Hologic (HOLX) 10-Q 6 Aug 09 2009 Q3 Quarterly report Financial data

Statement Of Financial Position

Statement Of Financial Position Classified (USD $)
In Thousands	Jun. 27, 2009	Sep. 27, 2008
Current assets:
Cash and cash equivalents	$243,721	$95,661
Restricted cash	911	3,629
Accounts receivable, less reserves of $7,117 and $6,326, respectively	279,811	321,299
Inventories (Note 5)	183,401	174,667
Deferred income tax assets	56,449	53,660
Prepaid income taxes	4,220	17,797
Prepaid expenses and other current assets	25,585	26,865
Total current assets	794,098	693,578
Property and equipment, net (Note 5)	277,640	283,975
Intangible assets, net (Note 17)	2,476,659	2,629,651
Goodwill (Note 17)	2,100,938	4,450,496
Other assets	68,910	76,932
Total assets	5,718,245	8,134,632
Current liabilities:
Current portion of long-term debt	25,355	38,480
Accounts payable	49,785	59,590
Accrued expenses	119,757	154,746
Deferred revenue	92,048	78,559
Deferred gain	9,500	9,500
Total current liabilities	296,445	340,875
Long-term debt, net of current portion (Note 6)	256,340	437,420
Convertible debt (Note 6)	1,725,000	1,725,000
Deferred income tax liabilities	918,603	920,838
Deferred service obligations - long-term	11,111	10,777
Other long-term liabilities	55,573	57,453
Commitments and contingencies (Notes 6, 7, 8, 13, 14 and 15)	0	0
Stockholders' equity:
Preferred stock, $0.01 par value - 1,623 shares authorized; 0 shares issued	0	0
Common stock, $0.01 par value - 750,000 shares authorized; 256,817 and 256,373 shares issued, respectively	2,568	2,564
Capital in excess of par value	4,879,428	4,853,837
Accumulated deficit	(2,428,821)	(217,644)
Accumulated other comprehensive income	3,431	4,945
Treasury stock, at cost - 214 shares	(1,433)	(1,433)
Total stockholders' equity	2,455,173	4,642,269
Total liabilities and stockholders' equity	$5,718,245	$8,134,632

1_Statement Of Financial Positi

Statement Of Financial Position Classified (Parenthetical) (USD $)
In Thousands, except Per Share data	Jun. 27, 2009	Sep. 27, 2008
Accounts receivable, reserves	$7,117	$6,326
Preferred stock, par value	0.01	0.01
Preferred stock, shares authorized	1,623	1,623
Preferred stock, shares issued	0	0
Common stock, par value	0.01	0.01
Common stock, shares authorized	750,000	750,000
Common stock, shares issued	256,817	256,373
Treasury stock, shares	214	214

Statement Of Income Alternative

Statement Of Income Alternative (USD $)
In Thousands, except Per Share data	3 Months Ended Jun. 27, 2009		3 Months Ended Jun. 28, 2008		9 Months Ended Jun. 27, 2009		9 Months Ended Jun. 28, 2008
Revenues:
Product sales	$349,414		$384,004		$1,081,409		$1,108,430
Service and other revenues	53,706		45,488		152,958		123,556
Revenues, Total	403,120		429,492		1,234,367		1,231,986
Costs and expenses:
Cost of product sales	114,232		121,649		352,040		397,030
Cost of product sales - amortization of intangible assets	40,773		24,574		116,279		69,649
Cost of product sales - impairment of acquired intangible assets (Note 17)	0		0		4,065		0
Cost of service and other revenues	36,970		38,506		111,305		113,071
Research and development	23,407		20,966		71,628		60,477
Selling and marketing	58,928		68,483		182,402		193,731
General and administrative	37,039		35,043		110,654		109,111
Amortization of acquired intangible assets	13,025		6,267		38,356		18,685
Impairment of goodwill (Note 17)	0		0		2,340,023		0
Impairment of acquired intangible assets (Note 17)	0		0		0		2,900
Acquired in-process research and development (Note 4)	0		0		0		370,000
Restructuring charge (Note 16)	0		6,383		0		6,383
Costs and Expenses, Total	324,374	[1]	321,871	[1]	3,326,752	[1]	1,341,037	[1]
Income (loss) from operations	78,746		107,621		(2,092,385)		(109,051)
Interest income	206		604		999		3,729
Interest expense	(17,552)		(14,103)		(53,057)		(65,102)
Other income (expense), net	(730)		788		(4,485)		615
Income (loss) before income taxes	60,670		94,910		(2,148,928)		(169,809)
Provision for income taxes	19,670		33,531		62,249		71,435
Net income (loss)	$41,000		$61,379		($2,211,177)		($241,244)
Net income (loss) per common share:
Basic	0.16		0.24		-8.62		-0.99
Diluted	0.16		0.24		-8.62		-0.99
Weighted average number of common shares outstanding:
Basic	256,556		255,676		256,381		242,604
Diluted	258,908		259,390		256,381		242,604
[1]Stock-based compensation included in costs and expenses during the three and nine months ended June 27, 2009 was $913 and $2,625 for cost of revenues, $747 and $3,095 for research and development, $1,228 and $4,005 for selling and marketing and $5,122 and $14,628 for general and administrative. Stock-based compensation included in costs and expenses during the three and nine months ended June 28, 2008 was $508 and $1,751 for cost of revenues, $553 and $1,782 for research and development, $907 and $2,402 for selling and marketing and $3,073 and $11,612 for general and administrative. The restructuring charge line item includes $1,941 for both the three and nine months ended June 28, 2008.

Statement Of Cash Flows Indirec

Statement Of Cash Flows Indirect (USD $)
In Thousands	9 Months Ended Jun. 27, 2009	9 Months Ended Jun. 28, 2008
Cash flows from operating activities:
Net loss	($2,211,177)	($241,244)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation	48,651	38,631
Amortization	154,635	88,347
Fair value write-up of Third Wave and Cytyc inventory	1,084	42,325
Non-cash interest expense	12,466	16,035
Goodwill impairment charge	2,340,023	0
Charge for in-process research and development	0	370,000
Charge for impairment of acquired intangible assets	4,065	2,900
Other-than-temporary impairment charges on cost-method investments	2,243	0
Excess tax benefit related to exercise of non-qualified stock options	(528)	(53,688)
Stock-based compensation expense	24,353	19,488
Deferred income taxes	2,797	(20,797)
Loss on disposal of property and equipment	2,676	1,715
Other non-cash activity	(427)	538
Changes in assets and liabilities, net of acquisitions:
Accounts receivable	39,150	(43,076)
Inventories	(15,878)	(38,015)
Prepaid income taxes	13,872	54,151
Prepaid expenses and other assets	(1,048)	(11,493)
Accounts payable	(9,634)	(9,135)
Accrued expenses and other liabilities	(26,095)	342
Deferred revenue	14,396	22,037
Net cash provided by operating activities	395,624	239,061
Cash flows from investing activities:
Merger with Cytyc Corporation, net of cash acquired	0	(2,027,017)
Additional business acquisition consideration, net	(229)	(956)
Decrease in restricted cash	2,718	2,296
Purchase of insurance contracts	(5,322)	(3,322)
Purchase of property and equipment	(24,809)	(42,270)
Increase in equipment under customer usage agreements	(17,354)	(17,950)
Purchase of licensed technology and other intangible assets	(7,414)	0
Proceeds from sale of intellectual property	1,500	3,000
Purchase of cost method investment	(400)	0
Proceeds from sale of cost method investment	0	936
Purchases of investment securities	0	(263)
Proceeds from sales and maturities of investment securities	0	2,638
Deferred gain	0	9,500
Net cash used in investing activities	(51,310)	(2,073,408)
Cash flows from financing activities:
Proceeds from issuance of convertible notes, net of issuance costs	0	1,688,974
Proceeds under credit agreement, net of issuance costs	0	2,335,679
Repayments under credit agreement	(195,307)	(2,350,000)
Payment upon conversion of Cytyc convertible notes	(298)	(40,574)
Financing costs on credit agreement	(350)	0
Proceeds from notes payable	0	2,227
Repayments of notes payable	(2,168)	(2,354)
Excess tax benefit related to exercise of non-qualified stock options	528	53,688
Net proceeds from sale of common stock pursuant to employee stock plans	2,111	168,723
Payments of employee restricted stock tax withholdings	(878)	(851)
Net cash (used in) provided by financing activities	(196,362)	1,855,512
Effect of exchange rate changes on cash and cash equivalents	108	(1,705)
Net increase in cash and cash equivalents	148,060	19,460
Cash and cash equivalents, beginning of period	95,661	100,403
Cash and cash equivalents, end of period	$243,721	$119,863

Notes to Financial Statements

Notes to Financial Statements
	9 Months Ended Jun. 27, 2009 USD / shares
Notes to Financial Statements [Abstract]
(1) Basis of Presentation	(1) Basis of Presentation The consolidated financial statements of Hologic, Inc. (the Company) presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission for quarterly reports on Form 10-Q and do not include all of the information and disclosures required by U.S. generally accepted accounting principles. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended September27, 2008, included in the Companys Form10-K as filed with the Securities and Exchange Commission on November26, 2008. In the opinion of management, the financial statements and notes contain all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Companys financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from managements estimates if past experience or other assumptions do not turn out to be substantially accurate. Operating results for the three and nine months ended June27, 2009 are not necessarily indicative of the results to be expected for any other interim period or the entire fiscal year ending September26, 2009. Based on a combination of factors, including the deteriorating macro-economic environment, declines in the stock market and the decline of the Companys market capitalization significantly below the book value of its net assets, the Company concluded that potential goodwill impairment indicators existed as of December27, 2008. During the second quarter of fiscal 2009, the Company completed its interim goodwill impairment analysis and recorded a goodwill impairment charge of $2,340,023 for the three months ended March28, 2009. Please refer to Note 17 for further discussion. On May28, 2009, the FASB issued Statement of Financial Accounting Standards (SFAS) No.165, Subsequent Events (SFAS 165). This Statement provides authoritative accounting literature on subsequent events that was previously only addressed in the auditing literature and is largely consistent with the current guidance in the auditing literature. The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated through August 6, 2009, the date these financial statements are considered issued, and the financial statements reflect those material items that arose after the balance sheet date but prior to this date that would be considered recognized subsequent events. There were no material recognized subsequent events recorded in the
(2) Fair Value Measurements	(2) Fair Value Measurements Effective September28, 2008, the Company adopted SFAS No.157, Fair Value Measurement (SFAS157), for its financial assets and financial liabilities that are re-measured and reported at fair value at each reporting period and its nonfinancial assets and nonfinancial liabilities that are re-measured and reported at fair value at least annually. In accordance with the provisions of FASB Staff Position (FSP) No.SFAS157-2, Effective Date of FASB Statement No.157, the Company has elected to defer implementation of SFAS157 as it relates to its nonfinancial assets and nonfinancial liabilities that are recognized and disclosed at fair value in the financial statements on a non-recurring basis until September27, 2009. The Company is evaluating the impact, if any, SFAS 157 will have on its nonfinancial assets and nonfinancial liabilities. The adoption of SFAS157 for financial assets and financial liabilities that are re-measured and reported at fair value on a recurring basis did not have an impact on the Companys financial results. SFAS 157 establishes a three-level valuation hierarchy for disclosure of fair value measurements. Financial assets and financial liabilities are categorized within the 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 defined as 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 managements best estimate of inputs market participants would use in pricing the asset or liability at the measurement date, including assumptions about risk. As of June27, 2009, the Companys financial assets that are re-measured at fair value on a recurring basis consisted of $7,710 in money market mutual funds that are classified as cash and cash equivalents in the Consolidated Balance Sheets. As there are no withdrawal restrictions, they are classified within Level1 of the fair value hierarchy and are valued using quoted market prices for identical assets. The Company holds certain minority cost-method equity investments in non-publicly traded securities aggregating $7,435 and $9,278 at June27, 2009 and September27, 2008, respectively, which are included in other long-term assets on the Companys Consolidated Balance Sheets. These investments are generally carried at cost as the Company owns less than 20% of the voting equity and does not have the ability to exercise significant influence over these companies. The Company regularly evaluates the carrying value of its cost-method investments for impairment and whether any events or circumstances are identified that would significantly harm the fair value of the investment. The indicators the Company utilizes to identify these events and circumstances include (1)the investees revenue or earnings trends compared t
(3) Disclosure of Fair Value of Financial Instruments	(3) Disclosure of Fair Value of Financial Instruments The Companys financial instruments mainly consist of cash and cash equivalents, accounts receivable, cost-method investments, accounts payable and debt obligations. The carrying amounts of the Companys cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term nature of these instruments. The Company believes the carrying amounts of its cost-method investments approximate fair value and has not performed an in-depth analysis of the fair values as it is not practical to do so. Amounts outstanding under the Companys Amended Credit Agreement (See Note 6) are subject to variable rates of interest based on current market rates. As such, the Company believes the carrying amount of this obligation approximates its fair value. The Companys AEG subsidiary also has several notes payable outstanding (See Note 6). These notes payable are denominated in either the Euro or US dollar and have variable rates of interest. As of June27, 2009 and September27, 2008, amounts outstanding under these notes payable approximate their fair value based on comparable market terms and conditions. The Company has $1,725,000 of Convertible Notes outstanding (See Note 6) as of June27, 2009 and September27, 2008. The fair value of these Convertible Notes was approximately $1,231,000 and $1,300,000 as of June27, 2009 and September27, 2008, respectively, based on the trading prices at those dates.
(4) Business Combinations	(4) Business Combinations (a) Third Wave Technologies, Inc. On July24, 2008the Company completed its acquisition of Third Wave Technologies, Inc. (Third Wave) pursuant to a definitive agreement dated June8, 2008. The Company concluded that the acquisition of Third Wave did not represent a material business combination and therefore no pro-forma financial information has been provided herein. Subsequent to the acquisition date, the Companys results of operations include the results of Third Wave, which is being reported as a component of the Companys Diagnostics reporting segment. Third Wave, located in Madison, Wisconsin, develops and markets molecular diagnostic reagents for a wide variety of DNA and RNA analysis applications based on its proprietary Invader chemistry. Third Waves current clinical diagnostic offerings consist of products for conditions such as Cystic Fibrosis, cardiovascular risk and other diseases. Third Wave recently received approval for two human papillomavirus (HPV) tests from the U.S. Food and Drug Administration (FDA). The Company paid $11.25 per share of Third Wave, for an aggregate purchase price of approximately $591,100 (subject to adjustment) consisting of approximately $575,400 in cash in exchange for stock and warrants; approximately 668 of fully vested stock options granted to Third Wave employees in exchange for their vested Third Wave stock options, with an estimated fair value of approximately $8,100; and approximately $7,600 for acquisition related fees and expenses. There are no potential contingent consideration arrangements payable to the former shareholders in connection with this transaction. Additionally, the Company granted approximately 315 unvested stock options in exchange for unvested Third Wave stock options, with an estimated fair value of approximately $5,100, which is being recognized as compensation expense over the vesting period. The Company determined the fair value of the options issued in connection with the acquisition in accordance with EITF Issue No.99-12, Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business Combination (EITF 99-12). The Company determined the measurement date to be July24, 2008, the date the transaction was completed, as the number of shares to be issued according to the exchange ratio was not fixed until this date. The Company valued the securities based on the average market price for two days before the measurement date and the measurement date itself. The weighted average stock price was determined to be approximately $23.54. The preliminary purchase price is as follows: Cash portion of consideration $ 575,400 Fair value of vested options exchanged 8,100 Direct acquisition costs 7,600 Total estimated purchase price $ 591,100 The fair value of vested Hologic common stock options exchanged for vested Third Wave options was included in the purchase price as such options were fully vested. The Company estimated the fair value of these stock options using the Binomial Option Pricing Model. The Company estimated the fair value of the
(5) Other Balance Sheet Information	(5) Other Balance Sheet Information Components of selected captions in the Consolidated Balance Sheets at June27, 2009 and September27, 2008 consisted of: June27, 2009 September27, 2008 Inventories Raw material and work-in-process $ 118,229 $ 106,291 Finished goods 65,172 68,376 $ 183,401 $ 174,667 Inventories are stated at the lower of cost (first-in, first-out) or market. June 27, 2009 September27, 2008 Property and Equipment, net Equipment and software $ 190,464 $ 172,790 Customer usage equipment 119,815 100,315 Building and improvements 56,652 55,743 Leasehold improvements 39,845 38,620 Furniture and fixtures 11,438 11,083 Land 8,932 8,978 427,146 387,529 Less accumulated depreciation and amortization (149,506 ) (103,554 ) $ 277,640 $ 283,975 Restricted Cash Restricted cash is currently primarily comprised of various deposits for operating leases and duty taxes. The Company paid $2,520 of the restricted cash balance to certain former executives related to deferred compensation during the three months ended June27, 2009.
(6) Indebtedness	(6) Indebtedness (a) Credit Agreement In connection with its acquisition of Third Wave, on July17, 2008 the Company entered into an amended and restated credit agreement (the Amended Credit Agreement) with Goldman Sachs Credit Partners L.P. and certain other lenders (collectively, the Lenders). The Amended Credit Agreement amended and restated the Companys existing credit agreement with the Lenders, dated as of October22, 2007. Pursuant to the terms and conditions of the Amended Credit Agreement, the Lenders committed to provide senior secured financing in an aggregate amount of up to $800,000. The credit facility consisted of a $400,000 senior secured tranche A term loan (Term Loan A); a $200,000 senior secured tranche B term loan (Term Loan B); and a $200,000 senior secured revolving credit facility (the Revolving Facility). In order to complete the acquisition of Third Wave, the Company borrowed $540,000 under the credit facilities on July17, 2008, consisting of $400,000 under the Term Loan A and $140,000 under the Term Loan B. As of June27, 2009, the Company had an aggregate of $269,693 of principal outstanding under this credit facility of which $194,419 was under the Term Loan A and $75,274 was under the Term Loan B. The long-term portion of the Term Loan A and Term Loan B loans were $173,401 and $74,187, respectively, at June27, 2009. Subsequent to June27, 2009, the Company paid down approximately $56,000 of the outstanding principal. The Company had no amounts outstanding under its Revolving Facility, and therefore, had full availability of the $200,000 Revolving Facility as of June27, 2009. The final maturity dates for the credit facility are September30, 2012 for the Term Loan A and Revolving Facility and March31, 2013 for the Term Loan B. The domestic subsidiaries of the Company which are party to the Amended Credit Agreement (including Third Wave, which joined as a party to the Amended Credit Agreement on July24, 2008) have guaranteed the Companys obligations under the credit facilities and the credit facilities are secured by first-priority liens on, and first-priority security interests in, substantially all of the assets of the Company and all subsidiaries party to the Amended Credit Agreement, a first priority security interest in 100% of the capital stock issued by each guarantor, 65% of the capital stock issued by certain first-tier foreign subsidiaries of the Company and all intercompany debt. The security interests are evidenced by an Amended and Restated Pledge and Security Agreement by and among Goldman Sachs Credit Partners L.P., as collateral agent, Hologic and the other parties therein named (the Amended Pledge and Security Agreement). The Amended Pledge and Security Agreement amended and restated Hologics existing Pledge and Security Agreement by and among Goldman Sachs Credit Partners L.P., as collateral agent, Hologic and the other parties therein named, dated as of October22, 2007. All amounts outstanding under the amended credit facilities bear interest, at Hologics option, as follows: With respect to loans made under the Revolving Facility and the Term Loan A facility: (i) at the Base
(7) Commitments and Contingencies	(7) Commitments and Contingencies (a) Contingent Earn-Out Payments As a result of the Cytyc merger, the Company assumed the obligation to the former Adiana stockholders to make contingent earn-out payments tied to the achievement of milestones. The milestone payments include potential contingent payments of up to $155,000 based on worldwide sales of the Adiana Permanent Contraception product in the first year following FDA approval and on annual incremental sales growth thereafter through December31, 2012. As FDA approval had not occurred as of June27, 2009, no amounts had been recorded or paid as of June27, 2009. FDA approval was received on July6, 2009, and the Company will begin accruing contingent consideration in the fourth quarter of fiscal 2009 based on the defined percentage of worldwide sales of the product. These amounts will be recorded as additional purchase price, and under the terms of the agreement the first payment is not expected to be due until October 2010. The Company satisfied its obligation for a second and final earn-out to the former Suros Surgical Systems, Inc. (Suros) stockholders related to Suros incremental revenue growth for revenues earned through July31, 2008. The Company accrued an amount of approximately $24,500 for this second annual earn-out in the fourth quarter of 2008, with an increase to goodwill, which was paid in full as of December27, 2008. The Company had also made a payment of approximately $19,000 to the former Suros stockholders in the fourth quarter of fiscal 2007 for the first year earn-out. The Company also has an obligation for up to two annual earn-out payments not to exceed $15,000 in the aggregate based on BioLucents achievement of certain revenue targets. The Company has considered the provisions of EITF Issue No.95-8, Accounting for Contingent Consideration Paid to the Shareholders of an Acquired Enterprise in a Purchase Business Combination, and concluded that this contingent consideration will represent additional purchase price. As a result, goodwill will be increased by the amount of the additional consideration, if any, when it becomes due and payable. As of June27, 2009, the revenue targets had not been achieved and the Company has not recorded any amounts for these potential earn-outs.
(8) Pension and Other Employee Benefits	(8) Pension and Other Employee Benefits In conjunction with its acquisition of AEG, the Company assumed certain defined benefit pension plans covering the employees of the AEG German subsidiary (the Pension Benefits). As of September29, 2007 the Company adopted SFAS No.158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No.87, 88, 106 and 132(R) (SFAS 158), using a prospective approach. The adoption of SFAS 158 did not impact the Companys compliance with its debt covenants under its credit agreements, cash position or results of operations. As of June27, 2009 and September27, 2008, the Company has recorded a pension liability of $7,039 and $7,323, respectively, primarily as a component of long-term liabilities, in the accompanying consolidated financial statements. As of June27, 2009 and September27, 2008, the pension plans held no assets. Under German law, there are no rules governing investment or statutory supervision of the pension plan. As such, there is no minimum funding requirement imposed on employers. Pension benefits are safeguarded by the Pension Guaranty Fund, a form of compulsory reinsurance that guarantees an employee will receive vested pension benefits in the event of insolvency. The Companys net periodic benefit cost and components thereof were not material during the nine months ended June27, 2009 and June28, 2008.
(9) Net Income (Loss) Per Share	(9) Net Income (Loss) Per Share Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus the dilutive effect of potential common shares from outstanding stock options, restricted stock units and convertible debt determined by applying the treasury stock method. In accordance with SFAS No.123 (revised 2004), Share-Based Payment, the assumed proceeds under the treasury stock method include the average unrecognized compensation expense of stock options that are in-the-money and restricted stock units. The Company applies the provisions of EITF No.04-8, The Effect of Contingently Convertible Instruments on Diluted Earnings per Share (EITF 04-8), to determine diluted weighted average shares outstanding as it relates to its outstanding Convertible Notes, and due to the type of debt instrument issued, the dilutive impact of the Companys Convertible Notes is based on the difference between the Companys current stock price and the conversion price of the Convertible Notes, provided there is a premium. Under EITF 04-8, there is no dilution from the accreted principal of the Convertible Notes. Accordingly, the Company uses the treasury stock method to determine dilutive weighted average shares related to its Convertible Notes and not the if-converted method. A reconciliation of basic and diluted share amounts are as follows: Three Months Ended Nine Months Ended June27, 2009 June28, 2008 June27, 2009 June28, 2008 Numerator: Net income (loss), as reported, for basic earnings per share $ 41,000 $ 61,379 $ (2,211,177 ) $ (241,244 ) Interest expense on Cytyc convertible debt, net of tax 1 Net income (loss), as adjusted, for diluted earnings per share $ 41,000 $ 61,380 $ (2,211,177 ) $ (241,244 ) Denominator: Basic weighted average common shares outstanding 256,556 255,676 256,381 242,604 Weighted average common stock equivalents from assumed exercise of stock options and restricted stock units 2,352 3,703 Weighted average common stock equivalents from assumed conversion of convertible notes 11 Diluted weighted average common shares outstanding 258,908 259,390 256,381 242,604 Basic net income (loss) per common share $ 0.16 $ 0.24 $ (8.62 ) $ (0.99 ) Diluted net income (loss) per common share $ 0.16 $ 0.24 $ (8.62 ) $ (0.99 ) Weighted-average anti-dilutive shares related to: Outstanding stock options 11,801 4,001 13,792 7,040 Restricted stock units 53 1,079 1,812 116 Diluted weighted average shares outstanding do not inclu
(10) Stock-Based Compensation	(10) Stock-Based Compensation Stock-based compensation expense from the issuance of stock options and restricted stock units in the three and nine months ended June27, 2009 and June28, 2008 is as follows: ThreeMonthsEnded Nine Months Ended June27, 2009 June28, 2008 June27, 2009 June28, 2008 Cost of revenues $ 913 $ 508 $ 2,625 $ 1,751 Research and development 747 553 3,095 1,782 Selling and marketing 1,228 907 4,005 2,402 General and administrative 5,122 3,073 14,628 11,612 Restructuring charge 1,941 1,941 8,010 $ 6,982 24,353 $ 19,488 Stock Options The Company granted 2,969 and 3,216 stock options, respectively, during the nine months ended June27, 2009 and June28, 2008 with weighted average exercise prices of $14.42 and $32.87, respectively. There were 16,116 options outstanding at June27, 2009 with a weighted average exercise price of $15.88. The Company uses a binomial model to determine the fair value of its stock options. The weighted-average assumptions utilized to value these stock options are indicated in the following table: ThreeMonthsEnded NineMonthsEnded June27, 2009 June28, 2008 June27, 2009 June28, 2008 Risk-free interest rate 2.0 % 3.0 % 2.0 % 3.0%to4.0 % Expected volatility 46.0 % 36.0 % 46.0 % 36.0%to38.0 % Expected life (in years) 4.0 3.8 4.0 3.8 to 4.6 Dividend yield Forfeiture rate 7.7 % 6.8 % 7.7 % 6.8%to9.0 % Weighted average fair value of stock options granted $ 5.10 $ 9.65 $ 5.40 $ 10.38 Included in stock-based compensation expense for the nine months ended June28, 2008 was $2,662 as a result of the acceleration of vesting for certain outstanding Hologic stock options upon the close of the merger with Cytyc. The original terms of these employee stock options provided for acceleration of vesting upon a change of control. In addition, stock-based compensation expense during the nine months ended June28, 2008 included $2,264 as a result of a modification of certain stock options in connection with the Cytyc Merger Agreement in May 2007. The modification provided for acceleration of vesting of the unvested options upon a termination as a result of a change of control, as well as an extension of the period to exercise vested options from 90 days to December31, 2009, which occurred upon the close of the merger with Cytyc. The Company also recorded additional stock-based compensation expense of $768 during the three months ended June28, 2008 for options issued to the former Chairman of the Board of Directors that were modified to extend the time period to exercise upon termination from 90 days to August31, 2009. As of June27, 2009, total unrecognized compensation expense related to stock options is $30,723, which is expected to be recognized over a weighted average period of 3.7 years Restricted Sto
(11) Comprehensive Income (Loss)	(11) Comprehensive Income (Loss) The Companys other comprehensive income (loss) comprise foreign currency translation adjustments and deferred tax on minimum pension liability. A reconciliation of comprehensive income (loss) is as follows: Three Months Ended Nine Months Ended June27, 2009 June28, 2008 June27, 2009 June28, 2008 Net income (loss) as reported $ 41,000 $ 61,379 $ (2,211,177 ) $ (241,244 ) Translation adjustment 3,865 (170 ) (1,514 ) 5,200 Deferred tax on minimum pension liability 295 (670 ) Comprehensive income (loss) $ 44,865 $ 61,504 $ (2,212,691 ) $ (236,714 )
(12) Business Segments and Geographic Information	(12) Business Segments and Geographic Information The Company reports segment information in accordance with SFAS No.131, Disclosures about Segments of an Enterprise and Related Information (SFAS 131). Operating segments are identified as components of an enterprise about which separate, discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions about how to allocate resources and assess performance. The Companys chief decision-maker, as defined under SFAS 131, is the chief operating officer. The Company reports its business as four segments: Breast Health, Diagnostics, GYN Surgical and Skeletal Health. The Diagnostics segment includes the results of Third Wave Technologies, which was acquired in the fourth quarter of fiscal 2008. Identifiable assets for the four principal operating segments consist of inventories, intangible assets, and property and equipment. The Company has presented all other identifiable assets as corporate assets. Intersegment sales and transfers are not significant. Segment information for the three and nine months ended June27, 2009 and June28, 2008 is as follows: Three Months Ended Nine Months Ended June27, 2009 June28, 2008 June27, 2009 June28, 2008 Total revenues Breast Health $ 174,892 $ 219,498 $ 554,084 $ 639,808 Diagnostics 139,530 126,564 409,189 351,311 GYN Surgical 65,840 56,310 197,594 161,417 Three Months Ended Nine Months Ended June27, 2009 June28, 2008 June27, 2009 June28, 2008 Skeletal Health 22,858 27,120 73,500 79,450 $ 403,120 $ 429,492 $ 1,234,367 $ 1,231,986 Operating income (loss) Breast Health $ 32,640 $ 56,421 $ (152,262 ) $ 157,375 Diagnostics 27,303 35,824 (836,176 ) (9,336 ) GYN Surgical 15,968 12,220 (1,114,746 ) (259,680 ) Skeletal Health 2,835 3,156 10,799 2,590 $ 78,746 $ 107,621 $ (2,092,385 ) $ (109,051 ) Depreciation and amortization Breast Health $ 14,608 $ 9,923 $ 36,868 $ 29,669 Diagnostics 39,295 25,474 117,933 70,340 GYN Surgical 13,985 8,141 42,315 22,506 Skeletal Health 2,517 1,573 6,170 4,463 $ 70,405 $ 45,111 $ 203,286 $ 126,978 Capital expenditures Breast Health $ 3,398 $ 4,656 $ 9,540 $ 14,090 Diagnostics 2,554 2,896 5,493 7,916 GYN Surgical 1,064 3,725 4,517 12,765 Skeletal Health 1,157 2,051 5,259 7,499 $ 8,173 $ 13,328 $ 24,809 $ 42,270 June27, 20
(13) Litigation and Other Matters	(13) Litigation and Other Matters On October5, 2007, Ethicon Endo-Surgery, Inc., a Johnson Johnson operating company, filed a complaint against the Company and its wholly-owned subsidiary Suros in the United States District Court for the Southern District of Ohio, Western Division. The complaint alleges that certain of the ATEC biopsy systems manufactured and sold by Suros infringe four Ethicon patents. An amended complaint filed January11, 2008 additionally asserts claims of unfair competition. The complaint seeks to enjoin Hologic and Suros from conducting acts of unfair competition and infringing the patents as well as the recovery of unspecified damages and costs. A Markman hearing was held on January8, 2009, and the Court issued its ruling on April3, 2009. A court ordered settlement conference is scheduled for August11, 2009. Given the stage of the litigation, the Company is unable to reasonably estimate the ultimate outcome of this case. On January9, 2008, Tissue Extraction Devices, LLC filed a complaint against the Company and Suros in the United States District Court for the Northern District of Illinois, alleging infringement of US Patent No.7,316,726 by certain of the ATEC biopsy systems manufactured and sold by Suros. The complaint seeks to enjoin the Company and Suros from infringing the patents as well as the recovery of damages and costs resulting from the alleged infringement. On May20, 2008, the judge in Illinois granted the Companys motion to transfer the case to the United States District Court for the Southern District of Indiana. On April14, 2009, the parties entered into a confidential settlement agreement calling for an immaterial payment by the Company in exchange for a fully paid up license to the patent in suit and related family member patent applications. The suit was dismissed with prejudice by the Court on April24, 2009. In October 2005, Third Wave, which the Company acquired by way of merger on July24, 2008, filed a declaratory judgment suit in the United States District Court for the Western District of Wisconsin against Digene Corporation seeking a ruling that its HPV ASRs do not infringe any valid claims of Digenes human papillomavirus related patents. In January 2006, Third Wave reached an agreement with Digene to dismiss the suit without prejudice. Third Wave also agreed that neither party would file a suit against the other relating to the human papillomavirus patents for one year. After this period expired, on January11, 2007, Digene Corporation filed suit against Third Wave in the United States Court for the Western District of Wisconsin. The complaint alleged patent infringement of unidentified claims of a single patent related to HPV type 52 by Third Waves HPV ASR product. Third Wave filed its response to Digenes complaint on February28, 2007, which, in addition to denying the alleged infringement, also asserted that certain Digene sales practices violate certain antitrust laws. After conducting a hearing on June22, 2007, the court released its claim construction order on July23, 2007 adopting all of Third Waves proposed construction. On July31, 2007, Digene filed a motion to reconsider the
(14) Income Taxes	(14) Income Taxes The Companys effective tax rates for the three and nine months ended June27, 2009 were 32.4% and (2.9)%, respectively. The Companys effective tax rates for the three and nine months ended June28, 2008 were 35.3% and (42.1)%, respectively. The Companys effective tax rate in the current three month period is lower that the statutory rate primarily due to a $2.3 million benefit related to a clarification in Massachusetts tax law on apportionment for affiliates of manufacturing companies. The effective tax rate for the current nine month period was significantly impacted by the goodwill impairment charge recorded in the second quarter of fiscal 2009, substantially all of which is not deductible for tax purposes. The effective tax rate for the nine months ended June28, 2008 was significantly impacted by the acquired in-process research and development charge related to the Cytyc merger, which is not deductible for tax purposes. As of June27, 2009, the Company has recorded a net deferred tax liability of approximately $862,000. This liability is net of approximately $56,000 of certain deferred tax assets. Managements conclusion that such assets will be recovered is based upon its expectation that the Companys future earnings will provide sufficient taxable income. The realization of the Companys deferred tax assets cannot be assured, and to the extent that the Company fails to generate sufficient future taxable income, some or all of the Companys deferred tax assets will not be realized. The Company had gross unrecognized tax benefits, including interest, of approximately $22,800 as of June27, 2009. Of this amount, $8,100 represents the amount of unrecognized tax benefits as of June27, 2009 that, if recognized, would result in a reduction of the Companys effective tax rate. Upon the adoption of SFAS No.141(R) changes in unrecognized tax benefits following an acquisition generally will affect income tax expense, including any changes associated with acquisitions that occurred prior to the effective date of SFAS 141(R). In the next twelve months it is reasonably possible that the Company will reduce the balance of its unrecognized tax benefits by $2,274 due to the expiration of statute of limitations and settlements with taxing authorities, of which $1,481 will reduce the Companys effective tax rate. The Companys policy is to recognize accrued interest and penalties related to unrecognized tax benefits as part of income tax expense. As of June27, 2009, accrued interest was approximately $1,100, net of federal benefit. As of June27, 2009, no penalties have been accrued. The Company and its subsidiaries are subject to U.S. federal income tax, as well as income tax of multiple state income and foreign jurisdictions. The current tax returns are open for audit through fiscal 2013. The Company currently has a tax holiday in Costa Rica that is scheduled to expire in 2015. This tax holiday does not materially reduce the Companys income tax provision for fiscal 2009.
(15) Product Warranties	(15) Product Warranties The Company generally offers a one-year warranty for its products. The Company provides for the estimated cost of product warranties at the time product revenue is recognized with the exception of the Companys R2 CAD and Dimensions digital mammography products for which the Company defers the vendor-specific objective evidence of fair value of the post contract support to be provided during the warranty period. Factors that affect the Companys warranty reserves include the number of units sold, historical and anticipated rates of warranty repairs and the cost per repair. The Company periodically assesses the adequacy of the warranty reserve and adjusts the amount as necessary. Product warranty activity for the nine months ended June27, 2009 and June28, 2008 is as follows: Balanceat beginningof period Accrualsfor warranties providedduring theperiod Accrualsfor warranties acquiredduring theperiod Write-offs/ payments Balanceat endofperiod Nine Months Ended: June27, 2009 $ 9,109 $ 3,265 $ $ (6,256 ) $ 6,118 June28, 2008 $ 12,087 $ 7,369 $ 591 $ (9,135 ) $ 10,912
(16) Restructuring Accrual	(16) Restructuring Accrual As a result of the Cytyc merger and the acquisition of Third Wave in the first and fourth quarters of fiscal 2008, respectively, the Company recorded liabilities related to restructuring plans, approved by the previous management of those companies and designed to reduce future operating expenses and recorded liabilities, of $4,658 and $7,509, respectively. In connection with the Cytyc merger, the Company assumed an arrangement in which the Company is sub-leasing all of its Mountain View facility to a third party for a term of approximately five years, a period of time equivalent to the remainder of the Companys lease of this facility. The sub-lease commenced on July1, 2007. The Company has not incurred any additional restructuring costs related to these plans, and it is anticipated that these costs will be paid in full during fiscal 2009. Additionally, during fiscal 2008 the Company recorded a liability related to the Cytyc merger in accordance with EITF 95-3, primarily related to the termination of certain employees as well as minimum inventory purchase commitments and other contractual obligations for which business activities have been discontinued. Changes in the restructuring accrual for the nine months ended June27, 2009 were as follows: Other Termination Benefits Beginning balance, September 27, 2008 $ 882 $ 1,309 Adjustments (720 ) (461 ) Payments (128 ) (742 ) Ending balance, June 27, 2009 $ 34 $ 106 On May20, 2008, the Company entered into a Separation and Release Agreement (the Separation Agreement) with Patrick J. Sullivan, former Chairman of the Board of Directors of the Company. The Separation Agreement required the Company to pay Mr.Sullivan a total of $4,442 and continue to pay Mr.Sullivans premiums for COBRA continuation coverage under the Companys group medical plan for eighteen months following the effective date of the separation. In addition, the Separation Agreement provided that Mr.Sullivans 45,710 restricted stock units granted pursuant to a Restricted Stock Unit Agreement dated October22, 2007 would become fully vested, and Mr.Sullivans options to purchase the Companys common stock, all of which were fully vested, would be extended so as to remain exercisable until August31, 2009. The acceleration of the restricted stock units and modification of options resulted in a stock-based compensation charge of $1,941. The Company recorded the lump sum payment and stock-based compensation charge totaling $6,383 as a restructuring charge in the accompanying Consolidated Statement of Operations during the three months ended June28, 2008.
(17) Goodwill and Intangible Assets	(17)Goodwill and Intangible Assets Goodwill In accordance with SFAS No.142, Goodwill and Other Intangible Assets (SFAS 142), the Company tests goodwill at the reporting unit level for impairment on an annual basis and between annual tests if events and circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value. Events that would indicate impairment and trigger an interim impairment assessment include, but are not limited to, current economic and market conditions, a significant adverse change in legal factors, business climate or operational performance of the business, and an adverse action or assessment by a regulator. In performing the impairment test, the Company utilizes the two-step approach prescribed under SFAS 142. The first step requires a comparison of the carrying value of the reporting units to the estimated fair value of the reporting units. To estimate the fair value of its reporting units for Step 1, the Company utilizes a combination of the income and market approaches and performs a valuation analysis. The income approach is based on a discounted cash flow analysis (DCF) and calculates the fair value by estimating the after-tax cash flows attributable to a reporting unit and then discounting the after-tax cash flows to a present value using a risk-adjusted discount rate. Assumptions used in the DCF require the exercise of significant judgment, including judgment about appropriate discount rates and terminal values, growth rates, and the amount and timing of expected future cash flows. The forecasted cash flows are based on the Companys most recent budget and for years beyond the budget, the Companys estimates are based on assumed growth rates. The Company believes its assumptions are consistent with the plans and estimates used to manage the underlying businesses. The discount rates, which are intended to reflect the risks inherent in future cash flow projections, used in the DCF are based on estimates of the weighted-average cost of capital (WACC) of a market participant relative to each respective reporting unit. The market approach considers comparable market data based on multiples of revenue or earnings before taxes, depreciation and amortization (EBITDA). The Company believes its assumptions used to determine the fair value of its respective reporting units are reasonable. If different assumptions were used, particularly with respect to forecasted cash flows, WACCs, or market multiples, different estimates of fair value may result and there could be the potential that an impairment charge could result. Actual operating results and the related 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 impairment test 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 units goodwill to its carrying value. The implied fair value of goodwill is derived by performin
(18) Sale of Gestiva	(18) Sale of Gestiva On January16, 2008, the Company entered into a definitive agreement pursuant to which it agreed to sell full U.S. and world-wide rights to Gestiva to K-V Pharmaceutical Company upon approval of the pending Gestiva new drug application (the Gestiva NDA) by the FDA. The purchase price to be paid to the Company as a result of the transaction is $82,000 in cash, of which $9,500 was paid in fiscal 2008 and the balance is due upon final approval by the FDA of the Gestiva NDA on or before February 19, 2010 and the production of a quantity of Gestiva suitable to enable the commercial launch of the product. The Company has agreed to continue its efforts to obtain FDA approval of the NDA for Gestiva as part of this arrangement. All costs incurred in these efforts will be reimbursed by K-V Pharmaceutical and are being recorded as a credit against research and development expenses. The Company has recorded the $9,500 as a deferred gain within current liabilities in the accompanying Consolidated Balance Sheet. The gain will be recognized upon the closing of the transaction following final FDA approval of the Gestiva NDA. The Company cannot assure that it will be able to obtain the requisite FDA approval, that the transaction will be completed or that it will receive the balance of the purchase price.Moreover, if K-V Pharmaceutical terminates the agreement as a result of a breach by the Company of a material representation, warranty, covenant or agreement, the Company will be required to return the funds previously received as well as expenses reimbursed by K-V. The development of Gestiva, a drug that, if approved by the FDA, could be used in the prevention of preterm birth in pregnant women with a history of at least one spontaneous preterm birth, was originally begun by Adeza Biomedical Corporation, which was acquired by Cytyc on April2, 2007. On October22, 2007, the Company completed its business combination transaction with Cytyc and as a result acquired all rights to Gestiva. The Company allocated $53,400 to acquired in-process research and development as part of the initial purchase price allocation.
(19) Recent Accounting Pronouncements	(19) Recent Accounting Pronouncements In April2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairment (FSP 115-2/124-2). FSP 115-2/124-2 amends the requirements for the recognition and measurement of other-than-temporary impairments for debt securities by modifying the pre-existing intent and ability indicator. Under FSP 115-2/124-2, an other-than-temporary impairment is triggered when there is an intent to sell the security, it is more likely than not that the security will be required to be sold before recovery, or the security is not expected to recover the entire amortized cost basis of the security. Additionally, FSP 115-2/124-2 changes the presentation of an other-than-temporary impairment in the income statement for those impairments involving credit losses. The credit loss component will be recognized in earnings and the remainder of the impairment will be recorded in other comprehensive income. FSP 115-2/124-2 is effective for the Company beginning with the third quarter of fiscal 2009. The adoption of FSP 115-2/124-2 did not have a significant impact on the Companys consolidated financial statements. In December 2007, the FASB issued SFAS No.141 (Revised 2007), Business Combinations (SFAS 141(R)). This Statement retains the fundamental requirements in SFAS 141 that the acquisition method of accounting (which SFAS 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. SFAS 141(R) requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the Statement. SFAS 141(R) replaces SFAS 141s cost-allocation process, which required the cost of an acquisition to be allocated to the individual assets acquired and liabilities assumed based on their estimated fair values. The Statement retains the guidance in SFAS 141 for identifying and recognizing intangible assets separately from goodwill. SFAS 141(R) will now require acquisition costs to be expensed as incurred, and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally to affect income tax expense. SFAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December15, 2008, which is the Companys 2010 fiscal year. Early adoption is prohibited. The Company is currently evaluating the impact that the adoption of SFAS141(R) will have on its consolidated financial statements. In December 2007, the FASB issued SFAS No.160, Noncontrolling Interests in Consolidated Financial StatementsAn amendment of ARB No.51 (SFAS 160). SFAS 160 amends Accounting Research Bulletin (ARB) No.51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership intere

Document Information

Document Information
	9 Months Ended Jun. 27, 2009 USD / shares
Document Information [Text Block]
Document Type	10-Q
Amendment Flag	false
Amendment Description	N.A.
Document Period End Date	2009-06-27

Entity Information

Entity Information (USD $)
	9 Months Ended Jun. 27, 2009	Aug. 03, 2009	Mar. 28, 2008
Entity [Text Block]
Trading Symbol	HOLX
Entity Registrant Name	HOLOGIC INC
Entity Central Index Key	0000859737
Current Fiscal Year End Date	--09-26
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		256,632,632
Entity Public Float			$7,082,916,053