# Table	of	Contents

# UNITED	STATES

# SECURITIES	AND	EXCHANGE	COMMISSION

(Mark	One)

# ANNUAL	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE	SECURITIES	EXCHANGE	ACT	OF	1934

For	the	fiscal	year	ended:	September	29,	2007

# TRANSITION	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE	SECURITIES	EXCHANGE	ACT	OF	1934

# Hologic,	Inc.

(Exact	Name	of	Registrant	as	Specified	in	Its	Charter)

Delaware

(State	or	Other	Jurisdiction	of	Incorporation	or	Organization)

(IRS	Employer	Identification	No.)

35	Crosby	Drive,	Bedford,	Massachusetts	01730

(Address	of	Principal	Executive	Offices)	(Zip	Code)

Registrant's	Telephone	Number,	Including	Area	Code	(781)	999-7300

# Securities	registered	pursuant	to	Section	12(b)	of	the	Act:

Title	of	Each	Class

Common	Stock,	$.01	par	value

Name	of	Each	Exchange	on	which	Registered

Nasdaq	Global	Select	Market

Securities	registered	pursuant	to	Section	12(g)	of	the	Act:				Rights	to	Purchase	Preferred	Stock

Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in	Rule	405	of	the	Securities	Act.				Yes		x				No		¨

Indicate	by	checkmark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	Section	15(d)	of	the	Act.				Yes		¨				No		x

Indicate	by	check	mark	whether	the	registrant	(1)	has	filed	all	reports	required	to	be	filed	by	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934	during	the preceding	12	months	(or	for	such	shorter	period	that	the	registrant	was	required	to	file	such	reports),	and	(2)	has	been	subject	to	such	filing	requirements	for	the	past	90 days.				Yes		x				No		¨

Indicate	by	check	mark	if	disclosure	of	delinquent	filers	pursuant	to	Item	405	of	Regulation	S-K	is	not	contained	herein,	and	will	not	be	contained,	to	the	best	of registrant's	knowledge,	in	definitive	proxy	or	information	statements	incorporated	by	reference	in	Part	III	of	this	Form	10-K	or	any	amendment	to	this	Form	10-K.		x

Indicate	by	check	mark	whether	the	registrant	is	a	large	accelerated	filer,	an	accelerated	filer,	or	a	non-accelerated	filer.	See	definition	of	"accelerated	filer	and large	accelerated	filer"	in	Rule	12b-2	of	the	Exchange	Act.

Large	Accelerated	Filer		x				Accelerated	Filer		¨				Non-Accelerated	Filer			¨

Indicate	by	check	mark	whether	the	registrant	is	a	shell	company	(as	defined	in	Exchange	Act	Rule	12b-2).				Yes		¨				No		x

The	aggregate	market	value	of	the	registrant's	Common	Stock	held	by	non-affiliates	of	the	registrant	as	of	March	30,	2007	was	$3,079,547,382	based	on	the	price of	the	last	reported	sale	on	the	Nasdaq	National	Market	on	that	date.

# DOCUMENTS	INCORPORATED	BY	REFERENCE

Portions	of	the	registrant's	Proxy	Statement	for	the	registrant's	annual	meeting	of	stockholders	to	be	filed	within	120	days	of	the	end	of	its	fiscal	year	ended September	29,	2007	are	incorporated	into	Part	III	(Items	10,	11,	12,	13	and	14)	of	this	Annual	Report	on	Form	10-K	where	indicated.

# SPECIAL	NOTE	REGARDING	FORWARD-LOOKING	STATEMENTS

Some	of	the	statements	contained	in	this	report	are	forward-looking	statements	within	the	meaning	of	Section	27A	of	the	Securities	Act	of	1933	and	Section	21E of	the	Securities	Exchange	Act	of	1934.	These	statements	involve	known	and	unknown	risks,	uncertainties	and	other	factors	which	may	cause	our	or	our	industry's actual	results,	performance	or	achievements	to	be	materially	different	from	any	future	results,	performance	or	achievements	expressed	or	implied	by	the	forward-looking statements.	Forward-looking	statements	include,	but	are	not	limited	to	statements	regarding:

•the	impact	and	anticipated	benefits	of	recently	completed	acquisitions	and	acquisitions	we	may	complete	in	the	future;

•our	goal	of	expanding	our	market	positions;

•the	development	of	new	competitive	technologies	and	products;

•regulatory	approval	and	clearances	for	our	products;

•production	schedules	for	our	products;

•the	anticipated	development	of	our	markets	and	the	success	of	our	products	in	these	markets;

•the	anticipated	performance	and	benefits	of	our	products;

•business	strategies;

•dependence	on	significant	or	sole	source	suppliers;

•our	ability	to	maintain	effective	internal	controls;

•the	impact	and	costs	and	expenses	of	any	litigation	we	may	be	subject	to	now	or	in	the	future;

•compliance	with	covenants	contained	in	our	credit	facility	and	long	term	leases;

•anticipated	trends	relating	to	our	financial	condition	or	results	of	operations;	and

•our	capital	resources	and	the	adequacy	thereof.

In	some	cases,	you	can	identify	forward-looking	statements	by	terms	such	as	"may,"	"will,"	"should,"	"could,"	"would,"	"expects,"	"plans,"	"anticipates," "believes,"	"estimates,"	"projects,"	"predicts,"	"potential"	and	similar	expressions	intended	to	identify	forward-looking	statements.	These	statements	are	only	predictions and	involve	known	and	unknown	risks,	uncertainties,	and	other	factors	that	may	cause	our	actual	results,	levels	of	activity,	performance,	or	achievements	to	be materially	different	from	any	future	results,	levels	of	activity,	performance,	or	achievements	expressed	or	implied	by	such	forward-looking	statements.	Given	these uncertainties,	you	should	not	place	undue	reliance	on	these	forward-looking	statements.	Also,	these	forward-looking	statements	represent	our	estimates	and	assumptions only	as	of	the	date	of	this	report.	Except	as	otherwise	required	by	law,	we	expressly	disclaim	any	obligation	or	undertaking	to	release	publicly	any	updates	or	revisions	to any	forward-looking	statement	contained	in	this	report	to	reflect	any	change	in	our	expectations	or	any	change	in	events,	conditions	or	circumstances	on	which	any	of our	forward-looking	statements	are	based.	Factors	that	could	cause	or	contribute	to	differences	in	our	future	financial	results	include	those	discussed	in	the	Risk	Factors set	forth	in	Part	I	Item	1A	below	as	well	as	those	discussed	elsewhere	in	this	report.	We	qualify	all	of	our	forward-looking	statements	by	these	cautionary	statements.

# PART	I

# Overview

We	are	a	diversified	medical	technologies	company	specializing	in	diagnostic	imaging	products	and	interventional	devices	dedicated	to	serving	the	healthcare needs	of	women.	Historically,	we	have	developed,	manufactured	and	marketed	products	focused	on	mammography,	breast	care	and	osteoporosis	assessment.	In	October 2007,	we	completed	our	business	combination	with	Cytyc	Corporation	(also	referred	to	in	this	document	as	"Cytyc"),	a	company	that	develops,	manufactures	and markets	complementary	products	covering	a	range	of	cancers	and	women's	health	indications,	including	cervical	cancer	screening,	prenatal	diagnostics	and	partial	breast radiation	therapy.

We	have	historically	focused	our	resources	on	developing	systems	and	subsystems	offering	superior	image	quality	and	diagnostic	accuracy,	which	has	enabled	us to	capture	significant	market	share	and	customer	loyalty,	despite	the	presence	of	large	competitors.	As	a	result	of	our	combination	with	Cytyc	we	intend	to	expand	our focus	to	further	utilize	Cytyc's	strengths	in	the	fields	of	obstetrics,	gynecology,	radiation	oncology	and	minimally	invasive	surgery.

Our	mammography	and	breast	care	products	include	a	broad	portfolio	of	breast	imaging	and	related	products,	including	digital	and	film-based	mammography systems,	computer-aided	detection	(CAD),	breast	biopsy	guidance	systems,	minimally	invasive	breast	biopsy	and	tissue	extraction	devices	and	our	recently	acquired MammoPad	breast	cushion.	Our	osteoporosis	assessment	products	primarily	consist	of	dual-energy	X-ray	bone	densitometry	systems	and	an	ultrasound-based osteoporosis	assessment	product.	Our	other	business	unit	includes	our	Fluoroscan	mini	C-arm	imaging	products,	our	Esaote	line	of	extremity	MRI	(Magnetic	Resonance Imaging)	systems	that	are	manufactured	by	an	original	equipment	manufacturer,	and	our	photoconductor	coating	business,	an	ancillary	business	that	we	acquired	as	part of	our	acquisition	of	AEG	Elektrofotografie	GmbH	("AEG").

Cytyc's	product	offerings	have	historically	been	divided	between	diagnostic	and	surgical	products.	Cytyc's	core	diagnostic	products	are	the	ThinPrep	System, which	is	primarily	used	in	cytology	testing	applications,	such	as	cervical	cancer	screening,	and	the	Full	Term	Fetal	Fibronectin	Test,	which	offers	clinical	and	cost benefits	for	the	assessment	of	the	risk	of	pre-term	birth.	Cytyc's	core	surgical	products	include	the	NovaSure	System,	which	enables	physicians	to	treat	women	suffering from	excessive	menstrual	bleeding	in	a	minimally	invasive	manner	in	order	to	eliminate	or	reduce	their	bleeding,	the	MammoSite	Radiation	Therapy	System,	which	is	a single-use	device	for	the	treatment	of	early-stage	breast	cancer,	the	GliaSite	Radiation	Therapy	System,	which	provides	a	full	course	of	post-surgical	radiation	therapy using	Iotrex,	a	proprietary,	liquid	radiation	source	for	which	Cytyc	has	an	exclusive	license,	and	the	Adiana	Complete	Transcervical	Sterilization	System,	which	is	a form	of	permanent	female	contraception	intended	as	an	alternative	to	tubal	ligation	and	for	which	Cytyc	is	in	the	process	of	seeking	a	pre-market	approval	from	the	U.S. Food	and	Drug	Administration	(the	"FDA").

We	were	founded	on	and	remain	committed	to	the	principle	of	applying	superior	technology	to	health	care	challenges	facing	women.	Recently,	we	have	expanded and	diversified	our	business	through	a	number	of	strategic	acquisitions,	including	the	following:

•In	September	2005,	we	acquired	intellectual	property	relating	to	the	mammography	business	and	products	of	Fischer	Imaging	Corporation	(Fischer), including	the	intellectual	property	relating	to	Fischer's	Mammotest	prone	breast	biopsy	and	Senoscan	digital	mammography	systems.	In	July	2006,	we	sold to	Siemens	all	of	the	intellectual	property	we	acquired	from	Fischer	relating	to	the	Mammotest	system,	and	retained	a	royalty-free,	non-exclusive,	perpetual, irrevocable,	worldwide	right	and	license	to	use	that	intellectual	property	for	current	and	future	products.

•In	May	2006,	we	acquired	AEG	Elektrofotografie	GmbH	("AEG"),	headquartered	in	Warstein,	Germany,	with	manufacturing	operations	in	Germany	and China.	AEG	specializes	in	the	manufacture	of	photoconductor	materials	for	use	in	a	variety	of	electro-photographic	applications,	including	the	selenium coating	of	our	digital	detectors.

•In	July	2006,	we	completed	the	acquisition	of	R2	Technology,	Inc.	("R2"),	then	located	in	Sunnyvale,	California,	a	leader	in	the	development	and commercialization	of	CAD,	an	innovative	technology	that	assists	radiologists	in	the	early	detection	of	breast	cancer.

•In	July	2006,	we	completed	the	acquisition	of	Suros	Surgical	Systems,	Inc.	("Suros"),	located	in	Indianapolis,	Indiana.	Suros	develops,	manufactures	and sells	minimally	invasive	interventional	breast	biopsy	technology	and	products	for	biopsy,	tissue	removal	and	biopsy	site	marking.

•In	September	2007,	we	completed	the	acquisition	of	BioLucent,	Inc.	("BioLucent"),	previously	located	in	Aliso	Viejo,	California.	BioLucent	develops	and markets,	the	MammoPad	breast	cushion,	which	is	designed	to	decrease	the	discomfort	associated	with	the	breast	compression	required	during	a mammography.

•	 On	October	22,	2007,	we	consummated	our	largest	transaction	to	date,	our	business	combination	with	Cytyc	Corporation.

We	believe	our	business	combination	with	Cytyc	will	provide	us	with	a	stronger	financial	base	and	a	more	diversified	and	balanced	product	portfolio,	while reinforcing	our	focus	on	women's	health.	Additionally,	we	believe	that	the	significantly	increased	scale	and	scope	of	our	operations	will	better	enable	us	to	take advantage	of	growth	opportunities	and	will	create	a	strong	platform	for	further	expanding	our	operations	through	product	development,	cross-selling	opportunities	and complementary	strategic	transactions.

We	were	incorporated	in	Massachusetts	in	October	1985	and	reincorporated	in	Delaware	in	March	1990.	Unless	the	context	otherwise	requires,	references	to	us, Hologic	or	our	company	refer	to	Hologic,	Inc.	and	each	of	its	consolidated	subsidiaries.	During	fiscal	year	2007,	we	viewed	our	operations	and	managed	our	business	in three	principal	reporting	segments:	mammography	and	breast	care	products,	osteoporosis	assessment	products	and	all	other	which	includes	our	mini	C-arm	imaging products,	extremity	MRI,	AEG	photoconductor	coatings,	and	general	radiography	products.	We	have	provided	financial	information	concerning	these	segments	in	Note 14	of	the	Notes	to	our	Consolidated	Financial	Statements	included	in	this	report.	In	fiscal	2008	we	expect	that	our	reporting	segments	will	be	reconfigured	to	reflect	the inclusion	of	Cytyc	and	the	integration	of	our	combined	businesses.

# Trademark	Notice

We	use	certain	registered	and	unregistered	trademarks	owned	by	us	and	our	subsidiaries	in	this	report,	including	without	limitation,	the	following:

Hologic	is	a	registered	trademark	of	Hologic,	Inc.	Other	trademarks,	logos	and	slogans	registered	or	used	by	Hologic	and	its	divisions	and	subsidiaries	in	the United	States	and	other	countries	include:	AEG,	Affinity,	ATEC,	CADfx,	Celero,	Citra,	Citra	PE,	Delphi,	Digital	Now	and	the	Digital	Now	logo,	Discovery	QDR, Discovery	P,	Direct	Radiography,	DirectRay	and	the	DirectRay	signal	profile	logo,	Discovery,	Explorer,	Express	Exam,	Fluoroscan,	Fully	Automatic	Self-adjusting Tilt,	FAST,	High	Definition	Instant	Vertebral	Assessment,	HTC,	ImageChecker,	Insight,	Instant	Vertebral	Assessment,	IVA,	IVA-HD,	LORAD,	M-IV,	M-IV	Platinum, Mammotest,	MultiCare,	MultiCare	Platinum,	MR-CADWorks,	Premier,	Premier	Encore,	QDR,	R2	and	the	R2	logo,	R2	Technology,	Sahara,	SecurView,	SecurView DX,	SecurView	RT,	Selenia,	Selenia	S,	SenoScan,	SenoSound,	Senoview,	Senoview	Plus,	SmartWindow,	StereoLoc,	StereoLoc	II,	Suros	and	the	Suros	logo.	In connection	with	our	BioLucent	acquisition	in	September	2007,	we	acquired	a	license	to	the	trademarks	BioLucent	and	MammoPad.	In	October	2007,	we	acquired	Cytyc, including	the	following	marks:	Cytyc,	Adiana,	Adeza,	Mammopad,	ThinPrep	System,	MammoSite,	MammoSite	Radiation	Therapy	System,	GliaSite,	GliaSite Radiation	Therapy	System,	Complete	Transcervical	Sterilization	System,	TCS,	FullTerm	and	the	FullTerm	logo,	Fetal	Fibornectin	Test,	ThinPrep,	ThinPrep	2000 Processor,	ThinPrep	3000	Processor,	ThinPrep	Imaging	System,

ThinPrep	Pap	Test,	PreservCyt,	CytoLyt,	Gestiva,	TliIQ,	MammoSite	Radiation	Therapy	System,	NovaSure,	NovaSure	RF	Controller	and	GliaSite	System.	In connection	with	the	Esaote	extremity	MRI	system	we	distribute,	we	have	a	license	to	use	the	trademarks	Opera,	C-Scan	and	E-Scan.

# Available	Information

Our	Internet	website	address	is	http://www.hologic.com.	Through	our	website,	we	make	available,	free	of	charge,	our	annual	report	on	Form	10-K,	quarterly reports	on	Form	10-Q,	current	reports	on	Form	8-K	and	any	amendments	to	those	reports,	as	soon	as	reasonably	practicable	after	we	electronically	file	such	material with,	or	furnish	it	to,	the	SEC.	These	SEC	reports	can	be	accessed	through	the	investor	relations	section	of	our	website.	The	information	found	on	our	website	is	not	part of	this	or	any	other	report	we	file	with	or	furnish	to	the	SEC.

You	may	read	and	copy	any	materials	we	file	with	the	SEC	at	the	SEC's	Public	Reference	Room	at	100	F	Street,	NE,	Washington,	DC	20549.	You	may	obtain information	on	the	operation	of	the	Public	Reference	Room	by	calling	the	SEC	at	1-800-SEC-0330.	The	SEC	also	maintains	an	Internet	website	that	contains	reports, proxy	and	information	statements,	and	other	information	regarding	the	Company	and	other	issuers	that	file	electronically	with	the	SEC.	The	SEC's	Internet	website address	is	http://www.sec.gov.

# Products

The	description	of	our	products	appearing	below	includes	a	description	of	our	mammography	and	breast	care	products,	our	osteoporosis	assessment	products,	and other	products	including	our	mini	C-arm	imaging	products,	the	Esaote	extremity	MRI	system	we	distribute,	and	the	AEG	photoconductor	materials	we	manufacture	and sell	for	a	variety	of	electrophotographic	applications.	Additionally,	we	have	included	a	separate	description	of	the	products	offered	by	Cytyc	as	of	the	date	of	our business	combination	with	Cytyc.	None	of	Cytyc's	products	were	sold	by	us	during	our	fiscal	year	2007	which	concluded	on	September	29,	2007	as	our	business combination	with	Cytyc	was	not	consummated	until	October	22,	2007.

# Mammography	and	Breast	Care	Products

Our	breast	cancer	detection	business	offers	a	broad	line	of	breast	imaging	products,	including	our	Direct	Ray	digital	detector	technology,	the	Selenia	full	field digital	mammography	system,	a	series	of	screen-film	mammography	systems,	CAD	systems	for	both	screen-film	and	digital	mammography,	and	a	range	of	breast biopsy	image	guidance	systems	and	breast	biopsy	devices.	Our	mammography	and	breast	care	products	include	the	following:

# DirectRay	Digital	Detector

Digital	radiography	technologies	can	be	divided	into	two	classes:	those	that	employ	direct	methods	to	convert	x-ray	energy	into	an	electrical	charge	and	those	that use	indirect	methods.	Technologies	using	direct-conversion	flat-panel	digital	detectors,	such	as	our	DirectRay	flat	panel	detector,	use	a	semiconductor	coating,	such	as amorphous	selenium	(a-Se),	to	directly	convert	x-ray	photons	into	an	electrical	charge.	No	intensifying	screens	or	additional	processes	are	required	to	capture	and convert	the	x-ray	energy.	Digital	radiography	technologies	using	indirect	conversion	detectors	employ	a	two-step	process	for	x-ray	detection.	Scintillator	coatings,	such as	cesium	iodide	or	gadolinium	oxysulfide,	capture	x-ray	energy	and	convert	it	to	light.	An	array	of	thin-film	diodes	then	converts	the	light	energy	to	electrical	signals. We	believe	that	other	digital	x-ray	imaging	technologies	that	require	light	may	compromise	image	resolution,	lessening	detection	capability.

DirectRay	amorphous	selenium	coated	detectors	are	particularly	well	suited	for	high-quality	digital	imaging	because	selenium	has	high	x-ray	absorption efficiency,	high	intrinsic	resolution	and	low	noise.	We	believe	that	amorphous	selenium	technology	results	in	high	quality	digital	images	across	a	wide	range	of	general radiographic	applications	and	is	particularly	valuable	for	mammography,	which	has	high-resolution	requirements.

# Selenia	Full	Field	Digital	Mammography	System

The	Selenia	full	field	digital	mammography	system	is	based	on	our	proprietary,	amorphous	selenium	DirectRay	digital	detector,	which	preserves	image	quality	by using	amorphous	selenium	to	directly	convert	x-rays	to	electronic	signals,	without	first	converting	them	to	light.	This	direct	conversion	process	preserves	image sharpness	by	eliminating	light	diffusion.

The	Selenia	has	a	number	of	other	features	designed	to	improve	image	quality	and	patient	throughput.	The	open	architecture	of	the	system's	design	provides	for full	integration	with	existing	enterprise	Picture	Archiving	and	Communications	Systems	(PACS)	and	Radiology	Information	Systems	(RIS).	Recent	additions	to	the Selenia	product	line	include	the	development	of	the	Selenia	S,	a	product	specifically	designed	for	the	screening	mammography	facility	or	mobile	environment,	and	a	new tungsten	x-ray	tube	option,	which	when	used	in	combination	with	a	special	silver	filter,	allows	images	to	be	acquired	at	a	lower	dose	without	compromising	the	image quality	of	Selenia.

# Screen-Film	Mammography	Systems

Our	screen-film	mammography	systems	include	our	LORAD	M-IV	and	LORAD	Affinity	product	lines.	The	M-IV	Platinum	incorporates	our	Fully	Automatic Self-adjusting	Tilt	(FAST)	Paddle,	and	our	High	Transmission	Cellular	(HTC)	Grid	which	was	recognized	by	Frost	&	Sullivan	in	connection	with	LORAD's	receipt	of the	2001	Frost	&	Sullivan	Technology	Innovation	Award,	as	one	of	the	most	effective	contrast	improvements	in	20	years	of	breast	imaging.	The	LORAD	Affinity	is	a high-performance	screen-film	mammography	system	specifically	developed	to	fill	a	market	need	for	a	cost-effective	product,	with	performance	characteristics	similar	to high-end	systems.	Affinity	can	be	used	with	other	LORAD	innovations	to	improve	image	quality,	including	our	HTC	and	FAST	Paddle	technologies.

# SecurView	Workstation

The	images	captured	by	digital	mammography	systems	are	typically	transmitted	electronically	for	review	by	a	radiologist	at	a	work	station.	In	2005	we	focused our	product	development	activities	on	improving	digital	workflow	in	the	breast-imaging	suite.	To	this	end,	we	released	the	SecurViewDX	breast	imaging	softcopy workstation,	approved	for	interpretation	of	digital	mammograms	from	most	vendors	as	well	as	images	from	other	diagnostic	breast	modalities.	To	complement	this product,	we	also	released	the	SecurViewRT	workstation,	a	technologist	workstation	enabling	bi-directional	exchange	of	electronic	communications	between	the reviewer	and	the	technologist.	An	additional	configuration	was	added	to	the	Selenia	acquisition	workstation	to	allow	incorporation	of	a	second	monitor	and	computer, providing	all	functionalities	of	the	SecurViewRT	workstation	within	the	exam	room.	This	configuration	is	called	Selenia	with	TechMate.	In	2006	we	released	two	new products	extending	the	functionality	of	our	SecurViewDX	products:	an	Advanced	Multimodality	Package	which	allows	simultaneous	display	and	interpretation	of digital	mammograms,	as	well	as	breast	images	from	other	modalities,	such	as	ultrasound	and	MR	(magnetic	resonance);	and	MR-CADWorks,	a	sophisticated	software package	for	advanced	display,	analysis,	and	interpretation	of	breast	MR	exams.

# CAD	Systems

In	July	2006,	we	acquired	R2,	which	developed	computer	aided	detection,	or	CAD,	systems	for	a	variety	of	imaging	modalities	and	disease	states.	CAD	is	used	by an	increasing	number	of	radiologists	as	"a	second	pair	of	eyes"	when	reading	a	woman's	mammogram.	The	technology	has	the	potential	to	detect	findings	that	might otherwise	be	overlooked	during	the	review	process,	thus	increasing	cancer	detection.	R2's	CAD	technology	assists	physicians	in	the	detection	of	breast	cancer, actionable	lung	nodules	and	other	lung	abnormalities.	R2	pioneered	the	use	of	CAD	for	mammography	when	its	ImageChecker	system	was	approved	by	the	FDA	for film	based	mammography	in	1998	and	for	digital	mammography	in	2001.	In	2004,	the	FDA	approved	the	use	of	R2's	ImageChecker	CAD	technology	customized	for our	Selenia	full	field	digital	mammography	system.

R2's	mammography	applications	software	tools	have	been	integrated	into	our	line	of	multi-modality	breast	imaging	workstations.	The	Citra	software	brings physicians	a	universal	and	'CAD-intelligent'	system	for	reviewing	digital	mammography	images	and,	if	needed,	comparing	them	with	digitized	prior	film	images.	For analog	facilities,	R2	has	developed	the	DigitalNow,	a	software	product	for	those	mammography	facilities	that	may	upgrade	to	digital	mammography	in	the	future.	The DigitalNow	software	allows	users	to	build	a	library	of	digitized	prior	mammograms,	to	help	facilitate	a	seamless	transition	to	softcopy	review	when	the	facility transitions	to	digital.

# Stereotactic	Breast	Biopsy	Systems

We	provide	clinicians	with	the	flexibility	of	choosing	from	either	upright	or	prone	systems	for	breast	biopsy	by	offering	two	minimally	invasive	stereotactic breast	biopsy	guidance	systems,	the	MultiCare	Platinum	dedicated,	prone	breast	biopsy	table	and	the	StereoLoc	II	upright	attachment.	The	StereoLoc	II	attachment	is used	in	conjunction	with	our	M-IV	series	of	screen-film	mammography	systems	and	our	Selenia	full	field	digital	mammography	system.	These	systems	provide	an alternative	to	open	surgical	biopsy,	and	can	be	performed	as	an	outpatient	procedure	under	local	anesthesia,	allowing	shorter	recovery	times	and	reduced	morbidity.

# Breast	Biopsy	Products

In	July	2006,	we	acquired	Suros,	an	Indiana-based	developer	and	manufacturer	of	minimally	invasive	interventional	products	for	breast	biopsy,	tissue	removal and	biopsy	site	marking.	Its	technology,	which	includes	a	patented	fluid	management	system,	allows	the	removal	of	tissue	or	biopsy	samples	using	stereotactic	x-ray, ultrasound	and	MRI	guidance	systems.	Suros'	ATEC	(Automated	Tissue	Excision	and	Collection)	product	line	includes	percutaneous,	automatic	vacuum-assisted	breast biopsy	collection	systems,	a	disposable	handpiece	used	to	collect	samples,	and	biopsy	site	markers.	The	ATEC	line	of	products	is	designed	to	accommodate	a	broad range	of	clinical	and	patient	presentations.	In	2007,	we	began	offering	the	Suros	Celero,	a	vacuum-assisted,	spring	loaded,	large	core	biopsy	device	designed	for	use under	ultrasound	guidance	to	access	hard-to-reach	lesions	in	the	axilla,	near	the	chest	wall,	near	implants	or	behind	the	nipple.

# MammoPad	Breast	Cushion

In	September	2007,	we	acquired	BioLucent,	the	manufacturer	of	the	proprietary	MammoPad	breast	cushion.	The	MammoPad	cushion	is	designed	to	reduce	the discomfort	women	often	experience	during	mammography.	The	cushion's	grip-like	surface	holds	breast	tissue	in	place	to	ensure	optimal	breast	positioning.	The radiolucent	cushion	does	not	interfere	with	image	quality	and	can	be	used	with	both	digital	and	analog	mammography.

# Breast	Tomosynthesis

Breast	tomosynthesis	is	an	experimental	technology,	which	is	not	yet	commercially	available	and	for	which	we	are	seeking	pre-market	FDA	approval.	The	system is	designed	specifically	to	address	many	of	the	limitations	of	two	dimensional	(2D)	digital	mammography,	and	is	comprised	of	a	mammography	gantry	capable	of performing	both	2D	and	three	dimensional	(3D)	image	acquisition	and	display.	The	tomosynthesis	system	when	operating	in	3D	mode	acquires	a	series	of	low	dose	x- ray	images	taken	in	a	scanning	motion	at	various	angles.	The	images	are	mathematically	processed	into	a	series	of	one	millimeter	slices,	revealing	breast	tissue	from	a three	dimensional	perspective.	The	purpose	of	the	technology	is	to	eliminate	the	tissue	distortion	and	shadowing	caused	by	breast	compression	required	during	a	typical mammography	exam.	By	allowing	the	clinician	to	review	breast	tissue	in	three	dimensional	space,	we	believe	the	more	subtle	architecture	of	various	types	of	suspicious lesions	can	be	better	interpreted,	ultimately	increasing	cancer	detection	and	reducing	unnecessary	patient	callbacks.

# Osteoporosis	Assessment	Products

Our	osteoporosis	assessment	products	include	a	family	of	QDR	x-ray	bone	densitometers	and	the	Sahara	Clinical	Bone	Sonometer,	a	low-cost	ultrasound	device that	assesses	the	bone	density	of	the	heel.	In	addition	to	sales	of	new	bone	densitometry	systems,	we	also	offer	upgrade	opportunities	to	purchasers	of	many	of	our	earlier generation	systems.

QDR	x-ray	Bone	Densitometers.	We	began	commercial	shipments	of	our	first	QDR	dual-energy	x-ray	bone	densitometry	system	in	1987.	Since	that	introduction, dual-energy	x-ray	technology	became	and	remains	a	leading	bone	densitometry	assessment	tool.	We	believe	that	the	advantages	of	dual-energy	x-ray	systems	include high	precision,	and	the	ability	to	measure	bone	density	of	the	most	important	fracture	sites,	the	spine	and	hip.

In	November	1999,	we	introduced	our	Delphi	QDR	Series	bone	densitometer.	Delphi	is	a	bone	densitometer	that	offers	physicians	the	ability	to	simultaneously assess	two	of	the	strongest	risk	factors	for	osteoporotic	fracture:	existing	fractures	of	the	spine	and	low	bone	density.	Using	high-resolution	fan	beam	x-ray	imaging technology,	our	Instant	Vertebral	Assessment,	or	IVA,	technology	enables	clinicians	to	perform	a	rapid,	low-dose	evaluation	of	the	spine	in	a	single	office	visit	during	a routine	bone	densitometry	exam.	In	May	2001,	we	received	the	2001	Frost	&	Sullivan	Technology	Innovation	Award	in	the	osteoporosis	diagnostics	market,	given	for technical	superiority	within	the	industry.

In	December	of	2002,	we	introduced	our	next	generation	of	bone	densitometers,	the	Discovery	QDR	series	of	bone	densitometers.	The	Discovery	systems	reduce bone	density	scan	times	providing	bone	density	and	IVA	scans	in	just	ten	seconds.	The	Discovery's	CADfx	software	feature	automates	the	classification	of	spine fractures,	and	our	Express	Exam	feature	automates	the	patient	examination	procedure.

In	February	of	2004,	we	began	shipments	of	our	Explorer	series	bone	densitometer.	The	Explorer	system	is	an	entry-level	x-ray	bone	densitometer	targeted	at cost	conscious	practitioners,	particularly	in	international	markets.

In	June	of	2005,	we	introduced	the	Discovery	P	system,	our	first	system	specifically	configured	for	primary	care	physicians,	including	the	capability	of	integrating bone	density	information	with	the	patient's	electronic	medical	record.	In	November	2005,	we	introduced	High	Definition	Instant	Vertebral	Assessment	(IVA-HD), which	improved	the	resolution	of	imaging	performed	on	the	Discovery	system.	We	also	introduced	a	lower	resolution	version	of	IVA	on	our	Explorer	line,	making	IVA a	component	on	all	of	our	bone	densitometry	systems.

In	May	2006,	we	received	FDA	pre-market	clearance	for	the	visualization	of	Abdominal	Aortic	Calcification	(AAC)	using	our	IVA	imaging	technology.	The presence	of	moderate	or	severe	AAC	has	been	prospectively	demonstrated	to	predict	cardiovascular	disease	a	leading	cause	of	death	of	women	over	age	65	years.

Ultrasound.	In	addition	to	our	QDR	x-ray	bone	densitometers,	we	have	developed	and	sell	a	lightweight,	portable	ultrasound	bone	analyzer,	called	Sahara,	that assesses	the	bone	density	of	the	heel.	Clinical	trials	of	ultrasound	systems	have	indicated	a	significant	association	of	low	ultrasonic	bone	measurements	of	the	heel	and the	risk	of	fracture.	Since	ultrasound	devices	do	not	use	x-rays	in	making	their	measurements,	they	do	not	require	x-ray	licensed	or	registered	operators.	However, because	ultrasound	bone	measurements	currently	are	not	as	precise	as	x-ray	and	other	measurements,	they	are	less	reliable	for	monitoring	small	changes	in	bone	density or	for	assessing	the	response	to	therapies.	In	addition,	they	are	generally	limited	to	measurements	at	peripheral	skeletal	sites,	not	the	spine	or	hip,	which	are	considered the	optimal	sites	for	the	diagnosis	of	osteoporosis.	We	believe	that	our	Sahara	ultrasound	system	represents	a	relatively	low	cost,	portable,	easy-to-use,	non-ionizing measurement	technique	to	assist	in	initial	screening	for	osteoporosis.

# Other	Products

Our	other	product	offerings	include	our	mini	C-arm	imaging	products,	our	Esaote	line	of	extremity	MRI	systems,	which	are	manufactured	by	an	original equipment	manufacturer,	and,	our	photoconductor	coating	business,	which	we	acquired	in	connection	with	our	acquisition	of	AEG.

# Mini	C-arm	Imaging

We	manufacture	and	distribute	Fluoroscan	mini	C-arm	imaging	systems.	Mini	C-arms	provide	low	intensity,	real-time	x-ray	imaging,	with	high-resolution	images at	radiation	levels	and	at	a	cost	below	those	of	conventional	x-ray	and	fluoroscopic	equipment.	Mini	C-arm	systems	are	used	primarily	by	orthopedic	surgeons	to perform	minimally	invasive	surgical	procedures	on	a	patient's	extremities,	such	as	the	hand,	wrist,	knee,	foot	and	ankle.

# Extremity	MRI

In	September	2005,	we	entered	into	an	agreement,	as	amended	in	November	2007,	with	Esaote	of	Genoa,	Italy	for	the	exclusive	distribution	and	service	in	the United	States	of	extremity	MRI	systems	manufactured	by	Esaote.	Distribution	for	this	line	is	effected	by	a	small	team	of	specialists	complemented	by	leads	generated	by our	primary	care	bone	densitometry	and	mini	C-arm	sales	organizations.	The	target	markets	for	these	products	are	rheumatology	(C-Scan),	with	specific	emphasis	on	the early	detection	of	rheumatoid	arthritis	and	orthopedics	(E-Scan),	with	an	emphasis	on	orthopedic	interventions	and	surgical	planning.

In	2007,	we	began	to	distribute	the	Opera	extremity	MRI	product	for	the	orthopedic	market	which	is	designed	to	open	up	a	wider	array	of	diagnostic	possibilities with	complete	imaging	of	all	extremities,	including	hip	and	shoulder	applications.	The	Opera	product	uses	real	time	positioning	to	speed	set	up	and	significantly	reduce exam	time.

# Photoconductor	Coatings

On	May	2,	2006,	we	acquired	AEG,	with	plants	in	Warstein,	Germany,	and	Shanghai,	China.	AEG	is	our	sole	supplier	of	the	amorphous	selenium	photoconductor coatings	employed	in	our	Selenia	full-field	digital	mammography	detectors.	AEG	also	develops,	manufactures,	and	sells	non-medical	selenium	and	organic photoconductor	materials	for	use	in	a	variety	of	other	electro	photographic	applications,	including	copying	and	printing.	It	is	one	of	only	two	companies	which	produce selenium	drums	for	high-speed	printers.	It	also	develops	and	sells	organic	photoconductor	coatings	for	use	in	low	speed	copier	and	laser	printer	cartridges	sold	in	the aftermarket.	AEG	sells	primarily	to	assemblers	of	aftermarket	laser	printer	cartridges,	who	sell	to	users	for	replacement	use.

# Cytyc's	Diagnostic	Products

Cytyc	diagnostic	product	offerings	include	the	ThinPrep	System	used	primarily	for	cytology	testing	applications,	such	as	cervical	cancer	screening,	and	as	a	result of	Cytyc's	acquisition	of	Adeza	in	March	2007,	the	FullTerm	Fetal	Fibronectin	Test	for	the	assessment	of	the	risk	of	pre-term	birth.

# Thin	Prep	System

The	ThinPrep	System	is	the	most	widely	used	method	for	cervical	cancer	screening	in	the	United	States.	Cervical	cancer	is	one	of	the	most	common	cancers among	women	throughout	the	world.	If	detected	in	the	pre-cancerous	stage,	virtually	all	cervical	cancer	cases	are	preventable.	The	ThinPrep	System	consists	of	any	one or	more	of	the	following:	the	ThinPrep	2000	Processor,	ThinPrep	3000	Processor,	ThinPrep	Imaging	System,	and	related	reagents,	filters	and	other	supplies,	such	as	the ThinPrep	Pap	Test	and	Cytyc's	proprietary	ThinPrep	PreservCyt	Solution.

The	FDA	approved	the	ThinPrep	Pap	Test	in	1996	as	an	effective	replacement	for	the	conventional	Pap	smear	method	for	the	detection	of	low	grade	and	more severe	lesions	in	a	variety	of	patient	populations.	The	FDA	later	allowed	expanded	labeling	to	include	Cytyc's	clinical	trial	data,	which	indicated	a	59.7%	increase	in	the detection	of	high	grade	lesions	with	the	ThinPrep	System.	The	ThinPrep	System	offers	significantly	improved	specimen	quality	over	that	of	the	conventional	Pap	smear method.

The	ThinPrep	System	also	serves	as	a	platform	for	additional	gynecological	applications	using	residual	patient	specimen	collected	in	ThinPrep	PreservCyt Solution.	Cytyc's	PreservCyt	Solution	has	been	approved	by	the	FDA	as	a	transport	medium	in	testing	for	sexually	transmitted	infections	such	as	Chlamydia	trachomatis and	Neisseria	gonorrhea	directly	from	the	ThinPrep	Pap	Test	vial	using	Roche	Diagnostics	Corporation's	("Roche")	COBAS	Amplicor™	automated	system,	as	well	as using	Gen-Probe	Incorporated's	APTIMA	Combo	2®	assay.	In	addition,	Cytyc's	PreservCyt	Solution	has	been	approved	by	the	FDA	as	a	transport	medium	for	testing for	the	human	papillomavirus	("HPV")	using	Qiagen	N.V.'s,	formerly	Digene	Corporation,	Hybrid	Capture®	II	HPV	DNA	Assay.	Cytyc	has	also	obtained	approval	of two	pre-market	approval	supplements	from	the	FDA:	(i)	one	that	allows	for	the	removal	of	up	to	four	milliliters	from	the	PreservCyt	sample	vial	before	preparing	the ThinPrep	Pap	Test	slide	to	better	facilitate	ancillary	testing,	which	improves	the	implementation	of	and	provides	broader	application	of	molecular	testing,	particularly	in high-volume	laboratories	and	(ii)	one	related	to	the	detection	of	endocervical	and	endometrial	glandular	lesions	with	the	ThinPrep	Pap	Test.

The	ThinPrep	Imaging	System	is	a	device	that	uses	computer	imaging	technology	to	assist	in	primary	cervical	cancer	screening	of	ThinPrep	Pap	Test	slides processed	through	the	ThinPrep	System.	The	system	combines	imaging	technology	to	identify	diagnostic	fields	of	interest	with	an	automated	microscope	to	facilitate locating	these	fields.	Cytotechnologists	using	the	ThinPrep	Imaging	System	are	subject	to	higher	workload	limits	compared	to	the	workload	limits	applicable	to	manual review	of	slides.	As	a	result,	Cytyc	believes	the	ThinPrep	Imaging	System	increases,	and	is	expected	to	continue	to	increase,	a	cytology	laboratory's	screening productivity	and	diagnostic	accuracy	while	leveraging	the	increased	effectiveness	of	the	ThinPrep	Pap	Test.

The	ThinPrep	Process.	The	ThinPrep	process	begins	with	the	patient's	cervical	sample	being	taken	by	the	physician	using	a	cervical	sampling	device	that,	rather than	being	smeared	on	a	microscope	slide	as	in	a	conventional	Pap	smear,	is	rinsed	in	a	vial	filled	with	Cytyc's	proprietary	PreservCyt	Solution.	This	enables	most	of	the patient's	cell	sample	to	be	preserved	before	the	cells	can	be	damaged	by	air	drying.	The	ThinPrep	specimen	vial	is	then	labeled	and	sent	to	a	laboratory	equipped	with	a ThinPrep	Processor	for	slide	preparation.

At	the	laboratory,	the	ThinPrep	specimen	vial	is	inserted	into	a	ThinPrep	Processor,	a	proprietary	sample	preparation	device	which	automates	the	process	of preparing	cervical	specimens.	Once	the	vial	is	inserted	into	the	ThinPrep	Processor,	a	dispersion	step	breaks	up	blood,	mucus,	non-diagnostic	debris	and	large	sheets	of cells	and	homogenizes	the	cell	population.	The	cells	are	then	automatically	collected	onto	Cytyc's	proprietary	ThinPrep	Pap	Test	Filter,	which	incorporates	a	porous membrane	specifically	designed	to	collect	cells.	The	ThinPrep	Processor	constantly	monitors	the	rate	of	flow	through	the	ThinPrep	Pap	Test	filter	during	the	cell collection	process	in	order	to	prevent	the	cellular	concentration	from	being	too	scant	or	too	dense.	A	thin	layer	of	cells	is	then	transferred	from	the	filter	to	a	glass	slide in	a	20	mm-diameter	circle	and	the	slide	is	automatically	deposited	into	a	fixative	solution.	This	slide	is	then	available	for	staining	and	microscopic	examination.

The	cytotechnologist	manually	screens	each	Pap	test	slide	with	a	microscope	to	first	determine	the	adequacy	of	the	slide	and	to	then	differentiate	diseased	or abnormal	cells	from	normal	cells.	With	the	ThinPrep	Imaging	System,	the	screening	process	has	been	automated	to	combine	the	power	of	computer	imaging	technology and	human	interpretive	skills.	Prior	to	human	review,	the	ThinPrep	Imaging	System	rapidly	scans	and	locates	areas	of	interest	for	review.	The	cytotechnologist	then places	the	imaged	slide	onto	the	ThinPrep	Imaging	System	review	scope	which	automatically	presents	each	area	of	interest	to	the	cytotechnologist	in	geographic	order. The	cytotechnologist	evaluates	each	area	of	interest,	selecting	those	areas	which	require	further	pathologist	review,	or	the	cytotechnologist	may	look	beyond	the identified	areas	of	interest.	Alternatively,	the	cytotechnologist	can	determine	that	the	slide	is	negative	and	simply	sign	the	case	out.	By	directing	the	cytotechnologist	to areas	of	interest	on	a	slide,	the	system	may	increase	a	cytology	laboratory's	screening	productivity	and	diagnostic	accuracy.

Additional	Applications.	In	addition	to	acting	as	a	replacement	for	the	conventional	Pap	smear,	the	ThinPrep	System	also	can	be	used	for	non-gynecological cytology	screening	applications.	Non-gynecological	cytology	applications	include	fine-needle	aspiration	specimens	(e.g.,	breast,	thyroid,	lung	or	liver),	lavage specimens	(e.g.,

breast,	gastrointestinal),	body	fluids	(e.g.,	urine,	pleural	fluid,	ascitic	fluid,	pericardial	fluid),	respiratory	specimens	(e.g.,	sputum,	brushing	of	respiratory	tracts)	and ancillary	testing	(e.g.,	cell	blocks,	immunocytochemistry,	special	stains).

# FullTerm	Fetal	Fibronectin	Test

In	connection	with	Cytyc's	acquisition	of	Adeza	Biomedical	Corporation,	Cytyc	acquired	a	patented	diagnostic	test,	the	FullTerm	Fetal	Fibronectin	Test,	that utilizes	a	single-use,	disposable	cassette	and	is	analyzed	on	Adeza's	patented	instrument,	the	TLiIQ	System.	This	test	is	approved	by	the	FDA,	for	broad	use	in	assessing the	risk	of	preterm	birth	and	is	branded	as	the	FullTerm	Fetal	Fibronectin	Test.	The	FullTerm	Test	designed	to	Fetal	Fibronectin	objectively	determine	a	woman's	risk	of preterm	birth	by	detecting	the	presence	of	a	specific	protein,	fetal	fibronectin,	in	vaginal	secretions	during	pregnancy.	Adeza	began	selling	its	single-use,	disposable FullTerm	Fetal	Fibronectin	test	in	1999	and	launched	its	second-generation	system,	the	TLiIQ	System,	in	2001.

# Gestiva

In	connection	with	its	acquisition	of	Adeza,	Cytyc	also	acquired	Gestiva	(17	alpha-hydroxyprogesterone	caproate	injection	250	mg/ml),	a	pharmaceutical	product candidate	to	prevent	preterm	birth	in	women	at	risk	of	preterm	delivery.	A	New	Drug	Application,	or	NDA,	has	been	submitted	with	the	FDA	for	Gestiva.	In	January, 2007,	Adeza	was	notified	by	the	Office	of	Orphan	Products	Development	of	the	FDA	that	it	had	granted	Orphan	Drug	designation	covering	Gestiva.	In	October	2007,	a third	party	filed	a	petition	challenging	this	Orphan	Drug	designation.	If	Gestiva	is	approved,	and	the	challenge	rejected,	Orphan	Drug	designation	provides	the opportunity	for	seven	years	of	U.S.	market	exclusivity.

# Cytyc's	Surgical	Products

Cytyc's	surgical	product	offerings	include	the	NovaSure	System,	the	MammoSite	Radiation	Therapy	System,	the	GliaSite	Radiation	Therapy	System,	and,	as	a result	of	Cytyc's	acquisition	of	Adiana	Inc.,	in	March,	2007,	the	Adiana	Complete	Transcervical	Sterilization	System	("TCS"),	which	is	a	form	of	permanent	female contraception	intended	as	an	alternative	to	tubal	ligation	and	for	which	we	are	in	the	process	of	seeking	a	pre-market	approval	from	the	FDA.

# NovaSure	System

The	NovaSure	System	allows	physicians	to	treat	women	suffering	from	excessive	menstrual	bleeding	in	a	minimally	invasive	manner	to	eliminate	or	reduce	their bleeding.	The	FDA	granted	pre-market	approval	in	September	2001	for	the	NovaSure	System	to	treat	excessive	menstrual	bleeding	due	to	benign	causes	in	women	for whom	childbearing	is	complete.	The	NovaSure	System	was	commercially	launched	in	the	United	States	in	early	2002.

The	NovaSure	System	provides	physicians	and	patients	with	a	fast,	simple,	safe	and	effective	treatment	for	excessive	menstrual	bleeding.	The	system	consists	of	a disposable	device	and	a	controller	that	delivers	radio	frequency,	or	RF,	energy	to	the	endometrial	wall	of	the	uterus	to	ablate	the	endometrium.	The	NovaSure	disposable device	is	a	hand-held,	single-use	device	that	incorporates	a	flexible	gold-plated	mesh	electrode	used	to	deliver	radiofrequency	energy	during	the	NovaSure	procedure. The	NovaSure	RF	Controller	generates	and	delivers	an	amount	of	radiofrequency	energy	individually	determined	for	each	patient,	monitors	several	critical	treatment	and safety	parameters,	and	automatically	controls	other	aspects	of	the	procedure.

The	NovaSure	procedure	is	typically	performed	as	an	outpatient	procedure	in	the	hospital,	ambulatory	surgery	center	or	physician's	office.	Based	on	pivotal clinical	trial	data	used	to	obtain	initial	U.S.	regulatory	approval,	the	NovaSure	System	was	demonstrated	to	have	a	success	rate	(returning	a	woman's	menstrual	flow	to normal)	for	treatment	of	77.7%	at	twelve	months	after	treatment,	as	compared	to	a	success	rate	of	74.4%	by	rollerball	ablation,	a	traditional	"first	generation" endometrial	ablation	treatment.

The	NovaSure	System	is	a	"second	generation"	endometrial	ablation	therapy	approved	by	the	FDA	to	be	performed	without	drug	or	surgical	pre-treatment.	Pre- treatment	can	be	time-consuming,	expensive	and	inconvenient	for	both	patients	and	physicians	and	can	result	in	uncomfortable	or	painful	side	effects	and	complications. The	NovaSure	procedure	is	completed	in	a	single	outpatient	visit	and	often	does	not	require	the	use	of	general	anesthesia.	In	addition,	in	Cytyc's	pivotal	clinical	trial,	the mean	procedure	time,	or	the	period	from	device	insertion	to	device	removal,	for	the	NovaSure	System	was	4.2	minutes,	as	compared	to	24.2	minutes	for	rollerball ablation.

# MammoSite	Radiation	Therapy	System

The	MammoSite	System	is	comprised	of	an	inflatable	balloon	catheter	in	which	a	radioactive	source	is	introduced	for	therapy	delivery.	The	inflatable	balloon	is inserted	into	the	surgical	cavity	remaining	after	removal	of	the	tumor.	The	catheter	portion	of	the	system	allows	the	radioactive	source	to	be	added	or	withdrawn	over	the course	of	the	therapy.	This	local	placement	of	the	balloon	enhances	therapeutic	delivery	of	radiation	to	the	tissue	most	likely	to	contain	residual	cancerous	cells following	surgery.

The	MammoSite	System	provides	partial-breast	irradiation,	which	delivers	controlled	high-dose	radiation	to	the	specific	lumpectomy	site	for	five	days	while minimizing	radiation	exposure	to	adjacent	healthy	tissue.	Published	data	indicates	that	on	an	annual	basis,	approximately	20%	of	breast	cancer	patients	who	undergo lumpectomy	surgery	choose	not	to	receive	any	form	of	post-surgical	radiation	as	a	result	of	the	harmful	effects	of	traditional	radiation	therapy	and	the	hardship	of	an extended	schedule	of	daily	therapy.	Indications	have	shown	that	patients	with	tumors	with	a	diameter	of	less	than	three	centimeters	and	those	at	least	45	years	of	age	are the	most	appropriate	for	the	MammoSite	procedure.

# GliaSite	System

Cytyc's	GliaSite	System	works	on	malignant	brain	tumors	in	the	same	manner	and	utilizes	similar	technology	as	the	MammoSite	System.	The	GliaSite	System provides	a	full	course	of	post-surgical	radiation	therapy	using	Iotrex,	a	proprietary,	liquid	radiation	source	for	which	Cytyc	has	an	exclusive	license.	In	clinical	trials,	the GliaSite	System	has	demonstrated	equivalent,	median	survival	time,	preservation	of	cognitive	function	and	quality	of	life	compared	to	external	beam	whole	brain irradiation.	The	GliaSite	System	allows	for	radiation	treatment	to	be	completed	within	three	to	six	days	and	often	as	an	outpatient	therapy.

# The	Adiana	Complete	Transcervical	Sterilization	System

In	connection	with	Cytyc's	acquisition	of	Adiana	Inc.,	Cytyc	acquired	The	Adiana	Complete	Transcervical	Sterilization	System	or	"TCS",	which	is	a	form	of permanent	female	contraception	intended	as	an	alternative	to	tubal	ligation	and	for	which	we	are	in	the	process	of	seeking	pre-market	approval	from	the	FDA.

# Marketing	and	Sales

We	sell	and	service	our	products	through	a	combination	of	a	direct	sales	and	service	force	and	a	network	of	independent	distributors.	In	fiscal	2007,	2006	and 2005,	no	customer	accounted	for	more	than	10%	of	our	consolidated	revenues.

As	of	November	12,	2007	our	direct	sales	and	service	force,	consisted	of	approximately	1,330	people,	which	includes	the	addition	of	approximately	450	people	to our	sales	force	as	a	result	of	our	business	combination	with	Cytyc.	Additionally,	as	of	November	12,	2007,	we	employed	approximately	680	people	as	field	service engineers,	internal	technical	support	personnel	and	related	administrative	personnel,	which	includes	the	addition	of	approximately	175	people	serving	these	functions	as a	result	of	our	business	combination	with	Cytyc.

During	fiscal	year	2007,	our	sales	force	was	comprised	of	full	line	modality	account	managers	selling	mammography	and	bone	densitometry	products,	assisted	by women's	health	and	CAD	specialists.	The	Suros	account	managers	team	sold	with	our	modality	accounts	managers	leveraging	the	strong	market	presence	of	Hologic	in women's	health.	Other	specialty	sales	groups	consisted	of	primary	care,	targeting	densitometry	sales	to	doctors	offices,	MRI	specialists	and	mini	C-arm	sales	agents selling	into	orthopedics.	Our	United	States	sales	efforts	also	included	the	use	of	two	national	account	managers	focused	on	obtaining	purchasing	contracts	from	large purchasing	entities,	such	as	managed	care	organizations,	integrated	delivery	networks	(IDN)	and	government	healthcare	facilities.

During	fiscal	year	2007,	we	sold	our	products	in	international	markets	through	a	network	of	independent	distributors,	as	well	as	a	direct	sales	and	service	force	in Belgium	(and	Germany	for	AEG	products).	We	offer	our	broad	range	of	products	in	Europe,	Latin	America,	including	Argentina,	Brazil,	Chile	and	Mexico	and	into Pacific	Rim	countries,	including	Japan,	Australia,	South	Korea,	Thailand	and	Taiwan,	by	working	with	local	sales	representatives	and	distributors	or	entering	into strategic	marketing	alliances	in	those	territories.	In	fiscal	2007,	2006	and	2005	foreign	sales	accounted	for	approximately	25%,	28%	and	33%	of	our	product	sales, respectively.	See	Note	14	of	Notes	to	Consolidated	Financial	Statements	for	geographical	information	concerning	those	sales.

Cytyc's	sales	and	marketing	objective	has	been	to	achieve	broad	market	acceptance	of	the	ThinPrep	System,	including:	the	ThinPrep	Imaging	System,	for	cervical cancer	screening	and	other	diagnostic	applications;	the	NovaSure	System	for	treating	excessive	menstrual	bleeding;	the	MammoSite	and	GliaSite	Systems	for	the treatment	of	breast	and	malignant	brain	tumors;	and	the	Fetal	Fibronectin	Test	for	assessing	the	risk	of	preterm	birth.	A	critical	element	of	Cytyc's	strategy	in	the	United States	has	been	to	utilize	the	results	of	its	clinical	trials	and	expanded	FDA	labeling	to	demonstrate	the	safety,	efficacy	and	productivity	improvements	to	patients, healthcare	providers,	clinical	laboratories	and	third-party	payors.

We	plan	to	continue	to	expand	the	market	reach	for	Cytyc's	products	through	the	efforts	of	its	more	than	400-person	worldwide	direct	sales	force	focused	on healthcare	providers,	clinical	laboratories	and	third-party	payors.	Cytyc's	integrated	sales	force	has	been	trained	to	cross-sell	Cytyc's	product	offerings,	as	appropriate, and	following	the	business	combination	with	us,	is	being	similarly	trained	to	cross	sell	our	products.	For	example,	Cytyc's	breast	surgical	sales	team	has	begun	to	sell our	Celero	breast	biopsy	device,	and	we	are	exploring	ways	in	which	Cytyc's	extensive	presence	in	gynecology	can	be	leveraged	to	promote	the	sales	of	our	bone densitometers.

Historically,	Cytyc's	international	division	marketed	Cytyc's	diagnostic	and	surgical	products	outside	of	the	United	States	by	maintaining	a	presence	in	Canada, Europe,	Australia	and	Hong	Kong.	Cytyc	established	these	operations	to	manage	sales,	service,	training	and	distribution	in	the	Canadian,	European	and	Asia/Pacific markets.	Cytyc	has	also	utilized	a	network	of	third-party	distributors	in	various	other	countries	throughout	the	world,	including	Japan	and	China.	Internationally,	the combined	company	will	be	focused	on	establishing	and	maintaining	sales	channels	appropriate	for	increasing	our	international	customer	base,	taking	into	consideration factors	such	as	government	regulations	and	clinical	practices	of	the	particular	country	or	region.	We	believe	that	in	order	to	effectively	market	our	current	products	and any	other	new	products	and	applications	on	a	worldwide	basis,	we	will	need	to	continue	to	increase	our	international	marketing,	sales,	and	service	capabilities.

# Competition

The	healthcare	industry	in	general,	and	the	markets	our	products	compete	in	are	highly	competitive	and	characterized	by	continual	change	and	improvement	in technology,	and	multiple	technologies	that	have	been	or	are	under	development.	A	number	of	companies	have	developed,	or	are	expected	to	develop	products	that compete	or	will	compete	with	our	products.	Many	of	these	competitors	offer	a	range	of	products	in	areas	other	than	those	in	which	we	compete,	which	may	make	such competitors	more	attractive	to	hospitals,	radiology	clients,	group	purchasing	organizations,	laboratories,	physicians	and	other	potential	customers.	In	addition,	many	of our	competitors	and	potential	competitors	are	larger	and	have	greater	financial	resources	than	we	do	and	offer	a	range	of	products	broader	than	our	products.	Some	of the	companies	with	whom	we	compete	have	or	may	have	more	extensive	research,	marketing	and	manufacturing	capabilities	and	significantly	greater	technical	and personnel	resources	than	we	do,	and	may	be	better	positioned	to	continue	to	improve	their	technology	in	order	to	compete	in	an	evolving	industry.	The	companies	that have	significantly	greater	resources	and	product	breadth	than	we	do	include	General	Electric	Medical	Systems	(GE),	Siemens,	Philips,	Fuji,	Carestream	Health	(formerly Kodak),	Becton,	Dickinson	and	Company,	Johnson	&	Johnson,	Boston	Scientific	and	Toshiba.	Competitors	may	develop	superior	products	or	products	of	similar	quality for	sale	at	the	same	or	lower	prices.	Moreover,	our	products	could	be	rendered	obsolete	by	new	industry	standards	or	changing	technology.	We	cannot	assure	that	we will	be	able	to	compete	successfully	with	existing	or	new	competitors.

Our	mammography	and	related	products	and	subsystems	compete	on	a	worldwide	basis	with	products	offered	by	a	number	of	competitors,	including	GE, Siemens,	Philips,	PlanMed,	Agfa,	Carestream	Health,	Fuji,	IMS	Giotto,	Sectra	and	Toshiba.	Our	FDA	approved	Selenia	full	field	digital	mammography	system	competes with	products	such	as	GE's	and	Siemens'	full	field	digital	mammography	system.	Siemens	has	adopted	our	DirectRay	direct-to-digital	detectors	for	use	in	their	digital mammography	system.	In	2006,	Fuji	received	FDA	clearance	to	market	its	Computed	Radiography	(CR)	mammography	system,	a	lower	priced	alternative	to	digital mammography.	CR	requires	the	use	of	an	analog	or	film	based	mammography	system,	where	instead	of	film,	a	phosphor	plate	is	used	to	capture	a	facsimile	of	the image.	It	then	requires	an	extra	step	of	having	the	plate	processed	on	a	specialized	reader	to	create	a	digital	image.	In	addition,	Carestream	Health	has	filed	with	the	FDA to	have	its	CR	mammography	product	cleared	for	use.	Agfa,	Carestream	Health,	Cedara	and	Sectra	have	introduced	approved	mammography	workstations	and	are marketing	these	in	competition	with	our	line	of	radiologist	review	stations.	Other	companies	are	marketing	digital	mammography	systems	or	technologies	in	Europe	and other	international	markets	and	have	or	are	expected	to	apply	for	FDA	clearance	in	the	U.S.	In	addition,	the	FDA	is	considering	reclassifying	full	field	digital mammography	systems	from	Class	III	to	Class	II	devices.	If	this	reclassification	is	implemented,	these	systems	will	be	cleared	for	commercialization	through	the	510(k) process	rather	than	the	more	rigorous	pre-market	approval	process,	which	may	increase	the	number	of	competitors	entering	the	United	States	market.	The	Company anticipates	that	competition	in	the	digital	mammography	market	will	intensify.	While	we	offer	a	broad	product	line	of	breast	imaging	products,	we	compete	most effectively	in	the	high-end	segment	of	the	mammography	market.	We	believe	that	our	continued	success	will	depend	upon	the	continued	success	of	our	Selenia	full	field digital	mammography	system,	as	well	as	our	ability	to	maintain	our	technology	leadership	through	product	enhancements	and	the	development	of	new	products	and technologies.	Although	Selenia	systems	are	priced	higher	than	competing	technologies,	we	believe	the	Selenia	system	provides	outstanding	performance	in	aiding physicians	in	the	early	detection	of	breast	cancer	due	to	its	image	quality	and	workflow	features	and	functionality.	Our	MultiCare	breast	biopsy	guidance	systems compete	with	products	offered	by	GE,	Siemens,	PlanMed,	IMS	Giotto	and	with	conventional	surgical	biopsy	procedures.	We	believe	Siemens	has	entered	this	market with	its	newly	acquired	prone	technology.	We	believe	that	competition	for	our	mammography	and	related	systems	is	based	largely	on	image	quality,	product	features, ease	of	use,	product	reliability	and	reputation	as	well	as	price	and	quality	of	service.

The	primary	competitor	for	our	Suros	biopsy	and	tissue	extraction	product	line	is	Ethicon,	a	Johnson	&	Johnson	company.	There	are	many	companies	in	the biopsy	device	market,	but	other	principal	competitors	would	include	SenoRx	and	Bard.	In	addition,	emerging	companies	like	Sanarus,	Rubicor	and	Intact	Medical	all share	some	smaller	portion	of	the	biopsy	device	market.	We	believe	that	competition	for	our	biopsy	and	tissue

extraction	product	line	is	based	largely	on	tissue	sampling	quality,	product	features,	ease	of	use,	product	reliability	and	price.

The	primary	competitor	for	our	CAD	product	line	is	iCAD,	Inc.	Although	Carestream	has	introduced	a	CAD	product,	its	acceptance	has	been	limited.	We	believe that	competition	for	our	CAD	product	line	is	based	largely	on	performance	measurements	of	sensitivity	and	specificity,	product	features,	ease	of	use	and	price.

International	clinical	guidelines	recognize	spine	and	hip	bone	density	measurements	as	the	standard	for	diagnosis	of	osteoporosis.	GE	is	our	primary	competitor	in the	osteoporosis	assessment	market	with	bone	density	of	the	hip	and	spine	systems.	Other	companies	have	developed	lower	priced	x-ray	and	ultrasound	based	systems that	assess	bone	status	of	peripheral	skeletal	sites,	such	as	the	heel,	hand	or	wrist.	Measurements	of	bone	density	at	peripheral	sites	are	utilized	for	screening	for osteoporosis	risk,	and	patients	identified	as	at	risk	by	peripheral	testing	are	commonly	referred	for	spine	and	hip	bone	density	testing.	We	believe	that	competition	in	the field	of	osteoporosis	assessment	bone	densitometry	systems	is	based	upon	product	versatility	and	features,	price,	precision,	speed	of	measurement,	reputation,	cost	and ease	of	operation,	product	reliability	and	quality	of	service.	While	we	are	generally	not	the	lowest	cost	provider	of	dual-energy	x-ray	systems,	we	believe	that	we	have been	able	to	compete	effectively	because	of	our	advanced	technology	and	product	features,	including	vertebral	assessment	imaging.	We	offer	our	Explorer	system	for the	more	price	sensitive	segment	of	the	x-ray	based	osteoporosis	assessment	market,	and	our	Sahara	ultrasound	bone	analyzer	for	screening	applications.	We	believe that	competition	in	the	field	of	osteoporosis	assessment	ultrasound	systems	is	based	on	price,	precision,	speed	of	measurement,	cost	and	ease	of	operation,	reputation, product	reliability	and	quality	of	service.	Because	ultrasound	systems	can	only	measure	peripheral	skeletal	sites	and	do	not	have	the	precision	of	dual-energy	x-ray systems,	we	believe	dual-energy	x-ray	systems	will	continue	to	be	the	predominant	means	of	diagnosis	and	monitoring	of	bone	density	changes	for	patients	being	treated for	osteoporosis.

Our	mini	C-arm	products	compete	directly	with	mini	C-arms	manufactured	and	sold	by	a	limited	number	of	companies	including	GE.	We	also	compete	with manufacturers	of	conventional	C-arm	image	intensifiers	including	Philips,	Siemens	and	GE.	We	believe	that	competition	for	our	mini	C-arm	systems	is	based	largely	on price,	quality,	reputation,	service	and	production	capabilities.	We	believe	that	advantages	of	our	mini	C-arm	systems	include	low	levels	of	radiation,	image	quality	or resolution,	low	product	life	cycle	costs,	mobility,	quality	and	durability.

While	Cytyc	is	the	market	leader	in	the	sale	of	liquid-based	slide	preparation	systems	in	the	United	States,	it	faces	direct	competition	in	the	United	States	from Becton,	Dickinson	and	Company	("Becton	Dickinson"),	who	acquired	TriPath	Imaging,	Inc.	in	the	fourth	quarter	of	2006	and	who	also	manufactures	liquid-based	slide preparation	systems	and	slide	imaging	systems,	and	from	other	sample	preparation	systems	in	international	markets.	In	addition,	Cytyc	competes	with	MonoGen,	Inc. who	uses	a	liquid-based	slide	preparation	system.	Cytyc	also	competes	with	the	conventional	Pap	smear	and	other	alternative	methods	for	detecting	cervical	cancer and/or	its	precursors,	such	as	that	manufactured	by	Digene.	Cytyc's	products	compete	on	the	basis	of	a	number	of	factors,	including	clinical	performance,	product quality,	marketing	and	sales	capabilities,	manufacturing	efficiency,	price	and	customer	service	and	support.	Internationally,	Cytyc's	Thin	Prep	product	competes	with	a variety	of	companies	and	other	"off-market"	(non-FDA-approved)	tests,	since	fewer	regulatory	barriers	exist	in	Europe	as	compared	to	the	United	States.

Cytyc	is	currently	the	only	provider	of	a	FullTerm	Fetal	Fibronectin	Test	for	predicting	the	risk	of	preterm	birth.	However,	this	product	could	experience competition	for	the	preterm	birth	diagnostic	products	from	companies	that	manufacture	and	market	pregnancy-related	diagnostic	products	and	services.	In	addition, healthcare	providers	use	diagnostic	techniques	such	as	clinical	examination	and	ultrasound	to	diagnose	the	likelihood	of	preterm	birth.	Healthcare	providers	may	choose to	continue	using	these	techniques	to	assess	their	patients,	rather	than	use	the	FullTerm	Fetal	Fibronectin	Test.	They	may	also	choose	to	use	these	techniques	in conjunction	with	our	FullTerm	Test	to	predict	preterm	birth.

Cytyc's	NovaSure	System	currently	faces	direct	competition	from	Johnson	&	Johnson,	Boston	Scientific	Corporation,	American	Medical	Systems,	Inc.	and Microsulis	Medical	Limited,	each	of	which	currently	markets

an	FDA-approved	"second	generation"	endometrial	ablation	device	for	the	treatment	of	excessive	menstrual	bleeding.	In	addition	to	these	devices,	there	exist	alternative treatments	to	Cytyc's	NovaSure	System,	such	as	drug	therapy,	hysterectomy,	dilation	and	curettage	and	rollerball	ablation.	Rollerball	ablation	and	the	Johnson	& Johnson	endometrial	ablation	device	have	been	in	use	for	a	longer	time	than	Cytyc's	procedure	for	the	treatment	of	excessive	menstrual	bleeding.	Internationally, Cytyc's	products	compete	with	drug	therapy,	as	well	as	other	endometrial	ablation	devices,	including	Johnson	&	Johnson's	Thermachoice,	Boston	Scientific Corporation's	HTA,	the	Microsulis	Endometrial	Ablation	device	and	two	other	relatively	small	companies	that	market	products	that	are	not	FDA	approved.	Because drug	therapy	is	an	alternative	to	Cytyc's	NovaSure	procedure,	competitors	to	this	product	also	include	many	major	pharmaceutical	companies	that	manufacture hormonal	drugs	for	women.

As	a	result	of	the	relatively	short	period	of	time	Cytyc's	MammoSite	and	GliaSite	Systems	have	been	in	the	market,	these	products	face	competition	from	the more	commonly-known	alternatives,	such	as	treatment	using	external	beam	radiation,	which	has	longer-term	data	on	patient	outcome,	and	future	products	such	as	Xoft Microtube,	Inc.'s	("Xoft")	electronic	brachytherapy,	SenoRx's	Contura	and	Cianna	Medical's	SAVI.	Internationally,	Cytyc's	MammoSite	product	faces	competition from	traditional	mastectomy,	whole	breast	radiation	therapy	after	lumpectomy,	and	a	more	radical	breast-conserving	procedure	called	a	quadrantectomy.	Additional radiation	therapy	methods,	such	as	intraoperative	radiation	therapy,	are	being	explored	in	Europe	by	potential	competitors;	however,	such	alternative	methods	have	not achieved	widespread	commercial	use.

# Manufacturing

We	have	historically	purchased	many	of	the	components	and	raw	materials	used	in	our	products	from	numerous	suppliers	worldwide.	In	some	cases,	we	have established	long-term	supply	contracts	with	our	suppliers.	For	reasons	of	quality	assurance,	sole	source	availability	or	cost	effectiveness,	certain	components	and	raw materials	used	in	the	manufacture	of	our	products	are	available	only	from	a	sole	supplier.	We	have	worked	closely	with	our	suppliers	to	develop	contingency	plans	to assure	continuity	of	supply	while	maintaining	high	quality	and	reliability.	Due	to	the	FDA's	requirements	regarding	the	manufacture	of	our	products,	we	may	not	be	able to	quickly	establish	additional	or	replacement	sources	for	certain	components	or	materials.	In	the	event	that	we	are	unable	to	obtain	sufficient	quantities	of	raw	materials or	components	on	commercially	reasonable	terms	or	in	a	timely	manner,	our	ability	to	manufacture	our	products	on	a	timely	and	cost-competitive	basis,	may	be compromised	which	may	have	a	material	adverse	effect	on	our	business,	financial	condition	and	results	of	operations.

We	manufacture	our	direct	radiography	detectors	at	our	manufacturing	facilities	in	Newark,	Delaware	and	Warstein,	Germany.	The	manufacturing	of	detectors consists	primarily	of	vapor	deposition	coatings	in	clean	rooms,	microelectronics	fabrication,	assembly,	test,	burn-in	and	quality	control.	Our	manufacturing	operations	in Germany	are	focused	on	the	critical	process	of	providing	the	selenium	coatings	used	in	our	detectors.	We	rely	on	one	or	only	a	limited	number	of	suppliers	for	key components	or	subassemblies	for	our	detectors.	In	particular,	we	have	only	a	limited	number	of	suppliers	for	our	thin-film	transistors	(TFT).	The	manufacturing	of	our direct	radiography	detectors	is	highly	complex	requiring	precision,	assembly	and	process	control.	Product	design	changes	and	process	improvements,	along	with	new capital	equipment	have	allowed	us	to	increase	our	production	rates	while	reducing	scrap	and	improving	yields.

We	manufacture	our	mammography	and	breast	biopsy	systems	at	our	manufacturing	facilities	in	Danbury,	Connecticut.	We	manufacture	our	R2	Cad	line	of products,	our	osteoporosis	assessment	and	our	mini	C-arm	imaging	systems	at	our	headquarters	in	Bedford,	Massachusetts.	We	continue	to	develop	our	software	for	our CAD	products	at	our	R2	Santa	Clara,	California	facility.

Suros,	a	company	we	acquired	in	July	2006,	specializes	in	breast	biopsy	devices.	The	Suros	system	control	consoles	are	manufactured	by	a	third	party,	with quality	control	performed	by	our	employees.	The	piece	parts	related	to	the	disposable	device	are	outsourced	and	then	assembled	at	our	facility	in	Indianapolis,	Indiana, where	they	are	also	tested	and	packaged.	We	rely	on	one	or	a	limited	number	of	suppliers	for	key	components	of	the	Suros	console	and	devices,	including	certain cannulas,	plastic	components	and	tubing.

The	MammoPad	breast	cushion	acquired	through	our	acquisition	of	BioLucent	in	September	2007,	is	manufactured	by	third	parties,	with	quality	control performed	by	our	employees.	We	rely	on	a	limited	number	of	suppliers	for	the	manufacture	of	the	MammoPad	cushion.

Cytyc	assembles	all	ThinPrep	Processors	and	ThinPrep	Imaging	Systems	at	its	facility	in	Marlborough,	Massachusetts,	fills	all	ThinPrep	PreservCyt	vials	at	its facility	in	Londonderry,	New	Hampshire	and	manufactures	its	ThinPrep	System	filters	at	both	its	Marlborough	and	Londonderry	facilities.	Cytyc	manufactures	the NovaSure	disposable	devices	at	its	manufacturing	facility	in	San	Jose,	Costa	Rica.	Additionally,	Cytyc	has	contracted	with	a	leading	global	electronics	contract manufacturer	for	production	of	the	RF	Controller	component	of	Cytyc's	NovaSure	System.	Cytyc	contracts	with	several	third-parties	to	manufacture	portions	of	Cytyc's MammoSite	System	and	GliaSite	System	based	on	Cytyc's	specifications.	It	is	not	anticipated	that	the	combined	company	will	alter	any	of	Cytyc's	manufacturing arrangements.

# Backlog

Our	backlog	as	of	November	4,	2007,	totaled	$237.9	million	and	as	of	November	19,	2006	totaled	$184.7	million.	Backlog	consists	of	customer	orders	for	which a	delivery	schedule	within	the	next	twelve	months	has	been	specified.	Orders	included	in	backlog	may	be	canceled	or	rescheduled	by	customers	without	significant penalty.	Backlog	as	of	any	particular	date	should	not	be	relied	upon	as	indicative	of	our	net	revenues	for	any	future	period.

# Research	and	Development

Our	research	and	development	efforts	are	focused	on	enhancing	our	existing	products	and	developing	new	products.	We	anticipate	that	the	combined	company's research	and	development	focus	will	be	on	the	further	development	of	digital	detectors,	software	and	hardware	improvements	for	our	existing	products,	the	enhancement of	Cytyc's	existing	product	lines	through	the	implementation	of	operational	enhancements	and	cost	reductions,	as	well	as	the	engineering	and	design	of	new	innovative medical	diagnostic	and	interventional	devices,	therapeutic	applications	and	end	use	systems	focused	on	women's	health.	These	research	and	development	efforts	will include	continuing	engineering	and	new	product	development	of	technologies	that	benefit	our	full	field	digital	mammography	system,	and	in	particular	the	development of	systems	to	perform	breast	tomosynthesis	which	is	a	3-dimensional	x-ray	imaging	technique.	In	addition	to	product	development,	our	research	and	development personnel	play	an	active	role	in	the	review	of	product	specifications,	clinical	protocols	and	FDA	submissions.	Our	research	and	product	development	expenses	were approximately	$44.5	million	in	fiscal	2007,	$28.3	million	in	fiscal	2006	and	$18.6	million	in	fiscal	2005.

# Patents	and	Proprietary	Rights

We	rely	primarily	on	a	combination	of	trade	secrets,	patents,	copyright	and	trademark	laws,	and	confidentiality	procedures	to	protect	our	technology.	Due	to	the rapid	technological	change	that	characterize	the	markets	we	operate	in,	we	believe	that	the	improvement	of	existing	products,	reliance	upon	trade	secrets	and	unpatented proprietary	know-how	and	the	development	of	new	products	are	generally	as	important	as	patent	protection	in	establishing	and	maintaining	a	competitive	advantage. Nevertheless,	we	have	obtained	patents	and	will	continue	to	make	efforts	to	obtain	patents,	when	available,	in	connection	with	our	product	development	program.

We	own	numerous	U.S.	patents,	including	those	patents	we	assumed	in	connection	with	our	business	combination	with	Cytyc.	Additionally,	we	have	applied	for numerous	additional	U.S.	patents	relating	to	our	technologies,	and	have	also	obtained	or	applied	for	corresponding	patents	in	selected	foreign	countries.	These	patents relate	to	various	aspects	of	our	products	including	our	mammography,	bone	densitometry,	direct	radiography	and	mini	C-arm,	ThinPrep	System,	ThinPrep	Imaging System,	NovaSure	System,	MammoSite	System,	GilaSite	System	and	other	related	technologies.

In	addition	to	the	patents	we	have	been	issued	or	we	have	acquired,	we	license	patents	from	others	on	a	variety	of	terms	and	conditions.

There	has	been	substantial	litigation	regarding	patent	and	other	intellectual	property	rights	in	the	medical	device	and	related	industries.	In	the	early	1990s,	we were	involved	in	extensive	patent	litigation	with	Lunar	Corporation,	which	has	since	been	acquired	by	GE.	This	litigation	was	settled	by	agreement	dated	November	22, 1995.	The	agreement	provided	that	neither	party	would	engage	the	other	party	in	patent	litigation	respecting	bone	densitometry	for	a	period	of	ten	years,	regardless	of	the infringement	claimed	and	regardless	of	whether	the	technology	in	question	currently	existed	at	the	time	or	was	developed	or	acquired	by	the	other	party	in	the	future. Neither	party	was	required	to	disclose	to	the	other	any	of	its	technology.	During	the	last	fiscal	year,	we	entered	into	an	eight-year	extension	of	this	agreement	through September	26,	2013.	Upon	expiration	of	this	period	on	September	26,	2013,	there	will	be	no	restrictions	by	either	party	on	the	assertion	of	an	infringement	claim	against the	other.

In	addition	to	the	matter	described	above,	we	are	engaged	in	intellectual	property	litigation	as	described	in	Item	3,	Legal	Proceedings,	and	may	be	notified	in	the future,	that	we	may	be	infringing	intellectual	property	rights	possessed	by	other	third	parties.	In	connection	with	any	such	litigation	or	if	any	claims	are	asserted	against us	or	our	products,	we	may	seek	to	enter	into	royalty	or	licensing	arrangements.	There	is	a	risk	in	these	situations	that	no	license	will	be	available	or	that	a	license	will not	be	available	on	reasonable	terms.	Alternatively,	we	may	decide	to	litigate	such	claims	or	to	design	around	the	patented	technology.	These	actions	could	be	costly	and would	divert	the	efforts	and	attention	of	our	management	and	technical	personnel.	As	a	result,	any	infringement	claims	by	third	parties	or	other	claims	for indemnification	by	customers	resulting	from	infringement	claims,	whether	or	not	proven	to	be	true,	may	harm	our	business	and	prospects.

# Regulation

The	manufacture,	sale,	lease	and	service	of	medical	diagnostic	and	surgical	devices	and	pharmaceutical	products	intended	for	commercial	use	are	subject	to extensive	governmental	regulation	by	the	FDA	in	the	United	States	and	by	a	variety	of	regulatory	agencies	in	other	countries.	Under	the	Federal	Food,	Drug	and Cosmetic	Act,	known	as	the	FD&C	Act,	manufacturers	of	medical	products	and	devices	must	comply	with	certain	regulations	governing	the	design,	testing, manufacturing,	packaging,	servicing	and	marketing	of	medical	products.	Some	of	our	products	are	also	subject	to	the	Radiation	Control	for	Health	and	Safety	Act, administered	by	the	FDA,	which	imposes	performance	standards	and	record	keeping,	reporting,	product	testing	and	product	labeling	requirements	for	devices	that	emit radiation,	such	as	x-rays.

The	FDA	generally	must	clear	the	commercial	sale	of	new	medical	devices.	Commercial	sales	of	our	medical	devices	within	the	United	States	must	be	preceded by	either	a	pre-market	notification	filing	pursuant	to	Section	510(k)	of	the	FD&C	Act	or	the	granting	of	a	pre-market	approval.	The	510(k)	notification	filing	must contain	information	that	establishes	the	device	to	be	substantially	equivalent	to	a	device	commercially	distributed	prior	to	May	28,	1976.

The	pre-market	approval	procedure	involves	a	more	complex	and	lengthy	testing	and	review	process	by	the	FDA	than	the	510(k)	pre-market	notification procedure	and	may	require	several	years	to	obtain.	We	may	need	to	first	obtain	an	investigational	device	exemption,	known	as	an	IDE,	for	the	product	to	conduct extensive	clinical	testing	of	the	device	to	obtain	the	necessary	clinical	data	for	submission	to	the	FDA.	The	FDA	will	thereafter	only	grant	pre-market	approval	if,	after evaluating	this	clinical	data,	it	finds	that	the	safety	and	effectiveness	of	the	product	has	been	sufficiently	demonstrated.	This	approval	may	restrict	the	number	of	devices distributed	or	require	additional	patient	follow-up	for	an	indefinite	period	of	time.

Sales	of	medical	devices	outside	of	the	United	States	are	subject	to	foreign	regulatory	requirements	that	vary	widely	from	country	to	country.	The	time	required	to obtain	approval	from	a	foreign	country	to	market	and	sell	our	products	may	be	longer	or	shorter	than	that	required	for	FDA	approval	and	the	requirements	may	differ. No

assurance	can	be	given	that	such	foreign	regulatory	approvals	will	be	granted	on	a	timely	basis,	or	at	all.	In	addition,	there	can	be	no	assurance	that	we	will	meet	the FDA's	export	requirements	or	receive	FDA	export	approval	when	such	approval	is	necessary,	or	that	countries	to	which	the	devices	are	to	be	exported	will	approve	the devices	for	import.	Our	failure	to	meet	the	FDA's	export	requirements	or	obtain	FDA	export	approval	when	required	to	do	so,	or	to	obtain	approval	for	importation	into various	countries,	could	have	a	material	adverse	effect	on	our	business,	financial	condition	and	results	of	operations.	Some	of	our	technology	is	governed	by	the International	Traffic	in	Arms	Regulations	of	the	United	States	Department	of	State.	As	a	result,	the	export	of	some	of	our	systems	to	some	countries	may	be	limited	or prohibited.

On	February	15,	2006	the	FDA	published	a	proposed	rule	to	reclassify	bone	sonometer	devices	from	Class	III	into	Class	II,	subject	to	special	controls.	Also	on that	date	the	FDA	announced	the	availability	of	a	draft	guidance	for	industry	and	FDA	staff	entitled	"Class	II	Special	Controls	Guidance	Document:	Bone	Sonometers." The	reclassification	would	result	in	sonometers	being	cleared	for	commercialization	through	the	510(k)	process,	which	is	less	rigorous,	than	the	present	PMA	process. This	may	result	in	more	competitors	entering	the	United	States	market.	It	is	not	possible	to	predict	when	the	actual	reclassification	will	occur.

On	May	23,	2006	the	FDA	Radiological	Devices	Panel	recommended	the	reclassification	of	full	field	digital	mammography	systems	from	Class	III	to	Class	II devices.	The	reclassification	would	result	in	these	systems	being	cleared	for	commercialization	through	the	510(k)	process.	This	may	result	in	more	competitors	entering the	United	States	market.	The	FDA	has	indicated	that	they	intend	to	issue	guidance	on	full	field	digital	mammography	during	2008.	The	FDA	has	not	taken	any additional	steps	to	act	on	the	panel's	recommendations	and	it	is	not	possible	to	predict	if	and	when	the	reclassification	will	occur.

Our	manufacturing	processes	and	facilities	are	subject	to	continuing	review	by	the	FDA	and	foreign	governments	or	their	representatives.	Adverse	findings	could result	in	various	actions	against	us,	including	withdrawal	of	approvals	and	product	recall.

We	cannot	assure	that	the	FDA	or	foreign	regulatory	agencies	will	give	the	requisite	approvals	or	clearances	for	any	of	our	medical	devices	under	development	on a	timely	basis,	if	at	all.	Moreover,	after	clearance	is	given,	these	agencies	can	later	withdraw	the	clearance	or	require	us	to	change	the	device	or	its	manufacturing	process or	labeling,	to	supply	additional	proof	of	its	safety	and	effectiveness,	or	to	recall,	repair,	replace	or	refund	the	cost	of	the	medical	device,	if	it	is	shown	to	be	hazardous	or defective.	The	process	of	obtaining	clearance	to	market	products	is	costly	and	time-consuming	and	can	delay	the	marketing	and	sale	of	our	products.

Pharmaceutical	products,	similar	to	medical	devices,	are	subject	to	extensive	regulation	by	national,	state	and	local	agencies	in	the	countries	in	which	they	do business.	For	example,	the	FDA	administers	requirements	covering	the	testing,	safety,	effectiveness,	manufacturing,	labeling,	marketing,	advertising	and	post-marketing surveillance	of	our	pharmaceutical	products	that	are	in	many	respects	similar	to	medical	devices.	Under	the	FD&C	Act	a	New	Drug	Application,	or	NDA,	has	been submitted	with	the	FDA	for	Gestiva.

The	Orphan	Drug	Act	provides	incentives	to	develop	and	market	drugs	("Orphan	Drugs")	for	rare	disease	conditions	in	the	United	States.	A	drug	that	receives Orphan	Drug	designation	and	is	the	first	product	to	receive	FDA	marketing	approval	for	its	product	claim	is	entitled	to	a	seven-year	exclusive	marketing	period	in	the United	States	for	that	product	claim.	A	drug	which	is	considered	by	the	FDA	to	be	different	than	such	FDA-approved	Orphan	Drug	is	not	barred	from	sale	in	the	United States	during	such	exclusive	marketing	period	even	if	it	receives	approval	for	the	same	claim.	In	January	2007,	Adeza	was	notified	by	the	Office	of	Orphan	Products Development	of	the	FDA	that	it	had	granted	Orphan	Drug	designation	covering	Gestiva.

We	are	also	subject	to	various	federal	and	state	laws	pertaining	to	healthcare	fraud	and	abuse,	including	federal	and	state	anti-kickback	laws,	as	well	as	the Foreign	Corrupt	Practices	Act.	Anti-kickback	laws	make	it	illegal	for	an	entity	to	solicit,	offer,	receive,	or	pay	remuneration	or	anything	of	value	in	exchange	for,	or	to induce,	the	referral	of	business	or	the	purchasing,	leasing,	ordering,	or	arranging	for	or	recommending	the	purchase,	lease	or	order	of	any	item	or	service	paid	for	by Medicare,	Medicaid	or	certain	other	federal	healthcare

programs.	The	statute	has	been	broadly	interpreted	to	cover	a	wide	array	of	practices.	Some	states	have	passed	similar	laws.	The	federal	government	has	published regulations	that	identify	"safe	harbors,"	which	if	applicable	will	assure	that	certain	arrangements	will	not	be	found	to	violate	the	federal	anti-kickback	statutes.	Our activities	relating	to	the	sale	and	marketing	of	its	products	may	be	subject	to	scrutiny	under	these	laws.	While	we	makes	every	effort	to	comply	with	the	regulations,	it	is possible	that	our	practices	might	be	challenged	under	federal	anti-kickback	or	similar	laws	due	to	the	breadth	of	the	statutory	provisions	and	the	absence	of	extensive guidance	regarding	compliance.	Violations	of	these	laws	may	be	punishable	by	criminal	and/or	civil	sanctions,	including	fines	and	civil	monetary	penalties,	as	well	as the	possibility	of	exclusion	from	federal	healthcare	programs	(including	Medicare	and	Medicaid).	If	the	government	were	to	raise	questions	about	our	behavior	or	find that	we	have	violated	these	laws,	there	could	be	a	material	adverse	effect	on	our	business.	Our	activities	could	be	subject	to	challenge	for	the	reasons	discussed	above, due	to	the	broad	scope	of	these	laws	and	the	increasing	attention	being	given	to	them	by	law	enforcement	authorities.

We	are	also	subject	to	numerous	federal,	state	and	local	laws	relating	to	such	matters	as	safe	working	conditions,	manufacturing	practices,	environmental protection,	fire	hazard	control	and	disposal	of	hazardous	or	potentially	hazardous	substances.	There	can	be	no	assurance	that	we	will	not	be	required	to	incur	significant costs	to	comply	with	such	laws	and	regulations	in	the	future,	or	that	such	laws	or	regulations	will	not	have	a	material	adverse	effect	upon	our	business,	financial condition	and	results	of	operations.

The	laboratories	that	purchase	Cytyc's	ThinPrep	System,	ThinPrep	Imaging	System	and	the	FullTerm	Test	are	subject	to	extensive	regulation	under	the	Clinical Laboratory	Improvement	Amendments	of	1988	("CLIA"),	which	require	laboratories	to	meet	specified	standards	in	the	areas	of	personnel	qualifications,	administration, participation	in	proficiency	testing,	patient	test	management,	quality	control,	quality	assurance	and	inspections.	We	believe	that	the	ThinPrep	System	including	the ThinPrep	Imaging	System	and	the	FullTerm	Test,	operate	in	a	manner	that	will	allow	laboratories	purchasing	the	device	to	comply	with	CLIA	requirements.	However, there	can	be	no	assurance	that	adverse	interpretations	of	current	CLIA	regulations	or	future	changes	in	CLIA	regulations	would	not	have	an	adverse	effect	on	sales	of	the ThinPrep	System,	ThinPrep	Imaging	System	and	the	FullTerm	Test.

Federal,	state	and	foreign	regulations	regarding	the	manufacture	and	sale	of	medical	devices	and	pharmaceuticals	are	subject	to	future	change.	We	cannot	predict what	impact,	if	any,	such	changes	might	have	on	our	business.

# Reimbursement

In	the	United	States,	the	Centers	for	Medicare	&	Medicaid	Services,	known	as	CMS,	establishes	guidelines	for	the	reimbursement	of	healthcare	providers	treating Medicare	and	Medicaid	patients.	Under	current	CMS	guidelines,	varying	reimbursement	levels	have	been	established	for	bone	density	assessment,	endometrial ablations,	mammography,	surgical	and	other	imaging,	diagnostic	and	surgical	procedures	performed	using	our	products.	The	actual	reimbursement	amounts	are determined	by	individual	state	Medicare	carriers	and,	for	non-Medicare	and	Medicaid	patients,	private	insurance	carriers.	There	are	often	delays	between	the reimbursement	approvals	by	CMS	and	by	a	state	Medicare	carrier	and	private	insurance	carriers.	Moreover,	states	as	well	as	private	insurance	carriers	may	choose	not	to follow	the	CMS	reimbursement	guidelines.	The	use	of	our	products	outside	the	United	States	is	similarly	affected	by	reimbursement	policies	adopted	by	foreign regulatory	and	insurance	carriers.

Cytyc's	laboratory	customers	bill	most	insurers	(including	Medicare)	for	the	ThinPrep	Pap	Test	using	a	Current	Procedural	Terminology	("CPT")	code specifically	for	liquid-based	cervical	cell	specimen	preparation.	As	of	November	2007,	based	on	information	provided	to	us,	we	believe	that	the	ThinPrep	Pap	Test	and the	ThinPrep	Imaging	System	are	covered	by	Medicare	and	almost	all	third-party	payors,	thus	allowing	access	for	almost	all	women	in	the	United	States.

In	November	2007,	CMS	announced	2008	reimbursement	rates	for	physician,	hospital	and	ambulatory	surgical	center	payments.	Reimbursement	rates	also	reflect a	Sustainable	Growth	Rate	("SGR")	reduction	which

requires	that	reimbursement	rates	factor	in	a	10.1%	reduction	in	physician	payments	under	the	physician	fee	schedule	as	determined	by	the	SGR	formula.	CMS	also implemented	provisions	of	the	Deficit	Reduction	Act	of	2005	related	to	certain	medical	imaging	procedures.	For	2008,	the	changes	that	affect	us	include	the	following:	a decline	of	approximately	4%	to	9%	in	digital	and	analog	mammography	screening	and	diagnostic	reimbursement	rates,	primarily	due	to	the	10.1%	SGR	reduction;	an approximately	22%	decline	in	reimbursement	for	CAD,	which	reflects	the	second	year	of	the	four	year	phase-in	of	an	approximately	50%	decline	announced	in	2006	in addition	to	the	SGR	reduction.	In	November	2006,	CMS	announced	reductions	to	the	2007	reimbursement	levels	for	bone	density	assessments	including	an approximately	40%	decline	in	2007	in	reimbursement	for	osteoporosis	(DXA)	testing,	which	increases	to	an	approximately	70%	decline	over	four	years.	The	increase	in the	decline	for	2008	for	reimbursement	for	DXA	testing	is	approximately	2%.	Medicare	payments	for	2008	for	our	other	products	are	effected	primarily	by	the	SGR reduction,	and	will	decline	by	less	than	approximately	12%,	with	in-office	payments	for	NovaSure	and	MammoSite	balloon	catheter	placement	declining	by approximately	17%.	Hospital	outpatient	department	payments	for	placement	of	MammoSite	balloon	catheters	will	increase	by	approximately	13%.

Congress	has,	from	time	to	time	overridden	some	or	all	of	the	proposed	reduction	in	reimbursement.	However,	we	cannot	assure	that	Congress	will	override	any part	of	the	recent	proposed	reductions.	We	believe	that	the	significant	reductions	in	reimbursement	rates	proposed	for	the	use	of	several	of	our	products	have	had	and may	continue	to	have	a	material	adverse	affect	on	the	sales	of	those	products.

# Employees

As	of	November	12,	2007,	we	had	3,580	full-time	employees,	including	1,310	in	manufacturing	operations,	364	in	research	and	development,	1,495	in	marketing, sales	and	support	services,	and	411	in	finance	and	administration.	Except	for	AEG's	non-management	employees	in	Germany,	none	of	our	employees	are	represented	by a	union.	AEG's	approximately	200	non-management	German	employees	were	subject	to	collective	bargaining	agreements	negotiated	on	a	national	and	regional	basis between	Unternehmens-Verband	Südöstliches	Westfalen	e.V.,	the	Employers	Association	of	North	Rhine-Westphalia,	and	the	German	Metal	Workers	Union, IndustrieGewerkschaft	Metall.	In	addition,	AEG's	German	employees	are	represented	by	a	works	council,	a	Betriebsrat,	with	respect	to	various	shop	agreements	for social	matters	and	working	conditions.	By	Chinese	law,	all	labor	contracts	of	the	91	non-management	employees	of	AEG's	Chinese	subsidiary	are	registered	at	the	labor department	of	the	local	authorities,	but	are	currently	not	members	of	the	labor	union.	We	believe	that	our	relationship	with	our	employees	is	good.	Except	as	described herein,	none	of	our	other	employees	are	represented	by	a	union.

# Item	1A.				RiskFactors

This	report	contains	forward-looking	statements	that	involve	risks	and	uncertainties,	such	as	statements	of	our	objectives,	expectations	and	intentions.	The cautionary	statements	made	in	this	report	should	be	read	as	applicable	to	all	forward-looking	statements	wherever	they	appear	in	this	report.	Our	actual	results	could differ	materially	from	those	discussed	herein.	Factors	that	could	cause	or	contribute	to	such	differences	include	those	discussed	below,	as	well	as	those	discussed elsewhere	in	this	report.

# Risks	Related	to	our	Indebtedness

# We	incurred	significant	indebtedness	in	order	to	finance	the	merger	with	Cytyc	Corporation,	which	limits	our	operating	flexibility,	and	could	adversely	affect our	operations	and	financial	results	and	prevent	us	from	fulfilling	our	obligations.

In	order	to	finance	the	cash	portion	of	the	merger	with	Cytyc	Corporation	("Cytyc")	and	other	expenses	incurred	in	connection	with	the	merger,	we	incurred	over $2.35	billion	of	new	indebtedness,	including	approximately	$600	million	under	a	senior	secured	tranche	A	term	loan	facility	which	matures	on	September	30,	2012, $500	million	under	a	senior	secured	tranche	B-1	and	B-2	term	loan	facility	which	matures	on	March	31,	2013,	and	$1.25	billion	under	senior	secured	capital	markets term	loan	facility	which	matures	on	April	22,	2009.	Additionally,	certain	other	of	our	indebtedness	may	remain	outstanding.	These	credit	facilities	bear	interest	at variable	rates.	This	level	of	indebtedness	may:

•	 make	it	more	difficult	for	us	to	satisfy	our	obligations	with	respect	to	our	outstanding	indebtedness;

•increase	our	vulnerability	to	general	adverse	economic	and	industry	conditions,	including	increases	in	interest	rates;

•require	us	to	dedicate	a	substantial	portion	of	our	cash	flow	from	operations	to	interest	and	principal	payments	on	our	indebtedness,	which	would	reduce the	availability	of	our	cash	flow	to	fund	working	capital,	capital	expenditures,	expansion	efforts	and	other	general	corporate	purposes;

•limit	our	flexibility	in	planning	for,	or	reacting	to,	changes	in	our	business	and	the	industry	in	which	we	operate;

•place	us	at	a	competitive	disadvantage	compared	to	our	competitors	that	have	less	debt;	and

•limit	our	ability	to	borrow	additional	funds	for	working	capital,	capital	expenditures,	general	corporate	purposes	or	acquisitions.

In	addition,	the	terms	of	our	financing	obligations	contain	covenants	that	restrict	our	ability,	and	that	of	our	subsidiaries,	to	engage	in	certain	transactions	and	may impair	our	ability	to	respond	to	changing	business	and	economic	conditions,	including,	among	other	things,	limitations	on	the	ability	to:

•incur	additional	indebtedness;

•pay	dividends	and	make	distributions;

•repurchase	stock;

•	 make	certain	investments;

•create	liens;

•engage	in	transactions	with	affiliates;

•	 merge	with	or	acquire	another	company;	and

•transfer	and	sell	assets.

Our	new	credit	facilities	also	require	us	to	satisfy	certain	financial	covenants.

Our	ability	to	comply	with	these	provisions	may	be	affected	by	general	economic	conditions,	political	decisions,	industry	conditions	and	other	events	beyond	our control.	Our	failure	to	comply	with	the	covenants	contained	in	the	new	credit	facilities,	including	financial	covenants,	could	result	in	an	event	of	default,	which	could materially	and	adversely	affect	our	results	of	operation	and	financial	condition.

If	there	were	an	event	of	default	under	one	of	our	debt	instruments	or	a	change	of	control,	the	holders	of	the	defaulted	debt	could	cause	all	amounts	outstanding with	respect	to	that	debt	to	be	due	and	payable	immediately	and	may	be	cross-defaulted	to	other	debt.	Our	assets	or	cash	flow	may	not	be	sufficient	to	fully	repay borrowings	under	our	outstanding	debt	instruments	if	accelerated	upon	an	event	of	default,	and	there	is	no	guarantee	that	we	would	be	able	to	repay,	refinance	or restructure	the	payments	on	those	debt	securities.

# We	may	not	be	able	to	generate	sufficient	cash	flow	to	service	all	of	our	obligations,	including	our	obligations	under	our	credit	facilities.

Our	ability	to	make	payments	on	and	to	refinance	our	indebtedness	and	to	fund	planned	capital	expenditures,	strategic	transactions	and	expansion	efforts	will depend	on	our	ability	to	generate	cash	in	the	future.	This,	to	a	certain	extent,	is	subject	to	general	economic,	financial,	competitive,	legislative,	regulatory	and	other factors	that	are	beyond	our	control.

Our	business	may	not	be	able	to	generate	sufficient	cash	flow	from	operations,	and	we	cannot	assure	that	future	borrowings	will	be	available	to	us	in	amounts sufficient	to	enable	us	to	pay	our	indebtedness	as	such	indebtedness	matures	and	to	fund	our	other	liquidity	needs.	If	this	is	the	case,	we	will	need	to	refinance	all	or	a portion	of	our	indebtedness	on	or	before	maturity,	and	there	can	be	no	assurance	that	we	will	be	able	to	refinance	any	of	our	indebtedness	on	commercially	reasonable terms,	or	at	all.	We	may	need	to	adopt	one	or	more	alternatives,	such	as	reducing	or	delaying	planned	expenses	and	capital	expenditures,	selling	assets,	restructuring debt,	or	obtaining	additional	equity	or	debt	financing.	These	financing	strategies	may	not	be	affected	on	satisfactory	terms,	if	at	all.	Our	ability	to	refinance	our indebtedness	or	obtain	additional	financing,	or	to	do	so	on	commercially	reasonable	terms,	will	depend	on,	among	other	things,	our	financial	condition	at	the	time, restrictions	in	agreements	governing	our	indebtedness,	and	other	factors,	including	the	condition	of	the	financial	markets	and	the	markets	in	which	we	compete.

If	we	do	not	generate	sufficient	cash	flow	from	operations,	and	additional	borrowings,	refinancings	or	proceeds	of	asset	sales	are	not	available	to	us,	we	may	not have	sufficient	cash	to	enable	us	to	meet	all	of	our	obligations.

We	may	be	required	to	enter	into	hedging	transactions	for	our	variable	interest	rate	exposure	under	our	existing	credit	facilities	which	could	adversely	affect our	ability	to	repay	all	or	a	portion	of	those	facilities	without	incurring	additional	costs,	and	will	subject	us	to	risks	of	default	by	the	counterparties	to	those transactions.

The	terms	of	our	credit	facility	obligate	us	to	enter	into	hedging	transactions	to	hedge	a	substantial	portion	of	the	interest	rate	risk	under	those	facilities,	if	we	do not	otherwise	refinance	a	substantial	portion	of	those	facilities	with	debt	bearing	a	fixed	rate	of	interest.	If	we	repay,	redeem	or	repurchase	(voluntarily	or	mandatorily) all	or	a	portion	of	our	credit	facilities	prior	to	their	scheduled	maturities,	our	obligations	under	those	hedging	transactions,	if	any,	may	cease	to	match	our	obligations under	the	credit	facilities,	and	could	result	in	significant	additional	expense	to	the	company.	These	hedging	transactions	may	not	qualify	for	effective	hedge	treatment	in accordance	with	U.S.	GAAP	and	as	a	result,	any	changes	in	fair	value	of	hedge	contracts	could	be	required	to	be	recorded	to	the	statement	of	income.	In	addition,	default by	the	counterparties	to	our	hedging	transactions	could	result	in	us	having	to	make	interest	payments	at	the	variable	rates	payable	under	the	credit	facilities	and	expose	us further	to	interest	rate	fluctuation	risk	under	those	credit	facilities.

# Risks	Related	to	our	Business

# Sales	and	market	acceptance	of	our	products	is	dependent	on	third	party	reimbursement.	Failure	of	third	party	payors	to	provide	appropriate	levels	of reimbursement	for	use	of	our	products	could	harm	our	business	and	prospects.

Sales	and	market	acceptance	of	our	medical	products	in	the	United	States	and	other	countries	is	dependent	on	the	reimbursement	of	patient's	medical	expenses	by government	healthcare	programs	and	private	health	insurers.	The	costs	of	our	products	to	customers	are	substantial,	and	market	acceptance	of	our	products	will	continue to	depend	upon	our	customers'	ability	to	obtain	an	appropriate	level	of	reimbursement	from	third-party	payors	for	use	of	such	products.	In	the	United	States,	the	Centers for	Medicare	&	Medicaid	Services,	known	as	CMS,	establish	guidelines	for	the	reimbursement	of	healthcare	providers	treating	Medicare	and	Medicaid	patients.	Under current	CMS	guidelines,	varying	reimbursement	levels	have	been	established	for	our	products	and	procedures.	The	actual	reimbursement	amounts	are	determined	by individual	state	Medicare	carriers	and,	for	non-Medicare	and	Medicaid	patients,	private	insurance	carriers.	There	are	often	delays	between	the	reimbursement	approvals by	CMS	and	by	a	state	Medicare	carrier	and	private	insurance	carriers.	Moreover,	states	as	well	as	private	insurance	carriers	may	choose	not	to	follow	the	CMS reimbursement	guidelines.	The	use	of	our	products	outside	the	United	States	is	similarly	affected	by	reimbursement	policies	adopted	by	foreign	governments' reimbursements	and	regulatory	positions	and	insurance	carriers.

In	November	2007,	the	CMS	announced	reductions	to	the	2008	reimbursement	levels	for	physician,	hospital	and	ambulatory	surgical	center	payments.	Such reimbursement	rates	also	reflect	a	Sustainable	Growth	Rate	("SGR")	reduction	which	requires	that	reimbursement	rates	factor	in	a	10.1%	reduction	in	physician payments	under	the	physician	fee	schedule	as	determined	by	the	SGR	formula.	The	most	significant	reductions	for	2008	applicable	to	our	products	were	an approximately	4%	to	9%	decline	in	digital	and	analog	mammography	screening	and	diagnostic	reimbursement	rates,	primarily	due	to	the	10.1%	SGR	reduction	and	an approximately	22%	decline,	in	addition	to	the	SGR	reduction,	in	reimbursement	for	CAD	in	2008,	the	second	year	of	the	increases	to	an	approximately	50%	decline	over four	years	as	announced	in	2006.	Medicare	payments	in	2008	for	our	other	products	are	effected	primarily	by	the	SGR	reduction,	and	will	decline	by	less	than approximately	12%,while	in-office	payments	for	NovaSure	and	MammoSite	balloon	catheter	placement	will	decline	by	approximately	17%.	In	November	2006,	CMS announced	reductions	to	the	2007	reimbursement	levels	for	bone	density	assessments	including	an	approximately	40%	decline	in	2007	in	reimbursement	for	osteoporosis (DXA)	testing,	which	increases	to	an	approximately	70%	decline	over	four	years.	The	increase	in	the	decline	for	2008	for	reimbursement	for	DXA	testing	is approximately	2%.	These	reductions	or	any	other	reduction	or	adverse	change	in	reimbursement	policies	for	the	use	of	our	products	could	harm	our	business	and prospects.

# Our	business	may	be	harmed	by	our	recently	completed	acquisitions	and	our	merger	with	Cytyc.

We	recently	acquired	a	number	of	businesses,	technologies,	product	lines,	and	products,	including	Cytyc,	BioLucent,	Suros,	R2,	AEG,	Adeza	and	Adiana.	The success	of	these	acquisitions	will	depend	on	our	ability	to	realize	the	anticipated	benefits	from	combining	the	acquired	businesses	with	our	business.	We	may	fail	to realize	these	anticipated	benefits	for	a	number	of	reasons,	including	the	following:

•problems	may	arise	with	our	ability	to	successfully	integrate	the	acquired	businesses,	which	may	result	in	us	not	operating	as	effectively	and	efficiently	as expected,	and	may	include:

•diversion	of	management	time,	as	well	as	a	shift	of	focus	from	operating	the	businesses	to	issues	related	to	integration	and	administration	or inadequate	management	resources	available	for	integration	activity	and	oversight;

•failure	to	retain	and	motivate	key	employees;

•failure	to	successfully	manage	relationships	with	customers,	distributors	and	suppliers;

•failure	of	customers	to	accept	new	products;

•failure	to	effectively	coordinate	sales	and	marketing	efforts;

•failure	to	combine	product	offerings	and	product	lines	quickly	and	effectively;

•failure	to	effectively	enhance	acquired	technology	and	products	or	develop	new	products	relating	to	the	acquired	businesses;

•potential	difficulties	and	inefficiencies	in	managing	and	operating	businesses	in	multiple	locations	or	operating	businesses	in	which	we	have	either limited	or	no	direct	experience;

•potential	difficulties	integrating	financial	reporting	systems;

•potential	difficulties	in	the	timely	filing	of	required	reports	with	the	SEC;	and

•potential	difficulties	in	implementing	controls,	procedures	and	policies,	including	disclosure	controls	and	procedures	and	internal	controls	over financial	reporting,	appropriate	for	a	larger	public	company	at	companies	that,	prior	to	the	acquisition	of	such	companies,	had	lacked	such	controls, procedures	and	policies,	which	may	result	in	ineffective	disclosure	controls	and	procedures	or	material	weaknesses	in	internal	controls	over financial	reporting;

•	 we	may	not	be	able	to	achieve	the	expected	synergies	from	an	acquisition	or	it	may	take	longer	than	expected	to	achieve	those	synergies;

•an	acquisition	may	result	in	future	impairment	charges	related	to	diminished	fair	value	of	businesses	acquired	as	compared	to	the	price	we	paid	for	them;

•an	acquisition	may	involve	restructuring	operations	or	reductions	in	workforce	which	may	result	in	substantial	charges	to	our	operations;

•an	acquisition	may	involve	unexpected	costs	or	liabilities,	or	the	effects	of	purchase	accounting	may	be	different	from	our	expectations;	and

•the	acquired	businesses	may	be	adversely	affected	by	future	legislative,	regulatory,	or	tax	decisions	and/or	changes	as	well	as	other	economic,	business and/or	competitive	factors.

Our	acquisition	of	AEG,	which	conducts	its	business	worldwide,	with	headquarters	in	Germany	and	manufacturing	operations	in	Germany	and	China,	is	also subject	to	the	additional	challenges	and	risks	associated	with	volatility	in	the	market	for	organic	photoconductor	coatings	used	for	laser	printer	cartridges,	and	our international	operations,	including	those	related	to	integration	of	operations	across	different	cultures	and	languages,	currency	risk	and	the	particular	economic,	legal, political	and	regulatory	risks	associated	with	specific	countries.

Our	failure	to	realize	the	anticipated	benefits	from	combining	the	acquired	businesses	could	harm	our	business	and	prospects	and	adversely	affect	the	market	price of	our	common	stock.

# The	current	levels	of	growth	in	the	markets	for	our	direct-to-digital	full-field	mammography	products	and	endometrial	ablation	procedures,	such	as	our NovaSure	System,	may	not	continue	to	develop	as	expected	or	be	indicative	of	future	growth.

Demand	for	newly	introduced	technologies	or	treatments	can	initially	be	exaggerated	as	supply	increases	to	meet	pre-existing	demand.	However,	once	the	pre- existing	demand	is	met,	growth	in	the	market	may	abruptly	stop	or	significantly	slow.	The	markets	for	our	direct-to-digital	full-field	mammography	products	and endometrial	ablation	procedures,	such	as	our	NovaSure	System,	may	not	continue	to	develop	as	current	levels	of	growth	and	demand	may	indicate	and	we	cannot	predict when,	or	at	what	rate,	this	demand	may	stop	or	decline	in	growth.

There	is	a	significant	installed	base	of	conventional	screen-film	mammography	products	in	hospitals	and	radiological	practices.	The	use	of	our	direct-to-digital mammography	products	in	many	cases	would	require	these	potential	customers	to	replace	their	existing	x-ray	imaging	equipment.	Moreover,	as	digital	mammography products	are	generally	more	expensive	than	conventional	screen-film	mammography	products,	we	believe	that	a	major	factor	in	the	market's	acceptance	of	digital mammography	products	has	been	and	will	continue	to	be	based	upon	the	benefits	of	digital	technology	as	compared	to	less	expensive	technologies.	As	a	result,	the market	for	our	digital	mammography	products	has	and	will	continue	to	be	affected	by	published	studies	and	reports	relating	to	the	comparative	efficacy	of	digital mammography	products.	The	publication	of	an	adverse	study	could	significantly	impair	the	adoption	of	this	technology	and	harm	our	business.	Similarly,	we	cannot assure	you	that	we	will	be	successful	in	continuing	to	attract	physicians	and	women	to	use	the	NovaSure	System,	or	whether	or	not	evolving	trends	in	the	treatment	of excessive	menstrual	bleeding	will	favor	new	endometrial	ablation	procedures	as	compared	to	traditional	approaches.

If	the	demand	for	our	direct-to-digital	mammography	products	and	treatments	like	the	NovaSure	System	were	to	stop	abruptly	or	begin	to	decline,	our	operating results	and	profitability	could	be	adversely	affected.

# The	success	of	our	ThinPrep	System	depends	upon	the	cost	and	continued	market	acceptance	of	our	ThinPrep	System	products.

The	success	of	our	ThinPrep	System	depends	on	the	continued	market	acceptance	of	our	ThinPrep	System	and	ThinPrep	Imaging	System,	including	any	follow- on	applications	of	ThinPrep	technology.	The	laboratory	cost	of	using	the	ThinPrep	System	and	ThinPrep	Imaging	System	for	cervical	cancer	screening,	both	together and	individually,	is	higher	than	that	of	a	conventional	Pap	smear	and,	we	believe,	competing	liquid-based	slide	preparation	systems.	Due	in	part	to	increased	competitive pressures	in	the	cytology	screening	market	and	healthcare	industry	to	reduce	costs,	our	ability	to	continue	to	gain	market	acceptance	of	the	ThinPrep	System	and	follow- on	products	will	depend	on	our	ability	to	demonstrate	that	the	higher	cost	of	using	the	ThinPrep	System	is	offset	by	(i)	a	reduction	in	costs	often	associated	with conventional	Pap	smears	or	competing	liquid-based	slide	preparation	systems,	such	as	inaccurate	diagnoses	and	the	need	for	repeat	Pap	smears,	as	well	as	(ii)	the	ability to	conduct	additional	testing,	such	as	testing	for	the	HPV,	Chlamydia	trachomatis	and	Neisseria	gonorrhea	on	samples	collected	in	a	ThinPrep	vial	of	preservative.	In particular,	for	the	ThinPrep	Imaging	System,	we	will	need	to	work	with	healthcare	providers,	insurance	companies	and	other	third-party	payors,	and	clinical	laboratories to	reinforce	the	known	clinical	efficacy	and	cost-effectiveness	of	the	ThinPrep	Imaging	System.

# We	are	dependent	upon	a	relatively	small	number	of	large	clinical	laboratory	customers	in	the	United	States	for	a	significant	portion	of	our	sales	of	the ThinPrep	System.

We	are	dependent	upon	a	relatively	small	number	of	large	clinical	laboratory	customers	in	the	United	States	for	a	significant	portion	of	our	sales	of	the	ThinPrep System.	Due	in	part	to	a	trend	toward	consolidation	of	clinical	laboratories	in	recent	years	and	the	relative	size	of	the	largest	United	States	laboratories,	it	is	likely	that	a significant	portion	of	ThinPrep	System	sales	will	continue	to	be	concentrated	among	a	relatively	small	number	of	large	clinical	laboratories.	Our	business	and	prospects may	be	harmed	if	we	are	unable	to	increase	sales	to,	or	maintain	pricing	levels	with	our	existing	customers	and	establish	new	customers	both	within	and	outside	the United	States.

# Our	success	will	depend	on	new	product	development.

We	have	continuing	research	and	development	programs	designed	to	develop	new	products	and	to	enhance	and	improve	our	products.	We	are	expending significant	resources	on	the	development	of	digital	x-ray	imaging	products,	including	the	development	of	a	digital	mammography	product	to	perform	breast tomosynthesis,	a	3-dimensional	imaging	technique	as	well	as	on	continued	product	line	enhancements.	The	successful	development	of	our	products	and	product enhancements	is	subject	to	numerous	risks,	both	known	and	unknown,	including:

•unanticipated	delays;

•access	to	capital;

•budget	overruns;

•third	party	intellectual	property;

# •technical	problems;	and

•other	difficulties	that	could	result	in	the	abandonment	or	substantial	change	in	the	design,	development	and	commercialization	of	these	new	products, including,	for	example,	changes	requested	by	the	FDA	in	connection	with	pre-market	approval	applications	for	products	or	510(k)	notification.

Given	the	uncertainties	inherent	with	product	development	and	introduction,	there	can	be	no	assurance	that	any	of	our	product	development	efforts	will	be successful	on	a	timely	basis	or	within	budget,	if	at	all.	Our	failure	to	develop	new	products	and	product	enhancements,	such	as	our	digital	mammography	tomosynthesis product,	on	a	timely	basis	or	within	budget	could	harm	our	business	and	prospects	and	could	adversely	affect	the	market	price	of	our	common	stock.

# The	markets	for	and	future	growth	of	our	products	and	treatments	may	not	develop	as	expected.

There	can	be	no	assurance	that	our	existing	products	or	treatments,	or	the	enhancement	of	products	or	treatments	will	be	commercially	successful.	The	successful commercialization	of	our	products	and	treatments	are	subject	to	numerous	risks,	both	known	and	unknown,	including:

•uncertainty	of	the	development	of	a	market	for	such	product	or	treatment;

•trends	relating	to,	or	the	introduction	or	existence	of,	competing	products,	technologies	or	alternative	treatments	or	therapies	that	may	be	more	effective, safer	or	easier	to	use	than	our	products,	technologies,	treatments	or	therapies;

•perceptions	of	our	products	or	treatments	as	compared	to	other	products	and	treatments;

•recommendation	and	support	for	the	use	of	our	products	or	treatments	by	influential	customers,	such	as	hospitals,	radiological	practices,	breast	surgeons and	radiation	oncologists	and	treatment	centers;

•the	availability	and	extent	of	data	demonstrating	the	clinical	efficacy	of	our	products	or	treatments;

•competition,	including	the	presence	of	competing	products	sold	by	companies	with	longer	operating	histories,	more	recognizable	names	and	more established	distribution	networks;	and

# •other	technological	developments.

Often,	the	development	of	a	significant	market	for	a	product	or	treatment	will	depend	upon	the	establishment	of	a	reimbursement	code	or	an	advantageous reimbursement	level	for	use	of	the	product	or	treatment.	Moreover,	even	if	addressed,	such	reimbursement	codes	or	levels	frequently	are	not	addressed	until	after	a product	or	treatment	is	developed	and	commercially	introduced,	which	can	delay	the	successful	commercialization	of	a	product	or	treatment.	If	we	are	unable	to successfully	commercialize	and	create	a	significant	market	for	our	products	and	treatments,	such	as	our	digital	mammography	tomosynthesis	product,	due	to,	among other	things,	the	lack	of	reimbursement	codes	or	disadvantageous	reimbursement	levels	for	such	products	or	treatments,	our	business	and	prospects	could	be	harmed	and the	market	price	of	our	common	stock	could	be	adversely	affected.

# We	may	not	be	successful	in	growing	our	international	sales,	which	could	have	a	material	adverse	effect	on	our	business	and	financial	condition.

We	cannot	guarantee	that	we	will	successfully	continue	to	develop	international	sales	channels	or	capabilities	that	will	enable	us	to	generate	significant	revenue from	international	sales.	We	may	not	be	able	to	obtain	favorable	third-party	reimbursements	and	required	regulatory	approvals	in	foreign	countries.	Failure	to	continue to	increase	international	sales	could	harm	our	business	and	prospects.

# Our	success	depends	on	our	ability	to	manage	growth	effectively.

Our	operations	and	facilities,	including	the	number	of	employees	and	the	geographic	area	of	operations,	have	grown	rapidly,	and	our	operations	and	facilities	are expected	to	continue	to	grow.	Our	failure	to	manage	growth	effectively	could	harm	our	business	and	prospects.	Such	growth	may	significantly	strain	our	managerial, operational	and	financial	resources	and	systems.	To	manage	such	growth	effectively,	it	is	expected	that	we	will	continue	to	implement	and	improve	additional management	and	financial	systems	and	controls,	and	to	effectively	retain,	expand,	train	and	manage	our	employee	base.

# Our	business	could	be	harmed	if	we	infringe	upon	the	intellectual	property	rights	of	others.

There	has	been	substantial	litigation	regarding	patent	and	other	intellectual	property	rights	in	the	medical	device	and	related	industries.	We	have	been	involved	in infringement	litigation,	and	may	in	the	future	be	notified	that	we	may	be	infringing	intellectual	property	rights	possessed	by	third	parties.

For	example,	in	October	2007,	Ethicon	Endo-Surgery,	Inc.,	a	Johnson	&	Johnson	operating	company	("Ethicon"),	filed	a	complaint	against	us	and	our	wholly- owned	subsidiary	Suros.	The	complaint	alleges	that	certain	of	the	ATEC	biopsy	systems	manufactured	and	sold	by	Suros	infringe	four	Ethicon	patents.	The	complaint seeks	to	enjoin	us	and	Suros	from	infringing	the	patents	as	well	as	the	recovery	of	damages	and	costs	resulting	from	the	alleged	infringement.

In	connection	with	litigation	or	if	any	claims	are	asserted	against	our	intellectual	property	rights,	we	may	seek	to	enter	into	royalty	or	licensing	arrangements. There	is	a	risk	in	these	situations	that	no	license	will	be	available	or	that	a	license	will	not	be	available	on	reasonable	terms.	Alternatively,	we	may	decide	to	litigate	such claims	or	to	design	around	the	patented	technology.	These	actions	could	be	costly	and	would	divert	the	efforts	and	attention	of	our	management	and	technical	personnel. As	a	result,	any	infringement	claims	by	third	parties	or	claims	for	indemnification	by	customers	resulting	from	infringement	claims,	whether	or	not	proven	to	be	true, may	harm	our	business	and	prospects.

# If	we	fail	to	achieve	and	maintain	the	high	manufacturing	standards	that	our	direct	radiography	products	require,	we	may	not	be	successful	in	developing	and marketing	those	products.

The	manufacture	of	our	direct	radiography	detectors	is	highly	complex	and	requires	precise	high	quality	manufacturing	that	is	difficult	to	achieve.	We	have	in	the past	and	may	in	the	future	experience	difficulties	in	manufacturing	these	detectors	in	sufficient	quantities,	primarily	related	to	delays	and	difficulties	in	obtaining	critical components	for	these	detectors	that	meet	our	high	manufacturing	standards.	Our	initial	difficulties	led	to	increased	delivery	lead-times	and	increased	costs	of manufacturing	these	products.	Our	failure,	including	the	failure	of	our	contract	manufacturers,	to	achieve	and	maintain	the	required	high	manufacturing	standards	could result	in	further	delays	or	failures	in	product	testing	or	delivery,	cost	overruns,	product	recalls	or	withdrawals,	increased	warranty	costs	or	other	problems	that	could harm	our	business	and	prospects.

# The	uncertainty	of	healthcare	reform	could	harm	our	business	and	prospects.

In	recent	years,	the	healthcare	industry	has	undergone	significant	change	driven	by	various	efforts	to	reduce	costs,	including	efforts	at	national	healthcare	reform, trends	toward	managed	care,	cuts	in	Medicare,	consolidation	of	healthcare	distribution	companies	and	collective	purchasing	arrangements	by	office-based	healthcare practitioners.	Healthcare	reform	proposals	and	medical	cost	containment	measures	in	the	United	States	and	in	many	foreign	countries	could:

•limit	the	use	of	our	products;

•reduce	reimbursement	available	for	such	use;	or

•adversely	affect	the	use	of	new	therapies	for	which	our	products	may	be	targeted.

These	reforms	or	cost	containment	measures,	including	the	uncertainty	in	the	medical	community	regarding	their	nature	and	effect,	could	harm	our	business	and prospects.

# Our	business	could	be	harmed	if	we	are	unable	to	protect	our	proprietary	technology.

We	have	relied	primarily	on	a	combination	of	trade	secrets,	patents,	copyright	and	trademark	laws	and	confidentiality	procedures	to	protect	our	products	and technology.	Despite	these	precautions,	unauthorized	third	parties	may	infringe,	copy	or	reverse	engineer	portions	of	our	technology.	We	do	not	know	if	current	or	future patent	applications	will	be	issued	with	the	scope	of	the	claims	sought,	if	at	all,	or	whether	any	patents	issued	will	be	challenged	or	invalidated.	In	addition,	we	have obtained	or	applied	for	corresponding	patents	and	patent	applications	in	several	foreign	countries	for	some	of	our	patents	and	patent	applications.	There	is	a	risk	that these	patent	applications	will	not	be	granted	or	that	the	patent	or	patent	application	will	not	provide	significant	protection	for	our	products	and	technology.	Our competitors	may	independently	develop	similar	technology	that	our	patents	do	not	cover.	In	addition,	because	patent	applications	in	the	United	States	are	not	generally publicly	disclosed	until	eighteen	months	after	the	application	is	filed,	applications	may	have	been	filed	by	third	parties	which	relate	to	our	technology.	Moreover,	there is	a	risk	that	foreign	intellectual	property	laws	will	not	protect	our	intellectual	property	rights	to	the	same	extent	as	United	States	intellectual	property	laws.	In	the absence	of	significant	patent	protection,	we	may	be	vulnerable	to	competitors	who	attempt	to	copy	our	products,	processes	or	technology.

# Our	international	operations	expose	us	to	additional	operational	challenges	that	we	might	not	otherwise	face.

We	are	subject	to	a	number	of	additional	risks	and	expenses	due	to	our	international	operations.	Any	of	these	risks	or	expenses	could	have	a	material	adverse effect	on	our	operating	results.	These	risks	and	expenses	include:

•difficulties	in	staffing	and	managing	operations	in	multiple	locations	as	a	result	of,	among	other	things,	distance,	language	and	cultural	differences;

•protectionist	laws	and	business	practices	that	favor	local	companies;

•greater	difficulties	in	trade	accounts	receivable	collection;

•difficulties	and	expenses	related	to	implementing	internal	controls	over	financial	reporting	and	disclosure	controls	and	procedures;

•expenses	associated	with	customizing	products	for	clients	in	foreign	countries;

•possible	adverse	tax	consequences;

•governmental	currency	controls;

•	 multiple,	conflicting	and	changing	government	laws	and	regulations	(including,	among	other	things,	antitrust	and	tax	requirements,	international	trade regulations	and	the	Foreign	Corrupt	Practices	Act);

•reduced	protection	for	intellectual	property	rights	in	some	countries;

•political	and	economic	changes	and	disruptions;

•export/import	controls;	and

•tariff	regulations.

# Interruptions,	delays,	shutdowns	or	damage	at	our	manufacturing	facilities	could	harm	our	business.

We	manufacture	most	of	our	mammography,	breastcare	and	osteoporosis	assessment	products	as	well	as	our	mini	C-arm	products	and	MRI	systems	at	our manufacturing	facilities	in	Danbury,	Connecticut,	Bedford,	Massachusetts,	Indianapolis,	Indiana	and	Newark,	Delaware.	In	addition,	we	manufacture	the	selenium coatings	used	in	the	digital	x-ray	image	capture	radiographic	systems	in	Germany	and	our	selenium	and	organic	photoconductor	coatings	for	other	uses	in	Germany	and China.	We	assemble	and	manufacture	our	ThinPrep	products	at	our	facilities	in	Marlborough,	Massachusetts	and	Londonderry,	New	Hampshire.	In	addition,	we

manufacture	our	NovaSure	System	and	MammoSite	System	in	Costa	Rica.	An	interruption	in	manufacturing	capabilities	at	any	of	these	facilities,	as	a	result	of equipment	failure	or	other	reasons,	could	reduce,	delay	or	prevent	the	production	of	our	products.	Our	manufacturing	facilities	are	subject	to	the	risk	of	catastrophic	loss due	to	unanticipated	events,	such	as	fires,	earthquakes,	explosions,	floods	or	weather	conditions.	Our	manufacturing	facilities	may	experience	plant	shutdowns,	strikes	or other	labor	disruptions,	or	periods	of	reduced	production	as	a	result	of	equipment	failures,	loss	of	power,	gray	outs,	delays	in	deliveries	or	extensive	damage	to	any	of	our facilities,	which	could	harm	our	business	and	prospects.	Because	some	of	our	manufacturing	operations	are	located	in	Germany,	China	and	Costa	Rica,	those manufacturing	operations	are	also	subject	to	additional	challenges	and	risks	associated	with	international	operations	described	below.

# Our	business	could	be	harmed	if	products	contain	undetected	errors	or	defects	or	do	not	meet	customer	specifications.

We	are	continuously	developing	new	products	and	improving	our	existing	products.	Newly	introduced	products	can	contain	undetected	errors	or	defects.	In addition,	these	products	may	not	meet	their	performance	specifications	under	all	conditions	or	for	all	applications.	If,	despite	internal	testing	and	testing	by	customers, any	of	our	products	contain	errors	or	defects	or	fail	to	meet	customer	specifications,	then	we	may	be	required	to	enhance	or	improve	those	products	or	technologies.	We may	not	be	able	to	do	so	on	a	timely	basis,	if	at	all,	and	may	only	be	able	to	do	so	at	considerable	expense.	In	addition,	any	significant	reliability	problems	could	result	in adverse	customer	reaction,	negative	publicity,	mandatory	or	voluntary	recall	or	legal	claims	and	could	harm	our	business	and	prospects.

# We	rely	on	one	or	only	a	limited	number	of	suppliers	for	some	key	components	or	subassemblies	for	our	products.	This	reliance	could	harm	our	business	and prospects.

We	rely	on	one	or	only	a	limited	number	of	suppliers	for	some	key	components	or	subassemblies	for	our	products.	In	particular,	we	have	a	limited	number	of suppliers	for	certain	components	of	our	digital	detector.	In	addition,	we	have	only	limited	sources	of	supply	for	some	key	components	used	in	our	mini	C-arm	systems and	our	Suros	biopsy	systems.	We	currently	obtain	certain	key	components	of	our	products,	including	the	proprietary	filter	material	and	microscope	slides	used	in	the ThinPrep	Pap	Test,	radioisotopes,	certain	balloons	and	other	items	used	in	the	design	and	manufacture	of	the	MammoSite	System	and	the	Iotrex	liquid	isotope	used	with the	GliaSite	System,	from	single	or	a	limited	number	of	sources	due	to	technology,	availability,	price,	quality	and	other	considerations.	Additionally,	the	NovaSure System	utilizes	several	components	that	may	become	obsolete	or	no	longer	be	manufactured.

Obtaining	alternative	sources	of	supply	of	these	components	could	involve	significant	delays	and	other	costs	and	regulatory	challenges,	and	may	not	be	available to	us	on	reasonable	terms,	if	at	all.	The	failure	of	a	component	supplier	or	contract	assembler	to	provide	sufficient	quantities,	acceptable	quality	and	timely	components or	assembly	service	at	an	acceptable	price,	or	an	interruption	of	supplies	from	such	a	supplier	could	harm	our	business	and	prospects.	Any	disruption	of	supplies	of	key components	could	delay	or	reduce	shipments,	which	could	result	in	lost	or	deferred	sales.

# We	face	intense	competition	from	other	companies	and	may	not	be	able	to	compete	successfully.

A	number	of	companies	have	developed,	or	are	expected	to	develop,	products	that	compete	or	will	compete	with	our	products.	Some	of	our	competitors	are	large companies	that	may	enjoy	significant	competitive	advantages	over	us,	including:

•significantly	greater	name	recognition;

•established	distribution	networks;

•additional	lines	of	products,	and	the	ability	to	offer	rebates	or	bundle	products	to	offer	discounts	or	incentives	to	gain	competitive	advantage;

•	 more	extensive	research,	development,	sales,	marketing	and	manufacturing	capabilities;	and

•better	positioning	to	continue	to	improve	their	technology	in	order	to	compete	in	an	evolving	industry.

The	markets	in	which	we	sell	our	products	are	intensely	competitive,	subject	to	rapid	change	and	may	be	significantly	affected	by	new	product	introductions	and other	market	activities	of	industry	participants.	Other	companies	may	develop	products	that	are	superior	to	or	less	expensive,	or	both,	than	our	products.	Improvements in	existing	competitive	products	or	the	introductions	of	new	competitive	products	may	reduce	our	ability	to	compete	for	sales,	particularly	if	those	competitive	products demonstrate	better	safety	or	effectiveness,	clinical	results,	ease	of	use	or	lower	costs.

If	we	are	unable	to	compete	effectively	against	existing	and	future	competitors	and	existing	and	future	alternative	treatments,	our	business	and	prospects	could	be

# harmed.

# Our	success	depends	upon	our	ability	to	adapt	to	rapid	changes	in	technology	and	customer	requirements.

The	markets	for	our	products	have	been	characterized	by	rapid	technological	change,	frequent	product	introductions	and	evolving	customer	requirements.	These trends	will	likely	continue	into	the	foreseeable	future.	Our	success	depends,	in	part,	upon	our	ability	to	enhance	our	existing	products,	successfully	develop	new	products that	meet	increasing	customer	requirements	and	gain	market	acceptance.	If	we	fail	to	do	so	our	products	may	be	rendered	obsolete	or	uncompetitive	by	new	industry standards	or	changing	technology.

# Our	results	of	operations	is	subject	to	significant	quarterly	variation	and	seasonal	fluctuation.

Our	results	of	operations	have	been	and	may	continue	to	be	subject	to	significant	quarterly	variation.	Our	results	for	a	particular	quarter	may	also	vary	due	to	a number	of	factors,	including:

•the	overall	state	of	healthcare	and	cost	containment	efforts;

•the	timing	and	level	of	reimbursement	for	our	products	domestically	and	internationally;

•the	development	status	and	demand	for	our	products;

•the	development	status	and	demand	for	therapies	to	treat	breast	cancer	and	osteoporosis;

•economic	conditions	in	our	markets;

•foreign	exchange	rates;

•the	timing	of	orders;

•the	timing	of	expenditures	in	anticipation	of	future	sales;

•the	mix	of	products	we	sell;

•the	introduction	of	new	products	and	product	enhancements	by	us	or	our	competitors;

•pricing	and	other	competitive	conditions;

•unanticipated	expenses;	and

•complex	revenue	recognition	rules	pursuant	to	U.S.	generally	accepted	accounting	principles	(U.S.	GAAP).

Customers	may	also	cancel	or	reschedule	shipments.	Production	difficulties	could	also	delay	shipments.	Any	of	these	factors	also	could	harm	our	business	and prospects.

# Our	delay	or	inability	to	obtain	any	necessary	United	States	or	foreign	regulatory	clearances	or	approvals	for	our	products	could	harm	our	business	and prospects.

Our	products	are	medical	devices	that	are	the	subject	of	a	high	level	of	regulatory	oversight.	Our	delay	or	inability	to	obtain	any	necessary	United	States	or foreign	regulatory	clearances	or	approvals	for	our	products,

such	as	our	digital	mammography	tomosynthesis	product	and	our	permanent	female	contraception	product,	could	harm	our	business	and	prospects	and	could	adversely affect	the	market	price	of	our	common	stock.	The	process	of	obtaining	clearances	and	approvals	can	be	costly	and	time-consuming.	There	is	a	risk	that	any	approvals	or clearances,	once	obtained,	may	be	withdrawn	or	modified.

Medical	devices	cannot	be	marketed	in	the	United	States	without	clearance	or	approval	by	the	FDA.	Any	modifications	to	a	device	that	has	received	a	pre-market approval	that	affect	its	safety	or	effectiveness	require	a	pre-market	approval	supplement	or	possibly	a	separate	pre-market	approval,	either	of	which	is	likely	to	be	time- consuming,	expensive	and	uncertain	to	obtain.	If	the	FDA	requires	us	to	seek	one	or	more	pre-market	approval	supplements	or	new	pre-market	approvals	for	any modification	to	a	previously	approved	device,	we	may	be	required	to	cease	marketing	or	to	recall	the	modified	device	until	we	obtain	approval,	and	we	may	be	subject	to significant	criminal	and/or	civic	sanctions,	including	but	not	limited	to,	regulatory	fines	or	penalties.

Medical	devices	sold	in	the	United	States	must	also	be	manufactured	in	compliance	with	FDA	Good	Manufacturing	Practices,	which	regulate	the	design, manufacture,	packing,	storage	and	installation	of	medical	devices.	Moreover,	medical	devices	are	required	to	comply	with	FDA	regulations	relating	to	investigational research	and	labeling.	States	may	also	regulate	the	manufacture,	sale	and	use	of	medical	devices,	particularly	those	that	employ	x-ray	technology.	Our	products	are	also subject	to	approval	and	regulation	by	foreign	regulatory	and	safety	agencies.

# Recent	proposed	changes	to	reclassify	full-field	digital	mammography	to	permit	510(k)	clearance	could	increase	competition	for	our	digital	mammography products.

On	May	23,	2006	the	FDA	Radiological	Devices	Panel	recommended	the	reclassification	of	full-field	digital	mammography	systems	from	Class	III	to	Class	II devices.	The	FDA	has	indicated	that	they	intend	to	issue	guidance	on	full	field	digital	mammography	during	2008.	If	the	FDA	implements	the	panel's	recommendation, the	reclassification	would	allow	full-field	digital	mammography	systems	to	be	cleared	for	commercialization	through	the	510(k)	process,	which	is	less	rigorous	than	the present	pre-market	approval	process.	If	and	when	implemented,	the	reclassification	for	full-field	digital	mammography	systems	from	Class	III	to	Class	II	devices	may lower	barriers	of	entry	into	the	digital	mammography	market,	may	result	in	more	competitors	entering	the	United	States	market	and	could	harm	sales	of	our	digital mammography	systems.

# Our	products	may	be	subject	to	recalls	even	after	receiving	FDA	clearance	or	approval,	which	could	harm	our	business	and	prospects.

The	FDA	and	similar	governmental	bodies	in	other	countries	have	the	authority	to	require	the	recall	of	medical	products	in	the	event	of	material	deficiencies	or defects	in	design	or	manufacture.	A	government	mandated	or	voluntary	recall	by	us	could	occur	as	a	result	of	component	failures,	manufacturing	errors	or	design	defects, including	defects	in	labeling.	Any	recall	could	harm	the	reputation	of	our	products	and	adversely	affect	our	business	and	prospects.

# Some	of	our	activities	may	subject	us	to	risks	under	federal	and	state	laws	prohibiting	"kickbacks"	and	false	or	fraudulent	claims.

We	are	subject	to	the	provisions	of	a	federal	law	commonly	known	as	the	Medicare/Medicaid	anti-kickback	law,	and	several	similar	state	laws,	which	prohibit payments	intended	to	induce	physicians	or	others	either	to	refer	patients	or	to	acquire	or	arrange	for	or	recommend	the	acquisition	of	healthcare	products	or	services. While	the	federal	law	applies	only	to	referrals,	products	or	services	for	which	payment	may	be	made	by	a	federal	healthcare	program,	state	laws	often	apply	regardless	of whether	federal	funds	may	be	involved.	These	laws	constrain	the	sales,	marketing	and	other	promotional	activities	of	manufacturers	of	medical	devices	by	limiting	the kinds	of	financial	arrangements,	including	sales	programs,	with	hospitals,	physicians,	laboratories	and	other	potential	purchasers	of	medical	devices.	Other	federal	and state	laws	generally	prohibit	individuals	or	entities	from	knowingly	presenting,	or	causing	to	be	presented,	claims	for	payment	from	Medicare,	Medicaid,	or	other

third-party	payors	that	are	false	or	fraudulent,	or	are	for	items	or	services	that	were	not	provided	as	claimed.	Anti-kickback	and	false	claims	laws	prescribe	civil	and criminal	penalties	(including	fines)	for	noncompliance	that	can	be	substantial.	While	we	continually	strive	to	comply	with	these	complex	requirements,	interpretations	of the	applicability	of	these	laws	to	marketing	practices	is	ever	evolving	and	even	an	unsuccessful	challenge	could	cause	adverse	publicity	and	be	costly	to	respond	to,	and thus	could	harm	our	business	and	prospects.

# We	are	subject	to	the	risk	of	product	liability	claims	relating	to	our	products.

Our	business	involves	the	risk	of	product	liability	and	other	claims	inherent	to	the	medical	device	business.	If	even	one	of	our	products	is	found	to	have	caused	or contributed	to	injuries	or	deaths,	we	could	be	held	liable	for	substantial	damages.	We	maintain	product	liability	insurance	subject	to	deductibles	and	exclusions.	There	is a	risk	that	the	insurance	coverage	will	not	be	sufficient	to	protect	us	from	product	and	other	liability	claims,	or	that	product	liability	insurance	will	not	be	available	to	us at	a	reasonable	cost,	if	at	all.	An	under-insured	or	uninsured	claim	could	harm	our	business	and	prospects.	In	addition,	claims	could	adversely	affect	the	reputation	of	the related	product,	which	could	damage	that	product's	competitive	position	in	the	market.

The	sale	and	use	of	one	of	our	diagnostic	products	could	also	lead	to	the	filing	of	product	liability	claims	if	someone	were	to	allege	that	one	of	our	products contained	a	design	or	manufacturing	defect	that	resulted	in	the	failure	to	detect	a	disorder	for	which	it	was	being	used	to	screen	or	caused	injuries	to	a	patient.	Any product	liability	claim	brought	against	us,	with	or	without	merit,	could	result	in	the	increase	of	our	product	liability	insurance	rates	or	the	inability	to	secure	additional coverage	in	the	future.	Also,	even	a	meritless	or	unsuccessful	product	liability	claim	could	be	time	consuming	and	expensive	to	defend,	which	could	result	in	a	diversion of	management's	attention	from	our	business	and	could	adversely	affect	the	perceived	safety	and	efficacy	of	our	products,	and	could	harm	our	business	and	prospects.

# We	use	hazardous	materials	and	products.

Our	research	and	development	involves	the	controlled	use	of	hazardous	materials,	such	as	toxic	and	carcinogenic	chemicals	and	various	radioactive	compounds. Although	we	believe	that	our	safety	procedures	for	handling	and	disposing	of	such	materials	comply	with	the	standards	prescribed	by	federal,	state	and	local	regulations, the	risk	of	accidental	contamination	or	injury	from	these	materials	cannot	be	eliminated.	In	the	event	of	this	type	of	accident,	we	could	be	held	liable	for	any	resulting damages,	and	any	such	liability	could	be	extensive.	We	are	also	subject	to	substantial	regulation	relating	to	occupational	health	and	safety,	environmental	protection, hazardous	substance	control,	and	waste	management	and	disposal.	The	failure	to	comply	with	such	regulations	could	subject	us	to,	among	other	things,	fines	and criminal	liability.

# Fluctuations	in	the	exchange	rates	of	European	currencies	and	the	other	foreign	currencies	in	which	we	conduct	our	business,	in	relation	to	the	U.S.	dollar, could	harm	our	business	and	prospects.

We	maintain	sales	and	service	offices	outside	the	United	States,	have	manufacturing	facilities	in	Germany,	Costa	Rica	and	China,	and	conduct	business worldwide.	The	expenses	of	our	international	offices	are	denominated	in	local	currencies,	except	at	our	Costa	Rica	subsidiary,	where	the	majority	of	business	is conducted	in	U.S.	dollars,	and	our	foreign	sales	may	be	denominated	in	local	currencies,	the	Euro	or	U.S.	dollars.

Fluctuations	in	foreign	currency	exchange	rates	could	affect	our	cost	of	goods	and	operating	margins	and	could	result	in	exchange	losses.	In	addition,	currency devaluation	can	result	in	a	loss	if	we	hold	deposits	of	that	currency.	We	have	historically	hedged,	and	may	in	the	future	hedge,	our	foreign	currency	exposure	by borrowing	funds	in	local	European	currencies	to	pay	the	expenses	of	our	foreign	offices.	In	addition,	our	AEG	operation	has	engaged	in	hedging	activities,	such	as currency	swaps,	to	hedge	our	foreign	currency	exposure.	There	is	a	risk	that	any	hedging	activities	will	not	be	successful	in	mitigating	our	foreign	exchange	risk exposure.

# Our	future	success	depends	on	the	continued	services	of	key	personnel.

The	loss	of	any	of	our	key	personnel,	particularly	key	research	and	development	personnel,	could	harm	our	business	and	prospects	and	could	impede	the achievement	of	our	research	and	development,	operational	or	strategic	objectives.	Our	success	also	depends	upon	our	ability	to	attract	and	retain	other	qualified managerial	and	technical	personnel.	Competition	for	such	personnel,	particularly	software	engineers	and	other	technical	personnel,	is	intense.	We	may	not	be	able	to attract	and	retain	personnel	necessary	for	the	development	of	our	business.

# Our	business	may	be	harmed	by	acquisitions	we	complete	in	the	future.

Our	identification	of	suitable	acquisition	candidates	involves	risks	inherent	in	assessing	the	values,	strengths,	weaknesses,	risks	and	profitability	of	acquisition candidates,	including	the	effects	of	the	possible	acquisition	on	our	business,	diversion	of	our	management's	attention	and	risks	and	costs	associated	with	unanticipated problems	or	latent	liabilities,	such	as	litigation,	investigations	or	inquiries	in	connection	with	acquisitions	that	we	complete.	If	we	are	successful	in	pursuing	future acquisitions,	we	will	be	required	to	expend	significant	funds,	incur	additional	debt	or	issue	additional	securities,	which	may	negatively	affect	our	results	of	operations and	be	dilutive	to	our	stockholders.	If	we	spend	significant	funds	or	incur	additional	debt,	our	ability	to	obtain	financing	for	working	capital	or	other	purposes	could decline,	and	we	may	be	more	vulnerable	to	economic	downturns	and	competitive	pressures.	We	cannot	guarantee	that	we	will	be	able	to	finance	additional	acquisitions or	that	we	will	realize	any	anticipated	benefits	from	acquisitions	that	we	complete.	Should	we	acquire	another	business,	the	process	of	integrating	acquired	operations into	our	existing	operations	may	result	in	unforeseen	operating	difficulties	and	may	require	significant	financial	resources	that	would	otherwise	be	available	for	the ongoing	development	or	expansion	of	our	existing	business.

# Our	failure	to	manage	current	or	future	alliances	or	joint	ventures	effectively	may	harm	our	business	and	prospects.

We	have	entered	into	alliances,	joint	ventures	or	other	business	relationships.	Alliances	with	certain	partners	or	companies	could	make	it	more	difficult	for	us	to enter	into	advantageous	business	transactions	or	relationships	with	others.	Moreover,	we	may	not	be	able	to:

•identify	appropriate	candidates	for	alliances	or	joint	ventures;

•assure	that	any	alliance	or	joint	venture	candidate	will	provide	us	with	the	support	anticipated;

•successfully	negotiate	an	alliance	or	joint	venture	on	terms	that	are	advantageous	to	us;	or

•successfully	manage	any	alliance	or	joint	venture.

Furthermore,	any	alliance	or	joint	venture	may	divert	management	time	and	resources.	Entering	into	a	disadvantageous	alliance	or	joint	venture,	failing	to	manage an	alliance	or	joint	venture	effectively,	or	failing	to	comply	with	obligations	in	connection	therewith,	could	harm	our	business	and	prospects.

# We	are	exposed	to	potential	risks	and	will	continue	to	incur	significant	costs	as	a	result	of	the	internal	control	testing	and	evaluation	process	mandated	by Section	404	of	the	Sarbanes-Oxley	Act	of	2002.

We	assessed	the	effectiveness	of	our	internal	control	over	financial	reporting	as	of	September	29,	2007	and	assessed	all	deficiencies	on	both	an	individual	basis and	in	combination	to	determine	if,	when	aggregated,	they	constitute	a	material	weakness.	As	a	result	of	this	evaluation,	no	material	weaknesses	were	identified.

We	expect	to	continue	to	incur	significant	costs,	including	increased	accounting	fees	and	increased	staffing	levels,	in	order	to	maintain	compliance	with	Section 404	of	the	Sarbanes-Oxley	Act.	We	continue	to	monitor	controls	for	any	weaknesses	or	deficiencies.	No	evaluation	can	provide	complete	assurance	that	our	internal controls	will	detect	or	uncover	all	failures	of	persons	within	the	company	to	disclose	material	information

otherwise	required	to	be	reported.	The	effectiveness	of	our	controls	and	procedures	could	also	be	limited	by	simple	errors	or	faulty	judgments.	In	addition,	as	we continue	to	expand	globally,	the	challenges	involved	in	implementing	appropriate	internal	controls	will	increase	and	will	require	that	we	continue	to	improve	our	internal controls	over	financial	reporting.

In	2007,	Cytyc	acquired	Adeza	and	Adiana	and	we	completed	the	merger	with	Cytyc.	We	expect	to	include	Cytyc,	Adeza	and	Adiana	in	our	assessment	of internal	control	over	financial	reporting	in	fiscal	2008.	We	expect	to	face	additional	challenges	in	implementing	the	required	processes,	procedures	and	controls	as	a result	of	the	merger	and	other	acquired	operations.	Although	we	intend	to	devote	substantial	time	and	incur	substantial	costs,	as	necessary,	to	ensure	ongoing compliance,	we	cannot	be	certain	that	we	will	be	successful	in	complying	with	Section	404	of	the	Sarbanes-Oxley	Act.

For	example,	in	connection	with	Cytyc's	filing	of	their	original	Annual	Report	on	Form	10-K	in	March	2007,	its	management	included	Management's	Report	on Internal	Control	over	Financial	Reporting	therein,	which	expressed	a	conclusion	by	management	that	they	believed	that	its	internal	control	over	financial	reporting	was effective	as	of	December	31,	2006.	As	a	result	of	the	restatement	of	Cytyc's	consolidated	financial	statements,	its	management	determined	that	a	material	weakness	in internal	control	over	financial	reporting	existed	as	of	December	31,	2006,	and,	subsequently	concluded	that	its	internal	control	over	financial	reporting	was	not	effective as	of	December	31,	2006.

A	material	weakness	is	a	significant	deficiency,	or	combination	of	significant	deficiencies,	that	results	in	more	than	a	remote	likelihood	that	a	material misstatement	of	the	annual	or	interim	financial	statements	will	not	be	prevented	or	detected.	The	following	material	weakness	in	Cytyc's	internal	control	over	financial reporting	as	of	December	31,	2006	was	identified	and	included	in	its	assessment:	Cytyc	did	not	implement	controls	necessary	to	provide	reasonable	assurance	that	the accounting	for	certain	stock	option	exercise	activity	that	occurred	during	the	period	from	1996	through	2002	was	properly	recorded	in	its	financial	statements	included	in its	2006	Annual	Report	on	Form	10-K,	as	originally	filed,	in	accordance	with	Accounting	Principles	Board	Opinion	No.	25,	Accounting	for	Stock	Issued	to	Employees. To	remedy	the	material	weakness	identified	in	the	Annual	Report	on	Form	10-K/A,	Cytyc	enhanced	its	policies	surrounding	consultations	on	complex	technical accounting	matters	to	include	third-party	subject	matter	experts.

In	the	future,	if	we	fail	to	complete	the	Sarbanes-Oxley	404	evaluation	in	a	timely	manner,	or	if	our	independent	registered	public	accounting	firm	cannot	attest	in a	timely	manner	to	our	evaluation,	we	could	be	subject	to	regulatory	scrutiny	and	a	loss	of	public	confidence	in	our	internal	controls	which	could	adversely	impact	the market	price	of	our	common	stock.	We	or	our	independent	registered	public	accounting	firm	may	identify	material	weaknesses	in	internal	controls	over	financial reporting	which	may	result	in	a	loss	of	public	confidence	in	our	internal	controls	and	adversely	impact	the	market	price	of	our	common	stock.	In	addition,	any	failure	to implement	required,	new	or	improved	controls,	or	difficulties	encountered	in	their	implementation,	could	harm	our	operating	results	or	cause	us	to	fail	to	meet	our reporting	obligations.

# Risks	Related	to	our	Common	Stock

Provisions	in	our	charter	and	bylaws	and	our	stockholder	rights	plan	may	have	the	effect	of	discouraging	advantageous	offers	for	our	business	or	common stock	and	limit	the	price	that	investors	might	be	willing	to	pay	in	the	future	for	shares	of	our	common	stock.

Our	charter,	bylaws	and	the	provisions	of	the	Delaware	General	Corporation	Law	include	provisions	that	may	have	the	effect	of	discouraging	or	preventing	a change	in	control.	In	addition,	we	have	a	stockholder	rights	plan	that	may	have	the	effect	of	discouraging	or	preventing	a	change	in	control.	These	provisions	could	limit the	price	that	our	stockholders	might	receive	in	the	future	for	shares	of	our	common	stock.

# Our	stock	price	is	volatile.

The	market	price	of	our	common	stock	has	been,	and	may	continue	to	be,	highly	volatile.	We	believe	that	a	variety	of	factors	could	cause	the	price	of	our common	stock	to	fluctuate,	perhaps	substantially,	including:

•announcements	and	rumors	of	developments	related	to	our	business,	including	changes	in	reimbursement	rates	or	regulatory	requirements,	proposed	and completed	acquisitions,	or	the	industry	in	which	we	compete;

•published	studies	and	reports	relating	to	the	comparative	efficacy	of	products	and	markets	in	which	we	participate;

•quarterly	fluctuations	in	our	actual	or	anticipated	operating	results	and	order	levels;

•general	conditions	in	the	worldwide	economy;

•announcements	of	technological	innovations;

•new	products	or	product	enhancements	by	us	or	our	competitors;

•developments	in	patents	or	other	intellectual	property	rights	and	litigation;	and

•developments	in	relationships	with	our	customers	and	suppliers.

In	addition,	in	recent	years	the	stock	market	in	general	and	the	markets	for	shares	of	"high-tech"	companies,	have	experienced	extreme	price	fluctuations	which have	often	been	unrelated	to	the	operating	performance	of	affected	companies.	Any	such	fluctuations	in	the	future	could	adversely	affect	the	market	price	of	our common	stock,	and	the	market	price	of	our	common	stock	may	decline.

# Item	1B.				UnresolvedStaff	Comments

# Item	2.				Properties

We	own	and	lease	the	real	property	identified	below.	We	believe	that	we	have	adequate	space	for	our	anticipated	needs	and	that	suitable	additional	space	will	be available	at	commercially	reasonable	prices	as	needed.

# Owned	Real	Property

We	own	an	approximately	168,000	square	foot	research	and	development,	manufacturing	and	administrative	site	in	Newark,	Delaware	at	which	we	conduct	our DirectRay	digital	detector	research	and	development	and	plate	manufacture.	We	currently	occupy	approximately	63,000	square	feet	of	this	building,	which	houses	our plate	manufacturing	facility,	including	both	a	class	1	and	a	class	2	clean	room.	We	lease	approximately	105,000	square	feet	of	the	facility	to	Dade	Behring	under	a	lease which	expires	in	April	2015.	Our	AEG	subsidiary	owns	approximately	180,000	square	foot	facility	in	Warstein,	Germany	which	is	used	for	its	headquarters,	German manufacturing	facility	and	primary	R&D	operation.	Cytyc	owns	approximately	2.7	acres	of	land	and	an	approximately	46,000	square	feet	of	facilities	housing	additional manufacturing	operations	in	Londonderry,	New	Hampshire.

# Leased	Real	Property

In	September	2002,	we	completed	a	sale/leaseback	transaction	for	our	approximately	200,000	square	foot	headquarters	and	manufacturing	facility	located	in Bedford,	Massachusetts	and	our	approximately	62,500	square	foot	LORAD	manufacturing	facility	in	Danbury,	Connecticut.	The	lease	for	these	facilities,	including	the associated	land,	has	a	term	of	20	years,	with	four-five	year	renewal	options.	We	also	sublease	approximately	11,000	square	feet	of	the	Bedford	facility	to	a	subtenant, pursuant	to	a	sublease	which	expires	in	April	2008.

We	also	lease	approximately	60,000	square	feet	of	office	and	manufacturing	space	in	Danbury,	Connecticut	near	our	LORAD	manufacturing	facility.	This	lease expires	in	December	2012.	R2	has	recently	moved	its	offices	and	research	facilities	to	Santa	Clara,	California	where	it	leases	approximately	40,362	square	feet.	Suros leases	approximately	55,091	square	feet	for	offices	and	manufacturing	in	the	Indianapolis,	Indiana	area.	Both	of	these	leases	expire	in	November	2011.	AEG's	Chinese subsidiary	subleases	its	approximately	44,000	square	foot	manufacturing	facility	in	Shanghai	from	Jaiding	Industrial	Zone	Development	(Group)	Co.,	Ltd.	This	sublease expires	in	April	2014.

Cytyc's	executive	offices,	as	well	as	its	administrative,	research,	and	certain	manufacturing	and	distribution	operations	are	located	in	a	facility	consisting	of approximately	216,000	square	feet	in	Marlborough,	Massachusetts	which	is	leased	for	a	term	of	15	years,	beginning	January	2004	with	two	(2)	five-year	options	to extend	the	term	upon	written	notice	to	landlord.	In	July	2006,	Cytyc	entered	into	a	12-year	lease	agreement	for	a	building	with	approximately	146,000	square	feet	also located	in	Marlborough,	Massachusetts,	to	be	principally	used	as	an	additional	manufacturing	facility	beginning	in	the	first	half	of	2007.	Cytyc	is	currently	making significant	renovations	to	this	facility.	Cytyc	has	an	option	to	lease	an	additional	approximately	30,000	square	feet	in	this	facility	in	June	2011.	Cytyc	also	leases	a distribution	facility	consisting	of	approximately	37,000	square	feet	in	Methuen,	Massachusetts.	Cytyc	leases	a	facility	in	Mountain	View,	California	consisting	of approximately	62,000	square	feet.	This	lease	expires	in	August	2012	and	will	remain	in	effect	despite	Cytyc's	2007	consolidation	of	its	Mountain	View	operations	into its	Costa	Rica	and	Massachusetts	operations.	Cytyc's	primary	manufacturing	and	operations	facility	for	the	NovaSure	single-use	devices	consists	of	approximately 26,500	square	feet	in	San	Jose,	Costa	Rica.	The	lease	for	this	facility	expires	in	2008,	with	an	option	to	renew	for	two	additional	five-year	terms.	In	April	2007,	Cytyc entered	into	a	ten	year	lease	for	a	building	with	approximately	164,000	square	feet	located	in	Alajuela,	Costa	Rica,	which	we	are	in	the	process	of	constructing. Following	the	completion	of	this	construction,	we	plan	to	move	our	Costa	Rica	manufacturing	operations	to	this	new	facility.

We	also	lease	several	sales	and	service	offices	throughout	the	world.

In	connection	with	the	financing	for	our	business	combination	with	Cytyc,	we	entered	into	mortgages	for	our	Newark,	Delaware	and	Londonderry,	New Hampshire	properties,	and	leasehold	mortgages	for	our	interests	in	our	Danbury,	Connecticut,	Bedford,	Massachusetts	and	Indianapolis,	Indiana	facilities.

# Item	3.				LegalProceedings

In	March	2005,	we	were	served	with	a	Complaint	filed	on	November	12,	2004,	by	Oleg	Sokolov	with	the	United	States	District	Court	for	the	District	of Connecticut	alleging	that	our	HTC™	grid	infringes	U.S.	Patent	Number	5,970,118.	The	plaintiff	is	seeking	to	preliminarily	and	permanently	enjoin	us	from	infringing the	patent,	as	well	as	damages	resulting	from	the	alleged	infringement,	treble	damages	and	reasonable	attorney	fees,	and	such	other	and	further	relief	as	may	be available.	On	April	25,	2005,	we	filed	an	Answer	and	Counterclaims	in	response	to	the	complaint	in	which	we	denied	the	plaintiff's	allegations	and,	among	other	things, sought	declaratory	relief	with	respect	to	the	patent	claims	and	damages,	as	well	as	other	relief.	On	March	2,	2007	the	Court	granted	summary	judgment	in	our	favor, holding	that	the	patent-in-suit	is	invalid,	and	dismissed	Oleg	Sokolov's	complaint,	thus	leaving	in	the	case	only	our	counterclaims	against	Oleg	Sokolov.	In	a	related matter,	the	United	States	Patent	and	Trademark	Office	decided	in	December	2005	to	re-examine	the	validity	of	Sokolov's	patent,	and	this	case	has	been	stayed	pending completion	of	this	process.	We	do	not	believe	that	we	infringe	any	valid	or	enforceable	patents	of	the	plaintiff.	However,	while	we	intend	to	vigorously	defend	our interests,	ongoing	litigation	can	be	costly	and	time	consuming,	and	we	cannot	guarantee	that	we	will	prevail.	On	October	28,	1998,	the	plaintiff	had	previously	sued Lorad,	asserting,	among	other	things,	that	Lorad	had	misappropriated	the	plaintiff's	trade	secrets	relating	to	the	HTC	Grid.	This	previous	case	was	dismissed	on	August 28,	2000.	The	dismissal	was	affirmed	by	the	Appellate	Court	of	the	State	of	Connecticut,	and	the	United	States	Supreme	Court	refused	to	grant	Certiorari.	Following	the dismissal,	Sokolov	threatened	to	file	further	claims	related	to	the	matter,	and	as	a	result,	we	entered	into	mediation	and	believe	we	reached	a	tentative	oral

settlement	which	is	expected	to	be	finalized	by	a	written	release	and	settlement	agreement.	There	are,	however,	no	assurances	that	a	settlement	will	be	reached.

On	June	16,	2003,	Cytyc	filed	a	suit	for	Declaratory	Judgment	in	United	States	District	Court	for	the	District	of	Massachusetts	asking	the	court	to	determine	and declare	that	certain	of	TriPath	Imaging,	Inc.'s	("TriPath")	patents	are	invalid	and	not	infringed	by	Cytyc's	ThinPrep	Imaging	System.	On	June	17,	2003,	TriPath announced	that	it	had	filed	a	lawsuit	against	Cytyc	in	the	United	States	District	Court	for	the	Middle	District	of	North	Carolina	alleging	patent	infringement,	false advertising,	defamation,	intentional	interference,	unfair	competition,	and	unfair	and	deceptive	trade	practices.	In	its	complaint	TriPath	sought	the	issuance	of	a preliminary	and	permanent	injunction	enjoining	Cytyc	from	infringing	the	asserted	patents	and	to	award	unspecified	damages,	unspecified	treble	damages	and	attorneys' fees,	and	the	impounding	and	destruction	of	the	alleged	infringing	products.	The	non-patent	claims	have	been	dismissed	and	the	patent	cases	have	since	been consolidated	into	a	single	action.	In	October	of	2007,	the	parties	entered	into	a	settlement	agreement.	Under	the	terms	of	the	settlement	agreement,	Cytyc	will	pay TriPath	an	on-going	royalty	for	a	license	under	certain	of	TriPath's	patents.	The	two	parties	have	also	agreed	to	a	non-royalty	bearing	cross-license	of	other	patents	held by	each	company.	The	settlement	agreement	resolves	all	pending	litigation	between	the	parties	and	permits	Cytyc	to	continue	making,	using	and	selling	the	ThinPrep Imaging	System.	We	do	not	believe	that	the	settlement	will	have	a	material	effect	on	our	business,	financial	position	or	results	of	operations.

On	or	about	October	5,	2007,	Ethicon	Endo-Surgery,	Inc.,	a	Johnson	&	Johnson	operating	company,	filed	a	complaint	against	us	and	our	wholly-owned subsidiary	Suros	Surgical	Systems,	Inc.	("Suros")	in	the	United	States	District	Court	for	the	District	of	Ohio.	The	complaint	alleges	that	certain	of	the	ATEC	biopsy systems	manufactured	and	sold	by	Suros	infringe	four	Ethicon	patents.	The	complaint	seeks	to	enjoin	Hologic	and	Suros	from	infringing	the	patents	as	well	as	the recovery	of	damages	and	costs	resulting	from	the	alleged	infringement.	Given	the	early	stage	of	the	litigation,	we	are	unable	to	reasonably	estimate	the	ultimate	outcome of	this	case.

We	are	a	party	to	various	other	legal	proceedings	arising	out	of	the	ordinary	course	of	our	business.	We	believe	that	there	are	no	proceedings	pending	against	us which,	if	determined	adversely,	would	have	a	material	adverse	effect	on	our	financial	condition	or	results	of	operations.

# Item	4.				Submissionof	Matters	to	a	Vote	of	Security	Holders.

A	Special	Meeting	of	Stockholders	(the	"Special	Meeting")	was	held	on	October	18,	2007	at	our	headquarters	located	at	35	Crosby	Drive,	Bedford,

Massachusetts.	At	the	Special	Meeting,	the	stockholders	approved	the	following	proposals	by	the	following	votes:

The	stockholders	approved	an	amendment	and	restatement	of	our	Amended	and	Restated	Certificate	of	Incorporation	to	increase	the	number	of	authorized	shares of	common	stock	from	90,000,000	to	300,000,000.

The	stockholders	approved	the	issuance	of	shares	of	our	common	stock	to	stockholders	of	Cytyc	in	connection	with	the	merger	of	Cytyc	with	and	into	our	wholly owned	subsidiary	Nor'easter	Corp.

The	stockholders	approved	an	amendment	to	our	1999	Equity	Incentive	Plan	to	increase	the	number	of	shares	reserved	for	issuance	thereunder	by	4,000,000

# shares.

The	stockholders	approved	a	proposal	to	adjourn	the	special	meeting,	if	necessary,	to	permit	further	solicitation	of	proxies	if	there	are	not	sufficient	votes	at	the time	of	the	special	meeting	to	approve	the	foregoing	proposals.

# PART	II

# Item	5. Market	for	Registrant's	Common	Equity,	Related	Stockholder	Matters	and	Issuer	Purchases	of	Equity	Securities.

Market	Information.	Our	common	stock	is	traded	on	the	Nasdaq	Global	Select	Market	under	the	symbol	"HOLX."	We	began	trading	on	the	Nasdaq	Global	Select Market	on	July	3,	2006,	and	prior	to	that	traded	on	the	Nasdaq	National	Market.	The	following	table	sets	forth,	for	the	periods	indicated,	the	high	and	low	sales	prices per	share	of	our	common	stock,	as	reported	by	the	Nasdaq	Global	Select	Market	and	the	Nasdaq	National	Market.	This	stock	price	information	has	been	adjusted	to	give effect	for	the	stock	split	effected	on	November	30,	2005.

| Fiscal	Year	Ended	September	30,	2006 | High | Low |
| :--- | :--- | :--- |
| First\tQuarter | $39.90 | $ 25.08 |
| Second\tQuarter | 55.61 | 35.26 |
| Third\tQuarter | 56.71 | 35.36 |
| Fourth\tQuarter | 50.70 | 38.07 |

| Fiscal	Year	Ended	September	29,	2007 | High | Low |
| :--- | :--- | :--- |
| First\tQuarter | $52.34 | $ 41.94 |
| Second\tQuarter | 60.24 | 45.88 |
| Third\tQuarter | 63.18 | 50.96 |
| Fourth\tQuarter | 62.53 | 47.51 |

Number	of	Holders.	As	of	November	20,	2007,	there	were	approximately	1,599	holders	of	record	of	our	common	stock,	including	multiple	beneficial	holders	at depositaries,	banks	and	brokers	listed	as	a	single	holder	in	the	street	name	of	each	respective	depositary,	bank	or	broker.

Dividend	Policy.	We	have	never	declared	or	paid	cash	dividends	on	our	capital	stock	and	do	not	plan	to	pay	any	cash	dividends	in	the	foreseeable	future.	Our current	policy	is	to	retain	all	of	our	earnings	to	finance	future	growth.	In	addition,	our	$2.55	billion	credit	facility	prohibits	us	from	declaring	or	paying	any	cash dividends.

Recent	Sales	of	Unregistered	Securities.	We	did	not	sell	unregistered	securities	during	the	fourth	quarter	of	fiscal	2007.

Issuer's	Purchases	of	Equity	Securities.	We	may	be	deemed	to	have	repurchased	approximately	17,000	shares	of	our	common	stock	to	satisfy	certain	tax withholding	upon	the	distribution	of	escrow	shares	to	former	R2	shareholders.	We	did	not	repurchase	any	other	of	our	equity	securities	during	the	fourth	quarter	of	fiscal 2007.

# Item	6. Selected	Financial	Data.

In	the	fourth	quarter	of	2003,	we	adopted	Emerging	Issues	Task	Force	(EITF)	00-21,	Revenue	Arrangements	with	Multiple	Deliverables,	as	a	cumulative	effect adjustment	for	a	change	in	accounting	principle.	Accordingly,	the	revenue	representing	the	fair	value	of	services	not	performed	at	the	time	of	product	shipment	such	as installation	and	training	are	deferred	and	recognized	as	performed.	In	fiscal	2006	we	acquired	the	intellectual	property	relating	to	Fischer	Imaging	Corporation's mammography	business.	In	fiscal	2006	we	also	acquired	the	entities	of	AEG	Elektrofotografic	(AEG),	R2	Technology,	Inc.	(R2)	and	Suros	Surgical,	Inc.	(Suros).	In	the fourth	quarter	of	fiscal	2007	we	acquired	BioLucent,	Inc.	(Biolucent).	We	used	the	purchase	method	of	accounting	in	accordance	with	SFAS	No.	141,	Business Combinations	to	account	for	acquired	entities.

|  | September	29,<br>2007 | September	30,<br>2006 | September	24,<br>2005 | September	25,<br>2004 | September	27,<br>2003 |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | (In\tthousands,\texcept\tper\tshare\tdata) | (In\tthousands,\texcept\tper\tshare\tdata) |  |  |
| Consolidated\tStatement\tof\tIncome\tData |  |  |  |  |  |
| Revenues: |  |  |  |  |  |
| Product\tsales | $628,854 | $388,111 | $229,075 | $177,936 | $156,734 |
| Service\tand\tother\trevenue | 109,514 | 74,569 | 58,609 | 50,769 | 47,301 |
|  | 738,368 | 462,680 | 287,684 | 228,705 | 204,035 |
| Costs\tand\tExpenses: |  |  |  |  |  |
| Cost\tof\tproduct\tsales | 265,151 | 186,862 | 116,478 | 94,762 | 86,506 |
| Cost\tof\tproduct\tsales—amortization\tof\tintangible\tassets | 11,024 | 4,784 | 911 | 911 | 911 |
| Cost\tof\tservice\tand\tother\trevenue | 116,626 | 77,502 | 58,181 | 48,574 | 43,949 |
| Research\tand\tdevelopment | 44,484 | 28,294 | 18,617 | 16,659 | 18,381 |
| Selling\tand\tmarketing | 84,845 | 55,910 | 34,199 | 31,761 | 29,978 |
| General\tand\tadministrative | 62,902 | 42,551 | 26,667 | 23,452 | 21,285 |
| Amortization\tof\tacquired\tintangible\tassets | 5,584 | 1,631 | — | — | — |
| Net\tgain\ton\tsale\tof\tintellectual\tproperty | — | (5,093) | — | — | — |
| Acquired\tin-process\tresearch\tand\tdevelopment | — | 19,900 | — | — | — |
|  | 590,616 | 412,341 | 255,053 | 216,119 | 201,010 |
| Income\tfrom\toperations | 147,752 | 50,339 | 32,631 | 12,586 | 3,025 |
| Interest\tincome | 2,815 | 4,082 | 2,219 | 540 | 685 |
| Interest/other\texpense | (2,078) | (1,198) | (155) | (199) | (445) |
| Income\tbefore\tprovision\tfor\tincome\ttaxes\tand\tcumulative\teffect\tof |  |  |  |  |  |
| change\tin\taccounting\tprinciple | 148,489 | 53,223 | 34,695 | 12,927 | 3,265 |
| Provision\tfor\tincome\ttaxes | 53,911 | 25,800 | 6,439 | 763 | 176 |
| Income\tbefore\tcumulative\teffect\tof\tchange\tin\taccounting\tprinciple | 94,578 | 27,423 | 28,256 | 12,164 | 3,089 |
| Cumulative\teffect\tof\tchange\tin\taccounting\tprinciple | — | — | — | — | (207) |
| Net\tincome | $94,578 | $27,423 | $28,256 | $12,164 | $2,882 |

|  | September	29,<br>2007 | September	30,<br>2006 | September	24,<br>2005 | September	25,<br>2004 | September	27,<br>2003 |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | (In\tthousands,\texcept\tper\tshare\tdata) |  |  |
| Basic\tincome\tper\tcommon\tand\tcommon\tequivalent\tshare\t(1): |  |  |  |  |  |
| Income\tbefore\tcumulative\teffect\tof\tchange\tin\taccounting\tprinciple | $1.77 | $0.59 | $0.66 | $0.30 | $0.08 |
| Cumulative\teffect\tof\tchange\tin\taccounting\tprinciple | — | — | — | — | (0.01) |
| Net\tincome | $1.77 | $0.59 | $0.66 | $0.30 | $0.07 |
| Diluted\tincome\tper\tcommon\tand\tcommon\tequivalent\tshare\t(1): |  |  |  |  |  |
| Income\tbefore\tcumulative\teffect\tof\tchange\tin\taccounting\tprinciple | $1.72 | $0.56 | $0.63 | $0.29 | $0.08 |
| Cumulative\teffect\tof\tchange\tin\taccounting\tprinciple | — | — | — | — | (0.01) |
| Net\tincome | $1.72 | $0.56 | $0.63 | $0.29 | $0.07 |
| Weighted\taverage\tnumber\tof\tcommon\tshares\toutstanding\t(1):\nBasic | 53,436 | 46,512 | 42,824 | 40,516 | 39,258 |
| Diluted | 54,834 | 48,620 | 45,126 | 42,593 | 40,261 |
| Consolidated\tBalance\tSheet\tData |  |  |  |  |  |
| Working\tcapital | $220,568 | $123,493 | $172,615 | $118,238 | $102,699 |
| Total\tassets | 1,066,349 | 856,205 | 279,839 | 211,751 | 188,603 |
| Line\tof\tcredit | — | 55,000 | — | — | — |
| Long-term\tdebt | 9,222 | 6,163 | — | 472 | 1,550 |
| Total\tstockholders'\tequity | 805,723 | 605,750 | 217,834 | 166,275 | 148,927 |

(1) All	share	and	per	share	data	have	been	retroactively	restated	to	reflect	the	2-for-1	stock	split	effected	on	November	30,	2005.

# Item	7. Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations.

The	following	discussion	and	analysis	should	be	read	in	conjunction	with	the	"Selected	Financial	Data"	and	the	Consolidated	Financial	Statements	included elsewhere	in	this	report	and	the	information	described	under	the	caption	"Risk	Factors"	below.

# CRITICAL	ACCOUNTING	POLICIES

The	discussion	and	analysis	of	our	financial	condition	and	results	of	operations	are	based	upon	our	consolidated	financial	statements,	which	have	been	prepared	in accordance	with	accounting	principles	generally	accepted	in	the	U.S.	The	preparation	of	these	consolidated	financial	statements	requires	us	to	make	estimates	and judgments	that	affect	the	reported	amounts	of	assets,	liabilities,	revenues	and	expenses,	and	related	disclosure	of	contingent	assets	and	liabilities.	On	an	on-going	basis, we	evaluate	our	estimates,	including	those	related	to	revenue	recognition	for	multiple	element	arrangements	and	product	warranties,	accounts	receivable	reserves, inventory	and	related	reserves,	valuations	and	purchase	price	allocations	related	to	business	combinations,	expected	cash	flows	used	to	evaluate	the	recoverability	of long-lived	assets,	estimated	fair	values	of	long-lived	assets	used	to	record	impairment	charges	related	to	intangible	assets	and	goodwill,	amortization	periods,	accrued expenses,	restructuring	and	other	related	charges,	stock-based	compensation,	pension	liabilities,	contingent	liabilities,	and	recoverability	of	our	net	deferred	tax	assets and	related	valuation	allowance.	We	base	our	estimates	on	historical	experience	and	on	various	other	assumptions	that	are	believed	to	be	reasonable	under	the

circumstances,	the	results	of	which	form	the	basis	for	making	judgments	about	the	carrying	values	of	assets	and	liabilities	that	are	not	readily	apparent	from	other sources.	Actual	results	may	differ	from	these	estimates	under	different	assumptions	or	conditions.

We	believe	the	following	critical	accounting	policies	affect	our	more	significant	judgments	and	estimates	used	in	the	preparation	of	our	consolidated	financial statements.

# Inventory

Our	inventories	include	material,	labor	and	overhead,	and	are	stated	at	the	lower	of	cost	(first-in,	first-out)	or	market.	As	a	designer	and	manufacturer	of	high technology	medical	equipment,	we	may	be	exposed	to	a	number	of	economic	and	industry	factors	that	could	result	in	portions	of	our	inventory	becoming	either	obsolete or	in	excess	of	anticipated	usage.	These	factors	include,	but	are	not	limited	to,	technological	changes	in	our	markets,	our	ability	to	meet	changing	customer	requirements, competitive	pressures	on	products	and	prices,	reliability	and	replacement	of	and	the	availability	of	key	components	from	our	suppliers.	Our	policy	is	to	establish inventory	reserves	when	conditions	exist	that	suggest	that	our	inventory	may	be	in	excess	of	anticipated	demand	or	is	obsolete	based	upon	our	assumptions	about	future demand	for	our	products	and	market	conditions.	We	regularly	evaluate	our	ability	to	realize	the	value	of	our	inventory	based	on	a	combination	of	factors	including	the following:	historical	usage	rates,	forecasted	sales	or	usage,	product	end	of	life	dates,	estimated	current	and	future	market	values	and	new	product	introductions. Assumptions	used	in	determining	our	estimates	of	future	product	demand	may	prove	to	be	incorrect,	in	which	case	the	provision	required	for	excess	and	obsolete inventory	would	have	to	be	adjusted	in	the	future.	If	inventory	is	determined	to	be	overvalued,	we	would	be	required	to	recognize	such	costs	as	cost	of	goods	sold	at	the time	of	such	determination.	Although	every	effort	is	made	to	ensure	the	accuracy	of	our	forecasts	of	future	product	demand,	any	significant	unanticipated	changes	in demand	could	have	a	significant	negative	impact	on	the	value	of	our	inventory	and	our	reported	operating	results.	Additionally,	purchasing	requirements	and	alternative usage	avenues	are	explored	within	these	processes	to	mitigate	inventory	exposure.	When	recorded,	our	reserves	are	intended	to	reduce	the	carrying	value	of	our inventory	to	its	net	realizable	value.

Provisions	for	excess	or	obsolete	inventory	are	primarily	based	on	our	estimates	of	forecasted	net	sales	and	service	usage	levels.	A	significant	change	in	the timing	or	level	of	demand	for	our	products	as	compared	to	forecasted	amounts	may	result	in	recording	additional	provisions	for	excess	or	expired	inventory	in	the	future. We	record	provisions	for	excess	or	obsolete	inventory	as	cost	of	sales.

# Accounts	Receivable	Reserves

We	maintain	allowances	for	doubtful	accounts	for	estimated	losses	resulting	from	the	inability	of	our	customers	to	make	required	payments.	We	regularly evaluate	the	collectability	of	our	trade	receivables	based	on	a	combination	of	factors,	which	may	include	dialogue	with	the	customer	to	determine	the	cause	of	non- payment,	the	use	of	collection	agencies,	and/or	the	use	of	litigation.	In	the	event	it	is	determined	that	the	customer	may	not	be	able	to	meet	its	full	obligation	to	us,	we record	a	specific	allowance	to	reduce	the	related	receivable	to	the	amount	that	we	expect	to	recover	given	all	information	present.	We	perform	ongoing	credit	evaluations of	our	customers	and	adjust	credit	limits	based	upon	payment	history	and	our	assessment	of	the	customer's	current	credit	worthiness.	We	continuously	monitor collections	from	our	customers	and	maintain	a	provision	for	estimated	credit	losses	based	upon	our	historical	experience	and	any	specific	customer	collection	issues	that we	have	identified.	While	such	credit	losses	have	historically	been	within	our	expectations	and	the	provisions	established,	we	cannot	guarantee	that	we	will	continue	to experience	the	same	credit	loss	rates	in	the	future.	If	the	financial	condition	of	our	customers	were	to	deteriorate,	resulting	in	an	impairment	of	their	ability	to	make payments,	additional	allowances	may	be	required.

We	also	record	a	provision	for	estimated	sales	returns	and	allowances	on	product	and	service	related	sales	in	the	same	period	as	the	related	revenues	are	recorded. These	estimates	are	based	on	the	specific	facts	and	circumstances	of	particular	orders,	analysis	of	credit	memo	data	and	other	known	factors.	If	the	data	we	use	to 43

calculate	these	estimates	do	not	properly	reflect	reserve	requirements,	then	a	change	in	the	allowances	would	be	made	in	the	period	in	which	such	a	determination	is made	and	revenues	in	that	period	could	be	adversely	affected.

Our	accounts	receivable	reserves	were	$4.6	million,	$3.7	million	and	$2.6	million	in	fiscal	2007,	2006	and	2005,	respectively.	The	increase	in	the	reserves	in fiscal	2006	was	primarily	due	to	the	addition	of	$852,000	of	reserves	as	a	result	of	our	acquisitions	of	AEG,	R2	Technology,	Inc.	and	Suros	Surgical	Systems,	Inc. during	fiscal	2006.	Also	contributing	to	the	increased	reserves,	but	to	a	lesser	extent,	was	our	increase	in	sales	during	fiscal	2006.	The	increase	in	reserves	in	fiscal	2007 was	primarily	due	to	our	increase	in	revenues	during	the	year.	Accounts	receivable	reserve	has	decreased	as	a	percentage	of	sales	as	a	result	of	our	historical	collection experience.

# Valuation	of	Business	Combinations

We	record	tangible	and	intangible	assets	acquired	and	liabilities	assumed	in	recent	business	combinations	under	the	purchase	method	of	accounting.	Amounts paid	for	each	acquisition	are	allocated	to	the	assets	acquired	and	liabilities	assumed	based	on	their	fair	values	at	the	dates	of	acquisition.	We	then	allocate	the	purchase price	in	excess	of	net	tangible	assets	acquired	to	identifiable	intangible	assets	based	on	detailed	valuations	that	use	information	and	assumptions	provided	by management.	We	allocate	any	excess	purchase	price	over	the	fair	value	of	the	net	tangible	and	intangible	assets	acquired	and	liabilities	assumed	to	goodwill.	The valuation	of	purchased	research	and	development	represents	the	estimated	fair	value	at	the	dates	of	acquisition	related	to	in-process	projects.	Our	purchased	research	and development	represents	the	value	of	in-process	projects	that	have	not	yet	reached	technological	feasibility	and	have	no	alternative	future	uses	as	of	the	date	of acquisition.	We	expense	the	value	attributable	to	these	in-process	projects	at	the	time	of	the	acquisition.	If	the	projects	are	not	successful	or	completed	in	a	timely manner,	we	may	not	realize	the	financial	benefits	expected	for	these	projects,	or	for	the	acquisitions	as	a	whole.

We	use	the	income	approach	to	determine	the	fair	values	of	our	purchased	research	and	development.	This	approach	determines	fair	value	by	estimating	the	after- tax	cash	flows	attributable	to	an	in-process	project	over	its	useful	life	and	then	discounting	these	after-tax	cash	flows	back	to	a	present	value.	We	base	our	revenue assumptions	on	estimates	of	relevant	market	sizes,	expected	market	growth	rates,	expected	trends	in	technology	and	expected	product	introductions	by	competitors.	In arriving	at	the	value	of	the	in-process	projects,	we	consider,	among	other	factors,	the	in-process	projects'	stage	of	completion,	the	complexity	of	the	work	completed	as of	the	acquisition	date,	the	costs	already	incurred,	the	projected	costs	to	complete,	the	contribution	of	core	technologies	and	other	acquired	assets,	the	expected introduction	date	and	the	estimated	useful	life	of	the	technology.	We	base	the	discount	rate	used	to	arrive	at	a	present	value	as	of	the	date	of	acquisition	on	the	time	value of	money	and	medical	technology	investment	risk	factors.	For	the	in-process	projects	we	acquired	in	connection	with	our	fiscal	2006	acquisitions,	we	used	risk-adjusted discount	rates	to	discount	our	projected	cash	flows,	ranging	from	14%	to	35%.	We	believe	that	the	estimated	purchased	research	and	development	amounts	so determined	represent	the	fair	value	at	the	date	of	acquisition	and	do	not	exceed	the	amount	a	third	party	would	pay	for	the	projects.	We	did	not	acquire	in-process research	and	development	in	connection	with	the	fiscal	2007	acquisition	of	BioLucent.

We	have	also	used	the	income	approach,	as	described	above,	to	determine	the	estimated	fair	value	of	certain	other	identifiable	intangibles	assets	including developed	technology,	customer	relationships	and	tradenames.	Developed	technology	represents	patented	and	unpatented	technology	and	know-how.	Customer relationships	represent	established	relationships	with	customers,	which	provides	a	ready	channel	for	the	sale	of	additional	products	and	services.	Tradenames	represent acquired	product	names	that	we	intend	to	continue	to	utilize.

# Goodwill	and	Intangible	Assets

Goodwill	and	intangible	assets	that	have	indefinite	useful	lives	are	not	amortized	but	are	evaluated	for	impairment	annually	or	whenever	events	or	changes	in circumstances	indicate	that	the	carrying	value	may	not	be	recoverable.	We	record	intangible	assets	at	historical	cost.	We	amortize	our	intangible	assets	that	have	finite lives	using	either	the	straight-line	method	or	based	on	estimated	future	cash	flows	to	approximate	the	pattern	in	which	the	economic	benefit	of	the	asset	will	be	utilized. Amortization	is	recorded	over	the	estimated	useful	lives

ranging	from	4	to	20	years.	We	review	intangible	assets	subject	to	amortization	quarterly	to	determine	if	any	adverse	conditions	exist	or	a	change	in	circumstances	has occurred	that	would	indicate	impairment	or	a	change	in	the	remaining	useful	life.	Conditions	that	would	indicate	impairment	and	trigger	a	more	frequent	impairment assessment	include,	but	are	not	limited	to,	a	significant	adverse	change	in	legal	factors	or	business	climate	that	could	affect	the	value	of	an	asset,	or	an	adverse	action	or assessment	by	a	regulator.	If	the	carrying	value	of	an	asset	exceeds	its	undiscounted	cash	flows,	we	will	write-down	the	carrying	value	of	the	intangible	asset	to	its	fair value	in	the	period	identified.	We	generally	calculate	fair	value	as	the	present	value	of	estimated	future	cash	flows	to	be	generated	by	the	asset	using	a	risk-adjusted discount	rate.	If	the	estimate	of	an	intangible	asset's	remaining	useful	life	is	changed,	we	will	amortize	the	remaining	carrying	value	of	the	intangible	asset	prospectively over	the	revised	remaining	useful	life.	In	connection	with	sale	of	certain	intellectual	property,	previously	acquired	from	Fischer	to	Siemens	AG,	we	recorded	an impairment	charge	of	approximately	$1.4	million	during	the	fourth	quarter	of	fiscal	2006.	The	impairment	charge	was	the	result	of	a	higher	carrying	value	of	such	assets as	compared	to	their	fair	value.	The	charge	is	a	component	of	the	net	gain	on	sale	of	intellectual	property	of	$5.1	million	and	is	classified	as	part	of	the	mammography segment.

Consistent	with	prior	years,	we	conducted	our	annual	impairment	test	of	goodwill	during	the	second	quarter	of	fiscal	2007.	In	performing	the	test,	we	utilize	the two-step	approach	prescribed	under	FASB	Statement	No.	142,	Goodwill	and	Other	Intangible	Assets.	The	first	step	requires	a	comparison	of	the	carrying	value	of	the reporting	units,	as	defined,	to	the	fair	value	of	these	units.	We	considered	a	number	of	factors	to	determine	the	fair	value	of	a	reporting	unit,	including	an	independent valuation	to	conduct	this	test.	The	valuation	is	based	upon	expected	future	discounted	operating	cash	flows	of	the	reporting	unit	as	well	as	analysis	of	recent	sales	or offerings	of	similar	companies.	If	the	carrying	value	of	a	reporting	unit	exceeds	its	fair	value,	we	will	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	unit's	goodwill	to	its	carrying value.	Since	the	adoption	of	Statement	No.	142,	we	have	not	performed	the	second	step	of	the	impairment	test	because	the	fair	value	of	each	reporting	unit	has	exceeded its	respective	carrying	value.	There	were	no	impairment	indicators	identified	during	the	remainder	of	fiscal	2007	that	required	a	re-assessment	of	the	annual	impairment test.

The	estimate	of	fair	value	requires	significant	judgment.	Any	loss	resulting	from	an	impairment	test	would	be	reflected	in	operating	income	in	our	consolidated statements	of	income.	The	annual	impairment	testing	process	is	subjective	and	requires	judgment	at	many	points	throughout	the	analysis.	If	these	estimates	or	their related	assumptions	change	in	the	future,	we	may	be	required	to	record	impairment	charges	for	these	assets	not	previously	recorded.

# Pension	Liabilities

In	connection	with	our	acquisition	of	AEG,	we	sponsor	defined	benefit	pension	plans	covering	the	employees	of	our	AEG	German	subsidiary.	On	September	29, 2006,	the	FASB	issued	SFAS	No.	158	(SFAS	158),	Employers'	Accounting	for	Defined	Benefit	Pension	and	Other	Post-retirement	Plans,	an	amendment	of	FASB Statements	No.	87,	88,	106	and	132(R).	SFAS	158	requires	an	entity	to	recognize	in	its	statement	of	financial	position	an	asset	for	a	defined	benefit	post-retirement plan's	overfunded	status	or	a	liability	for	a	plan's	underfunded	status,	measure	a	defined	benefit	post-retirement	plan's	assets	and	obligations	that	determine	its	funded status	as	of	the	end	of	the	employer's	fiscal	year,	and	recognize	changes	in	the	funded	status	of	a	defined	benefit	post-retirement	plan	in	comprehensive	income	in	the year	in	which	changes	occur.	SFAS	158	does	not	change	the	amount	of	net	periodic	benefit	cost	included	in	net	income	or	address	the	various	measurement	issues associated	with	post-retirement	benefit	plan	accounting.	As	required	by	SFAS	No.	158,	we	used	a	prospective	approach	in	our	adoption	of	SFAS	No.	158.	As	of September	29,	2007,	we	recognized	the	unfunded	status	of	its	deferred	benefit	pension	plan.	The	adoption	of	SFAS	No.	158	did	not	impact	our	compliance	with	our debt	covenants	under	its	credit	agreements,	cash	position	or	results	of	operations.	As	of	September	29,	2007,	we	have	recorded	a	pension	liability,	based	upon	an actuarial	valuation,	of	approximately	$7.6	million	as	a	component	of	accrued	expenses	in	the	accompanying	consolidated	financial	statements.	The	selection	of	the assumptions	used

to	determine	pension	expense	or	income	involves	significant	judgment.	Our	actuarial	assumptions	and	discount	rate	assumptions	are	considered	the	key	variables	in determining	pension	expense	or	income.	The	discount	rate	assumption	was	determined	by	using	a	model	consisting	of	theoretical	bond	portfolios	that	closely	match	the various	durations	of	that	of	our	pension	liability.	The	discount	rate	assumption	we	used	for	our	German	pension	benefits	plans	was	5.5%.	The	discount	rate	is	dependent on	the	participation	level	of	the	particular	countries	covered	within	the	plans.	Therefore,	the	discount	rate	is	consistent	with	the	fact	that	the	pension	is	100%	German- based.

# Revenue	Recognition

We	recognize	product	revenue	upon	shipment,	provided	that	there	is	persuasive	evidence	of	an	arrangement,	there	are	no	uncertainties	regarding	acceptance,	the sales	price	is	fixed	or	determinable,	no	rights	of	return	exist	and	collection	of	the	resulting	receivable	is	probable.	Generally,	our	product	arrangements	are	multiple element	arrangements,	including	services	such	as	installation	and	training.	Beginning	in	the	fourth	quarter	of	fiscal	2003,	we	began	accounting	for	these	arrangements	in accordance	with	EITF	00-21,	Accounting	for	Revenue	Arrangements	with	Multiple	Deliverables.	Based	on	the	terms	and	conditions	of	the	product	arrangements,	we have	concluded	that	these	services	and	undelivered	products	can	be	accounted	for	separately	from	the	delivered	product	element	as	our	delivered	product	has	value	to our	customers	on	a	stand-alone	basis	and	we	have	objective	and	reliable	evidence	of	the	fair	value	of	such	services	and	undelivered	products.	Accordingly,	service revenue	representing	the	fair	value	of	services	not	yet	performed	at	the	time	of	product	shipment	is	deferred	and	recognized	as	such	services	are	performed.	The	fair value	of	the	undelivered	products	is	also	deferred	at	the	time	of	product	shipment	and	recognized	when	these	products	are	delivered.	The	residual	revenue	under	the product	arrangement	will	be	recognized	as	product	revenue	upon	shipment.	There	are	no	customer	right	of	return	in	our	sales	agreements.

We	recognize	product	revenue	upon	the	completion	of	installation	for	products	whose	installation	is	essential	to	its	functionality,	primarily	related	to	our	digital imaging	systems.	A	provision	is	made	at	that	time	for	estimated	warranty	costs	to	be	incurred.

Service	revenues	primarily	consist	of	amounts	recorded	under	service	and	maintenance	contracts	and	repairs	not	covered	under	warranty,	installation	and	training revenues	and	shipping	and	handling	costs	billed	to	customers.	Service	and	maintenance	contract	revenues	are	recognized	ratably	over	the	term	of	the	contract.	Other service	revenues	are	recorded	when	the	services	are	delivered.

Although	our	products	contain	operating	and	application	software,	we	have	determined	that	for	all	of	our	products,	except	for	those	recently	obtained	with	the acquisition	of	R2	Technology,	Inc.,	the	software	element	is	incidental	in	accordance	with	AICPA	SOP	97-2,	Software	Revenue	Recognition,	(SOP	97-2)	and	EITF	Issue No.	03-05,	Applicability	of	AICPA	Statement	of	Position	97-2	to	Non-Software	Deliverables	in	an	Arrangement	Containing	More-Than-Incidental	Software.

We	have	determined	that	the	provisions	of	SOP	97-2	apply	to	revenue	transactions	for	those	CAD	products	recently	acquired	from	R2	Technology,	Inc.	SOP No.	97-2,	as	amended,	generally	requires	revenue	earned	on	software	arrangements	involving	multiple	elements	to	be	allocated	to	each	element	based	on	the	relative	fair values	of	the	elements.	Revenue	recognized	from	multi-element	arrangements	is	allocated	to	each	element	of	the	arrangement	using	the	residual	method	based	on	the	fair value	of	the	undelivered	elements.	Our	determination	of	fair	value	of	the	undelivered	elements	in	the	multi-element	arrangements	is	based	on	vendor-specific	objective evidence	(VSOE).	We	limit	our	assessment	of	VSOE	for	each	element	to	either	the	price	charged	when	the	same	element	is	sold	separately	or	the	price	established	by management,	having	the	relevant	authority	to	do	so	for	an	element	not	yet	sold	separately.	The	Company	recognizes	revenue	on	CAD	product	sales	upon	completion	of installation	at	which	time	the	only	remaining	undelivered	element	is	post	contract	support.

The	Company	recognizes	revenues	from	maintenance	services	ratably	over	the	term	of	the	maintenance	contract	period	based	on	VSOE	of	fair	value.	VSOE	of fair	value	is	based	upon	the	amount	charged	for	maintenance	when	purchased	separately,	which	is	typically	the	contract's	renewal	rate.	Maintenance	services	are typically	stated	separately	in	an	arrangement.	The	allocated	fair	value	of	revenues	pertaining	to	contractual	maintenance	obligations	are	classified	as	a	current	liability, since	they	are	typically	for	the	twelve-month	period	subsequent	to	the	balance	sheet	date.

For	multi-element	arrangements	where	VSOE	of	fair	value	for	post	contract	support	has	not	been	established,	we	would	recognize	revenue	ratably	over	the contractual	term	of	the	support.	For	multi-element	arrangements	where	VSOE	of	fair	value	of	post	contract	support	has	been	established,	we	recognize	revenue	using	the residual	method	at	the	time	all	other	revenue	recognition	criteria	have	been	met.	Amounts	attributable	to	post	contract	support	are	recorded	as	deferred	revenue	and recognized	ratably	over	the	contractual	term	of	the	support.

In	accordance	with	the	EITF	Issue	No.	00-10,	Accounting	for	Shipping	and	Handling	Fees,	the	Company	classifies	the	reimbursement	by	customers	of	shipping and	handling	costs	as	revenue	and	the	associated	cost	as	cost	of	revenue.	The	Company	also	records	reimbursable	out-of-pocket	expenses	in	both	maintenance	and services	revenues	and	as	a	direct	cost	of	maintenance	and	service	in	accordance	with	EITF	Issue	No.	01-14,	Income	Statement	Characterization	of	Reimbursements Received	for	Out-of-Pocket	Expenses	Incurred	(EITF	01-14).	For	the	fiscal	2007,	2006,	and	2005,	shipping	and	handling	costs	and	reimbursable	out-of-pocket	expenses were	not	material.

# Product	Warranties

Products	sold	are	generally	covered	by	a	warranty	for	a	period	of	one	year.	We	accrue	a	warranty	reserve	at	the	time	of	revenue	recognition	for	estimated	costs	to provide	warranty	services.	Our	estimate	of	costs	to	service	our	warranty	obligations	is	based	on	historical	experience	and	expectation	of	future	conditions.	To	the	extent we	experience	increased	or	decreased	warranty	claim	activity	or	increased	or	decreased	costs	associated	with	servicing	those	claims,	our	warranty	accrual	will	increase	or decrease,	respectively,	resulting	in	decreased	or	increased	gross	profit.	Our	warranty	accrual	was	approximately	$12.1	million,	$9.0	million	and	$6.7	million	in	fiscal 2007,	2006	and	2005,	respectively.	The	increase	in	the	warranty	accrual	in	fiscal	2007	is	primarily	attributable	to	the	increase	in	the	number	of	digital	mammography systems	sold.	The	increase	in	the	warranty	accrual	in	fiscal	2006	is	primarily	attributable	to	an	increase	in	the	number	of	digital	mammography	systems	sold	as	well $941,000	of	acquired	reserve	amounts	as	a	result	of	our	acquisitions	in	fiscal	2006.

# Stock-Based	Compensation

On	December	16,	2004	the	FASB	issued	SFAS	Statement	No.	123(R)	(SFAS	123(R)),	Share-Based	Payment,	which	is	a	revision	of	SFAS	Statement	No.	123 (SFAS	123),	Accounting	for	Stock-Based	Compensation.	SFAS	123(R)	supersedes	APB	Opinion	No.	25	(Opinion	25),	Accounting	for	Stock	Issued	to	Employees,	and amends	SFAS	No.	95,	Statement	of	Cash	Flows.	Generally,	the	approach	under	SFAS	123(R)	is	similar	to	the	approach	described	in	SFAS	123.	However,	SFAS	123(R) requires	all	share-based	payments	to	employees,	including	grants	of	employee	stock	options,	to	be	recognized	in	the	income	statement	based	on	their	fair	values.	Pro forma	disclosure	is	no	longer	an	alternative.

SFAS	123(R)	must	be	adopted	for	fiscal	years	starting	after	June	15,	2005.	As	a	result,	we	have	adopted	SFAS	123(R)	starting	in	our	fiscal	first	quarter	of	2006, which	began	on	September	25,	2005.

As	permitted	by	SFAS	123,	we	historically	accounted	for	share-based	payments	to	employees	using	Opinion	25's	intrinsic	value	method	and,	as	such,	generally recognized	no	compensation	cost	for	employee	stock	options.	We	have	adopted	the	"modified	prospective"	method	alternative	outlined	in	SFAS	123(R).	A	"modified prospective"	method	is	one	in	which	compensation	cost	is	recognized	beginning	with	the	effective	date	(a)	based	on	the	requirements	of	SFAS	123(R)	for	all	share-based payments	granted	after	the	effective	date	and	(b)	based	on	the	requirements	of	SFAS	123	for	all	awards	granted	to	employees	prior	to	the	effective	date	of	SFAS	123(R)

that	remain	unvested	on	the	effective	date.	As	a	result,	we	are	amortizing	the	unamortized	stock-based	compensation	expense	related	to	unvested	option	grants	issued prior	to	the	adoption	of	SFAS	123(R),	whose	fair	value	was	calculated	utilizing	a	Black-Scholes	Option	Pricing	Model.	For	options	granted	after	our	adoption	of	SFAS 123(R),	we	have	elected	to	use	a	bi-nomial	model	to	determine	the	weighted	average	fair	value	of	options,	rather	than	the	Black-Scholes	model,	which	we	had previously	used.	In	addition,	SFAS	123(R)	requires	companies	to	utilize	an	estimated	forfeiture	rate	when	calculating	the	expense	for	the	period,	whereas,	SFAS	123 permitted	companies	to	record	forfeitures	based	on	actual	forfeitures,	which	was	our	historical	policy	under	SFAS	123.	As	a	result,	we	have	applied	an	estimated forfeiture	rate	of	9.4%	in	fiscal	2007	and	a	range	between	9.4%	and	10.6%	in	fiscal	2006,	for	stock	option	awards,	in	determining	the	expense	recorded	in	our consolidated	statement	of	income.	For	further	information	regarding	the	assumptions	we	used	in	determining	our	stock-based	compensation	expense,	see	Note	2	to	our financial	statements.

During	the	year	ended	September	29,	2007	we	recorded	$6.1	million	of	stock-based	compensation	expense	for	employee	equity	awards.	The	stock-based compensation	expense	for	employee	equity	awards	included	$695,000	in	cost	of	revenues,	$828,000	in	research	and	development,	$602,000	in	selling	and	marketing	and $4.0	million	in	general	and	administrative	expense	for	the	year	ended	September	29,	2007.	The	compensation	expense	reduced	both	basic	earnings	per	share	by	$0.07 and	diluted	earnings	per	share	by	$0.08.	In	accordance	with	the	modified-prospective	transition	method	of	SFAS	123(R),	results	for	prior	periods	have	not	been	restated. As	of	September	29,	2007,	there	was	$13.6	million	of	unrecognized	compensation	expense	related	to	non-vested	market-based	stock	option	awards	that	we	expect	to recognize	over	a	weighted-average	period	of	3.09	years.	As	of	September	29,	2007,	there	was	$2.2	million	of	unrecognized	compensation	expense	related	to	non-vested restricted	stock	units	that	we	expect	to	recognize	over	a	weighted	average	period	of	1.6	years

# Income	Taxes

We	account	for	income	taxes	under	Statement	of	Financial	Accounting	Standard	(SFAS)	No.	109,	Accounting	for	Income	Taxes.	This	statement	requires	that	we recognize	a	current	tax	liability	or	asset	for	current	taxes	payable	or	refundable	and	a	deferred	tax	liability	or	asset	for	the	estimated	future	tax	effects	of	temporary differences	and	carry	forwards	to	the	extent	they	are	realizable.	We	record	a	valuation	allowance	to	reduce	our	deferred	tax	assets	to	the	amount	that	is	more	likely	than not	to	be	realized.	While	we	have	considered	future	taxable	income	and	ongoing	prudent	and	feasible	tax	planning	strategies	in	assessing	the	need	for	the	valuation allowance,	in	the	event	we	were	to	determine	that	we	would	be	able	to	realize	our	deferred	tax	assets	in	the	future	in	excess	of	the	net	recorded	amount,	an	adjustment	to the	deferred	tax	asset	would	increase	income	in	the	period	such	determination	was	made.	Likewise,	should	we	determine	that	we	would	not	be	able	to	realize	all	or	part of	our	net	deferred	tax	asset	in	the	future,	an	adjustment	to	the	deferred	tax	asset	would	be	charged	to	income	in	the	period	such	determination	was	made.

In	fiscal	2007,	we	recorded	approximately	$21.9	million	of	tax	benefit	associated	with	deductions	generated	by	excess	stock	based	compensation	deductions expected	to	be	utilized	on	our	fiscal	2007	U.S.	tax	return.	This	full	amount	was	recorded	as	an	increase	to	additional	paid	in	capital.	Additionally,	we	recorded	a	decrease of	approximately	$280,000	to	our	valuation	allowance	against	certain	federal	and	state	net	operating	losses	acquired	in	the	Suros	and	R2	acquisitions	with	a corresponding	reduction	to	goodwill.	The	remaining	change	in	valuation	allowance	is	attributable	to	the	decrease	in	valuation	allowance	on	certain	state	tax	assets generated	through	2007.	We	believe	it	is	more	likely	than	not	that	these	state	tax	assets	will	be	realized.

We	establish	tax	reserves	based	on	our	assessment	of	exposure	associated	with	permanent	tax	differences	and	tax	credits.	These	tax	reserves	are	analyzed periodically	and	adjustments	are	made	as	events	occur	to	warrant	adjustment	to	the	reserve.	Based	on	the	annual	evaluations	of	tax	positions,	we	believe	we	have appropriately	filed	our	tax	returns	and	accrued	for	possible	exposures.	To	the	extent	we	were	to	prevail	in	matters	for	which	accruals	have	been	established	or	be	required to	pay	amounts	in	excess	of	reserves,	our	effective	tax	rate	in	a	given	financial	period	might	be	materially	impacted.	During	the	fourth	quarter	of	fiscal	2005,	we	received notification	that	the	Joint	Committee	on	Taxation	had	no	exceptions	with	the	Internal	Revenue	Service's	conclusions	on	several	tax	returns	under	examination. Therefore,	we	released	$750,000	of	tax	reserves	related	to	these	returns	further	reducing	our	effective	tax	rate	for	fiscal	2005.

# Legal	Contingencies

We	are	currently	involved	in	certain	legal	proceedings.	In	connection	with	these	legal	proceedings,	management	periodically	reviews	estimates	of	potential	costs to	be	incurred	by	us	in	connection	with	the	adjudication	or	settlement,	if	any,	of	these	proceedings.	These	estimates	are	developed	in	consultation	with	outside	counsel and	are	based	on	an	analysis	of	potential	litigation	outcomes	and	settlement	strategies.	In	accordance	with	Financial	Accounting	Standards	Board	(FASB)	Statement No.	5,	Accounting	for	Contingencies,	loss	contingencies	are	accrued	if,	in	the	opinion	of	management,	an	adverse	outcome	is	probable	and	such	outcome	can	be reasonably	estimated.	We	do	not	believe	that	these	proceedings	will	have	a	material	adverse	effect	on	our	financial	position;	however,	it	is	possible	that	future	results	for any	particular	quarter	or	annual	period	may	be	materially	affected	by	changes	in	our	assumptions	or	the	effectiveness	of	our	strategies	relating	to	these	proceedings.

We	are	a	diversified	medical	technologies	company	specializing	in	diagnostic	imaging	products	and	interventional	devices	dedicated	to	serving	the	healthcare needs	of	women.	Historically,	we	have	developed,	manufactured	and	marketed	products	focused	on	mammography,	breast	care	and	osteoporosis	assessment.	In	October 2007,	we	completed	our	business	combination	with	Cytyc,	a	company	that	develops,	manufactures	and	markets	a	complementary	product	line	covering	a	range	of cancers	and	women's	health	indications,	including	cervical	cancer	screening,	prenatal	diagnostics	and	partial	breast	radiation	therapy.	As	a	result	of	our	business combination	with	Cytyc,	we	have	become	one	of	the	largest	companies	in	the	world	focused	on	creating	innovative	and	clinically	effective	advanced	technologies	in women's	health.

Our	mammography/	breast	care	products	include	a	broad	product	line	of	breast	imaging	and	related	products,	including	film-based	and	digital	mammography systems,	computer-aided	detection	(CAD),	breast	biopsy	systems	and	MammoPad	breast	cushions.	These	products	are	inclusive	of	those	acquired	from	R2	and	Suros	in fiscal	2006	and	BioLucent	in	fiscal	2007.	Beginning	in	fiscal	2006,	we	have	combined	our	digital	detector	business	with	our	mammography	operating	segment	to	better reflect	how	we	view	our	operations	and	manage	our	business.	Our	digital	detector	products	are	a	digital	component	for	our	digital	mammography	equipment	and,	to	a much	lesser	extent,	are	a	digital	component	for	original	equipment	manufacturers	to	incorporate	into	their	own	equipment.	Our	osteoporosis	assessment	products primarily	consist	of	dual-energy	X-ray	bone	densitometry	systems	and,	to	a	lesser	extent,	an	ultrasound-based	osteoporosis	assessment	product.	Our	other	business segment	includes	our	mini	C-arm,	extremity	MRI,	conventional	general	radiography	service,	digital	general	radiography	systems	and	AEG	photoconductor	materials businesses.	In	fiscal	2008	we	expect	that	our	reporting	segments	will	be	reconfigured	to	reflect	the	inclusion	of	Cytyc	and	the	integration	of	our	combined	businesses.

# ACQUISITIONS

# Fiscal	2008	Acquisition:

# Cytyc	Corporation

On	October	22,	2007	we	completed	the	merger	with	Cytyc	Corporation	(Cytyc)	pursuant	to	Agreement	and	Plan	of	Merger	(Merger	Agreement)	entered	into	on May	20,	2007	(the	Merger).	Under	the	terms	and	conditions	of	the	Merger	Agreement,	at	the	effective	time	of	the	merger,	each	share	of	common	stock	of	Cytyc,	issued and	outstanding	immediately	prior	to	the	closing	was	cancelled	and	converted	into	the	right	to	receive	(i)	0.52	shares	of	common	stock	of	Hologic	and	(ii)	$16.50	in cash.	The	purchase	price	for	the	transaction,	exclusive	of	certain	merger-related	costs	and	expenses,	in	the	aggregate	is	approximately	$6.2	billion.	As	of	September	29, 2007,	we	capitalized	a	total	of	$6.4	million	of	direct	acquisitions	costs,	which	are	included	in	other	long	term	assets	in	the	accompanying	Consolidated	Balance	Sheet.

Cytyc,	headquartered	in	Marlborough,	Massachusetts,	is	a	diversified	diagnostic	and	medical	device	company	that	designs,	develops,	manufactures,	and	markets innovative	and	clinically	effective	diagnostic	and

surgical	products.	Cytyc	products	cover	a	range	of	cancer	and	women's	health	applications,	including	cervical	cancer	screening,	treatment	of	excessive	menstrual bleeding,	radiation	treatment	of	early-stage	breast	cancer,	and	the	assessment	of	the	risk	of	pre-term	birth.

Under	the	Merger	Agreement,	Cytyc	shareholders	received	an	aggregate	of	approximately	67,300,000	shares	of	Hologic	common	stock	and	approximately	$2.1 billion	in	cash,	assuming	the	conversion	of	all	Cytyc's	outstanding	convertible	notes.	Through	October	22,	2007,	$176.7	million	of	the	$250.0	million	convertible	notes had	been	converted	into	cash	and	Hologic's	common	stock	with	$73.3	million	remaining.	We	expect	substantially	all	of	the	remainder	to	convert	by	the	end	of	our	first quarter	of	fiscal	2008.	In	connection	with	the	Merger,	we	entered	into	a	credit	agreement	relating	to	a	senior	secured	credit	facility	(Credit	Agreement)	with	Goldman Sachs	Credit	Partners	L.P.	and	certain	other	lenders,	in	which	the	lenders	committed	to	provide,	in	the	aggregate,	senior	secured	financing	of	up	to	approximately	$2.55 billion	to	pay	for	the	cash	portion	of	the	merger	consideration,	for	repayment	of	existing	debt	of	Cytyc,	for	expenses	relating	to	the	merger	and	for	working	capital following	the	completion	of	the	merger.	As	of	the	closing	of	the	merger	we	borrowed	$2.35	billion	under	the	credit	facility.

The	estimated	aggregate	purchase	price	of	approximately	$6.2	billion	includes	$2.1	billion	in	cash,	67,300,000	shares	of	Hologic	common	stock	at	an	estimated fair	value	of	$3.7	billion;	approximately	8.2	million	of	fully	vested	stock	options	granted	to	Cytyc	employees	at	an	estimated	fair	value	of	approximately	$246	million; and	approximately	$41.7	million	of	direct	acquisition	costs.	There	are	no	potential	contingent	consideration	payable	to	the	former	Cytyc	shareholders	in	connection	with this	transaction.

Our	business	combination	with	Cytyc	will	be	accounted	for	using	the	purchase	method	of	accounting.	In	accordance	with	SFAS	141,	we	are	considered	to	be	the acquirer	of	Cytyc	for	accounting	purposes.	This	means	that	the	total	purchase	price	will	be	allocated	to	the	assets	acquired	and	liabilities	assumed	from	Cytyc	based	on our	estimate	of	their	fair	values	as	of	the	date	of	the	completion	of	the	merger,	and	any	excess	of	purchase	price	over	those	fair	values	will	be	recorded	as	goodwill. Cytyc's	revenues	and	operating	income	for	the	nine	months	ended	September	30,	2007	were	$545.4	million,	and	$74.5	million,	respectively,	and	for	its	fiscal	year	ended December	31,	2006	were	$608.3	million,	and	$201.7	million,	respectively.	Cytyc's	results	for	the	nine	months	ended	September	30,	2007	included	charges	of approximately	$11.6	million	related	to	a	litigation	settlement	and	costs	associated	with	our	business	combination.	During	the	nine	months	ended	September	30,	2007, Cytyc's	net	cash	provided	by	operating	activities	was	approximately	$144.2	million.	During	this	period,	changes	in	Cytyc's	assets	and	liabilities,	excluding	the	effects	of acquisitions,	used	$36.6	million	of	cash,	including	an	increase	in	accounts	receivable	of	$15.8	million	and	a	decrease	in	accrued	expenses	of	$20.7	million.	Our	reported financial	condition	and	results	of	operations	issued	for	periods	ending	after	completion	of	the	merger	will	reflect	the	fair	value	of	acquired	tangible	and	intangible	assets and	liabilities	assumed	and	results	of	operations	after	completion	of	the	merger,	but	will	not	be	restated	retroactively	to	reflect	the	historical	financial	position	or	results of	operations	of	Cytyc.	Following	the	completion	of	the	merger,	our	earnings	will	also	reflect	purchase	accounting	adjustments,	such	as	increased	amortization	and	other expense	for	the	acquired	tangible	and	intangible	assets	of	Cytyc,	as	well	as	the	interest	on	the	funds	we	borrowed	to	complete	the	merger.	More	detailed	information concerning	our	preliminary	estimates	of	the	fair	value	of	assets	acquired	and	liabilities	assumed	in	the	Cytyc	merger,	as	well	as	supplemental	pro	forma	information relating	to	that	merger,	is	set	forth	in	Note	19	to	our	consolidated	financial	statements.

# BioLucent,	Inc.

On	September	18,	2007	we	completed	the	acquisition	of	Biolucent,	Inc.	(Biolucent)	pursuant	to	a	definitive	agreement	dated	June	20,	2007.	The	results	of operations	for	Biolucent	have	been	included	in	the	Company's	consolidated	financial	statements	from	the	date	of	acquisition	as	part	of	its	Mammography/Breastcare business	segment.

BioLucent,	previously	located	in	Aliso	Viejo,	California,	develops,	markets	and	sells	the	MammoPad	breast	cushion,	to	decrease	the	discomfort	associated	with mammography.	BioLucent's	primary	research	and	development	efforts	are	directed	at	its	brachytherapy	business	which	is	focused	on	breast	cancer	therapy.	Prior	to	the acquisition,	BioLucent	spun-off	its	brachytherapy	technology	and	business	to	the	holders	of	BioLucent's	outstanding	shares	of	capital	stock.	As	a	result	we	only acquired	BioLucent's	MammoPad	business	and	related	assets.	We	invested	$1	million	directly	in	the	spun-off	brachytherapy	business	in	exchange	for	shares	of	preferred stock	issued	by	the	new	business,	representing	less	than	20%	ownership.

The	aggregate	purchase	price	for	BioLucent	was	approximately	$73.2	million	consisting	of	approximately	$6.8	million	in	cash	and	1,157,000	shares	of	Hologic Common	Stock	valued	at	approximately	$63.2	million,	repayment	of	outstanding	debt	of	BioLucent	of	approximately	$1.6	million	and	approximately	$1.6	million	for acquisition	related	fees	and	expenses.	The	Company	determined	the	fair	value	of	the	shares	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.

The	acquisition	also	provides	for	up	to	two	annual	earn	out	payments	not	to	exceed	$15	million	in	the	aggregate	based	on	BioLucent's	achievement	of	certain revenue	targets.	We	have	considered	the	provision	of	EITF	Issue	No.	95-8,	Accounting	for	Contingent	Consideration	Paid	to	the	Shareholders	of	and	Acquired Enterprise	in	a	Purchase	Business	Combination,	and	concluded	that	this	contingent	consideration	represents	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.	The	final	purchase	allocations	will	be	completed	within	one	year	of	the acquisition	and	any	adjustments	are	not	expected	to	have	a	material	impact	on	our	financial	position	or	results	of	operations.

# Fiscal	2006	Acquisitions:

# Fischer	Imaging

On	September	29,	2005,	we	acquired	intellectual	property	relating	to	Fischer	Imaging	Corporation's	mammography	business	and	products,	including	the intellectual	property	relating	to	its	Mammotest	prone	breast	biopsy	and	Senoscan	digital	mammography	systems.	The	purchase	price	for	the	intellectual	property	was	$32 million,	approximately	$26.9	million	of	which	was	paid	out	of	existing	cash	with	the	remaining	amount	paid	through	the	cancellation	of	the	principal	and	interest outstanding	under	a	$5	million	secured	loan	we	previously	provided	to	Fischer	Imaging	on	June	22,	2005.	We	incurred	a	charge	of	approximately	$4.2	million	to	write off	in-process	research	and	development	in	the	first	quarter	of	fiscal	2006.	As	a	result	of	the	FTC	investigation	in	the	fourth	quarter	of	2006,	we	sold,	to	Siemens	AG	for a	cash	payment	of	$6.5	million,	all	of	the	intellectual	property	we	acquired	from	Fischer	relating	to	the	Mammotest	system,	subject	to	our	retention	of	a	royalty-free,	non- exclusive,	perpetual,	irrevocable,	worldwide	right	and	license	to	use	that	intellectual	property.	In	connection	with	this	sale	we	recorded	an	impairment	charge	of approximately	$1.4	million	and	a	resulting	net	gain	of	approximately	$5.1	million	from	the	proceeds	on	the	sale	during	the	fourth	quarter	of	fiscal	2006.

# AEG	Elektrofotografie

On	May	2,	2006,	we	acquired	AEG	Elektrofotografie	and	its	group	of	related	companies.	AEG	was	a	privately	held	group	of	companies	headquartered	in Warstein,	Germany,	with	manufacturing	operations	in	Germany,	China	and	U.S.	AEG	specializes	in	the	manufacture	of	photoconductor	materials	for	use	in	a	variety	of electro	photographic	applications,	including	for	the	coating	of	our	digital	detectors.	The	acquisition	of	AEG	allows	us	to	have	control	over	this	critical	step	in	our detector	manufacturing	process,	which	should	allow	us	to	more	efficiently	manage	our	supply	chain	and	improve	manufacturing	margins.	Our	acquisition	of	AEG should	also	facilitate	further	manufacturing	efficiencies	and	accelerate	research	and	development	of	new	detector	products.	The	results	of	AEG	operations	have	been included	in	our	consolidated	financial	statements	since	the	date	of	acquisition	and	is	a	component	of	our	other	business	segment.

The	aggregate	purchase	price	for	AEG	was	approximately	$31.3	million	(subject	to	adjustment)	consisting	of	EUR	24.1	and	110,000	shares	of	our	common	stock valued	at	$5.3	million,	and	approximately	$1.9	million	for	acquisition	related	fees	and	expenses.

The	acquisition	also	provided	for	a	one-year	earn	out	of	EUR	1.7	million	(approximately	$2.0	million	USD)	which	was	payable	in	cash	if	AEG	calendar	year	2006 earnings,	as	defined,	exceeded	a	pre-determined	amount.	AEG's	earnings	did	not	exceed	such	pre-determined	amount	and	no	payment	was	made.

We	finalized	and	implemented	a	plan	to	restructure	certain	of	AEG's	historical	activities.	We	recorded	a	liability	of	approximately	$1.9	million	in	accordance with	EITF	Issue	No.	95-3,	Recognition	of	Liabilities	in	Connection	with	a	Purchase	Business	Combination,	related	to	the	termination	of	certain	employees	under	this plan	and	all	amounts	have	been	paid	as	of	September	29,	2007.

As	part	of	the	purchase	price	allocation,	all	intangible	assets	that	were	a	part	of	the	acquisition	were	identified	and	valued.	It	was	determined	that	only	customer lists,	tradenames,	developed	technology	and	in-process	research	and	development	had	separately	identifiable	values.	The	fair	value	of	these	intangible	assets	was determined	through	the	application	of	the	income	approach.	Customer	lists	represent	customer	relationships	as	AEG	has	a	high	dependency	on	a	small	number	of	large accounts.	AEG	markets	its	products	through	distributors	as	well	as	directly	to	its	own	customers.	Trademarks	represent	the	AEG	product	names	that	the	we	intend	to continue	to	use.	Developed	technology	represents	currently	marketable	purchased	products	that	the	we	will	continue	to	resell	as	well	as	utilize	to	enhance	and incorporate	into	our	existing	products.	The	intangible	assets	are	expected	to	be	amortized	on	a	straight-line	basis	over	the	expected	useful	lives	as	the	anticipated undiscounted	cash	flows	are	relatively	consistent	over	the	expected	useful	lives	of	the	intangible	assets.

The	estimated	$600,000	of	purchase	price	allocated	to	in-process	research	and	development	projects	related	to	AEG's	Organic	Photoconductor	Coating	and Selenium	product	lines.

# R2	Technology

On	July	13,	2006,	we	completed	the	acquisition	of	R2	Technology,	Inc.	R2	Technology	then	located	in	Sunnyvale,	California,	develops	and	sells	computer-aided detection	technology	and	products	(CAD),	an	innovative	technology	that	assists	radiologists	in	the	early	detection	of	breast	cancer.	The	aggregate	purchase	price	for	R2 of	approximately	$220.6	million	(subject	to	adjustment)	consisted	of	4.4	million	shares	of	our	common	stock	valued	at	$205.5	million,	cash	paid	of	$6.9	million,	debt assumed	of	$5.7	million	and	approximately	$2.5	million	for	acquisition	related	fees	and	expenses.	The	results	of	operations	for	R2	have	been	included	in	our consolidated	financial	statements	from	the	date	of	acquisition	as	part	of	our	mammography	business	segment.

We	implemented	and	finalized	a	plan	to	restructure	certain	of	R2's	historical	activities.	We	recorded	a	liability	of	approximately	$798,000	in	accordance	with EITF	Issue	No.	95-3,	Recognition	of	Liabilities	in	Connection	with	a	Purchase	Business	Combination,	related	to	the	termination	of	certain	employees	and	a	loss	related to	the	abandonment	of	certain	lease	space	under	this	plan.	All	amounts	related	to	these	liabilities	have	been	paid	as	of	September	29,	2007.	We	reduced	goodwill	related to	the	R2	acquisition	in	the	amount	of	$400,000	during	the	year	ended	September	29,	2007.	The	reduction	was	primarily	related	to	a	change	in	the	preliminary	valuation of	certain	assets	and	liabilities	acquired	based	on	information	received	during	the	year.	The	final	purchase	price	allocations	were	completed	within	one	year	of	the acquisition	and	the	adjustments	did	not	have	a	material	impact	on	our	financial	position	or	results	of	operation.	There	have	been	no	other	material	changes	to	the purchase	price	allocation	as	disclosed	in	our	Form	10-K	for	the	year	ended	September	30,	2006.

As	part	of	the	purchase	price	allocation,	all	intangible	assets	that	were	a	part	of	the	acquisition	were	identified	and	valued.	It	was	determined	that	only	customer relationships,	tradenames,	developed	technology,	and	in-process	research	and	development	had	separately	identifiable	values.	Customer	relationships	represent	R2's

strong	active	customer	base,	dominant	market	position	and	strong	partnership	with	several	large	companies.	Trademarks	represent	the	R2	product	names	that	we	intend to	continue	to	use.	Developed	technology	represents	currently	marketable	purchased	products	that	we	will	continue	to	resell	as	well	as	utilize	to	enhance	and	incorporate into	our	existing	products.

The	estimated	$10.2	million	of	purchase	price	allocated	to	in-process	research	and	development	projects	primarily	related	to	R2's	Digital	CAD	products.	The projects	added	direct	digital	algorithm	capabilities	as	well	as	a	new	platform	technology	to	analyze	images	and	breast	density	measurement.	The	projects	were substantially	completed	as	planned	during	fiscal	2007.

# Suros	Surgical	Systems

On	July	27,	2006,	we	completed	the	acquisition	of	Suros	Surgical	Systems,	Inc.	Suros	Surgical,	located	in	Indianapolis,	Indiana,	develops,	manufactures	and	sells minimally	invasive	interventional	breast	biopsy	technology	and	products	for	biopsy,	tissue	removal	and	biopsy	site	marking.	The	initial	purchase	price	for	Suros	was approximately	$248.1	million	paid	in	a	combination	of	cash	and	2.3	million	shares	of	our	common	stock.	The	common	stock	value	of	approximately	$106.5	million, cash	paid	of	$139	million	inclusive	of	certain	liabilities	assumed,	and	approximately	$2.6	million	for	acquisition	related	fees	and	expenses	resulted	in	an	aggregate purchase	price	of	approximately	$248.1	million.	The	results	of	operations	for	Suros	have	been	included	in	our	consolidated	financial	statements	from	the	date	of acquisition	as	part	of	our	mammography	business	segment.

The	acquisition	also	provides	for	a	two-year	earn-out.	The	earn-out	is	payable	in	two	annual	cash	installments	equal	to	the	incremental	revenue	growth	in	Suros' business	in	the	two	years	following	the	closing.	We	have	considered	the	provisions	of	EITF	Issue	No.	95-8,	Accounting	for	Contingent	Consideration	Paid	to	the Shareholders	of	and	Acquired	Enterprise	in	a	Purchase	Business	Combination,	and	concluded	that	this	contingent	consideration	represents	additional	purchase	price. Goodwill	was	increased	by	$19.0	million	during	fiscal	2007	as	a	result	of	payment	made	related	to	the	incremental	revenue	growth	of	Suros'	business	in	the	first	year following	the	closing.	In	addition,	goodwill	will	be	increased	by	the	amount	of	the	additional	consideration	for	the	incremental	revenue	growth	in	year	two,	if	any,	when it	becomes	due	and	payable.

As	part	of	the	purchase	price	allocation,	all	intangible	assets	that	were	a	part	of	the	acquisition	were	identified	and	valued.	It	was	determined	that	only	customer relationships,	tradenames,	developed	technology	and	in-process	research	and	development	had	separately	identifiable	values.	Customer	relationships	represent	Suros' large	installed	base	that	are	expected	to	purchase	disposable	products	on	a	regular	basis.	Trademarks	represent	the	Suros	product	names	that	we	intend	to	continue	to	use. Developed	technology	represents	currently	marketable	purchased	products	that	the	Company	continues	to	sell	as	well	as	utilize	to	enhance	and	incorporate	into	our existing	products.

The	estimated	$4.9	million	of	purchase	price	allocated	to	in-process	research	and	development	projects	primarily	related	to	Suros'	disposable	products.	The projects	were	at	various	stages	of	completion	and	include	next	generation	handpiece	and	site	marker	technologies.	The	Company	has	continued	to	work	on	these	projects and	expects	they	will	be	completed	during	fiscal	2008.

We	had	existing	relationships	with	each	of	AEG,	R2	and	Suros	as	suppliers	of	inventory	items.	The	supply	agreements	were	entered	into	in	prior	years	at	arm's length	terms	and	conditions.	No	minimum	purchase	requirements	existed	and	the	pricing	was	consistent	with	other	vendor	agreements.

# RESULTS	OF	OPERATIONS

The	following	table	sets	forth,	for	the	periods	indicated,	the	percentage	of	total	revenues	represented	by	items	as	shown	in	our	consolidated	statements	of	income.

All	dollar	amounts	in	tables	are	presented	in	thousands.

|  | September	29,<br>2007 | September	30,<br>2006 | September	24,<br>2005 |
| :--- | :--- | :--- | :--- |
| Revenues: |  |  |  |
| Product\tsales | 85.2% | 83.9% | 79.6% |
| Service\tand\tother\trevenue | 14.8 | 16.1 | 20.4 |
|  | 100.0 | 100.0 | 100.0 |
| Costs\tand\texpenses: |  |  |  |
| Cost\tof\tproduct\tsales | 35.9 | 40.4 | 40.5 |
| Cost\tof\tproduct\tsales—amortization\tof\tintangible\tassets | 1.5 | 1.0 | 0.3 |
| Cost\tof\tservice\tand\tother\trevenue | 15.8 | 16.8 | 20.2 |
| Research\tand\tdevelopment | 6.0 | 6.1 | 6.5 |
| Selling\tand\tmarketing | 11.5 | 12.1 | 11.9 |
| General\tand\tadministrative | 8.5 | 9.2 | 9.3 |
| Amortization\tof\tacquired\tintangibles | 0.8 | 0.3 | — |
| Net\tgain\ton\tsale\tof\tintellectual\tproperty | — | (1.1) | — |
| Acquired\tin-process\tresearch\tand\tdevelopment | — | 4.3 | — |
|  | 80.0 | 89.1 | 88.7 |
| Income\tfrom\toperations | 20.0 | 10.9 | 11.3 |
| Interest\tincome | 0.4 | 0.9 | 0.8 |
| Interest/other\texpense | (0.3) | (0.3) | (0.1) |
| Income\tbefore\tincome\ttaxes | 20.1 | 11.5 | 12.0 |
| Provision\tfor\tincome\ttaxes | 7.3 | 5.6 | 2.2 |
| Net\tincome | 12.8% | 5.9% | 9.8% |

# Fiscal	Year	Ended	September	29,	2007	Compared	to	Fiscal	Year	Ended	September	30,	2006

# Product	Sales.

|  |  |  | Years	Ended |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | September\t29,\t2007 | September\t29,\t2007 | September\t30,\t2006 | September\t30,\t2006 | Change | Change |
|  | Amount | %\tof\tTotal\nRevenue | Amount | %\tof\tTotal\nRevenue | Amount | % |
| Product\tSales |  |  |  |  |  |  |
| Mammography/\tBreast\tCare | $510,793 | 69% | $292,773 | 63% | $218,020 | 74% |
| Osteoporosis\tAssessment | $44,828 | 6% | $59,678 | 13% | $(14,850) | (25%) |
| Other | $73,233 | 10% | $35,660 | 8% | $37,572 | 105% |
|  | $628,854 | 85% | $388,111 | 84% | $240,742 | 62% |

In	fiscal	2007	our	product	sales	increased	62%	compared	to	fiscal	2006	primarily	due	to	an	increase	in	revenues	from	our	mammography/breast	care	products,	led by	an	increase	in	the	number	of	Selenia	digital	mammography	systems	sold,	and	to	a	lesser	extent,	increased	breast	biopsy	sales	from	Suros,	acquired	in	the	fourth quarter	of	fiscal	2006.	Also	contributing	to	the	increase	was	an	increase	in	our	other	product	sales,	primarily	attributable	to	the	inclusion	for	the	full	year	of	sales	from AEG,	acquired	during	the	third	quarter	of	fiscal	2006	and	an	increase	in	sales	of	mini	C-arm	systems.	Partially	offsetting	these	increases	was	a	decrease	in	osteoporosis assessment	sales	in	fiscal	2007.

Mammography/Breast	Care	product	sales	increased	74%	in	fiscal	2007	compared	to	fiscal	2006	primarily	due	to	a	$178.0	million	increase	in	digital mammography	system	sales,	an	increase	of	$50.1	million	in	breast	biopsy	device	sales	from	Suros	and	a	$8.4	million	increase	in	CAD	product	sales	from	R2.	Suros	and R2	are	entities	we	acquired	in	the	fourth	quarter	of	fiscal	2006.	Prior	to	our	acquisition	of	R2	we	had	sold	CAD	products	together	with	our	digital	mammography systems,	primarily	from	R2	as	a	distributor.	The	increase	in	CAD	product	sales	represents	the	additional	CAD	sales	made	without	our	digital	mammography	systems. These	increases	were	partially	offset	by	an	$8.6	million	decrease	in	MultiCare	stereotactic	table	sales	and	an	$8.3	million	decrease	in	analog	mammography	systems sales.	The	increase	in	our	digital	mammography	product	sales	was	primarily	attributable	to	an	increase	in	the	number	of	Selenia	systems	and	related	components	sold, primarily	in	the	United	States.	In	fiscal	2007,	we	sold	1,189	digital	mammography	systems	compared	to	555	systems	in	fiscal	2006.	This	revenue	was	partially	offset	by a	decrease	in	average	selling	prices	primarily	attributable	to	increased	competition,	higher	dealer	sales,	changes	in	product	configuration	and	increased	multi-system sales.	We	attribute	the	increase	in	digital	mammography	system	sales	primarily	to	the	growing	acceptance	of	our	Selenia	mammography	system	and	of	digital mammography	in	general.	The	decrease	in	MultiCare	stereotactic	tables	was	primarily	attributable	to	a	decrease	in	the	number	of	systems	sold	worldwide	in	the	current fiscal	year	compared	to	fiscal	2006	due	in	part	to	higher	demand	in	2006	related	to	increased	sales	activity	following	our	acquisition	of	Fischer's	mammography intellectual	property	in	September	2005	and,	to	a	lesser	extent,	a	decrease	in	average	selling	prices	primarily	in	the	United	States.	The	decrease	in	sales	of	our	analog mammography	systems	was	primarily	attributable	to	a	decrease	in	the	number	of	systems	sold	worldwide	and,	to	a	lesser	extent,	a	decrease	in	average	selling	prices.	We believe	that	this	decrease	in	analog	system	sales	was	primarily	due	to	the	shift	in	product	sales	to	digital	systems.	We	expect	sales	for	analog	systems	to	continue	to decrease	in	fiscal	2008.

Osteoporosis	assessment	product	sales	decreased	25%	in	fiscal	2007	compared	to	fiscal	2006.	This	decrease	was	primarily	due	to	a	$13.9	million	decrease	in product	sales	in	the	United	States	primarily	due	to	a	decrease	in	the	number	of	bone	densitometry	systems	sold	and,	to	a	lesser	extent,	a	decrease	in	the	average	selling prices.	We	believe	this	decrease	in	our	domestic	unit	sales	reflect	a	decline	in	market	conditions	due	to	a	reduction	in	reimbursement	for	osteoporosis	assessment	exams.

Other	product	sales	increased	105%	in	fiscal	2007	compared	to	fiscal	2006.	This	increase	was	primarily	due	to	the	addition	of	$29.6	million	of	sales	from	AEG, acquired	during	the	third	quarter	of	fiscal	2006,	and	an	$8.7	million	increase	in	our	mini	C-arm	system	sales.	The	increase	in	mini	C-arm	revenue	is	primarily	the	result of	an	increase	in	the	number	of	systems	sold	in	the	United	States	and	Europe.

In	fiscal	2007,	approximately	75%	of	product	sales	were	generated	in	the	United	States,	15%	in	Europe,	5%	in	Asia,	and	5%	in	other	international	markets.	In fiscal	2006,	approximately	72%	of	product	sales	were	generated	in	the	United	States,	17%	in	Europe,	7%	in	Asia,	and	4%	in	other	international	markets.	We	believe	the higher	growth	in	sales	dollars	to	the	United	States	market	is	primarily	due	to	an	increase	in	demand	for	our	Selenia	digital	mammography	system	as	adoption	of	digital mammography	is	occurring	at	an	increased	rate	in	the	United	States	as	compared	to	international	markets.

# Service	and	Other	Revenue.

|  |  |  | Years	Ended |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | September\t29,\t2007 | September\t29,\t2007 | September\t30,\t2006 | September\t30,\t2006 | Change | Change |
|  |  | %\tof\tTotal |  | %\tof\tTotal |  |  |
|  | Amount | Revenue | Amount | Revenue | Amount | % |
| Service\tand\tOther\tRevenue | $109,514 | 15% | $74,569 | 16% | $34,945 | 47% |

Service	and	other	revenue	is	primarily	comprised	of	revenue	generated	from	our	field	service	organization	to	provide	ongoing	service,	installation	and	repair	of our	products.	Service	and	other	revenue	increased	47%	in	fiscal	2007	compared	to	fiscal	2006.	This	increase	was	primarily	due	to	an	increase	in	service	contract	revenues

of	$30.7	million	from	an	increase	in	the	number	of	service	contracts	sold	and,	to	a	lesser	extent,	an	increase	of	$3.1	million	in	training	revenues	in	our mammography/breast	care	segment.	We	believe	that	these	increases	reflect	the	continued	growth	in	our	installed	base	of	products,	especially	Selenia,	and	from	the addition	of	service	and	other	revenues	from	R2	and	Suros	which	we	acquired	in	the	fourth	quarter	of	fiscal	2006.

# Cost	of	Product	Sales.

|  |  |  | Years	Ended |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | September\t29,\t2007 | September\t29,\t2007 | September\t30,\t2006 | September\t30,\t2006 | Change | Change |
|  |  | %\tof\tProduct |  | %\tof\tProduct |  |  |
|  | Amount | Sales | Amount | Sales | Amount | % |
| Cost\tof\tProduct\tSales | $265,151 | 42% | $186,862 | 48% | $78,289 | 42% |

Cost	of	product	sales	increased	42%	in	fiscal	2007	compared	to	fiscal	2006,	in	absolute	dollars,	primarily	due	to	the	increased	product	sales	discussed	above.

Cost	of	product	sales	decreased	as	a	percentage	of	product	sales	to	42%	in	fiscal	2007	from	48%	in	fiscal	2006.	These	costs	decreased	as	a	percentage	of	product sales	primarily	due	to	increased	revenues	and	improved	profitability	associated	with	the	shift	in	mammography	product	sales	to	Selenia	and,	to	a	lesser	extent,	the	lower cost	of	CAD	as	a	result	of	our	acquisition	of	R2.	The	Selenia	systems	have	significantly	higher	selling	prices,	more	than	offsetting	the	higher	costs	of	the	product,	when compared	to	analog	mammography.	In	addition,	fiscal	2007	includes	results	of	the	recently	acquired	R2	and	Suros	product	lines	for	the	entire	year	which	have	lower costs	as	a	percentage	of	sales.	Our	higher	Selenia	sales	resulted	in	an	improved	absorption	of	fixed	manufacturing	costs.	These	improvements	were	partially	offset	by fewer	bone	densitometry	systems	sold,	primarily	in	the	United	States,	which	negatively	impacted	the	absorption	of	fixed	overhead	and	a	reduction	in	the	average	selling prices	for	these	systems.	Fiscal	2006	includes	$4.1	million	of	additional	costs	related	to	the	sales	of	acquired	AEG,	R2	and	Suros	inventory	that	was	written	up	to	fair value	for	purchase	accounting	purposes	as	of	the	date	of	each	acquisition.

# Cost	of	Product	Sales—Amortization	of	Intangible	Assets.

|  |  |  | Years	Ended |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | September\t29,\t2007 | September\t29,\t2007 | September\t30,\t2006 | September\t30,\t2006 | Change | Change |
|  |  | %\tof\tProduct |  | %\tof\tProduct |  |  |
|  | Amount | Sales | Amount | Sales | Amount | % |
| Cost\tof\tProduct\tSales—Amortization\tof\tIntangible\tAssets | $11,024 | \t\t2% | $4,784 | \t\t1% | $6,240 | 130% |

Costs	of	Product	Sales—Amortization	of	Intangible	Assets	increased	primarily	due	to	the	increase	in	acquired	intangible	assets	as	a	result	of	the	acquisitions	of AEG,	R2,	Suros	and	the	intangible	assets	acquired	from	Fischer	Imaging	during	fiscal	2006,	as	well	as,	the	acquisition	of	BioLucent	in	fiscal	2007.	The	underlying intangible	assets	substantially	relate	to	acquired	developed	technology	and	know-how.	These	intangible	assets	are	being	amortized	over	their	estimated	useful	lives	of between	8.5	and	13	years.

# Cost	of	Service	and	Other	Revenue.

|  |  |  | Years	Ended |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | September\t29,\t2007 | September\t29,\t2007 | September\t30,\t2006 | September\t30,\t2006 | Change | Change |
|  |  | %\tof\tService |  | %\tof\tService |  |  |
|  |  | and\tOther |  | and\tOther |  |  |
|  | Amount | Revenue | Amount | Revenue | Amount | % |
| Cost\tof\tService\tand\tOther\tRevenue | $116,626 | 106% | $77,502 | 104% | $39,124 | 50% |

Cost	of	service	and	other	revenue	increased	in	absolute	dollars	primarily	related	to	additional	personnel	and	other	costs	to	expand	our	service	capabilities, especially	in	the	United	States,	to	support	our	growing	installed	base	of	products	and	increased	warranty	costs.	We	expect	our	costs	of	service	and	other	revenue	to remain	relatively	high	as	a	percentage	of	service	and	other	revenue,	reflecting	our	need	to	employ	the	required	personnel	for	warranty,	non-warranty	and	installation activities	to	service	our	growing	installed	base	of	products.	We	also	expect	a	continued	increase	in	customers	entering	into	service	agreements	in	connection	with	our transition	to	digital	mammography	and	direct	service	coverage.

# Operating	Expenses.

|  | September	29,	2007 | September	29,	2007 | September	30,	2006 |  | Change | Change |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Amount | %\tof\tTotal\nRevenue | Amount | %\tof\tTotal\nRevenue | Amount | % |
| Operating\tExpenses |  |  |  |  |  |  |
| Research\tand\tDevelopment | $44,484 | 6% | $28,294 | 7% | $16,190 | 57% |
| Selling\tand\tMarketing | $84,845 | 11% | $55,910 | 12% | $28,935 | 52% |
| General\tand\tAdministrative | $62,902 | 9% | $42,551 | 9% | $20,351 | 48% |
| Amortization\tof\tAcquired\tIntangibles | $5,584 | 1% | $1,631 | 0% | $3,953 | 242% |
| Net\tGain\ton\tSale\tof\tIntellectual\tProperty | — | — | ($5,093) | (1%) | $5,093 | 100% |
| Acquired\tIn-Process\tResearch\tand\tDevelopment | — | — | $19,900 | 4% | $(19,900) | (100%) |
|  | $197,815 | 27% | $143,193 | 31% | $54,622 | 38% |

Research	and	Development	Expenses.	Research	and	development	expenses	increased	57%	in	fiscal	2007	compared	to	fiscal	2006.	The	increase	was	primarily	due to	$11.4	million	of	additional	expenses	as	a	result	of	the	AEG,	R2	and	Suros	acquisitions.	Also	contributing	to	the	increase	was	an	increase	in	mammography	related expenses	of	$3.7	million	primarily	related	to	our	tomosynthesis	development	project.

Selling	and	Marketing	Expenses.	Selling	and	marketing	expenses	increased	52%	in	fiscal	2007	compared	to	fiscal	2006.	The	dollar	increase	was	primarily	due	to increased	selling	and	marketing	costs	related	to	the	acquisitions	of	AEG,	R2	and	Suros	of	$18.8	million.	In	the	current	fiscal	year,	commission	expense	related	to	our direct	sales	force	increased	approximately	$7.4	million	due	to	the	increased	product	sales	in	direct	territories	and	increased	$5.5	million	related	to	distributor commissions	due	to	increased	product	sales	through	these	channels.	Salaries,	benefit	and	travel	expenses	increased	approximately	$8.6	million	as	a	result	of	increased personnel	to	support	our	increased	product	sales	and	as	a	result	of	the	acquisitions	of	AEG,	R2	and	Suros.	Also	contributing	to	the	increase	was	$1.2	million	of	additional tradeshow	and	marketing	related	expenses	as	compared	to	the	prior	year.

General	and	Administrative	Expenses.	General	and	administrative	expenses	increased	48%	in	fiscal	2007	compared	to	fiscal	2006.	The	increase	was	primarily due	to	an	increase	of	$13.4	million	in	compensation	and	related	benefits	primarily	due	to	an	increase	in	personnel	including	$10.7	million	from	the	increased	headcount as	a	result	of	the	acquisitions	of	AEG,	R2	and	Suros	and	an	increase	of	$1.4	million	of	stock-based	compensation.	Also	contributing	to	the	increase	was	$2.2	million	in accounting	and	tax	expenses	and	an	additional	$1.0	million	of	additional	depreciation	expense	associated	with	the	recently	acquired	entities.

Amortization	of	Acquired	Intangible	Assets.	The	Company	incurred	amortization	expense	for	acquired	intangible	assets	of	$5.6	million	in	fiscal	2007	primarily due	to	the	acquisitions	of	AEG,	R2,	Suros	and	the	intangible	assets	acquired	from	Fischer	Imaging	during	fiscal	2006,	as	well	as,	BioLucent	in	fiscal	2007.	The underlying	intangible	assets	substantially	relate	to	acquired	customer	relationships	and	tradenames.	These	intangible	assets	are	being	amortized	over	their	estimated useful	life	of	between	8.5	and	16	years.

Net	Gain	on	Sale	of	Intellectual	Property.	The	Company	recognized	a	net	gain	of	$5.1	million	for	the	sale	of	Mammotest	intellectual	property	to	Siemens	in fiscal	2006	for	$6.5	million.	This	gain	consisted	of	the	$6.5	million	proceeds	from	the	sale	partially	offset	by	the	$1.4	million	impairment	charge	for	the	related intangible	assets.

Acquired	In-Process	Research	and	Development	Expenses.	We	incurred	charges	for	acquired	in-process	research	and	development	of	$19.9	million	in	fiscal 2006.	The	charges	included	$4.2	million	in	connection	with	our	acquisition	of	Fischer	Imaging's	intellectual	property	relating	to	its	digital	mammography	product	on September	29,	2005,	$600,000	in	connection	with	our	acquisition	of	AEG	on	May	2,	2006,	$10.2	million	in	connection	with	our	acquisition	of	R2	on	July	13,	2006	and $4.9	million	in	connection	with	the	acquisition	of	Suros	on	July	27,	2006.	The	projects	are	described	in	further	detail	in	our	discussion	of	these	acquisitions.	There	was no	charge	for	acquired	in-process	research	and	development	related	to	the	fiscal	2007	acquisition	of	BioLucent.

# Interest	Income.

|  | September	29,	2007 | Years	Ended<br>September	30,	2006 | Change | Change |
| :--- | :--- | :--- | :--- | :--- |
|  | Amount | Amount | Amount | % |
| Interest\tIncome | $2,815 | $4,082 | $(1,267) | (31%) |

Interest	income	decreased	in	fiscal	2007	compared	to	fiscal	2006	primarily	due	to	the	substantial	reduction	of	our	investment	balances	in	connection	with	our acquisitions	of	AEG,	R2	and	Suros	during	fiscal	2006.

# Interest	and	Other	Expense,	net

|  |  |  | Years	Ended | Years	Ended |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | September\t29,\t2007 | September\t29,\t2007 | September\t30,\t2006 | September\t30,\t2006 | Change | Change | Change |
|  | Amount | Amount | Amount | Amount | Amount | Amount | % |
| Interest\tand\tOther\tExpense,\tnet | ($ | 2,078) | ($ | 1,198) | ($ | 880) | 73% |

In	fiscal	2007,	these	expenses	consisted	primarily	of	the	interest	costs	and	fees	on	our	unsecured	revolving	line	of	credit	entered	into	on	July	24,	2006	(and amended	on	September	25,	2006)	of	$1.5	million	as	well	as	interest	costs	on	notes	payable	assumed	with	the	acquisition	of	AEG	in	the	amount	of	$963,000.	These expenses	were	partially	offset	by	other	income	of	$857,000.	The	most	significant	item	of	other	income	related	to	the	increase	in	the	cash	surrender	value	of	life	insurance contracts	related	to	our	SERP.	In	fiscal	2006,	these	expenses	were	primarily	comprised	of	the	interest	costs	and	fees	on	our	unsecured	revolving	line	of	credit	of $738,000	as	well	as	interest	costs	related	to	AEG's	notes	payable	of	$309,000.	To	the	extent	that	foreign	currency	exchange	rates	fluctuate	in	the	future,	we	may	be exposed	to	continued	financial	risk.	Although	we	have	established	a	borrowing	line	of	credit	denominated	in	the	foreign	currency,	the	euro,	in	which	our	subsidiaries currently	conduct	business	to	minimize	this	risk,	we	cannot	assure	that	we	will	be	successful	or	can	fully	hedge	our	outstanding	exposure.

# Provision	for	Income	Taxes.

|  |  | Years	Ended |  |  |
| :--- | :--- | :--- | :--- | :--- |
|  | September\t29,\t2007 | September\t30,\t2006 | Change | Change |
|  | Amount | Amount | Amount | % |
| Provision\tfor\tIncome\tTaxes | $53,911 | $25,800 | $28,111 | 109% |

We	account	for	income	taxes	under	SFAS	No.	109.	This	statement	requires	that	we	recognize	a	current	tax	liability	or	asset	for	current	taxes	payable	or	refundable and	a	deferred	tax	liability	or	asset	for	the	estimated	future	tax	effects	of	temporary	differences	and	carry	forwards	to	the	extent	they	are	realizable.	Our	effective	tax	rate for	fiscal	2007	was	36.3%	of	pre-tax	earnings.	This	represented	our	normalized	rate	of	approximately	37%	reduced	by	certain	tax	credits.	Our	effective	tax	rate	for	fiscal 2006	was	48.5%	of	pre-tax	earnings.	This	represents	our	normalized	rate	of	approximately	38%	increased	for	the	in-process	research	and	development	charges	recorded during	the	year	which	are	not	deductible	for	tax	purposes.	We	anticipate	an	effective	tax	rate	of	36%	of	pre-tax	earnings	in	fiscal	2008.

# Segment	Results	of	Operations

Beginning	in	fiscal	2006,	we	combined	our	previously	reported	mammography	and	digital	detector	operating	segments,	to	better	reflect	how	we	view	our operations	and	manage	our	business.	In	prior	years,	we	offered	DirectRay	digital	detectors	in	Hologic	designed,	manufactured,	installed	and	serviced	general radiography	systems	and	also	sold	panels	to	Original	Equipment	Manufacturers	(OEMs),	to	incorporate	into	their	own	equipment.	In	fiscal	2006	we	moved	away	from selling	systems	and	panels	for	general	radiography	use	and	began	to	shift	resources	to	our	core	women's	health	products	mammography	systems.	In	January	2006	we ceased	sales	of	digital	systems	for	general	radiography,	and	on	October	1,	2006	we	ceased	manufacture	of	general	radiography	panels.	As	a	result	the	primary	function	of the	digital	detector	business	is	to	support	our	mammography	product	line.	We	now	report	our	business	as	three	segments:	mammography/	breast	care,	osteoporosis assessment	and	other.	The	operating	results	of	our	fiscal	2006	acquisition	of	the	AEG	photoconductor	business	is	included	in	our	other	business	segment.	The	operating results	of	our	fiscal	2006	acquisitions	of	R2	and	Suros	and	our	fiscal	2007	acquisition	of	BioLucent	are	included	in	mammography/breast	care.	Prior	periods	have	been restated	to	conform	to	this	presentation.

The	accounting	policies	of	the	segments	are	the	same	as	those	described	in	the	footnotes	to	the	accompanying	consolidated	financial	statements.	We	measure segment	performance	based	on	total	revenues	and	operating	income	or	loss.	Revenues	from	product	sales	of	each	of	these	segments	are	described	in	further	detail	above. The	discussion	that	follows	is	a	summary	analysis	of	total	revenues	and	the	primary	changes	in	operating	income	or	loss	by	segment.

# Mammography/	Breast	Care.

|  | September	29,	2007 | September	29,	2007 | September	30,	2006 | September	30,	2006 | Change | Change |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | %\tof\tTotal |  | %\tof\tTotal |  |  |
|  |  | Segment |  | Segment |  |  |
|  | Amount | Revenue | Amount | Revenue | Amount | % |
| Total\tRevenues | $588,896 | 100% | $335,795 | 100% | $253,101 | 75% |
| Operating\tIncome | $141,514 | 24% | $44,227 | 13% | $97,287 | 220% |

Mammography/Breast	Care	revenues,	as	discussed	above,	increased	primarily	due	to	the	$218.0	million	increase	in	product	sales	and	an	increase	of	$35.1	million in	service	and	other	revenues	primarily	related	to	the	increased	number	of	systems	in	our	installed	base.	Operating	income	for	this	business	segment	increased	primarily due	to	the	increased	revenues.	Our	gross	margin	in	this	business	segment	increased	to	50%	in	fiscal	2007	as	compared	to	44%	in	fiscal	2006.	In	fiscal	2007	our	gross margins	improved	from	the	increase	in	product	revenues	of	our	more	profitable	Selenia	systems	versus	our	analog	mammography	systems	as	well	as	a	full	year	of	higher margin	product	sales	from	the	recently	acquired	businesses	of	R2	and	Suros.	In	addition,	higher	total	revenues	including	higher	Selenia	sales	have	allowed	for	the	greater absorption	of	manufacturing	costs.	This	improvement	in	the	gross	margin	was	offset	in	part	by	an	increase	in	service	related	costs	due	to	an	increase	in	the	number	of	our service	personnel	and	an	increase	in	warranty	costs	in	the	current	fiscal	year.	Operating	expenses	for	this	business	segment	increased	47%	in	fiscal	2007	primarily	due	to increased	operating	expenses	in

support	of	our	growing	Selenia	business,	in	particular	increased	selling	expenses	primarily	due	to	the	higher	revenues,	and	as	a	result	of	the	Suros	acquisition	and,	to	a lesser	extent,	the	R2	acquisition.	Also	contributing	to	the	increase	was	an	increase	in	intangible	amortization	of	$10.0	million,	as	well	as	an	increase	in	stock	based compensation	of	$2.3	million.	Fiscal	2006	included	$19.3	million	of	charges	for	acquired	in-process	research	and	development	related	to	our	acquisitions.	These increased	expenses	in	fiscal	2006	were	partially	offset	in	part	by	a	net	gain	of	$5.1	million	from	our	sale	of	Mammotest	intellectual	property	to	Siemens.

# Osteoporosis	Assessment.

|  | September	29,	2007 | September	29,	2007 | September	30,	2006 | September	30,	2006 | Change | Change |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | %\tof\tTotal |  | %\tof\tTotal |  |  |
|  |  | Segment |  | Segment |  |  |
|  | Amount | Revenue | Amount | Revenue | Amount | % |
| Total\tRevenues | $64,513 | 100% | $80,162 | 100% | ($15,649) | (20%) |
| Operating\tIncome | $4,817 | 7% | $9,760 | 12% | ($4,943) | (51%) |

Osteoporosis	assessment	revenues	decreased	in	fiscal	2007	compared	to	fiscal	2006	primarily	due	to	the	$14.8	million	decrease	in	product	sales	discussed	above and	an	$800,000	decrease	in	service	revenues.	The	decrease	in	service	revenues	was	primarily	due	to	a	decrease	in	training	revenues.	Operating	income	for	osteoporosis assessment	decreased	primarily	from	the	decrease	in	product	sales	partially	offset	by	a	decrease	in	operating	expenses.	Our	gross	margin	in	this	business	segment	was 40%	in	fiscal	2007	compared	to	43%	in	fiscal	2006.	The	decrease	in	osteoporosis	assessment	gross	margin	reflects	the	decrease	in	product	sales	and	the	lower	average selling	prices.	Operating	income	partially	benefited	from	lower	overhead	allocations	as	there	were	higher	allocations	of	overhead	in	the	current	year	to	the mammography/breast	care	business	segment	reflecting	the	recent	acquisitions	and	higher	growth	of	that	segment.

# Other.

|  |  |  | Years	Ended |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | September\t29,\t2007 | September\t29,\t2007 | September\t30,\t2006 | September\t30,\t2006 | Change | Change |
|  | Amount | %\tof\tTotal\nSegment\nRevenue | Amount | %\tof\tTotal\nSegment\nRevenue | Amount | % |
| Total\tRevenues | $84,959 | 100% | $46,723 | 100% | $38,236 | 82% |
| Operating\tIncome\t(Loss) | $1,421 | 2% | ($3,648) | (8%) | $5,069 | (139%) |

Revenues	for	this	business	segment,	which	includes	the	AEG	photoconductor	business,	mini	C-arm	business,	domestic	distribution	of	a	third	party	extremity	MRI systems,	the	digital	radiography	business	and	the	conventional	general	radiography	service	business,	increased	primarily	due	to	the	incremental	revenues	of	$29.6 million	as	a	result	of	the	AEG	acquisition	in	the	third	quarter	of	fiscal	2006	discussed	above.	Also	contributing	to	the	increase	was	an	increase	in	mini	C-arm	sales	of $8.7	million.	The	increase	in	operating	income	was	due	primarily	to	the	operating	income	from	AEG	and,	to	a	lesser	extent,	from	the	mini	C-arm	business	partially offset	by	a	$2.0	million	extremity	MRI	inventory	write-down	and	insufficient	revenue	volume	for	the	third	party	extremity	MRI	systems	to	cover	the	fixed	costs, primarily	headcount	related,	to	support	the	distribution	of	these	systems.

# Fiscal	Year	Ended	September	30,	2006	Compared	to	Fiscal	Year	Ended	September	24,	2005

|  | September	30,	2006 | September	30,	2006 | September	24,	2005 | September	24,	2005 | Change | Change |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Amount | %\tof\tTotal\nRevenue | Amount | %\tof\tTotal\nRevenue | Amount | % |
| Product\tSales |  |  |  |  |  |  |
| Mammography/\tBreast\tCare | $292,773 | 63% | $159,469 | 55% | $133,304 | 84% |
| Osteoporosis\tAssessment | $59,678 | 13% | $56,065 | 19% | $3,613 | 6% |
| Other | $35,661 | 8% | $13,541 | 6% | $22,120 | 163% |
|  | $388,112 | 84% | $229,075 | 80% | $159,037 | 69% |

In	fiscal	2006	our	product	sales	increased	69%	compared	to	fiscal	2005	primarily	due	to	an	increase	in	revenues	from	our	mammography/breast	care	products. Also	contributing	to	the	increase	was	an	increase	in	our	other	product	sales,	primarily	attributable	to	$18.6	million	of	sales	from	AEG,	acquired	during	the	third	quarter of	fiscal	2006	and	the	initial	sales	of	a	new	line	of	third	party	extremity	MRI	systems	of	$4.8	million.	Osteoporosis	sales	also	increased,	to	a	lesser	extent,	in	fiscal	2006.

Mammography/Breast	Care	product	sales	increased	84%	in	fiscal	2006	compared	to	fiscal	2005	primarily	due	to	a	$106.9	million	increase	in	digital mammography	system	sales,	a	$19.5	million	increase	in	Multicare	stereotactic	table	sales	and	$12.1	million	of	product	sales	from	R2	and	Suros,	entities	acquired	in	the fourth	quarter	of	fiscal	2006.	These	increases	were	partially	offset	by	a	$4.8	million	decrease	in	analog	mammography	systems	sales.	The	increase	in	our	digital mammography	product	sales	was	primarily	attributable	to	an	increase	in	the	number	of	Selenia	systems	sold	worldwide.	In	fiscal	2006,	we	sold	555	digital mammography	systems	compared	to	239	systems	in	fiscal	2005.	We	attribute	the	increase	in	digital	mammography	system	sales	primarily	to	the	growing	acceptance	of our	Selenia	mammography	system	and	of	digital	mammography	in	general.	The	increase	in	Multicare	stereotactic	tables	was	primarily	attributable	to	an	increase	in	the number	of	systems	sold	worldwide	in	the	current	fiscal	year	compared	to	fiscal	2005.	We	attribute	this	increase	at	least	in	part,	to	our	acquisition	of	the	Mammotest intellectual	property	from	Fischer.	The	decrease	in	sales	of	our	analog	mammography	systems	was	primarily	attributable	to	a	decrease	in	the	number	of	systems	sold both	domestically	and	in	Europe,	partially	offset	by	an	increase	in	units	sold	in	other	international	markets	combined	with	a	decrease	in	average	selling	price	in	all markets.	We	believe	that	this	decrease	in	analog	system	sales	was	primarily	due	to	the	shift	in	product	sales	to	digital	systems.

Osteoporosis	assessment	product	sales	increased	6%	in	fiscal	2006	compared	to	fiscal	2005.	This	increase	was	primarily	due	to	an	increase	in	the	number	of systems	sold	in	the	United	States	and	an	increase	in	the	number	of	our	lower-priced	Explorer	bone	densitometry	systems	sold	internationally,	that	was	offset	in	part	by	a slight	decrease	in	the	average	selling	prices.

Other	product	sales	increased	163%	in	fiscal	2006	compared	to	fiscal	2005.	This	increase	was	primarily	due	to	the	addition	of	$18.6	million	of	sales	from	AEG, acquired	during	the	third	quarter	of	fiscal	2006,	$4.8	million	of	sales	from	a	new	line	of	third	party	extremity	MRI	systems	and,	to	a	lesser	extent,	a	$731,000	increase	in our	mini	C-arm	system	sales.	Partially	offsetting	these	increases	was	a	$2.0	million	decrease	in	our	sales	of	general	radiography	systems	resulting	from	our	phase	out	of that	business.

In	fiscal	2006,	approximately	72%	of	product	sales	were	generated	in	the	United	States,	17%	in	Europe,	7%	in	Asia,	and	4%	in	other	international	markets.	In fiscal	2005,	approximately	67%	of	product	sales	were	generated	in	the	United	States,	19%	in	Europe,	10%	in	Asia,	and	4%	in	other	international	markets.	We	believe	the shift	in	sales	dollars	to	the	United	States	market	is	primarily	due	to	an	increase	in	demand	for	our	Selenia	digital	mammography	system	as	digital	mammography	is becoming	more	widely	accepted	in	the	United	States.

|  |  |  | Years	Ended |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | September\t30,\t2006 | September\t30,\t2006 | September\t24,\t2005 | September\t24,\t2005 | Change | Change |
|  |  | %\tof\tTotal |  | %\tof\tTotal |  |  |
|  | Amount | Revenue | Amount | Revenue | Amount | % |
| Service\tand\tOther\tRevenue | $74,569 | 16% | $58,609 | 20% | $15,960 | 27% |

Service	and	other	revenue	is	primarily	comprised	of	revenue	generated	from	our	field	service	organization	to	provide	ongoing	service,	installation	and	repair	of our	products.	Service	and	other	revenue	increased	27%	in	fiscal	2006	compared	to	fiscal	2005.	This	increase	was	primarily	due	to	increases	in	the	number	of	service contracts	sold	and	training	revenues	in	our	mammography/	breast	care	segment	and,	to	a	lesser	extent,	in	our	osteoporosis	assessment	and	other	segments.	We	believe that	these	increases	reflect	the	continued	growth	in	our	installed	base	of	products.

|  |  |  | Years	Ended |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | September\t30,\t2006 | September\t30,\t2006 | September\t24,\t2005 | September\t24,\t2005 | Change | Change |
|  |  | %\tof\tProduct |  | %\tof\tProduct |  |  |
|  | Amount | Sales | Amount | Sales | Amount | % |
| Cost\tof\tProduct\tSales | $186,862 | 48% | $116,478 | 51% | $70,384 | 60% |

Cost	of	product	sales	decreased	as	a	percentage	of	product	sales	to	48%	in	fiscal	2006	from	51%	in	fiscal	2005.	These	costs	decreased	as	a	percentage	of	product sales	primarily	due	to	increased	revenues	and	improved	profitability	associated	with	the	shift	in	mammography	product	sales	to	Selenia,	our	full	field	digital mammography	systems.	The	Selenia	systems	have	significantly	higher	selling	prices,	more	than	offsetting	the	higher	costs	of	the	product,	when	compared	to	analog mammography.	In	addition,	the	fourth	quarter	of	fiscal	2006	includes	the	addition	of	the	recently	acquired	R2	and	Suros	product	lines	which	have	lower	costs	as	a percentage	of	sales.	Our	higher	Selenia	sales	combined	with	the	increase	in	revenues	for	the	Multicare	stereotactic	tables	also	resulted	in	an	improved	absorption	of	fixed manufacturing	costs.	Offsetting	these	improvements	was	an	increase	in	costs	as	a	percentage	of	sales	in	our	other	segment	due	to	the	combination	of	AEG photoconductor	sales,	which	earn	a	substantially	lower	margin	as	compared	to	our	core	product	lines,	and	higher	costs	associated	with	the	new	mini	C-arm	Insight product.	The	decreases	noted	above	were	offset	by	$4.1	million	of	additional	costs	related	to	the	sales	of	acquired	AEG,	R2	and	Suros	inventory	that	was	written	up	to fair	value	for	purchase	accounting	purposes	as	of	the	date	of	acquisition.

|  |  |  | Years	Ended |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | September\t30,\t2006 | September\t30,\t2006 | September\t24,\t2005 | September\t24,\t2005 | Change | Change |
|  |  | %\tof\tProduct |  | %\tof\tProduct |  |  |
|  | Amount | Revenue | Amount | Revenue | Amount | % |
| Cost\tof\tProduct\tSales—Amortization\tof\tintangible\tassets | $4,784 | \t\t1% | $911 | \t\t0% | $3,873 | 425% |

Costs	of	Product	Sales—Amortization	of	intangibles	increased	primarily	due	to	the	increase	in	acquired	intangible	assets	as	a	result	of	the	acquisitions	of	AEG, R2,	Suros	and	the	intangible	assets	acquired	from	Fischer	Imaging	during	fiscal	2006.	The	underlying	intangible	assets	substantially	relate	to	acquired	developed technology	and	know-how.	These	intangible	assets	are	being	amortized	over	their	estimated	useful	life	of	between	8.5	and	10	years.

|  |  |  | Years	Ended |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | September\t30,\t2006 | September\t30,\t2006 | September\t24,\t2005 | September\t24,\t2005 | Change | Change |
|  |  | %\tof\tService |  | %\tof\tService |  |  |
|  | Amount | Revenue | Amount | Revenue | Amount | % |
| Cost\tof\tService\tand\tOther\tRevenue | $77,502 | 104% | $58,181 | 99% | $19,321 | 33% |

Cost	of	service	and	other	revenue	increased	in	absolute	dollars	primarily	related	to	additional	personnel	and	other	costs	to	expand	our	service	capabilities, especially	in	the	United	States,	to	support	our	growing	installed	base	of	products	and	to	increased	warranty	costs.

|  |  |  | Years	Ended |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | September\t30,\t2006 |  | September\t24,\t2005 | September\t24,\t2005 | Change | Change |
|  | Amount | %\tof\tTotal\nRevenue | Amount | %\tof\tTotal\nRevenue | Amount | % |
| Operating\tExpenses |  |  |  |  |  |  |
| Research\tand\tDevelopment | $28,294 | 7% | $18,617 | 7% | $9,677 | 52% |
| Selling\tand\tMarketing | $55,910 | 12% | $34,199 | 12% | $21,711 | 63% |
| General\tand\tAdministrative | $42,551 | 9% | $26,667 | 9% | $15,884 | 60% |
| Amortization\tof\tAcquired\tIntangibles | $1,631 | 0% | — | — | $1,631 | — |
| Net\tGain\ton\tSale\tof\tIntellectual\tProperty | ($5,093) | (1%) | — | — | $(5,093) | — |
| Acquired\tIn-Process\tResearch\tand\tDevelopment | $19,900 | 4% | — | — | $19,900 | — |
|  | $143,193 | 31% | $79,483 | 28% | $63,710 | 80% |

Research	and	Development	Expenses.	Research	and	development	expenses	increased	52%	in	fiscal	2006	compared	to	fiscal	2005.	The	increase	was	primarily	due to	compensation	and	related	expenses	which	increased	$5.3	million	including	costs	associated	with	additional	personnel	for	our	core	business	$1.7	million	from	an increase	in	personnel	as	a	result	of	the	AEG,	R2	and	Suros	acquisitions,	and	to	$519,000	of	stock	based	compensation.	Also	contributing	to	the	increase	was	an	increase in	mammography	related	expenses	of	$1.9	million	primarily	related	to	our	tomosynthesis	development	project.

Selling	and	Marketing	Expenses.	Selling	and	marketing	expenses	increased	63%	in	fiscal	2006	compared	to	fiscal	2005.	The	increase	was	primarily	due	to	an increase	of	approximately	$9.3	million	of	commissions	expense	to	our	direct	sales	force	due	to	the	increased	product	sales	in	direct	territories	and	$2.9	million	of distributor	commissions	due	to	increased	product	sales	through	these	channels.	Salaries,	benefit	and	travel	expenses	increased	approximately	$5.9	million	as	a	result	of increased	personnel	to	support	our	increased	product	sales	and	as	a	result	of	the	acquisitions	of	AEG,	R2	and	Suros	and	to	a	lesser	extent	$351,000,	of	stock-based compensation	under	SFAS	123	(R).	Also	contributing	to	the	increase	was	$1.0	million	of	additional	tradeshow	and	marketing	related	expenses	as	compared	to	the	prior year.

General	and	Administrative	Expenses.	General	and	administrative	expenses	increased	60%	in	fiscal	2006	compared	to	fiscal	2005.	The	increase	was	primarily due	to	an	increase	of	$8.7	million	in	compensation	and	related	benefits	primarily	due	to	an	increase	in	personnel	including	$3.3	million	from	the	increased	headcount	as a	result	of	the	acquisitions	of	AEG,	R2	and	Suros	and	$2.6	million	of	stock-based	compensation	under	SFAS	123	(R).	Also	contributing	to	the	increase	was	$1.7	million in	legal	expenses	primarily	related	to	the	FTC	investigation	and	settlement	and	an	increase	of	$1.0	million	in	accounting	and	tax	expenses	associated	with	the	recently acquired	entities.

Amortization	of	Acquired	Intangible	Assets.	The	Company	incurred	amortization	expense	for	acquired	intangible	assets	of	$1.6	million	in	fiscal	2006	due	to	the acquisitions	of	AEG,	R2,	Suros	and	the	intangible	assets	acquired	from	Fischer	Imaging	during	fiscal	2006.	The	underlying	intangible	assets	substantially	relate	to acquired	customer	relationships	and	tradenames.	These	intangible	assets	are	being	amortized	over	their	estimated	useful	life	of	between	8.5	and	10	years.

Acquired	In-Process	Research	and	Development	Expenses.	We	incurred	charges	for	acquired	in-process	research	and	development	of	$19.9	million	in	fiscal 2006.	The	charges	included	$4.2	million	in	connection	with	our	acquisition	of	Fischer	Imaging's	intellectual	property	relating	to	its	digital	mammography	product	on September	29,	2005,	$600,000	in	connection	with	our	acquisition	of	AEG	on	May	2,	2006,	$10.2	million	in	connection	with	our	acquisition	of	R2	on	July	13,	2006	and $4.9	million	in	connection	with	the	acquisition	of	Suros	on	July	27,	2006.	The	projects	are	described	in	further	detail	in	our	discussion	of	these	acquisitions.

|  | September	30,	2006 | Years	Ended<br>September	24,	2005 | Change | Change |
| :--- | :--- | :--- | :--- | :--- |
|  | Amount | Amount | Amount | % |
| Interest\tIncome | $4,082 | $2,219 | $1,863 | 84% |

Interest	income	increased	in	fiscal	2006	compared	to	fiscal	2005	primarily	due	to	a	higher	average	investment	balance	and	an	increase	in	the	interest	rate	earned	in the	current	year	compared	to	last	year.

|  |  |  |  | Years	Ended |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | September\t30,\t2006 | September\t30,\t2006 | September\t24,\t2005 | September\t24,\t2005 | Change | Change |
|  | Amount | Amount | Amount | Amount | Amount | % |
| Interest\tand\tOther\tExpense,\tnet | ($ | 1,198) | ($ | 155) | ($1,043) | 673% |

In	fiscal	2006,	these	expenses	consisted	primarily	of	the	interest	costs	on	our	unsecured	revolving	line	of	credit	entered	into	on	July	24,	2006	(and	amended	on September	25,	2006)	of	$738,000	as	well	as	interest	costs	on	notes	payable	assumed	with	the	acquisition	of	AEG	in	the	amount	of	$309,000.	In	fiscal	2005,	these expenses	were	primarily	comprised	of	the	interest	costs	on	the	Wells	Fargo	Foothill,	Inc.	note	payable	of	$376,000	partially	offset	by	foreign	currency	transaction	gains of	$221,000.	In	September	2005,	we	paid	off	the	Wells	Fargo	Foothill,	Inc.	note	payable.	To	the	extent	that	foreign	currency	exchange	rates	fluctuate	in	the	future,	we may	be	exposed	to	continued	financial	risk.	Although	we	have	established	a	borrowing	line	of	credit	denominated	in	the	foreign	currency,	the	euro,	in	which	our subsidiaries	currently	conduct	business	to	minimize	this	risk,	we	cannot	assure	that	we	will	be	successful	or	can	fully	hedge	our	outstanding	exposure.	In	connection	with our	recent	acquisitions	we	assumed	approximately	$10.7	million	of	debt	as	a	result	of	the	AEG	acquisition	and	borrowed	$65	million,	of	which	$55	million	was outstanding	as	of	September	29,	2007,	under	our	unsecured	revolving	line	of	credit	for	the	Suros	acquisition.

|  |  | Years	Ended |  |  |
| :--- | :--- | :--- | :--- | :--- |
|  | September\t30,\t2006 | September\t24,\t2005 | Change | Change |
|  | Amount | Amount | Amount | % |
| Provision\tfor\tIncome\tTaxes | $25,800 | $6,439 | $19,361 | 301% |

We	account	for	income	taxes	under	SFAS	No.	109.	This	statement	requires	that	we	recognize	a	current	tax	liability	or	asset	for	current	taxes	payable	or	refundable and	a	deferred	tax	liability	or	asset	for	the	estimated	future	tax	effects	of	temporary	differences	and	carry	forwards	to	the	extent	they	are	realizable.	Our	effective	tax	rate for	fiscal	2006	was	48.5%	of	pre-tax	earnings.	This	represents	our	normalized	rate	of	approximately	38%	increased	for	the	in-process	research	and	development	charges recorded	during	the	year	which	are	not	deductible	for	tax	purposes.	Our	effective	tax	rate	for	fiscal	2005	was	19%	of	pre-tax	earnings.	This	represented	our	normalized rate	of	approximately	38%	reduced	by	a	decrease	in	certain	valuation	allowances	and	tax	reserves.

We	had	previously	recorded	a	valuation	allowance	to	reduce	our	deferred	tax	assets	to	the	amount	that	was	more	likely	than	not	to	be	realized.	In	fiscal	2005,	we considered	our	recent	operating	results,	future	taxable	income	and	ongoing	prudent	and	feasible	tax	planning	strategies	in	assessing	the	need	for	the	valuation	allowance. As	a	result,	we	determined	that	we	were	able	to	realize	a	portion	of	our	deferred	tax	assets	in	excess	of	the	net	recorded	amount,	and	therefore,	an	adjustment	of	$6.2 million	was	made	to	reduce	the	valuation	allowance.	The	benefit	of	the	release	in	valuation	allowance	was	realized	through	reductions	to	tax	expense	and	increases	to additional	paid	in	capital.	In	addition,	during	the	fourth	quarter	of	2005	we	received	notification	that	the	Joint	Committee	on	Taxation	had	no	exceptions	with	the	Internal Revenue	Service's	conclusions	on	several	tax	returns	under	examination.	Therefore,	we	released	$750,000	of	tax	reserves	related	to	these	returns	further	reducing	our provision	for	income	taxes	in	fiscal	2005.

|  |  |  | Years	Ended |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | September\t30,\t2006 | September\t30,\t2006 | September\t24,\t2005 | September\t24,\t2005 | Change | Change |
|  |  | %\tof\tTotal |  | %\tof\tTotal |  |  |
|  |  | Segment |  | Segment |  |  |
|  | Amount | Revenue | Amount | Revenue | Amount | % |
| Total\tRevenues | $335,795 | 100% | $189,313 | 100% | $146,482 | 77% |
| Operating\tIncome | $44,227 | 13% | $17,460 | 9% | $26,767 | 153% |

Mammography/Breast	Care	revenues,	as	discussed	above,	increased	primarily	due	to	the	$133.3	million	increase	in	product	sales	and	an	increase	of	$13.2	million in	service	and	other	revenues	primarily	related	to	the	increased	number	of	systems	in	our	installed	base.	Operating	income	for	this	business	segment	increased	primarily due	to	the	increased	revenues.	Our	gross	margin	in	this	business	segment	increased	to	44%	in	fiscal	2006	as	compared	to	37%	in	fiscal	2005.	In	fiscal	2006	our	gross margins	improved	from	the	increase	in	product	revenues	of	our	more	profitable	Selenia	systems	versus	our	analog	mammography	systems	as	well	as	the

integration	of	higher	margin	product	sales	from	the	recently	acquired	businesses	of	R2	and	Suros.	In	addition,	higher	Selenia	sales	combined	with	the	increase	in revenues	for	Multicare	stereotactic	tables	allowed	for	the	greater	absorption	of	manufacturing	costs.	This	improvement	in	the	gross	margin	was	offset	in	part	by	an increase	in	service	related	costs	related	to	an	increase	in	the	number	of	our	service	personnel	in	the	current	fiscal	year.	Operating	expenses	for	this	business	segment increased	98%	in	fiscal	2006	primarily	due	to	increased	selling	expenses	which	is	primarily	due	to	the	higher	revenues	an	increase	in	research	and	development, primarily	related	to	increased	expenditures	for	our	tomosynthesis	project,	the	$19.3	million	write-off	of	acquired	in-process	research	and	development	related	to	our acquisitions,	$1.6	million	of	intangible	asset	amortization	related	to	our	acquisitions,	and	$2.7	million	of	stock-based	compensation.	These	increased	expenses	were partially	offset	in	part	by	a	net	gain	of	$5.1	million	from	our	sale	of	Mammotest	intellectual	property	to	Siemens.

|  | September	30,	2006 | September	30,	2006 | September	24,	2005 | September	24,	2005 | Change | Change |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | %\tof\tTotal |  | %\tof\tTotal |  |  |
|  |  | Segment |  | Segment |  |  |
|  | Amount | Revenue | Amount | Revenue | Amount | % |
| Total\tRevenues | $80,162 | 100% | $74,957 | 100% | $5,205 | 7% |
| Operating\tIncome | $9,760 | 12% | $11,175 | 15% | $(1,415) | (13%) |

Osteoporosis	assessment	revenues	increased	in	fiscal	2006	compared	to	fiscal	2005	primarily	due	to	the	$3.6	million	increase	in	product	sales	discussed	above	and a	$1.6	million	increase	in	service	revenues.	The	increase	in	service	revenues	was	primarily	due	to	the	increased	number	of	systems	in	our	installed	base.	Operating income	for	osteoporosis	assessment	decreased	primarily	due	to	increased	operating	expenses	and	to	a	lesser	extent	a	decrease	in	gross	margins.	Our	gross	margin	in	this business	segment	was	43%	in	fiscal	2006	compared	to	44%	in	fiscal	2005.	The	decrease	in	osteoporosis	assessment	gross	margins	was	primarily	attributable	to	a combination	of	a	decrease	in	average	selling	prices	and	higher	service	repair	costs.	The	increase	in	operating	expenses	of	$3.2	million	was	primarily	attributable	to increased	general	and	administrative	expenses	of	$1.6	million	related	to	increased	compensation	and	legal	fees	discussed	above	as	well	as	$1.0	million	of	stock-	based compensation	under	SFAS	123	(R).

|  |  |  | Years	Ended |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | September\t30,\t2006 | September\t30,\t2006 | September\t24,\t2005 | September\t24,\t2005 | Change | Change |
|  | Amount | %\tof\tTotal\nSegment\nRevenue | Amount | %\tof\tTotal\nSegment\nRevenue | Amount | % |
| Total\tRevenues | $46,723 | 100% | $23,414 | 100% | $23,309 | 100% |
| Operating\tIncome\t(Loss) | ($3,648) | (8%) | $3,996 | 17% | ($7,644) | (191%) |

Revenues	for	this	business	segment,	which	includes	the	mini	C-arm	business,	domestic	distribution	of	a	third	party	extremity	MRI	system,	the	digital	general radiography	business,	the	conventional	general	radiography	service	business	and	the	AEG	photoconductor	businesses'	increased	in	fiscal	2006	primarily	due	to	the	$22.1 million	increase	in	product	sales	discussed	above	and	a	$1.2	million	increase	in	service	and	other	revenues.	The	increase	in	product	sales	was	primarily	due	to	the incremental	revenues	as	a	result	of	the	AEG	acquisition	as	well	as	the	initial	sales	of	a	new	line	of	third	party	extremity	MRI	systems.	These	increases	were	partially offset	by	decreases	in	product	sales	related	to	digital	general	radiography	business	and	the	conventional	general	radiography	service	business,	both	of	which	are	being phased	out.	The	increase	in	service	and	other	revenues	is

due	to	incremental	revenues	as	a	result	of	the	AEG	acquisition,	increased	mini	C-arm	and	digital	general	radiography	spare	parts	revenues	and	increased	service	revenues from	our	increased	installed	base	of	extremity	MRI	systems	partially	offset	by	a	decrease	in	these	revenues	in	the	conventional	general	radiography	business.	The decrease	in	operating	income	was	primarily	due	to	an	increase	in	operating	expenses	related	to	the	acquisition	of	AEG	as	well	as	purchase	accounting	related	charges including	a	$1.6	million	increase	of	cost	of	product	sales	related	to	the	sale	of	inventory	that	had	been	written	up	to	fair	value	as	of	the	date	of	acquisition	and	a	charge for	in-process	research	and	development	of	$600,000.	Also	contributing	to	the	decrease	of	operating	income	was	the	ramp-up	of	sales	and	marketing	expenses	for	a	new line	of	third	party	extremity	MRI	systems.

# Liquidity	and	Capital	Resources

At	September	29,	2007	we	had	approximately	$220.6	million	of	working	capital.	At	that	date	our	cash	and	cash	equivalents	totaled	$100.4	million.	Our	cash	and cash	equivalents	balance	increased	$70.5	million	during	fiscal	2007	primarily	due	to	cash	provided	by	operating	activities	and	cash	proceeds	from	the	exercise	of	stock options	partially	offset	by	cash	used	to	repay	amounts	outstanding	under	our	line	of	credit,	cash	used	for	purchases	of	property	and	equipment,	cash	used	to	pay	the	first year	Suros	earnout	and	cash	to	acquire	BioLucent.

Our	operating	activities	provided	us	with	$153.3	million	of	cash,	which	included	net	income	of	$94.6	million	for	fiscal	2007	increased	by	non-cash	charges	for depreciation	and	amortization	of	an	aggregate	$31.2	million,	which	were	partially	offset	by	the	$21.9	million	tax	benefit	related	to	the	exercise	of	non-qualified	stock options.	Cash	provided	by	operations	due	to	changes	in	our	current	assets	and	liabilities	included	an	increase	in	accrued	expenses	of	$59.0	million	and	deferred	revenue of	$14.5	million.	The	cash	provided	by	these	changes	in	our	current	assets	and	liabilities	was	partially	offset	by	an	increase	in	accounts	receivable	of	$39.3	million	and an	increase	in	inventories	of	$8.0	million.	The	increase	in	accrued	expenses	was	primarily	due	to	an	increase	in	income	taxes	payable	and	as	a	result	of	increases	in accrued	compensation	and	employee	benefits	including	the	deferred	compensation	payable	under	our	SERP.	The	increase	in	deferred	revenue	was	primarily	due	to	an increase	in	the	number	of	deferred	service	contracts	for	our	core	business	as	well	as	an	increase	in	amounts	related	to	our	newly	acquired	businesses.	The	increase	in accounts	receivable	was	primarily	due	to	the	increased	revenues	during	fiscal	2007.	The	increase	in	inventory	was	primarily	related	to	supporting	our	increased	product revenues.

In	fiscal	2007,	we	used	approximately	$59.2	million	of	cash	in	investing	activities.	This	use	of	cash	was	primarily	used	to	purchase	property	and	equipment	of $22.8	million,	which	consisted	primarily	of	manufacturing	and	test	equipment,	computer	hardware	and	demonstration	equipment,	to	pay	the	first	year	Suros	earnout	of $19.0	million	and	for	the	BioLucent	acquisition	of	$9.8	million,	net	of	cash	acquired.

In	fiscal	2007,	financing	activities	used	$22.5	million	of	cash	primarily	for	the	repayment	of	$55	million	under	our	bank	line	of	credit.	This	cash	use	was	partially offset	by	the	tax	benefit	from	the	exercise	of	non	qualified	stock	options	of	$21.9	million	and	proceeds	from	the	exercise	of	stock	options	of	$10.6	million.

AEG,	acquired	in	2006,	has	outstanding	existing	debt	whose	balances	aggregated	$11.2	million	as	of	September	29,	2007.	The	terms	of	the	agreements	have various	maturities	ranging	from	December	30,	2010	through	September	15,	2012.	Interest	rates	are	variable	and	at	September	29,	2007	ranged	from	5.7%	to	7.3%.

On	September	18,	2007,	we	completed	the	acquisition	of	BioLucent,	Inc.	The	purchase	price	for	the	acquisition	was	paid	in	a	combination	of	cash	and	in	shares	of our	common	stock.	In	addition,	a	cash	earn-out	will	be	payable	in	up	to	two	annual	installments	not	to	exceed	$15	million	in	the	aggregate	based	on	BioLucent's achievement	of	certain	revenue	targets.

On	September	25,	2006,	we	entered	into	an	amended	and	restated	credit	agreement	with	Bank	of	America,	N.A.,	and	the	other	lenders	party	there	to,	providing	for a	$150	million	senior	unsecured	revolving	line	of	credit.	At	our	option,	revolving	loans	outstanding	under	the	credit	agreement	carried	interest	at	a	rate	equal	to	(a)	the

Eurodollar	Rate—the	British	Bankers	Association	London	Inter-Bank	Offered	Rate	for	dollar	deposits	(known	as	"LIBOR")	plus	the	applicable	margin	(as	defined	in the	credit	agreement,	which	margin	ranges	from	0.625%	to	1.00%	depending	on	our	consolidated	leverage	ratio)	or	(b)	the	Base	Rate	which	was	the	higher	of	(i)	the Bank	of	America	prime	rate	and	(ii)	the	Federal	Funds	rate	plus	0.50%.	The	credit	agreement	included	financial	covenants	requiring	that	we	maintain,	measured	as	of	the end	of	each	fiscal	quarter,	a	maximum	consolidated	leverage	ratio	of	2.50:1.00	and	a	minimum	consolidated	interest	coverage	ratio	of	3.00:1.00.	We	were	in	compliance with	these	covenants	as	of	September	29,	2007.	The	credit	agreement	also	contained	events	of	default	that	permitted	the	acceleration	of	the	loans	and	the	termination	of the	credit	agreement,	including,	but	not	limited	to,	payment	defaults	under	the	credit	agreement	and	cross-default	under	certain	other	indebtedness,	the	breach	of	certain covenants,	the	entry	of	material	judgments,	and	the	occurrence	of	bankruptcy,	insolvency	or	change	of	control	events.	Borrowings	under	the	credit	agreement	were	used to	finance	a	portion	of	the	Suros	Surgical	acquisition	and	for	general	corporate	purposes.	There	were	no	amounts	outstanding	under	this	credit	agreement	as	of September	29,	2007.	The	credit	agreement	matures	on	September	24,	2011.	As	of	September	29,	2007,	we	had	$150	million	available	for	future	borrowings.	In connection	with	the	credit	agreement	entered	into	on	October	22,	2007,	described	below,	this	credit	agreement	was	terminated.

On	October	22,	2007,	we	entered	into	a	$2.55	billion	senior	secured	credit	agreement	with	Goldman	Sachs	Credit	Partners	L.P.	and	Banc	of	America	Securities LLC,	as	Joint	Lead	Arrangers;	Bank	of	America,	N.A.,	as	Syndication	Agent;	Goldman	Sachs	Credit	Partners	L.P.,	as	Administrative	Agent	and	Collateral	Agent;	and Citicorp	North	America,	Inc.,	JPMorgan	Chase	Bank,	N.A.,	RBS	Citizens,	National	Association	and	Fifth	Third	Bank,	as	Co-Documentation	Agents	(the	"Credit Agreement").	As	of	the	closing	of	the	Cytyc	merger,	we	borrowed	$2.35	billion	under	the	credit	facilities	all	of	which	have	variable	interest	rates.	Borrowings	under	the Senior	Secured	Credit	Facility	bear	interest	at	a	rates	per	annum	equal	to,	at	our	option,	either	(1)	the	Base	Rate	or	(2)	Eurodollar	Rate,	plus	an	applicable	margins determined	by	reference	to	the	leverage	ratio,	as	set	forth	in	the	credit	agreement.	As	of	October	22,	2007	all	amounts	outstanding	bear	interest	at	the	Eurodollar	rate with	applicable	margins	ranging	from	1.75%	to	2.50%.	Each	25	basis	point	change	in	interest	rates	would	result	in	approximately	$5.9	million	change	in	annual	interest expense	based	on	amounts	currently	outstanding.

Our	subsidiaries	which	are	party	to	the	credit	agreement	have	guaranteed	our	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	Hologic,	Inc.	and	substantially	all	of	our	U.S.	subsidiaries,	a	first	priority	security interest	in	100%	of	the	capital	stock	of	each	of	our	U.S.	subsidiaries,	65%	of	the	capital	stock	of	certain	of	our	first-tier	foreign	subsidiaries,	and	all	intercompany	debt. The	security	interests	are	evidenced	by	a	pledge	and	security	agreement	with	Goldman	Sachs	Credit	Partners	L.P.,	as	collateral	agent,	and	other	related	agreements, including	certain	stock	pledges	and	mortgages.

We	used	the	proceeds	from	the	credit	facilities	to	pay	the	cash	consideration	of	the	Cytyc	merger	and	commissions	and	expenses	we	incurred	in	connection	with our	merger	with	Cytyc	and	the	Credit	Agreement.	In	addition,	we	may	use	the	proceeds	of	the	credit	facilities,	together	with	the	combined	company's	available	cash,	for the	conversion	of	Cytyc's	remaining	2.25%	Senior	Convertible	Notes	due	2024,	which	have	not	been	converted	into	Cytyc	common	stock	and	which	may	be	delivered to	the	Company	for	redemption	or	conversion.

# The	credit	facilities	under	the	Credit	Agreement	consist	of:

•$600	million	senior	secured	tranche	A	term	loan	with	a	final	maturity	date	of	September	30,	2012;

•$250	million	senior	secured	tranche	B-1	term	loan	and	$250	million	senior	secured	tranche	B-2	term	loan	(collectively,	the	"term	loan	B	facility")	with	a final	maturity	date	of	March	31,	2013;

•$1,250	million	senior	secured	capital	markets	term	loan	(the	"term	loan	X	facility")	with	a	final	maturity	date	of	April	22,	2009;

•$200	million	senior	secured	revolving	credit	facility	(the	"revolving	facility")	with	a	final	maturity	date	of	October	22,	2012.

Under	the	Credit	Agreement,	we	may	elect,	subject	in	certain	circumstances	to	pro	forma	compliance	with	a	ratio	of	total	debt	to	adjusted	consolidated	EBITDA specified	in	the	credit	agreement	and	other	conditions,	to	increase,	under	terms	and	conditions	to	be	determined,	the	total	principal	amount	of	borrowings	available	under the	credit	facilities	by	up	to	$250	million.	EBITDA	means	earnings	before	interest,	taxes,	depreciation	and	amortization,	as	defined	in	the	Credit	Agreement.

We	are	required	to	make	scheduled	principal	payments	under	the	term	A	loan	facility	in	increasing	amounts	ranging	from	$7.5	million	per	quarter	beginning	on December	29,	2007	to	$22.5	million	per	quarter	commencing	on	the	quarter	ending	December	25,	2010,	and	under	the	term	B	loan	facility,	in	equal	quarterly installments	of	$1.25	million	beginning	on	the	quarter	ending	December	29,	2007	and	for	the	first	21	quarters	thereafter,	with	the	remaining	balance	of	each	term	loan facility	due	at	the	maturity	of	the	applicable	term	loan	facility.	The	revolving	credit	facility	and	the	term	loan	X	facility	will	become	due	at	maturity.	No	scheduled amortizations	are	required	under	the	revolving	facility	or	the	term	loan	X	facility.

We	are	required	to	make	principal	repayments	first,	pro	rata	among	the	term	loan	facilities	and	second	to	the	revolving	credit	facility	from	specified	excess	cash flows	from	operations	and	from	the	net	proceeds	of	specified	types	of	asset	sales,	debt	issuances,	insurance	recoveries	and	equity	offerings,	provided,	however,	that	net proceeds	from	certain	debt	issuances	and	equity	offerings	are	contemplated	to	be	applied	first	to	the	term	loan	X	facility	until	such	facility	is	repaid	in	full.

We	may	voluntarily	prepay	any	of	the	credit	facilities	without	premium	or	penalty	(other	than	applicable	breakage	costs	related	to	interest	on	Eurodollar	loans).

All	amounts	outstanding	under	the	credit	facilities	will	bear	interest,	at	our	option,	initially,	with	respect	to	all	loans	made	under	the	revolving	facility	and	the term	A	loan	facility:	(i)	at	the	Base	Rate	plus	1.25%	per	annum;	or	(ii)	at	the	reserve	adjusted	Eurodollar	Rate	plus	2.25%	per	annum.	The	Base	Rate	is	defined	as	the greater	of	the	Prime	Rate	as	quoted	in	the	Wall	Street	Journal	and	the	Federal	Funds	Effective	Rate	plus	0.5%.	With	respect	to	loans	made	under	the	term	loan	B	facility: (i)	at	a	rate	per	annum	equal	to	the	Base	Rate	plus	1.5%;	or	(ii)	at	a	rate	per	annum	equal	to	the	reserve	adjusted	Eurodollar	Rate	plus	2.50%;	and	with	respect	to	loans made	under	the	term	loan	X	facility:	(i)	at	a	rate	per	annum	equal	to	the	Base	Rate	plus	0.75%;	or	(ii)	at	a	rate	per	annum	equal	to	the	reserve	adjusted	Eurodollar	Rate plus	1.75%.	The	margin	applicable	to	loans	under	the	revolving	credit	facility	and	the	term	loan	A	facility	subject	to	specified	changes	based	on	certain	change	in	the leverage	ratio	as	specified	in	the	Credit	Agreement.

We	will	pay	a	quarterly	commitment	fee,	at	an	annual	rate	of	0.50%,	on	the	undrawn	commitments	available	under	the	revolving	credit	facility,	subject	to reduction	based	on	a	leverage	ratio	as	specified	in	the	Credit	Agreement.

The	credit	facilities	contain	affirmative	and	negative	covenants	customarily	applicable	to	senior	secured	credit	facilities,	including	covenants	restricting	our ability,	subject	to	negotiated	exceptions,	to:	incur	additional	indebtedness	and	additional	liens	on	their	assets,	engage	in	mergers	or	acquisitions	or	dispose	of	assets,	enter into	sale-leaseback	transactions,	pay	dividends	or	make	other	distributions,	voluntarily	prepay	other	indebtedness,	enter	into	transactions	with	affiliated	persons,	make investments,	and	change	the	nature	of	their	businesses.

The	credit	facility	requires	us	to	maintain	maximum	leverage	and	minimum	interest	coverage	ratios,	as	of	the	last	day	of	each	fiscal	quarter,	as	defined	within	the Credit	Agreement.	The	maximum	leverage	ratio	is	5.50:1.00	beginning	on	our	fiscal	quarter	ending	December	29,	2007,	and	then	decreases	over	time	to	3:00:1.00	for the	quarters	ending	September	25,	2010	and	thereafter.	The	minimum	interest	coverage	ratio	is	2.00:1.00	beginning	with	our	fiscal	quarter	ending	March	29,	2008,	and then	increases	over	time	to	2.75:1.00	for	the	quarters	ending	September	25,	2010	and	thereafter.	The	leverage	ratio	is	defined	as	the	ratio	of	our	consolidated	total	debt	to our	consolidated	adjusted	EBITDA	for	the	four-fiscal	quarter	period	ending	on	the	measurement	date.	The	interest	coverage	ratio	is	defined	as	the	ratio	of	our	annualized consolidated	adjusted	EBITDA	for	the	applicable	periods	to	our	annualized	consolidated	interest	expense.

Future	scheduled	minimum	payments	under	this	credit	facility	are	as	follows:

| Fiscal	2008 | $35,000 |
| :--- | :--- |
| Fiscal\t2009 | 1,315,000 |
| Fiscal\t2010 | 65,000 |
| Fiscal\t2011 | 95,000 |
| Fiscal\t2012 | 365,000 |
| Thereafter | 475,000 |
| Total | $2,350,000 |

# Contingent	Earn-Out	Payments

As	a	result	of	the	Cytyc	merger,	the	Company	assumed	the	obligation	to	Adiana	to	make	contingent	earn-out	payments	tied	to	the	achievement	of	milestones.	The milestone	payments	include	(i)	payment	of	up	to	$25	million	tied	to	the	timing	of	certain	FDA	milestone	achievements	of	the	Adiana	permanent	contraception	product and	(ii)	potential	contingent	payments	of	up	to	$130	million,	based	on	incremental	sales	growth	of	the	Adiana	permanent	contraception	product	during	the	four-year period	following	FDA	approval	of	this	product.

The	following	table	summarizes	our	contractual	obligations	and	commitments	as	of	September	29,	2007:

|  |  | Less	than |  |  | More	than |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Contractual\tObligations | Total | 1\tyear | 1-3\tyears | 3-5\tyears | 5\tyears |
| Operating\tLeases | $66,861 | $7,071 | $13,103 | $10,857 | $35,830 |
| Purchase\tObligations\t(1) | \t 19,225 | 11,862 | 7,163 | 200 | — |
| Long-Term\tDebt\tObligations | \t 11,199 | 1,977 | 1,977 | 1,977 | 5,268 |
| Total\tContractual\tObligations | $97,258 | $20,910 | $22,243 | $13,034 | $41,098 |

(1) Approximately	$3.7	million	of	the	purchase	obligations	relates	to	an	exclusive	distribution	and	service	agreement	in	the	United	States	under	which	we	will	sell and	service	a	line	of	extremity	MRI	systems.	Pursuant	to	the	terms	of	this	contract,	we	have	certain	minimum	inventory	purchase	obligations	for	the	initial	term	of eighteen	months.	Thereafter	the	purchase	obligations	are	subject	to	renegotiation	in	the	event	of	any	unforeseen	changes	in	the	market	dynamics.

The	amounts	above	do	not	include	any	amount	that	may	be	payable	to	Suros	and	BioLucent	for	earn-outs	over	the	next	two	fiscal	years.	Additionally,	the	above amounts	do	not	include	obligations	incurred	or	assumed	as	part	of	the	Cytyc	merger	including	the	$2.35	billion	borrowed	under	the	Credit	Agreement,	potential	Cytyc earn-out	payments,	Cytyc	outstanding	debt	(capital	leases)	and	Cytyc	commitment	for	construction	of	a	new	Costa	Rica	facility.	Except	as	set	forth	above	and	potential earn-out	payments	to	Suros	and	BioLucent,	we	do	not	have	any	other	significant	capital	commitments.	We	are	working	on	several	projects,	with	an	emphasis	on	digital mammography.	In	addition,	we	expect	to	continue	to	review	and	evaluate	potential	acquisitions	of	businesses,	products	or	technologies,	and	strategic	alliances	that	we believe	will	complement	our	current	or	future	business.	Subject	to	the	risk	factors	set	forth	above	and	the	general	disclaimers	set	forth	in	our	Special	Note	Regarding Forward-Looking	Statements	at	the	outset	of	this	Report,	we	believe	that	cash	flow	from	operations	and	cash	available	from	our	bank	line	of	credit	will	provide	us	with sufficient	funds	in	order	to	fund	our	expected	operations	over	the	next	twelve	months.

In	connection	with	our	merger	with	Cytyc,	we	will	be	treated	for	accounting	purposes	as	having	assumed	all	of	Cytyc's	outstanding	indebtedness	as	of	the effective	time	of	the	merger,	including	those	set	forth	below.

Cytyc	entered	into	a	lease	agreement	on	April	23,	2007	for	a	new	manufacturing	and	office	facility	located	in	Alajuela,	Costa	Rica	("Costa	Rica	Lease").	The lease	term	will	commence	on	or	around	February	2008	and

Cytyc	is	expected	to	transfer	most	of	its	Costa	Rican	operations	to	this	facility	during	the	first	half	of	calendar	year	2008.	The	term	of	the	lease	is	for	a	period	of approximately	ten	years	with	the	option	to	extend	for	two	consecutive	five-year	terms.

On	July	11,	2006,	Cytyc	entered	into	a	lease	agreement	for	a	manufacturing	facility	located	in	Marlborough,	Massachusetts	("Marlborough	Lease").	The	term	of the	lease	is	for	a	period	of	approximately	12	years	commencing	on	November	14,	2006.	In	2011,	Cytyc	will	have	an	option	to	lease	an	additional	30,000	square	feet.	In connection	with	the	Merger,	we	guaranteed	Cytyc's	obligations	under	this	lease.

Future	minimum	payments,	including	principal	and	interest,	under	these	leases	agreement	were	as	follows	at	September	29,	2007

|  |  |  | Total |  |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | with | Fiscal | Fiscal | Fiscal | Fiscal |  |
|  | Total | Interest | interest | 2008 | 2009 | 2010 | 2011 | Thereafter |
| Costa\tRica\tLease | $9,772 | $7,066 | $16,838 | $957 | $1,469 | $1,520 | $1,573 | $11,319 |
| Marlborough\tLease | 6,695 | 5,276 | 11,971 | 924 | 924 | 982 | 982 | 8,159 |

In	connection	with	the	Cytyc	merger,	we	assumed	the	obligations	under	Cytyc's	2.25%	Senior	Convertible	Notes	due	2024	(the	Cytyc	Notes)	and	the	indenture entered	into	on	March	22,	2004	by	Cytyc	and	U.S.	Bank	Trust	National	Association,	as	trustee	thereunder	(the	Trustee),	pursuant	to	which	the	Cytyc	Notes	were	issued (the	Indenture).	As	of	October	22,	2007,	Cytyc	Notes	in	the	approximate	principal	face	amount	of	$73,300,000	were	outstanding.	Interest	on	the	Cytyc	Notes	is	payable semi-annually	and	the	Cytyc	Notes	were	previously	convertible	into	shares	of	Cytyc	common	stock.	At	the	effective	time	of	the	Merger,	we	entered	into	a	supplemental indenture	with	the	Trustee	(the	Supplemental	Indenture)	as	required	by	the	Indenture	in	order	to	provide	that	we,	as	the	successor	to	Cytyc,	assumed	the	obligations	of Cytyc	under	the	Cytyc	Notes	and	the	Indenture,	and	as	a	result	of	the	Merger,	the	Cytyc	Notes	ceased	to	be	convertible	into	shares	of	Cytyc	common	stock	but	rather became	convertible	into	the	kind	and	amount	of	shares	of	stock	which	a	holder	of	shares	of	Cytyc	common	stock	would	have	been	entitled	to	receive	upon	the	Merger had	the	Cytyc	Notes	been	converted	into	shares	of	our	common	stock	immediately	prior	to	the	Merger,	such	that	each	$1,000	principal	face	amount	of	Cytyc	Notes	may be	converted	at	any	time	and	from	time	to	time	into	$556.12	in	cash	and	17.53	shares	of	our	common	stock.	Pursuant	to	the	terms	of	the	Indenture,	we	were	obligated	to offer	to	repurchase	all	of	the	outstanding	Cytyc	Notes	in	exchange	for	the	principal	face	amount	of	such	Cytyc	Notes	plus	accrued	but	unpaid	interest	thereon.	Our obligations	under	the	Cytyc	Notes	and	the	Indenture	may	be	accelerated	upon	the	occurrence	of	certain	customary	events	of	default	including,	without	limitation, payment	defaults,	uncured	defaults	in	the	performance	of	certain	covenants	and	agreements	under	the	Indenture	and	bankruptcy	and	insolvency	related	defaults.

The	expected	timing	of	payment	and	amounts	of	the	obligations	discussed	above	are	estimated	based	on	current	information.

# Recent	Accounting	Pronouncements

In	July	2006,	the	Financial	Account	Standards	Board	(FASB)	issued	Financial	Interpretation	No.	(FIN)	48,	Accounting	for	Uncertainty	in	Income	Taxes,	which applies	to	all	tax	positions	related	to	income	taxes	subject	to	SFAS	No.	109	(SFAS	109),	Accounting	for	Income	Taxes.	This	includes	tax	positions	considered	to	be "routine"	as	well	as	those	with	a	high	degree	of	uncertainty.	FIN	48	utilizes	a	two-step	approach	for	evaluating	tax	positions.	Recognition	(step	one)	occurs	when	an enterprise	concludes	that	a	tax	position,	based	solely	on	its	technical	merits,	is	more-likely-than-not	to	be	sustained	upon	examination.	Measurement	(step	two)	is	only addressed	if	step	one	has	been	satisfied	(i.e.,	the	position	is	more-likely-than-not	to	be	sustained).	Under	step	two,	the	tax	benefit	is	measured	as	the	largest	amount	of benefit,	determined	on	a	cumulative	probability	basis

that	is	more-likely-than-not	to	be	realized	upon	ultimate	settlement.	FIN	48's	use	of	the	term	"more-likely-than-not"	in	steps	one	and	two	is	consistent	with	how	that term	is	used	in	SFAS	109	(i.e.,	a	likelihood	of	occurrence	greater	than	50	percent).

Those	tax	positions	failing	to	qualify	for	initial	recognition	are	recognized	in	the	first	subsequent	interim	period	they	meet	the	more-likely-than-not	standard,	or are	resolved	through	negotiation	or	litigation	with	the	taxing	authority,	or	upon	expiration	of	the	statue	of	limitations.	Derecognition	of	a	tax	position	that	was	previously recognized	would	occur	when	a	company	subsequently	determines	that	a	tax	position	no	longer	meets	the	more-likely-than-not	threshold	of	being	sustained.	FIN	48 specifically	prohibits	the	use	of	a	valuation	allowance	as	a	substitute	for	derecognition	of	tax	positions.

In	addition,	FIN	48	will	require	expanded	disclosure	requirements,	which	include	a	tabular	rollforward	of	the	beginning	and	ending	aggregate	unrecognized	tax benefits	as	well	as	specific	detail	related	to	tax	uncertainties	for	which	it	is	reasonably	possible	the	amount	of	unrecognized	tax	benefit	will	significantly	increase	or decrease	within	twelve	months.	These	disclosures	are	required	at	each	annual	reporting	period	unless	a	significant	change	occurs	in	an	interim	period.

FIN	48	is	effective	for	fiscal	years	beginning	after	December	15,	2006.	We	expect	to	adopt	FIN	48	in	our	first	quarter	of	fiscal	2008,	which	begins	on September	30,	2007.	Differences	between	the	amounts	recognized	in	the	statements	of	financial	position	prior	to	the	adoption	of	FIN	48	and	the	amounts	reported	after adoption	should	be	accounted	for	as	a	cumulative-effect	adjustment	recorded	to	the	beginning	balance	of	retained	earnings.	The	cumulative	effect	adjustment	would	not apply	to	those	items	that	would	not	have	been	recognized	in	earnings,	such	as	the	effect	of	adopting	FIN	48	on	tax	positions	related	to	business	combinations.

We	believe	the	adoption	will	not	have	a	material	impact	on	our	results	of	operation	or	financial	position.

On	September	13,	2006,	the	SEC	staff	published	SAB	No.	108	(SAB	108),	Considering	the	Effects	of	Prior	Year	Misstatements	when	Quantifying	Misstatements in	Current	Year	Financial	Statements.	SAB	108	addresses	quantifying	the	financial	statement	effects	of	misstatements,	specifically,	how	the	effects	of	prior	year uncorrected	errors	must	be	considered	in	quantifying	misstatements	in	the	current	year	financial	statements.	SAB	108	does	not	change	the	SEC	staff's	previous	positions in	SAB	99,	Materiality,	regarding	qualitative	considerations	in	assessing	the	materiality	of	misstatements.	SAB	108	acknowledges	the	existing	diversity	in	practice	in this	area	and	discusses	techniques	commonly	used	to	accumulate	and	quantify	misstatements.	The	"rollover"	method	used	by	some	companies	and	auditors	quantifies	a misstatement	based	on	the	effects	of	correcting	the	misstatement	existing	in	the	current	period	income	statement.	The	"iron	curtain"	method	quantifies	a	misstatement based	on	the	effects	of	correcting	the	misstatement	in	the	balance	sheet	at	the	end	of	the	current	period,	regardless	of	the	misstatement's	period	of	origin.	The	SEC	staff does	not	believe	exclusive	reliance	on	one	method	biased	toward	either	the	income	statement	of	the	balance	sheet	is	appropriate.	The	staff	believes	that	registrants	and auditors	must	quantify	the	effects	on	the	current	year	financial	statements	of	correcting	all	misstatements,	including	both	carryover	and	reversing	effects	of	uncorrected prior	year	misstatements.	After	considering	all	relevant	quantitative	and	qualitative	factors,	if	either	approach	results	in	a	misstatement	that	is	material,	a	registrant's financial	statements	must	be	adjusted.	SAB	108	is	effective	for	fiscal	years	ending	after	November	15,	2006,	which	is	our	year	ending	September	29,	2007.	The adoption	of	SAB	108	did	not	have	a	material	impact	on	the	Company's	results	of	operations	or	financial	condition.

On	September	15,	2006,	the	FASB	issued	SFAS	No.	157	(SFAS	157),	Fair	Value	Measurements.	SFAS	157	provides	enhanced	guidance	for	using	fair	value	to measure	assets	and	liabilities.	SFAS	157	also	responds	to	investors'	requests	for	expanded	information	about	the	extent	to	which	companies	measure	assets	and liabilities	at	fair	value,	the	information	used	to	fair	value	and	the	effect	of	fair	value	measurements	on	earnings.	SFAS	157	applies	whenever	other	standards	require	(or permit)	assets	or	liabilities	to	be	measured	at	fair	value.	SFAS	157	does	not	expand	the	use	of	fair	value	in	any	new	circumstances.	SFAS	157	is	effective	for	financial statements	issued	for	fiscal	years	beginning	after	November	15,	2007	and	interim	periods	within	those	fiscal	years.	Early

adoption	is	not	permitted.	Therefore,	we	will	adopt	SFAS	157	in	fiscal	2009,	which	commences	on	September	28,	2008.	We	are	currently	evaluating	the	impact	that	the adoption	of	SFAS	157	will	have	on	our	consolidated	financial	statements.

In	February	2007,	the	FASB	issued	Statement	No.	159,	The	Fair	Value	Option	for	Financial	Assets	and	Financial	Liabilities,	including	an	amendment	of	FASB Statement	No.	115,	which	allows	an	entity	to	elect	to	record	financial	assets	and	liabilities	at	fair	value	upon	their	initial	recognition	on	a	contract-by-contract	basis. Subsequent	changes	in	fair	value	would	be	recognized	in	earnings	as	the	changes	occur.	Statement	No.	159	also	establishes	additional	disclosure	requirements	for	these items	stated	at	fair	value.	Statement	No.	159	is	effective	as	of	the	beginning	of	an	entity's	first	fiscal	year	that	begins	after	November	15,	2007,	which	is	our	2009	fiscal year,	with	early	adoption	permitted,	provided	that	we	also	adopt	Statement	No.	157,	Fair	Value	Measurements.	We	are	currently	evaluating	the	impact	that	the	adoption of	Statement	No.	159	will	have	on	our	consolidated	financial	statements.

In	June	2006,	the	FASB	ratified	EITF	Issue	No.	06-3,	How	Taxes	Collected	from	Customers	and	Remitted	to	Governmental	Authorities	Should	Be	Presented	in the	Income	Statement	(That	Is,	Gross	versus	Net	Presentation).	The	scope	of	this	consensus	includes	any	taxes	assessed	by	a	governmental	authority	that	are	directly imposed	on	a	revenue	producing	transaction	between	a	seller	and	a	customer	and	may	include,	but	are	not	limited	to,	sales,	use,	value-added,	and	some	excise	taxes.	Per the	consensus,	the	presentation	of	these	taxes	on	either	a	gross	(included	in	revenues	and	costs)	or	a	net	(excluded	from	revenues)	basis	is	an	accounting	policy	decision that	should	be	disclosed.	We	present	sales	net	of	sales	taxes	in	our	consolidated	statements	of	income.	Issue	No.	06-3	is	effective	for	interim	and	annual	reporting periods	beginning	after	December	15,	2006.	No	change	of	presentation	has	resulted	from	our	adoption	of	Issue	No.	06-3.

In	July	2007,	the	FASB	ratified	EITF	Issue	No.	07-3,	Accounting	for	Nonrefundable	Advance	Payments	for	Goods	or	Services	to	Be	Used	in	Future	Research and	Development	Activities.	The	scope	of	this	consensus	includes	nonrefundable	advance	payments	for	goods	or	services	to	be	received	in	the	future	for	use	in	research and	development	activities	should	be	deferred	and	capitalized.	The	capitalized	amounts	should	be	expensed	as	the	related	goods	are	delivered	or	the	services	are performed.	If	an	entity's	expectations	change	such	that	it	does	not	expect	it	will	need	the	goods	to	be	delivered	or	the	services	to	be	rendered,	capitalized	nonrefundable advance	payments	should	be	charged	to	expense.	Issue	No.	07-3	is	effective	for	new	contract	entered	into	during	fiscal	years	beginning	after	December	15,	2007, including	interim	periods	within	those	fiscal	years.	The	consensus	may	not	be	applied	to	earlier	periods.	Early	adoption	of	the	provisions	is	not	permitted.	Our	historical policy	has	been	to	capitalize	upfront	nonrefundable	advance	payments	related	to	research	and	development	activities	and	expense	these	amounts	as	the	goods	are delivered	or	services	rendered.	Therefore,	the	adoption	of	this	consensus	is	not	expected	to	have	any	impact	on	our	consolidated	financial	statements.

# Item	7A. Quantitative	and	Qualitative	Disclosures	About	Market	Risk.

Financial	Instruments,	Other	Financial	Instruments,	and	Derivative	Commodity	Instruments.	SFAS	No.	107,	Disclosure	of	Fair	Value	of	Financial	Instruments, requires	disclosure	about	fair	value	of	financial	instruments.	Financial	instruments	consist	of	cash	equivalents,	short	and	long-term	investments,	accounts	receivable,	and debt	obligations.	The	fair	value	of	these	financial	instruments	approximates	their	carrying	amount.

Primary	Market	Risk	Exposures.	Our	primary	market	risk	exposures	are	in	the	areas	of	interest	rate	risk	and	foreign	currency	exchange	rate	risk.	In	fiscal	2007,	we incurred	interest	expense	on	borrowings	outstanding	under	our	credit	agreement	with	Bank	of	America	and	on	the	debt	assumed	as	a	result	of	our	acquisition	of	AEG.	At September	29,	2007,	there	were	no	amounts	outstanding	under	the	Bank	of	America	credit	agreement,	and	in	connection	with	the	Credit	Agreement	we	entered	into	on October	22,	2007,	the	Bank	of	America	credit	agreement	was	terminated.

As	of	the	closing	of	the	Cytyc	merger,	we	borrowed	$2.35	billion	under	our	October	22,	2007	Credit	Agreement	all	of	which	carries	variable	interest	rates. Borrowings	under	the	credit	agreement	bear	interest	at	a

rate	per	annum	equal	to,	at	our	option,	either	(1)	the	Base	Rate	(the	greater	of	the	prime	rate	as	quoted	in	The	Wall	Street	Journal	and	the	Federal	Funds	Effective	Rate plus	0.5%)	or	(2)	the	Eurodollar	Rate,	plus	an	applicable	margin	determined	by	reference	to	the	leverage	ratio,	as	set	forth	in	the	credit	agreement.	As	of	October	22, 2007	all	amounts	outstanding	accrued	interest	at	the	Eurodollar	rate	with	applicable	margins	ranging	from	1.75%	to	2.50%.	Each	25	basis	point	change	in	interest	rates would	result	in	approximately	$5.9	million	change	in	annual	interest	expense	based	on	amounts	currently	outstanding.	The	terms	of	the	credit	agreement	obligate	us	to enter	into	hedging	transactions	by	April	2008	to	hedge	the	interest	rate	risk	of	at	least	50%	of	the	indebtedness	under	the	credit	agreement	if	we	do	not	otherwise refinance	such	portion	of	the	indebtedness	with	debt	financing	bearing	a	fixed	rate	of	interest.

The	terms	of	the	AEG	debt	agreements	have	various	maturities	ranging	from	December	30,	2010	through	September	15,	2012.	Interest	rates	are	variable	and	at September	29,	2007	ranged	from	5.7%	to	7.3%.	We	may	also	incur	interest	expense	on	loans	made	under	a	European	line	of	credit	that	accrues	interest	at	the	Europe Interbank	Offered	Rate	plus	1.50%	to	2.25%,	as	defined.	At	September	29,	2007,	there	were	no	amounts	outstanding	under	the	European	line	of	credit.

We	terminated	interest	rate	swap	contracts,	totalling	6	million	Euros	and	$8.5	million	U.S.	dollars,	where	we	paid	a	fixed	rate	and	received	at	a	floating	rate,	in the	fourth	quarter	of	fiscal	2007.	The	termination	resulted	in	a	gain	of	$75,000.

Investments	in	both	fixed	rate	and	floating	rate	interest	earning	instruments	carry	a	degree	of	interest	rate	risk.	Fixed	rate	securities	may	have	their	fair	market value	adversely	impacted	due	to	a	rise	in	interest	rates,	while	floating	rate	securities	may	produce	less	income	than	expected	if	interest	rates	fall.	Due	in	part	to	these factors,	our	future	investment	income	may	fall	short	of	expectation	due	to	changes	in	interest	rates	or	we	may	suffer	losses	in	principal	if	forced	to	sell	securities	that experience	a	decline	in	market	value	due	to	changes	in	interest	rates.	A	hypothetical	10%	increase	or	decrease	in	investment	interest	rates,	however,	would	not	have	a material	adverse	effect	on	our	financial	condition.	Interest	income	on	our	investments	is	recorded	as	a	component	of	Other	Income	in	our	accompanying	consolidated financial	statements.

Foreign	Currency	Exchange	Risk.	Our	international	business	is	subject	to	risks,	including,	but	not	limited	to:	unique	economic	conditions,	changes	in	political climate,	differing	tax	structures,	other	regulations	and	restrictions,	and	foreign	exchange	rate	volatility.	Accordingly,	our	future	results	could	be	materially	adversely impacted	by	changes	in	these	or	other	factors.

We	maintain	sales	and	service	offices	outside	the	United	States,	have	manufacturing	facilities	in	Germany,	Costa	Rica	and	China,	and	conduct	business worldwide.	The	expenses	of	our	international	offices	are	denominated	in	local	currencies,	except	at	our	Costa	Rica	subsidiary,	where	the	majority	of	the	business	is conducted	in	U.S.	dollars.	Our	foreign	sales	are	denominated	in	local	currencies,	the	Euro	or	U.S.	dollars.	Fluctuations	in	the	foreign	currency	rates	could	affect	our	cost of	goods	and	operating	margins	and	could	result	in	exchange	losses.	In	addition,	currency	devaluations	can	result	in	a	loss	if	we	hold	deposits	of	that	currency.

We	believe	that	the	operating	expenses	of	our	international	subsidiaries	that	are	incurred	in	local	currencies	will	not	have	a	material	adverse	effect	on	our business,	results	of	operations	or	financial	condition.	Our	operating	results	and	certain	assets	and	liabilities	that	are	denominated	in	the	Euro	are	affected	by	changes	in the	relative	strength	of	the	U.S.	dollar	against	the	Euro.	Our	expenses	are	positively	affected	when	the	United	States	dollar	strengthens	against	the	Euro	and	adversely affected	when	the	United	States	dollar	weakens.	However,	we	believe	that	the	foreign	currency	exchange	risk	is	not	significant.	During	fiscal	2007,	2006,	and	2005,	we incurred	foreign	currency	exchange	gains	(losses)	of	$(440,390),	$30,000,	and	$221,000,	respectively.

We	occasionally	use	forward	foreign	exchange	contracts	to	mitigate	our	foreign	currency	exchange	rate	exposures	related	to	our	foreign	currency	denominated assets	and	liabilities,	and	more	specifically,	to	hedge,	on	a	net	basis,	the	foreign	currency	exposure	of	a	portion	of	our	German	sales	denominated	in	the	U.S.	dollar.	The 74

terms	of	these	forward	contracts	are	generally	of	a	short-term	nature	(6-12	months).	At	September	29,	2007,	we	had	no	outstanding	forward	foreign	exchange	contracts.

# Item	8. Financial	Statements	and	Supplementary	Data.

Our	consolidated	Financial	Statements	and	Supplementary	Data	are	listed	under	Part	IV,	Item	15,	in	this	report.

# Item	9. Changes	in	and	Disagreements	with	Accountants	on	Accounting	and	Financial	Disclosure.

# None.

# Item	9A. Controls	and	Procedures.

# Evaluation	of	Disclosure	Controls	and	Procedures

We	maintain	disclosure	controls	and	procedures	that	are	designed	to	ensure	that	information	required	to	be	disclosed	in	our	Securities	Exchange	Act	reports	is recorded,	processed,	summarized	and	reported	within	the	time	periods	specified	in	the	SEC's	rules	and	forms,	and	that	such	information	is	accumulated	and communicated	to	our	management,	including	our	Chief	Executive	Officer	and	Chief	Financial	Officer,	as	appropriate,	to	allow	timely	decisions	regarding	required disclosure.	In	designing	and	evaluating	the	disclosure	controls	and	procedures,	management	recognized	that	any	controls	and	procedures,	no	matter	how	well	designed and	operated,	can	provide	only	reasonable	assurance	of	achieving	the	desired	control	objectives,	as	ours	are	designed	to	do,	and	management	necessarily	was	required	to apply	its	judgment	in	evaluating	the	cost-benefit	relationship	of	possible	controls	and	procedures.

As	of	September	29,	2007,	we	carried	out	an	evaluation,	under	the	supervision	and	with	the	participation	of	our	management,	including	our	Chief	Executive Officer	and	Chief	Financial	Officer,	of	the	effectiveness	of	the	design	and	operation	of	our	disclosure	controls	and	procedures,	as	defined	in	Rules	13a-15(e)	and	15d- 15(e)	under	the	Securities	Exchange	Act	of	1934.	Based	upon	that	evaluation,	our	Chief	Executive	Officer	and	Chief	Financial	Officer	concluded	that	our	disclosure controls	and	procedures	are	effective	in	enabling	us	to	record,	process,	summarize	and	report	information	required	to	be	included	in	our	periodic	SEC	filings	within	the required	time	period.

# Report	of	Management	on	Internal	Control	over	Financial	Reporting

We	are	responsible	for	establishing	and	maintaining	adequate	internal	control	over	financial	reporting.	Internal	control	over	financial	reporting	is	defined	in	Rule 13a-15(f)	and	15d-15(f)	under	the	Securities	Exchange	Act	of	1934,	as	amended,	as	a	process	designed	by,	or	under	the	supervision	of	our	principal	executive	and principal	financial	officers	and	effected	by	our	board	of	directors,	management	and	other	personnel	to	provide	reasonable	assurance	regarding	the	reliability	of	financial reporting	and	the	preparation	of	financial	statements	for	external	purposes	in	accordance	with	generally	accepted	accounting	principles	and	includes	those	policies	and procedures	that:

•pertain	to	the	maintenance	of	records	that	in	reasonable	detail	accurately	and	fairly	reflect	the	transactions	and	disposition	of	our	assets;

•provide	reasonable	assurance	that	transactions	are	recorded	as	necessary	to	permit	preparation	of	financial	statements	in	accordance	with	generally accepted	accounting	principles,	and	that	our	receipts	and	expenditures	are	being	made	only	in	accordance	with	authorization	of	our	management	and directors;	and

•provide	reasonable	assurance	regarding	prevention	or	timely	detection	of	unauthorized	acquisition,	use	or	disposition	of	our	assets	that	could	have	a material	effect	on	the	financial	statements.

Our	internal	control	system	was	designed	to	provide	reasonable	assurance	to	our	management	and	board	of	directors	regarding	the	preparation	and	fair presentation	of	published	financial	statements.	Because	of	its	inherent	limitations,	internal	control	over	financial	reporting	may	not	prevent	or	detect	misstatements. Projections	of	any	evaluation	of	effectiveness	to	future	periods	are	subject	to	the	risks	that	controls	may	become	inadequate	because	of	changes	in	conditions,	or	that	the degree	of	compliance	with	the	policies	or	procedures	may	deteriorate.

We	have	assessed	the	effectiveness	of	our	internal	control	over	financial	reporting	as	of	September	29,	2007.	In	making	this	assessment,	we	used	the	criteria	set forth	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission	(COSO)	in	Internal	Control-Integrated	Framework.

Our	assessment	of	and	conclusion	on	the	effectiveness	of	internal	control	over	financial	reporting	did	not	include	the	internal	controls	of	BioLucent,	Inc.,	a business	we	acquired	during	the	year	ended	September	29,	2007	and	which	is	included	in	our	fiscal	2007	consolidated	financial	statements	and	constituted	approximately $83,600,000	and	$72,500,000	of	total	and	net	assets,	respectively,	as	of	September	29,	2007	and	approximately	$800,000	and	$100,000	of	revenues	and	net	income, respectively	for	the	period	from	the	date	of	acquisition	through	September	29,	2007.

Based	on	our	assessment,	we	believe	that,	as	of	September	29,	2007,	our	internal	control	over	financial	reporting	is	effective	at	a	reasonable	assurance	level	based on	these	criteria.

# Report	of	Independent	Registered	Public	Accounting	Firm

# The	Board	of	Directors	and	Shareholders	of	Hologic,	Inc.:

We	have	audited	Hologic	Inc.'s	(the	"Company")	internal	control	over	financial	reporting	as	of	September	29,	2007,	based	on	criteria	established	in	Internal Control—Integrated	Framework	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission	(the	COSO	criteria).	Hologic	Inc.'s	management	is responsible	for	maintaining	effective	internal	control	over	financial	reporting,	and	for	its	assessment	of	the	effectiveness	of	internal	control	over	financial	reporting included	in	the	accompanying	Report	of	Management	on	Internal	Control	over	Financial	Reporting.	Our	responsibility	is	to	express	an	opinion	on	the	Company's internal	control	over	financial	reporting	based	on	our	audit.

We	conducted	our	audit	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those	standards	require	that	we plan	and	perform	the	audit	to	obtain	reasonable	assurance	about	whether	effective	internal	control	over	financial	reporting	was	maintained	in	all	material	respects.	Our audit	included	obtaining	an	understanding	of	internal	control	over	financial	reporting,	assessing	the	risk	that	a	material	weakness	exists,	testing	and	evaluating	the	design and	operating	effectiveness	of	internal	control	based	on	the	assessed	risk,	and	performing	such	other	procedures	as	we	considered	necessary	in	the	circumstances.	We believe	that	our	audit	provides	a	reasonable	basis	for	our	opinion.

A	company's	internal	control	over	financial	reporting	is	a	process	designed	to	provide	reasonable	assurance	regarding	the	reliability	of	financial	reporting	and	the preparation	of	financial	statements	for	external	purposes	in	accordance	with	generally	accepted	accounting	principles.	A	company's	internal	control	over	financial reporting	includes	those	policies	and	procedures	that	(1)	pertain	to	the	maintenance	of	records	that,	in	reasonable	detail,	accurately	and	fairly	reflect	the	transactions	and dispositions	of	the	assets	of	the	company;	(2)	provide	reasonable	assurance	that	transactions	are	recorded	as	necessary	to	permit	preparation	of	financial	statements	in accordance	with	generally	accepted	accounting	principles,	and	that	receipts	and	expenditures	of	the	company	are	being	made	only	in	accordance	with	authorizations	of management	and	directors	of	the	company;	and	(3)	provide	reasonable	assurance	regarding	prevention	or	timely	detection	of	unauthorized	acquisition,	use,	or disposition	of	the	company's	assets	that	could	have	a	material	effect	on	the	financial	statements.

Because	of	its	inherent	limitations,	internal	control	over	financial	reporting	may	not	prevent	or	detect	misstatements.	Also,	projections	of	any	evaluation	of effectiveness	to	future	periods	are	subject	to	the	risk	that	controls	may	become	inadequate	because	of	changes	in	conditions,	or	that	the	degree	of	compliance	with	the policies	or	procedures	may	deteriorate.

As	indicated	in	the	accompanying	Report	of	Management	on	Internal	Control	over	Financial	Reporting,	management's	assessment	of	and	conclusion	on	the effectiveness	of	internal	control	over	financial	reporting	did	not	include	the	internal	controls	of	Biolucent,	Inc.,	a	business	acquired	by	Hologic.	Inc.	during	the	year- ended	September	29,	2007,	which	is	included	in	the	2007	consolidated	financial	statements	of	Hologic,	Inc.	and	constituted	approximately	$83,600,000	and	$72,500,000 of	total	and	net	assets,	respectively,	as	of	September	29,	2007	and	$800,000	and	$100,000	of	revenues	and	net	income,	respectively,	for	the	year	then	ended.	Our	audit	of internal	control	over	financial	reporting	of	Hologic,	Inc.	also	did	not	include	an	evaluation	of	the	internal	control	over	financial	reporting	of	Biolucent,	Inc.

In	our	opinion,	Hologic,	Inc.	maintained,	in	all	material	respects,	effective	internal	control	over	financial	reporting	as	of	September	29,	2007,	based	on	the	COSO criteria.

We	have	also	audited,	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States),	the	consolidated	balance	sheets	of Hologic,	Inc.	as	of	September	29,	2007	and	September	30,	2006	and	the	related	consolidated	statements	of	income,	stockholders'	equity	and	other	comprehensive income	and	cash	flows	for	each	of	the	three	years	in	the	period	ended	September	29,	2007	of	Hologic,	Inc.	and	our	report	dated	November	26,	2007	expressed	an unqualified	opinion	thereon.

/s/	Ernst	&	Young	LLP

Boston,	Massachusetts

# Changes	in	Internal	Control	over	Financial	Reporting

As	a	result	of	our	recent	acquisitions	we	have	begun	to	intergrate	certain	business	processes	and	systems	of	the	acquired	entities.	Accordingly,	certain	changes have	been	made	and	will	continue	to	be	made	to	our	internal	controls	over	financial	reporting	until	such	time	as	these	integrations	are	complete.	There	have	been	no other	changes	in	our	internal	control	over	financial	reporting	that	occurred	during	the	last	fiscal	quarter	that	have	materially	affected,	or	are	reasonably	likely	to materially	affect,	our	internal	control	over	financial	reporting.

# Item	9B. Other	Information.

# PART	III

# Item	10. Directors,	and	Executive	Officers	and	Corporate	Governance.

Pursuant	to	Section	406	of	the	Sarbanes-Oxley	Act	of	2002,	we	have	adopted	a	Code	of	Ethics	for	Senior	Financial	Officers	that	applies	to	our	principal	executive officer	and	principal	financial	officer,	principal	accounting	officer	and	controller,	and	other	persons	performing	similar	functions.	Our	Code	of	Ethics	for	Senior Financial	Officers	is	publicly	available	on	our	website	at	www.hologic.com.	We	intend	to	satisfy	the	disclosure	requirement	under	Item	5.05	of	Current	Report	on	Form 8-K	regarding	an	amendment	to,	or	waiver	from,	a	provision	of	this	code	by	posting	such	information	on	our	website,	at	the	address	specified	above.

The	additional	information	required	by	this	item	is	incorporated	by	reference	to	our	Definitive	Proxy	Statement	for	our	annual	meeting	of	stockholders	to	be	filed with	the	Securities	and	Exchange	Commission	within	120	days	after	the	close	of	our	fiscal	year.

# Item	11. Executive	Compensation.

The	information	required	by	this	item	is	incorporated	by	reference	to	our	Definitive	Proxy	Statement	for	our	annual	meeting	of	stockholders	to	be	filed	with	the Securities	and	Exchange	Commission	within	120	days	after	the	close	of	our	fiscal	year.

# Item	12. Security	Ownership	of	Certain	Beneficial	Owners	and	Management	and	Related	Stockholder	Matters.

We	maintain	a	number	of	equity	compensation	plans	for	employees,	officers,	directors	and	others	whose	efforts	contribute	to	our	success.	The	table	below	sets forth	certain	information	as	of	the	end	of	our	fiscal	year	ended	September	29,	2007	regarding	the	shares	of	our	common	stock	available	for	grant	or	granted	under	stock option	plans	and	equity	incentives	that	(i)	were	approved	by	our	stockholders,	and	(ii)	were	not	approved	by	our	stockholders.	The	number	of	securities	and	the	exercise price	of	the	outstanding	securities	have	been	adjusted	to	reflect	our	two-for-one	stock	split	effected	on	November	30,	2005.

# Equity	Compensation	Plan	Information

| Plan	Category | Number	of<br>securities	to	be<br>issued	upon<br>exercise	of<br>outstanding<br>options,	warrants<br>and	rights<br>(a) | Weighted-average<br>exercise	price	of<br>outstanding<br>options,<br>warrants	and	rights<br>(b) | Number	of	securities<br>remaining	available	for<br>future	issuance	under<br>equity	compensation<br>plans	(excluding<br>securities	reflected	in<br>column	(a))<br>(c) |
| :--- | :--- | :--- | :--- |
| Equity\tcompensation\tplans\tapproved\tby\tsecurity\tholders | 2,590,898 | $22.08 | 942,512 |
| Equity\tcompensation\tplans\tnot\tapproved\tby\tsecurity\tholders\t(1) | 352,796 | $7.33 | — |
| Total | 2,943,694 | $20.31 | 942,512 |

(1) Includes	the	following	plans:	1997	Employee	Equity	Incentive	Plan	and	2000	Acquisition	Equity	Incentive	Plan.	A	description	of	each	of	these	plans	is	as follows:

1997	Employee	Equity	Incentive	Plan.	The	purposes	of	the	1997	Employee	Equity	Incentive	Plan	(the	"1997	Plan"),	adopted	by	the	Board	of	Directors	in	May 1997,	are	to	attract	and	retain	key	employees,	consultants	and	advisors,	to	provide	an	incentive	for	them	to	assist	us	in	achieving	long-range	performance	goals,	and	to enable	such	person	to	participate	in	our	long-term	growth.	In	general,	under	the	1997	Plan,	all	employees,

consultants,	and	advisors	who	are	not	executive	officers	or	directors	are	eligible	to	participate	in	the	1997	Plan.	The	1997	Plan	is	administered	by	a	committee	consisting of	at	least	three	members	of	the	Board	appointed	by	the	Board	of	Directors.	Participants	in	the	1997	Plan	are	eligible	to	receive	non-qualified	stock	options,	stock appreciation	rights,	restricted	stock	and	performance	shares.	A	total	of	2,200,000	shares	of	our	common	stock	were	reserved	for	issuance	under	the	1997	Plan.	Of	the shares	reserved	for	issuance	under	the	1997	Plan,	options	to	purchase	214,094	shares	are	outstanding	as	of	September	29,	2007.	In	September	2005,	our	Board	of Directors	determined	that	no	further	awards	would	be	made	under	this	plan	and	cancelled	all	remaining	166,084	shares,	available	for	issuance	under	the	1997	Plan	that are	not	subject	to	outstanding	stock	option	awards.

2000	Acquisition	Incentive	Plan.	The	purpose	of	the	2000	Acquisition	Equity	Incentive	Plan	(the	"2000	Plan"),	adopted	by	the	Board	of	Directors	in	April	2001, is	to	attract	and	retain	(a)	employees,	consultants	and	advisors,	of	newly	acquired	businesses	who	have	been	or	are	being	hired	as	employees,	consultants	or	advisors	of our	company	or	any	of	our	consolidated	subsidiaries,	and	(b)	employees,	consultants	and	advisors,	of	our	company	who	have	or	are	anticipated	to	provide	significant assistance	in	connection	with	the	acquisition	of	a	newly	acquired	business	or	its	integration	with	our	company,	and	to	provide	such	persons	an	incentive	for	them	to achieve	long-range	performance	goals,	and	to	enable	them	to	participate	in	our	long-term	growth.	In	general,	under	the	2000	Plan,	only	employees,	consultants	and advisors	who	are	not	officers	or	directors	of	our	company	are	eligible	to	participate	in	the	2000	Plan.	The	2000	Plan	is	administered	by	the	Board	or,	at	its	option,	a committee	consisting	of	at	least	three	members	of	the	Board	appointed	by	the	Board	of	Directors.	Participants	in	the	2000	Plan	are	eligible	to	receive	non-qualified	stock options,	stock	appreciation	rights,	restricted	stock	and	performance	shares.	A	total	of	1,600,000	shares	of	our	common	stock	were	reserved	for	issuance	under	the	2000 Plan.	Of	the	shares	reserved	for	issuance	under	the	2000	Plan,	options	to	purchase	138,702	shares	are	outstanding	as	of	September	29,	2007.	In	September	2005,	the Board	of	Directors	determined	that	no	further	awards	would	be	made	under	this	plan	and	cancelled	all	remaining	417,704	shares,	available	for	issuance	under	the	2000 Plan	that	are	not	subject	to	outstanding	stock	option	awards.

# Item	13. Certain	Relationships	and	Related	Transactions.

# Item	14. Principal	Accountant	Fees	and	Services.

# PART	IV

# Item	15. Exhibits,	Financial	Statement	Schedules.

(a)	The	following	documents	are	filed	as	part	of	this	report:

(1)	Financial	Statements

Report	of	Independent	Registered	Public	Accounting	Firm	on	Consolidated	Financial	Statements

Consolidated	Balance	Sheets	as	of	September	29,	2007	and	September	30,	2006

Consolidated	Statements	of	Income	for	the	years	ended	September	29,	2007,	September	30,	2006	and	September	24,	2005

Consolidated	Statements	of	Stockholders'	Equity	and	Comprehensive	Income	for	the	years	ended	September	29,	2007,	September	30,	2006	and September	24,	2005

Consolidated	Statements	of	Cash	Flows	for	the	years	ended	September	29,	2007,	September	30,	2006	and	September	24,	2005

Notes	to	Consolidated	Financial	Statements

# (2)	Financial	Statement	Schedules

All	schedules	have	been	omitted	because	they	are	not	required	or	because	the	required	information	is	given	in	the	Consolidated	Financial	Statements or	Notes	thereto.

# (b)	Listing	of	Exhibits

* Management	compensation	plan	or	arrangement

** Portions	of	this	Agreement	have	been	omitted	pursuant	to	a	request	for	confidential	Treatment	and	have	been	filed	separately	with	the	Commission

A We	previously	filed	this	exhibit	on	January	24,	1990	with	the	referenced	exhibit	number	as	an	exhibit	to	our	Registration	Statement	on	Form	S-1	(Registration No.	33-33128)	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

B We	previously	filed	this	exhibit	on	January	31,	1990	with	the	referenced	exhibit	number	as	an	exhibit	to	our	Registration	Statement	on	Form	8-A,	and	the previously	filed	exhibit	is	incorporated	herein	by	reference.

C We	previously	filed	this	exhibit	on	May	14,	1996,	with	the	referenced	exhibit	number	as	an	exhibit	to	our	Quarterly	Report	on	Form	10-Q	(SEC	File	No.	000- 18281)	for	the	quarter	ended	March	30,	1996,	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

D We	previously	filed	this	exhibit	on	August	20,	1997	with	the	referenced	exhibit	number	as	an	exhibit	to	our	Registration	Statement	on	Form	S-8	(SEC	File	No. 333-34003)	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

E Trex	Medical	Corporation	previously	filed	this	exhibit	with	the	referenced	exhibit	number	as	an	exhibit	to	its	Registration	Statement	on	Form	S-1	(Reg.	No. 333-2926)	and	the	previously	filed	exhibit	is	incorporated	by	reference.

F We	previously	filed	this	exhibit	on	December	12,	2001	with	the	referenced	exhibit	number	as	an	exhibit	to	our	Annual	Report	on	Form	10-K	(SEC	File	No.	000- 18281)	for	the	fiscal	year	ended	September	29,	2001,	and	the	previously	filed	exhibit	is	incorporated	by	reference.

G We	previously	filed	this	exhibit	on	December	4,	2002	with	the	referenced	exhibit	number	as	an	exhibit	to	our	registration	statement	on	Form	8-A	(SEC	File	No. 000-18281)	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

H We	previously	filed	this	exhibit	on	December	24,	2002	with	the	referenced	exhibit	number	as	an	exhibit	to	our	Annual	Report	on	Form	10-K	(SEC	File	No.	000- 18281)	for	the	fiscal	year	ended	September	28,	2002,	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

I We	previously	filed	this	exhibit	on	September	23,	2004	with	the	referenced	exhibit	number	as	an	exhibit	to	our	Current	Report	on	Form	8-K	(SEC	File	No.	000- 18281)	dated	as	of	September	23,	2004,	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

J We	previously	filed	this	exhibit	on	February	3,	2005	with	the	referenced	exhibit	number	as	an	exhibit	to	our	Quarterly	Report	on	Form	10-Q	(SEC	File	No.	000- 18281)	for	the	quarter	ended	December	25,	2004,	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

K We	previously	filed	this	exhibit	on	May	4,	2006	with	the	referenced	exhibit	number	as	an	exhibit	to	our	Quarterly	Report	on	Form	10-Q	(SEC	File	No.	000- 18281)	for	the	fiscal	quarter	ended	March	25,	2006,	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

L We	previously	filed	this	exhibit	on	December	6,	2005	with	the	referenced	exhibit	number	as	an	exhibit	to	our	Annual	Report	on	Form	10-K	(SEC	File	No.	000- 18281)	for	the	fiscal	year	ended	September	24,	2005,	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

M We	previously	filed	this	exhibit	on	November	2,	2006	with	the	referenced	exhibit	number	as	an	exhibit	to	our	Current	Report	on	Form	8-K	(SEC	File	No. 000-18281)	dated	as	of	November	2,	2006,	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

N We	previously	filed	this	exhibit	on	May	21,	2007	with	the	referenced	exhibit	number	as	an	exhibit	to	our	Current	Report	on	Form	8-A	(SEC	File	No.	000- 18281)	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

O We	previously	filed	this	exhibit	on	July	27,	2006	with	the	referenced	exhibit	number	as	an	exhibit	to	our	Current	Report	on	Form	8-K	(SEC	File	No.	000- 18281)	dated	as	of	July	27,	2006,	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

P We	previously	filed	this	exhibit	on	December	14,	2006	with	the	referenced	exhibit	number	as	an	exhibit	to	our	Annual	Report	on	Form	10-K	(SEC	File	No. 000-18281)	for	the	fiscal	year	ended	September	30,	2006,	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

Q We	previously	filed	this	exhibit	on	May	21,	2007	with	the	referenced	exhibit	number	to	our	Current	Report	on	Form	8-K	(SEC	File	No.	000-18281)	dated	as of	May	21,	2007,	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

R We	previously	filed	this	exhibit	on	June	25,	2007	with	the	referenced	exhibit	number	to	our	Current	Report	on	Form	8-K	(SEC	File	No.	000-18281)	dated	as of	June	25,	2007,	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

S We	previously	filed	this	exhibit	on	June	29,	2007	with	the	referenced	exhibit	number	to	our	Registration	Statement	on	Form	S-4	(SEC	File	No.	333-144238) dated	as	of	June	29,	2007,	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

T We	previously	filed	this	exhibit	on	August	20,	2007	with	the	referenced	exhibit	number	to	our	Registration	Statement	on	Form	S-4	(SEC	File	No.	333- 144238)	dated	as	of	August	20,	2007,	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

U We	previously	filed	this	exhibit	on	October	22,	2007	with	the	referenced	exhibit	number	to	our	Current	Report	on	Form	8-K	(SEC	File	No.	000-18281)	dated as	of	October	22,	2007,	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

V We	previously	filed	this	exhibit	on	October	23,	2007	with	the	referenced	exhibit	number	to	our	Registration	Statement	on	Form	S-8	(SEC	File	No.	333- 146887)	dated	as	of	October	23,	2007,	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

W We	previously	filed	this	exhibit	on	October	23,	2007	with	the	referenced	exhibit	number	to	our	Current	Report	on	Form	8-K/A	(SEC	File	No.	000-18281) dated	as	of	October	23,	2007	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

X Cytyc	Corporation	previously	filed	this	exhibit	on	February	13,	2007	with	the	referenced	exhibit	number	as	an	Exhibit	to	its	current	report	on	Form	8-K (SEC	File	No.	000-27558)	and	the	previously	filed	exhibit	is	incorporated	by	reference.

Y Cytyc	Corporation	previously	filed	this	exhibit	on	February	28,	2007	with	the	referenced	exhibit	number	as	an	Exhibit	to	its	current	report	on	Form	8-K (SEC	File	No.	000-27558)	and	the	previously	filed	exhibit	is	incorporated	by	reference.

Z Cytyc	Corporation	previously	filed	this	exhibit	on	June	7,	2004	with	the	referenced	exhibit	number	as	an	Exhibit	to	its	registration	statement	on	Form	S-3 (SEC	File	No.	333-16237)	and	the	previously	filed	exhibit	is	incorporated	by	reference.

AA Cytyc	Corporation	previously	filed	this	exhibit	on	November	2,	2004	with	the	referenced	exhibit	number	as	an	exhibit	to	its	quarterly	report	on	Form	10-Q (SEC	File	No.	000-27558)	and	the	previously	filed	exhibit	is	incorporated	by	reference.

BB Cytyc	Corporation	previously	filed	this	exhibit	on	January	30,	2004	with	the	referenced	exhibit	number	as	an	exhibit	to	its	annual	report	on	Form	10-K	(SEC File	No.	000-27558)	and	the	previously	filed	exhibit	is	incorporated	by	reference.

CC Cytyc	Corporation	previously	filed	this	exhibit	with	the	referenced	exhibit	number	as	an	exhibit	to	its	registration	statement	on	Form	S-1	(SEC	File	No.	333- 00300)	and	the	previously	filed	exhibit	is	incorporated	by	reference.

DD Cytyc	Corporation	previously	filed	this	exhibit	on	March	24,	2003	with	the	referenced	exhibit	number	as	an	exhibit	to	its	annual	report	on	Form	10-K	(SEC File	No.	000-27558)	and	the	previously	filed	exhibit	is	incorporated	by	reference.

# SIGNATURES

Pursuant	to	the	requirements	of	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934,	the	registrant	has	duly	caused	this	report	to	be	signed	on	its	behalf	by the	undersigned,	thereunto	duly	authorized.

# JOHN	W.	CUMMING

Pursuant	to	the	requirements	of	the	Securities	Exchange	Act	of	1934,	this	report	has	been	signed	below	by	the	following	persons	on	behalf	of	the	registrant	and	in the	capacities	and	on	the	dates	indicated.

# Audited	Consolidated	Financial	Statements

# Contents

# on	Consolidated	Financial	Statements

# The	Board	of	Directors	and	Stockholders	of	Hologic,	Inc.

We	have	audited	the	accompanying	consolidated	balance	sheets	of	Hologic,	Inc.	and	subsidiaries	as	of	September	29,	2007	and	September	30,	2006,	and	the related	consolidated	statements	of	income,	stockholders'	equity	and	other	comprehensive	income,	and	cash	flows	for	each	of	the	three	years	in	the	period	ended September	29,	2007.	These	financial	statements	are	the	responsibility	of	the	Company's	management.	Our	responsibility	is	to	express	an	opinion	on	these	financial statements	based	on	our	audits.

We	conducted	our	audits	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those	standards	require	that	we plan	and	perform	the	audit	to	obtain	reasonable	assurance	about	whether	the	financial	statements	are	free	of	material	misstatement.	An	audit	includes	examining,	on	a test	basis,	evidence	supporting	the	amounts	and	disclosures	in	the	financial	statements.	An	audit	also	includes	assessing	the	accounting	principles	used	and	significant estimates	made	by	management,	as	well	as	evaluating	the	overall	financial	statement	presentation.	We	believe	that	our	audits	provide	a	reasonable	basis	for	our	opinion.

In	our	opinion,	the	financial	statements	referred	to	above	present	fairly,	in	all	material	respects,	the	consolidated	financial	position	of	Hologic,	Inc.	and subsidiaries	at	September	29,	2007	and	September	30,	2006,	and	the	consolidated	results	of	their	operations	and	their	cash	flows	for	each	of	the	three	years	in	the	period ended	September	29,	2007,	in	conformity	with	U.S.	generally	accepted	accounting	principles.

As	discussed	in	Note	2	to	the	consolidated	financial	statements,	as	of	September	25,	2005,	the	Company	adopted	the	provisions	of	Statement	of	Financial Accounting	Standards	No.	123(R),	Share-Based	Payment.

As	discussed	in	Note	7	to	the	consolidated	financial	statements,	as	of	September	29,	2007	the	Company	adopted	the	provisions	of	Statement	of	Financial Accounting	Standards	No.	158,	Employers'	Accounting	for	Defined	Benefit	Pension	and	Other	Postretirement	Plans,	an	amendment	of	FASB	Statements	No.	87,	88, 106	and	132(R).

We	also	have	audited,	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States),	the	effectiveness	of	Hologic,	Inc.'s internal	control	over	financial	reporting	as	of	September	29,	2007,	based	on	criteria	established	in	Internal	Control-Integrated	Framework	issued	by	the	Committee	of Sponsoring	Organizations	of	the	Treadway	Commission	and	our	report	dated	November	26,	2007	expressed	an	unqualified	opinion	thereon.

# Consolidated	Balance	Sheets

# (In	thousands,	except	per	share	data)

|  | September	29,<br>2007 | September	30<br>2006 |
| :--- | :--- | :--- |
| Assets |  |  |
| Current\tassets: |  |  |
| Cash\tand\tcash\tequivalents | $100,403 | $29,923 |
| Accounts\treceivable,\tless\treserves\tof\t$4,598\tand\t$3,712\trespectively | 152,743 | 108,566 |
| Inventories | 105,289 | 93,477 |
| Deferred\tincome\ttax\tasset | 29,356 | 50,944 |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | 11,389 | 7,112 |
| Total\tcurrent\tassets | 399,180 | 290,022 |
| Property\tand\tequipment,\tat\tcost: |  |  |
| Land | 2,710 | 2,695 |
| Buildings\tand\timprovements | 28,577 | 25,699 |
| Equipment\tand\tsoftware | 81,390 | 65,113 |
| Furniture\tand\tfixtures | 6,044 | 5,120 |
| Leasehold\timprovements | 6,636 | 4,535 |
|  | 125,357 | 103,162 |
| Less—accumulated\tdepreciation\tand\tamortization | 55,588 | 41,439 |
|  | 69,769 | 61,723 |
| Other\tassets: |  |  |
| Intangible\tassets,\tnet\tof\taccumulated\tamortization\tof\t$9,149\tand\t$7,766,\trespectively | 12,340 | 10,265 |
| Customer\trelationship,\tnet\tof\taccumulated\tamortization\tof\t$6,303\tand\t$1,477,\trespectively | 49,389 | 37,116 |
| Developed\ttechnology\tand\tknow-how,\tnet\tof\taccumulated\tamortization\tof\t$19,625\tand\t$8,946,\trespectively | 112,632 | 110,780 |
| Goodwill | 407,528 | 341,994 |
| Other,\tnet | 15,511 | 4,305 |
| Total\tassets | $1,066,349 | $856,205 |
| Liabilities |  |  |
| Current\tliabilities: |  |  |
| Line\tof\tcredit | $— | $55,000 |
| Current\tportion\tof\tnotes\tpayable | 1,977 | 2,921 |
| Accounts\tpayable | 42,289 | 26,443 |
| Accrued\texpenses\t(Note\t15) | 88,577 | 51,262 |
| Deferred\trevenue | 45,769 | 30,903 |
| Total\tcurrent\tliabilities | 178,612 | 166,529 |
| Note\tpayable,\tnet\tof\tcurrent\tportion | 9,222 | 6,163 |
| Deferred\tincome\ttax\tliabilities | 54,866 | 60,858 |
| Deferred\tservice\tobligations—long\tterm | 10,135 | 7,902 |
| Other\tlong\tterm\tliabilities | 7,791 | 9,006 |
| Commitments\tand\tcontingencies\t(Notes\t13,\t16\tand\t19) |  |  |
| Stockholders'\tequity |  |  |
| Preferred\tstock,\t$0.01\tpar\tvalue–1,623\tshares\tauthorized;\t0\tshares\tissued | — | — |
|  | 551 | 526 |
| Capital\tin\texcess\tof\tpar\tvalue | 634,029 | 532,255 |
| Retained\tearnings | 168,453 | 73,875 |
| Accumulated\tother\tcomprehensive\tincome\t(loss) | 4,123 | (442) |
| Treasury\tstock,\tat\tcost—107\tand\t90\tshares,\trespectively | (1,433) | (464) |
| Total\tstockholders'\tequity | 805,723 | 605,750 |
| Total\tliabilities\tand\tstockholders'\tequity | $1,066,349 | $856,205 |

See	accompanying	notes.

# Consolidated	Statements	of	Income

|  | September	29,<br>2007 | September	30,<br>2006 | September	24,<br>2005 |
| :--- | :--- | :--- | :--- |
| Revenues: |  |  |  |
| Product\tsales | $628,854 | $388,111 | $229,075 |
| Service\tand\tother\trevenue | 109,514 | 74,569 | 58,609 |
|  | 738,368 | 462,680 | 287,684 |
| Costs\tand\texpenses\t(1): |  |  |  |
| Cost\tof\tproduct\tsales | 265,151 | 186,862 | 116,478 |
| Cost\tof\tproduct\tsales—amortization\tof\tintangible\tassets | 11,024 | 4,784 | 911 |
| Cost\tof\tservice\tand\tother\trevenue | 116,626 | 77,502 | 58,181 |
| Research\tand\tdevelopment | 44,484 | 28,294 | 18,617 |
| Selling\tand\tmarketing | 84,845 | 55,910 | 34,199 |
| General\tand\tadministrative | 62,902 | 42,551 | 26,667 |
| Amortization\tof\tacquired\tintangible\tassets | 5,584 | 1,631 | — |
| Net\tgain\ton\tsale\tof\tintellectual\tproperty | — | (5,093) | — |
| Acquired\tin-process\tresearch\tand\tdevelopment | — | 19,900 | — |
|  | 590,616 | 412,341 | 255,053 |
| Income\tfrom\toperations | 147,752 | 50,339 | 32,631 |
| Interest\tincome | 2,815 | 4,082 | 2,219 |
| Interest\tand\tother\texpense,\tnet | (2,078) | (1,198) | (155) |
| Income\tbefore\tincome\ttaxes | 148,489 | 53,223 | 34,695 |
| Provision\tfor\tincome\ttaxes | 53,911 | 25,800 | 6,439 |
| Net\tincome | $94,578 | $27,423 | $28,256 |
| Basic\tnet\tincome\tper\tcommon\tand\tcommon\tequivalent\tshare | $1.77 | $0.59 | $0.66 |
| Diluted\tnet\tincome\tper\tcommon\tand\tcommon\tequivalent\tshare | $1.72 | $0.56 | $0.63 |
| Weighted\taverage\tnumber\tof\tcommon\tshares\toutstanding:\nBasic | 53,436 | 46,512 | 42,824 |
| Diluted | 54,834 | 48,620 | 45,126 |

(1) Stock-based	compensation	included	in	costs	and	expenses	during	the	years	ended	September	29,	2007	and	September	30,	2006	was	$695	and	$481	for	cost	of revenues,	$828	and	$519	for	research	and	development,	$602	and	$351	for	selling	and	marketing	and	$3,979	and	$2,600	for	general	and	administrative, respectively.

# Consolidated	Statements	of	Stockholders'	Equity	and	Comprehensive	Income

|  | Common	Stock | Common	Stock |  |  | Treasury	Stock | Treasury	Stock | Accumulated |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | Capital\tin |  |  |  | Other | Total |  |
|  | Number\tof | $0.01 | Excess\tof | Retained | Number\tof |  | Comprehensive | Stockholders' | Comprehensive |
|  | Shares | Par\tValue | Par\tValue | Earnings | Shares | Amount | Income\t(Loss) | Equity | Income |
| Balance\tat\tSeptember\t25,\t2004 | 41,171 | $412 | $149,246 | $18,196 | 90 | $(464) | $(1,115) | $166,275 |  |
| Exercise\tof\tstock\toptions | 3,077 | 31 | 15,324 | — | — | — | — | 15,355 | — |
| Issuance\tof\tcommon\tstock\tunder\temployer |  |  |  |  |  |  |  |  |  |
| stock\tpurchase\tplan | 47 | — | 511 | — | — | — | — | 511 | — |
| Tax\tbenefit\trelated\tto\texercise\tof\tstock\toptions | — | — | 7,561 | — | — | — | — | 7,561 | — |
| Net\tincome | — | — | — | 28,256 | — | — | — | 28,256 | $28,256 |
| Translation\tadjustments | — | — | — | — | — | — | (124) | (124) | (124) |
| Comprehensive\tincome |  |  |  |  |  |  |  |  | $28,132 |
| Balance\tat\tSeptember\t24,\t2005 | 44,295 | 443 | \t 172,642 | 46,452 | 90 | (464) | (1,239) | 217,834 |  |
| Issuance\tof\tcommon\tstock\trelated\tto |  |  |  |  |  |  |  |  |  |
| acquisitions | 6,924 | 69 | \t 317,206 | — | — | — | — | 317,275 | — |
| Exercise\tof\tstock\toptions | 1,426 | 14 | 10,548 | — | — | — | — | 10,562 | — |
| Stock\tbased\tcompensation\texpense | — | — | 3,951 | — | — | — | — | 3,951 | — |
| Tax\tbenefit\trelated\tto\texercise\tof\tstock\toptions | — | — | 27,908 | — | — | — | — | 27,908 | — |
| Net\tincome | — | — | — | 27,423 | — | — | — | 27,423 | $27,423 |
| Translation\tadjustments | — | — | — | — | — | — | 797 | 797 | 797 |
| Comprehensive\tincome |  |  |  |  |  |  |  |  | $28,220 |
| Balance\tat\tSeptember\t30,\t2006 | 52,645 | 526 | \t 532,255 | 73,875 | 90 | (464) | (442) | 605,750 |  |
| Issuance\tof\tcommon\tstock\trelated\tto |  |  |  |  |  |  |  |  |  |
| acquisitions | 1,158 | 12 | 63,166 | — | — | — | — | 63,178 |  |
| Exercise\tof\tstock\toptions | 1,347 | 13 | 10,578 | — | — | — | — | 10,591 |  |
| Stock\tbased\tcompensation\texpense | — | — | 6,104 | — | — | — | — | 6,104 |  |
| Purchase\tof\ttreasury\tshares\tto\tsettle\tminimum |  |  |  |  |  |  |  |  |  |
| withholding\ttaxes | — | — | — | — | 17 | (969) | — | (969) |  |
| Tax\tbenefit\trelated\tto\texercise\tof\tstock\toptions | — | — | 21,926 | — | — | — | — | 21,926 |  |
| Net\tincome | — | — | — | 94,578 | — | — | — | 94,578 | $94,578 |
| Translation\tadjustments |  |  |  |  |  |  | 2,353 | 2,353 | 2,353 |
| Reduction\tof\tminimum\tpension\tliability | — | — | — | — | — | — | 2,212 | 2,212 | 2,212 |
| Comprehensive\tincome |  |  |  |  |  |  |  |  | $99,143 |
| Balance\tat\tSeptember\t29,\t2007 | 55,150 | $551 | $634,029 | $168,453 | 107 | $(1,433) | $4,123 | $805,723 |  |

# Consolidated	Statements	of	Cash	Flows

# (In	thousands)

|  | September	29,	2007 | September	30,	2006 | September	24,	2005 |
| :--- | :--- | :--- | :--- |
| Operating\tactivities |  |  |  |
| Net\tincome | $94,578 | $27,423 | $28,256 |
| Adjustments\tto\treconcile\tnet\tincome\tto\tnet\tcash\tprovided\tby\toperating\tactivities: |  |  |  |
| Depreciation | 14,291 | 9,492 | 6,421 |
| Amortization | 16,871 | 6,641 | 1,153 |
| Impairment\tcharge\ton\tsale\tof\tintellectual\tproperty | — | 1,407 | — |
| Non-cash\tinterest\texpense | 181 | 15 | 133 |
| Tax\tbenefit\trelated\tto\texercise\tof\tnon\tqualified\tstock\toptions | (21,926) | (27,908) | 7,561 |
| Charge\tfor\tin-process\tresearch\tand\tdevelopment | — | 19,900 | — |
| Stock-based\tcompensation\texpense | 6,104 | 3,951 | — |
| Deferred\tincome\ttaxes | 5,873 | (5,797) | (135) |
| Loss\ton\tdisposal\tof\tproperty\tand\tequipment | 734 | 420 | 805 |
| Changes\tin\tassets\tand\tliabilities,\tnet\tof\tacquisitions: |  |  |  |
| Accounts\treceivable | (39,270) | (9,545) | (9,310) |
| Inventories | (7,997) | (23,023) | (4,381) |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | (3,981) | 92 | (3,059) |
| Accounts\tpayable | 14,265 | 3,940 | 3,623 |
| Accrued\texpenses | 59,008 | 6,832 | 5,972 |
| Deferred\trevenue | 14,519 | 2,673 | 8,139 |
| Net\tcash\tprovided\tby\toperating\tactivities | 153,250 | 16,513 | 45,178 |
| Investing\tactivities |  |  |  |
| Business\tacquisitions,\tnet\tof\tcash\tacquired | (9,793) | (171,828) | — |
| Net\tcash\tpaid\tfor\tacquisition\tof\tintangible\tassets | — | (27,594) | — |
| Proceeds\tfrom\tsale\tof\tintellectual\tproperty | — | 6,500 | — |
| Additional\tacquisition\tcontingent\tconsideration | (19,033) | — | — |
| Proceeds\tfrom\tsale\tof\tbuilding | 1,427 | — | — |
| Proceeds\tfrom\tsale\tof\tcost\tmethod\tinvestment | 2,150 | — | — |
| Purchase\tof\tcost\tmethod\tinvestment | (1,000) | — | — |
| Acquisition\tof\tminority\tinterest | (1,100) | — | — |
| Deferred\tacquisition\tcosts | (6,393) | — | (5,428) |
| Purchase\tof\tproperty\tand\tequipment | (22,840) | (12,989) | (7,699) |
| Increase\tin\tother\tassets | (5,536) | (1,679) | (1,172) |
| Increase\tin\tdeferred\trevenue | 2,142 | 7,900 | — |
| Increase\tin\tother\tliabilities | 750 | 7,708 | — |
| Net\tcash\tused\tin\tinvesting\tactivities | (59,226) | (191,982) | (14,299) |
| Financing\tactivities |  |  |  |
| Proceeds\tunder\tcredit\tfacility | — | 65,000 | — |
| Repayments\tunder\tcredit\tfacility | (55,000) | (10,000) | — |
| Increase\tin\tnote\tpayable | 6,889 | — | — |
| Repayments\tof\tnotes\tpayable | (5,884) | (2,948) | (947) |
| Tax\tbenefit\trelated\tto\texercise\tof\tnon\tqualified\tstock\toptions | 21,926 | 27,908 | — |
| Net\tproceeds\tfrom\tsale\tof\tcommon\tstock\tpursuant\tto\tstock\tplans | 10,578 | 10,639 | 15,868 |
| Purchase\tof\ttreasury\tshares\tto\tsettle\tminimum\twithholding\ttaxes | (969) | — | — |
| Net\tcash\t(used\tin)\tprovided\tby\tfinancing\tactivities | (22,460) | 90,599 | 14,921 |
| Effect\tof\texchange\trate\tchanges\ton\tcash\tand\tcash\tequivalents | (1,084) | 799 | (141) |
| Net\tincrease\t(decrease)\tin\tcash\tand\tcash\tequivalents | 70,480 | (84,071) | 45,659 |
| Cash\tand\tcash\tequivalents,\tbeginning\tof\tyear | $29,923 | 113,994 | 68,335 |
| Cash\tand\tcash\tequivalents,\tend\tof\tyear | $100,403 | $29,923 | $113,994 |
| Supplemental\tDisclosure\tof\tCash\tFlow\tInformation: |  |  |  |
| Cash\tpaid\tduring\tthe\tperiod\tfor\tincome\ttaxes | $8,344 | $1,817 | $1,118 |
| Cash\tpaid\tduring\tthe\tperiod\tfor\tinterest | $2,246 | $1,077 | $185 |
| Supplemental\tDisclosure\tof\tNon-Cash\tInvesting\tActivities: |  |  |  |
| Exchange\tof\tnote\treceivable\tfor\tintangible\tassets | $— | $5,428 | $— |
| Business\tAcquisition,\tNet\tof\tCash\tAcquired: |  |  |  |
| Fair\tvalue\tof\ttangible\tassets\tacquired | $5,148 | $152,077 | — |
| Liabilities\tassumed | (11,798) | (135,623) | — |
| Fair\tvalue\tof\tstock\tissued | (63,178) | (317,275) | — |
| Cost\tin\texcess\tof\tfair\tvalue\tof\tassets\t(Goodwill) | 47,774 | 335,709 | — |
| Fair\tvalue\tof\tacquired\tidentifiable\tintangible\tassets | 32,100 | 132,100 | — |
| In\tprocess\tresearch\tand\tdevelopment | — | 15,700 | — |
|  | 10,046 | 182,688 | — |
| Less\tcash\tacquired | 253 | 10,860 | — |
| Net\tcash\tpaid\tfor\tacquisition | $9,793 | $171,828 | $— |

# 1. Operations

Hologic,	Inc.	(the	Company	or	Hologic)	develops,	manufactures	and	distributes	diagnostic	and	medical	imaging	systems	primarily	serving	the	healthcare	needs	of women.	The	Company's	core	women's	healthcare	business	units	are	focused	on	mammography	and	osteoporosis	assessment	and	breast	biopsy.

In	October	2007,	the	Company	completed	its	business	combination	with	Cytyc	Corporation	(Cytyc),	a	company	that	develops,	manufactures	and	markets complementary	products	covering	a	range	of	cancer	and	women's	health	applications,	including	cervical	cancer	screening,	treatment	of	excessive	menstrual	bleeding, and	radiation	treatment	of	early-stage	breast	cancer.	As	a	result	of	our	business	combination	with	Cytyc,	as	more	fully	described	in	Note	19,	the	Company	has	become one	of	the	largest	companies	in	the	world	focused	on	women's	health.

# 2. Summary	of	Significant	Accounting	Policies

The	accompanying	consolidated	financial	statements	reflect	the	application	of	certain	accounting	policies	as	described	in	this	note	and	elsewhere	in	the accompanying	consolidated	financial	statements.

The	Company	believes	that	a	significant	accounting	policy	is	one	that	is	both	important	to	the	portrayal	of	the	Company's	financial	condition	and	results	of operations	and	requires	management's	most	difficult,	subjective	or	complex	judgments,	often	as	the	result	of	the	need	to	make	estimates	about	the	effect	of	matters	that are	inherently	uncertain.

# Principles	of	Consolidation

The	principles	of	Financial	Accounting	Standards	Board	(FASB)	Interpretation	(FIN)	No.	46,	Consolidation	of	Variable	Interest	Entities	and	Accounting Research	Bulletin	No.	51,	Consolidation	of	Financial	Statements	are	considered	when	determining	whether	an	entity	is	subject	to	consolidation.	The	consolidated financial	statements	include	the	accounts	of	the	Company	and	its	wholly	owned	subsidiaries.	The	consolidated	financial	statements	include	the	accounts	of	its	AEG Photoconductor	(Shanghai)	Co.	Ltd.	(APS),	which	was	acquired	as	part	of	the	acquisition	of	AEG	Elektrofotografie	GmbH	(AEG)	in	fiscal	2006	(Note	3).	Prior	to September	11,	2007,	APS	was	a	majority-owned	(85.6%)	subsidiary,	on	such	date	the	Company	acquired	the	remaining	14.4%	for	809	euro	(approximately	$1,100 USD).	All	significant	intercompany	transactions	and	balances	have	been	eliminated	in	consolidation.

# Reclassifications

Long	term	deferred	service	obligations	totaling	$1,272,	previously	recorded	in	other	long	term	liabilities	in	fiscal	2006	in	the	consolidated	balance	sheets	has	been reclassified	to	deferred	service	obligations—long	term.	Long	term	pension	liability	totaling	$7,750	previously	recorded	in	accrued	expenses	in	fiscal	2006	in	the consolidated	balance	sheets	has	been	reclassified	to	other	long	term	liabilities.	Both	of	these	balance	sheet	reclassifications	have	been	made	to	conform	the	fiscal	2006 presentation	with	the	current	period	presentation.

Amortization	expense	for	acquired	developed	technology	and	know	how	previously	recorded	within	general	and	administrative	expense	totaling	$911	for	fiscal 2005	in	the	consolidated	statement	of	income	has	been	reclassified	to	cost	of	product	sales—amortization	of	intangible	assets	to	conform	with	the	current	period presentation.

# Notes	to	Consolidated	Financial	Statements	(continued)

# Fiscal	Year

# Stock	Split

On	November	30,	2005,	the	Company	effected	a	two-for-one	stock	split	in	the	form	of	a	stock	dividend.	The	stock	split	has	been	retroactively	reflected	in	the accompanying	consolidated	financial	statements	and	notes	for	all	periods	presented.

# Management's	Estimates	and	Uncertainties

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.

Significant	estimates	relied	upon	in	preparing	these	consolidated	financial	statements	include	revenue	recognition	for	multiple-element	arrangements,	accounts receivable	reserves,	inventory	and	related	reserves,	valuations	and	purchase	price	allocations	related	to	business	combinations,	expected	future	cash	flows	used	to evaluate	the	recoverability	of	long-lived	assets,	estimated	fair	values	of	long-lived	assets	used	to	record	impairment	charges	related	to	intangible	assets	and	goodwill, amortization	periods,	accrued	expenses,	restructuring	and	other	related	charges,	stock-based	compensation,	pension	liabilities,	contingent	liabilities,	and	recoverability of	the	Company's	net	deferred	tax	assets	and	related	valuation	allowance.

Although	the	Company	regularly	assesses	these	estimates,	actual	results	could	differ	materially	from	these	estimates.	Changes	in	estimates	are	recorded	in	the period	in	which	they	become	known.	The	Company	bases	its	estimates	on	historical	experience	and	various	other	assumptions	that	it	believes	to	be	reasonable	under	the circumstances.	Actual	results	may	differ	from	management's	estimates	if	past	experience	or	other	assumptions	do	not	turn	out	to	be	substantially	accurate.

The	Company	is	subject	to	a	number	of	risks	similar	to	those	of	other	companies	of	similar	size	in	its	industry,	including,	early	stage	of	development	of	certain products,	rapid	technological	changes,	competition,	limited	number	of	suppliers,	customer	concentration,	integration	of	acquisitions,	substantial	indebtedness, government	regulations,	management	of	international	activities,	protection	of	proprietary	rights,	patent	and	other	litigation	and	dependence	on	key	individuals.

# Cash	Equivalents

The	Company	considers	its	highly	liquid	investments	with	original	maturities	of	three	months	or	less	at	the	time	of	acquisition	to	be	cash	equivalents.	At September	29,	2007	and	September	30,	2006	the	Company's	cash	equivalents	consisted	of	money	market	accounts.

# Concentrations	of	Credit	Risk

Financial	instruments	that	subject	the	Company	to	credit	risk	primarily	consist	of	cash	and	cash	equivalents,	cost-method	investments,	derivative	financial instrument	contracts	and	trade	accounts	receivable.	The	Company	invests	its	cash	and	cash	equivalents	with	financial	institutions	with	highly	rated	credit	and	monitors the	amount

of	credit	exposure	to	any	one	financial	institution.	The	Company's	credit	risk	is	managed	by	investing	its	cash	in	high-quality	money	market	instruments.	The	Company transacts	derivative	financial	instrument	contracts	with	major	financial	institutions	and	monitors	outstanding	positions	to	limit	its	credit	exposure.	The	Company's customers	are	principally	located	in	the	United	States,	Europe	and	Asia.	The	Company	performs	ongoing	credit	evaluations	of	the	financial	condition	of	its	customers and	generally	does	not	require	collateral.	Although,	the	Company	is	directly	affected	by	the	overall	financial	condition	of	the	healthcare	industry,	management	does	not believe	significant	credit	risk	exists	as	of	September	29,	2007.	The	Company	generally	has	not	experienced	any	material	losses	related	to	receivables	from	individual customers	or	groups	of	customers	in	the	x-ray	and	medical	device	industry.	The	Company	maintains	an	allowance	for	doubtful	accounts	based	on	accounts	past	due according	to	contractual	terms	and	historical	collection	experience.	Actual	losses	when	incurred	are	charged	to	the	allowance.	The	Company's	losses	related	to	collection of	trade	receivables	have	consistently	been	within	management's	expectations.	Due	to	these	factors,	no	additional	credit	risk	beyond	amounts	provided	for	collection losses,	which	the	Company	reevaluates	on	a	monthly	basis	based	on	specific	review	of	receivable	agings	and	the	period	that	any	receivables	are	beyond	the	standard payment	terms,	is	believed	by	management	to	be	probable	in	the	Company's	accounts	receivable.

There	were	no	customers	with	balances	greater	than	10%	of	accounts	receivable	as	of	September	29,	2007	and	September	30,	2006,	nor	customers	that represented	greater	than	10%	of	product	revenues	for	fiscal	2007,	2006	and	2005.

# Disclosure	of	Fair	Value	of	Financial	Instruments

The	Company's	financial	instruments	mainly	consist	of	cash	and	cash	equivalents,	accounts	receivable,	cost-method	investments,	derivative	financial	instrument contracts,	line	of	credit,	and	notes	payable.	The	carrying	amounts	of	the	Company's	cash	equivalents	and	accounts	receivable	approximate	fair	value	due	to	the	short- term	nature	of	these	instruments.	The	Company's	$150	million	line	of	credit	with	Bank	of	America	had	a	variable	interest	rate	and,	therefore,	fluctuated	based	on	market conditions,	however	no	amounts	were	outstanding	as	of	September	29,	2007.	The	Company's	AEG	subsidiary	also	has	several	notes	payable	outstanding.	These	notes payable	are	denominated	in	either	the	Euro	or	US	dollar	and	have	variable	rates	of	interest.	As	of	September	29,	2007	the	outstanding	notes	payable	approximates	the carrying	amount	based	on	comparable	market	terms	and	conditions.

Additionally,	in	connection	with	the	acquisition	of	AEG,	the	Company	acquired	certain	forward	foreign	contracts	and	certain	interest	rate	swap	contracts	in	place related	to	debt	assumed	in	connection	with	the	acquisition.	(See	Note	6	for	further	discussion).

# Inventories

Inventories	are	stated	at	the	lower	of	cost	(first-in,	first-out)	or	market	and	consist	of	the	following:

|  | September	29,<br>2007 | September	30,<br>2006 |
| :--- | :--- | :--- |
| Raw\tmaterials\tand\twork-in-process | $69,400 | $58,226 |
| Finished\tgoods | 35,889 | 35,251 |
|  | $105,289 | $93,477 |

Work-in-process	and	finished	goods	inventories	consist	of	materials,	labor	and	manufacturing	overhead.	Provisions	for	excess	or	obsolete	inventory	are	primarily based	on	management's	estimates	of	forecasted	net

sales	and	service	usage	levels.	A	significant	change	in	the	timing	or	level	of	demand	for	the	Company's	products	as	compared	to	forecasted	amounts	may	result	in recording	additional	provisions	for	excess	or	expired	inventory	in	the	future.	The	Company	records	provisions	for	excess	or	obsolete	inventory	as	cost	of	product	sales. During	the	fourth	quarter	of	fiscal	2007	the	Company	recorded	a	$2,000	provision	for	excess	inventory	related	to	certain	of	its	MRI	finished	goods	on	hand.

# Concentration	of	Suppliers

The	Company	purchases	certain	components	of	the	Company's	products	from	a	small	number	of	suppliers.	A	change	in	or	loss	of	these	suppliers	could	cause	a delay	in	filling	customer	orders	and	a	possible	loss	of	sales,	which	would	adversely	affect	results	of	operations;	however,	management	believes	that	suitable	replacement suppliers	could	be	obtained	in	such	an	event.

# Property	and	Equipment

The	Company	provides	for	depreciation	and	amortization	by	charges	to	operations,	using	the	straight-line	method,	which	allocate	the	cost	of	property	and equipment	over	the	following	estimated	useful	lives:

# Repair	and	maintenance	costs	are	expensed	as	incurred.

The	Company	applies	the	provisions	of	American	Institute	of	Certified	Public	Accountants	(AICPA)	Statement	of	Position	(SOP)	98-1,	Software	Developed	or Obtained	for	Internal	Use.	SOP	98-1	requires	computer	software	costs	associated	with	internal	use	software	to	be	expensed	as	incurred	until	certain	capitalization criteria	are	met.	SOP	98-1	also	defines	which	types	of	costs	should	be	capitalized	and	which	should	be	expensed.	The	Company	capitalized	$341,	$664,	and	$453 during	fiscal	2007,	2006	and	2005,	respectively,	related	to	a	company	wide	Enterprise	Resource	Planning	(ERP)	systems	implementation	project,	as	well	as,	upgrades and	enhancements	that	added	significant	functionality	to	the	system	and	has	included	these	amounts	in	equipment	and	software	in	the	accompanying	consolidated balance	sheets.

The	Company	amortizes	such	costs	when	the	ERP	system	and	new	functionality	become	operational.	The	initial	system	costs	are	being	amortized	over	an estimated	useful	life	of	ten	years	and	new	functionality	is	amortized	over	the	remaining	useful	life	of	the	related	system.

# Valuation	of	Business	Combinations	and	Acquisition	of	Intangible	Assets

The	Company	records	intangible	assets	acquired	in	business	combinations	and	acquisitions	of	intangible	assets	under	the	purchase	method	of	accounting.	The Company	accounts	for	acquisitions	in	accordance	with	FASB	Statement	No.	141,	Business	Combinations.	Amounts	paid	for	each	acquisition	are	allocated	to	the	assets acquired	and	liabilities	assumed	based	on	their	fair	values	at	the	dates	of	acquisition.	The	Company	then	allocates	the	purchase	price	in	excess	of	the	fair	value	of	the	net tangible	assets	acquired	to	identifiable	intangible	assets,

including	purchased	research	and	development	based	on	detailed	valuations	that	use	information	and	assumptions	provided	by	management.	The	Company	allocates	any excess	purchase	price	over	the	fair	value	of	the	net	tangible	and	intangible	assets	acquired	to	goodwill.

The	valuation	of	purchased	research	and	development	represents	the	estimated	fair	value	at	the	dates	of	acquisition	related	to	in-process	projects.	The	Company's purchased	research	and	development	represents	the	value	of	in-process	projects	that	have	not	yet	reached	technological	feasibility	and	have	no	alternative	future	uses	as of	the	date	of	acquisition.	The	Company	expenses	the	value	attributable	to	these	in-process	projects	at	the	time	of	the	acquisition.	If	the	projects	are	not	successful	or completed	in	a	timely	manner,	the	Company	may	not	realize	the	financial	benefits	expected	for	these	projects,	or	for	the	acquisitions	as	a	whole.

The	Company	uses	the	income	approach	to	determine	the	fair	values	of	its	purchased	research	and	development.	This	approach	determines	fair	value	by estimating	the	after-tax	cash	flows	attributable	to	an	in-process	project	over	its	useful	life	and	then	discounting	these	after-tax	cash	flows	back	to	a	present	value.	The Company	bases	its	revenue	assumptions	on	estimates	of	relevant	market	sizes,	expected	market	growth	rates,	expected	trends	in	technology	and	expected	product introductions	by	competitors.	In	arriving	at	the	value	of	the	in-process	projects,	the	Company	considers,	among	other	factors,	the	in-process	projects'	stage	of completion,	the	complexity	of	the	work	completed	as	of	the	acquisition	date,	the	costs	already	incurred,	the	projected	costs	to	complete,	the	contribution	of	core technologies	and	other	acquired	assets,	the	expected	introduction	date	and	the	estimated	useful	life	of	the	technology.	The	Company	bases	the	discount	rate	used	to arrive	at	a	present	value	as	of	the	date	of	acquisition	on	the	time	value	of	money	and	medical	technology	investment	risk	factors.	For	the	in-process	projects	the Company	acquired	in	connection	with	its	2006	acquisitions,	it	used	risk-adjusted	discount	rates	ranging	from	14	%	to	35%	to	discount	its	projected	cash	flows.	The Company	did	not	acquire	any	such	projects	during	fiscal	2007	or	fiscal	2005.	The	Company	believes	that	the	estimated	purchased	research	and	development	amounts	so determined	represent	the	fair	value	at	the	date	of	acquisition	and	do	not	exceed	the	amount	a	third	party	would	pay	for	the	projects.

The	Company	also	used	the	income	approach,	as	described	above,	to	determine	the	estimated	fair	value	of	certain	other	identifiable	intangibles	assets	including developed	technology,	customer	relationships	and	tradenames.	Developed	technology	represents	patented	and	unpatented	technology	and	know-how.	Customer relationships	represent	established	relationships	with	customers,	which	provides	a	ready	channel	for	the	sale	of	additional	products	and	services.	Tradenames	represent acquired	product	names	that	the	Company	intends	to	continue	to	utilize.

Goodwill	and	intangible	assets	that	have	indefinite	useful	lives	are	not	amortized	but	are	evaluated	for	impairment	annually	or	whenever	events	or	changes	in circumstances	indicate	that	the	carrying	value	may	not	be	recoverable.	The	Company	records	intangible	assets	at	historical	cost.	The	Company	amortizes	its	intangible assets	that	have	finite	lives	using	either	the	straight-line	method	or	based	on	estimated	future	cash	flows	to	approximate	the	pattern	in	which	the	economic	benefit	of	the asset	will	be	utilized.	Amortization	is	recorded	over	the	estimated	useful	lives	ranging	from	4	to	20	years.	The	Company	reviews	intangible	assets	subject	to amortization	quarterly	to	determine	if	any	adverse	conditions	exist	or	a	change	in	circumstances	has	occurred	that	would	indicate	impairment	or	a	change	in	the remaining	useful	life.	Conditions	that	would	indicate	impairment	and	trigger	a	more	frequent	impairment	assessment	include,	but	are	not	limited	to,	a	significant	adverse change	in	legal	factors	or	business	climate	that	could	affect	the	value	of	an	asset,	or	an	adverse	action	or	assessment	by	a	regulator.	If	the	carrying	value	of	an	asset exceeds	its	undiscounted	cash	flows,	the	Company	will	write-down	the	carrying	value	of	the	intangible	asset	to	its	fair	value	in	the	period	identified.	The	Company generally	calculates	fair	value	as	the	present	value	of	estimated	future	cash	flows	to	be	generated	by	the	asset	using	a	risk-adjusted	discount	rate.	If	the	estimate	of	an intangible	asset's	remaining	useful	life	is	changed,	the	Company	will	amortize

the	remaining	carrying	value	of	the	intangible	asset	prospectively	over	the	revised	remaining	useful	life.	In	connection	with	sale	of	certain	intellectual	property, previously	acquired	from	Fischer	to	Siemens	AG	in	July	2006,	the	Company	recorded	an	impairment	charge	of	approximately	$1,400	during	the	fourth	quarter	of	fiscal 2006.	The	impairment	charge	was	the	result	of	a	higher	carrying	value	of	such	assets	as	compared	to	their	fair	value.	The	charge	is	a	component	of	the	net	gain	on	sale	of intellectual	property	in	the	accompanying	consolidated	statement	of	income	and	is	classified	as	part	of	the	mammography	segment.

Consistent	with	prior	years,	the	Company	conducted	its	annual	impairment	test	of	goodwill	during	the	second	quarter	of	fiscal	2007.	In	performing	the	test,	the Company	utilizes	the	two-step	approach	prescribed	under	FASB	Statement	No.	142,	Goodwill	and	Other	Intangible	Assets.	The	first	step	requires	a	comparison	of	the carrying	value	of	the	reporting	units,	as	defined,	to	the	fair	value	of	these	units.	The	Company	considered	a	number	of	factors	to	determine	the	fair	value	of	a	reporting unit,	including	an	independent	valuation	to	conduct	this	test.	The	valuation	is	based	upon	expected	future	discounted	operating	cash	flows	of	the	reporting	unit	as	well	as analysis	of	recent	sales	or	offerings	of	similar	companies.	If	the	carrying	value	of	a	reporting	unit	exceeds	its	fair	value,	the	Company	will	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	unit's	goodwill	to	its	carrying	value.	The	Company	did	not	perform	the	second	step	of	the	impairment	test	as	part	of	its	fiscal	2007	review	because	the	fair value	of	each	reporting	unit	exceeded	its	respective	carrying	value.	There	were	no	impairment	indicators	identified	during	the	remainder	of	fiscal	2007	that	required	a	re- assessment	of	the	annual	impairment	test.

The	estimate	of	fair	value	requires	significant	judgment.	Any	loss	resulting	from	an	impairment	test	would	be	reflected	in	operating	income	in	the	Company's consolidated	statements	of	income.	The	annual	impairment	testing	process	is	subjective	and	requires	judgment	at	many	points	throughout	the	analysis.	If	these	estimates or	their	related	assumptions	change	in	the	future,	the	Company	may	be	required	to	record	impairment	charges	for	these	assets	not	previously	recorded.

A	rollforward	of	goodwill	from	September	30,	2006	to	September	29,	2007	is	as	follows:

| Balance	as	of	September	24,	2005 | $6,285 |
| :--- | :--- |
| Acquisition\tof\tAEG | 6,973 |
| Acquisition\tof\tR2 | \t 145,915 |
| Acquisition\tof\tSuros | \t 182,821 |
| Balance\tas\tof\tSeptember\t30,\t2006 | \t 341,994 |
| Acquisition\tof\tBioLucent\tInc. | 47,774 |
| Additional\tbusiness\tacquisition\tcontingent\tconsideration\trelated\tto\tSuros\tacquisition | 19,033 |
| Purchase\tprice\tadjustments\tand\tforeign\tcurrency\timpact | (1,273) |
| Balance\tas\tof\tSeptember\t29,\t2007 | $407,528 |

Goodwill	by	reporting	segment	consists	of	the	following:

|  | Balance	as	of | Balance	as	of |
| :--- | :--- | :--- |
| Reporting\tSegment | September\t29,\t2007 | September\t30,\t2006 |
| Mammography | $401,711 | $335,021 |
| Other | 5,817 | 6,973 |
|  | $407,528 | $341,994 |

Intangible	assets	consist	of	the	following:

|  |  | Average | Gross |  | Gross |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | Estimated | Carrying | Accumulated | Carrying | Accumulated |
| Reporting\tSegment | Description | Useful\tLife | Value | Amortization | Value | Amortization |
| Osteoporosis\tAssessment | Patents | 11.6\tyears | $5,066 | $4,784 | $4,952 | $4,650 |
| Mammography | Developed\tTechnology | 9.7\tyears | 130,126 | 19,269 | 117,826 | 8,853 |
|  | Customer\tRelationship | 11.1\tyears | 54,793 | 6,153 | 37,793 | 1,437 |
|  | Trade\tName | 10.4\tyears | 11,900 | 854 | 9,100 | 134 |
|  | Order\tbacklog | 6\tmonths | 800 | 800 | 800 | 430 |
|  | Patents | 6.9\tyears | 1,273 | 636 | 777 | 531 |
| Other | Patents | 4\tyears | 2,000 | 2,000 | 2,000 | 2,000 |
|  | Developed\tTechnology | 8.5\tyears | 2,131 | 356 | 1,900 | 93 |
|  | Customer\tRelationship | 8.5\tyears | 899 | 150 | 800 | 40 |
|  | Trade\tName | 8.5\tyears | 450 | 75 | 400 | 20 |
|  | Totals |  | $209,438 | $35,077 | $174,348 | $18,188 |

Amortization	expense	related	to	developed	technology	and	order	backlog	is	classified	as	a	component	of	cost	of	product	sales—amortization	of	intangible	assets in	the	accompanying	consolidated	statement	of	income.	Amortization	expense	related	to	customer	relationship	and	trade	name	is	classified	as	a	component	of amortization	of	acquired	intangible	assets	in	the	accompanying	consolidated	statement	of	income.

The	estimated	remaining	amortization	expense	for	each	of	the	five	succeeding	fiscal	years:

| Fiscal	2008 | $24,014 |
| :--- | :--- |
| Fiscal\t2009 | 24,454 |
| Fiscal\t2010 | 24,600 |
| Fiscal\t2011 | 22,193 |
| Fiscal\t2012 | 19,934 |

The	amortization	expense	estimated	above	excludes	amounts	that	will	be	recorded	in	each	of	these	periods	as	a	result	of	the	Company's	merger	with	Cytyc	in October	2007	(Note	19).

# Long-Lived	Assets

The	Company	accounts	for	long-lived	assets	in	accordance	with	the	provisions	of	Statement	of	Financial	Accounting	Standards	(SFAS)	No.	144,	Accounting	for the	Impairment	or	Disposal	of	Long	Lived	Assets.	This	statement	requires	that	long-lived	assets	and	certain	identifiable	intangible	assets	be	reviewed	for	impairment whenever	events	or	changes	in	circumstances	indicate	that	the	carrying	amount	of	an	asset	may	not	be	recoverable.	During	this	review,	the	Company	re-evaluates	the significant	assumptions	used	in	determining	the	original	cost	and	estimated	lives	of	long-lived	assets.	Although	the	assumptions	may	vary	from	asset	to	asset,	they generally	include	operating	results,	changes	in	the	use	of	the	asset,	cash	flows	and	other	indicators	of	value.	Management	then	determines	whether	the	remaining	useful life	continues	to	be	appropriate	or	whether	there	has	been	an	impairment	of	long-lived	assets	based	primarily	upon	whether	expected	future	undiscounted	cash	flows	are sufficient	to	support	the	assets'	recovery.	If	impairment	exists,	the	Company	would	adjust	the	carrying	value	of	the	asset	to	fair	value,	generally	determined	by	a discounted	cash	flow	analysis.	To	date,	the	Company	has	not	identified	any	impairments	requiring	adjustment.

# Other	Assets

As	of	September	29,	2007,	other	assets	was	comprised	primarily	of	the	value	of	certain	Company	owned	life	insurance	contracts,	deferred	acquisition	costs, deferred	financing	costs	and	cost-method	investments.	The	Company	owned	life	insurance	contracts	include	contracts	that	were	purchased	in	connection	with	the Company's	Supplemental	Executive	Retirement	Plan	(SERP)	and	were	valued	at	$3,654	as	of	September	29,	2007	(see	Note	11	for	further	discussion).	Deferred financing	costs	related	to	direct	third	party	costs	incurred	in	the	Company's	closing	of	the	credit	facility	with	Bank	of	America	on	July	24,	2006	and	as	amended	on September	25,	2006	(see	Note	5)	were	approximately	$719	and	$900	as	of	September	29,	2007	and	September	30,	2006,	respectively.	The	Company	is	amortizing	these amounts	to	interest	expense	over	a	five-year	period,	which	approximates	the	level	yield	method.	Other	assets	also	includes	certain	other	minority	cost-method	equity investments	in	non-publicly	traded	securities.	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	investments.	When	the	carrying	value	of	an investment	exceeds	the	fair	value	and	the	decline	in	the	fair	value	is	deemed	to	be	other-than-temporary,	the	Company	writes	down	the	value	of	the	investment	to	its	fair value.	During	2007,	2006	and	2005,	none	of	the	investments	held	were	deemed	to	be	in	a	other-than-temporary	loss.	The	carrying	value	of	these	investments	was approximately	$1,132	and	$1,530	as	of	September	29,	2007	and	September	30,	2006,	respectively.

As	of	September	29,	2007,	other	assets	also	included	$6,393	of	deferred	acquisition	costs	and	$1,460	of	deferred	financing	costs	related	to	the	Cytyc	merger	and related	credit	agreement	both	of	which	closed	in	the	first	quarter	of	fiscal	2008	(Note	19).

# Research	and	Software	Development	Costs

Costs	incurred	in	the	research	and	development	of	the	Company's	products	are	expensed	as	incurred.	Nonrefundable	advance	payments	for	goods	or	services	to be	received	in	the	future	for	use	in	research	and	development	activities	are	deferred	and	capitalized.	The	capitalized	amounts	are	expensed	as	the	related	goods	are delivered	or	the	services	are	performed.	If	the	Company's	expectations	change	such	that	it	does	not	expect	it	will	need	the	goods	to	be	delivered	or	the	services	to	be rendered,	capitalized	nonrefundable	advance	payments	are	charged	to	expense	in	that	period.

The	Company	accounts	for	the	development	costs	of	software	embedded	in	the	Company's	products	in	accordance	with	SFAS	No.	86,	Accounting	for	the	Costs	of Computer	Software	to	be	Sold,	Leased	or	Otherwise	Marketed.	Costs	incurred	in	the	research,	design	and	development	of	software	embedded	in	products	to	be	sold	to customers	are	charged	to	expense	until	technological	feasibility	of	the	ultimate	product	to	be	sold	is	established.	Software	development	costs	incurred	after	the establishment	of	technological	feasibility	and	until	the	product	is	available	for	general	release	are	capitalized,	provided	recoverability	is	reasonably	assured.	Software development	costs	eligible	for	capitalization	have	not	been	significant	to	date.

# Foreign	Currency	Translation

The	financial	statements	of	the	Company's	foreign	subsidiary	are	translated	in	accordance	with	SFAS	No.	52,	Foreign	Currency	Translation.	The	reporting currency	for	the	Company	is	the	U.S.	dollar	(dollar).	The	functional	currency	of	the	Company's	subsidiaries	in	Belgium	and	Germany	is	the	Euro	and	China	is	the Renminbi.	Accordingly,	the	assets	and	liabilities	of	the	Company's	subsidiaries	are	translated	into	U.S.	dollars	using	the	exchange	rate	in	effect	at	each	balance	sheet date.

Revenue	and	expense	accounts	generally	are	translated	using	an	average	rate	of	exchange	during	the	period.	Foreign	currency	translation	adjustments	are accumulated	as	a	component	of	other	comprehensive	loss	as	a	separate	component	of	stockholders'	equity.	Gains	and	losses	arising	from	transactions	denominated	in foreign	currencies	are	included	in	interest	and	other	expense	on	the	consolidated	statements	of	income	and	to	date	have	not	been	material.

# Comprehensive	Income

SFAS	No.	130,	Reporting	Comprehensive	Income,	requires	disclosure	of	all	components	of	comprehensive	income	on	an	annual	and	interim	basis. Comprehensive	income	is	defined	as	the	change	in	equity	of	a	business	enterprise	during	a	period	from	transactions,	other	events	and	circumstances	from	nonowner sources.	Comprehensive	income	is	disclosed	in	the	accompanying	consolidated	statements	of	stockholders'	equity	and	comprehensive	income.	Prior	to	fiscal	2007 foreign	currency	translation	adjustments	were	the	only	items	in	other	comprehensive	income.	During	fiscal	2007,	foreign	currency	translation	adjustments	and	amounts related	to	a	minimum	pension	liability	adjustment	(see	Note	7	for	further	discussion),	were	the	only	items	of	other	comprehensive	income.

The	Company	recognizes	product	revenue	upon	shipment,	provided	that	there	is	persuasive	evidence	of	an	arrangement,	there	are	no	uncertainties	regarding acceptance,	the	sales	price	is	fixed	or	determinable,	no	right	of	return	exists	and	collection	of	the	resulting	receivable	is	probable.	Generally,	the	Company's	product arrangements	are	multiple-element	arrangements,	including	services,	such	as	installation	and	training	and	multiple	products.	In	accordance	with	Emerging	Issues	Task Force	(EITF)	Issue	No.	00-21,	Accounting	for	Revenue	Arrangements	with	Multiple	Deliverables,	based	on	the	terms	and	conditions	of	the	product	arrangements,	the Company	believes	that	these	services	and	undelivered	products	can	be	accounted	for	separately	from	the	delivered	product	element	as	the	Company's	delivered	product has	value	to	its	customers	on	a	stand-alone	basis	and	the	Company	has	objective	and	reliable	evidence	of	the	fair	value	of	such	services	and	undelivered	products. Accordingly,	service	revenue	representing	the	fair	value	of	services	not	yet	performed	at	the	time	of	product	shipment	is	deferred	and	recognized	as	such	services	are performed.	The	fair	value	of	the	undelivered	products	is	also	deferred	at	the	time	of	product	shipment	and	recognized	when	these	products	are	delivered.	The	residual revenue	under	the	product	arrangement	is	recognized	as	product	revenue	upon	shipment.	There	is	no	customer	right	of	return	in	the	Company's	sales	agreements.

The	Company	recognizes	product	revenue	upon	the	completion	of	installation	for	products	whose	installation	is	essential	to	its	functionality,	primarily	related	to its	digital	imaging	systems.	A	provision	is	made	at	that	time	for	estimated	warranty	costs	to	be	incurred.

Although	the	Company's	products	contain	operating	and	application	software,	the	Company	has	determined	that	for	all	of	its	products,	except	for	those	recently obtained	with	the	acquisition	of	R2	Technology,	Inc.,	the	software	element	is	incidental	in	accordance	with	AICPA	SOP	97-2,	Software	Revenue	Recognition,	(SOP	97- 2)	and	EITF	Issue	No.	03-05,	Applicability	of	AICPA	Statement	of	Position	97-2	to	Non-Software	Deliverables	in	an	Arrangement	Containing	More-Than-Incidental Software.

The	Company	has	determined	that	the	provisions	of	SOP	97-2	apply	to	revenue	transactions	for	those	products	recently	acquired	from	R2	Technology,	Inc.	SOP No.	97-2,	as	amended,	generally	requires	revenue	earned	on	software	arrangements	involving	multiple	elements	to	be	allocated	to	each	element	based	on	the	relative	fair values	of	the	elements.	Revenue	recognized	from	multi-element	arrangements	is	allocated	to	each	element	of	the	arrangement	using	the	residual	method	based	on	the	fair value	of	the	undelivered	elements.	The	Company's	determination	of	fair	value	of	the	undelivered	elements	in	the	multi-element	arrangements	is	based	on	vendor-specific objective	evidence	(VSOE).	The	Company	limits	its	assessment	of	VSOE	for	each	element	to	either	the	price	charged	when	the	same	element	is	sold	separately	or	the price	established	by	management,	having	the	relevant	authority	to	do	so	for	an	element	not	yet	sold	separately.	The	Company	recognizes	revenue	on	R2	product	sales upon	completion	of	installation	at	which	time	the	only	remaining	undelivered	element	is	Post	Contract	Support	(PCS).

For	multi-element	arrangements	where	VSOE	of	fair	value	for	Post	Contract	Support	(PCS)	has	not	been	established,	the	Company	would	recognize	revenue	for the	entire	arrangement	ratably	over	the	contractual	term	of	PCS.	For	multi-element	arrangements	where	VSOE	of	fair	value	of	PCS	has	been	established,	the	Company recognizes	revenue	using	the	residual	method	at	the	time	all	other	revenue	recognition	criteria	have	been	met.	Amounts	attributable	to	PCS	are	recorded	as	deferred revenue	and	recognized	ratably	over	the	contractual	term	of	PCS.

In	accordance	with	EITF	Issue	No.	00-10,	Accounting	for	Shipping	and	Handling	Fees,	the	Company	classifies	the	reimbursement	by	customers	of	shipping	and handling	costs	as	revenue	and	the	associated	cost	as	cost	of	revenue.	The	Company	records	reimbursable	out-of-pocket	expenses	in	both	maintenance	and	services revenues	and	as	a	direct	cost	of	maintenance	and	services	in	accordance	with	EIFT	Issue	No.	01-14,	Income	Statement	Characterization	of	Reimbursements	Received	for Out-of-Pocket	Expenses	Incurred	(EITF	01-14).	For	fiscal	2007,	2006	and	2005,	shipping	and	handling	and	reimbursable	out-of-pocket	expense	were	not	material.

# Cost	of	Service	and	Other	Revenues

Cost	of	service	and	other	revenues	primarily	represents	payroll	and	related	costs	associated	with	the	Company's	professional	services'	employees,	consultants, infrastructure	costs	and	overhead	allocations,	including	depreciation	and	rent.

At	September	29,	2007,	the	Company	has	several	stock-based	employee	compensation	plans,	which	are	more	fully	described	in	Note	9.	During	2004,	the	FASB issued	SFAS	Statement	No.	123(R),	Share-Based	Payment,	(SFAS	123(R)),	which	is	a	revision	of	SFAS	Statement	No.	123,	Accounting	for	Stock-Based	Compensation (SFAS	123).	SFAS	123(R)	supersedes	APB	Opinion	No.	25,	Accounting	for	Stock	Issued	to	Employees	(Opinion	25),	and	amends	SFAS	No.	95,	Statement	of	Cash Flows.	Generally,	the	approach	on	SFAS	123(R)	is	similar	to	the	approach	described	in	SFAS	123.	However,	SFAS	123(R)	requires	all	share-based	payments	to employees,	including	grants	of	employee	stock	options,	to	be	recognized	in	the	income	statement	based	on	their	fair	values.	Pro	forma	disclosure	is	no	longer	an alternative.

SFAS	123(R)	must	be	adopted	for	fiscal	years	starting	after	June	15,	2005.	As	a	result,	the	Company	adopted	SFAS	123(R)	at	the	beginning	of	fiscal	2006 utilizing	the	"modified	prospective"	method.	A	"modified	prospective"	method	is	one	in	which	compensation	cost	is	recognized	beginning	with	the	adoption	date (a)	based	on	the	requirements	of	SFAS	123(R)	for	all	share-based	payments	granted	after	the	adoption	date	and	(b)	based	on	the	requirements	of	SFAS	123	for	all	awards granted	to	employees	prior	to	the	adoption	date	of	SFAS	123(R)	that	remain	unvested	on	the	effective	date.	As	a	result,	the	Company	is	recognizing	compensation	for the	fair	value	of	the	unvested	portion	of	options	grants	issued	prior	to	the	adoption	of	SFAS	123(R),	whose	fair	value

was	calculated	utilizing	a	Black-Scholes	Option	Pricing	Model.	In	addition,	SFAS	123(R)	requires	companies	to	utilize	an	estimated	forfeiture	rate	when	calculating	the expense	for	the	period,	whereas,	SFAS	123	permitted	companies	to	record	forfeitures	based	on	actual	forfeitures,	which	was	the	Company's	historical	policy	under SFAS	123.	As	a	result	the	Company	has	applied	an	estimated	forfeiture	rate	of	9.4%	in	fiscal	2007	and	a	range	between	9.4%	and	10.6%	in	fiscal	2006	in	determining the	expense	recorded	related	to	employee	stock	options	in	the	Company's	consolidated	statement	of	income.

Compensation	expense	related	to	stock-based	awards	reduced	both	basic	and	diluted	earning	per	share	by	$0.06	and	$0.04	for	fiscal	2007	and	2006,	respectively. These	results	reflect	stock	compensation	expense	of	$4,725	and	$3,560	and	related	tax	benefit	of	$1,715	and	$1,727	for	fiscal	2007	and	2006,	respectively.	No	stock- based	compensation	expense	was	capitalized	as	part	of	inventory	during	the	years	ended	September	29,	2007	and	September	30,	2006,	respectively.	In	accordance	with the	modified-prospective	transition	method	of	SFAS	123(R),	results	for	prior	periods	have	not	been	restated.	As	of	September	29,	2007,	there	was	approximately $13,600	of	unrecognized	compensation	expense	related	to	non-vested	market-based	share	awards	that	is	expected	to	be	recognized	over	a	weighted	average	grant	period of	3.09	years.

On	October	30,	2006,	the	Compensation	Committee	of	the	Board	of	Directors	approved	the	award	of	31	restricted	stock	units	with	a	fair	value	of	$1,500	on	the date	of	grant.	The	restricted	stock	units	vest	upon	the	earlier	of	(i)	October	30,	2009,	(ii)	death	or	disability	of	the	participant	or	(iii)	a	change	in	control	of	the	Company subject	to	certain	conditions.	Certain	executive	officers	who	hold	an	aggregate	of	approximately	12	of	these	restricted	stock	units	have	conditionally	waived	the accelerated	vesting	of	such	restricted	stock	units	that	would	occur	in	connection	with	the	merger	with	Cytyc.	The	Company	is	recording	compensation	expense	for	the restricted	stock	units	ratably	over	the	three-year	vesting	period	and	assuming	that	all	units	will	vest,	which	totaled	$442	for	the	year	ended	September	29,	2007.	The restricted	shares	have	been	excluded	from	the	computation	of	basic	earnings	per	share	until	the	shares	vest	because	the	employee	is	not	entitled	to	the	reward	of	stock ownership.	During	the	year	ended	September	29,	2007,	1	share	was	forfeited	as	a	result	of	the	termination	of	certain	employees	during	the	period.	None	of	these restricted	stock	units	were	vested	as	of	September	29,	2007.

The	Company	has	also	recorded	$937	and	$391	of	stock	based	compensation	expense	in	fiscal	2007	and	2006	related	to	the	amortization	of	the	fair	value	of restricted	stock	units	awarded	in	fiscal	2006.	(See	Note	12	for	further	discussion).

As	of	September	29,	2007,	there	was	$2,231	of	total	unrecognized	compensation	cost	related	to	non-vested	restricted	stock	units	granted	under	the	Plan.	That	cost is	expected	to	be	recognized	over	a	weighted-average	period	of	1.6	years.	Approximately	$580	of	this	amount	will	be	recorded	in	the	first	quarter	of	fiscal	2008	as certain	of	these	shares	will	become	fully	vested	upon	the	close	of	the	Cytyc	merger,	in	accordance	with	change	in	control	provisions	included	within	the	original	terms	of the	award.

As	permitted	by	Statement	No.	123,	for	periods	prior	to	the	beginning	of	fiscal	2006,	the	Company	accounted	for	share-based	payments	to	employees	using Opinion	No.	25's	intrinsic	value	method	and,	as	such,	generally	recognized	no	compensation	cost	for	the	granting	of	employee	stock	options.	The	following	table illustrates	the	effect	on	net	income	and	net	income	per	share	if	the	fair	value	based	method	had	been	applied	to	the	prior	period:

Effective	with	the	adoption	of	SFAS	123	(R),	the	Company	has	elected	to	use	a	bi-nomial	lattice	model	to	determine	the	weighted	average	fair	value	of	options, rather	than	the	Black-Scholes	model.	The	Company	considered	a	number	of	factors	to	determine	the	fair	value	of	options	including	the	advice	of	an	outside	valuation advisor	and	the	advisor's	model.

The	Company	had	used	the	Black-Scholes	option	pricing	model	to	determine	the	weighted	average	fair	value	of	options	prior	to	adopting	SFAS	123	(R).	The weighted	average	fair	value	of	options	granted	during	the	fiscal	year	ended	2007	and	2006,	under	the	binomial	valuation	method,	was	$26.37	per	share	and	$19.54	per share,	respectively.	The	weighted	average	fair	value	of	options	granted	during	the	year	ended	2005,	under	the	Black-Scholes	valuation	method,	was	$7.14	per	share.	The fair	value	of	options	at	the	date	of	grant	and	the	weighted-average	assumptions	utilized	to	determine	such	values	are	indicated	in	the	following	table:

|  | September	29,<br>2007 | September	30,<br>2006 | September	24,<br>2005 |
| :--- | :--- | :--- | :--- |
| Risk-free\tinterest\trates | 5.0% | 4.6% | 3.7% |
| Expected\tdividend\tyield | — | — | — |
| Expected\tlife\t(in\tyears) | 5.0 | 4.7 | 4.5 |
| Expected\tvolatility | 55.0% | 55.0% | 61.0% |

The	assumptions	used	to	calculate	the	pro	forma	disclosure	for	shares	purchased	under	the	Employee	Stock	Purchase	Plan	for	the	fiscal	year	2005	are	as	follows:

The	Employee	Stock	Purchase	Plan	was	terminated	in	fiscal	2005.

# Net	Income	Per	Share

Basic	and	diluted	net	income	per	share	is	presented	in	conformity	with	SFAS	No.	128,	Earnings	per	Share.	Basic	net	income	per	share	is	computed	by	dividing net	income	by	the	weighted-average	number	of	common	shares	outstanding	during	the	period.	Dilutive	net	income	per	share	in	2007,	2006	and	2005	includes	the	effects of	all	dilutive,	potentially	issuable	common	shares	using	the	treasury	stock	method.

Basic	and	diluted	weighted	average	common	shares	for	fiscal	years	2007,	2006,	and	2005	are	as	follows:

|  | September<br>29,	2007 | September	30,<br>2006 | September	24,<br>2005 |
| :--- | :--- | :--- | :--- |
| Basic\tweighted-average\tcommon\tshares\toutstanding | 53,436 | 46,512 | 42,824 |
| Weighted-average\tcommon\tequivalent\tshares | 1,398 | 2,108 | 2,302 |
| Diluted\tweighted-average\tcommon\tshares\toutstanding | 54,834 | 48,620 | 45,126 |

Dilutive	weighted-average	shares	outstanding	do	not	include	658,	285	and	133	common-equivalent	shares	for	fiscal	years	2007,	2006	and	2005,	respectively,	as their	effect	would	have	been	anti-dilutive.	Dilutive	weighted-average	shares	outstanding	also	exclude	84	and	51	of	unvested	restricted	stock	units	for	fiscal	2007	and 2006,	respectively	as	their	effect	would	have	been	anti-dilutive.

The	Company	typically	offers	a	one-year	warranty	for	all	of	its	products.	The	Company	provides	for	the	estimated	cost	of	product	warranties	at	the	time	product revenue	is	recognized.	Factors	that	affect	the	Company's	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	years	ended	September	29,	2007	and	September	30,	2006	is	as	follows:

|  | Balance	at<br>Beginning	of<br>Period | Charged	to<br>Costs	and<br>Expenses | Acquired<br>Reserves | Write-<br>Offs/<br>Payments | Balance	at	End<br>of	Period |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Period\tend: |  |  |  |  |  |
| September\t29,\t2007 | $8,987 | $10,947 | — | $(7,847) | $12,087 |
| September\t30,\t2006 | $6,674 | $6,020 | $941 | $(4,648) | $8,987 |

# Restructuring	Accrual

# Workforce	reduction

As	of	the	dates	of	acquisition	of	AEG	Elektrofotografie	GmbH,	R2	Technology,	Inc.	(R2)	and	Suros	Surgical,	Inc.	(Suros)	(see	Note	3),	management	of	the Company	began	assessing	and	formulating	a	plan	to	involuntarily	terminate	certain	employees	of	the	acquired	companies.	In	the	fourth	quarter	of	fiscal	2006,	the Company	approved	a	headcount	reduction	plan	under	which	the	Company	terminated	53	manufacturing	and	administrative	personnel	and	21	manufacturing	and administrative	personnel	of	the	acquired	AEG	Elektrofotografie	subsidiaries	in	Germany	and	United	States,	respectively.	In	the	fourth	quarter	of	fiscal	2006,	the Company	also	finalized	and	approved	a	headcount	reduction	plan	under	which	the	Company	terminated	58	personnel	of	R2	across	all	functional	areas	of	the	acquired entity.	During	the	second	quarter	of	fiscal	2007	the

Company	finalized	and	approved	a	head	count	reduction	under	which	the	Company	terminated	two	members	of	the	Suros	executive	management	team.	These	reduction plans	resulted	in	a	liability	for	costs	associated	with	an	employee	severance	arrangement	of	approximately	$3,135	in	accordance	with	EITF	Issue	No.	95-3,	Recognition of	Liabilities	in	Connection	with	a	Purchase	Business	Combination.	During	the	third	quarter	of	fiscal	2007,	the	Company	reduced	this	liability	by	approximately	$241, with	a	corresponding	reduction	in	goodwill	as	it	completed	its	plan	of	restructure	for	AEG	and	had	no	remaining	payments.	The	cost	was	included	in	the	respective purchase	price	allocations.	The	Company	has	made	payments	totaling	$2,789	through	September	29,	2007	and	anticipates	the	remaining	amount	of	$105	to	be	paid	in fiscal	2008.

# Lease	charges

In	conjunction	with	the	acquisition	of	R2	(see	Note	3),	the	Company	recorded	a	liability	for	lease	abandonment	costs	of	$312	related	to	lease	payments	on	leased facilities	in	Santa	Clara,	California.	The	costs	were	included	in	the	respective	purchase	price	allocations	in	accordance	with	EITF	Issue	No.	95-3.	As	of	September	29, 2007	the	Company	had	made	all	lease	payments.

# Advertising	Costs

Advertising	costs	are	charged	to	operations	as	incurred.	The	Company	does	not	have	any	direct-response	advertising.	Advertising	costs,	which	include	trade shows	and	conventions,	were	approximately	$6,683,	$5,003	and	$4,000	for	fiscal	2007,	2006	and	2005,	respectively,	and	were	included	in	selling	and	marketing	expense in	the	Consolidated	Statements	of	Income.

# Recently	Issued	Accounting	Pronouncements

In	July	2006,	the	Financial	Account	Standards	Board	(FASB)	issued	Financial	Interpretation	No.	(FIN)	48,	Accounting	for	Uncertainty	in	Income	Taxes,	which applies	to	all	tax	positions	related	to	income	taxes	subject	to	SFAS	No.	109	(SFAS	109),	Accounting	for	Income	Taxes.	This	includes	tax	positions	considered	to	be "routine"	as	well	as	those	with	a	high	degree	of	uncertainty.	FIN	48	utilizes	a	two-step	approach	for	evaluating	tax	positions.	Recognition	(step	one)	occurs	when	an enterprise	concludes	that	a	tax	position,	based	solely	on	its	technical	merits,	is	more-likely-than-not	to	be	sustained	upon	examination.	Measurement	(step	two)	is	only addressed	if	step	one	has	been	satisfied	(i.e.,	the	position	is	more-likely-than-not	to	be	sustained).	Under	step	two,	the	tax	benefit	is	measured	as	the	largest	amount	of benefit,	determined	on	a	cumulative	probability	basis	that	is	more-likely-than-not	to	be	realized	upon	ultimate	settlement.	FIN	48's	use	of	the	term	"more-likely-than- not"	in	steps	one	and	two	is	consistent	with	how	that	term	is	used	in	SFAS	109	(i.e.,	a	likelihood	of	occurrence	greater	than	50	percent).

FIN	48	is	effective	for	fiscal	years	beginning	after	December	15,	2006.	The	Company	expects	to	adopt	FIN	48	in	its	first	quarter	of	fiscal	2008,	which	begins	on September	30,	2007.	Differences	between	the	amounts	recognized	in	the	statements	of	financial	position	prior	to	the	adoption	of	FIN	48	and	the	amounts	reported	after adoption	should	be	accounted	for	as	a	cumulative-effect	adjustment	recorded	to	the	beginning	balance	of	retained	earnings.	The	cumulative	effect	adjustment	would	not apply	to	those	items	that	would	not	have	been	recognized	in	earnings,	such	as	the	effect	of	adopting	FIN	48	on	tax	positions	related	to	business	combinations.

The	Company	has	evaluated	the	impact	of	the	adoption	of	FIN	48	and	does	not	expect	that	the	adoption	will	have	a	material	impact	on	its	results	of	operation	or financial	position.

On	September	13,	2006,	the	SEC	staff	published	SAB	No.	108	(SAB	108),	Considering	the	Effects	of	Prior	Year	Misstatements	when	Quantifying	Misstatements in	Current	Year	Financial	Statements.	SAB	108	addresses	quantifying	the	financial	statement	effects	of	misstatements,	specifically,	how	the	effects	of	prior	year uncorrected	errors	must	be	considered	in	quantifying	misstatements	in	the	current	year	financial	statements.	SAB	108	does	not	change	the	SEC	staff's	previous	positions in	SAB	99,	Materiality,	regarding	qualitative	considerations	in	assessing	the	materiality	of	misstatements.	SAB	108	acknowledges	the	existing	diversity	in	practice	in this	area	and	discusses	techniques	commonly	used	to	accumulate	and	quantify	misstatements.	The	"rollover"	method	used	by	some	companies	and	auditors	quantifies	a misstatement	based	on	the	effects	of	correcting	the	misstatement	existing	in	the	current	period	income	statement.	The	"iron	curtain"	method	quantifies	a	misstatement based	on	the	effects	of	correcting	the	misstatement	in	the	balance	sheet	at	the	end	of	the	current	period,	regardless	of	the	misstatement's	period	of	origin.	The	SEC	staff does	not	believe	exclusive	reliance	on	one	method	biased	toward	either	the	income	statement	or	the	balance	sheet	is	appropriate.	The	staff	believes	that	registrants	and auditors	must	quantify	the	effects	on	the	current	year	financial	statements	of	correcting	all	misstatements,	including	both	carryover	and	reversing	effects	of	uncorrected prior	year	misstatements.	After	considering	all	relevant	quantitative	and	qualitative	factors,	if	either	approach	results	in	a	misstatement	that	is	material,	a	registrant's financial	statements	must	be	adjusted.	SAB	108	is	effective	for	fiscal	years	ending	after	November	15,	2006,	which	is	the	Company's	year	ending	September	29,	2007. The	adoption	of	SAB	108	did	not	have	a	material	impact	on	the	Company's	results	of	operations	or	financial	condition.

On	September	15,	2006,	the	FASB	issued	SFAS	No.	157	(SFAS	157),	Fair	Value	Measurements,	SFAS	157	provides	enhanced	guidance	for	using	fair	value	to measure	assets	and	liabilities.	SFAS	157	also	responds	to	investors'	requests	for	expanded	information	about	the	extent	to	which	companies	measure	assets	and liabilities	at	fair	value,	the	information	used	to	fair	value	and	the	effect	of	fair	value	measurements	on	earnings.	SFAS	157	applies	whenever	other	standards	require	(or permit)	assets	or	liabilities	to	be	measured	at	fair	value.	SFAS	157	does	not	expand	the	use	of	fair	value	in	any	new	circumstances.	SFAS	157	is	effective	for	financial statements	issued	for	fiscal	years	beginning	after	November	15,	2007	and	interim	periods	within	those	fiscal	years.	Early	adoption	is	not	permitted.	Therefore,	the Company	will	adopt	SFAS	157	in	fiscal	2009,	which	commences	on	September	28,	2008.	The	Company	is	currently	evaluating	the	impact	that	the	adoption	of	SFAS 157	will	have	on	its	consolidated	financial	statements.

In	February	2007,	the	FASB	issued	Statement	No.	159,	The	Fair	Value	Option	for	Financial	Assets	and	Financial	Liabilities,	including	an	amendment	of	FASB Statement	No.	115,	which	allows	an	entity	to	elect	to	record	financial	assets	and	liabilities	at	fair	value	upon	their	initial	recognition	on	a	contract-by-contract	basis. Subsequent	changes	in	fair	value	would	be	recognized	in	earnings	as	the	changes	occur.	Statement	No.	159	also	establishes	additional	disclosure	requirements	for	these items	stated	at	fair	value.	Statement	No.	159	is	effective	as	of	the	beginning	of	an	entity's	first	fiscal	year	that	begins	after	November	15,	2007,	which	is	the	Company's 2009	fiscal	year,	with	early	adoption	permitted,	provided	that	the	Company	also	adopt	Statement	No.	157,	Fair	Value	Measurements.	The	Company	is	currently evaluating	the	impact	that	the	adoption	of	Statement	No.	159	will	have	on	its	consolidated	financial	statements.

In	June	2006,	the	FASB	ratified	EITF	Issue	No.	06-3,	How	Taxes	Collected	from	Customers	and	Remitted	to	Governmental	Authorities	Should	Be	Presented	in the	Income	Statement	(That	Is,	Gross	versus	Net	Presentation).	The	scope	of	this	consensus	includes	any	taxes	assessed	by	a	governmental	authority	that	are	directly imposed	on	a	revenue	producing	transaction	between	a	seller	and	a	customer	and	may	include,	but	are	not	limited	to,	sales,	use,	value-added,	and	some	excise	taxes.	Per the	consensus,	the	presentation	of	these	taxes	on	either	a	gross	(included	in	revenues	and	costs)	or	a	net	(excluded	from	revenues)	basis	is	an	accounting	policy	decision that	should	be	disclosed.	The	Company	presents	sales	net	of	sales	taxes	in	its	consolidated	statements	of	income.	Issue	No.	06-3	is	effective	for	interim	and	annual reporting	periods	beginning	after	December	15,	2006.	No	change	of	presentation	has	resulted	from	the	Company's	adoption	of	Issue	No.	06-3.

In	July	2007,	the	FASB	ratified	EITF	Issue	No.	07-3,	Accounting	for	Nonrefundable	Advance	Payments	for	Goods	or	Services	to	Be	Used	in	Future	Research and	Development	Activities.	The	scope	of	this	consensus	includes	the	determination	that	nonrefundable	advance	payments	for	goods	or	services	to	be	received	in	the future	for	use	in	research	and	development	activities	should	be	deferred	and	capitalized.	The	capitalized	amounts	should	be	expensed	as	the	related	goods	are	delivered or	the	services	are	performed.	If	an	entity's	expectations	change	such	that	it	does	not	expect	it	will	need	the	goods	to	be	delivered	or	the	services	to	be	rendered, capitalized	nonrefundable	advance	payments	should	be	charged	to	expense.	Issue	No.	07-3	is	effective	for	new	contracts	entered	into	during	fiscal	years	beginning	after December	15,	2007,	including	interim	periods	within	those	fiscal	years.	The	consensus	may	not	be	applied	to	earlier	periods.	Early	adoption	of	the	provisions	is	not permitted.	The	Company's	historical	policy	has	been	to	capitalize	upfront	nonrefundable	advance	payments	related	to	research	and	development	activities	and	expense these	amounts	as	the	goods	are	delivered	or	services	rendered.	Therefore,	the	adoption	of	this	consensus	is	not	expected	to	have	any	impact	on	the	Company's consolidated	financial	statements.

# 3. Business	Combinations

On	September	18,	2007	the	Company	completed	the	acquisition	of	BioLucent,	Inc.	(BioLucent)	pursuant	to	a	definitive	agreement	dated	June	20,	2007.	The results	of	operations	for	BioLucent	have	been	included	in	the	Company's	consolidated	financial	statements	from	the	date	of	acquisition	as	part	of	its Mammography/Breast	Care	business	segment.	The	Company	has	concluded	that	the	acquisition	of	BioLucent	does	not	represent	a	material	business	combination	and therefore	no	pro	forma	financial	information	has	been	provided	herein.

BioLucent,	previously	located	in	Aliso	Viejo,	California,	develops,	markets	and	sells	MammoPad	breast	cushions	to	decrease	the	discomfort	associated	with mammography.	Prior	to	the	acquisition,	BioLucent's	primary	research	and	development	efforts	were	directed	at	its	brachytherapy	business	which	was	focused	on	breast cancer	therapy.	Prior	to	the	acquisition,	BioLucent	spun-off	its	brachytherapy	technology	and	business	to	the	holders	of	BioLucent's	outstanding	shares	of	capital	stock. As	a	result,	the	Company	only	acquired	BioLucent's	Mammopad	cushion	business	and	related	assets.	The	Company	invested	$1,000	directly	in	the	spun-off brachytherapy	business	in	exchange	for	shares	of	preferred	stock	issued	by	the	new	business.

The	aggregate	purchase	price	for	BioLucent	was	approximately	$73,200	(subject	to	adjustment)	consisting	of	approximately	$6,800	in	cash	and	1,157	shares	of Hologic	Common	Stock	valued	at	approximately	$63,200,	debt	assumed	and	paid	off	of	approximately	$1,600	and	approximately	$1,600	for	acquisition	related	fees	and expenses.	The	Company	determined	the	fair	value	of	the	shares	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.

The	acquisition	also	provides	for	up	to	two	annual	earn	out	payments	not	to	exceed	$15,000	in	the	aggregate	based	on	BioLucent's	achievement	of	certain	revenue targets.	The	Company	has	considered	the	provision	of	EITF	Issue	No.	95-8,	Accounting	for	Contingent	Consideration	Paid	to	the	Shareholders	of	and	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.	The	allocation	of	the	purchase	price	is	based	upon	preliminary estimates	of	the	fair	value	of	assets	acquired	and	liabilities	assumed	as	of	September	18,	2007.	The	Company	is	in	the	process	of	gathering	information	to	finalize	its valuation	of	certain	assets	and	liabilities.	The	purchase	price	allocation	will	be	finalized	once	the	Company	has	all	necessary	information	to	complete	its	estimate,	but generally	no	later	than	one	year	from	the	date	of	acquisition.	The	components	and	initial	allocation	of	the	purchase	price,	consists	of	the	following	approximate	amounts:

| Net	tangible	assets	acquired	as	of	September	18,	2007 | $2,800 |
| :--- | :--- |
| Developed\ttechnology\tand\tknow\thow | \t 12,300 |
| Customer\trelationship | \t 17,000 |
| Trade\tname | 2,800 |
| Deferred\tincome\ttax\tliabilities,\tnet | (9,500) |
| Goodwill | \t 47,800 |
| Estimated\tPurchase\tPrice | $73,200 |

As	part	of	the	purchase	price	allocation,	all	intangible	assets	that	were	a	part	of	the	acquisition	were	identified	and	valued.	It	was	determined	that	only	customer relationship,	trade	name	and	developed	technology	and	know	how	had	separately	identifiable	values.	The	fair	value	of	these	intangible	assets	was	determined	through the	application	of	the	income	approach.	Customer	relationship	represents	a	large	customer	base	that	are	expected	to	purchase	this	disposable	product	on	a	regular	basis. Trade	name	represents	the	BioLucent	product	names	that	the	Company	intends	to	continue	to	use.	Developed	technology	and	know	how	represents	currently	marketable purchased	products	that	the	Company	continues	to	sell	as	well	as	utilize	to	enhance	and	incorporate	into	the	Company's	existing	products.

The	deferred	income	tax	liability	relates	to	the	tax	effect	of	acquired	identifiable	intangible	assets,	and	fair	value	adjustments	to	acquired	inventory	as	such amounts	are	not	deductible	for	tax	purposes	partially	offset	by	acquired	net	operating	loss	carryforwards	of	approximately	$2,400.

On	May	2,	2006,	the	Company	acquired	100%	of	the	outstanding	voting	stock	of	AEG	Elektrofotografie	GmbH	and	its	group	of	related	companies	(AEG).	The results	of	operations	for	AEG	have	been	included	in	the	Company's	consolidated	financial	statements	from	the	date	of	acquisition	as	part	of	its	other	business	segment. The	Company	has	concluded	that	the	acquisition	of	AEG	does	not	represent	a	material	business	combination	and	therefore	no	pro	forma	financial	information	has	been provided	herein.

AEG	specializes	in	the	manufacture	of	photoconductor	materials	for	use	in	a	variety	of	electro	photographic	applications	including	for	the	coating	of	the Company's	digital	detectors.	The	acquisition	of	AEG	allows	the	Company	to	have	control	over	a	critical	step	in	its	detector	manufacturing	process—to	more	efficiently manage

its	supply	chain	and	improve	manufacturing	margins.	The	combination	of	the	companies	should	also	facilitate	further	manufacturing	efficiencies	and	accelerate	research and	development	of	new	detector	products.	AEG	was	a	privately	held	group	of	companies	headquartered	in	Warstein,	Germany,	with	manufacturing	operations	in Germany,	China	and	the	United	States.

The	aggregate	purchase	price	for	AEG	was	approximately	$31,300	(subject	to	adjustment)	consisting	of	EUR	$24,100	in	cash	and	110	shares	of	Hologic	Common Stock	valued	at	$5,300,	and	approximately	$1,900	for	acquisition	related	fees	and	expenses.	The	Company	determined	the	fair	value	of	the	shares	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.	These	110	shares	were	subject	to	contingent	put	options	pursuant	to	which	the	holders	had	the	option	to	resell	the	shares	to	the	Company	during	a period	of	one	year	following	the	completion	of	the	acquisition	if	the	closing	price	of	the	Company's	stock	falls	and	remains	below	a	threshold	price.	The	put	options were	never	exercised	and	expired	on	May	2,	2007.

The	acquisition	also	provided	for	a	one-year	earn	out	of	EUR	1,700	(approximately	$2,000	USD)	which	was	payable	in	cash	if	AEG	calendar	year	2006	earnings, as	defined,	exceeded	a	pre-determined	amount.	AEG's	2006	earnings	did	not	exceed	such	pre-determined	amounts	and	no	payment	was	made.	The	components	and allocation	of	the	purchase	price,	consists	of	the	following	approximate	amounts:

The	Company	implemented	a	plan	to	restructure	certain	of	AEG's	historical	activities.	The	Company	originally	recorded	a	liability	of	approximately	$2,100	in accordance	with	EITF	Issue	No.	95-3,	Recognition	of	Liabilities	in	Connection	with	a	Purchase	Business	Combination,	related	to	the	termination	of	certain	employees under	this	plan.	Upon	completion	of	the	plan	in	fiscal	2007	the	Company	reduced	this	liability	by	approximately	$241	with	a	corresponding	reduction	in	goodwill.	All amounts	have	been	paid	as	of	September	29,	2007.	As	part	of	the	AEG	acquisition	the	Company	acquired	a	minority	interest	in	the	equity	securities	of	a	private	German company.	The	Company	estimated	the	fair	value	of	these	securities	to	be	approximately	$1,400	in	its	original	purchase	price	allocation.	During	the	year	ended September	29,	2007,	the	Company	sold	these	securities	for	proceeds	of	approximately	$2,150.	The	difference	of	approximately	$750	between	the	preliminary	fair	value estimate	and	proceeds	upon	sale	has	been	recorded	as	a	reduction	of	goodwill.	The	final	purchase	price	allocations	were	completed	within	one	year	of	the	acquisition	and the	adjustments	did	not	have	a	material	impact	on	the	Company's	financial	position	or	results	of	operations.	There	have	been	no	other	material	changes	to	the	purchase price	allocation	as	disclosed	in	the	Company's	Form	10-K	for	the	year	ended	September	30,	2006.

As	part	of	the	purchase	price	allocation,	all	intangible	assets	that	were	a	part	of	the	acquisition	were	identified	and	valued.	It	was	determined	that	only	customer relationship,	trade	name,	developed	technology	and	know	how	and	in-process	research	and	development	had	separately	identifiable	values.	The	fair	value	of	these intangible	assets	was	determined	through	the	application	of	the	income	approach.	Customer	relationship	represents	AEG's	high	dependency	on	a	small	number	of	large accounts.	AEG	markets	its	products	through	distributors	as	well	as	directly	to	its	own	customers.	Trade	name	represents	AEG's	product	names	that	the	Company	intends to	continue	to	use.	Developed	technology	and	know	how	represents	currently	marketable

purchased	products	that	the	Company	continues	to	sell	as	well	as	utilize	to	enhance	and	incorporate	into	the	Company's	existing	products.	The	intangible	assets	are expected	to	be	amortized	on	a	straight-line	basis	over	the	expected	useful	lives	as	the	anticipated	undiscounted	cash	flows	are	relatively	consistent	over	the	expected useful	lives	of	the	intangible	assets.

The	estimated	$600	of	purchase	price	allocated	to	in-process	research	and	development	projects	related	to	AEG's	Organic	Photoconductor	Coating	and	Selenium product	lines.

The	deferred	income	tax	liability	relates	to	the	tax	effect	of	acquired	identifiable	intangible	assets,	and	fair	value	adjustments	to	acquired	inventory,	land,	building and	related	improvements	as	such	amounts	are	not	deductible	for	tax	purposes.

The	Company	had	an	existing	relationship	with	AEG	as	a	supplier	of	inventory	items.	The	supply	agreement	was	entered	into	in	prior	years	at	arm's	length	terms and	conditions.	No	minimum	purchase	requirements	existed	and	the	pricing	was	consistent	with	other	vendor	agreements.

# Acquisition	of	R2	Technology,	Inc.

On	July	13,	2006,	the	Company	completed	the	acquisition	of	R2	Technology,	Inc.	(R2)	pursuant	to	an	Agreement	and	Plan	of	Merger	dated	April	24,	2006.	The results	of	operations	for	R2	have	been	included	in	the	Company's	consolidated	financial	statements	from	the	date	of	acquisition	as	part	of	its	Mammography/Breast	Care business	segment.	R2,	previously	located	in	Santa	Clara,	California,	develops	and	sells	computer-aided	detection	technology	and	products	(CAD),	an	innovative technology	that	assists	radiologists	in	the	early	detection	of	breast	cancer.

The	aggregate	purchase	price	for	R2	of	approximately	$220,600	consisted	of	approximately	4,400	shares	of	Hologic	Common	Stock	valued	at	$205,500,	cash paid	of	$6,900,	debt	assumed	of	$5,700	and	approximately	$2,500	for	acquisition	related	fees	and	expenses.	The	Company	determined	the	fair	value	of	the	shares	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.	The	components	and	allocation	of	the	purchase	price,	consists	of	the	following	approximate	amounts:

| Net	tangible	assets	acquired	as	of	July	13,	2006 | $1,200 |
| :--- | :--- |
| In-process\tresearch\tand\tdevelopment | 10,200 |
| Developed\ttechnology\tand\tknow\thow | 39,500 |
| Customer\trelationship | 15,700 |
| Trade\tname | 3,300 |
| Order\tBacklog | 800 |
| Deferred\tincome\ttaxes | 4,400 |
| Goodwill | 145,500 |
| Estimated\tPurchase\tPrice | $220,600 |

The	Company	finalized	and	completed	a	plan	to	restructure	certain	of	R2's	historical	activities.	As	of	the	acquisition	date	the	Company	recorded	a	liability	of approximately	$798	in	accordance	with	EITF	Issue	No.	95-3,	Recognition	of	Liabilities	in	Connection	with	a	Purchase	Business	Combination,	related	to	the	termination of	certain	employees	and	loss	related	to	the	abandonment	of	certain	lease	space	under	this	plan.	All	amounts	under	this	plan	have	been	paid	as	of	September	29,	2007. The	Company	reduced	goodwill	related	to	the	R2	acquisition	in	the	amount	of	approximately	$400	during	the	year	ended	September	29,	2007.	The	reduction	was primarily	related	to	a	change	in	the	preliminary	valuation	of	certain	assets	and	liabilities	acquired	based	on	information	received	during	the	year.	The	final	purchase	price allocations	were	completed	within	one	year	of	the

acquisition	and	the	adjustments	did	not	have	a	material	impact	on	the	Company's	financial	position	or	results	of	operation.	There	have	no	other	material	changes	to	the purchase	price	allocation	as	disclosed	in	the	Company's	Form	10-K	for	the	year	ended	September	30,	2006.

As	part	of	the	purchase	price	allocation,	all	intangible	assets	that	were	a	part	of	the	acquisition	were	identified	and	valued.	It	was	determined	that	only	customer relationship,	trade	name,	developed	technology	and	know	how	and	in-process	research	and	development	had	separately	identifiable	values.	Customer	relationship represents	R2's	strong	active	customer	base,	dominant	market	position	and	strong	partnership	with	several	large	companies.	Trade	name	represents	the	R2	product names	that	the	Company	intends	to	continue	to	use.	Order	backlog	consists	of	customer	orders	for	which	revenue	has	not	yet	been	recognized.	Developed	technology and	know	how	represents	currently	marketable	purchased	products	that	the	Company	continues	to	resell	as	well	as	utilize	to	enhance	and	incorporate	into	the	Company's existing	products.

The	estimated	$10,200	of	purchase	price	allocated	to	in-process	research	and	development	projects	primarily	related	to	R2's	Digital	CAD	products.	The	projects added	direct	digital	algorithm	capabilities	as	well	as	a	new	platform	technology	to	analyze	images	and	breast	density	measurement.	The	projects	were	substantially completed	as	planned	in	fiscal	2007.

The	deferred	income	tax	asset	relates	to	the	tax	effect	of	acquired	net	operating	loss	carry	forwards	that	the	Company	believes	are	realizable	partially	offset	by acquired	identifiable	intangible	assets,	and	fair	value	adjustments	to	acquired	inventory	as	such	amounts	are	not	deductible	for	tax	purposes.

# Acquisition	of	Suros	Surgical	Systems,	Inc.

On	July	27,	2006,	the	Company	completed	the	acquisition	of	Suros	Surgical	Systems,	Inc.	(Suros),	pursuant	to	an	Agreement	and	Plan	of	Merger	dated	April	17, 2006.	The	results	of	operations	for	Suros	have	been	included	in	the	Company's	consolidated	financial	statements	from	the	date	of	acquisition	as	part	of	its Mammography/Breast	Care	business	segment.	Suros,	located	in	Indianapolis,	Indiana,	develops,	manufactures	and	sells	minimally	invasive	interventional	breast	biopsy technology	and	products	for	biopsy,	tissue	removal	and	biopsy	site	marking.

The	initial	aggregate	purchase	price	for	Suros	of	approximately	$248,100	(subject	to	adjustment)	consisted	of	2,300	shares	of	Hologic	Common	Stock	valued	at $106,500,	cash	paid	of	$139,000,	and	approximately	$2,600	for	acquisition	related	fees	and	expenses.	The	Company	determined	the	fair	value	of	the	shares	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.	The	components	and	allocation	of	the	purchase	price,	consists	of	the	following	approximate	amounts:

The	acquisition	also	provides	for	a	two-year	earn	out.	The	earn-out	is	payable	in	two	annual	cash	installments	equal	to	the	incremental	revenue	growth	in	Suros' business	in	the	two	years	following	the	closing.

The	Company	has	considered	the	provision	of	EITF	Issue	No.	95-8,	Accounting	for	Contingent	Consideration	Paid	to	the	Shareholders	of	and	Acquired	Enterprise	in	a Purchase	Business	Combination,	and	concluded	that	this	contingent	consideration	represents	additional	purchase	price.	During	the	fourth	quarter	of	fiscal	2007	the Company	paid	approximately	$19,000	to	former	Suros	shareholders	for	the	first	annual	earn-out	period	resulting	in	an	increase	to	goodwill	for	the	same	amount. Goodwill	will	be	increased	by	the	amount	of	the	additional	consideration,	if	any,	when	it	becomes	due	and	payable	for	the	second	annual	earn-out.	In	addition	to	the earn-out	discussed	above,	the	Company	increased	goodwill	related	to	the	Suros	acquisition	in	the	amount	of	$210	during	the	year	ended	September	29,	2007.	The increase	was	primarily	related	to	recording	a	liability	of	approximately	$550	in	accordance	with	EITF	95-3	related	to	the	termination	of	certain	employees	who	have ceased	all	services	for	the	Company.	Approximately	$400	of	this	liability	was	paid	during	the	year	ended	September	29,	2007	and	the	balance	is	expected	to	be	paid	by the	end	of	the	second	quarter	of	fiscal	2008.	This	increase	was	partially	offset	by	a	decrease	to	goodwill	as	a	result	of	a	change	in	the	valuation	of	certain	assets	and liabilities	acquired	based	on	information	received	during	the	year	ended	September	29,	2007.	There	have	been	no	other	material	changes	to	purchase	price	allocations	as disclosed	in	the	Company's	Form	10-K	for	the	year	ended	September	30,	2006.

As	part	of	the	purchase	price	allocation,	all	intangible	assets	that	were	a	part	of	the	acquisition	were	identified	and	valued.	It	was	determined	that	only	customer relationship,	trade	name,	developed	technology	and	know	how	and	in-process	research	and	development	had	separately	identifiable	values.	Customer	relationship represents	Suros	large	installed	base	that	are	expected	to	purchase	disposable	products	on	a	regular	basis.	Trade	name	represent	the	Suros	product	names	that	the Company	intends	to	continue	to	use.	Developed	technology	and	know	how	represents	currently	marketable	purchased	products	that	the	Company	continues	to	resell	as well	as	utilize	to	enhance	and	incorporate	into	the	Company's	existing	products.

The	estimated	$4,900	of	purchase	price	allocated	to	in-process	research	and	development	projects	primarily	related	to	Suros'	disposable	products.	The	projects were	at	various	stages	of	completion	and	include	next	generation	handpiece	and	site	marker	technologies.	The	Company	has	continued	to	work	on	these	projects	and expects	they	will	be	completed	during	fiscal	2008.

The	deferred	income	tax	liability	relates	to	the	tax	effect	of	acquired	identifiable	intangible	assets,	and	fair	value	adjustments	to	acquired	inventory	as	such amounts	are	not	deductible	for	tax	purposes,	partially	offset	by	acquired	net	operating	loss	carry	forwards	that	the	Company	believes	are	realizable.

For	all	of	the	acquisitions	discussed	above,	goodwill	represents	the	excess	of	the	purchase	price	over	the	net	identifiable	tangible	and	intangible	assets	acquired. The	Company	determined	that	the	acquisition	of	each	AEG,	BioLucent,	R2	and	Suros	resulted	in	the	recognition	of	goodwill	primarily	because	of	synergies	unique	to	the Company	and	the	strength	of	its	acquired	workforce.

# Supplemental	Unaudited	Pro-forma	Information

The	following	unaudited	pro	forma	information	presents	the	consolidated	results	of	operations	of	the	Company,	R2	and	Suros	as	if	the	acquisitions	had	occurred at	the	beginning	of	fiscal	2006,	with	pro	forma	adjustments	to	give	effect	to	amortization	of	intangible	assets,	an	increase	in	interest	expense	on	acquisition	financing	and certain	other	adjustments	together	with	related	tax	effects:

The	$15,100	charge	for	purchased	research	and	development	that	was	a	direct	result	of	these	two	transactions	is	excluded	from	the	unaudited	pro	forma information	above.	The	unaudited	pro	forma	results	are	not	necessarily	indicative	of	the	results	that	the	Company	would	have	attained	had	the	acquisitions	of	both	R2 and	Suros	occurred	at	the	beginning	of	the	periods	presented.

# 4. Acquisition	of	Intangible	Assets

On	September	29,	2005,	pursuant	to	an	Asset	Purchase	Agreement	between	the	Company	and	Fischer	Imaging	Corporation	(Fischer),	dated	June	22,	2005,	the Company	acquired	the	intellectual	property	and	customer	lists	relating	to	Fischer's	mammography	business	and	products	for	$26,900	in	cash	and	cancellation	of	the principal	and	interest	outstanding	under	a	$5,000	secured	loan	previously	provided	by	the	Company	to	Fischer.

The	aggregate	purchase	price	for	the	Fischer	intellectual	property	and	customer	lists	was	approximately	$33,000,	which	included	approximately	$1,000	related	to direct	acquisition	costs.	In	accordance	with	Emerging	Issues	Task	Force	Issue	No.	98-3,	Determining	Whether	a	Non-monetary	Transaction	Involved	Receipt	of Productive	Assets	or	of	a	Business,	the	Company	determined	that	the	acquisition	does	not	qualify	as	an	acquisition	of	a	business	and	in	accordance	with	SFAS	No.	141 and	SFAS	No.	142,	the	purchase	price	has	been	allocated	to	the	acquired	assets	of	Fischer	based	on	their	fair	value.

As	part	of	the	purchase	price	allocation,	all	intangible	assets	that	were	a	part	of	the	acquisition	were	identified	and	valued.	It	was	determined	that	technology	assets and	customer	lists	had	separately	identifiable	values.	As	a	result	of	this	identification	and	valuation	process,	the	Company	allocated	approximately	$4,200	of	the purchase	price	to	in-process	research	and	development	projects	related	to	Fischer's	digital	mammography	product.	This	allocation	represented	the	estimated	fair	value assuming	these	projects	were	completed	based	on	risk-adjusted	cash	flows	related	to	the	incomplete	research	and	development	projects.	At	the	date	of	acquisition,	the development	of	these	projects	had	not	yet	reached	technological	feasibility,	and	the	research	and	development	in	progress	had	no	alternative	future	use.	The	Company does	not	intend	to	complete	these	projects.	Accordingly,	these	costs	were	expensed	as	of	the	acquisition	date.

In	addition,	the	Company	allocated	approximately	$23,200	and	$5,600	to	developed	technology	and	know	how	and	customer	lists,	respectively	through	the application	of	the	income	approach	to	determine	the	fair	value	of	the	acquired	assets.	Developed	technology	and	know	how	represents	patented	and	unpatented technology	and	know-how	related	to	the	Fischer	digital	mammography	and	breast	biopsy	systems.	Developed	technology	and	know	how	is	expected	to	be	amortized over	a	period	of	12.5	years.	Customer	lists	represent	established	relationships	with	customers,	which	provides	a	ready	channel	for	the	sale	of	additional	products	and services.	Customer	lists	are	expected	to	be	amortized	over	a	period	of	8.5	years.

The	aggregate	purchase	price	of	approximately	$33,000	including	acquisition	costs	was	allocated	as	follows:

The	Company	considered	whether	any	contingencies	were	acquired,	as	the	price	paid	was	more	than	the	fair	market	value	of	the	intangible	assets	and	determined none	were	acquired.

As	a	result	of	an	FTC	inquiry,	the	Company	sold	all	of	the	intellectual	property	acquired	from	Fischer	relating	to	the	Mammotest	system,	in	the	fourth	quarter	of fiscal	2006	for	$6,500,	subject	to	the	Company's	retention	of	a	royalty-free,	non-exclusive,	perpetual,	irrevocable,	worldwide	right	and	license	to	use	that	intellectual property.	In	connection	with	this	sale,	the	Company	recorded	an	impairment	charge	of	approximately	$1,400	and	a	resulting	net	gain	of	approximately	$5,100	from	the proceeds	on	the	sale.

# 5. Credit	Facilities

# Bank	of	America	Line	of	Credit

On	September	25,	2006,	the	Company	entered	into	an	amended	and	restated	$150,000	unsecured	line	of	credit	agreement	with	Bank	of	America,	N.A.	and	the other	lenders	party	thereto	(BOA	Credit	Agreement).	At	the	Company's	option,	committed	loans	(as	defined	in	the	BOA	Credit	Agreement)	outstanding	under	the	BOA Credit	Agreement	will	bear	interest	at	a	rate	equal	to	(a)	Eurodollar	Rate—the	British	Bankers	Association	London	Inter-Bank	offered	Rate	for	dollar	deposits ("LIBOR")	plus	the	applicable	margin	(as	defined	in	the	BOA	Credit	Agreement,	which	margins	ranges	from	0.625%	to	1.00%	depending	on	the	Company's consolidated	leverage	ratio)	or	(b)	Base	Rate—the	higher	of	the	(i)	the	Bank	of	America	prime	rate	and	(ii)	the	Federal	Funds	rate	plus	0.50%	(the	"Base	Rate").	The BOA	Credit	Agreement	includes	financial	covenants	requiring	the	Company	to	maintain,	measured	as	of	the	end	of	each	fiscal	quarter,	a	maximum	consolidated leverage	ratio	of	2.50:1.00	and	a	minimum	consolidated	interest	coverage	ratio	of	3.00:1.00.	The	BOA	Credit	Agreement	also	contains	events	of	default	that	permit	the acceleration	of	the	loans	and	the	termination	of	the	BOA	Credit	Agreement,	including,	but	not	limited	to,	payment	default	under	the	BOA	Credit	Agreement	and	cross- default	under	certain	other	indebtedness,	the	breach	of	certain	covenants,	the	entry	of	material	judgments,	and	the	occurrence	of	bankruptcy,	insolvency	of	change	of control	events.	Certain	of	these	clauses	have	been	determined	to	represent	subjective	acceleration	clauses.	There	is	no	requirement	to	maintain	a	lock-box	arrangement with	Bank	of	America,	N.A	and	the	other	lenders	party	thereto.	There	were	no	amounts	outstanding	under	this	agreement	as	of	September	29,	2007.	Borrowings	that were	outstanding	during	the	year	ended	September	29,	2007	had	applicable	interest	rates	ranging	from	5.9%	to	6.2%.	Interest	expense	and	related	fees	incurred	under this	line	of	credit	totaled	$1,554	and	$738	for	the	years	ended	September	29,	2007	and	September	30,	2006,	respectively.	The	Company	was	in	compliance	with	its financial	covenants	as	of	September	29,	2007.	In	connection	with	the	Cytyc	acquisition	and	a	new	credit	agreement	entered	into	on	October	22,	2007,	the	BOA	Credit Agreement	was	terminated	and	replaced	with	a	new	$200,000	senior	secured	revolving	credit	facility	and	$2.35	billion	of	Term	loans	(Note	19).

# European	Line	of	Credit

The	Company	maintains	an	unsecured	line	of	credit	with	a	bank	for	the	equivalent	of	$3,000,	which	bears	interest	at	the	Europe	Interbank	Offered	Rate	(4.8%	at September	29,	2007)	plus	1.50%.	There	were	no	amounts	outstanding	during	2007	and	2006.	The	borrowings	under	this	line	are	primarily	used	by	the	Company's European	subsidiaries	to	settle	intercompany	sales	and	are	denominated	in	the	respective	local	currencies	of	its	European	subsidiaries.	The	line	of	credit	may	be canceled	by	the	bank	with	30	days'	notice.	There	were	no	borrowings	outstanding	under	the	line	of	credit	during	2007,	2006,	or	2005.	No	interest	expense	was	incurred for	fiscal	2007,	2006	and	2005	on	this	line	of	credit.

The	Company's	AEG	subsidiary	has	approximately	$11,000	outstanding	at	September	29,	2007	under	certain	debt	agreements.	The	terms	of	the	agreements	have various	maturities	ranging	from	December	30,	2011	through	September	15,	2012.	Outstanding	borrowings	had	a	weighted	average	interest	rates	of	6.34%	and	5.82% during	the	years	ended	September	29,	2007	and	September	30,	2006,	respectively.	Interest	expense	incurred	under	these	debt	agreements	totaled	$1,208	and	$307	during the	in	fiscal	2007	and	2006,	respectively.

Future	debt	principal	payments	under	these	debt	arrangements	are	approximately	as	follows:

| Fiscal	2008 | $1,977 |
| :--- | :--- |
| Fiscal\t2009 | 1,977 |
| Fiscal\t2010 | 1,977 |
| Fiscal\t2011 | 1,422 |
| Fiscal\t2012 | 3,846 |
| Thereafter | — |
| Total | $11,199 |

# 6. Derivative	Financial	Instruments	and	Hedging	Agreements

# Interest	rate	swaps

In	connection	with	the	debt	assumed	from	the	AEG	acquisition	(see	Notes	3	and	5),	the	Company	acquired	interest	rate	swap	contracts	used	to	convert	the	floating interest-rate	component	of	certain	debt	obligations	to	fixed	rates.	These	agreements	did	not	qualify	for	hedge	accounting	under	Statements	of	Financial	Accounting Standards	No.	133,	Accounting	for	Derivative	Instruments	and	Hedging	Activities	("SFAS	133")	and	thus	were	marked	to	market	each	reporting	period	with	the	change in	fair	value	recorded	to	other	income	(expense),	net	in	the	accompanying	consolidated	statements	of	income.	The	Company	terminated	all	outstanding	interest	rate swaps	in	the	fourth	quarter	of	fiscal	2007	which	resulted	in	a	gain	of	$75	recorded	in	Consolidated	Statement	of	Income.

# Forward	Contracts

Also	in	connection	with	the	AEG	acquisition,	the	Company	assumed	certain	foreign	currency	forward	contracts	to	hedge,	on	a	net	basis,	the	foreign	currency fluctuations	associated	with	a	portion	of	the	AEG's	assets	and	liabilities	that	were	denominated	in	the	US	dollar,	including	inter-company	accounts.	Increases	or decreases	in	the	Company's	foreign	currency	exposures	are	partially	offset	by	gains	and	losses	on	the	forward	contracts,	so	as	to	mitigate	foreign	currency	transaction gains	and	losses.	The	terms	of	these	forward	contracts	are	of	a	short-term	nature	(6	to	12	months).	The	Company	does	not	use	forward	contracts	for	trading	or speculative	purposes.	The	forward	contracts	are	not	designated	as	cash	flow	or	fair	value	hedges	under	SFAS	No.	133	and	do	not	represent	effective	hedges.	All outstanding	forward	contracts	are	marked	to	market	at	the	end	of	the	period	and	recorded	on	the	balance	sheet	at	fair	value	in	other	current	assets	and	other	current liabilities.	The	changes	in	fair	value	from	these	contracts	and	from	the	underlying	hedged	exposures	are	generally	offsetting	were	recorded	in	other	income,	net	in	the accompanying	Consolidated	Statements	of	Income	and	these	amounts	were	not	material.

As	of	September	29,	2007,	all	of	the	forward	exchange	contracts	assumed	in	the	AEG	acquisition	had	matured	and	the	Company	had	no	forward	exchange	contracts outstanding.

# 7. Pension	and	Other	Employee	Benefits

In	conjunction	with	the	May	2,	2006	acquisition	of	AEG,	the	Company	assumed	certain	defined	benefit	pension	plans	covering	the	employees	of	the	AEG German	subsidiary	(Pension	Benefits).	On	September	29,	2006,	the	FASB	issued	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).	SFAS	158	requires	an	entity	to	recognize	in	its	statement	of	financial position	an	asset	for	a	defined	benefit	postretirement

plan's	overfunded	status	or	a	liability	for	a	plan's	underfunded	status,	measure	a	defined	benefit	postretirement	plan's	assets	and	obligations	that	determine	its	funded status	as	of	the	end	of	the	employer's	fiscal	year,	and	recognize	changes	in	the	funded	status	of	a	defined	benefit	postretirement	plan	in	comprehensive	income	in	the year	in	which	changes	occur.	SFAS	158	does	not	change	the	amount	of	net	periodic	benefit	cost	included	in	net	income	or	address	the	various	measurement	issues associated	with	postretirement	benefit	plan	accounting.	As	required	by	SFAS	No.	158,	the	Company	used	a	prospective	approach	in	its	adoption	of	SFAS	No.	158.	As	of September	29,	2007,	the	Company	recognized	the	funded	status	of	its	deferred	benefit	pension	plan.	The	adoption	of	SFAS	No.	158	did	not	impact	the	Company's compliance	with	its	debt	covenants	under	its	credit	agreements,	cash	position	or	results	of	operations.

The	following	table	summarizes	the	incremental	effect	of	adopting	SFAS	No.	158	on	individual	line	items	in	the	Consolidated	Balance	Sheet	as	of	September	29, 2007:

|  | Before |  | After |
| :--- | :--- | :--- | :--- |
|  | Adoption\tof | Adjustments | Adoption\tof |
|  | SFAS\tNo.\t158 | (In\tthousands) | SFAS\tNo.\t158 |
| Accumulated\tother\tcomprehensive\tincome | $— | $2,212 | $2,212 |
| Total\tstockholders'\tequity | $803,511 | $2,212 | $805,723 |

As	of	September	29,	2007,	the	Company	has	recorded	a	pension	liability	of	approximately	$7,627	as	a	component	of	accrued	expenses	in	the	accompanying consolidated	financial	statements.	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.	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	tables	below	provide	a	reconciliation	of	benefit	obligations,	plan	assets,	funded	status,	and	related	actuarial	assumptions	of	the	Company's	German	Pension Benefits.

| Change	in	Benefit	Obligation | Pension	Benefits | Pension	Benefits |
| :--- | :--- | :--- |
|  | September\t29,\n2007 | September\t30,\n2006 |
| Benefit\tobligation\tat\tbeginning\tof\tyear\t(as\tof\tacquisition\tdate\tMay\t2,\t2006) | $(8,005) | $(8,635) |
| Service\tcost | — | (1) |
| Interest\tcost | (397) | (141) |
| Plan\tparticipants'\tcontributions | — | — |
| Actuarial\tgain | 1,455 | 677 |
| Foreign\texchange | (947) | — |
| Benefits\tpaid | 267 | 95 |
| Benefit\tobligation\tat\tend\tof\tyear | (7,627) | (8,005) |
| Plan\tassets | — | — |
| Funded\tstatus | $(7,627) | $(8,005) |

The	tables	below	outline	the	components	of	net	periodic	benefit	cost	and	related	actuarial	assumptions	of	the	Company's	German	Pension	Benefits	plan.

|  | 2007 | 2006 |
| :--- | :--- | :--- |
| Service\tcost | $— | $— |
| Interest\tcost | \t 411 | 355 |
| Expected\treturn\ton\tplan\tassets | \t — | \t — |
| Amortization\tof\tprior\tservice\tcost | \t — | \t — |
| Recognized\tnet\tactuarial\tgain | (91) | (1) |
| Net\tperiodic\tbenefit\tcost | $320 | $354 |

| Weighted-Average	Net	Periodic	Benefit	Cost	Assumptions | 2007 | 2006 |
| :--- | :--- | :--- |
| Discount\trate | 5.5% | 4.5% |
| Expected\treturn\ton\tplan\tassets | 0% | 0% |
| Rate\tof\tcompensation\tincrease | 0% | 0% |

The	projected	benefit	obligation	for	the	German	Pension	Benefits	plans	with	projected	benefit	obligations	in	excess	of	plan	assets	was	$7,627	and	$8,005	at September	29,	2007	and	September	30,	2006	and	the	accumulated	benefit	obligation	for	the	German	Pension	Benefits	plans	was	$7,627	and	$8,005	at	September	29, 2007	and	September	30,	2006.

There	also	exists	the	obligation	to	pay	long-term	service	awards	benefits.	The	projected	benefit	obligation	for	long-term	service	awards	was	$554	and	$489	at September	29,	2007	and	September	30,	2006,	respectively.

The	table	below	reflects	the	total	Pension	Benefits	expected	to	be	paid	from	the	plans.

|  | Pension	Benefits |
| :--- | :--- |
| 2008 | $305 |
| 2009 | 338 |
| 2010 | 346 |
| 2011 | 361 |
| 2012 | 379 |
| 2013-2017 | 2,176 |

The	Company	also	maintains	additional	contractual	pension	benefits	for	its	top	German	executive	officers	in	the	form	of	a	defined	contribution	plan. Contributions	in	fiscal	2007	and	2006	were	$175	and	$83,	respectively.

The	Company	accounts	for	income	taxes	using	the	liability	method	as	required	by	SFAS	No.	109,	"Accounting	for	Income	Taxes."	Under	this	method,	deferred income	taxes	are	recognized	for	the	future	tax	consequences	of	differences	between	the	tax	and	financial	accounting	of	assets	and	liabilities	at	the	end	of	each	reporting period.	Deferred	income	taxes	are	based	on	enacted	tax	laws	and	statutory	tax	rates	applicable	to	the	periods	in	which	the	differences	are	expected	to	affect	taxable income.	A	valuation	allowance	is	established	when	necessary	to	reduce	deferred	tax	assets	to	the	amounts	expected	to	be	realized.

The	provision	(benefit)	for	income	taxes	in	the	accompanying	consolidated	statements	of	income	consists	of	the	following:

|  | September	29,<br>2007 | September	30,<br>2006 | September	24,<br>2005 |
| :--- | :--- | :--- | :--- |
| Federal: |  |  |  |
| Current | $39,096 | $26,164 | $5,153 |
| Deferred | 6,053 | (3,540) | 18 |
|  | 45,149 | 22,624 | 5,171 |
| State: |  |  |  |
| Current | 6,735 | 4,240 | 987 |
| Deferred | (2,101) | (630) | (153) |
|  | 4,634 | 3,610 | 834 |
| Foreign: |  |  |  |
| Current | 6,167 | 196 | 434 |
| Deferred | (2,039) | (630) | — |
|  | 4,128 | (434) | 434 |
|  | $53,911 | $25,800 | $6,439 |

A	reconciliation	of	the	federal	statutory	rate	to	the	Company's	effective	tax	rate	is	as	follows:

|  |  | Years	ended |  |
| :--- | :--- | :--- | :--- |
|  | September\t29,\n2007 | September\t30,\n2006 | September\t24,\n2005 |
| Income\ttax\tprovision\tat\tfederal\tstatutory\trate | 35% | 35% | 35% |
| Increase\t(decrease)\tin\ttax\tresulting\tfrom: |  |  |  |
| Change\tin\tvaluation\tallowance | (0.4) | 1.3 | (17.9) |
| Release\tof\ttax\treserves | — | — | (2.2) |
| State\ttax\tprovision,\tnet\tof\tfederal\tbenefit | 3.3 | 4.0 | 3.1 |
| Tax\tCredits | (1.4) | (0.2) | (0.1) |
| In-process\tresearch\tand\tdevelopment | — | 10.3 | — |
| Permanent\tdifferences | (0.7) | (1.7) | 0.5 |
| Other | 0.5 | (0.2) | 0.2 |
|  | 36.3% | 48.5% | 18.6% |

The	components	of	domestic	and	foreign	income	(loss)	before	the	provision	for	income	taxes	are	as	follows:

|  |  | Years	ended |  |
| :--- | :--- | :--- | :--- |
|  | September\t29,\n2007 | September\t30,\n2006 | September\t24,\n2005 |
| Domestic | $137,659 | $54,542 | $33,662 |
| Foreign | 10,830 | (1,319) | 1,033 |
|  | $148,489 | $53,223 | $34,695 |

The	components	of	the	net	deferred	tax	asset	recognized	in	the	accompanying	Consolidated	Balance	Sheets	are	as	follows:

|  | September	29,<br>2007 | September	30,<br>2006 |
| :--- | :--- | :--- |
| Deferred\ttax\tassets |  |  |
| Net\toperating\tloss\tcarryforwards | $30,761 | $53,447 |
| Nondeductible\taccruals | 6,153 | 1,858 |
| Nondeductible\treserves | 8,954 | 6,070 |
| Other\ttemporary\tdifferences | (8,370) | 3,074 |
| Research\tand\tother\tcredits | 4,681 | 3,503 |
|  | $42,179 | $67,952 |
| Deferred\tTax\tLiabilities\nDepreciation\tand\tamortization | (58,736) | (67,560) |
|  | $(16,557) | $392 |
| Valuation\tallowance | (9,059) | (10,486) |
|  | $(25,616) | $(10,094) |

The	Company	generated	significant	tax	loss	carryforwards	during	fiscal	2001	and	2000,	which	may	be	carried	forward	for	16	and	15	years,	respectively.	Under SFAS	No.	109,	the	Company	can	only	recognize	a	deferred	tax	asset	for	future	benefit	of	its	tax	loss	carryforward	to	the	extent	that	it	is	"more	likely	than	not"	that	these assets	will	be	realized.	The	Company	has	a	valuation	allowance	against	a	portion	of	its	remaining	potential	deferred	tax	assets.	The	valuation	allowance	primarily	relates to	federal	and	state	operating	net	losses	from	the	Suros	and	R2	acquisitions,	for	which	realization	is	uncertain.

In	determining	the	realizability	of	these	assets,	the	Company	considers	numerous	factors,	including	historical	profitability,	estimated	future	taxable	income	and the	industry	in	which	it	operates.	In	fiscal	2007	the	Company	released	valuation	allowance	on	net	operating	losses	generated	by	excess	stock	deductions.	The approximate	$710	of	tax	benefit	associated	with	these	net	operating	losses	was	recorded	as	an	increase	to	additional	paid	in	capital.	Additionally,	the	Company	recorded a	decrease	of	approximately	$280	to	its	valuation	allowance	against	certain	federal	and	state	net	operating	losses	acquired	in	the	Suros	and	R2	acquisitions	with	a corresponding	reduction	to	goodwill.	The	remaining	change	in	valuation	allowance	is	attributable	to	the	decrease	in	valuation	allowance	recognized	on	certain	state	tax assets	generated	through	2007.	The	Company	believes	it	is	more	likely	than	not	that	these	state	tax	assets	will	be	realized.

In	addition	to	the	$710	discussed	above,	the	Company	also	recorded	a	$21,216	increase	to	additional	paid	in	capital	related	to	the	excess	tax	benefit	of	stock options	exercised	in	the	current	year.	The	total	increase	to	additional	paid	in	capital,	recorded	in	2007,	related	to	the	excess	tax	benefit	of	stock	options	was	$21,926.

As	of	September	29,	2007	the	Company	had	total	net	operating	loss	and	credit	carryforwards	of	approximately	$84,300	and	$4,700,	respectively.	The	following table	summarizes	the	expiration	periods	of	the	net	operating	loss	and	credit	carryforwards:

|  | 2010-2015 | 2016-2020 | 2021-2025 | 2026-2030 | No	expiration | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Net\toperating\tloss | $— | $51,503 | $29,730 | $3,071 | $— | $ 84,304 |
| R&amp;D\tcredit | $— | $1,295 | $1,560 | $— | $— | $3,106 |
| CT\tcredit | $18 | $958 | $271 | $— | $— | $1,247 |
| MA\tITC\tcredit | $144 | $— | $— | $— | $185 | $329 |

The	Company	had	previously	recorded	reserves	for	taxes	that	may	become	payable	as	a	result	of	federal	and	state	audits.	The	Company	establishes	reserves	based on	management's	assessment	of	exposure	associated	with	permanent	tax	differences	and	tax	credits.	The	tax	reserves	are	analyzed	periodically	and	adjustments	are made,	as	events	occur	to	warrant	adjustment	to	the	reserve.	During	the	fourth	quarter	of	fiscal	2005,	the	Company	received	notification	that	the	Joint	Committee	on Taxation	had	no	exceptions	with	the	Internal	Revenue	Service's	conclusions	on	several	tax	returns	under	examination.	Therefore,	the	Company	released	$750	of	tax reserves	related	to	these	returns.

# 9. Common	Stock

On	October	22,	2007	the	Company's	certificate	of	incorporation	was	amended	to	increase	the	number	of	authorized	shares	of	the	Company's	common	stock thereunder	from	90,000	to	300,000.

# Stock	Option	Plans

The	Company's	1994	Stock	Option	Plan	(the	1994	Plan)	and	the	1995	Stock	Option	Plan	(the	1995	Plan),	both	of	which	were	originally	adopted	by	Fluoroscan and	assumed	by	the	Company	upon	its	combination	with	Fluoroscan	in	1996,	are	administered	by	the	Board	of	Directors.	As	of	September	29,	2007,	the	Company	had no	shares	available	for	future	grant	under	these	plans.

In	June	1995,	the	Board	of	Directors	adopted	the	1995	Combination	Stock	Option	Plan	(the	1995	Combination	Plan),	pursuant	to	which	the	Company	is authorized	to	issue	2,200	options	to	purchase	shares	of	common	stock.	Under	the	terms	of	the	1995	Combination	Plan,	the	Company	may	grant	employees	either incentive	stock	options	or	nonqualified	stock	options	to	purchase	shares	of	the	Company's	common	stock	at	a	price	not	less	than	the	fair	market	value	at	the	date	of grant.	In	addition,	the	Company	may	grant	nonqualified	options	to	other	participants,	such	as	consultants	and	advisors.	As	of	September	29,	2007,	the	Company	had	no shares	available	for	future	grant	under	this	plan.

The	Company's	1990	Nonemployee	Director	Stock	Option	Plan	(the	Directors'	Plan)	allowed	for	eligible	directors	to	receive	options	to	purchase	20	shares	of common	stock	upon	election	as	a	director.	The	options	vest	ratably	over	a	five-year	period.	In	addition,	eligible	directors	were	entitled	to	annual	option	grants	to	purchase 16	shares	of	common	stock,	which	vest	after	six	months.	Option	grants	under	the	Directors'	Plan	were	made	at	not	less	than	fair	market	value	on	the	date	of	grant.	As	of September	29,	2007,	the	Company	had	no	shares	available	for	future	grant	under	this	plan.

In	May	1997,	the	Board	of	Directors	adopted	the	1997	Employee	Equity	Incentive	Plan	(the	1997	Plan),	pursuant	to	which	the	Company	is	authorized	to	issue 2,200	shares	of	common	stock.	Under	the	terms	of	the

1997	Plan,	the	Company	may	grant	employees,	consultants	and	advisors	who	are	not	executive	officers	or	directors	of	the	Company	either	nonqualified	stock	options, stock	appreciation	rights,	performance	shares,	restricted	stock,	or	stock	units.	In	September	2005,	the	Board	of	Directors	determined	that	no	further	awards	would	be made	under	this	plan.	As	a	result,	the	Board	of	Directors	amended	this	plan	to	eliminate	all	remaining	shares	of	common	stock	available	for	issuance	under	the	plan	that are	not	subject	to	outstanding	stock	option	awards.

In	March	1999,	the	Board	of	Directors	adopted	the	1999	Equity	Incentive	Plan	(the	1999	Plan),	pursuant	to	which	the	Company	is	authorized	to	issue	600	shares, plus	an	annual	increase,	as	defined,	on	the	first	day	of	each	fiscal	year	following	the	adoption	of	the	1999	Plan.	Effective	September	25,	2005	and	October	1,	2006,	the Board	of	Directors	increased	the	number	of	shares	available	by	1,000	shares	each	year	bringing	the	total	shares	available	for	issuance	to	7,660.	Under	the	terms	of	the 1999	Plan,	the	Company	may	grant	employees	either	incentive	stock	options	or	nonqualified	stock	options.	In	addition,	the	Company	may	grant	non-employee director's	nonqualified	stock	options.	The	exercise	price	of	the	options	granted	under	this	plan	may	not	be	less	than	the	fair	market	value	of	the	Company's	stock	on	the date	on	which	the	option	was	granted.	As	of	September	29,	2007,	the	Company	had	943	shares	available	for	future	grant	under	this	plan.	Effective	September	30,	2007 the	Board	of	Directors	increased	the	number	of	shares	available	by	1,000	bringing	the	total	shares	available	for	issuance	to	8,660.	On	October	18,	2007	the	stockholders of	the	Company	approved	an	increase	in	the	number	of	shares	available	by	4,000	bringing	the	total	shares	available	for	issuance	to	12,660.

In	April	2001,	the	Board	of	Directors	adopted	the	2000	Acquisition	Equity	Incentive	Plan	(the	2000	Plan),	pursuant	to	which	the	Company	was	authorized	to	issue 2,000	shares	of	common	stock.	On	December	17,	2003,	the	Board	of	Directors	approved	a	decrease	of	400	shares	of	common	stock	available	under	the	2000	Plan reducing	the	authorized	amount	to	1,600	shares.	Under	the	terms	of	the	2000	Plan,	the	Company	may	grant	employees,	consultants	and	advisors	of	newly	acquired businesses	either	nonqualified	stock	options,	stock	appreciation	rights,	performance	shares	or	restricted	stock.	In	September	2005,	the	Board	of	Directors	determined that	no	further	awards	would	be	made	under	this	plan.	As	a	result,	the	Board	of	Directors	amended	this	plan	to	eliminate	all	remaining	shares	of	common	stock	available for	issuance	under	the	plan	that	are	not	subject	to	outstanding	stock	option	awards.

Certain	option	and	share	awards	provide	for	accelerated	vesting	if	there	is	a	change	in	control	(as	defined	in	the	plans).	The	merger	with	Cytyc	in	the	first	quarter of	fiscal	2008	qualifies	as	a	change	of	control	under	certain	of	the	Company's	outstanding	option	and	share	awards.	As	a	result,	the	Company	expects	to	recognize approximately	$2,600	of	compensation	expense	related	to	the	acceleration	in	the	first	quarter	of	fiscal	2008	upon	the	close	of	the	merger.

The	following	table	summarizes	all	stock	award	activity	under	all	of	the	plans	for	the	three	years	in	the	period	ended	September	29,	2007:

|  |  |  | Weighted- | Aggregate |
| :--- | :--- | :--- | :--- | :--- |
|  | Number | Per\tShare | Average | Intrinsic |
|  | of\tShares | Exercise\tPrice | Exercise\tPrice | Value |
| Outstanding\tat\tSeptember\t25,\t2004 | 6,851 | $1.59\t–\t22.13 | $5.52 |  |
| Granted | 1,060 | 9.02\t–\t26.44 | 13.47 |  |
| Terminated | (129) | 2.06\t–\t18.34 | 8.37 |  |
| Exercised | (3,077) | 1.59\t–\t15.29 | 4.99 | $38,925 |
| Outstanding\tat\tSeptember\t24,\t2005 | 4,705 | 1.97\t–\t26.44 | 7.58 |  |
| Granted | 952 | 26.38\t–\t55.27 | 40.73 |  |
| Terminated | (66) | 2.50\t–\t53.67 | 14.06 |  |
| Exercised | (1,426) | 1.97\t–\t27.73 | 7.41 | $50,713 |
| Outstanding\tat\tSeptember\t30,\t2006 | 4,165 | $1.97\t–\t55.27 | $15.12 | $ 120,030 |
| Granted | 153 | 42.89\t–\t62.26 | 51.36 |  |
| Terminated | (111) | 4.50\t–\t61.67 | 39.69 |  |
| Exercised | (1,347) | 1.97\t–\t49.30 | 7.86 | $63,477 |
| Outstanding\tat\tSeptember\t29,\t2007 | 2,860 | $1.97\t–\t62.26 | 19.53 | $ 118,599 |
| Exercisable\tat\tSeptember\t29,\t2007 | 1,691 | $1.97\t–\t55.27 | 11.10 | $84,384 |
| Exercisable\tat\tSeptember\t30,\t2006 | 2,443 | $1.97\t–\t37.92 | $7.57 | $87,836 |
| Exercisable\tat\tSeptember\t24,\t2005 | 3,069 | $\t1.97\t–\t$26.44 | $7.42 | $59,716 |
| Vested\tand\texpected\tto\tvest\tat\tSeptember\t29, |  |  |  |  |
| 2007\t(1) | 2,620 |  |  |  |
| Available\tfor\tGrant\tat\tSeptember\t29,\t2007 | 943 |  |  |  |

(1) This	represents	the	number	of	vested	stock	options	as	of	September	29,	2007	plus	the	unvested	outstanding	options	at	September	29,	2007	expected	to	vest	in	the future,	adjusted	for	estimated	forfeitures.

The	table	below	provides	the	range	of	exercise	prices	for	options	outstanding	and	options	exercisable	at	September	29,	2007,	however,	the	table	excludes restricted	stock	units	issued	in	fiscal	2006	and	2007	for	54	and	30	shares	of	common	stock	with	a	weighted	average	exercise	price	of	$46.38	and	$48.30	respectively:

| Options	Outstanding | Options	Outstanding | Options	Outstanding | Options	Outstanding | Options	Exercisable | Options	Exercisable |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | Weighted-Average |  |  |  |
|  |  | Remaining |  |  |  |
| \t\t\t\t\t\t\t\tRange\tof | Options | Contractual\tLife | Weighted-Average | Options | Weighted-Average |
| \t\t\t\tExercise\tPrice | Outstanding | (Years) | Exercise\tPrice | Exercisable | Exercise\tPrice |
| $\t\t1.97–$2.53 | 100 | 3.25 | $2.44 | 100 | $2.44 |
| $\t\t2.56–$3.62 | 58 | 2.61 | 3.17 | 58 | 3.17 |
| $\t\t3.63–$5.13 | 490 | 4.82 | 4.69 | 490 | 4.69 |
| $\t\t5.25–$7.13 | 569 | 5.94 | 6.99 | 312 | 6.91 |
| $\t\t7.15–$10.18 | 451 | 3.28 | 9.83 | 427 | 9.84 |
| $10.42–$13.31 | 41 | 7.15 | 12.61 | 19 | 12.60 |
| $13.60–$18.48 | 78 | 7.40 | 17.13 | 22 | 14.73 |
| $18.56–$27.73 | 316 | 8.01 | 25.65 | 119 | 23.88 |
| $28.15–$42.24 | 121 | 8.31 | 36.47 | 46 | 36.44 |
| $42.30–$62.26 | 636 | 8.75 | 47.73 | 98 | 46.95 |
| $\t\t1.97–$62.26 | 2,860 | 6.18 | 19.53 | 1,691 | 11.10 |

A	summary	of	the	status	of	the	Company's	Restricted	Stock	Units	and	the	Company's	only	non-vested	shares,	as	of	September	29,	2007,	and	changes	during	the two	years	ended	September	29,	2007,	is	presented	below:

| Non-vested	Shares | Number	of<br>Shares | Date	Fair<br>Value |
| :--- | :--- | :--- |
| Non-vested\tat\tSeptember\t25,\t2005 | — | $— |
| Granted. | 54 | 46.38 |
| Vested | — | — |
| Forfeited | — | — |
| Non-vested\tat\tSeptember\t25,\t2006 | 54 | 46.38 |
| Granted. | 31 | 48.30 |
| Vested | — | — |
| Forfeited | (1) | 48.30 |
| Non-vested\tat\tSeptember\t29,\t2007 | 84 | $47.06 |

As	of	September	29,	2007,	the	Company	had	approximately	$46,753	of	excess	tax	benefits	available	for	potential	deferred	tax	write-offs	related	to	option accounting.

# Employee	Stock	Purchase	Plan

The	Company	had	an	Employee	Stock	Purchase	Plan	(the	ESP	Plan)	in	compliance	with	Section	423	of	the	Internal	Revenue	Code.	Employees	who	had completed	three	consecutive	months,	or	two	years,	whether	or	not	consecutive,	of	employment	with	the	Company	or	any	of	its	participating	subsidiaries	were	eligible	to participate	in	the	ESP	Plan.	The	ESP	Plan	allowed	participants	to	purchase	common	stock	of	the	Company	at	85%	of	the	fair	market	value,	as	defined.	During	the	fiscal year	ended	September	24,	2005	the	Company	issued	47	shares	under	the	ESP	Plan.	On	February	28,	2005,	the	Board	of	Directors	approved	to	discontinue	the	ESP	Plan effective	on	July	1,	2005.

# Rights	Agreement

On	September	17,	2002,	the	Board	of	Directors	adopted	a	new	shareholder	rights	plan	(the	2002	Rights	Plan)	to	replace	the	December	1992	Plan	when	it	expired on	December	31,	2002.	In	addition	to	certain	other	modifications,	the	2002	Rights	Plan	uses	preferred	stock	purchase	rights	rather	than	common	stock	purchase	rights. To	affect	the	2002	Rights	Plan,	the	Board	of	Directors	declared	a	dividend	distribution	of	one	right	for	each	share	of	the	Company's	common	stock	outstanding	as	of	the close	of	business	on	December	31,	2002.	Each	right	entitles	the	registered	holder	to	purchase	one-half	of	one	one-thousandth	of	a	share	of	the	Company's	Series	A Junior	Participating	Preferred	Stock	(after	taking	into	account	the	two-for-one	stock	split	effected	on	November	30,	2005)	at	a	purchase	price	of	$30.00.	The	rights	will be	exercisable	if	a	person	or	group	acquires	beneficial	ownership	of	15%	or	more	of	the	Company's	common	stock	or	announces	a	tender	or	exchange	offer	for	15%	or more	of	the	Company's	common	stock.	At	such	time,	each	holder	of	a	right	(other	than	the	15%	holder)	will	thereafter	have	a	right	to	purchase,	upon	payment	of	the purchase	price	of	the	right,	that	number	of	shares	of	the	Company's	common	stock,	which	have	a	market	value	of	twice	the	purchase	price	of	the	right.	The	2002	Rights Plan	is	designed	to	deter	coercive	or	unfair	takeover	tactics	and	to	ensure	that	all	of	the	Company's	shareholders	receive	fair	and	equal	treatment	in	the	event	of	an unsolicited	attempt	to	acquire	the	Company.	On	May	20,	2007,	in	connection	with	signing	the	merger	agreement	for	the	business	combination	with	Cytyc,	the	Company amended	the	2002	Rights	Plan	to	render	it	inapplicable	to	the	merger	agreement,	the	Cytyc	merger	and	the	issuance	of	shares	of	the	Company's	common	stock	to	the Cytyc	stockholders	in	connection	with	the	merger.

The	Company	has	a	qualified	profit	sharing	plan	covering	substantially	all	of	its	employees.	Contributions	to	the	plan	are	at	the	discretion	of	the	Company's Board	of	Directors.	The	Company	has	recorded	approximately	$1,572,	$1,200	and	$977	as	a	provision	for	the	profit	sharing	contribution	for	fiscal	2007,	2006	and	2005, respectively.

# 11. Supplemental	Executive	Retirement	Plan

Effective	March	15,	2006,	the	Company	adopted	a	Supplemental	Executive	Retirement	Plan	(the	"SERP").	The	SERP	is	a	deferred	compensation	plan	for	a	select group	of	highly-compensated	employees	of	the	Company,	including	the	executive	officers.	Eligible	employees	are	entitled	to	elect	to	contribute	up	to	75%	of	their annual	base	salary	and	100%	of	their	annual	bonus	to	the	SERP.	In	addition,	the	Company	has	the	discretion	to	make	annual	discretionary	contributions	on	behalf of	participants	in	the	SERP.	Each	Company	contribution	is	subject	to	a	three	year	vesting	schedule,	such	that	each	contribution	is	1/3rd	vested	each	year	and	is	fully vested	3	years	after	the	contribution	is	made.	The	Company	contributions	become	fully	vested	upon	death	or	disability	of	the	participant	or	a	change	in	control	of	the Company,	as	defined.	Voluntary	contributions	made	by	the	participant	are	100%	vested.	All	voluntary	contributions	have	been	recorded	as	a	component	of	accrued expenses	in	the	accompanying	Consolidated	Balance	Sheets.

Upon	enrollment	into	the	SERP,	employees	make	investment	elections	for	both	their	voluntary	contributions	and	discretionary	contributions,	if	any,	made	by	the Company.	Earnings	and	losses	on	contributions	based	on	these	investment	elections	are	recorded	as	a	component	of	compensation	expense	in	the	period	earned.

On	October	30,	2006	the	Compensation	Committee	of	the	Board	of	Directors	approved	a	$1,500	discretionary	cash	contribution	to	the	SERP.	Discretionary contributions	by	the	Company	to	the	SERP	are	held	in	a	Rabbi	Trust.	The	Company	is	recording	compensation	expense	for	the	SERP	discretionary	contribution	ratably

over	the	three-year	vesting	period,	which	totaled	$442	in	the	year	ended	September	29,	2007.	The	full	amount	of	the	discretionary	contribution	has	been	recorded	as	a component	of	accrued	expenses	in	the	accompanying	Consolidated	Balance	Sheets.	The	unvested	portion	of	the	contribution	totaling	$500	is	in	prepaid	and	other	current assets	and	totaling	$538	is	in	other	long	term	assets	in	the	accompanying	Consolidated	Balance	Sheets.

The	Company	has	purchased	Company-owned	group	life	insurance	contracts,	in	which	both	voluntary	and	discretionary	Company	SERP	contributions	are invested	to	fund	payment	of	the	Company	and	employees	contributed	amounts	and	related	earnings,	in	the	amount	of	$3,654	which	approximates	the	total	of	employee voluntary	contributions	into	the	plan	and	the	Company's	cash	portion	of	its	discretionary	contribution.	The	values	of	these	life	insurance	contracts	have	been	recorded	as a	component	of	other	long-term	assets	in	the	accompanying	Consolidated	Balance	Sheet.	Changes	in	the	cash	surrender	value	of	life	insurance	contract	are	recorded	as	a component	of	interest	and	other	income	(expense)	in	the	accompanying	Consolidated	Statement	of	Income.

# 12. Related	Party	Transactions

In	fiscal	2000	and	2001,	the	Company	loaned	an	officer	an	aggregate	of	$500.	The	note	was	unsecured	and	accrued	interest	at	7%	per	annum.	In	December	2002, the	Compensation	Committee	of	the	Board	of	Directors	approved	a	special	bonus	program	to	provide	the	officer	with	the	funds	necessary	to	pay	the	quarterly installments	due	under	the	loan	discussed	above.	Under	the	special	bonus	program,	for	so	long	as	the	officer	remained	an	officer	of	the	Company	and	there	are	amounts remaining	to	be	repaid	under	the	loan,	the	Company	paid	the	officer	a	special	quarterly	bonus	equal	to	the	amount	due	under	the	loan,	including	interest	due,	plus	an additional	payment	equal	to	the	taxes	due	as	a	result	of	the	special	bonus	and	such	additional	payment,	such	that	the	net-after-tax	special	quarterly	bonus	received	by	the officer	equaled	the	principal	and	interest	then	due	under	the	loan.	During	the	year	ended	September	30,	2006	the	Company	recognized	$75	in	bonus	expense	in connection	with	this	program.	As	of	January	1,	2006,	the	full	amount	of	the	loan	had	been	repaid,	and	no	further	amounts	will	be	paid	to	the	officer	under	this	program.

In	May	2006,	the	Company	entered	into	retention	and	severance	agreements	with	certain	executives	that	provide	for	retention	payments	in	cash	totaling	$3,000	if these	executives	remain	employed	with	the	Company	through	December	31,	2008	("Retention	Date").	The	Company	has	determined	that	it	is	probable	that	these amounts	will	be	paid	and	therefore,	is	accruing	these	amounts	ratably	through	the	Retention	Date.	In	addition,	in	connection	with	the	retention	and	severance	agreement, these	executives	were	awarded	54	restricted	stock	units	with	an	aggregate	value	of	$2,500.	These	restricted	stock	units	cliff	vest	on	the	Retention	Date.	These	shares	are excluded	from	the	computation	of	basic	earnings	per	share	until	the	shares	vest	because	the	employee	is	not	entitled	to	the	reward	of	stock	ownership.	The	Company	is recording	the	$2,500	of	stock	based	compensation,	over	the	vesting	period	of	the	restricted	stock.	As	a	result,	the	Company	recorded	stock	based	compensation	expense of	$937	and	$391	during	the	years	ended	September	29,	2007	and	September	30,	2006,	respectively.	The	retention	and	severance	agreements	also	provide	these executives	with	certain	cash	payment	and	continuation	of	benefits,	as	defined,	in	the	event	of	termination	without	cause.

In	May	2006,	the	Company	also	entered	into	severance	agreements	with	certain	other	key	officers	that	provide	for	certain	cash	payments	and	continuation	of benefits,	as	defined,	in	the	event	of	termination	without	cause.

# 13. Commitments	and	Contingencies

# Operating	Leases

The	Company	conducts	its	operations	in	leased	facilities	under	operating	lease	agreements	that	expire	through	fiscal	2022.	The	Company	leases	certain	equipment under	operating	lease	agreements	that	expire	through	fiscal	2015.	As	a	result	of	the	acquisitions	of	AEG,	R2,	Suros	and	BioLucent,	the	Company	assumed	the	obligation under	their	existing	facility	leases	as	well	as	for	certain	equipment	lease	agreements.

Substantially	all	of	the	Company's	lease	agreements	require	the	Company	to	maintain	the	facilities	during	the	term	of	the	lease	and	to	pay	all	taxes,	insurance, utilities	and	other	costs	associated	with	those	facilities.	The	Company	makes	customary	representations	and	warranties	and	agrees	to	certain	financial	covenants	and indemnities.	In	the	event	the	Company	defaults	on	the	lease,	the	landlord	may	terminate	the	lease,	accelerate	payments	and	collect	liquidated	damages.	As	of	the	end	of fiscal	2007,	the	Company	was	not	in	default	of	any	covenants	contained	in	the	lease.	Certain	of	the	Company's	lease	agreements	provide	for	renewal	options.	Such renewal	options	are	at	rates	similar	to	the	current	rates	under	the	agreements.

Future	minimum	lease	payments	under	all	of	the	Company's	operating	leases	are	approximately	as	follows:

The	Company	subleases	a	portion	of	its	Bedford	facility	and	Santa	Clara	facility	and	has	received	rental	income	of	$158,	$290	and	$298	for	fiscal	years	2007, 2006	and	2005,	respectively,	which	has	been	recorded	as	an	offset	to	rent	expense	in	the	accompanying	Consolidated	Statements	of	Income.	Rental	expense,	net	of sublease	income,	was	approximately	$7,355,	$5,785,	and	$4,739	for	fiscal	2007,	2006	and	2005,	respectively.

respectively,	which	has	been	recorded	as	an	offset	to	rent	expense	in	the	accompanying	Consolidated	Statements	of	Income.	The	future	minimum	annual	rental	income payments	under	these	sublease	agreements	are	approximately	as	follows:

The	majority	of	this	subrental	income	is	from	one	tenant	and	this	income	is	being	accounted	for	on	a	straight-line	basis.

# Purchase	Obligations

In	September	2005,	the	Company	entered	into	an	exclusive	distribution	and	service	agreement	in	the	United	States	under	which	the	Company	will	sell	and	service a	line	of	extremity	MRI	systems.	On	October	31,	2007	the	Company	and	Esaote	amended	the	terms	of	this	agreement	such	that	the	Company's	future	minimum purchase	obligation	is	$3,681	through	December	31,	2008.

The	Company	also	has	certain	other	minimum	purchase	obligations	totaling	$13,414	as	of	September	29,	2007	which	are	payable	through	fiscal	2009.

# Workforce	subject	to	collective	Bargaining	Agreements

Approximately	200	of	AEG's	German	employees	are	represented	by	a	Works	Council	and	are	subject	to	collective	bargaining	agreements.	None	of	the Company's	other	employees	are	subject	to	a	collective	bargaining	agreement.

# 14. 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.	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	how	to	allocate	resources	and	assess	performance.	The	Company's	chief	decision-maker,	as	defined	under	SFAS No.	131,	is	the	chief	operating	officer.	Beginning	in	fiscal	2006,	the	Company	combined	its	previously	reported	mammography	and	digital	detector	operating	segments, to	better	reflect	how	the	Company	views	its	operations	and	manages	its	business.	In	fiscal	2006,	the	primary	function	of	the	digital	detector	business	is	to	support	the Company's	mammography	product	line.	The	Company	now	reports	its	business	as	three	principal	operating	segments:	mammography/breast	care	products,	osteoporosis assessment	products,	and	other	products.

Identifiable	assets	for	the	three	principal	operating	segments	consist	of	inventories,	intangible	assets,	and	property	and	equipment.	The	Company	has	presented	all other	assets	as	corporate	assets.	Inter-segment	sales	and	transfers	are	not	significant.

The	accounting	policies	of	the	segments	are	the	same	as	those	described	in	the	summary	of	significant	accounting	policies.	The	Company	evaluates	performance based	on	revenues	and	operating	income.	Segment	information	for	fiscal	years	2007,	2006	and	2005	is	as	follows:

|  | September	29,<br>2007 | September	30,<br>2006 | September	24,<br>2005 |
| :--- | :--- | :--- | :--- |
| Total\trevenues: |  |  |  |
| Mammography/Breast\tCare | $588,896 | $335,795 | $189,313 |
| Osteoporosis\tAssessment | 64,513 | 80,162 | 74,957 |
| Other | 84,959 | 46,723 | 23,414 |
|  | $738,368 | $462,680 | $287,684 |
| Operating\tincome\t(loss): |  |  |  |
| Mammography/Breast\tCare | $141,514 | $44,227 | $17,460 |
| Osteoporosis\tAssessment | 4,817 | 9,760 | 11,175 |
| Other | 1,421 | (3,648) | 3,996 |
|  | 147,752 | $50,339 | $32,631 |
| Depreciation\tand\tamortization: |  |  |  |
| Mammography/Breast\tCare | $22,458 | $10,857 | $4,756 |
| Osteoporosis\tAssessment | 4,271 | 2,952 | 2,459 |
| Other | 4,433 | 2,322 | 359 |
|  | $31,162 | $16,131 | $7,574 |
| Capital\texpenditures: |  |  |  |
| Mammography/Breast\tCare | $8,656 | $5,754 | $4,458 |
| Osteoporosis\tAssessment | 7,270 | 5,221 | 3,241 |
| Other | 6,914 | 2,014 | — |
|  | 22,840 | $12,989 | $7,699 |
| Identifiable\tassets: |  |  |  |
| Mammography/Breast\tCare | $671,462 | $576,832 | $64,414 |
| Osteoporosis\tAssessment | 15,676 | 11,248 | 9,278 |
| Other | 60,548 | 59,063 | 8,801 |
| Corporate | 318,663 | 209,062 | 197,346 |
|  | $1,066,349 | $856,205 | $279,839 |

Export	sales	from	the	United	States	to	unaffiliated	customers,	primarily	in	Europe,	Asia	and	Latin	America	during	fiscal	2007,	2006	and	2005	totaled approximately	$158,827,	$109,749	and	$76,126,	respectively.

Transfers	between	the	Company	and	its	European	subsidiaries	generally	are	recorded	at	amounts	similar	to	the	prices	paid	by	unaffiliated	foreign	dealers.	All intercompany	profit	is	eliminated	in	consolidation.

Export	product	sales	as	a	percentage	of	total	product	sales	are	as	follows:

|  | September	29,<br>2007 | September	30,<br>2006 | September	24,<br>2005 |
| :--- | :--- | :--- | :--- |
| Europe | 15% | 17% | 19% |
| Asia | 5 | 7 | 10 |
| All\tothers | 5 | 4 | 4 |
|  | 25% | 28% | 33% |

# 15. Accrued	Expenses

Accrued	expenses	consist	of	the	following:

|  | September	29,<br>2007 | September	30,<br>2006 |
| :--- | :--- | :--- |
| Accrued\tcompensation\tand\temployee\tbenefits | $35,053 | $18,489 |
| Accrued\tcommissions | 9,989 | 9,373 |
| Accrued\tincome\ttaxes | 22,356 | 3,445 |
| Accrued\twarranty,\tcurrent\tportion | 11,871 | 8,820 |
| Other\taccrued\texpenses | 9,308 | 11,135 |
|  | $88,577 | $51,262 |

# 16. Litigation	and	Other	Matters

In	March	2005,	the	Company	was	served	with	a	Complaint	filed	on	November	12,	2004	by	Oleg	Sokolov	with	the	United	States	District	Court	for	the	District	of Connecticut	alleging	that	the	Company's	HTC	grid	infringes	U.S.	Patent	Number	5,970,118.	The	plaintiff	is	seeking	to	preliminarily	and	permanently	enjoin	the Company	from	infringing	the	patent,	as	well	as	damages	resulting	from	the	alleged	infringement,	treble	damages	and	reasonable	attorney	fees,	and	such	other	and further	relief	as	may	be	available.	On	April	25,	2005,	the	Company	filed	an	Answer	and	Counterclaims	in	response	to	the	Complaint	in	which	the	Company	denied	the plaintiff's	allegations	and,	among	other	things,	sought	declaratory	relief	with	respect	to	the	patent	claims	and	damages,	as	well	as	other	relief.	On	March	2,	2007	the Court	granted	summary	judgment	in	the	Company's	favor,	holding	that	the	patent-in-suit	is	invalid,	and	dismissed	Oleg	Sokolov's	complaint,	thus	leaving	in	the	case only	the	Company's	counterclaims	against	Oleg	Sokolov.	In	a	related	matter,	the	United	States	Patent	and	Trademark	Office	decided	in	December	2005	to	re-examine the	validity	of	Sokolov's	patent,	and	this	case	has	been	stayed	pending	completion	of	this	process.	The	Company	does	not	believe	that	the	Company	infringes	any	valid or	enforceable	patents	of	the	plaintiff.	However,	while	the	Company	intends	to	vigorously	defend	its	interests,	ongoing	litigation	can	be	costly	and	time	consuming,	and the	Company	cannot	guarantee	that	the	Company	will	prevail.	On	October	28,	1998,	the	plaintiff	had	previously	sued	Lorad,	asserting,	among	other	things,	that	Lorad had	misappropriated	the	plaintiff's	trade	secrets	relating	to	the	HTC	Grid.	This	previous	case	was	dismissed	on	August	28,	2000.	The	dismissal	was	affirmed	by	the Appellate	Court	of	the	State	of	Connecticut,	and	the	United	States	Supreme	Court	refused	to	grant	Certiorari.	Following	the	dismissal,	Sokolov	threatened	to	file	further claims	related	to	the	matter,	and	as	a	result,	the	Company	entered	into	mediation	and	reached	a	tentative	oral	settlement	which	is	expected	to	be	finalized	by	a	written release	and	settlement	agreement.	There	are,	however,	no	assurances	that	a	settlement	will	be	reached.

On	or	about	October	5,	2007,	Ethicon	Endo-Surgery,	Inc.,	a	Johnson	&	Johnson	operating	company,	filed	a	complaint	against	the	Company	and	the	Company's wholly-owned	subsidiary	Suros	Surgical	Systems,	Inc.	(Suros)	in	the	United	States	District	Court	for	the	District	of	Ohio.	The	complaint	alleges	that	certain	of	the ATEC	biopsy	systems	manufactured	and	sold	by	Suros	infringe	four	Ethicon	patents.	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.	Given	the	early	stage	of	the	litigation,	the	Company	is	unable	to	reasonably estimate	the	ultimate	outcome	of	this	case,	as	such	no	amounts	have	been	provided	for	in	the	accompanying	consolidated	financial	statements.

The	Company	became	subject	of	a	non-public	FTC	investigation	to	determine	whether	the	Company's	recent	acquisition	of	certain	mammography	intellectual property	assets	owned	by	Fischer	Imaging	Corporation	may	be	anticompetitive	and	in	violation	of	Section	7	of	the	Clayton	Act	or	Section	5	of	the	Federal	Trade Commission	Act.	On	July	7,	2006,	the	FTC	issued	a	complaint	relating	to	this	investigation	and,	on	the	same	day,	the	Company	entered	into	a	consent	agreement	with the	FTC	to	resolve	this	dispute.

As	part	of	the	consent	agreement,	the	Company	agreed	to	sell,	subject	to	FTC	approval,	all	of	the	intellectual	property	relating	to	Fischer's	Mammotest	prone table	breast	biopsy	system	to	Siemens	AG	for	a	cash	payment	of	$6,500.	The	Company	retained	a	royalty-free,	non-exclusive,	perpetual,	irrevocable,	worldwide	right and	license	to	use	the	intellectual	property	relating	to	the	Mammotest	system.	The	consent	agreement	received	final	approval	from	the	FTC	on	August	9,	2006.

In	the	ordinary	course	of	business,	the	Company	is	party	to	various	types	of	litigation.	The	Company	believes	it	has	meritorious	defenses	to	all	claims,	and,	in	its opinion,	all	litigation	currently	pending	or	threatened	will	not	reasonably	be	likely	to	have	a	material	effect	on	the	Company's	financial	condition	or	results	of operations.

# 17. Quarterly	Statement	of	Income	Information	(Unaudited)

The	following	table	presents	a	summary	of	quarterly	results	of	operations	for	2007	and	2006:

|  | First<br>Quarter | Second<br>Quarter | Third<br>Quarter | Fourth<br>Quarter |
| :--- | :--- | :--- | :--- | :--- |
| Total\trevenue\t(1) | $163,212 | $181,086 | $191,505 | $202,564 |
| Gross\tprofit | 74,355 | 83,548 | 90,113 | 97,550 |
| Net\tincome | 16,086 | 21,634 | 24,748 | 32,110 |
| Diluted\tnet\tincome\tper\tcommon\tand\tcommon\tequivalent\tshare | $0.30 | $0.40 | $0.45 | $0.58 |

|  | First<br>Quarter | Second<br>Quarter | Third<br>Quarter | Fourth<br>Quarter |
| :--- | :--- | :--- | :--- | :--- |
| Total\trevenue\t(1) | $87,956 | $100,985 | $119,685 | $154,055 |
| Gross\tprofit | 36,290 | 42,429 | 49,660 | 65,153 |
| Net\tincome\t(loss)\t(2) | 5,716 | 11,164 | 12,017 | (1,473) |
| Diluted\tnet\tincome\t(loss)\tper\tcommon\tand\tcommon\tequivalent\tshare | $0.12 | $0.24 | $0.25 | $(0.03) |

(1) The	sum	of	the	quarterly	total	revenue	does	not	agree	with	the	Consolidated	Statements	of	Income	due	to	rounding.

(2) See	Note	3	for	further	discussion	of	in-process	research	and	development	expenses	incurred	in	the	fourth	quarter	of	fiscal	2007	related	to	the	R2	and	Suros acquistions.

As	discussed	in	Note	2	the	Company's	financial	statements	are	prepared	on	a	fiscal	year	basis	ending	on	the	last	Saturday	in	September.	Each	of	the	quarters presented	above	represents	a	thirteen-week	period	ending	on	the	last	Saturday	of	December,	March,	June	and	September,	except	for	the	fourth	quarter	of	fiscal	2006 which	was	a	fourteen	week	period.

# 18. Valuation	and	Qualifying	Accounts

|  | Balance	at<br>Beginning<br>of	Period | Acquired<br>Reserve	/<br>Adjustments | Charged	to<br>Costs	and<br>Expenses | Write-<br>offs/<br>Payments | Balance	at<br>End	of<br>Period |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Accounts\tReceivable\tReserves\t(1) |  |  |  |  |  |
| Period\tEnded: |  |  |  |  |  |
| September\t29,\t2007 | $3,712 | $(20) | $947 | $(41) | $4,598 |
| September\t30,\t2006 | 2,592 | 852 | 320 | (52) | 3,712 |
| September\t24,\t2005 | 2,757 | — | — | (165) | 2,592 |
| Restructuring\tAccrual |  |  |  |  |  |
| Period\tEnded: |  |  |  |  |  |
| September\t29,\t2007 | $1,848 | $310 | $— | $(2,053) | $105 |
| September\t30,\t2006 | — | 2,896 | — | (1,048) | 1,848 |
| September\t24,\t2005 | — | — | — | — | — |

# 19. Subsequent	Event

On	October	22,	2007	the	company	completed	the	merger	with	Cytyc	Corporation	(Cytyc)	pursuant	to	Agreement	and	Plan	of	Merger	(Merger	Agreement)	entered into	on	May	20,	2007.	Under	the	terms	and	conditions	of	the	Merger	Agreement,	at	the	effective	time	of	the	merger,	Cytyc	became	a	wholly-owned	subsidiary	of	the Company	and	each	share	of	common	stock	of	Cytyc,	issued	and	outstanding	immediately	prior	to	the	closing	was	cancelled	and	converted	into	the	right	to	receive (i)	0.52	shares	of	common	stock	of	the	Company	and	(ii)	$16.50	in	cash.	As	of	September	29,	2007,	the	Company	capitalized	a	total	of	$6,393	of	direct	acquisitions costs,	which	are	included	in	other	long	term	assets	in	the	accompanying	Consolidated	Balance	Sheet.	In	accordance	with	SFAS	141,	Business	Combinations,	and	based on	the	terms	of	the	merger,	the	Company	is	the	accounting	acquirer.	This	conclusion	was	based	on	the	facts	that	Hologic	board	members	and	senior	management	will control	and	represent	a	majority	of	the	board	of	directors	and	senior	management	of	the	combined	company,	as	well	as	the	terms	of	the	exchange,	pursuant	to	which	the Cytyc	stockholders	received	a	premium	over	the	fair	market	value	ot	their	shares	on	such	date	and	cash	of	$16.50	per	share	(or	approximately	35%	of	the	merger consideration).	There	were	no	preexisting	relationships	between	the	two	companies.

Cytyc,	headquartered	in	Marlborough,	Massachusetts,	is	a	diversified	diagnostic	and	medical	device	company	that	designs,	develops,	manufactures,	and	markets innovative	and	clinically	effective	diagnostic	and	surgical	products.	Cytyc	products	cover	a	range	of	cancer	and	women's	health	applications,	including	cervical	cancer screening,	treatment	of	excessive	menstrual	bleeding	and	radiation	treatment	of	early-stage	breast	cancer.

Under	the	Merger	Agreement,	Cytyc	shareholders	received	an	aggregate	of	approximately	67,302	shares	of	Hologic	common	stock	and	approximately	$2,135,600 in	cash,	assuming	the	conversion	of	Cytyc's	outstanding	convertible	notes.	In	connection	with	the	close	of	the	merger,	the	Company	entered	into	a	credit	agreement relating	to	a	senior	secured	credit	facility	(Credit	Agreement)	with	Goldman	Sachs	Credit	Partners	L.P.	and	certain	other	lenders,	in	which	the	lenders	committed	to provide,	in	the	aggregate,	senior	secured	financing	of	up	to	approximately	$2,550,000	to	pay	for	the	cash	portion	of	the	merger	consideration,	for	repayment	of	existing debt	of	Cytyc,	for	expenses	relating	to	the	merger	and	for	working	capital	following	the	completion	of	the	merger.	As	of	the	closing	of	the	merger	the	Company borrowed	$2,350,000	under	the	credit	facility.

The	estimated	aggregate	purchase	price	of	approximately	$6,166,100	includes	$2,135,600	in	cash;	approximately	67,302	shares	of	Hologic	common	stock	at	an estimated	fair	value	of	$3,742,800;	approximately	8,200	of	fully	vested	stock	options	granted	to	Cytyc	employees	with	an	estimated	fair	value	of	approximately $246,000;	and	approximately	$41,700	of	direct	acquisition	costs.	There	are	no	potential	contingent	consideration	arrangements	payable	to	the	former	Cytyc	shareholders in	connection	with	this	transaction.

The	Company	has	measured	the	fair	value	of	the	67,302	shares	of	the	Company	common	stock	issued	as	consideration	in	connection	with	the	merger	under	EITF Issue	No.	99-12,	Determination	of	the	Measurement	Date	for	the	Market	Price	of	Acquirer	Securities	Issued	in	a	Purchase	Business	Combination.	The	Company determined	the	measurement	date	to	be	May	20,	2007,	the	date	the	transaction	was	announced,	as	the	number	of	shares	to	be	issued	according	the	exchange	ratio	was fixed	without	subsequent	revision.	The	Company	valued	the	securities	based	on	the	average	market	price	a	few	days	before	and	after	the	measurement	date.	The weighted	average	stock	price	was	determined	to	be	approximately	$55.61.

# (i)	Purchase	price

| Cash	portion	of	consideration | $2,135,600 |
| :--- | :--- |
| Fair\tvalue\tof\tsecurities\tissued(a) | 3,742,800 |
| Fair\tvalue\tof\tvested\toptions\texchanged | 246,000 |
| Direct\tacquisition\tcosts | 41,700 |
| Total\testimated\tpurchase\tprice | $6,166,100 |

The	fair	value	of	vested	Hologic	common	stock	options	exchanged	for	vested	Cytyc	options	was	included	in	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	stock	options	assuming no	expected	dividends	and	the	following	weighted-average	assumptions:

# (ii)	Preliminary	Purchase	Price	Allocation

The	allocation	of	the	purchase	price	is	based	upon	preliminary	estimates	of	the	fair	value	of	assets	acquired	and	liabilities	assumed	as	of	September	30,	2007.	The Company	is	in	the	process	of	gathering	information	to	finalize	its	valuation	of	certain	assets	and	liabilities.	The	purchase	price	allocation	will	be	finalized	once	the Company	has	all	necessary	information	to	complete	its	estimate,	but	generally	no	later	than	one	year	from	the	date	of	acquisition.	The	Company	has	begun	to	assess	and formulate	a	plan	to	restructure	certain	of	Cytyc's	activities.	The	Company	believes	its	plan	will	be	finalized	within	one	year	of	the	date	of	acquisition	and	will	record	any liability	as	a	result	of	its	plan	as	an	increase	to	goodwill

(a) Includes	shares	outstanding	as	of	October	22,	2007,	and	1,284	shares	to	be	issued	assuming	conversion	of	the	remaining	$73,258	of	Cytyc's	outstanding	2.25% Senior	Convertible	Notes	due	2024.

(b) The	deferred	income	tax	liability	at	estimated	effective	tax	rates	related	to	acquired	tangible	and	intangible	assets	for	which	the	amortization	is	not	deductible	for tax	purposes	($2,549,200	x	40%	=	$1,019,700).

# (iii)	Valuation	of	Intangible	Assets	and	Goodwill

The	purchase	price	for	the	merger	with	Cytyc	will	be	allocated	to	assets	acquired	and	liabilities	assumed	based	on	management's	estimate	of	their	estimated	fair values.	Management	will	then	allocate	the	purchase	price	in	excess	of	net	tangible	assets	acquired	to	identifiable	intangible	assets,	including	in-process	research	and development,	based	upon	a	detailed	valuation	that	relies	on	information	and	assumptions	further	described	below.	Any	excess	purchase	price	over	the	fair	value	of	the net	tangible	and	intangible	assets	acquired	and	liabilities	assumed	is	allocated	to	goodwill.

# Identifiable	Intangible	Assets

As	part	of	the	preliminary	purchase	price	allocation	Cytyc's	identifiable	intangible	assets	include	existing	technology,	customer	relationships	and	trade	names. Cytyc's	existing	technology	relates	to	patents,	patent	applications	and	know-how	with	respect	to	the	technologies	embedded	in	its	currently	marketed	products.	In determining	the	allocation	of	the	purchase	price	to	existing	technology,	consideration	was	only	given	to	patent	and	patent	applications	that	relate	to	products	that	have been	approved	by	the	FDA.	Cytyc's	customer	relationship	assets	relate	to	relationships	that	Cytyc's	sales	force	has	developed	with	OB/GYNS,	breast	surgeons,	clinical laboratories	and	other	physicians.	The	trade	names	relate	to	both	the	Cytyc	name	as	well	as	key	product	names.

The	Company	used	the	income	approach	to	value	the	existing	technology	and	marketing	based	intangibles.	This	approach	calculates	fair	value	by	discounting	the after-tax	cash	flows	back	to	a	present	value.	The	baseline	data	for	this	analysis	was	the	cash	flow	estimates	used	to	price	the	transaction.	Cash	flows	were	forecasted	for each	intangible	asset,	then	discounted	based	on	an	appropriate	discount	rate.	The	discount	rates	applied	were	benchmarked	with	reference	to	the	implied	rate	of	return from	the	transaction	model	as	well	as	Cytyc's	weighted	average	cost	of	capital	based	on	the	capital	asset	pricing	model.

In	estimating	the	useful	life	of	the	acquired	assets,	the	Company	considered	paragraph	11	of	SFAS	No.	142,	Goodwill	and	Other	Intangible	Assets,	which	lists	the pertinent	factors	to	be	considered	when	estimating	the	useful	life	of	an	intangible	asset.	These	factors	included	a	review	of	the	expected	use	by	the	combined	company of	the	assets	acquired,	the	expected	useful	life	of	another	asset	(or	group	of	assets)	related	to	the	acquired	assets,	legal,	regulatory	or	other	contractual	provisions	that may	limit	the	useful	life	of	an	acquired	asset	or	may	enable	the	extension	of	the	useful	life	of	an	acquired	asset	without	substantial	cost,	the	effects	of	obsolescence, demand,	competition	and	other	economic	factors,	and	the	level	of	maintenance	expenditures	required	to	obtain	the	expected	future	cash	flows	from	the	asset.	The Company	expects	to	amortize	these	intangible	assets	over	their	estimated	useful	lives	using	a	method	that	is	based	on	estimated	future	cash	flows	as	the	Company believes	this	will	approximate	the	pattern	in	which	the	economic	benefits	of	the	assets	will	be	utilized.

# Acquired	In-Process	Research	and	Development

As	part	of	the	preliminary	purchase	price	allocation	for	Cytyc,	approximately	$368,200	of	the	purchase	price	has	been	allocated	to	acquired	in-process	research and	development	projects.	The	amount	allocated	to	acquired	in-process	research	and	development	represents	the	estimated	fair	value	based	on	risk-adjusted	cash	flows related	to	in-process	projects	that	have	not	yet	reached	technological	feasibility	and	have	no	alternative	future	uses	as	of	the	date	of	the	acquisition.	The	primary	basis	for determining	the	technological	feasibility	of	these	projects	is	obtaining	regulatory	approval	to	market	the	underlying	products.	The	fair	value	attributable	to	these	in- process	projects	will	be	expensed	at	the	time	of	the	acquisition.	If	the	projects	are	not	successful	or	completed	in	a	timely	manner,	the	Company	may	not	realize	the financial	benefits	expected	for	these	projects	or	for	the	transaction	as	a	whole.

The	fair	value	assigned	to	acquired	in-process	technology	was	determined	by	estimating	the	costs	to	develop	the	acquired	technology	into	commercially	viable products,	estimating	the	resulting	net	cash	flows	from	the	projects,	and	discounting	the	net	cash	flows	to	their	present	value.	The	revenue	projections	used	to	value	the acquired	in-process	research	and	development	was	based	on	estimates	of	relevant	market	sizes	and	growth	factors,	expected	trends	in	technology,	and	the	nature	and expected	timing	of	new	product	introductions	by	us	and	our	competitors.	The	resulting	net	cash	flows	from	such	projects	were	based	on	our	estimates	of	cost	of	sales, operating	expenses,	and	income	taxes	from	such	projects.

The	rates	utilized	to	discount	the	net	cash	flows	to	their	present	value	were	based	on	estimated	cost	of	capital	calculations	and	the	implied	rate	of	return	from	the transaction	model	plus	a	risk	premium.	Due	to	the	nature	of	the	forecasts	and	the	risks	associated	with	the	developmental	projects,	appropriate	risk-adjusted	discount rates	were	used	for	the	in-process	research	and	development	projects.	The	discount	rates	are	based	on	the	stage	of	completion	and	uncertainties	surrounding	the successful	development	of	the	purchased	in-process	technology	projects.

The	purchased	in-process	technology	of	Cytyc	relates	to	the	following	research	and	development	projects:	Adiana	Complete	TransCervical	Sterilization	System; Expanded	Labeling	of	the	NovaSure	System;	Gestiva;	ThinPrep	Imaging	System	ThinPrep	Processor;	and	Helica.

The	most	significant	purchased	in-process	technology	relates	to	the	Adiana	Complete	TransCervical	Sterilization	System	(TCS)	for	which	the	Company	has estimated	a	value	of	approximately	$219	million.	The	TCS	product	is	an	incision-less	trans-cervical	permanent	sterilization	device	to	be	used	during	an	office	based procedure.	The	system	consists	of	three	different	parts:	a	disposable	applicator,	an	implanatable	polymer	matrix	and	a	radio	frequency	controller.	The	procedure	can	be performed	in	a	hospital	or	physician's	office,	and	generally	takes	twelve	minutes,	with	a	thirty	to	forty	minute	recovery	time.	The	estimated	remaining	costs	to	complete the	clinical	trials	are	expected	to	be	approximately	$1,000.

Cytyc's	other	in-process	research	and	development	projects	are	at	different	stages	of	development,	ranging	from	the	early	stages	of	development	to	Phase	IIb prototype	building,	ongoing	clinical	trials	and	submission	to	the	FDA	of	PMA	and	drug	applications.	FDA	approval	or	clearance	has	not	been	granted	for	any	of	the products	classified	as	in-process	research	and	development,	nor	has	Cytyc	received	any	foreign	approvals	or	clearances	for	any	of	these	products.	All	products	classified as	in-process	research	and	development	require	various	levels	of	in-house	and	external	testing,	clinical	trials	and	approvals	from	the	FDA	before	these	future	products can	be	marketed.	The	estimated	cash	requirements	in	the	aggregate	to	complete	these	remaining	products	is	expected	to	be	approximately	$15,800.

The	successful	development	of	new	products	and	product	enhancements	is	subject	to	numerous	risks	and	uncertainties,	both	known	and	unknown,	including, unanticipated	delays,	access	to	capital,	budget	overruns,	technical	problems	and	other	difficulties	that	could	result	in	the	abandonment	or	substantial	change	in	the design,	development	and	commercialization	of	these	new	products	and	enhancements,	including,	for	example	changes	requested	by	the	FDA	in	connection	with	pre- market	approval	applications	for	products	or	510(k)	notification.	Given	the	uncertainties	inherent	with	product	development	and	introduction,	there	can	be	no	assurance that	any	of	the	Company's	product	development	efforts	will	be	successful	on	a	timely	basis	or	within	budget,	if	at	all.	The

failure	of	the	Company	to	develop	new	products	and	product	enhancements	on	a	timely	basis	or	within	budget	could	harm	the	Company's	results	of	operations	and financial	condition.	For	additional	risks	that	may	affect	the	Company's	business	and	prospects	following	completion	of	the	merger,	see	"Risk	Factors"	in	Item	1A	of	the Company's	Form	10-K	for	the	year	ended	September	29,	2007.

# Goodwill

The	preliminary	purchase	price	allocation	has	resulted	in	goodwill	of	approximately	$3,895,100.	The	factors	contributing	to	the	recognition	of	this	amount	of goodwill	are	based	upon	several	strategic	and	synergistic	benefits	that	are	expected	to	be	realized	from	the	combination.	These	benefits	include	the	expectation	that	the Company's	complementary	products	and	technologies	will	create	a	leading	women's	healthcare	company	with	an	enhanced	presence	in	hospitals,	private	practices	and healthcare	organizations.	The	Company	also	expects	to	realize	substantial	synergies	through	the	use	of	Cytyc's	OB/GYN	and	breast	surgeon	sales	channel	to	cross-sell the	Company's	existing	and	future	products.	The	merger	provides	the	Company	broader	channel	coverage	within	the	United	States	and	expanded	geographic	reach internationally,	as	well	as	increased	scale	and	scope	for	further	expanding	operations	through	product	development	and	complementary	strategic	transactions.

The	following	unaudited	pro	forma	information	presents	the	consolidated	results	of	operations	of	the	Company	and	Cytyc	as	if	the	acquisitions	had	occurred	at the	beginning	of	fiscal	2007,	with	pro	forma	adjustments	to	give	effect	to	amortization	of	intangible	assets,	an	increase	in	interest	expense	on	acquisition	financing	and certain	other	adjustments	together	with	related	tax	effects:

The	$368,200	charge	for	acquired	in-process	research	and	development	that	was	a	direct	result	of	the	transaction	is	excluded	from	the	unaudited	pro	forma information	above.	The	unaudited	pro	forma	results	are	not	necessarily	indicative	of	the	results	that	the	Company	would	have	attained	had	the	acquisitions	of	Cytyc occurred	at	the	beginning	of	the	periods	presented.

Prior	to	the	close	of	the	merger	the	Board	of	Directors	of	both	Hologic	and	Cytyc	approved	a	modification	to	certain	outstanding	equity	awards	for	Cytyc employees.	The	modification	provided	for	the	acceleration	of	vesting	upon	the	close	of	Merger	for	those	awards	that	did	not	provide	for	acceleration	upon	a	change	of control	as	part	of	the	original	terms	of	the	award.	This	modification	was	made	so	that	the	Company	will	not	incur	stock	based	compensation	charges	that	it	otherwise would	have	if	the	awards	had	continued	to	vest	under	their	original	terms.

# Credit	Agreement

On	October	22,	2007,	Company	and	certain	of	its	domestic	subsidiaries,	entered	into	a	senior	secured	credit	agreement	with	Goldman	Sachs	Credit	Partners	L.P. and	certain	other	lenders,	(collectively,	the	"Lenders").	Pursuant	to	the	terms	and	conditions	of	the	Credit	Agreement,	the	Lenders	have	committed	to	provide	senior secured	financing	in	an	aggregate	amount	of	up	to	$2,550,000.	As	of	the	closing	of	the	Cytyc	merger,	the	Company	borrowed	$2,350,000	under	the	credit	facilities.

The	Company's	subsidiaries	which	are	party	to	the	credit	agreement	have	guaranteed	the	Company's	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	Hologic,	Inc.	and	substantially	all	of	the	Company's	U.S. subsidiaries,	a	first	priority	security	interest	in	100%	of	the	capital	stock	of	each	of	the	Company's	U.S.	subsidiaries,	65%	of	the	capital	stock	of	certain	of	the Company's	first-tier	foreign	subsidiaries,	and	all	intercompany	debt.	The	security	interests	are	evidenced	by	a	pledge	and	security	agreement	with	Goldman	Sachs	Credit Partners	L.P.,	as	collateral	agent,	and	other	related	agreements,	including	certain	stock	pledges	and	mortgages.

The	Company	used	the	proceeds	from	the	credit	facilities	to	pay	the	cash	consideration	of	the	Cytyc	merger,	to	pay	fees,	commissions	and	expenses	incurred	by the	Company	in	connection	with	the	Cytyc	merger	and	the	Credit	Agreement.	In	addition,	the	Company	may	use	the	proceeds	of	the	credit	facilities,	together	with	the Company's	available	cash,	to	redeem	or	convert	all	or	a	part	of	Cytyc's	outstanding	2.25%	Senior	Convertible	Notes	due	2024,	which	have	not	been	converted	into Cytyc	common	stock	and	which	have	been	delivered	to	the	Company	for	redemption	or	conversion.

•$600,000	senior	secured	tranche	A	term	loan	with	a	final	maturity	date	of	September	30,	2012;

•$250,000	senior	secured	tranche	B-1	term	loan	and	$250,000	senior	secured	tranche	B-2	term	loan	(collectively,	the	"term	loan	B	facility")	with	a	final maturity	date	of	March	31,	2013;

•$1,250,000	senior	secured	capital	markets	term	loan	(the	"term	loan	X	facility")	with	a	final	maturity	date	of	April	22,	2009;

•$200,000	senior	secured	revolving	credit	facility	(the	"revolving	facility")	with	a	final	maturity	date	of	October	22,	2012.

Under	the	Credit	Agreement,	the	Company	may	elect,	subject	in	certain	circumstances	to	pro	forma	compliance	by	the	Company	with	a	ratio	of	total	debt	to adjusted	consolidated	EBITDA	specified	in	the	Credit	Agreement	and	other	conditions,	to	increase,	under	terms	and	conditions	to	be	determined,	the	total	principal amount	of	borrowings	available	under	the	credit	facilities	by	up	to	$250	million.	EBITDA	means	earnings	before	interest,	taxes,	depreciation	and	amortization	as	defined in	the	Credit	Agreement.

The	Company	is	required	to	make	scheduled	principal	payments	under	the	term	A	loan	facility	in	increasing	amounts	ranging	from	$7,500	per	quarter	beginning with	the	quarter	ending	December	29,	2007	to	$22,500	per	quarter	commencing	on	the	quarter	ending	December	25,	2010,	and	under	the	term	B	loan	facility,	in	equal quarterly	installments	of	$1,250	beginning	on	the	quarter	ending	December	29,	2007	and	for	the	first	21	quarters	thereafter,	with	the	remaining	balance	of	each	term	loan facility	due	at	the	maturity	of	the	applicable	term	loan	facility.	The	revolving	credit	facility	and	the	term	loan	X	facility	will	become	due	at	maturity.	No	scheduled amortizations	are	required	under	the	revolving	facility	or	the	term	loan	X	facility.

The	Company	is	required	to	make	principal	repayments	first,	pro	rata	among	the	term	loan	facilities	and	second	to	the	revolving	credit	facility	from	specified excess	cash	flows	from	operations	and	from	the	net	proceeds	of	specified	types	of	asset	sales,	debt	issuances,	insurance	recoveries	and	equity	offerings,	provided, however,	that	net	proceeds	from	certain	debt	issuances	and	equity	offerings	are	contemplated	to	be	applied	first	to	the	term	loan	X	facility	until	such	facility	is	repaid	in full.

The	Company	may	voluntarily	prepay	any	of	the	credit	facilities	without	premium	or	penalty	(other	than	applicable	breakage	costs	related	to	interest	on Eurodollar	loans).

All	amounts	outstanding	under	the	credit	facilities	will	bear	interest,	at	the	Company's	option,	initially,	with	respect	to	all	loans	made	under	the	revolving	facility and	the	term	A	loan	facility:	(i)	at	the	Base	Rate	plus	1.25%	per	annum;	or	(ii)	at	the	reserve	adjusted	Eurodollar	Rate	plus	2.25%	per	annum.	With	respect	to	loans made	under	the	term	loan	B	facility:	(i)	at	a	rate	per	annum	equal	to	the	Base	Rate	plus	1.5%;	or	(ii)	at	a	rate	per	annum	equal	to	the	reserve	adjusted	Eurodollar	Rate plus	2.50%;	and	with	respect	to	loans	made	under	the	term	loan	X	facility:	(i)	at	a	rate	per	annum	equal	to	the	Base	Rate	plus	0.75%;	or	(ii)	at	a	rate	per	annum	equal	to the	reserve	adjusted	Eurodollar	Rate	plus	1.75%.	The	margin	applicable	to	loans	under	the	revolving	credit	facility	and	the	term	loan	A	facility	subject	to	specified changes	based	on	certain	change	in	the	leverage	ratio	as	specified	in	the	Credit	Agreement.	Under	the	terms	of	the	Credit	Agreement,	the	Company	has	to	enter	into interest	rate	hedge	agreements	or	otherwise	fix	the	interest	rate	on	up	to	50%	of	the	outstanding	debt	within	18	months	of	the	close.	To	date	the	Company	has	not	entered into	any	such	agreements.

The	Company	will	pay	a	quarterly	commitment	fee,	at	an	annual	rate	of	0.50%,	on	the	undrawn	commitments	available	under	the	revolving	credit	facility,	subject to	reduction	based	on	a	leverage	ratio	as	specified	in	the	Credit	Agreement.

The	Credit	Agreement	contains	affirmative	and	negative	covenants	customarily	applicable	to	senior	secured	credit	facilities,	including	covenants	restricting	the Company's	ability,	subject	to	negotiated	exceptions,	to:	incur	additional	indebtedness	and	additional	liens	on	their	assets,	engage	in	mergers	or	acquisitions	or	dispose	of assets,	enter	into	sale-leaseback	transactions,	pay	dividends	or	make	other	distributions,	voluntarily	prepay	other	indebtedness,	enter	into	transactions	with	affiliated persons,	make	investments,	and	change	the	nature	of	their	businesses.

The	credit	facility	requires	the	Company	to	maintain	maximum	leverage	and	minimum	interest	coverage	ratios,	as	of	the	last	day	of	each	fiscal	quarter,	as	defined within	the	Credit	Agreement.	The	maximum	leverage	ratio	is	5.50:1.00	beginning	on	the	Company's	fiscal	quarter	ending	December	29,	2007,	and	then	decreases	over time	to	3:00:1.00	for	the	quarters	ending	September	25,	2010	and	thereafter.	The	minimum	interest	coverage	ratio	is	2.00:1.00	beginning	with	the	Company	fiscal	quarter ending	March	29,	2008,	and	then	increases	over	time	to	2.75:1.00	for	the	quarters	ending	September	25,	2010	and	thereafter.	The	leverage	ratio	is	defined	as	the	ratio	of the	Company's	consolidated	total	debt	to	the	Company's	consolidated	adjusted	EBITDA	for	the	four-fiscal	quarter	period	ending	on	the	measurement	date.	The	interest coverage	ratio	is	defined	as	the	ratio	of	the	Company's	annualized	consolidated	adjusted	EBITDA	for	the	applicable	periods	to	the	Company's	annualized	consolidated interest	expense.

| Fiscal	2008 | $35,000 |
| :--- | :--- |
| Fiscal\t2009 | 1,315,000 |
| Fiscal\t2010 | 65,000 |
| Fiscal\t2011 | 95,000 |
| Fiscal\t2012 | 365,000 |
| Thereafter | 475,000 |
| Total | $2,350,000 |

The	amounts	above	do	not	include	any	potential	mandatory	prepayments	based	on	the	Company's	excess	cashflows	in	such	periods,	as	defined	in	the	credit agreement.

# Notes,	Indenture	and	Supplemental	Indenture

In	connection	with	the	Cytyc	merger	the	Company	assumed	the	obligations	of	Cytyc	under	Cytyc's	2.25%	Senior	Convertible	Notes	due	2024	(the	Cytyc	Notes) and	the	Indenture	entered	into	by	Cytyc	and	U.S.	Bank	Trust	National	Association,	as	trustee	thereunder	(the	Trustee)	on	March	22,	2004,	pursuant	to	which	the	Cytyc Notes	were	issued	(the	Indenture).	As	of	October	22,	2007,	Cytyc	Notes	in	the	approximate	principal	face	amount	of	$73,300	were	outstanding.	Interest	on	the	Cytyc Notes	is	payable	semi-annually	and	the	Cytyc	Notes	were	previously	convertible	into	shares	of	Cytyc	common	stock.	At	the	Closing,	the	Company	and	the	Trustee entered	into	the	First	Supplemental	Indenture	(the	Supplemental	Indenture)	as	required	by	the	Indenture	as	a	result	of	the	Merger	in	order	to	provide	that	the	Company	as the	successor	to	Cytyc,	assumed	the	obligations	of	Cytyc	under	the	Cytyc	Notes	and	the	Indenture,	and	as	a	result	of	the	Merger,	the	Cytyc	Notes	shall	cease	to	be convertible	into	shares	of	Cytyc	common	stock	but	rather	may	be	converted	into	the	kind	and	amount	of	shares	of	stock	which	a	holder	of	shares	of	Cytyc	common	stock would	have	been	entitled	to	receive	upon	the	Merger	had	the	Cytyc	Notes	been	converted	into	shares	of	Hologic	common	stock	immediately	prior	to	the	Merger,	such that	each	$1,000	principal	face	amount	of	Cytyc	Notes	may	be	converted	at	any	time	and	from	time	to	time	into	$556.12	in	cash	and	17.53	shares	of	Hologic	common stock.	Pursuant	to	the	terms	of	the	Indenture,	the	Company	is	obligated	to	offer	to	repurchase	all	of	the	outstanding	Cytyc	Notes	in	exchange	for	the	principal	face amount	of	such	Cytyc	Notes	plus	accrued	but	unpaid	interest	thereon.	The	obligations	of	the	Company	under	the	Cytyc	Notes	and	the	Indenture	may	be	accelerated	upon the	occurrence	of	certain	customary	events	of	default	including,	without	limitation,	payment	defaults,	uncured	defaults	in	the	performance	of	certain	covenants	and agreements	under	the	Indenture	and	bankruptcy	and	insolvency	related	defaults.

# Lease	Guaranties

On	October	22,	2007,	in	connection	with	the	Cytyc	merger,	the	Company	entered	into	certain	lease	guaranty	agreements	for	certain	of	Cytyc's	existing	lease obligations.	Under	these	lease	guaranty	agreements,	the	Company	unconditionally	guaranteed	Cytyc's	full	payment,	performance	and	observance	of	every	warranty, covenant,	agreement	and	obligation	of	Cytyc	under	the	provisions	of	Cytyc's	original	lease	agreement.

# Exhibit	Index



Question: what portion of the estimated purchase price is derived by the net tangible assets?
Calculation: tangible_assets = 2800
purchase_price = 73200
portion_derived = tangible_assets / purchase_price
answer = portion_derived * 100
Answer: 3.8%