Hologic (HOLX) 10-Q 4 Feb 10 2010 Q1 Quarterly report Financial data

Statement Of Financial Position

Statement Of Financial Position Classified (USD $)
In Thousands	Dec. 26, 2009	Sep. 26, 2009
Current assets:
Cash and cash equivalents	$345,042	$293,186	[1]
Restricted cash	910	916	[1]
Accounts receivable, less reserves of $7,736 and $7,279, respectively	263,226	263,231	[1]
Inventories	194,337	182,780	[1]
Deferred income tax assets	48,970	52,165	[1]
Prepaid expenses and other current assets	26,357	29,238	[1]
Total current assets	878,842	821,516	[1]
Property and equipment, net (Note 5)	263,679	271,628	[1]
Intangible assets, net	2,364,103	2,422,564	[1]
Goodwill	2,112,714	2,108,963	[1]
Other assets	62,886	59,555	[1]
Total assets	5,682,224	5,684,226	[1]
Current liabilities:
Current portion of long-term debt	31,226	38,373	[1]
Accounts payable	48,818	46,589	[1]
Accrued expenses	141,934	137,284	[1]
Deferred revenue	106,754	97,544	[1]
Deferred gain	9,500	9,500	[1]
Total current liabilities	338,232	329,290	[1]
Long-term debt, net of current portion (Note 6)	90,638	139,955	[1]
Convertible debt (principal of $1,725,000, Note 6)	1,391,733	1,373,923	[1]
Deferred income tax liabilities	1,033,718	1,045,183	[1]
Deferred service obligations - long-term	11,390	11,364	[1]
Other long-term liabilities	58,946	58,534	[1]
Stockholders' equity:
Preferred stock, $0.01 par value - 1,623 shares authorized; 0 shares issued	0	0	[1]
Common stock, $0.01 par value - 750,000 shares authorized; 258,518 and 257,938 shares issued, respectively	2,585	2,579	[1]
Capital in excess of par value	5,187,851	5,182,060	[1]
Accumulated deficit	(2,438,162)	(2,464,257)	[1]
Accumulated other comprehensive income	6,811	7,028	[1]
Treasury stock, at cost - 219 and 214 shares, respectively	(1,518)	(1,433)	[1]
Total stockholders' equity	2,757,567	2,725,977	[1]
Total liabilities and stockholders' equity	$5,682,224	$5,684,226	[1]
[1]Adjusted for the retrospective adoption of Financial Accounting Standards Board ("FASB") Staff Position ("FSP") No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement) (Codified within Accounting Standards Codification ("ASC") 470, Debt). See Note 6.

1_Statement Of Financial Positi

Statement Of Financial Position Classified (Parenthetical) (USD $)
In Thousands, except Per Share data	Dec. 26, 2009	Sep. 26, 2009
Accounts receivable, reserves	$7,736	$7,279	[1]
Convertible debt, principal	$1,725,000	$1,725,000	[1]
Preferred stock, par value	0.01	0.01	[1]
Preferred stock, shares authorized	1,623	1,623	[1]
Preferred stock, shares issued	0	0	[1]
Common stock, par value	0.01	0.01	[1]
Common stock, shares authorized	750,000	750,000	[1]
Common stock, shares issued	258,518	257,938	[1]
Treasury stock, shares	219	214	[1]
[1]Adjusted for the retrospective adoption of Financial Accounting Standards Board ("FASB") Staff Position ("FSP") No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement) (Codified within Accounting Standards Codification ("ASC") 470, Debt). See Note 6.

Statement Of Income Alternative

Statement Of Income Alternative (USD $)
In Thousands, except Per Share data	3 Months Ended Dec. 26, 2009	3 Months Ended Dec. 27, 2008
Revenues:
Product sales	$351,410	$380,108	[1]
Service and other revenues	61,038	49,125	[1]
Revenues, Total	412,448	429,233	[1]
Costs and expenses:
Cost of product sales	116,260	124,421	[1]
Cost of product sales - amortization of intangible assets	43,520	37,746	[1]
Cost of service and other revenues	36,223	37,107	[1]
Research and development	23,198	23,793	[1]
Selling and marketing	64,597	65,002	[1]
General and administrative	42,615	34,805	[1]
Amortization of intangible assets	13,579	12,638	[1]
Restructuring charge	487	0	[1]
Costs and Expenses, Total	340,479	335,512	[1]
Income from operations	71,969	93,721	[1]
Interest income	185	446	[1]
Interest expense	(31,804)	(34,342)	[1]
Other income (expense), net	743	(3,081)	[1]
Income before income taxes	41,093	56,744	[1]
Provision for income taxes	14,998	18,586	[1]
Net income	$26,095	$38,158	[1]
Net income per share:
Basic	0.1	0.15	[1]
Diluted	0.1	0.15	[1]
Weighted average number of shares outstanding:
Basic	258,024	256,212	[1]
Diluted	260,804	258,433	[1]
[1]Adjusted for the retrospective adoption of FSP APB 14-1. See Note 6.

Statement Of Cash Flows Indirec

Statement Of Cash Flows Indirect (USD $)
In Thousands	3 Months Ended Dec. 26, 2009		3 Months Ended Dec. 27, 2008
OPERATING ACTIVITIES
Net income	$26,095		$38,158	[2]
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	16,892		15,797	[2]
Amortization	57,099		50,384	[2]
Fair value write-up of Third Wave inventory sold	0		584	[2]
Non-cash interest expense - amortization of debt discount and deferred financing costs	21,073		18,775	[2]
Excess tax benefit related to exercise of non-qualified stock options	(781)		(78)	[2]
Stock-based compensation expense	8,121		7,470	[2]
Deferred income taxes	(8,108)		(5,382)	[2]
Loss on disposal of property and equipment	1,124		231	[2]
Other non-cash activity	2,038		476	[2]
Changes in operating assets and liabilities:
Accounts receivable	663		5,796	[2]
Inventories	(11,969)		(8,707)	[2]
Prepaid income tax	172		17,748	[2]
Prepaid expenses and other current assets	(320)		(570)	[2]
Accounts payable	2,142		(5,467)	[2]
Accrued expenses and other liabilities	2,155		(24,412)	[2]
Deferred revenue	9,581		9,448	[2]
Net cash provided by operating activities	125,977		120,251	[2]
INVESTING ACTIVITIES
Additional business acquisition consideration	0		(326)	[2]
Purchase of insurance contracts	(5,322)		(3,322)	[2]
Proceeds from sale of intellectual property	750		0	[2]
Purchase of other intangible assets	(500)		(238)	[2]
Purchase of cost-method investment	(125)		0	[2]
Purchase of property and equipment	(5,573)		(9,499)	[2]
Increase in equipment under customer usage agreements	(4,512)		(3,964)	[2]
Decrease in restricted cash	6		483	[2]
Net cash used in investing activities	(15,276)		(16,866)	[2]
FINANCING ACTIVITIES
Repayments under credit agreement	(54,644)		(29,042)	[2]
Financing costs on credit agreement	0		(283)	[2]
Repayments of notes payable	(1,842)		(290)	[2]
Purchase of non-controlling interests	(2,683)		0	[2]
Excess tax benefit related to exercise of non-qualified stock options	781		78	[2]
Net proceeds from issuance of common stock pursuant to employee stock plans	1,906		668	[2]
Payment of employee restricted stock tax withholding requirements	(2,332)		(7)	[2]
Net cash used in financing activities	(58,814)		(28,876)	[2]
Effect of exchange rate changes on cash and cash equivalents	(31)		1,309	[2]
Net increase in cash and cash equivalents	51,856		75,818	[2]
Cash and cash equivalents, beginning of period	293,186	[1]	95,661	[2]
Cash and cash equivalents, end of period	$345,042		$171,479	[2]
[1]Adjusted for the retrospective adoption of Financial Accounting Standards Board ("FASB") Staff Position ("FSP") No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement) (Codified within Accounting Standards Codification ("ASC") 470, Debt). See Note 6.
[2]Adjusted for the retrospective adoption of FSP APB 14-1. See Note 6.

Basis of Presentation

Basis of Presentation
	3 Months Ended Dec. 26, 2009 USD / shares
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 September26, 2009, included in the Companys Form10-K as filed with the Securities and Exchange Commission on November24, 2009. 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 consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. 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 months ended December26, 2009 are not necessarily indicative of the results to be expected for any other interim period or the entire fiscal year ending September25, 2010. 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 February4, 2010, 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. Subsequent to December26, 2009, the Company made a voluntary payment of $20,000 on its term notes, and as such, the Company reclassified this amount to short-term debt from long-term debt on its Consolidated Balance Sheet at December26, 2009. There were no other material recognized subsequent events recorded in the December26, 2009 financial statements. As discussed in Note 6, the Company adopted FSP No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (codified within Accounting Standards Codification (ASC) 470, Debt) in the first quarter of fiscal 2010. During the third quarter of fiscal 2009, the Company determined that certain amounts previously classified as a component of Selling and marketing shou

Fair Value Measurements

Fair Value Measurements
	3 Months Ended Dec. 26, 2009 USD / shares
Fair Value Measurements	(2) Fair Value Measurements Effective September28, 2008 (beginning of fiscal 2009), the Company adopted ASC 820, Fair Value Measurements and Disclosures (formerly Statement of Financial Accounting Standard (SFAS) No.157, Fair Value Measurement), for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and as permitted, delayed the adoption of these accounting rules to its non-financial assets and liabilities, that are measured and reported at fair value on a non-recurring basis, until fiscal 2010. The impact of adoption to its non-financial assets and liabilities was not material. ASC 820 establishes a three-level hierarchy to prioritize the inputs to valuation techniques used to measure fair value. 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 fair value 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 December26, 2009, the Companys financial assets that are re-measured at fair value on a recurring basis consisted of $313 in money market mutual funds that are classified as cash and cash equivalents in its 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 $7,710 and $7,585 at December26, 2009 and September26, 2009, respectively, which are included in other long-term assets on the Companys Consolidated Balance Sheets. These investments are generally carried at cost. As the inputs utilized for the Companys periodic impairment assessment are not based on observable market data, these cost-method investments are classified within Level 3 of the fair value hierarchy on a non-recurring basis. To determine the fair value of these investments, the Company uses all available financial information related to the entities, including information based on recent or pending third-party equity investments in these entities. In certain instances, a cost-method investments fair value is not estimated as there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment and to do so would be impractical.

Disclosure of Fair Value of Fin

Disclosure of Fair Value of Financial Instruments
	3 Months Ended Dec. 26, 2009 USD / shares
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 their 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 Company had $1,391,733 and $1,373,923 of Convertible Notes recorded (See Note 6) as of December26, 2009 and September26, 2009, respectively. The principal amount of the Convertible Notes at both periods was $1,725,000. The fair value of these Convertible Notes was approximately $1,471,000 and $1,424,000 as of December26, 2009 and September26, 2009, respectively, based on the trading prices at those dates.

Revenue Recognition

Revenue Recognition
	3 Months Ended Dec. 26, 2009 USD / shares
Revenue Recognition	(4) Revenue Recognition In September 2009, the FASB ratified ASC Update (ASU) No.2009-13, Multiple-Deliverable Revenue Arrangements (ASU 2009-13). ASU 2009-13 amends existing revenue recognition accounting standards that are currently within the scope of FASBASC, Subtopic 605-25, which is the revenue recognition guidance for multiple-element arrangements. ASU 2009-13 provides for three significant changes to the existing multiple element revenue recognition guidance as follows: 1) Deletes the requirement to have objective and reliable evidence of fair value for undelivered elements in an arrangement. This may result in more deliverables being treated as separate units of accounting. 2) Modifies the manner in which the arrangement consideration is allocated to the separately identified deliverables. ASU 2009-13 requires an entity to allocate revenue in an arrangement using its best estimate of selling prices (ESP) of deliverables if a vendor does not have vendor-specific objective evidence of selling price (VSOE) or third-party evidence of selling price (TPE), if VSOE is not available. Each separate unit of accounting must have a selling price, which can be based on managements estimate when there is no other means (VSOE or TPE) to determine the selling price of that deliverable. The arrangement consideration is allocated based on the elements relative selling prices. 3) Eliminates use of the residual method and requires an entity to allocate revenue using the relative selling price method, which results in the discount in the transaction being evenly allocated to the separate units of accounting. In September 2009, the FASB ratified ASU No.2009-14, Certain Revenue Arrangements that Include Software Elements (ASU 2009-14). ASU 2009-14 amends the existing revenue recognition accounting standards to remove tangible products that contain software components and non-software components that function together to deliver the products essential functionality from the scope of industry specific software revenue recognition guidance. As permitted, the Company elected to early adopt this new accounting guidance at the beginning of its first quarter of fiscal 2010 on a prospective basis for transactions originating or materially modified on or after September27, 2009. This accounting guidance generally does not change the units of accounting for the Companys revenue transactions, and most products and services qualify as separate units of accounting. The impact of adopting these new accounting standards was not material to the Companys financial statements in the first quarter of fiscal 2010, and if they were applied in the same manner to fiscal 2009 would not have had a material impact to revenue for the first quarter of fiscal 2009. The Company does not expect the adoption of these new accounting standards to have a significant impact on the timing and pattern of revenue recognition in the future due to the existence of VSOE across most of the Companys products and services and that the selling price of most of its elements that are undelivered at the time of shipment of the core product sales are much lower relative to

Other Balance Sheet Information

Other Balance Sheet Information
	3 Months Ended Dec. 26, 2009 USD / shares
Other Balance Sheet Information	(5) Other Balance Sheet Information Components of selected captions in the Consolidated Balance Sheets at December26, 2009 and September26, 2009 consisted of: December26, 2009 September26, 2009 Inventories Raw material and work-in-process $ 125,696 $ 116,983 Finished goods 68,641 65,797 $ 194,337 $ 182,780 December26, 2009 September26, 2009 Property and equipment Equipment and software $ 192,530 $ 187,961 Equipment under customer usage agreements 128,174 125,635 Building and improvements 57,253 57,214 Leasehold improvements 40,032 39,701 Furniture and fixtures 11,195 11,112 Land 8,960 8,983 438,144 430,606 Less accumulated depreciation and amortization (174,465 ) (158,978 ) $ 263,679 $ 271,628

Borrowings and Credit Arrangeme

Borrowings and Credit Arrangements
	3 Months Ended Dec. 26, 2009 USD / shares
Borrowings and Credit Arrangements	(6) Borrowings and Credit Arrangements The Company had total debt with carrying values of $1,513,597 at December26, 2009 and $1,552,251 at September26, 2009. The Companys borrowings consisted of the following at December26, 2009 and September26, 2009: December26, 2009 September26, 2009 As adjusted Current debt obligations: Term Loan A $ 23,591 $ 28,789 Term Loan B 6,321 6,785 AEG debt 1,500 Other 1,314 1,299 Total current debt obligations 31,226 38,373 Long-term debt obligations: Term Loan A 61,398 95,929 Term Loan B 28,213 42,664 Other 1,027 1,362 90,638 139,955 Convertible notes 1,391,733 1,373,923 Total long-term debt obligations 1,482,371 1,513,878 Total debt obligations $ 1,513,597 $ 1,552,251 Credit Agreement In connection with its acquisition of Third Wave Technologies, Inc., 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 December26, 2009, the Company had an aggregate of $119,523 of principal outstanding under this credit facility of which $84,989 was under the Term Loan A and $34,534 was under the Term Loan B. Subsequent to December26, 2009, the Company paid down approximately $22,500 of the outstanding principal of which $20,000 was a voluntary payment and is reflected in current portion of long-term debt on the Companys Consolidated Balance Sheet at December26, 2009. The Company had no amounts outstanding under its Revolving Facility, and therefore, had full availability of the $200,000 Revolving Facility as of December26, 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 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,

Commitments and Contingencies

Commitments and Contingencies
	3 Months Ended Dec. 26, 2009 USD / shares
Commitments and Contingencies	(7) Commitments and Contingencies (a) Contingent Earn-Out Payments As a result of the merger with Cytyc, the Company assumed the obligation to the former Adiana, Inc. 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 System in the first year following FDA approval and on annual incremental sales growth thereafter through December31, 2012. FDA approval of the Adiana Permanent Contraception System occurred on July6, 2009, and the Company began accruing contingent consideration in the fourth quarter of fiscal 2009 based on the defined percentage of worldwide sales of the product. The total contingent consideration recorded as additional purchase price at December26, 2009 is $6,251. Under the terms of the agreement the first payment is not due to the Adiana shareholders until October 2010. The agreement includes an indemnification provision that provides for the reimbursement of qualifying legal expenses in defense of the Adiana intellectual property, and the Company has the right to offset contingent consideration payments to the Adiana shareholders with these qualifying legal costs. The Company is recording legal fees related to the Conceptus litigation matter (described below) as an offset to the accrued contingent consideration payments. Legal costs have not been material to date. (b) Litigation and Related 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 occurred on August11, 2009 without any resolution. On January27, 2010, the Court granted the Companys motion for summary judgment of non-infringement as to one of the four patents in suit. The trial with respect to the three remaining patents started on February1, 2010. The Company is unable to reasonably estimate the ultimate outcome of this case. On May22, 2009, Conceptus, Inc. filed suit in the United States District Court for the Northern District of California seeking a declaration by the Court that Hologics planned importation, use, sale or offer to sell of its forthcoming Adiana Permanent Contraception System, would infringe five Conceptus patents. On July9, 2009, Conceptus filed an amended complaint alleging infringement of the same five patents by the Adiana Permanent Contraception System. The complaint seeks preliminary and permanent injunctive relief and unspecified

Sale of Gestiva

Sale of Gestiva
	3 Months Ended Dec. 26, 2009 USD / shares
Sale of Gestiva	(8) 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 its Gestiva pharmaceutical product to KV Pharmaceutical Company upon approval of the pending Gestiva new drug application (the Gestiva NDA) by the FDA for a purchase price of $82,000. The Gestiva product is a drug that, if approved by the FDA, could be used in the prevention of preterm births in pregnant women with a history of at least one spontaneous preterm birth. Under this agreement, the Company received $9,500 of the purchase price in fiscal 2008, and the balance was due upon final approval of the Gestiva NDA by the FDA on or before February19, 2010 and the production of a quantity of Gestiva suitable to enable the commercial launch of the product. The Company recorded the $9,500 as a deferred gain within current liabilities in the Consolidated Balance Sheet. Either party had the right to terminate the agreement if FDA approval was not obtained by February19, 2010. On January8, 2010, the parties executed an amendment to the agreement eliminating the date by which FDA approval must be received and extending the term indefinitely. In consideration of executing this amendment, the purchase price was changed from the original agreement and increased to $199,500. The Company received $70,000 at the signing of the amendment and is due to receive an additional $25,000 upon FDA approval of the product and an additional $95,000 over a nine-month period beginning one year after FDA approval. Under the arrangement, the Company is continuing its efforts to obtain FDA approval of the NDA for the Gestiva product. All costs incurred in these efforts are being reimbursed by KV Pharmaceutical and recorded as a credit against research and development expenses. These reimbursed costs have not been material to date on an annual basis. The Company expects that the amounts recorded in deferred 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 KV Pharmaceutical terminates the agreement prior to the transfer of the rights to the Gestiva product 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 KV.

Pension and Other Employee Bene

Pension and Other Employee Benefits
	3 Months Ended Dec. 26, 2009 USD / shares
Pension and Other Employee Benefits	(9) Pension and Other Employee Benefits The Company has certain defined benefit pension plans covering the employees of its AEG German subsidiary (the Pension Benefits). As of December26, 2009 and September26, 2009, the Company has recorded a pension liability of $6,578 and $6,736, respectively, primarily as a component of long-term liabilities in the Consolidated Balance Sheets. As of December26, 2009 and September26, 2009, 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 three months ended December26, 2009 and December27, 2008.

Net Income Per Share

Net Income Per Share
	3 Months Ended Dec. 26, 2009 USD / shares
Net Income Per Share	(10) Net Income Per Share Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted net income per share is computed by dividing net income by the weighted average number of common shares outstanding plus the dilutive effect of potential common shares from outstanding stock options, restricted stock units, the employee stock purchase plan, and convertible debt determined by applying the treasury stock method. In accordance with ASC 718, Stock Compensation (formerly 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 ASC 260, Earnings per Share, Subsection 10-45-44 (formerly EITF No.04-8, The Effect of Contingently Convertible Instruments on Diluted Earnings per Share), 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 this accounting guidance, 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: Threemonthsended December26, 2009 December27, 2008 As adjusted Numerator: Net income, as reported, for basic earnings per share $ 26,095 $ 38,158 Interest expense on Cytyc Notes, net of tax 1 Net income, as adjusted, for diluted earnings per share $ 26,095 $ 38,159 Denominator: Basic weighted average common shares outstanding 258,024 256,212 Weighted average common stock equivalents from assumed exercise of stock options, restricted stock units and employee stock purchase plan 2,780 2,211 Weighted average common stock equivalents from assumed conversion of Cytyc Notes 10 Diluted weighted average common shares outstanding 260,804 258,433 Basic net income per common share $ 0.10 $ 0.15 Diluted net income per common share $ 0.10 $ 0.15 Weighted-average anti-dilutive shares related to: Outstanding stock options 11,273 11,064 Restricted stock units 615 2,060 Diluted weighted average shares outstanding do not include any effect resulting from the assumed conversion of the Companys Convertible Notes issued in December 2007 as their impact would be anti-dilutive for all periods presented. In those reporting periods in which the Company has reported net income, anti-dilutive shares comprise those common stock equivalents t

Stock-based Compensation

Stock-based Compensation
	3 Months Ended Dec. 26, 2009 USD / shares
Stock-based Compensation	(11) Stock-based Compensation Share-based compensation expense for the three months ended December26, 2009 and December27, 2008 is as follows: Threemonthsended December26, 2009 December27, 2008 Cost of revenues $ 1,029 $ 644 Research and development 967 1,325 Selling and marketing 1,387 1,571 General and administrative 4,738 3,930 $ 8,121 $ 7,470 Stock Options The Company granted approximately 2,510 and 2,814 stock options during the three months ended December26, 2009 and December27, 2008, respectively, with weighted average exercise prices of $15.73 and $14.50, respectively. There were 16,524 options outstanding at December26, 2009 with a weighted average exercise price of $16.51. 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 December26, 2009 December27, 2008 Risk-free interest rate 1.8 % 2.0 % Expected volatility 47 % 46 % Expected life (in years) 3.9 4.0 Dividend yield Weighted average fair value of stock options granted $ 5.90 $ 5.43 Restricted Stock Units The Company granted approximately 1,131 and 1,629 restricted stock units (RSU) during the three months ended December26, 2009 and December27, 2008, respectively, with weighted average grant date fair values of $15.67 and $14.50, respectively. As of December26, 2009, there were 3,427 unvested RSUs outstanding with a weighted average grant date fair value of $20.71. The Company uses the straight-line attribution method to recognize stock-based compensation expense for stock options and RSUs. The vesting term of stock options is generally five years with annual vesting of 20%per year on the anniversary of the grant date, and RSUs either cliff vest at the end of three years or vest over four years with annual vesting at 25%per year on the anniversary of the grant date. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. Based on an analysis of historical forfeitures, the Company has determined a specific forfeiture rate for certain employee groups and has applied forfeiture rates ranging from 0% to 6% as of December26, 2009 depending on the specific employee group. This analysis is re-evaluated quarterly and the forfeiture rate will be adjusted as necessary. Ultimately, the actual stock-based compensation expense recognized will only be for those stock options and RSUs that vest. At December26, 2009, there was $42,344 and $43,376 of unrecognized compensation expense related to stock options and RSUs, respectively, to be recognized over a weighted average period of 3.8 years and 2.6 years, respectively.

Comprehensive Income

Comprehensive Income
	3 Months Ended Dec. 26, 2009 USD / shares
Comprehensive Income	(12) Comprehensive Income The Companys other comprehensive income solely relates to foreign currency translation adjustments. A reconciliation of comprehensive income is as follows: Three months ended December26, 2009 December27, 2008 Net income as reported $ 26,095 $ 38,158 Translation adjustment (217 ) (1,633 ) Comprehensive income $ 25,878 $ 36,525

Business Segments and Geographi

Business Segments and Geographic Information
	3 Months Ended Dec. 26, 2009 USD / shares
Business Segments and Geographic Information	(13) Business Segments and Geographic Information The Company reports segment information in accordance with ASC 280, Segment Reporting, (formerly SFAS No.131, Disclosures about Segments of an Enterprise and Related Information). 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 (CODM), or decision-making group, in making decisions about how to allocate resources and assess performance. The Companys CODM is its chief executive officer, and the Companys reportable segments have been identified based on the end markets to which its products are sold into. The Company reports its business as four segments: Breast Health, Diagnostics, GYN Surgical and Skeletal Health. 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. There were no intersegment revenues during the three months ended December26, 2009 and December27, 2008. Segment information for the three months ended December26, 2009 and December27, 2008 is as follows: Three Months Ended December26, 2009 December27, 2008 Total revenues: Breast Health $ 179,073 $ 199,112 Diagnostics 140,400 134,624 GYN Surgical 71,453 67,949 Skeletal Health 21,522 27,548 $ 412,448 $ 429,233 Operating income: Breast Health $ 27,786 $ 44,960 Diagnostics 27,416 24,283 GYN Surgical 14,724 19,981 Skeletal Health 2,043 4,497 $ 71,969 $ 93,721 Depreciation and amortization: Breast Health $ 12,718 $ 10,800 Diagnostics 41,425 39,346 GYN Surgical 17,007 14,293 Skeletal Health 2,841 1,742 $ 73,991 $ 66,181 Capital expenditures: Breast Health $ 1,306 $ 3,845 Diagnostics 857 1,487 GYN Surgical 1,819 1,942 Skeletal Health 1,591 2,225 $ 5,573 $ 9,499 December26, 2009 September26, 2009 As adjusted Identifiable assets: Breast Health $ 1,124,288 $ 1,133,714 Diagnostics 1,906,577 1,942,494 GYN Surgical 1,853,954 1,860,834 Skeletal Health 30,289 30,937 Corporate 767,116 716,247 $ 5,682,224 $ 5,684,226 There were no customers with balances greater than 10% of accounts receivable as of December26, 2009 or September26, 2009, nor any customer that represented greater than 10% of product revenues during the three months ended December26, 2009 and December27, 2008. The Company operates in the following major geographic areas as noted in the below chart. Product sales data is based upon customer location, and internationally totaled $73,444 and $81,421 during the three

Income Taxes

Income Taxes
	3 Months Ended Dec. 26, 2009 USD / shares
Income Taxes	(14) Income Taxes The Companys effective tax rates for the three months ended December26, 2009 and December27, 2008 were 36.5% and 32.8%, respectively. For the three months ended December26, 2009, the effective tax rate primarily reflects the statutory rate. For the three months ended December27, 2008, the effective tax rate was lower than the statutory rate primarily due to a retroactive reinstatement of the Federal research and development tax credit. As of December26, 2009, the Company has recorded a net deferred tax liability of approximately $985,000. This liability is net of certain deferred tax assets totaling approximately $49,000. Managements conclusion that such assets will be recovered is based upon its expectation that future earnings of the Company 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 taxable income, some or all of the Companys deferred tax assets may not be realized. The Company had gross unrecognized tax benefits, including interest, of $29,987 as of December26, 2009, all of which represents the amount of unrecognized tax that, if recognized, would result in a reduction of the Companys effective tax rate. The Companys policy is to recognize accrued interest and penalties related to unrecognized tax benefits and income tax liabilities as part of income tax expense. As of December26, 2009, accrued interest was $1,276, net of federal benefit. As of December26, 2009, no penalties have been accrued. The Company and its subsidiaries are subject to United States 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 will not materially reduce the Companys income tax provision for fiscal 2010.

Product Warranties

Product Warranties
	3 Months Ended Dec. 26, 2009 USD / shares
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 CAD and Dimensions digital mammography products for which the Company defers the selling price of post contract customer support, based on estimated fair value, 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 three months ended December26, 2009 and December27, 2008 is as follows: Balanceat beginningof period Provisions Settlements/ adjustments Balanceat endofperiod Three Months Ended: December26, 2009 $ 5,602 $ 43 $ (954 ) $ 4,691 December27, 2008 $ 9,109 $ 1,321 $ (2,306 ) $ 8,124

Restructuring Charges

Restructuring Charges
	3 Months Ended Dec. 26, 2009 USD / shares
Restructuring Charges	(16) Restructuring Charges In the fourth quarter of fiscal 2009, the Company closed its manufacturing facility in Shanghai, China. This facility, which manufactured organic photoconductor drum coatings, was acquired in connection with the AEG acquisition in 2006. The Company recorded restructuring charges for severance benefits of $420 and other costs of $377 in the fourth quarter of fiscal 2009. These severance benefits were paid to the employees as of September26, 2009. In connection with this action, the Company ceased production during the fourth quarter of 2009 and recorded impairment charges of $661 in cost of product sales for manufacturing equipment that had no further utility. In the first quarter of fiscal 2010, the Company recorded $487 of costs related to the clean-up and closure of this facility, including stay bonuses. At December26, 2009, $540 was accrued related to this action for the payment of certain other costs of $344 and stay bonuses of $196.

Goodwill and Intangible Assets

Goodwill and Intangible Assets
	3 Months Ended Dec. 26, 2009 USD / shares
Goodwill and Intangible Assets	(17) Goodwill and Intangible Assets Goodwill In accordance with ASC 350, Intangibles-Goodwill and Other (formerly SFAS No.142, Goodwill and Other Intangible Assets), 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. The Company conducts its annual goodwill impairment test as of the first day of its fourth quarter of each fiscal year. There were no indicators of impairment identified during the first quarter of fiscal 2010. In connection with completing its annual goodwill impairment test in the fourth quarter of fiscal 2009, the Company determined that if the fair value of two of its reporting units had been lower by 10%, they would have failed Step1 of the impairment test requiring a Step 2 analysis. These reporting units, one in the Diagnostics reportable segment and one in the Skeletal Health reportable segment, had fair values at the annual impairment test date that exceeded their carrying values by 9% and 2%, respectively, and goodwill of $236.0 million and $8.2 million, respectively. The fair value of these reporting units was determined by using the Income Approach, specifically a discounted cash flow analysis (DCF). The key assumptions that drive the fair value in this model are the weighted-average cost of capital (WACC), terminal values, growth rates, and the amount and timing of expected future cash flows. A deterioration in the current worldwide financial markets and economic environment would likely result in a higher WACC because market participants would require a higher rate of return. In the DCF as the WACC increases, the fair value decreases. The other significant factor in the DCF is the Companys projected financial information (i.e., amount and 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 fair values of these reporting units. For the Companys other reporting units with goodwill aggregating $1.77 billion as of the annual impairment test date, the Company believes that these reporting units are not at risk of failing Step 1 of the goodwill impairment test. The following table presents the changes in goodwill during the three months ended December26, 2009: Balance at September26, 2009 $ 2,108,963 Adiana contingent consideration 4,396 Other adjustments (522 ) Foreign currency translation impact (123 ) Balance at December26, 2009 $ 2,112,714 The allocation of goodwill by reporting segment consisted of the following: Balanceasof December26,2009 Balance asof September26,2009 Breast Health $ 662,623 $ 6

Recent Accounting Pronouncement

Recent Accounting Pronouncements
	3 Months Ended Dec. 26, 2009 USD / shares
Recent Accounting Pronouncements	(18) Recent Accounting Pronouncements In December 2007, the FASB issued ASC 805, Business Combinations (formerly SFAS No.141 (Revised 2007), Business Combinations). 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. ASC 805 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. ASC 805 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. ASC 805 retains the guidance in SFAS 141 for identifying and recognizing intangible assets separately from goodwill. ASC 805 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. ASC 805 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. The adoption of ASC 805 did not have a material impact on the Companys financial condition, results of operations or cash flows. In December 2007, the FASB issued SFAS No.160, Noncontrolling Interests in Consolidated Financial StatementsAn amendment of ARB No.51 (codified within ASC 810, Consolidation). 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 interest in the consolidated entity that should be reported as equity in the consolidated financial statements. The amount of net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement. This accounting guidance clarifies that changes in a parents ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest. In addition, this Statement requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. This accounting guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December15, 2008, which is the Companys 2010 fiscal year. Early adoption is prohibited. The adoption of this accounting guidance did not have a material impact on the Companys consolidated financial statements. In June 2008, the FASB ratified the consensus reached on EITF Issue No.07-5, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entitys Own Stock (EITF 07-5) (codified within ASC 815). This accounting guidance clari

Document Information

Document Information
	3 Months Ended Dec. 26, 2009 USD / shares
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2009-12-26

Entity Information

Entity Information (USD $)
	3 Months Ended Dec. 26, 2009	Feb. 01, 2010
Trading Symbol	HOLX
Entity Registrant Name	HOLOGIC INC
Entity Central Index Key	0000859737
Current Fiscal Year End Date	--09-26
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		258,458,793