In addition, the Executive shall be entitled, upon exercise of any outstanding stockoptions or stock appreciation rights of the Company, to receive in lieu of shares of the Company’s stock, shares of such stock or other securities of suchsuccessor as the holders of 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 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 satisfy Section 409A shall have no force and effect until amended to comply with Section 409A.Notwithstanding any provision of this Agreement to the contrary, in the event any payment or benefit hereunder is determined to constitute non-qualifieddeferred compensation subject to Section 409A, then to the extent 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:Allison Bebo(at the address on record with the company)If to the Company:Hologic, Inc.250 Campus DriveMarlborough, Massachusetts 02038Attention: Chief Executive Officer-11-Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 ofthis Agreement.(d) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to bewithheld pursuant to any applicable law or regulation.(e) The Executive's or the Company’s failure to insist upon strict compliance with any provision hereof shall not be deemed to be a waiver of suchprovision or any other provision thereof.(f) This Agreement contains the entire understanding of the Company and the Executive with respect to the rights and other benefits that theExecutive shall be entitled during the Employment Period, and in connection therewith shall supersede all prior oral and written communications with theExecutive with respect thereto; provided, however, that the Offer Letter, and Employee Intellectual Property Rights and Non-Competition Agreement, optionor other equity agreements or other employment agreement by and between the Company and Executive shall remain in full force and effect and if theCompany’s separation policy would provide greater benefits to the Executive than this Agreement, then the Executive may elect to receive benefits under theCompany’s separation policy in lieu of the benefits provided hereunder. Nothing herein shall affect the application of the Company’s separation policy inlieu of the benefits 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]-12-Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 her 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/ Stephen P. MacMillan Name: Stephen P. MacMillan Title: Chief ExecutiveOfficer EXECUTIVE/s/ Allison Bebo Allison Bebo-13-Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.CONFIDENTIAL TREATMENT REQUESTED: Certain portions of this document have been omitted pursuant to a request forconfidential treatment and, where applicable, have been marked with an asterisk (“[***]”) to denote where omissions have been made.The confidential material has been filed separately with the Securities and Exchange Commission.FIRST AMENDMENTTHIS FIRST AMENDMENT (the “First Amendment”) is made and entered into as of the 23rd day of August, 2017, (the“Execution Date”) by and between HINES GLOBAL REIT MARLBOROUGH CAMPUS LLC, a Delaware limited liabilitycompany (“Landlord”), and HOLOGIC, INC., a Delaware corporation (“Tenant”).RECITALSA. Landlord (as successor-in-interest to Marlborough Campus Limited Partnership) and Tenant (as successor-in-interest to Cytyc Corporation) are parties to that certain lease dated December 31, 2003 (the “Lease”). Pursuant to the Lease,Landlord has leased to Tenant space currently containing 216,218 rentable square feet comprising the entire building known as“Building 3” and located at 250 Campus Drive, Marlborough, Massachusetts (the “Premises”) in that certain building complexknown as The Campus at Marlborough (the “Project”) consisting of four (4) buildings comprising 531,980 rentable squarefeet.B. The Lease by its terms shall expire on December 31, 2018 (the “Expiration Date”), and in lieu of exercising thefirst of its two five-year extension terms pursuant to Section 2.2 of the Lease, Tenant desires to extend the Term of the Leasefor a period of seven (7) years, and Landlord is willing to extend the Term of the Lease on the terms and conditions hereinafterset forth.NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and for other good andvaluable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows:I. Extension of Term. The Term of the Lease is hereby extended for a period of seven (7) years (the “Extension Term”),commencing January 1, 2019, and expiring on December 31, 2025 (the “Extended Expiration Date”). Except as otherwise set forthherein, the Extension Term shall be upon all of the same terms and conditions of the Lease.A. Rent.(i) Base Rent. With respect to the Extension Term, Tenant shall pay Base Rent for the Premises in theamounts set forth below:PeriodAnnual Base RentMonthly Base RentBase Rent PerRentable Square Foot1/1/19 – 12/31/19[***][***][***]1/1/20 – 12/31/20[***][***][***]1/1/21 – 12/31/21[***][***][***]1/1/22 – 12/31/22[***][***][***]1/1/23 – 12/31/23[***][***][***]1/1/24 – 12/31/24[***][***][***]1/1/25 – 12/31/25[***][***][***](ii) Additional Rent.(1) With respect to the Extension Term, Tenant shall continue to pay Tenant’s Share of DirectExpenses (i.e., the sum of Operating Expenses and Tax Expenses) and Tenant’s Building Share in accordance withSource: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Article 4 of the Lease.(2) With respect to the Extension Term, Tenant shall continue to pay Tenant’s Water Cost, Tenant’sElectricity Cost, and other charges for which Tenant is directly responsible pursuant to Article 4 of the Lease.B.Condition of Premises. Whereas Tenant is in occupancy of the Premises, with respect to the Extension Term, Tenantshall take the Premises “as-is”, in the condition in which the Premises is in as of the commencement date of theExtension Term, and without any obligation on the part of Landlord to refurbish the Premises, and without anyrepresentation or warranty by Landlord to Tenant as to the condition of the Premises or the Building.C. Responsibility for Improvements to Premises. In the event Tenant desires any leasehold improvements bemade to refurbish the Premises for the Extension Term, said work shall be done at Tenant’s sole cost and expense.II.Cash Allowance. In order to induce Tenant to enter into this First Amendment, Landlord shall pay to Tenant a cash allowancein the amount of $265,768.00 (the “Cash Allowance”). The Cash Allowance shall be available to Tenant following the fullexecution and delivery of this First Amendment by the parties, and Tenant may use the Cash Allowance for any purposeTenant deems appropriate.II.Security Deposit. Reference is made to the fact that Landlord is currently holding a Security Deposit in the amount of$500,000.00 in the form of a letter of credit (the “Current Security Deposit”) pursuant to the provisions of Article 21 of theLease. Upon the full execution and delivery of this First Amendment by the parties, (x) Article 21 of the Lease shall be deletedin its entirety and shall be of no further force and effect, and (y) Landlord shall return the Current Security Deposit to Tenant.III.Extension Option. Tenant shall continue to have two (2) options to further extend the Term of the Lease for periods of five (5)years each, on the terms and conditions set forth in the Lease.IV.Notices.For all purposes of the Lease, the notice address for Landlord is as follows:Hines Global REIT Marlborough Campus I LLC c/o Hines Global REIT Inc. 2800 Post Oak Boulevard, Suite 4800 Houston, Texas 77056 Attention: Sherri ShugartWith copies of any notices to Landlord shall be sent to:Hines Interests Limited Partners100 Campus DriveMarlborough, Massachusetts 01752Attention: Property ManagerAndGoulston & Storrs, P.C.400 Atlantic AvenueBoston, Massachusetts 02110Attention: HinesV.Inapplicable Lease Provision. Exhibit I (Landlord’s Repair Work) of the Lease shall have no applicability with respect to thisFirst Amendment.VI. Miscellaneous.Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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.This First Amendment sets forth the entire agreement between the parties with respect to the matters set forth herein.There have been no additional oral or written representations or agreements. Under no circumstances shall Tenant beentitled to any Rent abatement, improvement allowance, leasehold improvements, or other work to the Premises, or anysimilar economic incentives that may have been provided Tenant in connection with entering into the Lease, unlessspecifically set forth in this First Amendment.C.Except as herein modified or amended, the provisions, conditions and terms of the Lease shall remain unchanged and infull force and effect.D.In the case of any inconsistency between the provisions of the Lease and this First Amendment, the provisions of thisFirst Amendment shall govern and control.E.Submission of this First Amendment by Landlord is not an offer to enter into this First Amendment but rather is asolicitation for such an offer by Tenant. Landlord shall not be bound by this First Amendment until Landlord hasexecuted and delivered the same to Tenant.F.The capitalized terms used in this First Amendment shall have the same definitions as set forth in the Lease to the extentthat such capitalized terms are defined therein and not redefined in this First Amendment.G.Tenant hereby represents to Landlord that Tenant has dealt with no broker in connection with this First Amendment,other than Jones Lang LaSalle (the “Broker”). Tenant agrees to indemnify and hold Landlord, its members, principals,beneficiaries, partners, officers, directors, employees, mortgagee(s) and agents, and the respective principals andmembers of any such agents (collectively, the “Landlord Related Parties”) harmless from all claims of any brokersclaiming to have represented Tenant in connection with this First Amendment, other than the Broker. Landlord agreesto indemnify and hold Tenant, its members, principals, beneficiaries, partners, officers, directors, employees, andagents, and the respective principals and members of any such agents (collectively, the “Tenant Related Parties”)harmless from all claims of any brokers claiming to have represented Landlord in connection with this FirstAmendment. Landlord agrees to pay any brokerage commission that may be due to the Broker by reason of this FirstAmendment.H.Each signatory of this First Amendment represents hereby that he or she has the authority to execute and deliver thesame on behalf of the party hereto for which such signatory is acting. This First Amendment may be executed in anynumber of counterparts which when taken as a whole shall constitute one and the same document.[Signatures appear on following page]IN WITNESS WHEREOF, Landlord and Tenant have duly executed this First Amendment as of the day and year firstabove written.LANDLORD: HINES GLOBAL REIT MARLBOROUGH CAMPUS LLC, a Delaware limited liability companyBy: /s/ Kevin L. McMeans Name: Kevin L. McMeans Title: Manager Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. TENANT:HOLOGIC, INC. a Delaware corporationBy: /s/ Ed ZielinskiName: Ed ZielinskiTitle: VP Global Real Estate First Amendment, Page 1Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 30,2017 September 24,2016 September 26,2015 September 27,2014 September 28,2013Earnings: Income (loss) before provision forincome taxes$1,230.5 $415.3 $177.2 $48.1 $(1,192.9)Fixed charges157.1 159.8 210.5 226.2 287.2Amortization of capitalized interest0.1 0.1 0.1 0.1 0.1Total earnings (losses)$1,387.7 $575.2 $387.8 $274.4 $(905.6)Fixed charges: Interest expense$153.2 $155.3 $205.5 $220.6 $281.1Estimate of interest within rentalexpense3.9 4.5 5.0 5.6 6.1Total fixed charges$157.1 $159.8 $210.5 $226.2 $287.2Ratio of earnings to fixed charges (a)8.83 3.60 1.84 1.21 —For the purpose of calculating the ratio of earnings to fixed charges, earnings consist of our income (loss) before provision for income taxes plus our fixedcharges. Fixed charges consist of interest expense, amortization of debt discount and debt issuance costs and an estimate of the interest portion of rentalexpense. Interest expense recorded on uncertain tax positions has been recorded in the provision for income taxes and therefore has been excluded from thecalculation.(a)In fiscal 2013, we incurred losses from pre-tax continuing operations, and as a result, our earnings wereinsufficient to cover our fixed charges by $1.19 billion.Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 Century Jinbai Technology Co., Ltd. ChinaBeijing Hologic Technology Co., Ltd. ChinaBeijing TCT Jinbai Technologies Co., Ltd. ChinaBioLucent, LLC DelawareCorizon GmbH GermanyCynosure B.V. NetherlandsCynosure GmbH GermanyCynosure, Inc. DelawareCynosure K.K. JapanCynosure Korea Limited KoreaCynosure Maroc SARL MoroccoCynosure Mexico, S. de R.L. de C.V. MexicoCynosure Portugal, Unipessoal, Limitada PortugalCynosure Pty Ltd AustraliaCynosure Spain S.L. SpainCynosure UK LTD United KingdomCytyc Cayman Limited Cayman IslandsCytyc Corporation DelawareCytyc Prenatal Products Corp. DelawareCytyc Surgical Products, LLC MassachusettsDirect Radiography Corp. DelawareGen-Probe Australia Pty Ltd. AustraliaGen-Probe Incorporated DelawareGen-Probe Prodesse, Inc. WisconsinGen-Probe Sales & Service, Inc. DelawareHangzhou Zuanbai Technology Co., Ltd ChinaHologic (Australia) Pty Ltd. AustraliaHologic (China) Enterprise Management Consulting Co., Ltd. ChinaHologic (MA), LLC MassachusettsHologic (UK) Limited England and WalesHologic ASE, LLC DelawareHologic Asia Pacific Limited Hong KongHologic Asia, Limited Hong KongHologic Canada Limited CanadaHologic Caribbean (Barbados) SRL BarbadosHologic Denmark ApS DenmarkHologic Deutschland, GmbH GermanyHologic Espana 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 KingdomSource: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 GGO 4 Ltd United KingdomHologic GGO 5, LLC DelawareHologic Global Holding LTD United KingdomHologic Hitec-Imaging GmbH GermanyHologic Hub LTD United KingdomHologic Iberia, S.L. SpainHologic India LLP IndiaHologic International Holdings B.V. NetherlandsHologic IP LTD United KingdomHologic Italia S.r.l. ItalyHologic Japan KK JapanHologic Latin America (Servicos Em Marketing E Negocios)Ltda. BrazilHologic Ltd. United KingdomHologic Medical Technologies (Beijing) Co., Ltd. ChinaHologic NV BelgiumHologic Netherlands B.V. NetherlandsHologic SA FranceHologic Singapore Pte. Ltd SingaporeHologic Suisse SA SwitzerlandHologic Surgical Products Costa Rica, S.R.L. Costa RicaHologic Sweden AB SwedenHologic UK Finance Ltd. United KingdomMedicor Medical Supplies GmbH SwitzerlandHologic Medicor GmbH GermanyNavigation Three Limited Hong KongPalomar Medical Products, LLC DelawarePalomar Medical Technologies, LLC DelawareS.A.R.L. Cynosure France FranceSentinelle Medical ULC CanadaSuros Surgical Systems, Inc. DelawareSuzhou Cynosure Medical Devices Company Ltd. ChinaTCT International Co., Ltd. British Virgin IslandsSource: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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. 333-214663) 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, as amended, (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, (13)Registration Statement (Form S-8 No. 333-210968) pertaining to the Hologic, Inc. 2012 Employee StockPurchase Plan.of our reports dated November 21, 2017, 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 30, 2017./s/ Ernst & Young LLPBoston, MassachusettsNovember 21, 2017Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 21, 2017 /s/ Stephen P. MacMillan Stephen P. MacMillan Chairman, President and Chief Executive Officer Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 21, 2017 /s/ Robert W. McMahon Robert W. McMahon Chief Financial Officer Source: HOLOGIC INC, 10-K, November 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 30, 2017 (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 21, 2017/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 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 30, 2017 (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 21, 2017/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 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 21, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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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