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	27,	2008

¨ 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.		¨

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

Large	accelerated	filer 	 x

Non-accelerated	filer 	 ¨		(Do	not	check	if	a	smaller	reporting	company)

		 Accelerated	filer 	 ¨

		 Smaller	reporting	company 	 ¨

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

The	aggregate	market	value	of	the	registrant's	Common	Stock	held	by	non-affiliates	of	the	registrant	as	of	March	28,	2008	was	$7,082,916,053	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	27,	2008	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

# Item	1. Business

# Overview

We	are	a	developer,	manufacturer	and	supplier	of	medical	imaging	systems	and	diagnostic	and	surgical	products	focused	on	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	applications,	including	cervical	cancer	screening,	prenatal	diagnostics	and	partial	breast radiation	therapy.

In	July	2008,	we	acquired	Third	Wave	Technologies,	Inc.	("Third	Wave"),	a	company	that	develops	and	markets	molecular	diagnostic	reagents	for	a	wide	variety of	DNA	and	RNA	analysis	applications	based	on	its	proprietary	Invader	chemistry.	Third	Wave's	current	clinical	diagnostic	offerings	consist	of	products	for	conditions such	as	Cystic	Fibrosis,	Hepatitis	C,	cardiovascular	risk	and	other	diseases.	Third	Wave	recently	submitted	pre-market	approval	("PMA")	applications	for	two	human papillomavirus	("HPV")	tests	to	the	U.S.	Food	and	Drug	Administration	("FDA").

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.	Our	combination	with	Cytyc	enabled	us	to	benefit	from	Cytyc's strengths	in	the	fields	of	obstetrics,	gynecology,	radiation	oncology	and	minimally	invasive	surgery.	Our	acquisition	of	Third	Wave	enabled	us	to	further	expand	our offerings	into	the	clinical	molecular	diagnostics	market	utilizing	Third	Wave's	Invader	chemistry	and	its	HPV	test	currently	awaiting	FDA	approval.

Our	breast	health	products	include	a	broad	portfolio	of	breast	imaging	and	related	products	and	accessories,	including	digital	and	film-based	mammography systems,	computer-aided	detection	("CAD"),	breast	biopsy	guidance	systems,	minimally	invasive	breast	biopsy	and	tissue	extraction	devices	and	breast	brachytherapy products.	We	have	submitted	a	PMA	application	for	our	next	generation	full	field	digital	mammography	system,	"Dimensions",	which	utilizes	a	new	technology, tomosynthesis,	to	produce	three	dimensional	("3D")	images.	The	Dimensions	product	received	CE	mark	approval	in	Europe	in	fiscal	2008.

Our	diagnostics	products	include	the	ThinPrep	System,	which	is	primarily	used	in	cytology	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.	Through	our	recent	acquisition	of	Third	Wave,	we	have added	in	vitro	diagnostic	devices	using	Third	Wave's	Invader	technology,	allowing	researchers	to	create	assays	to	perform	hepatitis	C	virus	genotyping,	inherited disorders	testing	and	testing	for	other	mutations	associated	with	genetic	predispositions	and	other	diseases	such	as	Cystic	Fibrosis.	As	noted	above,	we	have	also submitted	applications	to	the	FDA	for	pre-market	approval	of	two	HPV	tests.

Our	GYN	surgical	products	include	the	NovaSure	Impedance	Controlled	RF	Ablation	System	("NovaSure	System"),	which	enables	physicians	to	treat	women suffering	from	excessive	menstrual	bleeding	and	the	Adiana	Complete	Transcervical	Sterilization	("TCS")	System,	which	is	a	form	of	permanent	female	contraception intended	as	an	alternative	to	tubal	ligation	for	which	we	are	seeking	a	pre-market	approval	from	the	FDA.

Our	skeletal	health	products	include	dual-energy	X-ray	bone	densitometry	systems,	an	ultrasound-based	osteoporosis	assessment	product,	our	Fluoroscan	mini	C- arm	imaging	products	and	our	Esaote	line	of	extremity	Magnetic	Resonance	Imaging	("MRI")	systems	that	are	manufactured	by	an	original	equipment	manufacturer.

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.

# Trademark	Notice

Hologic	is	a	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,	but	are	not	limited	to,	the	following:

Adeza,	Adiana,	AEG,	ATEC,	BioLucent,	Celero,	Cellient,	Cervista,	Cytyc,	Dimensions,	DirectRay,	Discovery,	Fluoroscan,	FullTerm,	Gestiva,	GliaSite,	Invader,

LORAD,	MammoPad,	MammoSite,	M-IV,	M-IV	Platinum,	MultiCare,	NovaSure,	PreservCyt,	R2	StereoLoc	II,	Suros,	ThinPrep,	Third	Wave.

# 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	Securities	and	Exchange	Commission	("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

We	view	our	operations	and	manage	our	business	in	four	principal	reporting	segments:	Breast	Health,	Diagnostics,	GYN	Surgical	and	Skeletal	Health.	Financial information	concerning	these	segments	is	provided	in	Note	14	of	the	Notes	to	our	Consolidated	Financial	Statements	included	in	this	report.

# Breast	Health	Products

Our	breast	health	business	offers	a	broad	line	of	breast	imaging	products	including	the	Selenia	full	field	digital	mammography	system,	a	series	of	screen-film mammography	systems,	breast	biopsy	image	guidance	systems,	CAD	systems	for	both	screen-film	and	digital	mammography,	and	DirectRay	digital	detectors.	Our breast	health	business	also	includes	our	Interventional	Breast	Solutions	family	of	products	including	breast	biopsy	devices,	our	MammoSite	radiation	therapy	system	and the	MammoPad	breast	cushion.	Our	photoconductor	coating	business,	which	we	acquired	in	connection	with	our	acquisition	of	our	selenium	coating	capabilities	for	our digital	detectors,	is	also	a	component	of	our	breast	health	business.

# 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	signal	and	those	that use	indirect	methods.	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	digital	x-ray	imaging	technologies	that	require	light	conversion	may	compromise	image	resolution,	lessening	detection	capability.	Our	DirectRay	flat	panel detector	technology	employs	an	amorphous	selenium	("a-Se")	photoconductor	to	directly	convert	x-ray	photons	into	an	electrical	signal.	No	intensifying	screens	or additional	processes	are	required	to	capture	and	convert	the	x-ray	energy,	enabling	superior	imaging	resolution	and	contrast	sensitivity.

# 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	product	family	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	digital	mammography	system,	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.

# Breast	Tomosynthesis

Breast	tomosynthesis	is	new	technology,	enabling	our	next	generation	Selenia	full	field	digital	mammography	System	"Dimensions".	The	Dimensions	product received	CE	mark	approval	in	Europe	in	fiscal	2008;	however,	it	is	not	yet	commercially	available	in	the	United	States,	where	we	are	seeking	pre-market	FDA	approval. The	Dimensions	system	is	designed	specifically	to	address	many	of	the	limitations	of	two	dimensional	("2D")	digital	mammography.	It	includes	a	mammography	gantry capable	of	performing	both	2D	and	3D	image	acquisition	and	display.	The	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	small	slices,	revealing	breast	tissue	from	a	three	dimensional	perspective. The	purpose	of	the	technology	is	to	reduce	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,	with	the	goal	of	ultimately	increasing	cancer	detection	and	reducing	unnecessary	patient	callbacks.

# Screen-Film	Mammography	Systems

Our	screen-film	mammography	systems	include	our	LORAD	M-IV	and	M-IV	Platinum	systems.	The	M-IV	Platinum	system	incorporates	our	Fully	Automatic Self-adjusting	Tilt	("FAST")	Paddle,	and	our	High	Transmission	Cellular	("HTC")	Grid.

# SecurView	Workstation

The	images	captured	by	digital	mammography	systems	are	typically	transmitted	electronically	for	review	by	a	radiologist	at	a	work	station.	Early	product development	activities	focused	on	improving	digital	workflow	in	the	breast-imaging	suite	due	to	limited	PACS	mammography	functionality.	To	this	end,	we	developed 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	developed	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	the "Selenia	with	TechMate"	digital	mammography	system.

# CAD	Systems

In	July	2006	we	acquired	R2	Technology,	Inc.	("R2"),	which	develops	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.	Use	of	this	technology	provides	reviewers	with	the	potential	to	detect	findings	that	might	otherwise	be	overlooked	during the	review	process,	thus	increasing	cancer	detection.

R2's	mammography	applications	software	tools	have	been	integrated	into	our	line	of	multi-modality	breast	imaging	workstations.

# Stereotactic	Breast	Biopsy	Systems

We	provide	clinicians	with	the	flexibility	of	choosing	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	Surgical	Systems,	Inc.	("Suros"),	a	developer	and	manufacturer	of	minimally	invasive	interventional	products	for	breast	biopsy, tissue	removal	and	biopsy	site	marking.	The	biopsy	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.	The	Automated	Tissue	Excision	and	Collection	("ATEC")	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	Celero	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.

# MammoSite	Radiation	Therapy	System

The	MammoSite	System	accelerated	partial	breast	irradiation	(APBI)	technology	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	provides	for	therapeutic	delivery	of	a	5-day	course	of radiation	to	the	tissue	most	likely	to	contain	residual	cancerous	cells	following	surgery,	while	reducing	radiation	exposure	to	adjacent	healthy	tissue.

# MammoPad	Breast	Cushion

In	September	2007	we	acquired	BioLucent,	Inc.	("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	also	holds	breast	tissue	in	place	to	improve	breast positioning.	The	radiolucent	cushion	does	not	interfere	with	image	quality	and	can	be	used	with	both	digital	and	analog	mammography.

# Photoconductor	Coatings

On	May	2,	2006	we	acquired	AEG	Elektrofotografie	GmbH	("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.

# Diagnostic	Products

Our	diagnostic	product	offerings	include	the	ThinPrep	System	used	primarily	for	cytology	applications,	such	as	cervical	cancer	screening,	and	the	FullTerm	Fetal Fibronectin	Test	for	pre-term	birth	risk	assessment.	As	a	result	of	our	acquisition	of	Third	Wave	in	July	2008,	our	diagnostic	product	offerings	also	include	our proprietary	Invader	chemistry,	which	provides	clinicians	and	researchers	with	molecular	diagnostic	products	and	includes	two	HPV	tests	that	are	currently	awaiting FDA	approval.

# ThinPrep	System

The	ThinPrep	System	is	the	most	widely	used	method	for	cervical	cancer	screening	in	the	United	States.	If	detected	in	the	pre-cancerous	stage,	most	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	our	proprietary	ThinPrep	PreservCyt	Solution.

The	ThinPrep	System	also	serves	as	a	platform	for	additional	gynecological	applications,	including	our	new	HPV	tests	under	development	and	pending	FDA approval,	using	residual	patient	specimen	collected	in	ThinPrep	PreservCyt	Solution.

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	our	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	slides	for	staining	and	microscopic	examination.

In	the	case	of	manual	screening,	the	cytotechnologist	screens	each	Pap	test	slide	with	a	microscope	to	first	determine	the	adequacy	of	the	slide	and	to	then examine	the	entire	slide	to	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.	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	serving	as	a	replacement	for	the	conventional	Pap	smear,	the	ThinPrep	System	can	also	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

The	FullTerm	Fetal	Fibronectin	Test	is	a	patented	single-use	disposable	test	used	to	determine	a	woman's	risk	of	preterm	birth	by	detecting	the	presence	of	a specific	protein,	fetal	fibronectin,	in	vaginal	secretions	during	pregnancy.	This	test	is	approved	by	the	FDA	for	use	in	assessing	the	risk	of	preterm	birth.	The	test	utilizes a	single-use,	disposable	cassette	and	is	analyzed	on	our	patented	instrument,	the	TLiIQ	System.

# InVitro	Diagnostic	Devices

The	Invader	UGT1A1	Molecular	Assay,	a	molecular	diagnostic	acquired	as	part	of	our	recent	acquisition	of	Third	Wave,	is	cleared	for	use	to	identify	patients who	may	be	at	increased	risk	of	adverse	reaction	to	the	chemotherapy	drug	Camptosar	(irinotecan)	by	detecting	and	identifying	specific	mutations	in	the	UGT1A1	gene that	have	been	associated	with	that	risk.	Camptosar,	marketed	in	the	U.S.	by	Pfizer,	Inc.,	is	used	to	treat	colorectal	cancer	and	was	relabeled	in	2005	to	include	dosing recommendations	based	on	a	patient's	genetic	profile.

# Human	Papillomavirus	Offering

In	April	2008,	Third	Wave	submitted	pre-market	approval	applications	to	the	U.S.	Food	and	Drug	Administration	for	both	its	high-risk	and	16/18	genotyping products,	with	two	proposed	intended	uses:

•	 To	be	used	in	combination	with	a	Pap	test	to	assess	women	age	30	and	over	for	the	presence	of	high-risk	HPV	types	and	to	guide	their	treatment;	and

•	 To	be	used	to	test	patients	with	equivocal	Pap	results	to	determine	whether	they	should	be	referred	for	further	diagnostic	treatment.

These	tests	employ	Third	Wave's	Invader	technology	to	detect	the	presence	of	the	fourteen	high-risk	HPV	types	responsible	for	most	cervical	diseases,	including HPV	types	16	and	18,	the	types	that	cause	approximately	70%	of	cervical	disease.

# GYN	Surgical	Products

Our	surgical	product	offerings	include	the	NovaSure	System,	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,	and	the	GliaSite Radiation	Therapy	System.

# NovaSure	System

The	NovaSure	System	is	a	minimally-invasive	procedure	that	allows	physicians	to	treat	women	suffering	from	excessive	menstrual	bleeding.

The	system	consists	of	a	disposable	device	and	a	controller	that	delivers	radio	frequency,	or	RF,	energy	to	ablate	the	endometrial	lining	of	the	uterus.	The NovaSure	disposable	device	is	a	hand-held,	single-use	device	that	incorporates	a	flexible	gold-plated	mesh	electrode	used	to	deliver	the	RF	energy	during	the	NovaSure procedure.	The	NovaSure	RF	Controller	generates	and	delivers	the	RF	energy	customized	for	each	patient,	monitors	several	critical	treatment	and	safety	parameters,	and automatically	controls	other	aspects	of	the	procedure.

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. In	contrast,	the	NovaSure	procedure	is	typically	performed	as	an	outpatient	procedure	in	the	hospital,	ambulatory	surgery	center	or	physician's	office	and	often	does	not require	the	use	of	general	anesthesia.

# The	Adiana	Complete	Transcervical	Sterilization	System

The	Adiana	Complete	Transcervical	Sterilization	System	is	a	form	of	permanent	female	contraception	intended	as	an	alternative	to	tubal	ligation	for	which	we	are in	the	process	of	seeking	pre-market	approval	from	the	FDA.

Tubal	ligation	is	the	most	common	form	of	contraception	used	throughout	the	world.	The	surgery	is	typically	performed	in	a	hospital	operating	room	under general	anesthesia	and	requires	the	physician	to	make	one	or	two	incisions	in	the	abdomen.	In	contrast,	the	Adiana	TCS	is	designed	to	be	a	minimally-invasive,	non- incisional	alternative	that	requires	only	local	anesthesia	and	can	be	performed	in	a	physician's	office.

To	perform	the	Adiana	procedure,	a	hysteroscope	is	used	to	access	the	uterus	and	a	catheter	is	positioned	immediately	inside	the	opening	of	the	patient's	fallopian tube.	The	catheter	applies	a	very	low-level	of	bi-polar	RF	energy	to	remove	just	a	thin	layer	of	cells	that	line	a	small	section	of	the	inside	of	the	fallopian	tube.	The catheter	then	delivers	a	soft	polymer	implantable	"matrix",	which	remains	within	the	prepared	section	of	the	tube.	The	matrix	is	about	the	size	of	a	grain	of	rice.	The procedure	is	then	repeated	on	the	other	fallopian	tube.	Over	the	next	few	weeks,	healthy	tissue	grows	into	the	matrix,	creating	a	blockage	of	each	tube.	A	confirmatory dye	test	called	a	hysterosalpingogram	(HSG)	is	conducted	at	three	months	post-procedure	to	confirm	that	the	fallopian	tubes	are	blocked.

# The	GliaSite	Radiation	Therapy	System

In	the	first	quarter	of	fiscal	2009,	our	customers	were	notified	that	our	GliaSite	product	is	being	discontinued.	We	will	continue	to	sell	these	systems	until	our inventory	is	exhausted,	which	we	estimate	will	occur	by	the	end	of	December	2008.	With	the	exception	of	the	inventory	on	hand,	there	are	no	other	assets	recorded	on the	Company's	September	27,	2008	Consolidated	Balance	Sheet	related	to	this	product	line.

# Skeletal	Health	Products

Our	skeletal	health	products	include	a	family	of	QDR	dual	energy	x-ray	bone	densitometers	and	the	Sahara	Clinical	Bone	Sonometer,	our	mini	C-arm	imaging products	and	our	Esaote	line	of	extremity	MRI	systems,	which	are	manufactured	by	an	original	equipment	manufacturer.

# QDR	X-Ray	Bone	Densitometers

Bone	densitometry	is	the	measurement	of	bone	density	to	assist	in	the	diagnosis	and	monitoring	of	osteoporosis	and	other	metabolic	bone	diseases	that	can	lead	to debilitating	bone	fractures.	Osteoporosis	is	a	disease	that	is	most	prevalent	in	post-menopausal	women.	Our	proprietary	QDR	x-ray	bone	densitometers	incorporate	dual- energy	x-ray	technology	to	precisely	assess	bone	density	of	the	most	important	fracture	sites,	the	spine	and	hip.	Since	our	commercial	introduction	of	the	first	bone densitometer	employing	dual-energy	x-ray	technology	in	1987,	we	have	continually	improved	upon	our	technology,	and	the	use	of	dual-energy	x-ray	technology	has become	and	remains	a	leading	bone	densitometry	assessment	tool.	We	offer	a	range	of	bone	densitometers	with	various	features	and	options	to	address	the	requirements of	our	diverse	customer	base.

# Sahara	Clinical	Bone	Sonometers

We	have	developed	and	sell	a	relatively	low-cost,	lightweight,	portable	ultrasound	bone	analyzer,	called	Sahara,	that	assesses	the	bone	density	of	the	heel	that	can assist	in	initial	screening	for	osteoporosis.	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.

# 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

We	distribute	extremity	MRI	systems	manufactured	by	Esaote.	The	target	markets	for	these	products	are	rheumatology,	with	specific	emphasis	on	the	early detection	of	rheumatoid	arthritis	and	orthopedics,	with	an	emphasis	on	orthopedic	interventions	and	surgical	planning.

# Marketing,	Sales	and	Service

We	sell	and	service	our	products	through	a	combination	of	direct	sales	and	service	forces	and	a	network	of	independent	distributors	and	sales	representatives.	In fiscal	2008,	2007	and	2006,	no	customer	accounted	for	more	than	10%	of	our	consolidated	revenues.

As	of	October	25,	2008	our	direct	sales	and	service	force	consisted	of	approximately	1,297	people.

During	fiscal	year	2008,	our	U.S.	Breast	and	Skeletal	Health	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	breast	biopsy	(Suros)	account	managers	worked	together	with	our	modality	account managers	leveraging	our	strong	market	presence	in	women's	health,	calling	on	both	radiologists	and	breast	surgeons,	and	focused	on	the	sale	of	breast	biopsy	devices and	our	Mammosite	APBI	technology.	Our	U.	S.	sales	efforts	also	included	the	use	of	national	account	managers	focused	on	obtaining	purchasing	contracts	from	large purchasing	entities,	such	as	managed	care	organizations,	integrated	delivery	networks	("IDNs")	and	government	healthcare	facilities.	In	addition,	in	certain	regions	of the	U.S.	we	use	a	limited	number	of	independent	dealers	or	distributors	to	sell	and	service	our	product.	These	relationships	enable	us	to	sell	into	accounts	where	we might	not	otherwise	have	access.

During	fiscal	year	2008,	we	sold	our	breast	and	skeletal	health	products	in	international	markets	through	a	network	of	independent	distributors	and	sales representatives,	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	2008,	2007	and	2006	foreign	sales	accounted	for approximately	20%,	25%	and	28%	of	our	product	sales,	respectively.	See	Note	14	of	Notes	to	Consolidated	Financial	Statements	for	geographical	information concerning	those	sales.

Our	worldwide	Diagnostics	and	GYN	Surgical	sales	force	consists	of	more	than	687	persons	focused	on	healthcare	providers,	clinical	laboratories	and	third-party payors.	A	critical	element	of	our	strategy	in	the	United	States	has	been	to	utilize	the	results	of	our	clinical	trials	and	expanded	FDA	labeling	to	demonstrate	the	safety, efficacy	and	productivity	improvements	to	patients,	healthcare	providers,	clinical	laboratories	and	third-party	payors.

Our	Diagnostics	and	GYN	Surgical	products	are	marketed	outside	of	the	United	States	by	maintaining	a	presence	in	Canada,	Europe,	Australia	and	Hong	Kong. We	established	these	operations	to	manage	sales,	service,	training	and	distribution	in	the	Canadian,	European	and	Asia/Pacific	markets.	We	have	also	utilized	a	network of	third-party	distributors	in	various	other	countries	throughout	the	world,	including	Japan	and	China.	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.

Third	Wave's	products	have	historically	been	sold	globally	through	a	combination	of	direct	sales	personnel	who	are	focused	primarily	on	high-volume	clinical reference	laboratories	that	meet	the	criteria	for	highly-

complex	CLIA	laboratories,	and	through	collaborative	relationships.	Third	Wave's	products	for	the	research	market	are	sold	primarily	through	direct	sales	efforts	in	the U.S.	and	in	Japan.	During	2007,	the	majority	of	Third	Wave's	product	sales	were	to	domestic	clinical	laboratories.

Our	service	organization	is	responsible	for	installing	our	products,	providing	warranty	and	repair	services,	applications	training	and	biomedical	training.	Products sold	by	our	direct	sales	force	typically	carry	limited	warranties	covering	parts	and	labor	for	twelve	months.	Products	sold	through	dealers	also	carry	limited	warranties, with	terms	that	are	normally	for	twelve	months	and	cover	only	parts	or	components.	We	also	offer	service	contracts	to	our	customers	that	are	generally	one	to	five	years in	duration	after	the	original	warranty	period.	We	provide	both	repair	services	and	routine	maintenance	services	under	these	arrangements,	and	also	offer	repair	and maintenance	services	on	a	time	and	material	basis	to	customers	that	do	not	have	service	contracts.	Internationally,	we	primarily	use	distributors,	sales	representatives	and third	parties	to	provide	maintenance	service	for	our	products.

As	of	October	25,	2008,	we	employed	approximately	633	people	as	field	service	engineers,	internal	technical	support	personnel	and	related	administrative personnel,	including	the	addition	of	approximately	5	people	serving	these	functions	as	a	result	of	our	acquisition	of	Third	Wave.

# Competition

The	healthcare	industry	in	general,	and	the	markets	in	which	our	products	compete	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	competitive	products	broader than	our	products.	Some	of	the	companies	with	whom	we	compete	have	or	may	have	more	extensive	research,	sales,	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.	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	systems.	In	2006,	Fuji	received	FDA	clearance	to	market	its	Computed	Radiography	("CR") mammography	system,	a	lower-priced	alternative	to	digital	mammography.	Agfa,	Carestream	Health,	Cedara	and	Sectra	have	introduced	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.	The	FDA	has	announced	its	intent	to	reclassify	full	field	digital mammography	systems	from	Class	III	to	Class	II	devices.	As	a	result,	these	systems	are	expected	to	become	eligible	for	clearance	for	commercialization	through	the FDA's	510(k)	process	rather	than	the	more	rigorous	pre-market	approval	process,	which	may	increase	the	number	of	competitors	entering	the	United	States	market.	We anticipate	that	competition	in	the	digital	mammography	market	will	intensify.

While	we	offer	a	broad	product	line	of	breast	imaging	and	related	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,	such	as	our	Dimensions	breast	tomosynthesis	product, which	we	recently	introduced	in	Europe	and	is	subject	to	FDA	approval	in	the	United	States.

The	primary	competitor	for	our	biopsy	and	tissue	extraction	product	line	is	Ethicon,	a	Johnson	&	Johnson	company.	While	there	are	many	companies	in	the biopsy	device	market,	other	principal	competitors	include	SenoRx,	Bard	and	Cardinal.	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.

Our	MammoSite	System	faces	competition	from	more	commonly-known	alternatives,	such	as	treatments	using	external	beam	whole	breast	radiation,	which	has longer-term	data	on	patient	outcomes,	and	recent	market	entrants	such	as	SenoRx,	Inc.	and	Cianna	Medical,	which	offer	multi-lumen	products	that	may	support	higher reimbursement	rates	for	radiation	oncology	users.	Internationally,	our	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	yet	achieved	widespread	commercial	use.

Our	ThinPrep	liquid-based	slide	preparation	faces	direct	competition	in	the	United	States	primarily	from	Becton,	Dickinson	and	Company,	which	manufactures liquid-based	slide	preparation	systems	and	slide	imaging	systems.	We	also	compete	with	the	conventional	Pap	smear	and	other	alternative	methods	for	detecting	cervical cancer	and/or	its	precursors.	Our	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,	our	ThinPrep	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.

With	our	FullTerm	Fetal	Fibronectin	test,	we	are	currently	the	only	provider	of	a	molecular	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.

Our	NovaSure	System	currently	faces	direct	competition	from	Johnson	&	Johnson,	Boston	Scientific,	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	our	NovaSure	System,	such	as	drug	therapy,	hysterectomy,	dilation	and	curettage	and	rollerball	ablation. Internationally	our	products	compete	with	drug	therapy,	as	well	as	other	endometrial	ablation	devices,	including	Johnson	&	Johnson's	Thermachoice,	Boston	Scientific'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	our	NovaSure	procedure,	NovaSure's	competitors	also	include	many	major	pharmaceutical	companies	that	manufacture	hormonal	drugs	for	women.	We believe	that	the	initial	success	of	our	NovaSure	product	has	been	primarily	based	upon	its	efficacy,	ease	of	use,	including	limited	patient	pre-treatment	requirements,	and patient	recovery.

Our	MammoSite	System	faces	competition	from	more	commonly-known	alternatives,	such	as	treatments	using	external	beam	whole	breast	radiation,	which	has longer-term	data	on	patient	outcomes,	and	recent	market	entrants	such	as	SenoRx,	Inc.	and	Cianna	Medical,	which	offer	multi-lumen	products	that	may	support	higher 12

reimbursement	rates	for	radiation	oncology	users.	Internationally,	our	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	yet	achieved	widespread	commercial	use.

In	the	molecular	diagnostics	market,	our	Invader	products	compete	with	many	companies	in	the	U.S.	and	abroad	engaged	in	the	development,	commercialization and	distribution	of	similar	products	intended	for	clinical	molecular	diagnostic	applications.	These	companies	may	have	or	develop	products	competitive	with	the products	offered	by	us.	Clinical	laboratories	also	may	offer	testing	services	that	are	competitive	with	our	products.	Clinical	laboratories	may	use	reagents	purchased from	us	or	others	to	develop	their	own	diagnostic	tests.	Such	laboratory-developed	tests	may	not	be	subject	to	the	same	requirements	for	clinical	trials	and	FDA submission	requirements	that	may	apply	to	our	products.

In	the	clinical	market,	we	compete	with	several	companies	offering	alternative	technologies	to	the	Invader	chemistry.	These	companies	include,	among	others: Abbott	Laboratories;	Siemens;	Becton,	Dickinson	and	Company;	Qiagen;	Roche	Diagnostics	Corporation;	Gen-Probe;	Applera	Corporation;	Applied	Biosystems; Celera;	Innogenetics,	Inc.;	and	Luminex	Corporation.	Our	HPV	tests,	if	and	when	approved,	will	compete	with	a	test	marketed	by	Qiagen,	which	received	FDA	approval in	1999.	We	believe	the	primary	competitive	factors	in	the	markets	for	our	Invader	products	are	performance,	reliability,	ease	of	use,	standardization	and	our	proprietary market	position.

In	the	research	market,	we	compete	with	several	companies	offering	alternative	technologies	to	the	Invader	chemistry.	These	companies	include,	among	others: Applied	Biosystems,	Affymetrix,	Inc.,	and	Illumina,	Inc.

GE	is	our	primary	competitor	in	the	osteoporosis	assessment	market	with	bone	density	of	the	hip	and	spine	systems.	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.

# 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.	We	manufacture	substantially	all of	our	mammography	and	certain	of	our	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.	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.	Our	breast	biopsy	disposable	products	are	manufactured	in	Indianapolis,	Indiana.	Our	ATEC	control consoles	for	breast	biopsy	are	manufactured	by	a	third	party,	with	quality	control	performed	by	our	employees.

Our	ThinPrep	Processors	and	ThinPrep	Imaging	Systems	are	assembled	at	our	facility	in	Marlborough,	Massachusetts,	ThinPrep	PreservCyt	vials	are	filled	at	our facility	in	Londonderry,	New	Hampshire	and	ThinPrep	System	filters	are	manufactured	at	both	our	Marlborough	and	Londonderry	facilities.	Our	NovaSure	disposable devices	are	manufactured	at	our	facility	in	San	Jose,	Costa	Rica.	We	are	in	the	process	of	transferring	our	NovaSure	system	manufacturing	operations	to	our	new	facility in	Alajuela,	Costa	Rica.	We	have	increased	our	inventory	of	the	NovaSure	system	in	anticipation	of	this	transfer.	However,	we	could	incur	delays	and	unanticipated	costs in	connection	with	that	transfer,	including	delays	or	costs	in	obtaining	the	necessary	FDA	regulatory	approvals	or	clearances,	that	could	adversely	affect	our	manufacture of	the	NovaSure	system.	We	are	in	the	process	of	transferring	production	of	the	RF	Controller	component	of	our	NovaSure	System	from	an	electronics	contract manufacturer	to	our	Marlborough	facility.	We	also	contract	with	several	third-parties	to	manufacture	certain	components	of	our	MammoSite	System,	and	we	then complete	the	manufacturing	process	out	of	our	Costa	Rica	and/or	Marlborough	locations,	depending	on	the	configuration.

We	manufacture	our	molecular	diagnostics	products	at	our	facility	in	Madison,	Wisconsin	and	source	certain	components	from	various	contract	manufacturers.

# Backlog

Our	backlog	as	of	November	9,	2008	totaled	$356.7	million	and	as	of	November	4,	2007	totaled	$237.9	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	the	further	development	and	improvement	of	our	existing	products	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.	A	key	aim	of	our	research	and development	efforts	is	the	development	of	technologies	that	benefit	our	full	field	digital	mammography	system,	including	the	development	of	systems	to	perform	breast tomosynthesis,	a	3-dimensional	x-ray	imaging	technique.	During	fiscal	2008	we	also	expended	significant	efforts	in	seeking	FDA	approval	for	our	Adiana	Complete Transcervical	Sterilization	System,	including	the	completion	and	submission	of	three	year	clinical	trial	results	required	by	the	FDA	in	connection	with	that	ongoing process.	With	the	acquisition	of	Third	Wave,	we	anticipate	continuing	research	and	development	efforts	relating	to	the	Cervista	HPV	products	and	HPV	high	volume automation	solutions,	the	improvement	of	Third	Wave's	existing	products	and	the	development	of	new	molecular	diagnostic	products	focused	on	women's	health.

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,	as	well	as	ensuring	that	certain	of	our	products	conform	to	European	health,	safety	and	environmental	requirements	(CE	marking).	Our	research	and development	expenses	were	approximately	$81.4	million	in	fiscal	2008,	$44.4	million	in	fiscal	2007	and	$28.1	million	in	fiscal	2006.

# 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	changes	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.	Additionally,	we	have	applied	for	numerous	additional	U.S.	patents	relating	to	our	technologies,	and	also	own	or	have	applied	for corresponding	patents	in	selected	foreign	countries.	These	patents	relate	to	various	aspects	of	most	of	our	products.	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.	There	is	a	risk	that	our	patent applications	will	not	be	granted	or	that	the	patent	or	patent	application	will	not	provide	significant	protection	for	our	products	and	technology.	Unauthorized	third	parties may	infringe,	copy	or	reverse	engineer	portions	of	our	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.

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

We	are	engaged	in	intellectual	property	litigation	as	described	in	Item	3,	Legal	Proceedings,	and	may	be	notified	in	the	future	of	claims	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.	A	510(k)	pre-market	notification	filing must	contain	information	establishing	that	the	device	to	be	sold	is	substantially	equivalent	to	a	device	commercially	distributed	prior	to	May	28,	1976.

The	pre-market	approval	procedure	involves	a	complex	and	lengthy	testing	and	review	process	by	the	FDA	and	may	require	several	years	to	obtain.	We	may	need to	first	obtain	an	investigational	device	exemption,	known	as	an	IDE,	in	order	to	conduct	extensive	clinical	testing	of	the	device	to	obtain	the	necessary	clinical	data	for submission	to	the	FDA.	The	FDA	will	grant	pre-market	approval	only	if	after	evaluating	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.	We currently	have	four	pre-market	approval	applications	that	have	been	submitted	to	the	FDA.	These	PMAs	cover	our	Dimensions	tomosynthesis	product,	our	Adiana Complete	Transcervical	Sterilization	System	and	two

Cervista	human	papillomavirus	("HPV")	tests.	We	have	recently	responded	to	additional	questions	from	the	FDA	in	connection	with	our	tomosynthesis	product application	and	completed	the	aggregation	of	three-year	clinical	trial	results	that	were	required	to	support	our	pre-market	approval	application	for	the	Complete Transcervical	Sterilization	System.	We	are	also	in	the	process	of	responding	to	questions	relating	to	our	PMAs	for	our	HPV	tests.	The	FDA	may	have	additional questions	or	require	additional	information	or	clinical	trials	for	any	of	these	products	or	tests.	We	cannot	assure	when	or	whether	the	FDA	may	approve	any	of	our applications.

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.	In addition,	we	may	be	required	to	meet	the	FDA's	export	requirements	or	receive	FDA	export	approval	for	export	of	our	products	to	foreign	countries.	Moreover,	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." Effective	August	18,	2008,	the	FDA	down	classified	bone	sonometers	to	Class	II	510(k),	which	is	less	rigorous	than	the	previous	PMA	process.	This	may	result	in	more competitors	entering	the	United	States	market.

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	issued	a	guidance	document	on	full	field	digital	mammography	for	public	comment.	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.

The	laboratories	that	purchase	our	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	products	to	comply	with	CLIA	requirements.	However, we	cannot	assure	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.

The	majority	of	the	current	clinical	diagnostic	products	we	acquired	as	part	of	the	Third	Wave	acquisition	were	sold	as	Analyte	Specific	Reagents,	known	as ASRs.	The	FDA	restricts	the	sale	of	these	products	to	clinical	laboratories	certified	under	CLIA	to	perform	high	complexity	testing	and	also	restricts	the	types	of products	that	can	be	sold	as	ASRs.	In	2006,	followed	by	additional	clarification	in	2007,	the	FDA	issued	guidance	concerning	acceptable	examples	of	reagents	that	meet the	threshold	of	the	ASR	regulations.	In	this	guidance,	the	FDA	outlined	examples	of	products	and	marketing	practices	that	go	beyond	the	scope	of	the	ASR	regulations making	the	reagent	part	of	a	test	system	potentially	subject	to	premarket	review.	These	examples	include	combining,	or	promoting	for	use,	a	single	ASR	with	another product	such	as	other	ASRs,	general	purpose	reagents,	controls,	laboratory	equipment,	software,	etc.,	or	promoting	an	ASR	with	specific	analytical	or	performance claims,	instructions	for	use	in	a	particular	test,	or	instructions	for	validation	of	a	specific	test	using	the	ASR.	As	a	result	of	this	recent	guidance	we	have	taken	the necessary	steps	to	comply	with	the	guidance.	This	has	resulted	in

discontinuing	a	number	of	Third	Wave	products	that	were	previously	sold	as	ASRs.	We	have	applied	for	investigational	device	exemptions	for	the	remaining	products which	will	permit	continued	commercialization.	There	is	no	assurance	that	the	FDA	will	grant	such	exemptions,	in	which	case	we	may	be	required	to	discontinue	sales of	the	product	if	it	does	not	otherwise	qualify	for	use	as	an	ASR.

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.

We	are	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	our	products	may	be	subject	to	scrutiny	under	these	laws.	While	we	make	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.	We	may	be	required	to	incur	significant	costs	to	comply	with	such	laws and	regulations	in	the	future,	and	these	laws	and	regulations	may	have	a	material	adverse	effect	upon	our	business,	financial	condition	and	results	of	operations.

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	tests	and	surgical	procedures	performed	using	our	products.	The	actual	reimbursement	amounts	vary	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.

In	June	and	July	2008,	CMS	announced	proposed	2009	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	5.4%	reduction	in	physician	payments	under	the physician	fee	schedule	as	determined	by	the	SGR	formula	and	Congressional	legislation.	CMS	also	implemented	provisions	of	the	Deficit	Reduction	Act	of	2005	related to	certain	medical	imaging	procedures.	For	2009,	the	changes	that	affect	us	include	the	following:	a	decline	of	approximately	0%	to	5%	in	digital	and	analog mammography	screening	and	diagnostic	reimbursement	rates	and	an	approximate	19%	decline	in	reimbursement	for	CAD,	which	reflects	the	third	year	of	the	four	year phase-in	of	an	approximate	50%	decline	announced	in	2006	in	addition	to	the	SGR	reduction.	The	proposed	2009	decline	in	reimbursement	for	bone	density	assessments for	osteoporosis	(DXA)	testing	is	approximately	24%,	reflecting	the	third	year	of	the	four	year	phase-in	of	an	approximate	70%	decline	announced	in	2006	in	addition	to the	SGR	reduction.	Medicare	payments	for	2009	for	our	other	products	are	effected	primarily	by	the	SGR	reduction,	and	will	decline	by	less	than	approximately	8%, with	in-office	payments	for	NovaSure	and	MammoSite	balloon	catheter	placement	declining	by	approximately	13%.	Hospital	outpatient	department	and	Ambulatory Surgical	Center	payments	for	our	products	will	increase	by	approximately	2%	to	10%.	Payments	for	placement	of	MammoSite	brachytherapy	source	placement	are decreasing	by	approximately	40%	in	Free-standing	Radiation	Oncology	Centers.

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

# Employees

As	of	October	25,	2008,	we	had	approximately	3,933	full-time	employees,	including	1,391	in	manufacturing	operations,	409	in	research	and	development,	1,662 in	marketing,	sales	and	support	services,	and	470	in	finance	and	administration.	The	non-management	employees	of	our	subsidiary,	AEG,	are	represented	by	a	union. AEG's	approximate	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	93	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.	Risk	Factors

This	report	contains	forward-looking	information	that	involves	risks	and	uncertainties,	including	statements	regarding	our	plans,	objectives,	expectations	and intentions.	Such	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	Business

# The	current	crisis	affecting	world	financial	markets	may	adversely	affect	our	business	and	prospects.

Market	acceptance	of	our	medical	products	in	the	United	States	and	other	countries	is	dependent	upon	the	medical	equipment	purchasing	and	procurement practices	of	our	customers,	patient	demand	for	our	products	and	procedures	and	the	reimbursement	of	patient's	medical	expenses	by	government	healthcare	programs. The	current	uncertainty	surrounding	world	financial	markets	may	result	in	the	purchasers	of	medical	equipment

decreasing	their	medical	equipment	purchasing	and	procurement	activities.	Additionally,	constrictions	in	world	credit	markets	may	result	in	our	customers	having increased	difficulty	securing	the	financing	necessary	to	purchase	our	products	which	may	result	in	decreased	sales.	Widespread	economic	uncertainty	may	also	result	in cost-conscious	consumers	making	fewer	elective	trips	to	their	physicians	and	specialists	which	could	result	in	reduced	demand	for	our	products	and	procedures. Furthermore,	governments	around	the	world	facing	tightening	budgets	could	move	to	further	reduce	the	reimbursement	rates	offered	by	government	sponsored healthcare	programs.	If	the	current	economic	condition	results	in	the	occurrence	of	any	of	these	events,	our	business	and	prospects	may	be	adversely	affected.

# 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.

# 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	Third	Wave,	Cytyc,	BioLucent,	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	obtain	FDA	approval	or	clearance	for	products	under	development;

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

•failure	of	customers	to	accept	new	products;

•failure	to	effectively	coordinate	sales	and	marketing	efforts;

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

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

•	 potential	difficulties	and	inefficiencies	in	managing	and	operating	businesses	in	multiple	locations	or	operating	businesses	in	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	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.

# Our	success	will	depend	upon	our	ability	to	successfully	develop	and	commercialize	new	products	and	enhancements	to	our	existing	products.

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	enhancement	of	our	current	products	as	well	as	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,	the	continued	development	of	Third	Wave's	Cervista	HPV	products	and high	volume	automation	solution,	and	the	further	development	of	new	molecular	diagnostic	products	focused	on	women's	health.	We	have	also	committed	significant resources	to	our	efforts	to	achieve	FDA	approval	for	our	permanent	female	contraception	product.

The	successful	development	of	our	products	and	product	enhancements	is	subject	to	numerous	risks,	both	known	and	unknown,	including:

•	 unanticipated	delays	in	development	or	the	FDA's	approval	or	clearance	process;

•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)	clearance.

Given	the	uncertainties	inherent	with	product	development	and	introduction,	our	product	development	efforts	may	not	be	completed	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,	the	Cervista	HPV	products and	our	permanent	female	contraception	procedure	on	a	timely	basis	or	within	budget	could	harm	our	business	and	prospects.

# Our	delay	or	inability	to	obtain	any	necessary	United	States	or	foreign	regulatory	clearances	or	approvals	for	our	newly	developed	products	or	product enhancements	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	newly	developed	products	or	product	enhancements,	such	as	our	digital	mammography	tomosynthesis	product,	our permanent	female	contraception	product	and	our	Cervista	HPV	products,	could	harm	our	business	and	prospects.	The	process	of	obtaining	clearances	and	approvals	can be	costly	and	time-consuming.	Recently	we	have	encountered	unanticipated	delays	in	the	FDA	approval	process	relating	to	both	our	digital	mammography tomosynthesis	product	and	our	permanent	female	contraception	product.	Additionally,	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.

# The	markets	for	our	newly	developed	products	and	treatments	and	newly	introduced	enhancements	to	our	existing	products	and	treatments	may	not	develop as	expected.

The	successful	commercialization	of	our	newly	developed	products	and	treatments	and	newly	introduced	enhancements	to	our	existing	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.

# The	historical	levels	of	sales	growth	experienced	by	our	products	may	not	be	indicative	of	future	growth	as	the	markets	for	our	products	mature.

Historically,	the	demand	for	our	technologies	and	treatments	is	greatest	upon	their	initial	introduction.	However,	once	markets	mature,	growth	in	the	market	may abruptly	stop	or	significantly	slow	or	demand	may	decline.	The	demand	for	certain	of	our	products,	such	as	our	direct-to-digital	full-field	mammography	products	and our	NovaSure	endometrial	ablation	system	that	initially	experienced	rapid	growth,	may	not	continue	to	reflect	historical	levels	and	we	cannot	predict	when,	or	at	what rate,	this	demand	may	decline.	Reduced	growth	rates	and	slackening	demand	for	our	products	could	adversely	affect	our	operating	results	and	profitability.

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	and	our	molecular	diagnostic	products	added	with	the	Third	Wave	acquisition.

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	and	our	molecular	diagnostic	products	that	were	added	with	the	Third	Wave	acquisition.	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	these	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.

# 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	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.

As	examples,	we	are	currently	defending	ourselves	against	infringement	complaints	filed	by	Ethicon	Endo-Surgery,	Inc.,	a	Johnson	&	Johnson	operating company,	Tissue	Extraction	Devices,	LLC,	and	Digene	Corporation;	and	we	have	previously	defended	against	a	claim	of	infringement	by	Tripath	Imaging,	Inc.,	which was	settled	in	Fiscal	2008.	For	further	information	regarding	these	complaints,	please	refer	to	Item	3.	Legal	Proceedings.

In	connection	with	claims	of	patent	infringement,	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.

# 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.	Even	if	we believed	our	proprietary	information	is	protected	by	patents	or	otherwise,	the	initiation	of	actions	to	protect	our	proprietary	information	could	be	costly	and	divert	the efforts	and	attention	of	our	management	and	technical	personnel,	and	the	outcome	of	such	litigation	is	often	uncertain.	As	a	result	of	these	uncertainties,	we	could	also elect	to	forego	such	litigation	or	settle	such	litigation	without	fully	enforcing	our	proprietary	rights.	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;

•the	inability	to	obtain	favorable	third-party	reimbursements;

•the	inability	to	obtain	required	regulatory	approvals;

•	 governmental	currency	controls;

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

•reduced	protection	for	intellectual	property	rights	in	some	countries;

•	 political	and	economic	changes	and	disruptions;

•clone	or	"knock	off"	products;

•export/import	controls;	and

•tariff	regulations.

# 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,	with	a	majority	of	our	sales	to	international	dealers denominated	in	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.

Recently	the	value	of	the	U.S.	dollar	has	strengthened	against	the	value	of	many	foreign	currencies.	The	strengthening	of	the	U.S.	dollar	makes	dollar denominated	sales	less	competitive	in	international	markets	and	may	impact	sales	and	margins	over	time.	In	addition,	the	value	of	our	sales	denominated	in	foreign currencies	will	decrease	as	the	U.S.	dollar	strengthens.	We	believe	that	the	strengthening	of	the	U.S.	dollar,	if	it	persists,	may	have	a	material	adverse	effect	on	our international	sales	and	margins.

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

We	manufacture	our	products	at	a	number	of	different	facilities	located	throughout	the	world.	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.	We	have recently	completed	construction	of	a	new	manufacturing	facility	in	Costa	Rica.	There	is	a	risk	that	we	will	not	be	able	to	successfully	obtain	the	regulatory	approval	for this	facility	in	a	timely	manner	and	this	could	adversely	impact	our	business	and	prospects.

# 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.	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.

# 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.	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.

# 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,	manufacturing	and	financial	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	are	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;

•regulatory	approval	of	products;

•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.

# 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	issued	guidance	on	full	field	digital	mammography	for	public	comment	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,	inaccurate	test	results	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	and	manufacturing	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.

# 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.

An	adverse	change	in	the	projected	cash	flows	from	our	acquired	businesses	or	the	business	climate	in	which	they	operate,	including	the	continuation	of	the current	financial	and	economic	turmoil,	could	require	us	to	incur	an	impairment	charge	which	would	have	an	adverse	impact	on	our	operating	results.

We	periodically	review	the	carrying	value	of	the	goodwill	and	other	long-lived	assets	reflected	in	our	financial	statements	to	determine	if	any	adverse	conditions exist	or	a	change	in	circumstances	has	occurred	that	would	indicate	impairment	of	the	value	of	these	assets.	Conditions	that	would	indicate	impairment	and	necessitate	a revaluation	of	these	assets	include,	but	are	not	limited	to,	a	significant	adverse	change	in	the	business	climate	or	the	legal	or	regulatory	environment	within	which	we operate.	If	the	carrying	value	of	an	asset	is	determined	to	be	impaired	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.	As	of September	27,	2008,	we	had	approximately	$7.4	billion	of	goodwill	and	other	long-lived	assets.	Subsequent	to	September	27,	2008,	we	have	experienced	a	decline	in	the price	of	our	publicly-traded	common	stock	and	related	market	capitalization	such	that	our	market	capitalization	has	declined	below	the	book	value	of	our	net	assets.	We evaluated	this	decline	in	our	market	capitalization	subsequent	to	September	27,	2008	and	have	concluded	that	it	was	not	an	indicator	of	an	impairment	that	existed	as	of September	27,	2008.	We	will	continue	to	monitor	our	market	capitalization	compared	to	the	book	value	of	our	net	assets.	It	is	possible	that	the	continuation	of	the	current global	financial	and	economic	turmoil	could	negatively	affect	our	anticipated	cash	flows,	or	the	discount	rate	that	is	applied	to	valuing	those	cash	flows,	to	such	an extent	that	we	could	be	required	to	perform	an	interim	impairment	test	in	fiscal	2009.	Such	a	requirement	could	result	in	a	material	impairment	charge	that	would	have an	adverse	impact	on	our	operating	results.

# 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	27,	2008	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	2008,	we	acquired	Third	Wave	and	we	expect	to	include	Third	Wave	in	our	assessment	of	internal	control	over	financial	reporting	in	fiscal	2009.	We	expect	to face	additional	challenges	in	implementing	the	required	processes,	procedures	and	controls	as	a	result	of	the	acquisition	and	other	acquired	operations.	Although	we intend	to	devote	time	and	incur	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.

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	Indebtedness

# We	incurred	significant	indebtedness	in	order	to	finance	the	merger	with	Cytyc	Corporation	and	our	acquisition	of	Third	Wave,	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	and	other	expenses	in	connection	with	the	merger	we	incurred	over	$2.35	billion	of	new	indebtedness under	various	senior	secured	term	loan	facilities	(collectively,	the	"Cytyc	Facilities").	On	December	10,	2007,	we	issued	$1.725	billion	of	2.0%	convertible	notes	due 2037	(the	"Convertible	Notes"),	which	are	unsecured	and	subordinated	to	our	secured	indebtedness.	The	Cytyc	Facilities	were	repaid	in	full	as	of	June	28,	2008,	using the	net	proceeds	from	our	issuance	of	the	Convertible	Notes	and	our	voluntary	prepayment	of	principal.	The	Convertible	Notes	remain	outstanding	at	September	27, 2008.

In	connection	with	our	acquisition	of	Third	Wave,	we	entered	into	an	amended	and	restated	credit	agreement	in	order	to	replace	the	Cytyc	Facilities	with	$540 million	of	new	indebtedness,	including	approximately	$400	million	under	a	senior	secured	tranche	A	term	loan	facility	which	matures	on	September	30,	2012	and	$140 million	under	a	senior	secured	tranche	B	term	loan	facility	which	matures	on	March	31,	2013	(collectively,	the	"New	Credit	Facilities").	Additionally,	certain	other	of our	indebtedness	may	remain	outstanding.	Our	New	Credit	Facilities	bear	interest	at	variable	rates.	Our	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	New	Credit	Facilities	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	and	additional	liens	on	our	assets;

•engage	in	mergers	or	acquisitions	or	dispose	of	assets;

•enter	into	sale-leaseback	transactions;

•	 pay	dividends	or	make	other	distributions;

•	 voluntarily	prepay	other	indebtedness;

•enter	into	transactions	with	affiliated	persons;

•	 make	investments;	and

•change	the	nature	of	our	businesses.

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	our	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	may	be	permitted	to	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	the	indebtedness	under	the	New	Credit	Facilities	and	the	Convertible	Notes	or	any	other	of	our	obligations	or 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.

# The	accounting	for	convertible	debt	securities	such	as	our	Convertible	Notes	is	subject	to	change	that	will	result	in	a	significant	increase	in	the	accrual	of interest	expense	under	those	notes.

The	accounting	for	convertible	debt	securities	such	as	our	Convertible	Notes	is	subject	to	frequent	scrutiny	by	the	accounting	regulatory	bodies	and	is	subject	to change.	In	May	2008,	the	Financial	Accounting	Standards	Board	("FASB")	issued	FASB	Staff	Position	("FSP")	No.	APB	14-1,	Accounting	for	Convertible	Debt Instruments	That	May	Be	Settled	in	Cash	upon	Conversion	(Including	Partial	Cash	Settlement).	This	FSP	applies	to	convertible	debt	instruments	(such	as	our Convertible	Notes)	that,	by	their	stated	terms,	may	be	settled	in	cash	(or	other	assets)	upon	conversion,	including	partial	cash	settlement,	unless	the	embedded	conversion option	is	required	to	be	separately	accounted	for	as	a	derivative	under	Statement	of	Financial	Accounting	Standards	("SFAS")	No.	133.	As	a	result	of	the	issuance	of	this FSP,	the	liability	and	equity	components	of	our	Convertible	Notes	must	be	separately	accounted	for	in	a	manner	that	will	reflect	our	nonconvertible	debt	borrowing	rate when	interest	cost	is	recognized	in	subsequent	periods.	The	excess	of	the	principal	amount	of	the	debt	over	the	amount	ultimately	allocated	to	the	liability	component	is required	to	be	amortized	to	interest	expense	using	the	interest

method.	This	FSP	is	effective	for	financial	statements	issued	for	fiscal	years	beginning	after	December	15,	2008,	and	interim	periods	within	those	fiscal	years.	As	a result,	we	will	adopt	this	standard	at	the	beginning	of	fiscal	2010.	This	FSP	must	be	applied	retrospectively	to	all	periods	presented.	The	retrospective	adoption	of	this FSP	will	increase	our	historical	reported	interest	expense	from	December	10,	2007	(issuance	date	of	the	Convertible	Notes)	forward.	Upon	adoption,	we	expect	to	revise prior	periods	by	reclassifying	approximately	$470.0	million	of	our	Convertible	Notes	to	additional	paid-in	capital,	resulting	in	a	debt	discount.	As	a	result,	our	fiscal 2008	non-cash	interest	expense	will	increase	by	approximately	$48.2	million,	resulting	in	a	restated	diluted	loss	per	share	of	approximately	$1.69	per	share,	net	of	tax. Future	periods	would	be	similarly	affected	by	an	amortization	of	the	debt	discount	as	an	interest	expense.

# Risks	Related	to	our	Common	Stock	and	Convertible	Notes

# Future	issuances	of	common	stock	and	hedging	activities	may	depress	the	trading	price	of	our	common	stock	and	our	Convertible	Notes.

Any	future	issuance	of	equity	securities,	including	the	issuance	of	shares	upon	conversion	of	our	Convertible	Notes,	could	dilute	the	interests	of	our	existing stockholders,	including	holders	who	have	received	shares	upon	conversion	of	our	Convertible	Notes,	and	could	substantially	decrease	the	trading	price	of	our	common stock	and	our	Convertible	Notes.	We	may	issue	equity	securities	in	the	future	for	a	number	of	reasons,	including	to	finance	our	operations	and	business	strategy (including	in	connection	with	acquisitions,	strategic	collaborations	or	other	transactions),	to	adjust	our	ratio	of	debt	to	equity,	to	satisfy	our	obligations	upon	the	exercise of	outstanding	warrants	or	options	or	for	other	reasons.

In	addition,	the	price	of	our	common	stock	could	also	be	affected	by	possible	sales	of	our	common	stock	by	investors	who	view	our	Convertible	Notes	as	a	more attractive	means	of	equity	participation	in	our	company	and	by	hedging	or	arbitrage	trading	activity	that	we	expect	to	develop	involving	our	common	stock.	The	hedging or	arbitrage	could,	in	turn,	affect	the	trading	price	of	our	Convertible	Notes,	or	any	common	stock	that	note	holders	receive	upon	conversion	of	their	notes.

Future	sales	of	our	common	stock	in	the	public	market	or	the	issuance	of	securities	senior	to	our	common	stock	could	adversely	affect	the	trading	price	of	our common	stock	and	the	value	of	our	Convertible	Notes	and	our	ability	to	raise	funds	in	new	securities	offerings.

Future	sales	of	our	common	stock,	the	perception	that	such	sales	could	occur	or	the	availability	for	future	sales	of	shares	of	our	common	stock	or	securities convertible	into	or	exercisable	for	our	common	stock	could	adversely	affect	the	market	prices	of	our	common	stock	and	the	value	of	our	Convertible	Notes	prevailing from	time	to	time	and	could	impair	our	ability	to	raise	capital	through	future	offerings	of	equity	or	equity-related	securities.	In	addition,	we	may	issue	common	stock	or equity	securities	senior	to	our	common	stock	in	the	future	for	a	number	of	reasons,	including	to	finance	our	operations	and	business	strategy,	to	adjust	our	ratio	of	debt	to equity,	satisfy	our	obligations	upon	the	exercise	of	options	or	for	other	reasons.

# 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.

The	price	of	our	common	stock	also	may	be	adversely	affected	by	the	amount	of	common	stock	issuable	upon	conversion	of	our	Convertible	Notes.	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.

# Conversion	of	our	Convertible	Notes	will	dilute	the	ownership	interest	of	existing	stockholders,	including	holders	who	had	previously	converted	their	notes.

To	the	extent	we	issue	any	shares	of	our	common	stock	upon	conversion	of	our	Convertible	Notes,	the	conversion	of	some	or	all	of	our	Convertible	Notes	will dilute	the	ownership	interests	of	existing	stockholders,	including	holders	who	have	received	shares	of	our	common	stock	upon	prior	conversion	of	our	Convertible Notes.	Any	sales	in	the	public	market	of	the	common	stock	issuable	upon	such	conversion	could	adversely	affect	prevailing	market	prices	of	our	common	stock.	In addition,	the	existence	of	our	Convertible	Notes	may	encourage	short	selling	by	market	participants	because	the	conversion	of	our	Convertible	Notes	could	depress	the price	of	our	common	stock.

# Item	1B. Unresolved	Staff	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	Siemens	under	a	lease	which	expires	in	April	2015.	Our	AEG	subsidiary	owns	an	approximately	180,000	square	foot	facility	in	Warstein, Germany	which	is	used	for	its	headquarters,	manufacturing	and	research	and	development.	Cytyc	also	owns	approximately	2.7	acres	of	land	and	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.	In	January	2004,	Cytyc	leased	approximately	216,000	square	feet	in	Marlborough, Massachusetts	for	its	administrative,	research,	manufacturing	and	distribution	operations	for	a	term	of	15	years	with	two	(2)	five-year	options	to	extend	the	term	upon written	notice	to	the	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,	which	is	principally	used	as	an	additional	manufacturing	facility.	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.	In	April	2007,	Cytyc	entered	into	a	ten	year lease	for	a	building	with	approximately	164,000	square	feet	located	in	Alajuela,	Costa	Rica.	We	are	currently	in	the	process	of	moving	our	manufacturing	operations	to this	newly	constructed	facility.

We	lease	other	facilities	utilized	for	office	space	and	manufacturing	and	distribution	operations	across	the	United	States,	in	Shanghai,	China	and	in	Costa	Rica. We	also	lease	several	sales	and	service	offices	throughout	the	world.

In	connection	with	our	secured	credit	facility,	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. Legal	Proceedings

On	October	5,	2007	Ethicon	Endo-Surgery,	Inc.,	a	Johnson	&	Johnson	operating	company,	filed	a	complaint	against	us	and	our	wholly-owned	subsidiary	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	us	and	Suros	infringe four	Ethicon	patents.	An	amended	complaint	filed	January	11,	2008	additionally	asserts	claims	of	unfair	competition.	Through	the	complaint	Ethicon	seeks	to	enjoin	us and	Suros	from	the	alleged	conduct	including	the	acts	of	unfair	competition	and	infringement	of	the	patents	and	additionally	seeks	recovery	of	unspecified	damages	and costs.

On	January	9,	2008,	Tissue	Extraction	Devices,	LLC	filed	a	complaint	against	us	and	our	wholly-owned	subsidiary	Suros	in	the	United	States	District	Court	for the	Northern	District	of	Illinois,	alleging	infringement	of	US	Patent	No.	7,316,726	by	certain	of	the	ATEC	biopsy	systems	manufactured	and	sold	by	us	and	Suros.	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.

On	January	11,	2007,	Digene	Corporation	filed	suit	against	Third	Wave	in	the	United	States	Court	for	the	Western	District	of	Wisconsin.	The	complaint	alleged patent	infringement	by	Third	Wave's	HPV	ASR	product.	Third	Wave's	response	denied	the	alleged	infringement	and	asserted	that	certain	Digene	sales	practices	violate certain	antitrust	laws.	On	November	23,	2007	the	court	issued	an	order	dismissing	Digene's	patent	infringement	claims.	On	January	11,	2008,	the	court	issued	an	order granting	Digene's	motion	for	summary	judgment	on	Third	Wave's	antitrust	counterclaims.	On	February	29,	2008	both	Third	Wave	and	Digene	filed	notices	of	appeal	to the	Court	of	Appeals	for	the	Federal	Circuit.

As	of	September	27,	2008	we	do	not	believe	a	loss	is	probable	in	any	of	the	matters	disclosed	above.	We	are	a	party	to	various	other	legal	proceedings	arising	out of	the	ordinary	course	of	our	business.	We	believe,	that	except	for	those	described	above,	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. Submission	of	Matters	to	a	Vote	of	Security	Holders.

None.

# 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."	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.	This	stock	price	information	has	been	adjusted to	give	effect	for	the	stock	split	effected	on	April	2,	2008.

| Fiscal	Year	Ended	September	29,	2007 | High | Low |
| :--- | :--- | :--- |
| First\tQuarter | $26.17 | $20.97 |
| Second\tQuarter | \t 30.12 | \t 22.94 |
| Third\tQuarter | \t 31.59 | \t 25.48 |
| Fourth\tQuarter | \t 31.27 | \t 23.76 |

| Fiscal	Year	Ended	September	27,	2008 | High | Low |
| :--- | :--- | :--- |
| First\tQuarter | $35.79 | $29.40 |
| Second\tQuarter | \t 36.44 | \t 25.73 |
| Third\tQuarter | \t 30.99 | \t 20.15 |
| Fourth\tQuarter | \t 24.22 | \t 17.83 |

Number	of	Holders.	As	of	November	18,	2008,	there	were	approximately	1,558	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	amended	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	2008.

Issuer's	Purchases	of	Equity	Securities.	We	did	not	repurchase	any	of	our	equity	securities	during	the	fourth	quarter	of	fiscal	2008.

# Item	6. Selected	Financial	Data.

In	fiscal	2006	we	acquired	the	intellectual	property	relating	to	Fischer	Imaging	Corporation's	mammography	business.	In	fiscal	2006	we	also	acquired	AEG Elektrofotografie	("AEG"),	R2	Technology,	Inc.	("R2")	and	Suros	Surgical,	Inc.	("Suros").	In	the	fourth	quarter	of	fiscal	2007	we	acquired	BioLucent,	Inc. ("BioLucent").	In	the	first	and	fourth	quarters	of	fiscal	2008	we	acquired	Cytyc	Corporation	("Cytyc")	and	Third	Wave	Technologies,	Inc.	("Third	Wave"),	respectively. We	used	the	purchase	method	of	accounting	in	accordance	with	SFAS	No.	141,	Business	Combinations	to	account	for	acquired	entities.

|  | September	27,<br>2008 | September	29,<br>2007 | September	30,<br>2006 | September	24,<br>2005 | September	25,<br>2004 |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | (In\tthousands,\texcept\tper\tshare\tdata) |  |  |
| Consolidated\tStatement\tof\tOperations\tData |  |  |  |  |  |
| Revenues: |  |  |  |  |  |
| Product\tsales | $1,502,447 | $628,854 | $388,111 | $229,075 | $177,936 |
| Service\tand\tother\trevenues | 172,052 | 109,514 | 74,569 | 58,609 | 50,769 |
|  | 1,674,499 | 738,368 | 462,680 | 287,684 | 228,705 |
| Costs\tand\tExpenses: |  |  |  |  |  |
| Cost\tof\tproduct\tsales | 535,082 | 267,470 | 188,443 | 116,478 | 94,762 |
| Cost\tof\tproduct\tsales—amortization\tof\tintangible\tassets | 95,310 | 11,262 | 5,011 | 1,153 | 1,037 |
| Cost\tof\tservice\tand\tother\trevenues | 151,589 | 114,307 | 75,921 | 58,181 | 48,574 |
| Research\tand\tdevelopment | 81,421 | 44,381 | 28,113 | 18,508 | 16,494 |
| Selling\tand\tmarketing | 261,524 | 85,520 | 56,239 | 34,200 | 31,761 |
| General\tand\tadministrative | 147,405 | 62,092 | 42,176 | 26,533 | 23,491 |
| Amortization\tof\tacquired\tintangible\tassets | 25,227 | 5,584 | 1,631 | — | — |
| Restructuring | 6,383 | — | — | — | — |
| Impairment\tof\tacquired\tintangible\tassets | 2,900 | — | — | — | — |
| Net\tgain\ton\tsale\tof\tintellectual\tproperty | — | — | (5,093) | — | — |
| Acquired\tin-process\tresearch\tand\tdevelopment | 565,200 | — | 19,900 | — | — |
|  | 1,872,041 | 590,616 | 412,341 | 255,053 | 216,119 |
| (Loss)\tincome\tfrom\toperations | (197,542) | 147,752 | 50,339 | 32,631 | 12,586 |
| Interest\tincome | 4,528 | 2,815 | 4,082 | 2,219 | 540 |
| Interest\texpense | (84,912) | (2,511) | (1,230) | (376) | (278) |
| Other\t(expense)\tincome,\tnet | (1,215) | 433 | 32 | 221 | 79 |
| (Loss)\tincome\tbefore\tincome\ttaxes | (279,141) | 148,489 | 53,223 | 34,695 | 12,927 |
| Provision\tfor\tincome\ttaxes | 106,476 | 53,911 | 25,800 | 6,439 | 763 |
| Net\t(loss)\tincome | $(385,617) | $94,578 | $27,423 | $28,256 | $12,164 |

|  | September	27,<br>2008 | September	29,<br>2007 | September	30,<br>2006 | September	24,<br>2005 | September	25,<br>2004 |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | (In\tthousands,\texcept\tper\tshare\tdata) | (In\tthousands,\texcept\tper\tshare\tdata) |  |  |
| Basic\tnet\t(loss)\tincome\tper\tcommon\tand\tcommon\tequivalent\tshare |  |  |  |  |  |
| (1) | $(1.57) | $0.88 | $0.29 | $0.33 | $0.15 |
| Diluted\tnet\t(loss)\tincome\tper\tcommon\tand\tcommon\tequivalent\nshare\t(1) | $(1.57) | $0.86 | $0.28 | $0.31 | $0.14 |
| Weighted\taverage\tnumber\tof\tcommon\tshares\toutstanding\t(1):\nBasic | 245,968 | 106,873 | 93,025 | 85,648 | 81,031 |
| Diluted | 245,968 | 109,669 | 97,240 | 90,252 | 85,186 |
| Consolidated\tBalance\tSheet\tData |  |  |  |  |  |
| Working\tcapital | $352,703 | $220,568 | $123,493 | $172,615 | $118,238 |
| Total\tassets | 8,134,632 | 1,066,349 | 856,205 | 279,839 | 211,751 |
| Line\tof\tcredit | — | — | 55,000 | — | — |
| Long-term\tdebt | 2,162,420 | 9,222 | 6,163 | — | 472 |
| Total\tstockholders'\tequity | 4,642,269 | 805,723 | 605,750 | 217,834 | 166,275 |

(1) All	share	and	per	share	data	have	been	retroactively	restated	to	reflect	the	2-for-1	stock	splits	effected	on	November	30,	2005	and	April	2,	2008.

# 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",	the	Consolidated	Financial	Statements	and	the information	described	under	the	caption	"Risk	Factors"	included	elsewhere	in	this	report.

# CRITICAL	ACCOUNTING	POLICIES	AND	ESTIMATES

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,	allowance	for	doubtful	accounts,	reserves	for	excess	and obsolete	inventories,	valuations	and	purchase	price	allocations	related	to	business	combinations,	expected	future	cash	flows	used	to	evaluate	the	recoverability	of	long- lived	assets	and	goodwill,	estimated	fair	values	of	intangible	assets	and	goodwill,	amortization	methods	and	periods,	warranty	reserves,	certain	accrued	expenses, restructuring	and	other	related	charges,	stock-based	compensation,	pension	liabilities,	contingent	liabilities,	tax	reserves	and	recoverability	of	our	net	deferred	tax	assets and	related	valuation	allowance.	We	base	our	estimates	on	historical	experience	and	various	other	assumptions	that	are	believed	to	be	reasonable	under	the circumstances.	Actual	results	could	differ	from	these	estimates	if	past	experience	or	other	assumptions	do	not	turn	out	to	be	substantially	accurate.	Any	differences	may have	a	material	impact	on	our	financial	condition	and	results	of	operations.

The	following	is	a	discussion	of	what	we	believe	to	be	the	more	significant	critical	accounting	policies	and	estimates	used	in	the	preparation	of	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	collectibility	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,	for	example	as	a	result	of	the	recent	financial	and economic	turmoil	or	otherwise,	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 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	$6.5	million,	$4.6	million	and	$3.7	million	in	fiscal	2008,	2007	and	2006,	respectively.	The	increase	in	reserves	in	each	of the	last	two	fiscal	years	was	primarily	due	to	an	increase	in	our	revenues	and	associated	accounts	receivable.	Our	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	2008	and	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	intangible	assets	including developed	technology,	customer	relationships	and	trade	names.	Developed	technology	represents	patented	and	unpatented	technology	and	know-how.	Customer relationships	represent	established	relationships	with	customers,	which	provide	a	ready	channel	for	the	sale	of	additional	products	and	services.	Tradenames	represent acquired	product	names	that	we	intend	to	continue	to	utilize.

# Intangible	Assets	and	Goodwill

# Intangible	Assets

We	amortize	our	intangible	assets	that	have	finite	lives	using	either	the	straight-line	method	or,	if	reliably	determinable,	based	on	the	pattern	in	which	the economic	benefit	of	the	asset	is	expected	to	be	consumed	utilizing	expected	undiscounted	future	cash	flows.	Amortization	is	recorded	over	the	estimated	useful	lives ranging	from	4	to	30	years.	We	review	our	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.	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	the	sale	of	certain	intellectual	property	previously	acquired	from	Fischer,	to	Siemens	AG	in	July	2006,	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	in	the	accompanying	Consolidated	Statements	of	Operations	and	is	classified	as	part	of	the	Breast	Health	segment.

Subsequent	to	the	Cytyc	merger,	we	decided	to	discontinue	the	development	of	Cytyc's	Helica	product.	We	will	not	realize	any	future	cash	flows	from	this product.	Our	intangible	asset	valuation	for	Cytyc	included	approximately	$2.9	million	related	to	customer	relationships	for	Helica.	As	a	result	of	the	Helica	product discontinuation,	we	recorded	an	impairment	charge,	as	a	component	of	our	GYN	Surgical	segment,	of	$2.9	million	in	the	first	quarter	of	fiscal	2008.

# Goodwill

In	accordance	with	FASB	Statement	of	Financial	Accounting	Standard	No.	142	("SFAS	142"),	Goodwill	and	Other	Intangible	Assets,	we	test	goodwill	at	the reporting	unit	level	for	impairment	on	an	annual	basis	and	between	annual	tests	if	events	and	circumstances	indicate	it	is	more	likely	than	not	that	the	fair	value	of	a reporting	unit	is	less	than	its	carrying	value.	Events	that	would	indicate	impairment	and	trigger	an	interim	impairment	assessment	include,	but	are	not	limited	to,	a significant	adverse	change	in	legal	factors	or	business	climate	and	an	adverse	action	or	assessment	by	a	regulator.	Additionally,	current	economic	and	market	conditions may	also	require	an	interim	impairment	test	such	as	a	decline	in	an	entities	market	capitalization.

Consistent	with	prior	years,	we	conducted	our	annual	impairment	test	of	goodwill	for	certain	of	our	historical	reporting	units	(reporting	units	prior	to	the	Cytyc merger)	as	of	the	last	day	of	the	second	quarter	of	fiscal	2008.	In	performing	the	test,	we	utilize	the	two-step	approach	prescribed	under	SFAS	142.	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.	We	base	the	discount	rate	used	to	arrive	at	a	present	value	as	the	date	of	the	impairment	test	on	our weighted	average	cost	of	capital.	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.	To	date,	we	have	not	performed	the	second	step	of	the	impairment	test	as	part	of	our	review	because	the	fair	value	of	each	reporting	unit	exceeded	its respective	carrying	value.

In	the	fourth	quarter	of	fiscal	2008,	we	changed	the	measurement	date	from	the	last	day	of	our	second	quarter	to	the	first	day	of	our	fourth	quarter,	in	order	to provide	additional	time	to	quantify	the	fair	value	of	our	reporting	units	and	to	evaluate	the	results	of	the	impairment	testing.	This	change	did	not	delay,	accelerate	or avoid	an	impairment	charge.	This	change	did	not	have	an	effect	on	our	financial	performance	or	results	of	operations,	nor	was	there	any	impact	on	prior	period	financial statements	under	the	requirements	of	the	Financial	Accounting	Standard	Board	Statement	No.	154.	The	retrospective	application	as	required	under	SFAS	No.	154	was not	necessary	as	no	impairment	charges	had	been	recorded	in	any	previously	recorded	financial	statements	nor	did	the	change	in	measurement	date	cause	any impairments.

As	a	result	of	the	change	in	the	measurement	date	for	our	annual	goodwill	impairment	test	for	our	historical	reporting	units	from	the	last	day	of	the	second	quarter of	the	fiscal	year	to	the	first	day	of	the	fourth	quarter	of	the	fiscal	year,	we	have	evaluated,	in	accordance	with	paragraph	27	of	SFAS	142,	whether	the	detailed determination	of	fair	value	of	our	historical	reporting	units	as	of	March	29,	2008	can	be	carried	forward	to	the	first	day	of	our	fiscal	fourth	quarter	of	2009	or	if	a	new test	of	goodwill	impairment	is	required	to	be	performed	for	these	historical	reporting	units.	In	its	evaluation	we	noted	the	assets	and	liabilities	of	the	reporting	units	had not	changed	significantly,	there	was	sufficient	margin	between	the	carrying	amount	and	fair	value	determination	for	each	reporting	unit	and	no	events	or	circumstances related	to	these	reporting	units	would	suggest	that	a	current	fair	value	determination	of	reporting	units	would	result	in	a	valuation	lower	than	the	carrying	amount	of	the 41

reporting	units.	Based	on	this	evaluation	we	believe	we	sufficiently	meet	the	requirements	of	paragraph	27	of	SFAS	142	to	carry	forward	our	estimate	of	fair	value	for these	reporting	units.

We	conducted	our	annual	impairment	test	of	goodwill	for	our	new	reporting	units	as	a	result	of	our	acquisition	of	Cytyc	Corporation	as	of	the	first	day	of	the fourth	quarter	of	fiscal	2008.	In	performing	the	test,	we	utilized	the	two-step	approach	prescribed	under	SFAS	142.	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.	We	based	the	discount	rate	used	to	arrive	at	a	present	value	as	the	date	of	the impairment	test	on	our	weighted	average	cost	of	capital.	The	fair	value	of	each	reporting	unit	was	determined	to	be	in	excess	of	each	reporting	unit's	carrying	value	and as	a	result	the	second	step	of	the	impairment	test	was	not	required.

Subsequent	to	September	27,	2008,	we	have	experienced	a	decline	in	the	price	of	our	publicly-traded	common	stock	and	related	market	capitalization	such	that our	market	capitalization	has	declined	below	the	book	value	of	our	net	assets.	We	evaluated	this	decline	in	our	market	capitalization	subsequent	to	year-end	and	have concluded	that	it	was	not	an	indicator	of	an	impairment	that	existed	as	of	September	27,	2008.	We	will	continue	to	monitor	our	market	capitalization	compared	to	our book	value	of	net	assets	and	may	be	required	to	perform	an	interim	goodwill	impairment	test	in	our	first	quarter	of	fiscal	2009.

The	estimate	of	fair	value	requires	significant	judgment.	Any	loss	resulting	from	an	impairment	test	would	be	reflected	in	operating	(loss)	income	in	our Consolidated	Statements	of	Operations.	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

We	sponsor	defined	benefit	pension	plans	covering	the	employees	of	our	AEG	German	subsidiary.	On	September	29,	2006,	the	FASB	issued	SFAS	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	158,	we	used	a	prospective	approach	in	our	adoption	of	SFAS	158.	As	of	September	29,	2007,	we	recognized	the	unfunded	status	of	our	deferred benefit	pension	plan.	The	adoption	of	SFAS	158	did	not	impact	our	compliance	with	our	debt	covenants	under	our	credit	agreements,	cash	position	or	results	of operations.	As	of	September	27,	2008,	we	have	recorded	a	pension	liability,	based	upon	an	actuarial	valuation,	of	approximately	$0.3	million	as	a	component	of	accrued expenses	and	$7.0	as	a	component	of	other	long-term	liabilities	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	6.5%.	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	reasonably	assured.	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	Emerging	Issues	Task	Force ("EITF")	No.	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	rights	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	certain	of	our	products	contain	operating	and	application	software,	we	have	determined	that	except	for	our	products	obtained	with	the	acquisition	of	R2 and	the	newly	released	Dimensions	tomosynthesis/3-D	full	field	digital	mammography	product	("Dimensions"),	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	("EITF	03-05").

We	have	determined	that	the	provisions	of	SOP	97-2	apply	to	revenue	transactions	for	those	products	acquired	from	R2	Technology,	Inc.	and	the	Dimensions product.	SOP	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.	We	recognize	revenue	on	R2	and	Dimensions	product sales	upon	completion	of	installation,	at	which	time	the	only	remaining	undelivered	element	is	Post	Contract	Support	("PCS").

Upon	its	release	internationally,	we	completed	an	evaluation	of	the	software	component	of	our	Dimensions	product	in	accordance	with	SOP	97-2	and	EITF	03-05. We	noted	the	following	in	our	evaluation	of	the	software	component	of	our	new	Dimensions	product:

•	 Dimensions	will	be	offered	in	different	configurations	offering	different	levels	of	functionality	(2D	vs.	3D).	Customers	who	purchase	the	2D	configuration will	be	to	able	to	upgrade	the	product	to	a	3D	version	and	such	upgrade	will	solely	represent	a	software	upgrade	that	will	be	marketed	and	sold	separately. This	differentiation	from	our	existing	2D	digital	mammography	product	is	expected	to	be	highlighted	in	our	marketing	literature.

•	 As	part	of	the	initial	warranty	of	the	Dimensions	product,	customers	will	receive	not	only	bug	fixes	related	to	the	software	but	will	also	receive	any	updates and	enhancements	to	the	software	that	are	released.	Therefore,	we	concluded	that	this	represents	PCS	as	defined	in	SOP	97-2.

As	a	result,	we	have	determined	that	the	Dimensions	product	contains	software	that	is	more	than	incidental	to	the	product	as	a	whole	and	thus,	will	be	accounted for	under	SOP	97-2.	Therefore,	we	will	recognize	revenue	upon	installation	and	acceptance,	if	required,	and	will	defer	revenue	based	on	the	vendor-specific	objective evidence	of	fair	value	of	the	initial	bundled	PCS.	We	have	determined	that	vendor-specific	objective	evidence	of	fair	value	of	the	initial	bundled	PCS	exists	based	on	the establishment	of	the	price	for	which	this	element	will	be	sold	separately	by	management	having	the	relevant	authority	and	that	it	is	probable	that	this	price	will	not change	prior	to	when	this	service	is	sold	separately.	We	have	specified	the	renewal	rates	at	which	service	can	be	purchased	separately	upon	expiration	of	the	initial	PCS period	and	those	rates	have	been	consistent.

For	multi-element	arrangements	where	VSOE	of	fair	value	of	PCS	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.

As	a	result	of	the	merger	with	Cytyc,	we	now	sell	disposable	supplies	under	customer	usage	agreements.	Under	customer	usage	agreements,	we	install	certain equipment	(for	example,	a	ThinPrep	Processor	or	a	ThinPrep	Imaging	System)	at	customer	sites	and	customers	commit	to	purchasing	minimum	quantities	of	disposable supplies	at	a	stated	price	(generally	including	a	usage	fee	for	the	equipment)	over	a	defined	contract	term,	which	is	typically	between	three	and	five	years.	Revenue	is recognized	over	the	term	of	the	customer	usage	agreement	as	disposable	supplies	are	delivered.	Accordingly,	no	revenue	is	recognized	upon	delivery	of	the	equipment. As	a	result	of	the	merger	with	Cytyc,	we	also	rent	certain	other	equipment	to	customers.	Revenues	from	rental	agreements	are	recorded	over	the	terms	of	the	rental agreements.

# 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	$9.1	million,	$12.1	million	and	$9.0	million	in	fiscal 2008,	2007	and	2006,	respectively.	The	decrease	in	the	warranty	accrual	in	fiscal	2008	is	primarily	attributable	to	a	decrease	in	warranty	claim	activity	primarily	related to	our	digital	mammography	systems.	The	increase	in	the	warranty	accrual	in	fiscal	2007	is	primarily	attributable	to	the	increase	in	the	number	of	digital	mammography systems	sold.

# 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	binomial	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	the	following	estimated forfeiture	rates	for	stock	option	awards	in	determining	the	expense	recorded	in	our	Consolidated	Statements	of	Operations:	a	range	from	6.8%	to	9.0%	in	fiscal	2008; 9.4%	in	fiscal	2007;	and	a	range	between	9.4%	and	10.6%	in	fiscal	2006.	The	lower	forfeiture	rate	in	fiscal	2008	is	due	to	a	change	in	the	methodology	we	are	using	to calculate	this	rate	as	a	result	of	the	merger	with	Cytyc.	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	27,	2008	we	recorded	$25.7	million	of	stock-based	compensation	expense	for	employee	equity	awards.	The	stock-based compensation	expense	for	employee	equity	awards	included	$2.3	million	in	cost	of	revenues,	$2.8	million	in	research	and	development,	$3.5	million	in	selling	and marketing,	$15.1	million	in	general	and	administrative	expense	and	$1.9	million	in	restructuring	for	the	year	ended	September	27,	2008.	The	compensation	expense reduced	basic	and	diluted	earnings	per	share	by	$0.07.	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	$0.7	million	in	cost	of	revenues,	$0.8	million	in	research	and development,	$0.6	million	in	selling	and	marketing	and	$4.0	million	in	general	and	administrative	expense	for	the	year	ended	September	29,	2007.	The	compensation expense	reduced	basic	and	diluted	earnings	per	share	each	by	$0.04.	As	of	September	27,	2008,	there	was	$30.4	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	3.53	years.	As	of	September	27,	2008,	there	was	$29.1 million	of	unrecognized	compensation	expense	related	to	non-vested	restricted	stock	units	that	we	expect	to	recognize	over	a	weighted	average	period	of	2.11	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	2008,	we	recorded	approximately	$62.7	million	of	excess	tax	benefit	associated	with	deductions	generated	by	stock	options	exercised	in	fiscal	2008.

# Adoption	of	FASB	Interpretation	No.	48

On	September	30,	2007,	we	adopted	Financial	Accounting	Standards	Board	("FASB")	Interpretation	("FIN")	No.	48,	Accounting	for	Uncertainty	in	Income	Taxes —an	interpretation	of	FASB	Statement	No.	109,	which	clarifies	the	accounting	for	uncertainty	in	income	taxes	recognized	in	an	enterprise's	financial	statements	in accordance	with	FASB	Statement	No.	109,	Accounting	for	Income	Taxes.	FIN	No.	48	prescribes	a	recognition	threshold	and	measurement	criteria	for	the	financial statement	recognition	and	measurement	of	a	tax	position	taken	or	expected	to	be	taken	in	a	tax	return.	FIN	No.	48	also	provides	guidance	on	derecognition, classification,

interest	and	penalties,	accounting	in	interim	periods,	disclosure,	and	transition	and	defines	the	criteria	that	must	be	met	for	the	benefits	of	a	tax	position	to	be	recognized. As	a	result	of	our	adoption	of	FIN	No.	48,	we	recorded	the	cumulative	effect	of	the	change	in	accounting	principle	of	$0.5	million	as	a	decrease	to	opening	retained earnings.

We	had	gross	unrecognized	tax	benefits,	including	interest,	of	approximately	$20.2	million	as	of	September	27,	2008	and	$6.3	million	as	of	September	30,	2007. At	September	27,	2008,	$5.6	million	represents	the	amount	of	unrecognized	tax	benefits	that,	if	recognized,	would	result	in	a	reduction	of	the	Company's	effective	tax rate.	However,	upon	the	adoption	of	SFAS	No.	141	(Revised	2007)	("SFAS	141(R)"),	Business	Combinations,	changes	in	unrecognized	tax	benefits	following	an acquisition	generally	will	affect	income	tax	expense,	including	any	changes	associated	with	acquisitions	that	occurred	prior	to	the	effective	date	of	SFAS	141(R).	The increase	in	unrecognized	tax	benefits	at	September	27,	2008	is	primarily	due	to	the	merger	with	Cytyc.	In	the	next	twelve	months	it	is	reasonably	possible	that	the Company	will	reduce	the	balance	of	their	unrecognized	tax	benefits	by	$1.2	million	due	to	expiration	of	statute	of	limitations	and	settlements	with	taxing	authorities,	of which	$1.1	million	will	reduce	goodwill	and	$0.1	million	will	reduce	the	Company's	effective	tax	rate.

Our	policy	is	to	recognize	accrued	interest	and	penalties	related	to	unrecognized	tax	benefits	and	income	tax	liabilities,	when	applicable,	as	part	of	income	tax expense	in	our	Consolidated	Statements	of	Operations.	As	of	September	27,	2008	and	September	30,	2007,	accrued	interest	was	approximately	$0.7	million	and	$0.1 million,	net	of	federal	benefit.	As	of	September	27,	2008,	no	penalties	have	been	accrued.

We	are	subject	to	United	States	federal	income	tax,	as	well	as	income	tax	of	multiple	state	and	foreign	jurisdictions.	The	current	tax	returns	are	open	for	audit through	fiscal	2012.	We	currently	have	a	tax	holiday	in	Costa	Rica	that	is	scheduled	to	expire	in	2015.

# 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.	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	developer,	manufacturer	and	supplier	of	medical	imaging	systems	and	diagnostic	and	surgical	products	focused	on	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	complementary	products	covering	a	range	of	cancers	and	women's health	applications,	including	cervical	cancer	screening,	prenatal	diagnostics	and	partial	breast	radiation	therapy.	On	July	24,	2008	we	completed	our	acquisition	of	Third Wave,	a	company	that	develops	and	markets	molecular	diagnostic	reagents	for	a	wide	variety	of	DNA	and	RNA	analysis	applications	based	on	its	proprietary	Invader chemistry.

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.	Our	combination	with	Cytyc	enabled	us	to	benefit	from	Cytyc's strengths	in	the	fields	of	obstetrics,	gynecology,	radiation	oncology	and	minimally	invasive	surgery.	Our

acquisition	of	Third	Wave	enabled	us	to	further	expand	our	offerings	into	the	clinical	molecular	diagnostics	market	utilizing	Third	Wave's	Invader	chemistry	and	its HPV	test	currently	awaiting	FDA	approval.	The	Dimensions	product	received	CE	mark	approval	in	Europe	in	fiscal	2008.

Our	breast	health	products	include	a	broad	portfolio	of	breast	imaging	and	related	products	and	accessories,	including	digital	and	film-based	mammography systems,	computer-aided	detection	("CAD"),	breast	biopsy	guidance	systems,	minimally	invasive	breast	biopsy	and	tissue	extraction	devices,	and	breast	brachytherapy products.

Our	diagnostic	products	include	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.	Through	our	recent	acquisition	of	Third	Wave,	we have	added	in	vitro	diagnostic	devices	using	Third	Wave's	Invader	technology	allowing	researchers	and	clinical	laboratories	to	create	assays	to	perform	hepatitis	C	virus genotyping,	inherited	disorders	testing	and	testing	for	other	mutations	associated	with	genetic	predispositions	and	other	diseases	such	as	Cystic	Fibrosis.	We	have	also submitted	applications	to	the	FDA	for	pre-market	approval	of	two	HPV	tests.

Our	GYN	surgical	products	are	made	up	of	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,	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	we	are	in	the	process	of	seeking	a	pre-market	approval	from	the	FDA.

Our	skeletal	health	products	primarily	consist	of	dual-energy	X-ray	bone	densitometry	systems,	an	ultrasound-based	osteoporosis	assessment	product,	our Fluoroscan	mini	C-arm	imaging	products	and	our	Esaote	line	of	extremity	Magnetic	Resonance	Imaging	("MRI")	systems	which	are	manufactured	by	an	original equipment	manufacturer.

On	April	2,	2008,	we	effected	a	two-for-one	stock	split	in	the	form	of	a	stock	dividend.	The	stock	split	has	been	retroactively	reflected	in	the	Management Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operation	section	of	this	report.

# RECENT	ECONOMIC	DEVELOPMENTS

Market	acceptance	of	our	medical	products	in	the	United	States	and	other	countries	is	dependent	upon	the	medical	equipment	purchasing	and	procurement practices	of	our	customers,	patient	demand	for	our	products	and	procedures	and	the	reimbursement	of	patient's	medical	expenses	by	government	healthcare	programs, private	insurers	or	other	healthcare	payors.	The	current	uncertainty	surrounding	world	financial	markets	may	result	in	the	purchasers	of	medical	equipment	decreasing their	medical	equipment	purchasing	and	procurement	activities.	Additionally,	constrictions	in	world	credit	markets	may	result	in	our	customers	having	increased difficulty	securing	the	financing	necessary	to	purchase	our	products	which	may	result	in	decreased	sales.	Widespread	economic	uncertainty	may	also	result	in	cost- conscious	consumers	making	fewer	elective	trips	to	their	physicians	and	specialists	which	could	result	in	reduced	demand	for	our	products	and	procedures.	Furthermore, governments	around	the	world	facing	tightening	budgets	could	move	to	further	reduce	the	reimbursement	rates	offered	by	government	sponsored	healthcare	programs. If	the	current	economic	conditions	results	in	the	occurrence	of	any	of	these	events,	our	business	and	prospects	may	be	adversely	affected.

Recently	the	value	of	the	U.S.	dollar	has	strengthened	against	the	value	of	many	foreign	currencies.	A	majority	of	our	sales	to	international	dealers	are denominated	in	U.S.	dollars.	The	strengthening	of	the	U.S.	dollar	makes	these	products	less	competitive	in	international	markets	and	may	impact	sales	and	margins	over time.	In	addition,	we	have	international	sales,	principally	in	our	Diagnostic	segment,	that	are	denominated	in	foreign	currencies.	The	value	of	these	sales	will	decrease	as the	U.S.	dollar	strengthens.	We	believe	that	the	strengthening	of	the	U.S.	dollar,	if	it	persists,	may	have	a	material	adverse	effect	on	our	international	sales	and	margins.

# ACQUISITIONS

Fiscal	2008	Acquisitions:

# Third	Wave	Technologies,	Inc.

On	July	24,	2008	we	completed	our	acquisition	of	Third	Wave	Technologies,	Inc.	("Third	Wave")	pursuant	to	a	definitive	agreement	dated	June	8,	2008.	We	paid $11.25	per	share	of	Third	Wave,	for	an	estimated	aggregate	purchase	price	(subject	to	adjustment)	of	$591.2	million,	including	approximately	$8.1	million	for	the estimated	fair	value	of	fully	vested	stock-based	awards	and	approximately	$7.7	million	in	acquisition-related	expenses.	We	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.

We	have	concluded	that	the	acquisition	of	Third	Wave	does	not	represent	a	material	business	combination	and	therefore	no	pro	forma	financial	information	has been	provided	herein.	Our	results	of	operations	include	the	results	of	Third	Wave	since	the	acquisition	date,	as	a	component	of	our	Diagnostics	reporting	segment.

Third	Wave,	located	in	Madison,	Wisconsin,	develops	and	markets	molecular	diagnostic	reagents	for	a	wide	variety	of	DNA	and	RNA	analysis	applications	based on	its	proprietary	Invader	chemistry.	Third	Wave's	current	clinical	diagnostic	offerings	consist	of	products	for	conditions	such	as	Cystic	Fibrosis,	Hepatitis	C, cardiovascular	risk	and	other	diseases.	Third	Wave	recently	submitted	to	the	U.S.	Food	and	Drug	Administration	("FDA")	pre-market	approval	("PMA")	applications for	two	human	papillomavirus,	or	HPV,	tests.

Our	acquisition	of	Third	Wave	has	been	accounted	for	using	the	purchase	method	of	accounting.	This	means	that	the	total	purchase	price	has	been	allocated	to	the assets	acquired	and	liabilities	assumed	from	Third	Wave	based	on	our	estimate	of	their	fair	values	as	of	the	date	of	the	acquisition,	and	any	excess	of	purchase	price	over those	fair	values	has	been	recorded	as	goodwill.	Our	reported	financial	condition	and	results	of	operations	issued	for	the	period	ending	September	27,	2008	reflect	the fair	value	of	acquired	tangible	and	intangible	assets	and	liabilities	assumed,	and	our	results	of	operations	also	reflect	purchase	accounting	adjustments,	such	as	a significant	charge	for	acquired	in-process	research	and	development,	increased	amortization	and	other	expense	for	the	acquired	tangible	and	intangible	assets,	as	well	as the	interest	on	the	funds	we	borrowed	to	complete	the	acquisition.

The	allocation	of	the	purchase	price	is	based	upon	preliminary	estimates	of	the	fair	value	of	assets	acquired	and	liabilities	assumed	as	of	July	24,	2008.	We	are	in the	process	of	gathering	information	to	finalize	our	valuation	of	certain	assets	and	liabilities.	The	purchase	price	allocation	is	preliminary	and	will	be	finalized	once	we have	all	necessary	information	to	complete	our	estimate,	but	generally	no	later	than	one	year	from	the	date	of	acquisition.	The	purchase	price	allocation	is	not	expected to	have	a	material	impact	on	our	financial	position	or	results	of	operations.	The	purchase	price	in	excess	of	net	tangible	assets	acquired	was	allocated	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	was	allocated	to	goodwill.

As	part	of	the	preliminary	purchase	price	allocation,	approximately	$195.2	million	of	the	purchase	price	has	been	allocated	to	acquired	in-process	research	and development	projects.	The	amounts	allocated	to	acquired	in-process	research	and	development	represents	programs	for	which	some	research	and	development	has	been completed,	but	technological	feasibility	has	not	been	determined	or	FDA	approval	is	pending.	The	amount	allocated	to	acquired	in-process	research	and	development related	to	the	Third	Wave	acquisition	represents	the	estimated	fair	value	based	on	risk-adjusted	cash	flows	related	to	these	projects	using	a	discount	rate	of	20%.	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	was	expensed	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	transaction	as	a	whole.

The	most	significant	acquired	in-process	technology	related	to	the	HPV	Cervista	HR,	for	which	we	have	estimated	a	value	of	approximately	$151.2	million.	We currently	sell	HPV	reagents	that	detect	certain	high	risk	HPV	types	as	Analyte	Specific	Reagents	("ASRs").	In	2006,	Third	Wave	began	clinical	trials	for	PMA submissions	to	the	FDA	for	Cervista	HR.	We	submitted	the	PMA	in	April	2008	and	we	are	anticipating	FDA	approval	in	the	first	half	of	calendar	2009.	Subsequent	to receiving	FDA	approval,	we	expect	to	discontinue	selling	the	HPV	ASRs	and	only	sell	HPV	In	Vitro	Diagnostics	("IVDs").	As	such,	the	HPV	in	process	research	and development	relates	only	to	the	HPV	IVDs	and	the	HPV	ASRs	were	valued	as	Completed	Technology.	The	estimated	cost	to	complete	this	technology	is	approximately $19.3	million.

The	estimated	cost	to	complete	Third	Wave's	remaining	in-process	research	and	development	projects	in	the	aggregate	is	$9.8	million.

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

As	noted	below,	on	July	17,	2008,	we	entered	into	an	amended	and	restated	credit	agreement	with	Goldman	Sachs	Credit	Partners	L.P.	and	certain	other	lenders and	borrowed	$540.0	million	under	that	facility	to	finance	our	acquisition	of	Third	Wave.

# Cytyc	Corporation

On	October	22,	2007,	we	completed	our	business	combination	with	Cytyc,	pursuant	to	which	Cytyc	became	our	wholly-owned	subsidiary.	Under	the	terms	of	the merger	agreement	for	that	transaction,	Cytyc	shareholders	received	1.04	shares	of	our	common	stock	(after	adjusting	for	the	stock	split	effected	on	April	2,	2008)	and $16.50	in	cash	for	each	share	of	Cytyc	common	stock	held	by	them.	We	estimate	the	aggregate	consideration	we	paid	for	Cytyc,	including	liabilities	that	we	assumed	in connection	with	that	transaction,	to	be	approximately	$6.2	billion.	This	estimate	includes:

•	 merger	consideration	paid	to	the	former	Cytyc	stockholders	of	$5.8	billion,	consisting	of	approximately	$2.1	billion	in	cash	and	approximately	132.0	million shares	of	our	common	stock	with	an	estimated	fair	value	of	approximately	$3.7	billion;

•	 16.5	million	of	fully	vested	stock	options	issued	upon	conversion	of	Cytyc	stock	options	with	an	estimated	fair	value	of	approximately	$241.4	million;

•the	assumption	of	obligations	of	Cytyc	under	its	2.25%	Senior	Convertible	Notes	due	2024	with	a	principal	amount	outstanding	as	of	October	22,	2007	of approximately	$73.0	million	and	an	estimated	fair	value	of	approximately	$125.0	million;	and

•approximately	$24.2	million	of	direct	acquisition	costs.

In	connection	with	the	merger,	we	entered	into	a	credit	agreement	relating	to	a	senior	secured	credit	facility	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.	In	December	2007,	we	refinanced	a	substantial	portion	of	this	credit	facility	through	the issuance	of	2.00%	Convertible	Senior	Notes	due	2037	in	the	principal	amount	of	$1.725	billion.	On	July	17,	2008,	after	having	paid	off	all	outstanding	term	loans	under the	credit	facility,	we	amended	and	restated	the	credit	facility	to	finance	our	acquisition	of	Third	Wave.

Our	business	combination	with	Cytyc	was	accounted	for	using	the	purchase	method	of	accounting.	In	accordance	with	SFAS	141,	we	were	considered	to	be	the acquirer	of	Cytyc	for	accounting	purposes.	This	means	that	the	total	purchase	price	is	allocated	to	the	assets	acquired	and	liabilities	assumed	from	Cytyc	based	on	our 49

estimate	of	their	fair	values	as	of	the	date	of	the	completion	of	the	business	combination,	and	any	excess	of	purchase	price	over	those	fair	values	is	recorded	as	goodwill. Our	reported	financial	condition	and	results	of	operations	issued	for	fiscal	2008	reflect	the	fair	value	of	acquired	tangible	and	intangible	assets	and	liabilities	assumed and	results	of	operations	after	completion	of	the	business	combination.	Our	results	of	operations	also	reflect	purchase	accounting	adjustments,	such	as	the	write-off	of acquired	research	and	development,	increased	amortization	and	other	expense	for	the	acquired	tangible	and	intangible	assets	of	Cytyc,	and	the	interest	on	the	funds	we borrowed	to	complete	the	business	combination.

We	have	allocated	the	purchase	price	for	our	business	combination	with	Cytyc	to	assets	acquired	and	liabilities	assumed	based	on	our	estimate	of	their	estimated fair	values.	We	then	allocated	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	was	allocated	to	goodwill.

# Identifiable	Intangible	Assets

As	part	of	the	purchase	price	allocation,	we	determined	that	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.

We	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,	and	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,	we	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.	We	expect	to amortize	these	intangible	assets	over	their	estimated	useful	lives	using	a	method	that	is	based	on	estimated	future	cash	flows	as	we	believe	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	purchase	price	allocation	for	our	business	combination	with	Cytyc,	we	allocated	approximately	$370	million	of	the	purchase	price	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	merger.	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	is	expensed	at	the	time	of	the	business	combination.	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	transaction	as	a	whole.

The	fair	value	assigned	to	acquired	in-process	research	and	development	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	acquired	in-process	research	and	development	of	Cytyc	related	to	the	following	research	and	development	projects:	Adiana	TCS	system	and	expanded labeling	of	the	NovaSure	System,	Gestiva,	the	ThinPrep	Imaging	System,	the	ThinPrep	Processor	and	Helica.

The	most	significant	acquired	in-process	technology	relates	to	the	Adiana	Complete	TransCervical	Sterilization	System	for	which	we	have	estimated	a	value	of approximately	$220.0	million.	The	system,	currently	under	review	by	the	FDA,	is	an	incisionless	trans-cervical	permanent	sterilization	device	intended	to	be	used	during an	office	or	hospital	based	procedure.	It	consists	of	three	different	parts:	a	disposable	applicator,	an	implantable	polymer	matrix	and	a	radio	frequency	controller.	During January	2008,	the	FDA	requested	an	additional	year	of	clinical	trial	data	for	the	product,	which	we	have	since	completed.	We	anticipate	additional	costs	of approximately	$0.6	million	and	a	delay	in	the	commercial	release	of	this	product	until	at	least	the	second	quarter	of	fiscal	2009.	However,	we	do	not	believe	this	delay will	have	a	material	adverse	impact	on	our	results	of	operations.

On	January	16,	2008,	we	entered	into	a	definitive	agreement	to	sell	our	rights	to	Gestiva,	a	drug	being	developed	to	be	used	in	the	prevention	of	preterm	birth	in pregnant	women	with	a	history	of	spontaneous	preterm	birth,	to	K-V	Pharmaceutical	Company.	The	purchase	price	is	to	be	completed	upon	final	approval	by	the	FDA	of a	Gestiva	New	Drug	Application	("NDA")	on	or	before	February	19,	2010	and	the	production	of	a	quantity	of	Gestiva	suitable	to	enable	the	commercial	launch	of	the product.	The	purchase	price	to	be	paid	to	us	as	a	result	of	the	transaction	is	$82.0	million	in	cash,	$7.5	million	of	which	was	paid	on	February	21,	2008,	$2.0	million	of which	was	paid	on	May	22,	2008	and	the	balance	of	which	is	payable	upon	the	satisfaction	of	the	above	conditions.	We	have	agreed	to	continue	our	efforts	to	obtain FDA	approval	of	the	NDA	for	Gestiva	as	part	of	this	arrangement,	for	which	we	will	be	reimbursed	by	K-V	Pharmaceutical.	All	costs	incurred	in	these	efforts	will	be reimbursed	by	K-V	Pharmaceutical	and	will	be	recorded	as	a	credit	against	research	and	development	expenses.	These	costs	were	immaterial	during	fiscal	2008.	We have	recorded	the	$9.5	million	as	a	deferred	gain	within	current	liabilities	of	our	Consolidated	Balance	Sheet.	The	gain	will	be	recognized	upon	final	FDA	approval	of the	Gestiva	NDA.	We	have	allocated	$53.4	million	to	acquired	in-process	research	for	this	product	as	part	of	the	initial	purchase	price	allocation.	We	cannot	assure	that we	will	be	able	to	obtain	the	requisite	FDA	approval,	that	the	transaction	will	be	completed	or	that	we	will	receive	the	balance	of	the	purchase	price.	Moreover,	if	K-V Pharmaceutical	terminates	the	agreement	as	a	result	of	our	breach	of	a	material	representation,	warranty,	covenant	or	agreement,	we	will	be	required	to	return	the	funds previously	received	by	us	as	well	as	expenses	reimbursed	to	us	by	K-V.	In	fiscal	2008,	we	recognized	no	revenue	for	the	receipt	of	the	initial	installment	of	the	purchase price.	Rather	such	payments	have	been	included	in	deferred	revenue	and	will	not	be	recognized	as	revenue	unless	and	until	the	transaction	is	completed.

Subsequent	to	the	Cytyc	merger,	we	decided	to	discontinue	the	development	of	Cytyc's	Helica	Thermal	Coagulator	System	product.	We	will	not	incur	any	further costs	or	realize	any	future	cash	flows	from	this	product.	We	will	not	realize	any	future	cash	flows	from	this	product.	Our	intangible	asset	valuation	for	Cytyc	included approximately	$2.9	million	related	to	customer	relationships	for	Helica.	As	a	result	of	the	Helica	product	discontinuation,	we	recorded	an	impairment	charge	of	$2.9 million	during	the	first	quarter	of	fiscal	2008.

The	other	in-process	research	and	development	projects	we	acquired	in	our	business	combination	with	Cytyc	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	had	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	was	expected	to	be approximately	$5.7	million	as	of	September	27,	2008.

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	PMA	or NDA	applications	for	products	or	510(k)	notification.	Given	the	uncertainties	inherent	with	product	development	and	introduction,	we	cannot	provide	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	on	a timely	basis	or	within	budget	could	harm	our	results	of	operations	and	financial	condition.

Our	purchase	price	allocation	for	Cytyc	has	resulted	in	goodwill	of	approximately	$3.8	billion.	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	our complementary	products	and	technologies	will	create	a	leading	women's	healthcare	company	with	an	enhanced	presence	in	hospitals,	private	practices	and	healthcare organizations.	We	also	expect	to	realize	substantial	synergies	through	the	use	of	Cytyc's	OB/GYN	and	breast	surgeon	sales	channel	to	cross-sell	our	existing	and	future products.	Our	business	combination	with	Cytyc	provides	us	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.

# Fiscal	2007	Acquisition:

# 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	our	consolidated	financial	statements	from	the	date	of	acquisition	as	part	of	our	Breast	Health	business	segment.	We have	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,	we	only	acquired	BioLucent's	MammoPad	cushion	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.

The	aggregate	purchase	price	for	BioLucent	was	approximately	$73.2	million,	consisting	of	approximately	$6.8	million	in	cash	and	2,314,000	shares	of	Hologic Common	Stock	valued	at	approximately	$63.2	million,	debt	assumed	and	paid	off	of	approximately	$1.6	million	and	approximately	$1.6	million	for	acquisition	related fees	and	expenses.	We	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	$15.0	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	an	Acquired	Enterprise in	a	Purchase	Business	Combination,	and	concluded	that	this	contingent	consideration	will	represent	additional	purchase	price.	As	a	result,	goodwill	will	be	increased	by the	amount	of	the	additional	consideration,	if	any,	when	it	becomes	due	and	payable.	As	of	September	27,	2008,	we	have	not	recorded	any	amounts	for	these	potential earn-outs.

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	29,	2007.	The	allocation	of	the	purchase	price	is	based	upon	estimates	of	the	fair	value	of	assets	acquired	and	liabilities	assumed	as	of	September	18,	2007.

# 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 $32.0	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	$5.0	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	("AEG")	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	allowed	us	to	take	control	over	this	critical	step	in	our detector	manufacturing	process.	The	results	of	AEG	operations	have	been	included	in	our	consolidated	financial	statements	since	the	date	of	acquisition	and	are	a component	of	our	other	business	segment.

The	aggregate	purchase	price	for	AEG	was	approximately	$31.3	million	consisting	of	$24.1	million	and	220,000	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	had	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,	trade	names,	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	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	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	$0.6	million	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").	R2	develops	and	sells	CAD	technology	and	products,	an	innovative	technology that	assists	radiologists	in	the	early	detection	of	breast	cancer.	The	aggregate	purchase	price	for	R2	of	approximately	$220.6	million	consisted	of	8.8	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	$0.8	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	and	a	loss	related to	the	abandonment	of	certain	lease	space	under	this	plan.	All	amounts	related	to	these	liabilities	had	been	paid	as	of	September	29,	2007.	We	reduced	goodwill	related to	the	R2	acquisition	in	the	amount	of	$2.3	million	and	$0.4	million	during	the	years	ended	September	29,	2007	and	2008,	respectively.	The	reduction	in	2007	was primarily	related	to	a	change	in	the	preliminary	valuation	of	certain	assets	and	liabilities	acquired	based	on	information	received	during	the	year.	The	decrease	in goodwill	during	2008	was	related	to	the	reduction	of	an	income	tax	liability.	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	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 relationships,	trade	names,	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").	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	purchase	price	for	Suros was	approximately	$248.1	million	paid	in	a	combination	of	cash	and	4.6	million	shares	of	our	common	stock.	The	common	stock	value	of	approximately	$106.5	million, cash	paid	of	$139.0	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.	Goodwill	increased	by	$24.5	million	during	fiscal	2008	as	a	result	of	the	second	and	final	earn-out	related	to	Suros'	incremental	revenue	growth. In	addition	to	the	earn-out	discussed	above,	we	decreased	goodwill	in	the	amount	of	$1.3	million	during	fiscal	2008	related	to	the	reduction	of	an	income	tax	liability.

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,	trade	names,	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	we	continue	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.	We	have	continued	to	work	on	these	projects	and	they are	substantially	complete	at	September	27,	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 Operations.	All	dollar	amounts	in	tables	are	presented	in	thousands.

|  | September	27,<br>2008 | September	29,<br>2007 | September	30,<br>2006 |
| :--- | :--- | :--- | :--- |
| Revenues: |  |  |  |
| Product\tsales | 89.7% | 85.2% | 83.9% |
| Service\tand\tother\trevenues | 10.3 | 14.8 | 16.1 |
|  | 100.0 | 100.0 | 100.0 |
| Costs\tand\texpenses: |  |  |  |
| Cost\tof\tproduct\tsales | 32.0 | 36.2 | 40.7 |
| Cost\tof\tproduct\tsales—amortization\tof\tintangible\tassets | 5.7 | 1.5 | 1.1 |
| Cost\tof\tservice\tand\tother\trevenues | 9.0 | 15.5 | 16.4 |
| Research\tand\tdevelopment | 4.9 | 6.0 | 6.1 |
| Selling\tand\tmarketing | 15.6 | 11.6 | 12.1 |
| General\tand\tadministrative | 8.8 | 8.4 | 9.1 |
| Amortization\tof\tacquired\tintangible\tassets | 1.5 | 0.8 | 0.4 |
| Restructuring | 0.4 | — | — |
| Impairment\tof\tacquired\tintangible\tassets | 0.2 | — | — |
| Net\tgain\ton\tsale\tof\tintellectual\tproperty | — | — | (1.1) |
| Acquired\tin-process\tresearch\tand\tdevelopment | 33.7 | — | 4.3 |
|  | 111.8 | 80.0 | 89.1 |
| (Loss)\tincome\tfrom\toperations | (11.8) | 20.0 | 10.9 |
| Interest\tincome | 0.3 | 0.3 | 0.9 |
| Interest\texpense | (5.1) | (0.3) | (0.3) |
| Other\t(expense)\tincome,\tnet | (0.1) | 0.1 | 0.0 |
| (Loss)\tincome\tbefore\tincome\ttaxes | (16.7) | 20.1 | 11.5 |
| Provision\tfor\tincome\ttaxes | 6.3 | 7.3 | 5.6 |
| Net\t(loss)\tincome | (23.0)% | 12.8% | 5.9% |

# Fiscal	Year	Ended	September	27,	2008	Compared	to	Fiscal	Year	Ended	September	29,	2007

# Product	Sales.

|  |  |  | Years	Ended |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | September\t27,\t2008 | September\t27,\t2008 | September\t29,\t2007 | September\t29,\t2007 | Change | Change |
|  | Amount | %\tof\tTotal\nRevenue | Amount | %\tof\tTotal\nRevenue | Amount | % |
| Product\tSales |  |  |  |  |  |  |
| Breast\tHealth | $731,267 | 44% | $559,092 | 76% | $172,175 | 31% |
| Diagnostics | 474,633 | 28% | — | —\t\t% | \t 474,633 | N/A |
| GYN\tSurgical | 219,305 | 13% | — | —\t\t% | \t 219,305 | N/A |
| Skeletal\tHealth | 77,242 | 5% | 69,762 | 9% | 7,480 | 11% |
|  | $1,502,447 | 90% | $628,854 | 85% | $873,593 | 139% |

In	fiscal	2008	our	product	sales	increased	139%	compared	to	fiscal	2007,	primarily	due	to	the	revenues	from	the	addition	of	the	Diagnostics	segment,	of approximately	$474.6	million,	and	the	GYN	Surgical	segment,	of

approximately	$219.3	million,	that	we	acquired	in	connection	with	our	business	combination	with	Cytyc,	and	an	increase	in	revenues	from	our	Breast	Health	products	of approximately	$172.2	million.

Breast	Health	product	sales	increased	31%	in	fiscal	2008	compared	to	fiscal	2007,	primarily	due	to	a	$97.0	million	increase	in	worldwide	digital	mammography system	sales,	the	addition	of	$33.9	million	of	product	sales	of	the	MammoSite	Radiation	Therapy	System,	a	$23.6	million	increase	in	breast	biopsy	device	sales	from Suros	and	an	increase	of	$21.5	million	in	product	sales	of	the	MammoPad	breast	cushion.	Partially	offsetting	these	increases	was	a	decrease	of	$6.4	million	in	digital array	sales	to	an	OEM	as	we	phase	out	of	selling	these	arrays	to	third	parties.	The	MammoSite	system	was	acquired	in	connection	with	our	business	combination	with Cytyc	in	October	2007	and	the	MammoPad	breast	cushion	was	acquired	in	connection	with	our	BioLucent	acquisition	in	September	2007.	The	increase	in	our	digital mammography	product	sales	was	primarily	attributable	to	an	increase	in	the	number	of	Selenia	systems	and	related	components	sold,	including	our	R2	CAD	software.	In fiscal	2008	we	sold	1,678	digital	mammography	systems	compared	to	1,189	systems	in	fiscal	2007.	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.	We	expect	the growth	in	the	sales	of	these	systems	to	slow	as	the	market	for	digital	mammography	matures.

Diagnostics	product	sales	were	$474.6	million	in	fiscal	2008,	due	to	the	inclusion	of	Cytyc	results	for	49	of	the	52	weeks	in	the	current	year	as	well	as	9	weeks	of Third	Wave	revenues	of	approximately	$5.9	million.	Cytyc	Diagnostic	sales	include	our	ThinPrep	and	FullTerm	products.

GYN	Surgical	product	sales	were	$219.3	million	in	fiscal	2008,	due	to	the	inclusion	of	Cytyc	results	for	49	of	the	52	weeks	in	the	current	year.	These	sales	include our	NovaSure	system.

Skeletal	Health	product	sales	increased	11%	in	fiscal	2008	compared	to	fiscal	2007,	primarily	due	to	a	$10.8	million	increase	in	mini	C-arm	sales	worldwide, partially	offset	by	a	$2.0	million	decrease	in	extremity	MRI	sales	and	a	$1.2	million	decrease	in	bone	densitometry	product	sales.	The	increase	in	mini	C-arm	sales	was primarily	due	to	an	increase	in	the	number	of	units	sold	and,	to	a	lesser	extent,	an	increase	in	the	average	selling	prices	related	to	the	commercialization	of	a	new	and enhanced	product	version.	The	decrease	in	extremity	MRI	sales	was	due	to	a	decrease	in	the	number	of	systems	sold.	The	decrease	in	bone	densitometry	sales	was primarily	due	to	a	decrease	in	the	number	of	used	bone	densitometry	systems	and	upgrades	sold	and	a	decrease	in	the	average	selling	prices	of	our	bone	densitometry systems	in	the	United	States,	partially	offset	by	an	increase	in	the	number	of	bone	densitometry	systems	sold	internationally.	We	believe	the	decrease	in	our	domestic osteoporosis	assessment	average	selling	prices	reflected	a	decline	in	market	conditions	due	in	part	to	a	reduction	in	reimbursement	for	osteoporosis	assessment	exams.

In	fiscal	2008,	approximately	80%	of	product	sales	were	generated	in	the	United	States,	12%	in	Europe,	4%	in	Asia,	and	4%	in	other	international	markets.	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.	The	increase	in the	percentage	of	product	sales	generated	in	the	United	States	in	fiscal	2008	is	primarily	due	to	the	additional	product	sales	from	Cytyc,	which	had	a	higher	percentage	of its	product	sales	from	the	United	States	than	our	historical	businesses.

#       Service	and	Other	Revenues.

Service	and	other	revenues	is	primarily	comprised	of	revenue	generated	from	our	field	service	organization	to	provide	ongoing	service,	installation	and	repair	of our	products.	Service	and	other	revenues	increased	57%	in	fiscal	2008	compared	to	fiscal	2007.	This	increase	was	primarily	due	to	an	increase	in	service	and	other revenues	of	$49.8	million	in	our	Breast	Health	segment,	primarily	due	to	an	increase	in	service	contract	revenues,	and	the	inclusion	of	service	and	other	revenues	of $10.3	million	from	the	Diagnostics	segment	as	a	result	of	the	inclusion	of	Cytyc	results	for	49	of	the	52	weeks	in	fiscal	2008.	We	believe	that	the	increase	in	our	Breast Health	service	and	other	revenues	reflects	the	continued	growth	in	our	installed	base	of	systems	and	detectors.

The	cost	of	product	sales	increased	100%	in	fiscal	2008	compared	to	fiscal	2007	primarily	due	to	the	addition	of	$196.0	million	of	cost	of	product	sales	from	the Cytyc	products	included	in	our	results	since	October	22,	2007	and,	to	a	lesser	extent,	increased	product	sales	of	our	historical	products	discussed	above.	Included	in	the additional	Cytyc	cost	of	product	sales	is	approximately	$42.3	million	of	additional	costs	related	to	sales	of	acquired	Cytyc	inventory	that	was	written	up	to	fair	value	for purchase	accounting	purposes	as	of	the	date	of	acquisition.

The	cost	of	product	sales	as	a	percentage	of	product	revenue	in	fiscal	2008	was	36%	as	compared	to	43%	in	the	prior	year.	These	costs	as	a	percentage	of	product sales	decreased	primarily	due	to	the	higher	gross	margins	earned	on	Cytyc	product	sales	compared	to	our	historical	products,	partially	offset	by	the	additional	charges	for the	write-up	to	fair	value	for	the	Cytyc	inventory	sold	as	noted	above.	Also	contributing	to	the	decrease	in	cost	of	product	sales	as	a	percentage	of	product	revenue	was increased	revenues	and	improved	profitability	associated	with	the	shift	in	mammography	product	sales	to	our	Selenia	full	field	digital	mammography	systems.	Our	higher Selenia	system	sales	resulted	in	an	improved	absorption	of	fixed	manufacturing	costs.	Partially	offsetting	the	decreases	in	costs	as	a	percentage	of	product	sales	were charges	associated	with	a	MRI	inventory	impairment	charge	and	related	purchase	obligations	totaling	$4.5	million	and	$3.9	million	related	to	sales	of	acquired	Third Wave	inventory	that	was	written	up	to	fair	value	in	connection	with	purchase	accounting	in	fiscal	2008.

We	have	identified	certain	costs	recorded	within	"Cost	of	Service	and	Other	Revenues"	in	our	Consolidated	Statement	of	Operations	during	the	first	three	quarters of	fiscal	2008	that	more	appropriately	should	be	classified	as	"Cost	of	Product	Sales".	We	determined	that	the	reclassification	is	not	material	to	our	consolidated financial	statements	and	we	have	corrected	the	classification	in	the	fourth	quarter	of	fiscal	2008.	In	future	filings,	we	will	reclassify	these	costs	related	to	prior	periods	to the	current	presentation,	which	will	result	in	an	increase	in	"Cost	of	Product	Sales"	and	a	corresponding	decrease	in	"Cost	of	Service	and	Other	Revenues"	of	$9.3 million	in	the	three	months	ended	December	29,	2007;	$12.3	million	in	the	three	months	ended	March	29,	2008;	and	$13.3	million	in	the	three	months	ended	June	28, 2008.

#       Cost	of	Product	Sales—Amortization	of	Intangible	Assets.

| Cost	of	Product	Sales—Amortization	of	Intangible	Assets. |  |  |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | Years\tEnded |  |  |  |
|  | September\t27,\t2008 | September\t27,\t2008 | September\t29,\t2007 | September\t29,\t2007 | Change | Change |
|  |  | %\tof\tProduct |  | %\tof\tProduct |  |  |
|  | Amount | Sales | Amount | Sales | Amount | % |
| Cost\tof\tProduct\tSales—Amortization\tof\tIntangible\tAssets | $95,310 | 6% | $11,262 | 2% | $84,048 | 746% |

Cost	of	product	sales	–	amortization	of	intangible	assets	increased	primarily	due	to	$80.2	million	of	amortization	of	intangible	assets	obtained	as	part	of	the	Cytyc business	combination	in	the	first	quarter	of	fiscal	2008.	The	underlying	intangible	assets	substantially	relate	to	acquired	developed	technology	and	know-how.	These intangible	assets	are	generally	being	amortized	over	their	estimated	useful	lives	of	between	8.5	and	15	years.

#       Cost	of	Service	and	Other	Revenues.

| intangible	assets	are	generally	being	amortized	over	their	estimated	useful	lives	of	between	8.5	and	15	years. |  |  |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Cost\tof\tService\tand\tOther\tRevenues. |  |  |  |  |  |  |
|  |  |  | Years\tEnded |  |  |  |
|  | September\t27,\t2008 | September\t27,\t2008 | September\t29,\t2007 | September\t29,\t2007 | Change | Change |
|  |  | %\tof\tService |  | %\tof\tService |  |  |
|  |  | and\tOther |  | and\tOther |  |  |
|  | Amount | Revenues | Amount | Revenues | Amount | % |
| Cost\tof\tService\tand\tOther\tRevenues | $151,589 | 88% | $114,307 | 104% | $37,282 | 33% |

Cost	of	service	and	other	revenues	increased	in	absolute	dollars	primarily	related	to	additional	costs	from	the	Cytyc	business	combination	of	approximately	$14.7 million	in	fiscal	2008.	The	remainder	of	the	increase	was	primarily	due	to	personnel	and	other	costs	to	expand	our	service	capabilities	for	breast	health,	especially	in	the United	States,	to	support	our	growing	installed	base	of	our	breast	health	products	as	a	result	of	the	increased	service	and	other	revenues.	We	expect	our	costs	of	service and	other	revenues	to	remain	relatively	high	as	a	percentage	of	service	and	other	revenues,	reflecting	our	need	to	employ	the	required	personnel	for	warranty,	non- warranty	and	installation	activities	to	service	our	growing	installed	base	of	products.	Please	see	"Cost	of	Product	Sales"	above	for	discussion	of	reclassification	between cost	of	product	sales	and	cost	of	service	and	other	revenues	during	fiscal	2008.

# Operating	Expenses.

|  |  |  | Years	Ended |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | September\t27,\t2008 | September\t27,\t2008 | September\t29,\t2007 | September\t29,\t2007 | Change | Change |
|  | Amount | %\tof\tTotal\nRevenue | Amount | %\tof\tTotal\nRevenue | Amount | % |
| Operating\tExpenses |  |  |  |  |  |  |
| Research\tand\tDevelopment | $81,421 | 5% | $44,381 | 6% | $37,040 | 83% |
| Selling\tand\tMarketing | 261,524 | 16% | 85,520 | 12% | \t 176,004 | 206% |
| General\tand\tAdministrative | 147,405 | 9% | 62,092 | 8% | 85,313 | 137% |
| Amortization\tof\tAcquired\tIntangibles | 25,227 | 1% | 5,584 | 1% | 19,643 | 352% |
| Restructuring | 6,383 | — | — | — | 6,383 | — |
| Impairment\tof\tAcquired\tIntangibles | 2,900 | — | — | — | 2,900 | — |
| Acquired\tIn-Process\tResearch\tand\tDevelopment | 565,200 | 34% | — | — | \t 565,200 | — |
|  | $1,090,060 | 65% | $197,577 | 27% | $892,483 | 452% |

Research	and	Development	Expenses.	Research	and	development	expenses	increased	83%	in	fiscal	2008	as	compared	to	fiscal	2007.	These	increases	were primarily	due	to	the	inclusion	of	$31.5	million	and	$3.7	million	of	expenses	in	the	current	year	associated	with	Cytyc-related	and	Third	Wave-related	activity, respectively,	since	the	close	of	the	business	combination	with	Cytyc	and	the	acquisition	of	Third	Wave.	Also	contributing	to	the	increase	was	an	increase	in mammography	related	expenses	of	$2.6	million	in	fiscal	2008	primarily	related	to	our	tomosynthesis	project	and	a	$1.8	million	charge	for	a	change	in	control	payment related	to	the	Cytyc	business	combination	recorded	in	the	first	quarter.	We	expect	total	research	and	development	expenses	to	increase	in	fiscal	2009	due	to	the	inclusion of	a	full	year	of	expenses	from	the	Third	Wave	acquisition	and	Cytyc	business	combination	and	our	continued	development	of	tomosynthesis	technology	for mammography.

Selling	and	Marketing	Expenses.	Selling	and	marketing	expenses	increased	206%	in	fiscal	2008	as	compared	to	fiscal	2007.	These	increases	were	primarily	due to	the	inclusion	of	$160.3	million	of	expenses	associated	with	Cytyc-related	activity	since	the	close	of	the	business	combination	and	approximately	$5.1	million	related to	increased	compensation	and	related	expenses	from	the	additional	sales	representatives	added	from	the	BioLucent	acquisition	in	the	fourth	quarter	of	fiscal	2007.	Also contributing	to	the	increase	was	approximately	$3.3	million	increased	commission	expense	due	to	the	increased	product	sales.	We	expect	total	sales	and	marketing expenses	to	increase	in	fiscal	2009	with	a	full	year	of	compensation	and	related	expenses	for	additional	personnel	related	to	the	Third	Wave	acquisition	and	the	Cytyc business	combination	and	an	increase	in	total	product	sales.

General	and	Administrative	Expenses.	General	and	administrative	expenses	increased	137%	in	fiscal	2008	as	compared	to	fiscal	2007	primarily	due	to	$77.5 million	in	expenses	associated	with	Cytyc-related	activity	since	the	close	of	the	business	combination	and	an	increase	of	$11.2	million	due	to	incremental	stock-based compensation.	We	expect	total	general	and	administrative	expenses	to	increase	in	fiscal	2009	with	a	full	year	of	compensation	and	related	expenses	for	additional personnel	related	to	the	Third	Wave	acquisition	and	the	Cytyc	business	combination.

Amortization	of	Acquired	Intangible	Assets.	Amortization	expense	of	acquired	intangible	assets	increased	352%	in	fiscal	2008	as	compared	to	fiscal	2007, primarily	due	to	$15.9	million	of	amortization	of	intangible	assets	obtained	as	part	of	the	Cytyc	business	combination	in	the	first	quarter	of	fiscal	2008.	Fiscal	years	2008 and	2007	also	include	the	amortization	of	intangible	assets	acquired	from	AEG,	R2,	and	Suros	in	the	third	and	fourth	quarters	of	fiscal	2006.	The	underlying	intangible assets	substantially	relate	to	acquired	customer	relationships	and	trade	names.	These	intangible	assets	acquired	in	the	Cytyc	business	combination	are	being	amortized over	their	estimated	useful	lives	of	between	8.5	and	30	years.	We	expect	to	incur	additional	amortization	of	acquired	intangible	assets	in	connection	with	our	acquisition of	Third	Wave.

Restructuring.	During	fiscal	2008	we	recorded	$6.4	million	in	compensation	charges,	including	$1.9	million	in	stock-based	compensation,	related	to	the resignation	of	our	Executive	Chairman,	which	was	effective	May	20,	2008.

Impairment	of	Acquired	Intangible	Assets.	Subsequent	to	the	Cytyc	business	combination,	we	discontinued	the	development	of	Cytyc's	Helica	Thermal Coagulator	System	product,	used	for	the	treatment	of	endometriosis.	We	will	not	realize	any	future	cash	flows	from	this	product.	Our	intangible	asset	valuation	for	Cytyc included	approximately	$2.9	million	related	to	customer	relationships	for	Helica.	As	a	result	of	the	Helica	product	discontinuation,	we	recorded	an	impairment	charge	of $2.9	million	during	the	first	quarter	of	fiscal	2008.

Acquired	In-Process	Research	and	Development	Expenses.	Included	in	this	charge	in	fiscal	2008	is	$370.0	million	for	in-process	research	and	development incurred	in	connection	with	our	business	combination	with	Cytyc	as	described	in	further	detail	above	under	"Fiscal	2008	Acquisitions—Cytyc	Corporation."	Also included	is	$195.2	million	for	in-process	research	and	development	incurred	in	connection	with	our	acquisition	of	Third	Wave	as	described	in	further	detail	above	under "Fiscal	2008	Acquisitions—Third	Wave	Technologies,	Inc."

Interest	income	increased	in	fiscal	2008	compared	to	fiscal	2007	primarily	due	an	increase	in	our	investment	balances,	partially	offset	by	a	decrease	in	the	interest rate	earned	during	the	current	year	compared	to	fiscal	2007.

#       Interest	Expense.

| Interest	Expense. |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- |
|  |  | Years\tEnded |  |  |
|  | September\t27,\t2008 | September\t29,\t2007 | Change | Change |
|  | Amount | Amount | Amount | % |
| Interest\tExpense | $(84,912) | $(2,511) | $(82,401) | 3,282% |

In	fiscal	2008,	these	expenses	consisted	primarily	of	the	interest	costs	and	the	related	amortization	of	deferred	financing	costs	related	to	both	the	senior	secured credit	agreement	entered	into	on	October	22,	2007	in	connection	with	the	Cytyc	business	combination	and	our	subsequent	2.0%	Convertible	Note	Offering.	In	fiscal 2007,	these	expenses	consisted	primarily	of	the	interest	costs	and	fees	on	the	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	$1.0	million.	We	incurred additional	interest	expense	in	the	fourth	quarter	of	fiscal	2008	in	connection	with	our	borrowing	of	$540.0	million	on	July	17,	2008	to	fund	a	portion	of	the	purchase	price for	the	acquisition	of	Third	Wave.

In	fiscal	2008,	these	balances	were	primarily	related	to	foreign	currency	transaction	losses	of	approximately	$0.7	million	and	a	decrease	in	the	cash	surrender value	of	life	insurance	contracts	related	to	our	SERP	of	approximately	$1.4	million.	To	the	extent	that	foreign	currency	exchange	rates	fluctuate	in	the	future,	we	may	be exposed	to	continued	financial	risk.	Although	we	have	established	certain	debt	agreements	denominated	in	the	foreign	currency,	the	Euro,	in	which	certain	of	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	fiscal	2007, other	income	related	primarily	to	the	increase	in	the	cash	surrender	value	of	life	insurance	contracts	related	to	our	SERP.

#       Provision	for	Income	Taxes.

We	account	for	income	taxes	under	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.

Our	effective	tax	rate	for	fiscal	2008	was	38.1%	of	the	pre-tax	loss.	For	fiscal	2008,	our	effective	tax	rate	was	affected	by	the	in-process	research	and	development and	intangible	asset	impairment	charges	we	incurred	in	connection	with	our	business	combination	with	Cytyc	and	the	in-process	research	and	development	that	we incurred	in	connection	with	the	acquisition	of	Third	Wave	Technologies.	Absent	the	in-process	research	and	development	and	intangible	asset	impairment	charges,	our effective	tax	rate	would	have	been	approximately	36.9%	for	fiscal	2008.	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	net	deferred	tax	liability	increased	approximately	$842.0	million	in	fiscal	2008	primarily	due	to	the	increase	of	intangible	assets	as	a	result	of	the	Cytyc merger,	for	which	the	related	amortization	is	not	deductible	for	tax	purposes.

We	anticipate	an	effective	tax	rate	of	approximately	35-36%	of	pre-tax	earnings	in	fiscal	2009.

# Segment	Results	of	Operations

As	discussed	above,	we	are	now	reporting	our	business	as	four	segments:	Breast	Health,	Diagnostics,	GYN	Surgical	and	Skeletal	Health.	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.

# Breast	Health.

|  | September	27,	2008 | September	27,	2008 | September	29,	2007 | September	29,	2007 | Change | Change |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | %\tof\tTotal |  | %\tof\tTotal |  |  |
|  |  | Segment |  | Segment |  |  |
|  | Amount | Revenue | Amount | Revenue | Amount | % |
| Total\tRevenues | $860,848 | 100% | $638,898 | 100% | $221,950 | 35% |
| Operating\tIncome | $211,704 | 25% | $146,907 | 23% | $64,797 | 44% |

Breast	Health	revenues	for	fiscal	2008	increased	primarily	due	to	the	$172.2	million	increase	in	product	sales	discussed	above	and	due	to	a	$49.8	million	increase in	service	revenues	that	was	primarily	related	to	the	increased	number	of	service	contracts	for	the	increased	number	of	Selenia	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	was	51%	in	fiscal	2008	as	compared	to 49%	in	fiscal	2007.	In	fiscal	2008	our	gross	margins	improved	from	the	increase	in	product	revenues	of	our	more	profitable	Selenia	systems	versus	our	analog mammography	systems	and,	to	a	lesser	extent,	higher	margins	realized	on	our	MammoSite	product,	acquired	as	part	of	the	Cytyc	merger.	In	addition,	higher	total revenues	including	higher	Selenia	system	sales	have	allowed	for	the	greater	absorption	of	manufacturing	costs.	Partially	offsetting	these	improvements	was	a	charge	of $3.3	million	for	the	write-up	to	fair	value	of	MammoSite	RTS	inventory	sold,	primarily	during	the	first	quarter	of	fiscal	2008.	Operating	expenses	for	this	business segment	increased	34%	in	fiscal	2008,	primarily	due	to	the	addition	of	$28.4	million	of	operating	expenses	from	the	MammoSite	business	as	well	as	from	increased operating	expenses	in	support	of	our	growing	Selenia	business.	Also	contributing	to	the	increases	during	the	year	was	an	increase	in	stock-based	compensation	of	$7.1 million,	as	well	as	a	$0.4	million	restructuring	charge	in	the	third	quarter	related	to	the	resignation	of	our	Executive	Chairman	in	May	2008.

# Diagnostics.

|  | September	27,	2008 | September	27,	2008 | September	29,	2007 | September	29,	2007 | Change | Change |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | %\tof\tTotal |  | %\tof\tTotal |  |  |
|  |  | Segment |  | Segment |  |  |
|  | Amount | Revenue | Amount | Revenue | Amount | % |
| Total\tRevenues | $485,004 | 100% | $— | — | $485,004 | — |
| Operating\tLoss | $(172,538) | (36%) | $— | — | $(172,538) | — |

Diagnostics	revenues,	which	include	our	ThinPrep,	FullTerm	and	Third	Wave	products,	totaled	$485.0	million	in	fiscal	2008.	Our	gross	margin	in	this	business segment	was	57%,	including	charges	of	$26.6	million	and	$3.9	million,	respectively,	for	the	write-up	to	fair	value	of	the	Cytyc	inventory	sold	during	the	first	quarter	and the	Third	Wave	inventory	sold	during	the	fourth	quarter	of	fiscal	2008.	The	operating	loss	also	included	an	$85.2	million	charge	for	in-process	research	and development	as	a	result	of	the	Cytyc	business	combination	in	the	first	quarter,	a	$195.2	million	charge	for	in-process	research	and	development	as	a	result	of	the	Third Wave	acquisition	in	the	fourth	quarter,	stock-based	compensation	of	$7.6	million	and	a	$3.6	million	restructuring	charge	in	the	third	quarter	related	to	the	resignation	of our	Executive	Chairman	in	May	2008.

# GYN	Surgical.

|  |  |  | Years	Ended |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | September\t27,\t2008 | September\t27,\t2008 | September\t29,\t2007 | September\t29,\t2007 | Change | Change |
|  |  | %\tof\tTotal |  | %\tof\tTotal |  |  |
|  |  | Segment |  | Segment |  |  |
|  | Amount | Revenue | Amount | Revenue | Amount | % |
| Total\tRevenues | $221,069 | 100% | $— | — | $221,069 | — |
| Operating\tLoss | $(241,450) | (109%) | $— | — | $(241,450) | — |

GYN	Surgical	revenues,	which	include	our	NovaSure	products	and	Adiana	systems	under	development,	totaled	$221.1	million	in	fiscal	2008.	In	the	second	and third	quarters,	we	believe	that	sales	of	the	NovaSure	system	were	adversely	affected	by	a	modest	softening	in	sales	to	the	hospital-based	market,	as	well	as	lower	than expected	customer	inventory	utilization.	Our	sales	to	both	the	hospital	market	and	office	based	market	generally	have	been	based	upon	current	order	bookings	for immediate	shipment	with	little	or	no	backlog.	Over	the	last	three	quarters,	we	have	refocused	our	sales	efforts	and	programs	to	increasing	longer	term	customer commitments.	However,	while	we	cannot	assure	that	we	will	be	successful,	our	goal	is	to	have	a	continuing	increase	in	NovaSure	system	backlog,	followed	by	a continued	increase	in	sequential	growth	of	revenue	during	fiscal	2009	with	sales	to	the	physician	office-based	market	playing	a	role	in	that	increase.	Our	gross	margin	in this	business	segment	was	67%	during	this	period	and	includes	a	charge	of	$12.4	million	for	the	write-up	to	fair	value	of	the	Cytyc	inventory	sold	during	the	first	fiscal quarter	of	2008.	The	operating	loss	for	fiscal	2008	also	includes	a	$284.8	million	charge	for	in-process	research	and	development	as	a	result	of	the	Cytyc	business combination	and	a	$2.9	million	impairment	charge	of	the	Helica	Thermal	Coagulator	System	intangibles.	This	segment	included	stock-based	compensation	of	$3.8 million	in	fiscal	2008,	as	well	as	a	$2.4	million	restructuring	charge	in	the	third	quarter	related	to	the	resignation	of	our	Executive	Chairman	in	May	2008.

# Skeletal	Health.

|  | September	27,	2008 | September	27,	2008 | September	29,	2007 | September	29,	2007 | Change | Change |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | %\tof\tTotal |  | %\tof\tTotal |  |  |
|  |  | Segment |  | Segment |  |  |
|  | Amount | Revenue | Amount | Revenue | Amount | % |
| Total\tRevenues | $107,578 | 100% | $99,470 | 100% | $8,108 | 8% |
| Operating\tIncome | $4,742 | 4% | $845 | 1% | $3,897 | 461% |

Skeletal	Health	revenues	increased	in	fiscal	2008	compared	to	the	corresponding	period	in	the	prior	year	primarily	due	to	the	$7.5	million	increase	in	product	sales discussed	above.	Our	gross	margin	in	this	business	segment	was	34%	in	fiscal	2008	compared	to	32%	in	fiscal	2007.	Operating	income	and	gross	margin	for	the	Skeletal Health	segment	increased	in	fiscal	2008	over	fiscal	2007	primarily	due	to	the	increased	revenues	and	due	to	improved	absorption	as	a	result	of	manufacturing	additional products	in	the	facility	where	the	Skeletal	Health	products	are	produced,	partially	offset	by	charges	associated	with	MRI	inventory	and	purchase	obligations	recorded	in fiscal	2008	totaling	$4.5	million	compared	to	$2.0	million	in	fiscal	2007.	Skeletal	Health	costs	and	expenses	included	stock	compensation	of	$2.2	million	and	$1.1 million	in	fiscal	2008	and	fiscal	2007,	respectively.

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

|  |  |  | 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 |  |  |  |  |  |  |
| Breast\tHealth | $559,092 | 76% | $311,440 | 67% | $247,652 | 80% |
| Skeletal\tHealth | 69,762 | 9% | 76,671 | 17% | (6,909) | (9%) |
|  | $628,854 | 85% | $388,111 | 84% | $240,743 | 62% |

In	fiscal	2007	our	product	sales	increased	62%	compared	to	fiscal	2006	primarily	due	to	an	increase	in	revenues	from	our	breast	health	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	and	the	inclusion	for	the	full	year	of	sales	from	AEG,	acquired	during	the	third	quarter	of	fiscal	2006.	Also	contributing	to	the	increase	was	an	increase	in sales	of	mini	C-arm	systems;	offsetting	these	increases	was	a	decrease	in	other	skeletal	health	sales	in	fiscal	2007.

Breast	Health	product	sales	increased	80%	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,	$29.6	million	in	additional	sales	from	AEG	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	and	AEG	was	acquired	in	the	third	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	fiscal	2007	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.

Skeletal	Health	product	sales	decreased	9%	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.	This decrease	was	partially	offset	by	an	$8.7	million	increase	in	our	mini	C-arm	system	sales.	The	increase	in	mini	C-arm	revenue	was	primarily	the	result	of	an	increase	in the	number	of	systems	sold	in	the	United	States	and	Europe.

We	believe	this	decrease	in	our	domestic	unit	sales	reflected	a	decline	in	market	conditions	due	to	a	reduction	in	reimbursement	for	osteoporosis	assessment exams.

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	was	primarily	due	to	an	increase	in	demand	for	our	Selenia	digital	mammography	system	as	adoption	of	digital mammography	was	occurring	at	an	increased	rate	in	the	United	States	as	compared	to	international	markets.

Service	and	other	revenues	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	breast	health segment.	We	believe	that	these	increases	reflected	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\tEnded |  |  |  |
|  | 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 | $267,470 | 43% | $188,443 | 49% | $79,027 | 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	43%	in	fiscal	2007	from	49%	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.

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.

| between	8.5	and	13	years. |  |  |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Cost\tof\tService\tand\tOther\tRevenues. |  |  |  |  |  |  |
|  |  |  | Years\tEnded |  |  |  |
|  | September\t29,\t2007 | September\t29,\t2007 | September\t30,\t2006 | September\t30,\t2006 | Change | Change |
|  |  | %\tof\tService |  | %\tof\tService |  |  |
|  |  | and\tOther |  | and\tOther |  |  |
|  | Amount | Revenues | Amount | Revenues | Amount | % |
| Cost\tof\tService\tand\tOther\tRevenues | $114,307 | 104% | $75,921 | 102% | $38,386 | 51% |

Cost	of	service	and	other	revenues	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.

|  | 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 | $44,381 | 6% | $28,113 | 6% | $16,268 | 58% |
| Selling\tand\tMarketing | 85,520 | 12% | 56,239 | 12% | 29,281 | 52% |
| General\tand\tAdministrative | 62,092 | 8% | 42,176 | 9% | 19,916 | 47% |
| Amortization\tof\tAcquired\tIntangibles | 5,584 | 1% | 1,631 | 1% | 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%) |
|  | $197,577 | 27% | $142,966 | 31% | $54,611 | 38% |

Research	and	Development	Expenses.	Research	and	development	expenses	increased	58%	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	fiscal	2007,	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	47%	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.	We	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	trade	names.	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.	We	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,	$0.6	million	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	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.

| acquisitions	of	AEG,	R2	and	Suros	during	fiscal	2006. |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- |
| Interest\tExpense. |  |  |  |  |
|  |  | Years\tEnded |  |  |
|  | September\t29,\t2007 | September\t30,\t2006 | Change | Change |
|  | Amount | Amount | Amount | % |
| Interest\tExpense | $(2,511) | $(1,230) | $(1,281) | 104% |

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.	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.

In	fiscal	2007,	this	balance	was	made	up	of	other	income	of	$857,000,	offset	by	foreign	currency	transaction	losses	of	approximately	$440,000.	The	most significant	item	of	other	income	related	to	the	increase	in	the	cash	surrender	value	of	life	insurance	contracts	related	to	our	SERP.	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\tEnded |  |  |
|  | 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.

In	fiscal	2007,	we	reported	our	business	as	three	segments:	mammography/breast	care,	osteoporosis	assessment	and	other.	In	fiscal	2008,	we	consolidated	these three	segments	into	two:	breast	health	and	skeletal	health.	Our	other	business	segment	previously	included	AEG,	mini	C-arm,	extremity	MRI,	conventional	general radiography	service	and	digital	general	radiography	systems	businesses.	The	AEG	business	is	now	part	of	Breast	Health	while	the	remaining	reporting	units	are	part	of Skeletal	Health.	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.

|  |  |  | Years	Ended |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | September\t29,\t2007 | September\t29,\t2007 | September\t30,\t2006 | September\t30,\t2006 | Change | Change |
|  |  | %\tof\tTotal |  | %\tof\tTotal |  |  |
|  |  | Segment |  | Segment |  |  |
|  | Amount | Revenue | Amount | Revenue | Amount | % |
| Total\tRevenues | $638,898 | 100% | $355,364 | 100% | $283,534 | 80% |
| Operating\tIncome | $146,907 | 23% | $42,027 | 12% | $104,880 | 250% |

Breast	Health	revenues,	as	discussed	above,	increased	primarily	due	to	the	$247.7	million	increase	in	product	sales,	an	increase	of	$30.9	million	in	service	and other	revenues	primarily	related	to	the	increased	number	of	systems	in	our	installed	base,	and	incremental	revenues	of	$29.6	million	as	a	result	of	the	AEG	acquisition	in the	third	quarter	of	fiscal	2006	discussed	above.	Operating	income	for	this	business	segment	increased	primarily	due	to	the	increased	revenues.	Our	gross	margin	in	this business	segment	increased	to	49%	in	fiscal	2007	as	compared	to	43%	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	50%	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	and	AEG	acquisitions	and,	to	a	lesser	extent,	the	R2	acquisition. Also	contributing	to	the	increase	was	an	increase	in	intangible	amortization	of	$4.0	million,	as	well	as	an	increase	in	stock	based	compensation	of	$2.3	million.	Fiscal 2006	included	$19.9	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.

|  |  |  | Years	Ended |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | September\t29,\t2007 | September\t29,\t2007 | September\t30,\t2006 |  | Change | Change |
|  |  | %\tof\tTotal | %\tof\tTotal | %\tof\tTotal |  |  |
|  |  | Segment | Segment | Segment |  |  |
|  | Amount | Revenue | Amount | Revenue | Amount | % |
| Total\tRevenues | $99,470 | 100% | $107,316 | 100% | $(7,846) | (7%) |
| Operating\tIncome | $845 | 1% | $8,312 | 8% | $(7,467) | (90%) |

Skeletal	Health	revenues	decreased	in	fiscal	2007compared	to	fiscal	2006	primarily	due	to	the	$6.9	million	decrease	in	product	sales	discussed	above	and	an	$0.2 million	increase	in	service	revenues,	partially	offset	by	an	increase	in	mini	C-arm	sales	of	$8.7	million.	The	decrease	in	service	revenues	was	primarily	due	to	a	decrease in	training	revenues.	Operating	income	for	skeletal	health	decreased	primarily	from	the	decrease	in	product	sales	as	well	as	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,	partially	offset	by	a	decrease	in	operating	expenses.	Our	gross	margin	in	this	business	segment	was	32%	in	fiscal	2007	compared	to	38%	in	fiscal	2006. The	decrease	in	skeletal	health	gross	margin	reflects	the	decrease	in	product	sales,	the	lower	average	selling	prices,	and	the	$2.0	million	extremity	MRI	inventory	write down	mentioned	above.	Operating	income	partially	benefited	from	lower	overhead	allocations	as	there	were	higher	allocations	of	overhead	in	the	current	year	to	the breast	health	business	segment	reflecting	the	recent	acquisitions	and	higher	growth	of	that	segment.

# Liquidity	and	Capital	Resources

At	September	27,	2008	we	had	approximately	$352.7	million	of	working	capital.	At	that	date,	our	cash	and	cash	equivalents	totaled	$95.7	million.	Our	cash	and cash	equivalents	balance	decreased	slightly	by	approximately	$4.7	million	during	fiscal	2008,	primarily	due	to	cash	utilized	in	our	investing	activities	including	cash used	to	pay	the	merger	consideration	for	the	Cytyc	business	combination	and	Third	Wave	acquisition	and,	to	a	lesser	extent,	to	purchase	property	and	equipment	as	well as	financing	activities	relating	to	our	repayment	of	amounts	outstanding	under	our	credit	agreement.	These	cash	uses	were	partially	offset	by	cash	received	from	our issuance	of	convertible	notes,	the	exercise	of	common	stock	options,	cash	acquired	as	a	result	of	our	business	combination	with	Cytyc	and	cash	provided	by	both	our legacy	and	Cytyc	operating	activities.

Our	operating	activities	provided	us	with	$364.6	million	of	cash,	which	included	a	net	loss	of	$385.6	million	for	the	year	mostly	relating	to	non-cash	charges	of $565.2	million	of	acquired	in-process	research	and	development,	depreciation	and	amortization	of	an	aggregate	$173.0	million,	$46.3	million	write	up	of	acquired	Cytyc and	Third	Wave	inventory,	amortization	of	deferred	financing	costs	of	$20.5	million	and	stock-based	compensation	expense	of	$24.3	million,	which	were	partially offset	by	a	$62.7	million	tax	benefit	related	to	the	exercise	of	stock	options	and	a	$10.4	million	deferred	tax	benefit.	Cash	used	by	operations	due	to	changes	in	our current	assets	and	liabilities	included	an	increase	in	accounts	receivable	of	$48.4	million,	an	increase	in	inventory	of	$29.6	million,	a	decrease	in	accrued	expenses	of $15.2	million,	a	decrease	in	accounts	payable	of	$10.2	million,	and	an	increase	in	prepaid	expenses	and	other	current	assets	of	$10.0	million.	The	cash	used	by	these 70

changes	in	our	current	assets	and	liabilities	was	partially	offset	by	a	decrease	in	income	tax	refundable	of	$74.4	million	and	an	increase	in	deferred	revenue	of	$27.0 million.	The	increase	in	accounts	receivable	was	primarily	due	to	the	increased	sales	volume,	especially	from	the	addition	of	Cytyc	revenues	since	the	merger	date.	The increase	in	inventory	was	primarily	related	to	the	addition	of	Cytyc	inventories	since	the	merger	and	an	increase	in	our	historical	products	to	support	the	increased	sales, especially	for	digital	mammography.	The	decrease	in	accounts	payable	and	accrued	expenses	was	primarily	due	to	the	payment	of	merger	related	fees	and	expenses.	The increase	in	prepaid	expenses	and	other	current	assets	was	primarily	due	to	the	timing	of	payment	of	prepaid	items.	The	decrease	in	income	taxes	refundable	was	due	to the	use	of	acquired	Cytyc	net	operating	loss	carryforwards	and	tax	overpayments,	and	the	tax	benefit	related	to	the	exercise	of	stock	options	discussed	above	to	offset current	income	taxes	payable.	The	increase	in	deferred	revenue	was	primarily	due	to	an	increase	in	the	number	of	deferred	service	contracts	for	our	historical	business	as well	as	amounts	added	by	the	Cytyc	operations	after	the	close	of	the	business	combination.

In	fiscal	2008,	we	used	approximately	$2.7	billion	of	cash	in	investing	activities.	This	use	of	cash	was	primarily	attributable	to	the	$2.0	billion	and	$557.9	million, net	of	cash	acquired,	used	to	complete	the	business	combination	with	Cytyc	on	October	22,	2007	and	the	acquisition	of	Third	Wave	on	July	24,	2008,	respectively.	We also	used	$53.3	million	for	purchases	of	property	and	equipment,	which	consisted	primarily	of	manufacturing,	demonstration	and	test	equipment	and	computer hardware.	We	invested	$25.0	million	in	equipment	under	customer	usage	agreements.	We	also	paid	$24.4	million	for	the	second	and	final	earn-out	to	the	former	Suros shareholders,	partially	offset	by	an	increase	of	$9.5	million	in	deferred	gain	as	a	result	of	proceeds	from	the	sale	of	Gestiva.

In	fiscal	2008,	financing	activities	provided	approximately	$2.3	billion	of	cash,	primarily	reflecting	our	borrowings	of	$2.9	billion	under	our	credit	agreements, proceeds	from	the	issuance	of	$1.7	billion	of	convertible	notes	and	$171.0	million	of	cash	from	the	exercise	of	stock	options	and	related	tax	benefit	of	$62.7	million. Borrowings	under	the	credit	agreements	were	used	to	pay	the	cash	portion	of	the	Cytyc	merger	consideration	and	related	fees	and	expenses	and	the	acquisition consideration	for	Third	Wave	and	related	fees	and	expenses.	These	financing	proceeds	were	partially	offset	by	$2.4	billion	of	repayments	under	our	credit	agreements which	was	primarily	funded	by	the	proceeds	from	our	issuance	of	the	convertible	notes	and	our	available	cash	flow.	Also	offsetting	these	proceeds	was	the	payment	of $40.6	million	upon	the	conversion	of	Cytyc's	convertible	notes.

# Indebtedness

Credit	Agreement.	On	October	22,	2007,	we	entered	into	a	$2.55	billion	senior	secured	credit	agreement	(the	"Credit	Agreement")	with	Goldman	Sachs	Credit Partners	L.P.	and	certain	other	lenders	(collectively,	the	"Lenders").	As	of	the	closing	of	the	Cytyc	merger	we	borrowed	$2.35	billion	under	the	credit	facilities,	all	of which	have	variable	interest	rates.	We	applied	the	net	proceeds	from	our	convertible	note	offering	described	below	to	repay	amounts	outstanding	under	the	Credit Agreement,	including	all	of	the	Term	Loan	X	and	Term	Loan	B-2,	$1.1	billion	and	$250	million,	respectively,	and	a	pro	rata	portion	of	our	$251	million	Term	Loan	A and	$104	million	Term	Loan	B-1.	During	the	year	ended	September	27,	2008,	we	also	made	voluntary	prepayments	of	principal	under	our	Term	Loan	X,	Term	Loan	A and	Term	Loan	B-1	of	$150	million,	$349	million	and	$146	million,	respectively.	There	were	no	amounts	outstanding	under	these	term	loans	as	of	September	27,	2008.

On	July	17,	2008,	in	connection	with	our	acquisition	of	Third	Wave,	we	entered	into	an	amended	and	restated	credit	agreement	with	certain	of	the	Lenders	(the "Amended	Credit	Agreement").	The	Amended	Credit	Agreement	amended	and	restated	our	existing	Credit	Agreement	with	Goldman	Sachs	Credit	Partners	L.P.	and	the lenders	named	therein,	dated	as	of	October	22,	2007.

Pursuant	to	the	terms	and	conditions	of	the	Amended	Credit	Agreement,	the	Lenders	committed	to	provide	senior	secured	financing	in	an	aggregate	amount	of	up to	$800	million.

The	credit	facilities	under	the	Amended	Credit	Agreement	consist	of:

•	 $400.0	million	senior	secured	tranche	A	term	loan	("Term	Loan	A");

•	 $200.0	million	senior	secured	tranche	B	term	loan	("Term	Loan	B");

•	 $200.0	million	senior	secured	revolving	credit	facility	(the	"revolving	facility").

Under	the	Amended	Credit	Agreement,	the	amounts	under	the	Term	Loan	A	and	the	Term	Loan	B	were	available	to	us	in	multiple	drawdowns	until	the	earlier	of the	consummation	of	the	Third	Wave	acquisition	or	December	5,	2008.	In	order	to	consummate	the	offer	to	purchase	all	issued	and	outstanding	stock	of	Third	Wave	and complete	the	acquisition	of	Third	Wave,	we	initially	borrowed	$540	million	under	the	credit	facilities	on	July	17,	2008.	During	the	fourth	quarter	of	fiscal	2008,	we repaid	a	pro	rata	portion	of	the	Term	Loan	A	in	the	amount	of	approximately	$56.0	million	and	the	Term	Loan	B	in	the	amount	of	approximately	$19.0	million.

As	of	September	27,	2008,	we	had	an	aggregate	of	$465.0	million	of	principal	outstanding	under	this	credit	facility	of	which	approximately	$344.4	million	was under	the	Term	Loan	A	and	$120.6	million	was	under	the	Term	Loan	B.	The	long-term	portion	of	the	Term	Loan	A	and	Term	Loan	B	was	$310.0	and	$118.8	million, respectively,	at	September	27,	2008.

Our	domestic	subsidiaries	which	are	party	to	the	Amended	Credit	Agreement	(including	Third	Wave,	which	joined	as	a	party	to	the	agreement	on	July	24,	2008, the	effective	date	of	the	transaction)	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	our	assets,	a	first	priority	security	interest	in	100%	of	the	capital	stock	issued	by	each	guarantor,	65%	of	the	capital	stock issued	by	certain	of	our	first-tier	foreign	subsidiaries	and	all	intercompany	debt.	The	security	interests	are	evidenced	by	an	Amended	and	Restated	Pledge	and	Security Agreement	by	and	among	Goldman	Sachs	Credit	Partners	L.P.,	as	collateral	agent,	us	and	the	other	parties	therein	named	(the	"Amended	Pledge	and	Security Agreement").

The	final	maturity	dates	for	the	credit	facilities	are	as	follows:

•for	the	revolving	facility,	September	30,	2012.

We	are	required	to	make	scheduled	principal	payments	under	the	Term	Loan	A	in	increasing	amounts	ranging	from	$10.0	million	per	quarter	commencing	with the	quarter	ending	September	30,	2008	to	$15.0	million	per	quarter	commencing	with	the	quarter	ending	September	30,	2010,	and	under	the	Term	Loan	B,	in	equal quarterly	installments	of	$500,000	beginning	on	the	quarter	ending	September	30,	2008,	with	the	remaining	balance	of	each	term	loan	facility	due	at	the	maturity	of	the applicable	term	loan	facility.	The	revolving	credit	facility	will	become	due	at	maturity.	No	scheduled	amortizations	are	required	under	the	revolving	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.

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	bear	interest,	at	our	option,	as	follows:

Initially,with	respect	to	loans	made	under	the	revolving	facility	and	the	Term	Loan	A:

(ii) at	the	reserve	adjusted	Eurodollar	Rate	plus	2.50%	per	annum;	and

With respect	to	loans	made	under	the	Term	Loan	B:

(ii) at	the	reserve	adjusted	Eurodollar	Rate	plus	3.25%	per	annum.

The	margin	applicable	to	loans	under	the	revolving	credit	facility	and	the	Term	Loan	A	is	subject	to	specified	changes	based	on	certain	changes	in	the	leverage ratio	as	specified	in	the	Amended	Credit	Agreement.

Interest	accruing	at	the	base	rate	generally	is	payable	on	a	quarterly	basis.	Interest	accruing	at	the	Eurodollar	Rate	is	payable	on	the	last	day	of	selected	interest periods	(which	shall	be	one,	two,	three	and	six	months	and	in	certain	circumstances,	nine	or	twelve	months)	unless	the	interest	period	exceeds	three	months,	in	which case,	interest	will	be	due	at	the	end	of	every	three	months.	The	weighted	average	interest	rate	under	the	Amended	Credit	Agreement	was	5.24%	during	fiscal	2008.

We	are	required	to	pay	a	quarterly	commitment	fee,	at	a	per	annum	rate	of	0.50%,	on	the	undrawn	commitments	available	under	the	revolving	credit	facility, which	per	annum	rate	is	subject	to	reduction	based	on	a	leverage	ratio	as	specified	in	the	Amended	Credit	Agreement.

The	credit	facilities	contain	affirmative	and	negative	covenants	customarily	applicable	to	senior	secured	credit	facilities,	including	covenants	restricting	the	ability of	the	loan	parties,	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	facilities	require	us	to	maintain	maximum	leverage	and	minimum	interest	coverage	ratios,	as	of	the	last	day	of	each	fiscal	quarter.	The	maximum leverage	ratio	is	5.50:1.00	beginning	on	our	fiscal	quarter	ending	September	27,	2008,	and	then	decreases	over	time	to	3:00:1.00	for	the	fiscal	quarter	ending September	25,	2010	and	each	fiscal	quarter	thereafter.	The	minimum	interest	coverage	ratio	is	2.25:1.00	beginning	with	our	fiscal	quarter	ending	September	27,	2008, and	then	increases	over	time	to	2.75:1.00	for	the	fiscal	quarter	ending	September	25,	2010	and	each	fiscal	quarter	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	consolidated	adjusted	EBITDA	for	the	applicable	periods	to	our	consolidated	interest	expense.	These	terms,	and	the	calculation	thereof,	are	defined	in further	detail	in	the	Amended	Credit	Agreement.	We	were	in	compliance	with	our	financial	covenants	as	of	September	27,	2008.

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

| Fiscal	2009 | $36,167 |
| :--- | :--- |
| Fiscal\t2010 | 36,167 |
| Fiscal\t2011 | 53,389 |
| Fiscal\t2012 | 226,041 |
| Fiscal\t2013 | 113,236 |
| Total | $465,000 |

Convertible	Notes.	On	December	10,	2007,	we	issued	and	sold	$1.725	billion	aggregate	original	principal	amount	of	our	2.00%	Convertible	Senior	Notes	due 2037.	The	notes	were	registered	under	an	effective	Registration	Statement	and	were	issued	pursuant	to	an	Indenture	between	us	and	Wilmington	Trust	Company,	as Trustee	(the	"Indenture")	and	a	First	Supplemental	Indenture	thereto	(the	"Supplemental	Indenture"),	both	dated	December	10,	2007.

The	net	proceeds	from	the	offering	was	approximately	$1.69	billion,	after	deducting	the	underwriters'	discounts	and	estimated	offering	expenses	of	approximately $1.5	million	payable	by	us,	and	was	used	to	repay	a	portion	of	our	then	outstanding	senior	secured	indebtedness	under	our	Credit	Agreement.

Holders	may	require	us	to	repurchase	the	notes	on	December	13	of	2013,	and	on	each	of	December	15,	2017,	2022,	2027	and	2032	at	a	repurchase	price	equal	to 100%	of	their	accreted	principal	amount,	plus	accrued	and	unpaid	interest.	We	may	redeem	any	of	the	notes	beginning	December	18,	2013,	by	giving	holders	at	least	30 days'	notice.	We	may	redeem	the	notes	either	in	whole	or	in	part	at	a	redemption	price	equal	to	100%	of	their	principal	amount,	plus	accrued	and	unpaid	interest, including	contingent	interest	and	liquidated	damages,	if	any,	to,	but	excluding,	the	redemption	date.

The	notes	bear	interest	at	a	rate	of	2.00%	per	year	on	the	principal	amount,	payable	semi-annually	in	arrears	in	cash	on	June	15	and	December	15	of	each	year, beginning	June	15,	2008,	and	ending	on	December	15,	2013	and	will	accrete	principal	from	December	15,	2013	at	a	rate	that	provides	holders	with	an	aggregate	annual yield	to	maturity	of	2.00%	per	year.	Beginning	with	the	six	month	interest	period	commencing	December	15,	2013,	we	will	pay	contingent	interest	during	any	six	month interest	period	to	the	holders	of	notes	if	the	"trading	price",	as	defined,	of	the	notes	for	each	of	the	five	trading	days	ending	on	the	second	trading	day	immediately preceding	the	first	day	of	the	applicable	six	month	interest	period	equals	or	exceeds	120%	of	the	accreted	principal	amount	of	the	notes.	The	holders	of	the	notes	may convert	the	notes	into	shares	of	our	common	stock	at	a	conversion	price	of	approximately	$38.60	per	share,	subject	to	adjustment,	prior	to	the	close	of	business	on September	15,	2037,	subject	to	prior	redemption	or	repurchase	of	the	notes,	under	any	of	the	following	circumstances:	(1)	during	any	calendar	quarter	after	the	calendar quarter	ending	December	31,	2007	if	the	last	reported	sale	price	of	our	common	stock	exceeds	130%	of	the	conversion	price	for	at	least	20	trading	days	in	the	30 consecutive	trading	days	ending	on	the	last	trading	day	of	the	preceding	calendar	quarter;	(2)	during	the	five	business	day	period	after	any	five	consecutive	trading	day period	in	which	the	trading	price	per	note	for	each	day	of	such	period	was	less	than	98%	of	the	product	of	the	last	reported	sale	price	of	our	common	stock	and	the conversion	rate	on	each	such	day;	(3)	if	the	notes	have	been	called	for	redemption;	or	(4)	upon	the	occurrence	of	specified	corporate	events.

In	lieu	of	delivery	of	shares	of	our	common	stock	in	satisfaction	of	our	obligation	upon	conversion	of	the	notes,	we	may	elect	to	deliver	cash	or	a	combination	of cash	and	shares	of	our	common	stock.	If	we	elect	to	satisfy	our	conversion	obligation	solely	in	cash,	we	will	deliver	cash	in	an	amount	as	provided	in	the	indenture	for the	notes.	If	we	elect	to	satisfy	our	conversion	obligation	in	a	combination	of	cash	and	shares	of	our	common	stock,	we	will	deliver	up	to	a	specified	dollar	amount	of cash	per	$1,000	original	principal	amount	of	notes,	and	will	settle	the	remainder	of	our	conversion	obligation	in	shares	of	our	common	stock,	in	each	case	based	on	the daily	conversion	value	calculated	as	provided	in	the	indenture	for	the	notes.	In	addition,	at	any	time	on	or	prior	to	the	35th	scheduled	trading	day	prior	to	the	maturity date	of	the	notes,	we	may	make	an	irrevocable	election	to	settle	conversions	of	the	notes	either	solely	in	cash	or	in	a	combination	of	cash	and	shares	of	our	common stock	with	a	specified	cash	amount	at	least	equal	to	the	accreted	principal	amount	of	the	notes.	This	net	share	settlement	election	is	in	our	sole	discretion	and	does	not require	the	consent	of	holders	of	the	notes.	It	is	our	current	intent	and	policy	to	settle	any	conversion	of	the	notes	as	if	we	had	elected	to	make	the	net	share	settlement election.

The	notes	are	our	senior	unsecured	obligations	and	rank	equally	with	all	of	our	existing	and	future	senior	unsecured	debt	and	prior	to	all	future	subordinated	debt. The	notes	are	effectively	subordinated	to	any	future	secured	indebtedness	to	the	extent	of	the	collateral	securing	such	indebtedness,	and	structurally	subordinated	to	all indebtedness	and	other	liabilities	(including	trade	payables)	of	our	subsidiaries.

AEG	Debt.	AEG,	which	we	acquired	in	2006,	has	outstanding	existing	debt	in	an	aggregate	principal	amount	of	$10.6	million	as	of	September	27,	2008.	The terms	of	the	loans	have	various	maturities	ranging	from	December	30,	2010	through	March	30,	2014.	Interest	rates	are	variable	and	weighted-average	interest	rates	in fiscal	2008	ranged	from	5.5%	to	7.2%.

Other	Indebtedness.	As	a	result	of	the	Cytyc	merger,	we	assumed	Cytyc's	outstanding	convertible	notes,	of	which	$0.3	million	remained	outstanding	as	of September	27,	2008.	We	may	redeem	these	notes	at	par	at	any	time	on	or	after	March	20,	2009.	The	stated	interest	rate	is	fixed	at	2.25%.

Contingent	Earn-Out	Payments.	As	a	result	of	our	merger	with	Cytyc,	we	assumed	Cytyc's	obligation	to	Adiana,	Inc.	to	make	contingent	earn-out	payments	tied to	the	achievement	of	milestones.	The	milestone	payments	include	potential	contingent	payments	of	up	to	$155	million,	based	on	the	achievement	of	certain	FDA milestones	and	on	incremental	sales	growth	of	the	Adiana	permanent	contraception	product	during	the	four-year	period	following	FDA	approval	of	this	product.	As	FDA approval	has	not	been	received	for	the	product,	no	payments	have	been	made	to	Adiana.

We	also	satisfied	our	obligation	for	a	second	and	final	earn-out	to	the	former	Suros	Surgical	stockholders	related	to	Suros'	incremental	revenue	growth	for revenues	earned	through	July	31,	2008.	This	earnout,	which	totaled	$24.5	million,	was	substantially	paid	in	the	fourth	quarter	of	fiscal	2008,	with	an	increase	in goodwill.	We	had	also	made	a	payment	of	approximately	$19.0	million	to	the	former	Suros	stockholders	in	the	fourth	quarter	of	fiscal	2007	for	the	first	year	earn-out.

On	September	18,	2007,	we	completed	the	acquisition	of	BioLucent,	Inc.	A	cash	earn-out	may	be	payable	in	up	to	two	annual	installments	not	to	exceed	$15.0 million	in	the	aggregate	based	on	BioLucent's	achievement	of	certain	revenue	targets.	As	of	September	27,	2008,	the	revenue	targets	have	not	been	achieved	and	we have	not	made	any	payments	for	this	earn-out.

Financing	Leases.	Cytyc	entered	into	a	lease	agreement	on	April	23,	2007	for	a	new	manufacturing	and	office	facility	located	in	Alajuela,	Costa	Rica.	The	lease term	commenced	in	May	2008,	at	which	time	we	began	transferring	our	Costa	Rican	operations	to	this	facility.	We	expect	this	process	to	be	complete	by	the	end	of	the second	quarter	of	fiscal	2009.	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.	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	our	merger with	Cytyc,	we	guaranteed	Cytyc's	obligations	under	this	lease.

Operating	Leases.	The	lease	for	our	headquarters	and	manufacturing	facility	located	in	Bedford,	Massachusetts	and	our	Lorad	manufacturing	facility	in	Danbury, Connecticut,	has	a	term	of	20	years	commencing	August	28,	2002,	with	four	five-year	renewal	terms,	which	we	may	exercise	at	our	option.	The	basic	rent	for	the facilities	is	$3.3	million	per	year,	which	is	subject	to	adjustment	for	increases	in	the	consumer	price	index.	In	addition,	we	are	required	to	maintain	the	facilities	during the	term	of	the	lease	and	to	pay	all	taxes,	insurance,	utilities	and	other	costs	associated	with	those	facilities.	Under	the	lease,	we	make	customary	representations	and warranties	and	agree	to	certain	financial	covenants	and	indemnities.	In	the	event	we	default	on	the	lease,	the	landlord	may	terminate	the	lease,	accelerate	payments	and collect	liquidated	damages.	We	were	in	compliance	with	all	covenants	as	of	September	27,	2008.

As	a	result	of	the	merger	with	Cytyc,	we	assumed	all	of	Cytyc's	outstanding	operating	leases	of	which	the	most	significant	operating	leases	pertain	to	Cytyc's headquarters	located	in	Marlborough,	Massachusetts	which	has	a	15-year	term	that	expires	on	December	31,	2018	with	future	lease	payments	of	approximately	$39.0 million	and	Cytyc's	warehouse	in	Methuen,	Massachusetts	which	has	a	10-year	term	that	expires	on	March	31,	2013	with	future	lease	payments	of	approximately	$1.2 million.	In	addition,	we	are	required	to	maintain	the	facilities	during	the	term	of	the	leases	and	to	pay	all	proportionate	shares	of	taxes,	insurance,	utilities	and	other	costs associated	with	those	facilities.

As	a	result	of	our	acquisition	of	Third	Wave	on	July	24,	2008,	we	assumed	certain	operating	leases,	the	most	significant	of	which	is	related	to	their	corporate facility	in	Madison,	Wisconsin,	which	is	effective	through	September	2014.	Future	lease	payments	on	these	operating	leases	were	approximately	$5.8	million	as	of September	27,	2008.

Additionally,	we	assumed	several	license	agreements	for	certain	patent	rights.	These	payments	will	be	made	through	2011	and	future	payments	under	these	license agreements	are	approximately	$7.0	million	as	of	September	27,	2008.

Contractual	Obligations.	The	following	table	summarizes	our	contractual	obligations	and	commitments	as	of	September	27,	2008:

|  | Less	than |  |  | More	than |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Contractual\tObligations | 1\tyear | 1-3\tyears | 3-5\tyears | 5\tyears | Total |
| Long-Term\tDebt\tObligations | $38,480 | $109,436 | $327,400 | $1,725,584 | $2,200,900 |
| Interest\ton\tLong-Term\tDebt\tObligations | 58,734 | 110,973 | 90,433 | 7,484 | 267,624 |
| Operating\tLeases | 18,528 | 33,162 | 27,199 | 63,616 | 142,505 |
| Purchase\tObligations\t(1) | 33,176 | 15,703 | — | — | 48,879 |
| Financing\tLeases | 2,408 | 5,035 | 5,333 | 15,008 | 27,784 |
| Long-Term\tSupply\tContracts\t(2) | 3,371 | 6,000 | 3,750 | — | 13,121 |
| Private\tEquity\tInvestment\t(3) | 1,874 | — | — | — | 1,874 |
| Total\tContractual\tObligations | $156,571 | $280,309 | $454,115 | $1,811,692 | $2,702,687 |

(1) Approximately	$6.4	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.

(2) As	a	result	of	the	merger	with	Cytyc,	we	assumed	on	a	consolidated	basis	certain	non-cancelable	supply	contracts.	For	reasons	of	quality	assurance,	sole	source availability	or	cost	effectiveness,	certain	key	components	and	raw	materials	are	available	only	from	a	sole	supplier.	To	assure	continuity	of	supply	while maintaining	high	quality	and	reliability,	long-term	supply	contracts	have	been	executed	with	these	suppliers.	In	certain	of	these	contracts,	a	minimum	purchase commitment	has	been	established.

(3) As	a	result	of	the	merger	with	Cytyc,	we	assumed	a	private	equity	investment	commitment	with	a	limited	liability	partnership,	which	could	be	paid	over	the succeeding	three	years.

The	amounts	above	do	not	include	any	amount	that	may	be	payable	to	BioLucent	and	Adiana	for	earn-outs.	We	are	working	on	several	projects	and	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	in	Part	I,	Item	1A	of	this	report	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	Amended	Credit	Agreement	will	provide	us	with sufficient	funds	in	order	to	fund	our	expected	operations	over	the	next	twelve	months.	Our	longer-term	liquidity	is	contingent	upon	future	operating	performance	and	our ability	to	continue	to	meet	financial	covenants	under	our	Amended	Credit	Agreement.	We	may	also	require	additional	capital	in	the	future	to	fund	capital	expenditures, acquisitions	or	other	investments,	or	to	repay	our	convertible	notes.	The	holders	of	the	convertible	notes	may	require	us	to	repurchase	the	notes	on	December	13	of 2013,	and	on	each	of	December	15,	2017,	2022,	2027	and	2032	at	a	repurchase	price	equal	to	100%	of	their	accreted	principal	amount.	These	capital	requirements	could be	substantial.	Our	operating	performance	may	also	be	affected	by	matters	discussed	under	the	above-referenced	Risk	Factors	as	elsewhere	in	this	report.	These	risks, trends	and	uncertainties	may	also	adversely	affect	our	long-term	liquidity.

# Recent	Accounting	Pronouncements

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.	FASB	Staff	Position 157-2,	Effective	Date	of	FASB	Statement	No.	157,	defers	the	effective	date	of	SFAS	157	for	one	year	for	all	nonfinancial	assets	and	nonfinancial	liabilities,	except	for those	items	that	are	recognized	or	disclosed	at	fair	value	in	the	financial	statements	on	a	recurring	basis	(at	least	annually).	Therefore,	we	are	required	to	adopt	SFAS	157 on	the	first	day	of	fiscal	2009	for	financial	assets	and	liabilities	and	nonfinancial	assets	and	nonfinancial	liabilities	that	are	recognized	or	disclosed	at	fair	value	in	the financial	statements	on	a	recurring	basis.	We	are	required	to	adopt	SFAS	157	on	the	first	day	of	fiscal	2010	for	all	other	nonfinancial	assets	and	nonfinancial	liabilities. The	adoption	of	SFAS	157	will	not	have	a	material	impact	on	our	financial	condition	or	results	of	operations.

In	February	2007,	the	FASB	issued	SFAS	No.	159	("SFAS	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.	SFAS	159	also	establishes	additional	disclosure	requirements	for	these items	stated	at	fair	value.	SFAS	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	SFAS	157.	The	adoption	of	SFAS	159	will	not	have	a	material	impact	on	our	financial	condition	or	results	of operations.

In	June	2007,	the	FASB	ratified	EITF	Issue	No.	07-3	("EITF	07-3"),	Accounting	for	Nonrefundable	Advance	Payments	for	Goods	or	Services	to	Be	Used	in Future	Research	and	Development	Activities.	EITF	Issue	No.	07-3	states	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.	EITF	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.	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	should	not	have	any	impact	on	our	consolidated	financial	statements.

In	December	2007,	the	FASB	issued	SFAS	No.	141	(Revised	2007)	("SFAS	141(R)"),	Business	Combinations.	This	Statement	retains	the	fundamental requirements	in	SFAS	141	that	the	acquisition	method	of	accounting	(which	SFAS	141	called	the	purchase	method)	be	used	for	all	business	combinations	and	for	an acquirer	to	be	identified	for	each	business	combination.	SFAS	141(R)	requires	an	acquirer	to	recognize	the	assets	acquired,	the	liabilities	assumed,	and	any noncontrolling	interest	in	the	acquiree	at	the	acquisition	date,	measured	at	their	fair	values	as	of	that	date,	with	limited	exceptions	specified	in	the	Statement.	That replaces	SFAS	141's	cost-allocation	process,	which	required	the	cost	of	an	acquisition	to	be	allocated	to	the	individual	assets	acquired	and	liabilities	assumed	based	on their	estimated	fair	values.	The	Statement	retains	the	guidance	in	SFAS	141	for	identifying	and	recognizing	intangible	assets	separately	from	goodwill.	SFAS	141(R) will	now	require	acquisition	costs	to	be	expensed	as	incurred,	restructuring	costs	associated	with	a	business	combination	must	generally	be	expensed	prior	to	the acquisition	date	and	changes	in	deferred	tax	asset	valuation	allowances	and	income	tax	uncertainties	after	the	acquisition	date	generally	will	affect	income	tax	expense. SFAS	141(R)	applies	prospectively	to	business	combinations	for	which	the	acquisition	date	is	on	or	after	the	beginning	of	the	first

annual	reporting	period	beginning	on	or	after	December	15,	2008,	which	is	our	2010	fiscal	year.	Earlier	adoption	is	prohibited.	We	are	currently	evaluating	the	impact that	the	adoption	of	SFAS	141(R)	will	have	on	our	consolidated	financial	statements.

In	December	2007,	the	FASB	issued	SFAS	No.	160	("SFAS	160"),	Noncontrolling	Interests	in	Consolidated	Financial	Statements—An	amendment	of	ARB No.	51.	SFAS	160	amends	ARB	No.	51	to	establish	accounting	and	reporting	standards	for	the	noncontrolling	interest	in	a	subsidiary	and	for	the	deconsolidation	of	a subsidiary.	It	clarifies	that	a	noncontrolling	interest	in	a	subsidiary	is	an	ownership	interest	in	the	consolidated	entity	that	should	be	reported	as	equity	in	the	consolidated financial	statements.

The	amount	of	net	income	attributable	to	the	noncontrolling	interest	will	be	included	in	consolidated	net	income	on	the	face	of	the	income	statement.	SFAS	160 clarifies	that	changes	in	a	parent's	ownership	interest	in	a	subsidiary	that	do	not	result	in	deconsolidation	are	equity	transactions	if	the	parent	retains	its	controlling financial	interest.	In	addition,	this	Statement	requires	that	a	parent	recognize	a	gain	or	loss	in	net	income	when	a	subsidiary	is	deconsolidated.	SFAS	160	is	effective	for fiscal	years,	and	interim	periods	within	those	fiscal	years,	beginning	on	or	after	December	15,	2008,	which	is	our	2010	fiscal	year.	Earlier	adoption	is	prohibited.

In	March	2008,	the	FASB	issued	SFAS	No.	161	("SFAS	161"),	Disclosures	about	Derivative	Instruments	and	Hedging	Activities,	which	amends	SFAS	No.	133 ("SFAS	133"),	Accounting	for	Derivative	Instruments	and	Hedging	Activities,	by	requiring	expanded	disclosures	about	an	entity's	derivative	instruments	and	hedging activities.	SFAS	161	requires	increased	qualitative,	quantitative,	and	credit-risk	disclosures,	including	(a)	how	and	why	an	entity	uses	derivative	instruments,	(b)	how derivative	instruments	and	related	hedged	items	are	accounted	for	under	SFAS	133	and	its	related	interpretations,	and	(c)	how	derivative	instruments	and	related	hedged items	affect	an	entity's	financial	position,	financial	performance,	and	cash	flows.	We	are	required	to	adopt	SFAS	161	effective	for	the	quarter	ending	March	31,	2009. We	are	currently	evaluating	the	impact	that	the	adoption	of	SFAS	161	will	have	on	our	consolidated	financial	statements.

In	April	2008,	the	FASB	issued	FSP	142-3,	Determination	of	the	Useful	Life	of	Intangible	Assets,	which	amends	the	factors	that	must	be	considered	in developing	renewal	or	extension	assumptions	used	to	determine	the	useful	life	over	which	to	amortize	the	cost	of	a	recognized	intangible	asset	under	SFAS	142.	The	FSP amends	paragraph	11(d)	of	SFAS	142	to	require	an	entity	to	consider	its	own	assumptions	about	renewal	or	extension	of	the	term	of	the	arrangement,	consistent	with	its expected	use	of	the	asset.

The	FSP	also	requires	the	following	incremental	disclosures	for	renewable	intangible	assets:

•	 The	weighted-average	period	prior	to	the	next	renewal	or	extension	(whether	explicit	and	implicit)	for	each	major	intangible	asset	class •	 The	entity's	accounting	policy	for	the	treatment	of	costs	incurred	to	renew	or	extend	the	term	of	a	recognized	intangible	asset •	 For	intangible	asset	renewed	or	extended	during	the	period:

•	 For	entities	that	capitalize	renewal	or	extension	costs,	the	costs	incurred	to	review	or	extend	the	asset,	for	each	major	intangible	asset	class •	 The	weighted-average	period	prior	to	the	next	renewal	or	extension	(whether	explicit	and	implicit)	for	each	major	intangible	asset	class

The	FSP	is	effective	for	financial	statements	for	fiscal	years	beginning	after	December	15,	2008,	which	will	be	the	beginning	of	fiscal	2010	for	us.	The	guidance for	determining	the	useful	life	of	a	recognized	intangible	asset	must	be	applied	prospectively	to	intangible	assets	acquired	after	the	effective	date.	Early	adoption	is prohibited.	Accordingly,	the	FSP	would	not	serve	as	a	basis	to	change	the	useful	life	of	an	intangible	asset	that	was	acquired	prior	to	the	effective	date.	However,	the incremental	disclosure	requirements	described	above

would	apply	to	all	intangible	assets,	including	those	recognized	in	periods	prior	to	the	effective	date	of	the	FSP.	We	are	currently	evaluating	the	impact	that	the	adoption of	this	FSP	will	have	on	our	consolidated	financial	statements.

In	May	2008,	the	FASB	issued	FASB	Staff	Position	("FSP")	No.	APB	14-1,	Accounting	for	Convertible	Debt	Instruments	That	May	Be	Settled	in	Cash	upon Conversion	(Including	Partial	Cash	Settlement).	This	FSP	applies	to	convertible	debt	instruments	that,	by	their	stated	terms,	may	be	settled	in	cash	(or	other	assets)	upon conversion,	including	partial	cash	settlement,	unless	the	embedded	conversion	option	is	required	to	be	separately	accounted	for	as	a	derivative	under	SFAS	133.	The liability	and	equity	components	of	convertible	debt	instruments	within	the	scope	of	this	FSP	must	be	separately	accounted	for	in	a	manner	that	will	reflect	the	entity's nonconvertible	debt	borrowing	rate	when	interest	cost	is	recognized	in	subsequent	periods.	The	excess	of	the	principal	amount	of	the	debt	over	the	amount	ultimately allocated	to	the	liability	component	is	required	to	be	amortized	to	interest	expense	using	the	interest	method.	This	FSP	is	effective	for	financial	statements	issued	for fiscal	years	beginning	after	December	15,	2008,	and	interim	periods	within	those	fiscal	years.	As	a	result,	we	will	adopt	this	standard	at	the	beginning	of	fiscal	2010. This	FSP	must	be	applied	retrospectively	to	all	periods	presented.	The	retrospective	adoption	of	this	FSP	will	increase	our	historical	reported	interest	expense	from December	10,	2007	(issuance	date	of	the	Convertible	Notes)	forward.

The	adoption	of	FSP	APB	14-1	will	have	no	impact	on	our	actual	past	or	future	cash	flows.	However,	upon	adoption	in	fiscal	2010	we	expect	to	revise	prior periods	by	reclassifying	approximately	$470.0	million	of	our	Convertible	Notes	to	additional	paid-in	capital,	resulting	in	a	debt	discount.	Our	fiscal	2008	non-cash interest	expense	will	increase	by	approximately	$48.2	million,	resulting	in	a	restated	diluted	net	loss	per	share	of	approximately	$1.69	per	share,	net	of	tax.

On	May	5,	2008,	Statement	of	Financial	Accounting	Standard	No.	162,	the	Hierarchy	of	Generally	Accepted	Accounting	Principles	("SFAS	162")	was	issued. This	standard	identifies	the	sources	of	accounting	principles	and	the	framework	for	selecting	the	principles	to	be	used	in	the	preparation	of	financial	statements	that	are presented	in	conformity	with	generally	accepted	accounting	principles	in	the	U.S.	We	do	not	expect	the	adoption	of	this	standard	to	have	a	material	impact	on	our consolidated	financial	statements.

In	June	2008,	the	FASB	ratified	the	consensus	reached	on	EITF	Issue	No.	07-05,	Determining	Whether	an	Instrument	(or	Embedded	Feature)	Is	Indexed	to	an Entity's	Own	Stock.	EITF	Issue	No.	07-05	clarifies	the	determination	of	whether	an	instrument	(or	an	embedded	feature)	is	indexed	to	an	entity's	own	stock,	which would	qualify	as	a	scope	exception	under	SFAS	No.	133,	Accounting	for	Derivative	Instruments	and	Hedging	Activities.	EITF	Issue	No.	07-05	is	effective	for	financial statement	issued	for	fiscal	years	beginning	after	December	15,	2008.	Early	adoption	for	an	existing	instrument	is	not	permitted.	We	are	currently	evaluating	the	impact that	the	adoption	of	EITF	Issue	No.	07-05	will	have	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,	accounts	receivable,	and	debt	obligations.	Except	for	our outstanding	convertible	note,	the	fair	value	of	these	financial	instruments	approximates	their	carrying	amount.	As	of	September	27,	2008	we	have	$1.725	billion	of Convertible	Notes	outstanding.	The	fair	value	of	our	Convertible	Notes	was	approximately	$1.3	billion	as	of	September	27,	2008	based	on	the	trading	price	as	of	that date.

Primary	Market	Risk	Exposures.	Our	primary	market	risk	exposures	are	in	the	areas	of	interest	rate	risk	and	foreign	currency	exchange	rate	risk.	We	incur	interest expense	on	borrowings	outstanding	under	our	Amended	Credit	Agreement	and	on	the	debt	assumed	as	a	result	of	our	acquisition	of	AEG.	Borrowings	under	the Amended	Credit	Agreement	bear	interest	at	a	rate	per	annum	equal	to,	at	our	option,	with	respect	to	the

borrowings	under	the	Term	Loan	A	of	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	1.5%	or	(2)	the	Eurodollar	Rate,	plus	2.5%	and	with	respect	to	the	Term	Loan	B	of	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	2.25%	or	(2)	the	Eurodollar	Rate,	plus	3.25%.

On	July	17,	2008,	the	date	we	entered	into	the	Amended	Credit	Agreement,	we	borrowed	$400	million	under	the	Term	Loan	A	and	$140	million	under	the	Term Loan	B.	As	of	September	27,	2008,	there	was	approximately	$465	million	outstanding	under	the	Amended	Credit	Agreement,	including	$344.4	million	under	the	Term Loan	A	facility	which	matures	on	September	30,	2012	and	$120.6	million	under	the	Term	Loan	B	facility	which	matures	on	March	31,	2013.

The	terms	of	the	AEG	debt	agreements	have	various	maturities	ranging	from	December	30,	2010	through	March	30,	2014.	Interest	rates	are	variable	and	had weighted	average	interest	rates	ranging	from	5.5%	to	7.2%	during	the	twelve	months	ended	September	27,	2008.	We	may	also	incur	interest	expense	on	loans	made under	a	European	line	of	credit	that	accrues	interest	at	the	Europe	Interbank	Offered	Rate	7.5%,	as	defined.	At	September	27,	2008,	there	were	no	amounts	outstanding under	the	European	line	of	credit.

These	debt	obligations	are	variable	rate	instruments	and	our	interest	expense	associated	with	these	instruments	is,	therefore,	subject	to	changes	in	market	interest rates.	A	10%	adverse	movement	(increase	in	LIBOR)	would	increase	annual	interest	expense	by	approximately	$2.4	million.

The	return	from	cash	and	cash	equivalents	will	vary	as	short-term	interest	rates	change.	A	hypothetical	10%	increase	or	decrease	in	interest	rates,	however,	would not	have	a	material	adverse	effect	on	our	financial	condition.	Interest	income	on	our	cash	and	cash	equivalents	is	recorded	as	a	component	of	Other	Income	in	our accompanying	Consolidated	Statements	of	Operations.

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	2008,	2007	and	2006,	we incurred	foreign	exchange	(losses)	gains	of	approximately	($658,000),	($440,000)	and	$30,000,	respectively.

# 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.

# 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	27,	2008,	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	27,	2008.	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	Third	Wave Technologies,	Inc.,	a	business	we	acquired	on	July	24,	2008	and	which	is	included	in	our	fiscal	2008	consolidated	financial	statements	and	constituted	approximately $391.3	million	and	$389.9	million	of	total	and	net	assets,	respectively,	as	of	September	27,	2008	and	approximately	$5.9	million	and	$205.6	million	of	revenues	and	net loss,	respectively,	for	the	year	ended	September	27,	2008.

Based	on	our	assessment,	we	believe	that,	as	of	September	27,	2008,	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	27,	2008,	based	on	criteria	established	in	Internal Control—Integrated	Framework	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission	(the	COSO	criteria).	The	Company'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	Third	Wave	Technologies,	Inc.,	a	business	acquired	by	Hologic.	Inc. during	the	year-ended	September	27,	2008,	which	is	included	in	the	2008	consolidated	financial	statements	of	Hologic,	Inc.	and	constituted	approximately	$391.3 million	and	$389.9	million	of	total	and	net	assets,	respectively,	as	of	September	27,	2008	and	approximately	$5.9	million	and	$205.6	million	of	revenues	and	net	loss respectively,	for	the	year	ended	September	27,	2008.	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	Third	Wave	Technologies,	Inc.

In	our	opinion,	Hologic,	Inc.	maintained,	in	all	material	respects,	effective	internal	control	over	financial	reporting	as	of	September	27,	2008,	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	27,	2008	and	September	29,	2007	and	the	related	consolidated	statements	of	operations,	stockholders'	equity	and	other	comprehensive income	(loss)	and	cash	flows	for	each	of	the	three	years	in	the	period	ended	September	27,	2008	of	Hologic,	Inc.	and	our	report	dated	November	24,	2008	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	integrate	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	27,	2008	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	splits	effected	on	November	30,	2005	and	April	2,	2008.

# 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 | 15,370,814 | $16.10 | 19,977,099 |
| Equity\tcompensation\tplans\tnot\tapproved\tby\tsecurity\tholders\t(1) | 582,881 | $3.79 | — |
| Total | 15,953,695 | $15.65 | 19,977,099 |

(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	4,400,000	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	352,703	shares	are	outstanding	as	of	September	27,	2008.	In	September	2005,	our	Board	of Directors	determined	that	no	further	awards	would	be	made	under	this	plan	and	cancelled	all	remaining	332,168	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	3,200,000	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	230,178	shares	are	outstanding	as	of	September	27,	2008.	In	September	2005,	the Board	of	Directors	determined	that	no	further	awards	would	be	made	under	this	plan	and	cancelled	all	remaining	835,408	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	27,	2008	and	September	29,	2007

Consolidated	Statements	of	Operations	for	the	years	ended	September	27,	2008,	September	29,	2007	and	September	30,	2006

Consolidated	Statements	of	Stockholders'	Equity	and	Comprehensive	Income	(Loss)	for	the	years	ended	September	27,	2008,	September	29,	2007	and September	30,	2006

Consolidated	Statements	of	Cash	Flows	for	the	years	ended	September	27,	2008,	September	29,	2007	and	September	30,	2006

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

** 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)	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

J 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.

K 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.

L 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)	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

M 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.

N 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)	and	the previously	filed	exhibit	is	incorporated	herein	by	reference.

O 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)	and	the previously	filed	exhibit	is	incorporated	herein	by	reference.

P 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)	and the	previously	filed	exhibit	is	incorporated	herein	by	reference.

Q 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) and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

R 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)	and	the previously	filed	exhibit	is	incorporated	herein	by	reference.

S 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) and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

T 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)	and	the previously	filed	exhibit	is	incorporated	herein	by	reference.

U 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.

V 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.

W 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.

X 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.

Y 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.

Z 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.

AA We	previously	filed	this	exhibit	on	September	17,	2002	with	the	referenced	exhibit	number	as	an	exhibit	to	our	Registration	Statement	on	Form	8-A	(SEC	File	No. 000-18218)	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

BB We	previously	filed	this	exhibit	on	June	9,	2008	with	the	referenced	exhibit	number	as	an	exhibit	to	our	Current	Report	on	Form	8-K	(SEC	File	No.	000-18281) and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

CC We	previously	filed	this	exhibit	on	March	11,	2008	with	the	referenced	exhibit	number	as	an	exhibit	to	our	Current	Report	on	Form	8-K	(SEC	File	No.	000- 18281)	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

DD We	previously	filed	this	exhibit	on	September	23,	2008	with	the	referenced	exhibit	number	as	an	exhibit	to	our	Current	Report	on	Form	8-K	(SEC	File	No.	000- 18281)	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

EE We	previously	filed	this	exhibit	on	April	3,	2008	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.

FF We	previously	filed	this	exhibit	on	December	7,	2007	with	the	referenced	exhibit	number	as	an	exhibit	to	our	Current	Report	on	Form	8-K	(SEC	File	No.	000- 18281)	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

GG We	previously	filed	this	exhibit	on	November	17,	2008	with	the	referenced	exhibit	number	as	an	exhibit	to	our	Current	Report	on	Form	8-K	(SEC	File	No.	000- 18281)	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

HH We	previously	filed	this	exhibit	on	May	8,	2008	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	29,	2008,	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

II We	previously	filed	this	exhibit	on	January	17,	2008	with	the	referenced	exhibit	number	as	an	exhibit	to	our	Current	Report	on	Form	8-K	(SEC	File	No.	000- 18281)	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

JJ We	previously	filed	this	exhibit	on	July	17,	2008	with	the	referenced	exhibit	number	as	an	exhibit	to	our	Current	Report	on	Form	8-K	(SEC	File	No.	000-18281) and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

KK Third	Wave	Technologies,	Inc.	previously	filed	this	exhibit	on	July	31,	2000	with	the	referenced	exhibit	number	as	an	exhibit	to	its	Registration	Statement	on Form	S-1	(SEC	File	No.	333-42694)	and	the	previously	filed	exhibit	is	incorporated	by	reference.

LL Third	Wave	Technologies,	Inc.	previously	filed	this	exhibit	on	June	6,	2006	with	the	referenced	exhibit	number	as	an	exhibit	to	its	Registration	Statement	on Form	S-8	(SEC	File	No.	333-134783)	and	the	previously	filed	exhibit	is	incorporated	by	reference.

MM Third	Wave	Technologies,	Inc.	previously	filed	this	exhibit	on	March	16,	2007	with	the	referenced	exhibit	number	as	an	exhibit	to	its	Annual	Report	on	Form	10- K	(SEC	File	No.	000-31745)	for	the	fiscal	year	ended	December	31,	2006,	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

NN Third	Wave	Technologies,	Inc.	previously	filed	this	exhibit	on	March	7,	2008	with	the	referenced	exhibit	number	as	an	exhibit	to	its	Annual	Report	on	Form	10-K (SEC	File	No.	000-31745)	for	the	fiscal	year	ended	December	31,	2007,	and	the	previously	filed	exhibit	is	incorporated	herein	by	reference.

OO We	previously	filed	this	exhibit	on	November	27,	2007	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,	2007,	and	the	previously	filed	exhibit	is	incorporated	herein	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	27,	2008	and	September	29,	2007,	and	the related	consolidated	statements	of	operations,	stockholders'	equity	and	other	comprehensive	income	(loss),	and	cash	flows	for	each	of	the	three	years	in	the	period	ended September	27,	2008.	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	consolidated	financial	statements	referred	to	above	present	fairly,	in	all	material	respects,	the	consolidated	financial	position	of	Hologic,	Inc. and	subsidiaries	at	September	27,	2008	and	September	29,	2007,	and	the	consolidated	results	of	their	operations	and	their	cash	flows	for	each	of	the	three	years	in	the period	ended	September	27,	2008,	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).

As	discussed	in	Note	8	to	the	consolidated	financial	statements,	as	of	September	30,	2008,	the	Company	adopted	the	provisions	of	FASB	Interpretation	No.	48, Accounting	for	Uncertainty	in	Income	Taxes	an	interpretation	of	FASB	Statement	No.	109.

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	27,	2008,	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	24,	2008	expressed	an	unqualified	opinion	thereon.

# Consolidated	Balance	Sheets

(In	thousands,	except	per	share	data)

|  | September	27,<br>2008 | September	29,<br>2007 |
| :--- | :--- | :--- |
| Assets |  |  |
| Current\tassets: |  |  |
| Cash\tand\tcash\tequivalents | $95,661 | $100,403 |
| Restricted\tcash | 3,629 | — |
| Accounts\treceivable,\tless\treserves\tof\t$6,532\tand\t$4,598\trespectively\t(\nNote\t18) | 327,201 | 152,743 |
| Inventories,\tnet | 174,667 | 105,289 |
| Deferred\tincome\ttax\tassets,\tnet | 53,660 | 29,356 |
| Income\ttax\trefundable | 17,797 | 61 |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | 20,963 | 11,328 |
| Total\tcurrent\tassets | 693,578 | 399,180 |
| Property\tand\tequipment,\tat\tcost: |  |  |
| Land | 8,978 | 2,710 |
| Buildings\tand\timprovements | 55,743 | 28,577 |
| Equipment\tand\tsoftware | 273,105 | 81,390 |
| Furniture\tand\tfixtures | 11,083 | 6,044 |
| Leasehold\timprovements | 38,620 | 6,636 |
|  | 387,529 | 125,357 |
| Less—accumulated\tdepreciation\tand\tamortization | 103,554 | 55,588 |
|  | 283,975 | 69,769 |
| Other\tassets: |  |  |
| Developed\ttechnology\tand\tknow-how,\tnet\tof\taccumulated\tamortization\tof\t$112,568\tand\t$19,625,\trespectively | 2,023,121 | 112,632 |
| Customer\trelationship,\tnet\tof\taccumulated\tamortization\tof\t$22,509\tand\t$6,303,\trespectively | 461,627 | 49,389 |
| Other\tintangible\tassets,\tnet\tof\taccumulated\tamortization\tof\t$18,407\tand\t$9,149,\trespectively | 144,903 | 12,340 |
| Goodwill | 4,450,496 | 407,528 |
| Other,\tnet | 76,932 | 15,511 |
| Total\tassets | $8,134,632 | $1,066,349 |
| Liabilities |  |  |
| Current\tliabilities: |  |  |
| Current\tportion\tof\tlong-term\tdebt | $38,480 | $1,977 |
| Accounts\tpayable | 59,590 | 42,289 |
| Accrued\texpenses\t(Note\t15) | 154,746 | 88,577 |
| Deferred\trevenue | 78,559 | 45,769 |
| Deferred\tgain\t(Note\t5) | 9,500 | — |
| Total\tcurrent\tliabilities | 340,875 | 178,612 |
| Long-term\tdebt,\tnet\tof\tcurrent\tportion\t(Note\t6) | 437,420 | 9,222 |
| Convertible\tdebt\t(Note\t6) | 1,725,000 | — |
| Deferred\tincome\ttax\tliabilities,\tnet | 920,838 | 54,866 |
| Deferred\tservice\tobligations—long-term | 10,777 | 10,135 |
| Other\tlong-term\tliabilities\t(Note\t15) | 57,453 | 7,791 |
| Commitments\tand\tcontingencies\t(Notes\t13\tand\t16) |  |  |
| Stockholders'\tequity |  |  |
| Preferred\tstock,\t$0.01\tpar\tvalue–1,623\tshares\tauthorized;\t0\tshares\tissued | — | — |
|  | 2,564 | 1,103 |
| Capital\tin\texcess\tof\tpar\tvalue | 4,853,837 | 633,477 |
| Retained\t(deficit)\tearnings | (217,644) | 168,453 |
| Accumulated\tother\tcomprehensive\tincome | 4,945 | 4,123 |
| Treasury\tstock,\tat\tcost—214\tshares | (1,433) | (1,433) |
| Total\tstockholders'\tequity | 4,642,269 | 805,723 |
| Total\tliabilities\tand\tstockholders'\tequity | $8,134,632 | $1,066,349 |

See	accompanying	notes.

# Consolidated	Statements	of	Operations

|  | September	27,<br>2008 | September	29,<br>2007 | September	30,<br>2006 |
| :--- | :--- | :--- | :--- |
| Revenues: |  |  |  |
| Product\tsales | $1,502,447 | $628,854 | $388,111 |
| Service\tand\tother\trevenues | 172,052 | 109,514 | 74,569 |
|  | 1,674,499 | 738,368 | 462,680 |
| Costs\tand\texpenses\t(1): |  |  |  |
| Cost\tof\tproduct\tsales | 535,082 | 267,470 | 188,443 |
| Cost\tof\tproduct\tsales—amortization\tof\tintangible\tassets | 95,310 | 11,262 | 5,011 |
| Cost\tof\tservice\tand\tother\trevenues | 151,589 | 114,307 | 75,921 |
| Research\tand\tdevelopment | 81,421 | 44,381 | 28,113 |
| Selling\tand\tmarketing | 261,524 | 85,520 | 56,239 |
| General\tand\tadministrative | 147,405 | 62,092 | 42,176 |
| Amortization\tof\tacquired\tintangible\tassets | 25,227 | 5,584 | 1,631 |
| Restructuring\t(Notes\t2\tand\t12) | 6,383 | — | — |
| Impairment\tof\tacquired\tintangible\tassets\t(Note\t2) | 2,900 | — | — |
| Net\tgain\ton\tsale\tof\tintellectual\tproperty | — | — | (5,093) |
| Acquired\tin-process\tresearch\tand\tdevelopment | 565,200 | — | 19,900 |
|  | 1,872,041 | 590,616 | 412,341 |
| (Loss)\tincome\tfrom\toperations | (197,542) | 147,752 | 50,339 |
| Interest\tincome | 4,528 | 2,815 | 4,082 |
| Interest\texpense | (84,912) | (2,511) | (1,230) |
| Other\t(expense)\tincome,\tnet | (1,215) | 433 | 32 |
| (Loss)\tincome\tbefore\tincome\ttaxes | (279,141) | 148,489 | 53,223 |
| Provision\tfor\tincome\ttaxes | 106,476 | 53,911 | 25,800 |
| Net\t(loss)\tincome | $(385,617) | $94,578 | $27,423 |
| Basic\tnet\t(loss)\tincome\tper\tcommon\tand\tcommon\tequivalent\tshare | $(1.57) | $0.88 | $0.29 |
| Diluted\tnet\t(loss)\tincome\tper\tcommon\tand\tcommon\tequivalent\tshare | $(1.57) | $0.86 | $0.28 |
| Weighted\taverage\tnumber\tof\tcommon\tshares\toutstanding:\nBasic | 245,968 | 106,873 | 93,025 |
| Diluted | 245,968 | 109,669 | 97,240 |

# Consolidated	Statements	of	Stockholders'	Equity	and	Comprehensive	Income	(Loss)

|  | 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 | (Loss)\tIncome | Equity | Income\t(Loss) |
| Balance\tat\tSeptember\t24,\t2005 | 88,591 | $886 | $172,199 | $46,452 | 180 | $(464) | $(1,239) | $217,834 |  |
| Issuance\tof\tcommon\tstock\trelated\tto\tacquisitions | 13,846 | 138 | 317,137 | — | — | — | — | 317,275 |  |
| Exercise\tof\tstock\toptions | 2,853 | 29 | 10,533 | — | — | — | — | 10,562 |  |
| Stock-based\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 | 105,290 | 1,053 | 531,728 | 73,875 | 180 | (464) | (442) | 605,750 |  |
| Issuance\tof\tcommon\tstock\trelated\tto\tacquisitions | 2,315 | 23 | 63,155 | — | — | — | — | 63,178 |  |
| Exercise\tof\tstock\toptions | 2,695 | 27 | 10,564 | — | — | — | — | 10,591 |  |
| Stock-based\tcompensation\texpense | — | — | 6,104 | — | — | — | — | 6,104 |  |
| Purchase\tof\ttreasury\tshares\tto\tsettle\tminimum\twithholding\ttaxes | — | — | — | — | 34 | (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 | 110,300 | 1,103 | 633,477 | 168,453 | 214 | (1,433) | 4,123 | 805,723 |  |
| Issuance\tof\tcommon\tstock\trelated\tto\tacquisitions | 132,060 | 1,321 | \t 3,670,818 | — | — | — | — | 3,672,139 |  |
| Exercise\tof\tstock\toptions | 11,398 | 114 | 170,995 | — | — | — | — | 171,109 |  |
| Fair\tvalue\tof\tcommon\tstock\tissued\tin\tconnection\twith\tconversion\tof |  |  |  |  |  |  |  |  |  |
| Cytyc\tconvertible\tdebt | 2,557 | 25 | 84,176 | — | — | — | — | 84,201 |  |
| Fair\tvalue\tof\tvested\toptions\texchanged\trelated\tto\tacquisitions | — | — | 256,941 | — | — | — | — | 256,941 |  |
| Issuance\tof\tcommon\tstock\tto\temployees\tunder\tbenefit\tplans,\tnet | 58 | 1 | (1,343) | — | — | — | — | (1,342) |  |
| Stock-based\tcompensation\texpense | — | — | 25,664 | — | — | — | — | 25,664 |  |
| Tax\tbenefit\trelated\tto\texercise\tof\tstock\toptions | — | — | 13,109 | — | — | — | — | 13,109 |  |
| Cumulative\teffect\tof\ta\tchange\tin\taccounting\tprinciple—FIN\t48 | — | — | — | (480) | — | — | — | (480) |  |
| Net\tloss | — | — | — | (385,617) | — | — | — | (385,617) | $(385,617) |
| Translation\tadjustments | — | — | — | — | — | — | 1,092 | 1,092 | 1,092 |
| Adjustment\tto\tminimum\tpension\tliability,\tnet | — | — | — | — | — | — | (270) | (270) | (270) |
| Comprehensive\tloss |  |  |  |  |  |  |  |  | $(384,795) |
| Balance\tat\tSeptember\t27,\t2008 | 256,373 | $2,564 | $4,853,837 | $(217,644) | 214 | $(1,433) | $4,945 | $4,642,269 |  |

# Consolidated	Statements	of	Cash	Flows

# (In	thousands)

|  | September	27,<br>2008 | September	29,<br>2007 | September	30,<br>2006 |
| :--- | :--- | :--- | :--- |
| Operating\tactivities |  |  |  |
| Net\t(loss)\tincome | $(385,617) | $94,578 | $27,423 |
| Adjustments\tto\treconcile\tnet\t(loss)\tincome\tto\tnet\tcash\tprovided\tby\toperating\tactivities: |  |  |  |
| Depreciation | 52,413 | 14,291 | 9,492 |
| Amortization | 120,537 | 16,871 | 6,641 |
| Impairment\tcharge\ton\tsale\tof\tintellectual\tproperty | — | — | 1,407 |
| Increase\tin\tunrecognized\tincome\ttax\tbenefits | 1,363 | — | — |
| Fair\tvalue\twrite-up\tof\tCytyc\tand\tThird\tWave\tinventory | 46,258 | — | — |
| Non-cash\tinterest\texpense | 20,541 | 181 | 15 |
| Non-cash\tinterest\tincome | (58) | — | — |
| Tax\tbenefit\trelated\tto\texercise\tof\tstock\toptions | (62,740) | (21,926) | (27,908) |
| Acquired\tin-process\tresearch\tand\tdevelopment | 565,200 | — | 19,900 |
| Impairment\tcharge\ton\tacquired\tintangibles | 2,900 | — | — |
| Stock-based\tcompensation\texpense | 24,333 | 6,104 | 3,951 |
| Deferred\tincome\ttaxes | (10,365) | 5,873 | (5,797) |
| Loss\ton\tdisposal\tof\tproperty\tand\tequipment\tand\tintangible\tassets | 1,740 | 734 | 420 |
| Changes\tin\tassets\tand\tliabilities,\tnet\tof\tacquisitions: |  |  |  |
| Accounts\treceivable | (48,436) | (39,270) | (9,545) |
| Inventories | (29,595) | (7,997) | (23,023) |
| Income\ttax\trefundable | 74,408 | — | — |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | (9,966) | (3,981) | 92 |
| Accounts\tpayable | (10,189) | 14,265 | 3,940 |
| Accrued\texpenses | (15,153) | 59,008 | 6,832 |
| Deferred\trevenue | 27,022 | 14,519 | 2,673 |
| Net\tcash\tprovided\tby\toperating\tactivities | 364,596 | 153,250 | 16,513 |
| Investing\tactivities |  |  |  |
| Acquisition\tof\tbusinesses,\tnet\tof\tcash\tacquired | (2,\t584,947) | (9,793) | (171,828) |
| Net\tcash\tpaid\tfor\tacquisition\tof\tintangible\tassets | — | — | (27,594) |
| Proceeds\tfrom\tsale\tof\tintellectual\tproperty | 3,000 | — | 6,500 |
| Payment\tof\tadditional\tacquisition\tconsideration | (24,394) | (19,033) | — |
| Proceeds\tfrom\tsale\tof\tbuilding | — | 1,427 | — |
| Proceeds\tfrom\tsale\tof\tcost\tmethod\tinvestment | 936 | 2,150 | — |
| Purchase\tof\tcost\tmethod\tinvestment | — | (1,000) | — |
| Purchases\tof\tinvestment\tsecurities | (263) | — | — |
| Proceeds\tfrom\tsales\tand\tmaturities\tof\tinvestment\tsecurities | 2,638 | — | — |
| Acquisition\tof\tminority\tinterest | — | (1,100) | — |
| Deferred\tacquisition\tcosts | — | (6,393) | — |
| Increase\tin\tequipment\tunder\tcustomer\tusage\tagreements | (24,983) | — | — |
| Purchase\tof\tproperty\tand\tequipment | (53,284) | (22,840) | (12,989) |
| Increase\tin\trestricted\tcash | (1,332) | — | — |
| Increase\tin\tother\tassets | (6,365) | (5,536) | (1,679) |
| Deferred\tgain | 9,500 | — | — |
| (Decrease)\tincrease\tin\tother\tliabilities | (806) | 2,\t892 | 15,608 |
| Net\tcash\tused\tin\tinvesting\tactivities | (2,680,300) | (59,226) | (191,982) |

# Consolidated	Statements	of	Cash	Flows	(continued)

|  | September	27,<br>2008 | September	29,<br>2007 | September	30,<br>2006 |
| :--- | :--- | :--- | :--- |
| Financing\tactivities |  |  |  |
| Proceeds\tfrom\tissuance\tof\tconvertible\tnotes,\tnet\tof\tissuance\tcosts | 1,688,974 | — | — |
| Payments\tupon\tconversion\tof\tCytyc\tconvertible\tnotes | (40,574) | — | — |
| Proceeds\tunder\tcredit\tagreements,\tnet\tof\tissuance\tcosts | 2,855,609 | — | 65,000 |
| Repayments\tunder\tcredit\tagreements | (2,425,000) | (55,000) | (10,000) |
| Increase\tin\tnote\tpayable | 2,062 | 6,889 | — |
| Repayments\tof\tnotes\tpayable | (2,895) | (5,884) | (2,948) |
| Tax\tbenefit\trelated\tto\texercise\tof\tstock\toptions | 62,740 | 21,926 | 27,908 |
| Net\tproceeds\tfrom\tsale\tof\tcommon\tstock\tpursuant\tto\tstock\tplans | 171,014 | 10,578 | 10,639 |
| Purchase\tof\ttreasury\tshares\tto\tsettle\tminimum\twithholding\ttaxes | — | (969) | — |
| Net\tcash\tprovided\tby\t(used\tin)\tfinancing\tactivities | 2,311,930 | (22,460) | 90,599 |
| Effect\tof\texchange\trate\tchanges\ton\tcash\tand\tcash\tequivalents | (968) | (1,084) | 799 |
| Net\t(decrease)\tincrease\tin\tcash\tand\tcash\tequivalents | (4,742) | 70,480 | (84,071) |
| Cash\tand\tcash\tequivalents,\tbeginning\tof\tyear | 100,403 | 29,923 | 113,994 |
| Cash\tand\tcash\tequivalents,\tend\tof\tyear | $95,661 | $100,403 | $29,923 |
| Supplemental\tDisclosure\tof\tCash\tFlow\tInformation: |  |  |  |
| Cash\tpaid\tduring\tthe\tperiod\tfor\tincome\ttaxes | $40,971 | $8,344 | $1,817 |
| Cash\tpaid\tduring\tthe\tperiod\tfor\tinterest | $51,786 | $2,246 | $1,077 |
| Supplemental\tDisclosure\tof\tNon-Cash\tInvesting\tActivities: |  |  |  |
| Additional\tbusiness\tacquisition\tcontingent\tconsideration | $73 | $— | $— |
| Exchange\tof\tnote\treceivable\tfor\tintangible\tassets | $— | $— | $5,428 |
| Supplemental\tDisclosure\tof\tNon-Cash\tFinancing\tActivities: |  |  |  |
| Issuance\tof\tcommon\tstock\tupon\tconversion\tof\tCytyc\tconvertible\tnotes | $84,201 | $— | $— |
| Business\tAcquisitions,\tNet\tof\tCash\tAcquired: |  |  |  |
| Fair\tvalue\tof\ttangible\tassets\tacquired | $695,113 | $5,148 | $152,077 |
| Liabilities\tassumed | (301,441) | (11,798) | (135,623) |
| Fair\tvalue\tof\toptions\texchanged | (249,460) | — | — |
| Fair\tvalue\tof\tstock\tissued | (3,671,513) | (63,178) | (317,275) |
| Cost\tin\texcess\tof\tfair\tvalue\tof\tassets\tacquired\t(Goodwill) | 4,071,767 | 47,774 | 335,709 |
| Acquired\tidentifiable\tintangible\tassets | 2,579,500 | 32,100 | 132,100 |
| Deferred\ttax\tliability | (982,630) | — | — |
| In-process\tresearch\tand\tdevelopment | 565,200 | — | 15,700 |
|  | 2,706,536 | 10,046 | 182,688 |
| Less\tacquisition\tcosts\tpaid\tprior\tto\tSeptember\t29,\t2007 | 6,400 | — | — |
| Less\tcash\tand\tcash\tequivalents\tacquired | 115,189 | 253 | 10,860 |
| Net\tcash\tpaid\tfor\tbusiness\tacquisition | $2,584,947 | $9,793 | $171,828 |

# 1. Operations

Hologic,	Inc.	(the	"Company"	or	"Hologic")	develops,	manufactures	and	distributes	medical	imaging	systems	and	diagnostic	and	surgical	products	focused	on	the healthcare	needs	of	women.

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	the	Company's	business	combination	with	Cytyc,	as	more	fully	described	in	Note	3,	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.	For	such	consolidated	entities	in	which	the	Company	owns	less	than	100% interest,	it	will	record	minority	interest	in	its	Consolidated	Statement	of	Operations	for	the	ownership	interest	of	the	minority	owner.	All	significant	intercompany transactions	and	balances	have	been	eliminated	in	consolidation.

# Reclassifications

Amortization	expense	for	patents	previously	recorded	within	general	and	administrative	expenses	and	research	and	development	expenses	totaling	$238	and	$227 for	fiscal	years	2007	and	2006,	respectively,	has	been	reclassified	to	cost	of	product	sales—amortization	of	intangible	assets.	Certain	customer	support	expenses previously	recorded	in	general	and	administrative	expenses	totaling	$675	and	$329	for	fiscal	years	2007	and	2006,	respectively,	have	been	reclassified	to	selling	and marketing	expenses.	Both	of	these	statement	of	operations	reclassifications	have	been	made	to	conform	with	the	current	period	presentation.

The	Company	has	identified	certain	costs	recorded	within	"Cost	of	Service	and	Other	Revenues"	in	its	Consolidated	Statement	of	Operations	during	the	first	three quarters	of	fiscal	2008	that	more	appropriately	should	be	classified	as	"Cost	of	Product	Sales"	totaling	$34,949.	The	Company	determined	that	the	reclassification	is	not material	to	its	consolidated	financial	statements	and	has	corrected	the	classification	in	the	fourth	quarter	of	fiscal	2008	to	present	the	appropriate	classification	for	the year	ended	September	27,	2008.	In	future	quarterly	filings,	the	Company	will	reclassify	these	costs	related	to	prior	periods	to	the	current	presentation,	which	will	result in	an	increase	in	"Cost	of	Product	Sales"	and	a	corresponding	decrease	in	"Cost	of	Service	and	Other

# Notes	to	Consolidated	Financial	Statements	(continued)

Revenues"	of	$9,312	in	the	three	months	ended	December	29,	2007;	$12,344	in	the	three	months	ended	March	29,	2008;	and	$13,293	in	the	three	months	ended	June	28, 2008.	The	Company	has	also	reclassified	$2,319	and	$1,581	of	royalty	expense	for	fiscal	2007	and	2006,	respectively,	in	the	accompanying	Consolidated	Statement	of Operations	from	"Cost	of	Services	and	Other	Revenues"	to	"Cost	of	Product	Sales"	to	conform	to	the	current	presentation.	In	addition,	the	Company	has	identified	that the	excess	tax	benefit	related	to	the	exercise	of	vested	stock	options	exchanged	in	connection	with	the	Company's	acquisition	of	Cytyc	Corporation	recognized	during the	second	and	third	quarters	of	fiscal	2008	would	be	more	appropriately	classified	as	a	cash	flows	provided	by	financing	activities	instead	of	a	cash	flows	provided	by operating	activities.	The	Company	has	determined	that	the	reclassification	is	not	material	to	its	consolidated	financial	statements	and	has	corrected	the	classification	in the	fourth	quarter	of	fiscal	2008	to	present	the	appropriate	classification	in	the	accompanying	Consolidated	Statement	of	Cash	Flows	for	the	year	ended	September	27, 2008.	In	future	quarterly	filings,	the	Company	will	reclassify	these	cash	flows	related	to	prior	periods	to	the	current	presentation,	which	will	result	in	a	reduction	of	cash flows	provided	by	operating	activities	for	the	six-month	period	ended	March	29,	2008	and	the	nine-month	period	ended	June	28,	2008	of	approximately	$21,000	and $40,000,	respectively,	with	corresponding	increases	in	the	cash	flows	provided	by	financing	activities	for	those	periods.

# 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.

On	April	2,	2008,	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	accounting	principles	generally	accepted	in	the	United	States	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	and	assumptions	by	management	affect	the	Company's revenue	recognition	for	multiple	element	arrangements,	estimated	fair	values	of	cost	method	investments,	allowance	for	doubtful	accounts,	reserves	for	excess	and obsolete	inventories,	valuations	and	purchase	price	allocations	related	to	business	combinations,	expected	future	cash	flows	used	to	evaluate	the	recoverability	of	long- lived	assets	and	goodwill,	estimated	fair	values	of	intangible	assets	and	goodwill,	amortization	methods	and	periods,	warranty	reserves,	certain	accrued	expenses, restructuring	and	other	related	charges,	stock-based	compensation,	pension	liabilities,	contingent	liabilities,	tax	reserves	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	could	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,	dependence	on	third	party reimbursements	to	support	the	markets	of	the	Company's	products,	early	stage	of	development	of	certain	products,	rapid	technological	changes,	recoverability	of	long- lived	assets,	including	intangible	assets	and	goodwill,	competition,	current	crisis	affecting	world	financial	markets,	ability	to	obtain	regulatory	approvals,	limited number	of	suppliers,	customer	concentration,	integration	of	acquisitions,	substantial	indebtedness,	government	regulations,	future	sales	or	issuances	of	our	common stock,	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	27,	2008	and	September	29,	2007	the	Company's	cash	equivalents	consisted	of	certificates	of	deposit	and	money	market	accounts,	respectively.

# Restricted	Cash

Restricted	cash	is	primarily	comprised	of	bank	deposits	to	fund	deferred	compensation	payments	to	former	executives.	The	Company	expects	to	make	all payments	within	fiscal	2009.

# 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.	On a	very	limited	basis,	the	Company	has	transacted	derivative	financial	instrument	contracts	with	major	financial	institutions.	The	impact	of	these	derivative	contracts	was not	material	to	the	Company's	Consolidated	Statements	of	Operations	during	any	period	in	the	three	years	ended	September	27,	2008.	There	were	no	derivative	contracts outstanding	as	of	September	27,	2008	and	September	29,	2007.	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	as	well	as	global	economic	conditions,	management	does	not	believe	significant	credit	risk	exists	as	of September	27,	2008.	The	Company	generally	has	not	experienced	any	material	losses	related	to	receivables	from	individual	customers	or	groups	of	customers	in	the health	care	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	27,	2008	and	September	29,	2007,	nor	customers	that represented	greater	than	10%	of	total	revenues	for	fiscal	2008,	2007	and	2006.

# Disclosure	of	Fair	Value	of	Financial	Instruments

The	Company's	financial	instruments	mainly	consist	of	cash	and	cash	equivalents,	accounts	receivable,	cost-method	investments,	and	debt	obligations.	The carrying	amounts	of	the	Company's	cash	equivalents	and	accounts	receivable	approximate	fair	value	due	to	the	short-term	nature	of	these	instruments.	Amounts outstanding	under	the	Company's	Amended	Credit	Agreement	(See	Note	6)	are	subject	to	variable	rates	of	interest	based	on	current	market	rates;	as	such,	the	Company believes	the	carrying	amounts	of	this	obligation	approximate	its	fair	value.

The	Company's	AEG	subsidiary	also	has	several	notes	payable	outstanding	(See	Note	6).	These	notes	payable	are	denominated	in	either	the	Euro	or	US	dollar and	have	variable	rates	of	interest.	As	of	September	27,	2008,	amounts	outstanding	under	these	notes	payable	approximate	their	fair	value	based	on	comparable	market terms	and	conditions.

The	Company	has	$1,725,000	of	Convertible	Notes	outstanding	(See	Note	6)	as	of	September	27,	2008.	The	fair	value	of	these	Convertible	Notes	was approximately	$1,300,000	as	of	September	27,	2008	based	on	the	trading	prices	as	of	that	date.

# Inventories

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

|  | September	27,<br>2008 | September	29,<br>2007 |
| :--- | :--- | :--- |
| Raw\tmaterials\tand\twork-in-process | $106,291 | $69,400 |
| Finished\tgoods | 68,376 | 35,889 |
|  | $174,667 | $105,289 |

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	fiscal	2008	and	fiscal	2007	the	Company	recorded	a	$1,000	and	$2,000	provision	to	cost	of	product	sales	in	the accompanying	Consolidated	Statements	of	Operations,	respectively	for	excess	inventory	related	to	certain	of	its	MRI	finished	goods	on	hand.	Please	refer	to	Note	13, "Commitments	and	Contingencies",	for	additional	information	related	to	the	Company's	purchase	commitments	for	its	MRI	product	line.

# Property	and	Equipment

The	Company	provides	for	depreciation	and	amortization	by	charges	to	operations,	using	the	straight-line	method,	which	allocates	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	$3,215,	$341,	and	$664 during	fiscal	2008,	2007	and	2006,	respectively,	related	to	a	company	wide	Enterprise	Resource	Planning	("ERP")	system	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.

As	a	result	of	the	Cytyc	merger,	the	Company	assumed	two	leases	under	which	Cytyc	or	the	Company	had	disbursed	cash	for	property	and	equipment	to	build	out and	equip	these	leased	facilities	and	pursuant	to	the	provisions	of	EITF	Issue	No.	97-10	("EITF")	97-10,	The	Effect	of	Lessee	Involvement	in	Asset	Construction,	the Company	was	deemed	to	be	the	owner	of	the	facility	during	the	construction	periods	and	upon	completion	of	the	construction	periods,	the	Company	determined	that these	leases	did	not	qualify	for	sales-leaseback	treatment	under	SFAS	No.	98,	Accounting	for	Leases:	Sale-Leaseback	Transactions	Involving	Real	Estate,	Sales-Type Leases	of	Real	Estate,	Definition	of	the	Lease	Term,	and	Initial	Direct	Costs	of	Direct	Financing	Leases—an	amendment	of	Financial	Accounting	Standards	Board ("FASB")	Statements	No.	13,	66,	and	91	and	a	rescission	of	FASB	Statement	No.	26	and	Technical	Bulletin	No.	79-.	As	such,	these	leases	are	not	classified	as	operating leases	and	the	Company	recorded	the	fair	market	value	of	these	facilities	within	property	and	equipment	on	its	consolidated	balance	sheet,	with	an	offsetting	increase	to accrued	expenses	and	other	non-current	liabilities.	Please	refer	to	Note	13,	"Commitments	and	Contingencies",	for	further	discussion	regarding	the	Company's obligations	under	these	lease	agreements.

# Valuation	of	Business	Combinations	and	Acquisition	of	Intangible	Assets

The	Company	records	tangible	and	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.	Please	see	Note	3	for	a	discussion	of	the risk-adjusted	discount	rates	used	to	discount	projected	cash	flows	for	the	in-process	projects	the	Company	acquired	in	connection	with	each	of	its	2008	and	2006 acquisitions.	The	Company	did	not	acquire	any	such	projects	during	fiscal	2007.	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	intangible	assets	including developed	technology,	customer	relationships	and	trade	names.	Developed	technology	represents	patented	and	unpatented	technology	and	know-how.	Customer relationships	represent	established	relationships	with	customers,	which	provide	a	ready	channel	for	the	sale	of	additional	products	and	services.	Tradenames	represent acquired	product	names	that	the	Company	intends	to	continue	to	utilize.

The	majority	of	the	Company's	intangible	assets	arose	in	connection	with	its	business	combinations.	These	intangible	assets	were	recorded	at	fair	value	and	are stated	net	of	accumulated	amortization	and	impairments.

The	Company	amortizes	its	intangible	assets	that	have	finite	lives	using	either	the	straight-line	method	or,	if	reliably	determinable,	based	on	the	pattern	in	which the	economic	benefit	of	the	asset	is	expected	to	be	consumed	utilizing	expected	undiscounted	future	cash	flows.	Amortization	is	recorded	over	the	estimated	useful	lives ranging	from	4	to	30	years.	The	Company	reviews	its	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.	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	Statements	of	Operations	and	is	classified	as part	of	the	Breast	Health	segment.

Subsequent	to	the	Cytyc	merger,	the	Company	decided	to	discontinue	the	development	of	Cytyc's	Helica	product.	The	Company	will	not	realize	any	future	cash flows	from	this	product.	The	Company's	intangible	asset	valuation	for	Cytyc	included	approximately	$2,900	related	to	customer	relationships	for	Helica.	As	a	result	of the	Helica	product	discontinuation,	the	Company	recorded	an	impairment	charge,	as	a	component	of	its	GYN	Surgical	segment,	of	$2,900	in	the	first	quarter	of	fiscal 2008.

Intangible	assets	consist	of	the	following:

| Reporting	Segment | Description | Estimated<br>Amortization<br>Period	(in	years) | Gross<br>Carrying<br>Value | Accumulated<br>Amortization | Gross<br>Carrying<br>Value | Accumulated<br>Amortization |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Breast\tHealth | Developed\tTechnology | 3.43 | $293,689 | $35,739 | $132,257 | $19,625 |
|  | Customer\tRelationship | 7.14 | 69,319 | 14,603 | 55,692 | 6,303 |
|  | Trade\tName | 5.37 | 24,663 | 2,309 | 12,350 | 929 |
|  | Order\tBacklog | 0.00 | 800 | 800 | 800 | 800 |
|  | Patents | 10.73 | 4,085 | 668 | 1,273 | 636 |
| Diagnostics | Developed\tTechnology | 7.70 | 1,074,700 | 55,862 | — | — |
|  | Customer\tRelationship | 7.27 | 224,900 | 7,837 | — | — |
|  | Trade\tName | 13.22 | 71,500 | 5,009 | — | — |
|  | Capitalized\tLicense |  |  |  |  |  |
|  | Fees | 6.94 | 4,364 | 112 | — | — |
| GYN\tSurgical | Developed\tTechnology | 5.71 | 767,300 | 20,967 | — | — |
|  | Customer\tRelationship | 6.36 | 189,917 | 69 | — | — |
|  | Trade\tName | 9.55 | 50,800 | 2,632 | — | — |
| Skeletal\tHealth | Patents | 7.98 | 7,098 | 6,877 | 7,066 | 6,784 |
|  | Totals |  | $2,783,135 | $153,484 | $209,438 | $35,077 |

On	April	4,	2008,	the	Company	sold	its	CT	CAD	technology,	acquired	as	part	of	its	acquisition	of	R2	Technology	in	2006.	As	a	result	of	this	sale,	the	Company reduced	the	net	book	value	of	its	developed	technology	in	the	Breast	Health	reporting	segment	by	$11,000	during	the	twelve	month	period	ended	September	27,	2008.

Amortization	expense	related	to	developed	technology,	capitalized	license	fees	and	patents	is	classified	as	a	component	of	cost	of	product	sales	–	amortization	of intangible	assets	in	the	accompanying	Consolidated	Statements	of	Operations.	Amortization	expense	related	to	customer	relationship	and	trade	name	is	classified	as	a component	of	amortization	of	other	acquired	intangible	assets	in	the	accompanying	Consolidated	Statements	of	Operations.

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

| Fiscal	2009 | $201,689 |
| :--- | :--- |
| Fiscal\t2010 | 223,846 |
| Fiscal\t2011 | 230,227 |
| Fiscal\t2012 | 235,643 |
| Fiscal\t2013 | 228,509 |

In	accordance	with	FASB	Statement	of	Financial	Accounting	Standard	No.	142	("SFAS	142"),	Goodwill	and	Other	Intangible	Assets,	the	Company	tests goodwill	at	the	reporting	unit	level	for	impairment	on	an	annual	basis	and	between	annual	tests	if	events	and	circumstances	indicate	it	is	more	likely	than	not	that	the	fair value	of	a	reporting	unit	is	less	than	its	carrying	value.	Events	that	would	indicate	impairment	and	trigger	an	interim	impairment	assessment	include,	but	are	not	limited to,	a	significant	adverse	change	in	legal	factors	or	business	climate	and	an	adverse	action	or	assessment	by	a	regulator.	Additionally,	current	economic	and	market conditions	may	also	require	an	interim	impairment	test	such	as	a	decline	in	an	entities	market	capitalization.

Consistent	with	prior	years,	the	Company	conducted	its	annual	impairment	test	of	goodwill	for	certain	of	its	reporting	units,	(its	historical	reporting	units	prior	to the	Cytyc	merger)	as	of	the	last	day	of	the	second	quarter	of	fiscal	2008.	In	performing	the	test,	the	Company	utilizes	the	two-step	approach	prescribed	under	SFAS	142. The	first	step	requires	a	comparison	of	the	carrying	value	of	the	reporting	units,	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.	The	Company	bases	the	discount	rate	used	to	arrive	at	a	present value	as	the	date	of	the	impairment	test	on	the	Company's	weighted	average	cost	of	capital.	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.	To	date,	the	Company	has	not	performed	the	second	step	of	the	impairment	test	as	part	of	its review	because	the	fair	value	of	each	reporting	unit	exceeded	its	respective	carrying	value.

In	the	fourth	quarter	of	fiscal	2008,	the	Company	has	changed	the	measurement	date	from	the	last	day	of	its	second	quarter	to	the	first	day	of	its	fourth	quarter,	in order	to	provide	additional	time	to	quantify	the	fair	value	of	its	reporting	units	and	to	evaluate	the	results	of	the	impairment	testing.	This	change	did	not	delay,	accelerate or	avoid	an	impairment	charge.	This	change	did	not	have	an	effect	on	the	Company's	financial	performance	or	results	of	operations,	nor	was	there	any	impact	on	prior periods	financial	statements	under	the	requirements	of	the	Financial	Accounting	Standard	Board	Statement	No.	154.	The	retrospective	application	as	required	under SFAS	No.	154	was	not	necessary	as	no	impairment	charges	had	been	recorded	in	any	previously	recorded	financial	statements	nor	did	the	change	in	measurement	date cause	any	impairments.

As	a	result	of	the	change	in	the	measurement	date	for	the	Company's	annual	goodwill	impairment	test	for	its	historical	reporting	units	from	the	last	day	of	the second	quarter	of	the	fiscal	year	to	the	first	day	of	the	fourth	quarter	of	the	fiscal	year,	the	Company	has	evaluated,	in	accordance	with	paragraph	27	of	SFAS	142, whether	the	detailed	determination	of	fair	value	of	its	historical	reporting	units	as	of	March	29,	2008	can	be	carried	forward	to	the	first	day	of	its	fiscal	fourth	quarter	of 2009	or	if	a	new	test	of	goodwill	impairment	is	required	to	be	performed	for	these	historical	reporting	units.	In	its	evaluation	the	Company	noted	the	assets	and	liabilities of	the	reporting	units	had	not	changed	significantly,	there	was	sufficient	margin	between	the	carrying	amount	and	fair	value	determination	for	each	reporting	unit	and	no events	or	circumstances	related	to	these	reporting	units	would	suggest	that	a	current	fair	value	determination	of	reporting	units	would	result	in	a	valuation	lower	than	the carrying	amount	of	the	reporting	units.	Based	on	this	evaluation	the	Company	believes	it	sufficiently	meets	the	requirements	of	paragraph	27	of	SFAS	142	to	carry forward	its	estimate	of	fair	value	for	these	reporting	units.

The	Company	conducted	its	annual	impairment	test	of	goodwill	for	its	new	reporting	units	as	a	result	of	the	Company's	acquisition	of	Cytyc	Corporation	as	of	the first	day	of	the	fourth	quarter	of	fiscal	2008.	In	performing	the	test,	the	Company	utilizes	the	two-step	approach	prescribed	under	SFAS	142.	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.	The	Company	bases	the	discount	rate	used	to arrive	at	a	present	value	as	the	date	of	the	impairment	test	on	the	Company's	weighted	average	cost	of	capital.	The	fair	value	of	each	reporting	unit	was	determined	to	be in	excess	of	each	reporting	unit's	carrying	value	and	as	a	result	the	second	step	of	the	impairment	test	was	not	required.

Subsequent	to	September	27,	2008,	the	Company	has	experienced	a	decline	in	the	price	of	its	publicly-traded	common	stock	and	related	market	capitalization such	that	the	Company's	market	capitalization	has	declined	below	the	Company's	book	value	of	its	net	assets.	The	Company	evaluated	this	decline	in	its	market capitalization	subsequent	to	year-end	and	has	concluded	that	it	was	not	an	indicator	of	an	impairment	that	existed	as	of	September	27,	2008.	The	Company	will	continue to	monitor	its	market	capitalization	compared	to	its	book	value	of	net	assets	and	may	be	required	to	perform	an	interim	goodwill	impairment	test	in	its	first	quarter	of fiscal	2009.	An	impairment	analysis	may	also	be	required	for	the	Company's	other	intangible	assets	at	that	time.	Should	an	impairment	be	determined,	it	may	have	a material	impact	on	the	Company's	results	of	operations.

The	estimate	of	fair	value	requires	significant	judgment.	Any	loss	resulting	from	an	impairment	test	would	be	reflected	in	operating	(loss)	income	in	the Company's	Consolidated	Statements	of	Operations.	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	27,	2008	is	as	follows:

The	other	purchase	price	adjustments	in	fiscal	2008	substantially	relate	to	the	adjustment	of	R2	and	Suros	tax	liabilities.	See	Note	3	for	further	discussion	of	these adjustments.

Since	the	time	of	the	Cytyc	merger,	the	Company	reallocated	its	segment	allocation	of	goodwill	to	reflect	expected	revenue	synergies	in	its	historical	reporting segments.	Accordingly,	the	Company	recorded	an	increase	in	goodwill	allocated	to	its	Breast	Health	and	Skeletal	Health	segments	in	the	amount	of	$502,800	and $7,600,	respectively.	The	preliminary	allocation	of	goodwill	by	reporting	segment	consists	of	the	following:

|  | Balance	as	of | Balance	as	of |
| :--- | :--- | :--- |
| Reporting\tSegment | September\t27,\t2008 | September\t29,\t2007 |
| Breast\tHealth | $930,672 | $406,949 |
| Diagnostics | 1,486,988 | — |
| GYN\tSurgical | 2,024,639 | — |
| Skeletal\tHealth | 8,197 | 579 |
|  | $4,450,496 | $407,528 |

# Long-Lived	Assets

The	Company	accounts	for	long-lived	assets	in	accordance	with	the	provisions	of	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.

# Other	Assets

As	of	September	27,	2008,	other	assets	was	comprised	primarily	of	the	value	of	certain	deferred	financing	costs,	cost-method	investments	and	Company	owned life	insurance	contracts.

As	of	September	27,	2008,	other	assets	included	$31,251	and	$20,804,	respectively,	of	deferred	financing	costs	related	to	the	Company's	Convertible	Notes	and the	Company's	Amended	Credit	Agreement	(See	Note	6).	The	Company	is	amortizing	deferred	financing	costs	related	to	the	Amended	Credit	Agreement	to	interest expense	over	a	five	year	period,	approximating	the	effective	interest	method,	resulting	in	interest	expense	of	$2,718	and	$814	related	to	deferred	financing	costs	on	its Amended	Credit	Agreement	and	revolving	credit	facility,	respectively	during	the	twelve	months	ended	September	27,	2008.	The	Company	is	amortizing	amounts related	to	the	convertible	notes	on	a	straight-line	basis	over	the	period	of	earliest	redemption,	which	is	a	six	year	period.	As	a	result,	the	Company	recorded	amortization expense	of	$4,775	during	the	year	ended	September	27,	2008.	As	a	result	of	the	convertible	note	offering	and	other	voluntary	repayments,	the	Company's	term	loans under	the	original	Credit	Agreement	were	repaid	and	the	Company	accelerated	the	amortization	of	the	related	deferred	financing	costs	resulting	in	total	amortization expense	of	$11,516	relating	to	these	term	loans	during	the	twelve	months	ended	September	27,	2008.	Additionally,	the	Company	recorded	$718	of	interest	expense related	to	its	unamortized	deferred	financing	costs	upon	the	termination	of	its	credit	facility	with	Bank	of	America	during	fiscal	2008.

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	2008	and	2007,	none	of	the	investments	held	were	deemed	to	be	in	an other-than-temporary	loss.	The	carrying	value	of	these	investments	was	approximately	$9,278	as	of	September	27,	2008	which	includes	$7,445	of	investments	acquired as	a	result	of	the	Cytyc	merger,	as	described	below,	and	approximately	$1,132	as	of	September	29,	2007.	The	Company	made	additional	payments	related	to	the investments	acquired	as	a	result	of	the	Cytyc	merger	of	$700	for	the	year	ended	September	27,	2008.

As	a	result	of	the	merger	with	Cytyc,	the	Company	acquired	investments	Cytyc	had	entered	into	prior	to	the	merger	with	the	Company.	During	2005,	Cytyc entered	into	a	$5,000	private	equity	investment	commitment	with	a	limited	liability	partnership,	which	may	be	paid	over	the	succeeding	three	years.	As	of	September	27, 2008,	approximately	$3,126	of	this	investment	has	been	paid.	The	Company	is	accounting	for	this	investment	under	the	cost	method,	since	it	does	not	have	the	ability	to exercise	significant	influence	and,	as	of	September	27,	2008,	holds	less	than	three	percent	of	the	partnership's	voting	stock.	In	March	2006,	Cytyc	had	entered	into	a $1,900	private	equity	investment	agreement	with	a	corporation,	in	which	Cytyc	received	shares	of	preferred	stock	in	exchange	for	granting	a	non-exclusive	license	to certain	of	Cytyc's	patents.	The	Company	is	accounting	for	this	investment	under	the	cost	method,	since	it	does	not	have	the	ability	to	exercise	significant	influence	and, as	of	September	27,	2008,	holds	less	than	20	percent	of	the	corporation's	voting	stock.	In	addition,	in	July	2007,	Cytyc	entered	into	an	agreement	with	an	early-stage company,	under	which	Cytyc	has	invested	in	the	early	stage	company.	Under	this	investment,	Cytyc	received	2,100	shares	of	the	company's	Preferred	Stock	Series	A	at a	fair	market	value	of	$1	per	share.	In	exchange	for	the	Preferred	Stock	Series	A	received	by	Cytyc	under	this	investment	agreement,	the	company	received	from	Cytyc	a fully	paid,	worldwide	license	to	certain	patents	and	patent	applications	in	Cytyc's	portfolio	that	will	allow	access	to	certain	of	Cytyc's	intellectual	property	as	part	of	its development	of	a	surgical	device.	The	Company	is	accounting	for	this	investment	under	the	cost	method,	since	it	does	not	have	the	ability	to	exercise	significant influence	and,	as	of	September	27,	2008,	holds	less	than	20	percent	of	the	corporation's	voting	stock.	The	Company's	determination	of	whether	it	has	significant influence	over	an	investment	requires	judgment.

If	at	any	time	the	private	equity	investment	in	the	limited	liability	partnership	exceeds	three	percent	of	the	partnership's	voting	stock,	the	private	equity investments	entered	into	exceed	20	percent	of	the	corporation's	voting	stock,	or	the	Company	determines	that	it	has	the	ability	to	exercise	significant	influence	over	any of	these,	among	other	factors,	the	Company	will	begin	to	account	for	the	related	investment	under	the	equity	method.

The	Company	owned	life	insurance	contracts	included	in	other	assets	primarily	include	contracts	that	were	purchased	in	connection	with	the	Company's Supplemental	Executive	Retirement	Plan	("SERP")	and	were	valued	at	$5,575	as	of	September	27,	2008	and	$3,654	as	of	September	29,	2007	(See	Note	11	for	further discussion).

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.

# 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	for	which	revenues	are	recognized	in	accordance	with	AICPA SOP	97-2,	Software	Revenue	Recognition	("SOP	97-2"),	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	subsidiaries	are	translated	in	accordance	with	SFAS	No.	52,	Foreign	Currency	Translation.	The	reporting currency	for	the	Company	is	the	U.S.	dollar	("dollar").	With	the	exception	of	its	Costa	Rica	subsidiary,	whose	functional	currency	is	the	U.S.	dollar,	the	functional currency	of	the	Company's	subsidiaries	is	their	local	currency.	Accordingly,	the	assets	and	liabilities	of	these	subsidiaries	are	translated	into	U.S.	dollars	using	the exchange	rate	in	effect	at	each	balance	sheet	date.

Revenue	and	expense	accounts	for	these	subsidiaries	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	other	(expense)	income,	net	on	the	Consolidated	Statements	of	Operations	and	to	date	have	not	been	material.

# Comprehensive	(Loss)	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.	Foreign	currency translation	adjustments	was	the	only	item	of	other	comprehensive	income	prior	to	fiscal	2007.

Accumulated	other	comprehensive	(loss)	income,	net	of	tax	consists	of	the	following:

|  |  | Minimum | Accumulated |
| :--- | :--- | :--- | :--- |
|  |  | Pension | Other |
|  | Translation | Liability | Comprehensive |
|  | Adjustments | Adjustment | (Loss)\tIncome |
| Balance\tat\tSeptember\t30,\t2006 | $(442) | $— | $(442) |
| Translation\tadjustments | 2,353 | — | 2,353 |
| Record\tminimum\tpension\tliability\t(See\tNote\t7) | — | 2,212 | 2,212 |
| Balance\tat\tSeptember\t29,\t2007 | 1,911 | 2,212 | 4,123 |
| Translation\tadjustments | 1,092 | — | 1,092 |
| Adjustment\tto\tminimum\tpension\tliability,\tnet | — | (270) | (270) |
| Balance\tat\tSeptember\t27,\t2008 | $3,003 | $1,942 | $4,945 |

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	certain	of	the	Company's	products	contain	operating	and	application	software,	the	Company	has	determined	that	except	for	its	products	obtained	with the	acquisition	of	R2	Technology,	Inc.	and	the	newly	released	Dimensions	Tomosynthesis/3D	full	field	digital	mammography	product	("Dimensions"),	the	software element	is	incidental	in	accordance	with	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	("EITF	03-05").

The	Company	has	determined	that	the	provisions	of	SOP	97-2	apply	to	revenue	transactions	for	those	products	acquired	from	R2	Technology,	Inc.	and	the Dimensions	product	(see	below).	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	and	Dimensions	product	sales	upon	completion	of	installation	at	which	time	the	only	remaining	undelivered	element	is	Post Contract	Support	("PCS").

Upon	its	release	internationally,	the	Company	completed	an	evaluation	of	the	software	component	of	its	Dimensions	product	in	accordance	with	SOP	97-2	and EITF	03-05.	The	Company	noted	the	following	in	its	evaluation	of	the	software	component	of	its	new	Dimensions	product:

•	 Dimensions	will	be	offered	in	different	configurations	offering	different	levels	of	functionality	(2D	vs.	3D).	Customers	who	purchase	the	2D	configuration will	be	to	able	to	upgrade	the	product	to	a	3D

version	and	such	upgrade	will	solely	represent	a	software	upgrade	that	will	be	marketed	and	sold	separately.	This	differentiation	from	the	Company's existing	2D	digital	mammography	product	is	expected	to	be	highlighted	in	the	Company's	marketing	literature.

•	 As	part	of	the	initial	warranty	of	the	Dimensions	product,	customers	will	receive	not	only	bug	fixes	related	to	the	software	but	also	will	receive	any	updates and	enhancements	to	the	software	that	are	released.	Therefore,	the	Company	concluded	that	this	represents	PCS	as	defined	in	SOP	97-2.

As	a	result,	the	Company	has	determined	that	the	Dimensions	product	contains	software	that	is	more	than	incidental	to	the	product	as	a	whole	and	thus,	will	be accounted	for	under	SOP	97-2.	Therefore,	the	Company	will	recognize	revenue	upon	installation	and	acceptance,	if	required,	and	will	defer	the	vendor-specific	objective evidence	of	fair	value	of	the	initial	bundled	PCS.	The	Company	has	determined	that	vendor-specific	objective	evidence	of	fair	value	of	the	initial	bundled	PCS	exists based	on	the	establishment	of	price	for	which	this	element	will	be	sold	separately	by	management	having	the	relevant	authority	and	that	it	is	probable	that	this	price	will not	change	prior	to	when	this	service	is	sold	separately.	The	Company	has	specified	the	renewal	rates	at	which	service	can	be	purchased	separately	for	upon	expiration of	the	initial	PCS	period	and	those	rates	are	consistent.

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.

As	a	result	of	the	merger	with	Cytyc,	the	Company	now	sells	disposable	supplies	under	customer	usage	agreements.	Under	customer	usage	agreements,	the Company	installs	certain	equipment	(for	example,	a	ThinPrep	Processor	or	a	ThinPrep	Imaging	System)	at	customer	sites	and	customers	commit	to	purchasing minimum	quantities	of	disposable	supplies	at	a	stated	price	(generally	including	a	usage	fee	for	the	equipment)	over	a	defined	contract	term,	which	is	typically	between three	and	five	years.	Revenue	is	recognized	over	the	term	of	the	customer	usage	agreement	as	disposable	supplies	are	delivered.	Accordingly,	no	revenue	is	recognized upon	delivery	of	the	equipment.	As	a	result	of	the	merger	with	Cytyc,	the	Company	also	rents	certain	other	equipment	to	customers.	Revenues	from	rental	agreements are	recorded	over	the	terms	of	the	rental	agreements.

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	and	materials	consumed	in	providing	the	service.

At	September	27,	2008	the	Company	has	several	stock-based	employee	compensation	plans,	which	are	more	fully	described	in	Note	9.	During	2004,	the	FASB issued	SFAS	No.	123(R)	("SFAS	123(R)"),	Share-Based	Payment,	which	is	a	revision	of	SFAS	No.	123	("SFAS	123"),	Accounting	for	Stock-Based	Compensation. SFAS	123(R)	supersedes	Accounting	Principles	Board	("APB")	Opinion	No.	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.

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

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,	the	Company	is	recognizing compensation	for	the	fair	value	of	the	unvested	portion	of	option	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	in	determining	the	expense	recorded	related	to	employee	stock	options	in	the	Company's	Consolidated	Statements	of	Operations. Compensation	expense	related	to	stock	options	reduced	both	basic	and	diluted	earning	per	share	by	$0.04,	$0.03	and	$0.02	for	fiscal	2008,	2007	and	2006,	respectively. These	results	reflect	stock	compensation	expense	related	to	stock	options	of	$13,968,	$4,725	and	$3,560	and	related	tax	benefit	of	$5,154,	$1,715	and	$1,727	for	fiscal 2008,	2007	and	2006,	respectively.	No	stock-based	compensation	expense	was	capitalized	as	part	of	inventory	during	fiscal	years	2008,	2007	or	2006.	In	accordance with	the	modified-prospective	transition	method	of	SFAS	123(R),	results	for	prior	periods	have	not	been	restated.	As	of	September	27,	2008	there	was	approximately $30,438	of	unrecognized	compensation	expense	related	to	non-vested	market-based	stock	options	that	is	expected	to	be	recognized	over	a	weighted	average	grant	period of	3.53	years.

Included	in	stock-based	compensation	expense	for	fiscal	2008	was	$2,662	as	a	result	of	the	acceleration	of	vesting	for	certain	outstanding	Hologic	stock	options upon	the	close	of	the	merger	with	Cytyc.	The	original	terms	of	these	employee	stock	options	provided	for	acceleration	of	vesting	upon	a	change	of	control.

Stock-based	compensation	expense	includes	a	total	of	$3,512	related	to	option	modifications	during	fiscal	2008.	During	this	period,	the	Company	recorded	$768 related	to	a	modification	of	certain	options	to	extend	the	period	of	time	to	exercise	upon	termination	from	90	days	to	August	31,	2009	upon	termination	of	the Company's	Chairman	of	the	Board	of	Directors	(See	Note	12).	The	Company	also	recorded	$2,264	of	stock-based	compensation	as	a	result	of	a	modification	of	certain stock	options	in	connection	with	the	Cytyc	Merger	Agreement	in	May	2007.	The	modification	provided	for	acceleration	of	vesting	of	the	unvested	options	upon	a termination	as	a	result	of	a	change	of	control,	as	well	as	an	extension	of	the	period	to	exercise	vested	options	from	90	days	to	December	31,	2009,	which	occurred	upon the	close	of	the	merger	with	Cytyc.	Additionally,	stock-based	compensation	expense	included	$480	related	to	certain	former	Third	Wave	executives	who	were terminated.

Effective	with	the	adoption	of	SFAS	123(R),	the	Company	elected	to	use	a	binomial	lattice	model	to	determine	the	weighted	average	fair	value	of	options.	The Company	considers	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	weighted	average	fair	value	of	options	granted	during	the	fiscal	year	ended	2008,	2007	and	2006,	under	the	binomial	valuation	method,	was	$10.61	per	share, $13.19	per	share	and	$9.77	per	share,	respectively.	The	weighted-average	assumptions	utilized	to	determine	such	values	are	indicated	in	the	following	table:

|  | September	27,<br>2008 | September	29,<br>2007 | September	30,<br>2006 |
| :--- | :--- | :--- | :--- |
| Risk-free\tinterest\trates | 2.7%\tto\t4.0% | 5.0% | 4.6% |
| Dividend\tyield | — | — | — |
| Expected\tlife\t(in\tyears) | 3.8\tto\t4.6 | 5.0 | 4.7 |
| Expected\tvolatility | 36%\tto\t38% | 55.0% | 55.0% |
| Forfeiture\trate | 6.8%\tto\t9.0% | 9.4% | 9.4%\tto\t10.6% |

The	risk-free	interest	rate	is	based	on	a	treasury	instrument	whose	term	is	consistent	with	the	expected	life	of	the	stock	options.	In	projecting	expected	stock	price volatility,	the	Company	considered	both	historical	data	and	observable	market	prices	of	similar	equity	instruments.	The	Company	estimated	the	expected	life	of	stock options	and	stock	option	forfeitures	based	on	historical	experience.

The	reduction	in	the	assumption	used	for	the	expected	life	of	the	options	from	5	years	to	3.8	years	beginning	in	the	third	quarter	of	fiscal	2008	is	due	to	a	change in	the	contractual	life	of	the	options	granted	beginning	in	the	second	quarter	of	2008	from	10	years	to	7	years.

The	lower	forfeiture	rate	beginning	in	the	second	quarter	of	2008	is	due	to	a	change	in	the	methodology	the	Company	is	using	to	calculate	this	rate	as	a	result	of the	transformational	merger	with	Cytyc.

The	Company	has	also	recorded	$11,696,	$937	and	$391	of	stock-based	compensation	expense	during	fiscal	2008,	2007	and	2006,	respectively,	for	the	fair	value of	restricted	stock	units.	In	fiscal	2008	this	amount	included	$570	as	a	result	of	the	acceleration	of	vesting	for	certain	outstanding	restricted	stock	units	upon	the	close	of the	merger	with	Cytyc.	The	original	terms	of	these	restricted	stock	units	provided	for	acceleration	of	vesting	upon	a	change	of	control.	The	fiscal	2008	amount	also included	$1,174	related	to	the	acceleration	of	certain	restricted	stock	units	related	to	a	separation	agreement	with	the	Company's	Chairman	of	the	Board	of	Directors (See	Note	12).

As	of	September	27,	2008	there	was	approximately	$29,145	of	unrecognized	compensation	expense	related	to	non-vested	restricted	stock	units	that	is	expected	to be	recognized	over	a	weighted	average	grant	period	of	2.11	years.

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.

# Net	(Loss)	Income	Per	Share

Basic	net	(loss)	income	per	share	is	computed	by	dividing	net	(loss)	income	by	the	weighted	average	number	of	common	shares	outstanding.	Diluted	net	(loss) income	per	share	is	computed	by	dividing	net	(loss)	income	by	the	weighted	average	number	of	common	shares	and	potential	common	shares	from	outstanding	stock options,	restricted	stock	units	and	convertible	debt.

The	Company	applies	the	provisions	of	EITF	No.	04-08,	The	Effect	of	Contingently	Convertible	Instruments	on	Diluted	Earnings	per	Share	to	determine	diluted weighted	average	shares	outstanding	as	it	relates	to	its	outstanding	convertible	notes	and	the	remaining	Cytyc	Notes.	Accordingly,	the	Company	uses	the	treasury	stock method	to	determine	dilutive	weighted	average	shares	related	to	its	convertible	notes	and	the	if-converted	method	as	it	relates	to	the	remaining	Cytyc	Notes.	The potential	common-equivalent	shares	as	calculated	for	both	convertible	notes	were	excluded	from	the	Company's	dilutive	weighted	average	shares	as	a	result	of	the Company's	net	loss	position	for	the	twelve	months	ended	September	27,	2008.

A	reconciliation	of	basic	and	diluted	share	amounts	for	fiscal	years	2008,	2007,	and	2006	are	as	follows:

|  | September	27,<br>2008 | September	29,<br>2007 | September	30,<br>2006 |
| :--- | :--- | :--- | :--- |
| Numerator: |  |  |  |
| Net\t(loss)\tincome,\tas\treported,\tfor\tbasic\tearnings\tper\tshare | $(385,617) | $94,578 | $27,423 |
| Net\t(loss)\tincome,\tas\tadjusted,\tfor\tdiluted\tearnings\tper\tshare | $(385,617) | $94,578 | $27,423 |
| Denominator: |  |  |  |
| Basic\tweighted\taverage\tcommon\tshares\toutstanding | 245,968 | 106,873 | 93,025 |
| Weighted\taverage\tcommon\tequivalent\tshares\tfrom\tassumed\texercise\tof |  |  |  |
| stock\toptions\tand\trestricted\tstock\tunits | — | 2,796 | 4,215 |
| Diluted\tweighted\taverage\tcommon\tshares\toutstanding | 245,968 | 109,669 | 97,240 |
| Basic\tnet\t(loss)\tincome\tper\tcommon\tshare | $(1.57) | $0.88 | $0.29 |
| Diluted\tnet\t(loss)\tincome\tper\tcommon\tshare | $(1.57) | $0.86 | $0.28 |

Diluted	weighted	average	shares	outstanding	do	not	include	options	outstanding	to	purchase	7,303	common	shares	and	132	outstanding	restricted	stock	units	for fiscal	year	2008,	as	their	effect	would	have	been	anti-dilutive.	Diluted	weighted	average	shares	outstanding	do	not	include	10	common	shares	that	would	be	issued	upon conversion	of	the	Cytyc	notes.	Diluted	weighted	average	shares	outstanding	do	not	include	options	outstanding	to	purchase	1,316	common	shares	and	168	outstanding restricted	stock	units	for	fiscal	year	2007,	as	their	effect	would	have	been	anti-dilutive.	Diluted	weighted	average	shares	outstanding	do	not	include	options	outstanding to	purchase	570	common	shares	and	102	outstanding	restricted	stock	units	for	fiscal	year	2006,	as	their	effect	would	have	been	anti-dilutive.	There	were	no	convertible debt	amounts	outstanding	during	fiscal	years	2007	or	2006.

The	Company	generally	offers	a	one-year	warranty	for	its	products.	The	Company	provides	for	the	estimated	cost	of	product	warranties	at	the	time	product revenue	is	recognized.	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	27,	2008	and	September	29,	2007	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\t27,\t2008 | $12,087 | $5,223 | $591 | $(8,792) | $9,109 |
| September\t29,\t2007 | $8,987 | $10,947 | $— | $(7,847) | $12,087 |

# Restructuring	Accrual

As	a	result	of	the	Cytyc	merger,	the	Company	assumed	previous	Cytyc	management	approved	restructuring	plans	designed	to	reduce	future	operating	expenses	by consolidating	its	Mountain	View,	California	operations	into	its	existing	operations	in	Costa	Rica	and	Massachusetts	as	well	as	restructuring	plans	relating	to	Cytyc's historical	acquisitions	completed	in	March	2007.	In	connection	with	these	plans,	the	Company	assumed	a	total	liability	of	approximately	$4,658.	During	the	twelve months	ended	September	27,	2008,	the	Company	did	not	incur	any	additional	restructuring	costs	related	to	retention	costs	for	these	employees.

As	a	result	of	the	Third	Wave	acquisition,	the	Company	assumed	previous	Third	Wave	management	approved	restructuring	plans	designed	to	reduce	future operating	expenses.	In	connection	with	these	plans,	the	Company	assumed	a	total	liability	related	to	termination	benefits	of	approximately	$7,509.	The	Company	did	not incur	any	additional	restructuring	costs	related	to	retention	costs	for	these	employees	from	the	date	of	acquisition	through	September	27,	2008.	We	anticipate	that	these costs	will	be	paid	in	full	during	fiscal	2009.

Additionally,	the	Company	recorded	a	liability	related	to	the	Cytyc	merger	in	accordance	with	EITF	95-3	as	detailed	below,	primarily	related	to	the	termination	of certain	employees	as	well	as	minimum	inventory	purchase	commitments	and	other	contractual	obligations	for	which	business	activities	have	been	discontinued.

During	the	twelve	months	ended	September	27,	2008	the	Company	incurred	approximately	$6.4	million	of	expense	related	to	the	resignation	of	the	Chairman	of the	Board	of	Directors,	which	is	not	included	in	the	table	below	(See	Note	12).

Changes	in	the	restructuring	accrual	for	the	twelve	months	ended	September	27,	2008	were	as	follows:

|  | Other | Termination<br>Benefits |
| :--- | :--- | :--- |
| Beginning\tbalance | $— | $105 |
| Cytyc\tbalance\tacquired,\tOctober\t22,\t2007 | — | 4,658 |
| Third\tWave\tbalance\tacquired,\tJuly\t24,\t2008 | 261 | 7,029 |
| Provided\tfor\tunder\tEITF\tNo.\t95-3 | \t 1,820 | 1,020 |
| Adjustments | (382) | (270) |
| Payments | (817) | (11,233) |
| Ending\tbalance | $882 | $1,309 |

As	of	the	dates	of	acquisition	of	AEG	Elektrofotografie	GmbH	("AEG"),	R2	Technology,	Inc.	("R2")	and	Suros	Surgical,	Inc.	("Suros")	(See	Note	3), management	of	the	Company	implemented	and	finalized	plans	to	involuntarily	terminate	certain	employees	of	the	acquired	companies.	These	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.	As	of	September	29,	2007,	all	amounts	other	than	$105	had	been	paid.	The	Company	had	made	full	payment	on	this	remaining liability	as	of	September	27,	2008.

# 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	$15,281,	$6,683	and	$5,003	for	fiscal	2008,	2007	and	2006,	respectively,	and	were	included	in	selling	and	marketing expense	in	the	Consolidated	Statements	of	Operations.

# Recently	Issued	Accounting	Pronouncements

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.	FASB	Staff	Position 157-2,	Effective	Date	of	FASB	Statement	No.	157,	defers	the	effective	date	of	SFAS	157	for	one	year	for	all	nonfinancial	assets	and	nonfinancial	liabilities,	except	for those	items	that	are	recognized	or	disclosed	at	fair	value	in	the	financial	statements	on	a	recurring	basis	(at	least	annually).	Therefore,	the	Company	is	required	to	adopt SFAS	157	on	the	first	day	of	fiscal	2009	for	financial	assets	and	liabilities	and	nonfinancial	assets	and	nonfinancial	liabilities	that	are	recognized	or	disclosed	at	fair value	in	the	financial	statements	on	a	recurring	basis.	The	Company	is	required	to	adopt	SFAS	157	on	the	first	day	of	fiscal	2010	for	all	other	nonfinancial	assets	and nonfinancial	liabilities.	The	adoption	of	SFAS	157	for	the	Company's	financial	assets	and	liabilities	will	not	have	a	material	impact	on	the	Company's	financial condition	or	results	of	operations.

In	February	2007,	the	FASB	issued	SFAS	No.	159	("SFAS	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.	SFAS	159	also	establishes	additional	disclosure	requirements	for	these items	stated	at	fair	value.	SFAS	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	adopts	SFAS	157.	The	adoption	of	SFAS	159	will	not	have	a	material	impact	on	the Company's	financial	condition	or	results	of	operations.

In	June	2007,	the	FASB	ratified	EITF	Issue	No.	07-3	("EITF	07-3"),	Accounting	for	Nonrefundable	Advance	Payments	for	Goods	or	Services	to	Be	Used	in Future	Research	and	Development	Activities.	EITF	07-3	states	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.	EITF	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	should	not	have	any	impact	on	its	consolidated	financial	statements.

In	December	2007,	the	FASB	issued	SFAS	No.	141	(Revised	2007)	("SFAS	141(R)"),	Business	Combinations.	This	Statement	retains	the	fundamental requirements	in	SFAS	141	that	the	acquisition	method	of	accounting	(which	SFAS	141	called	the	purchase	method)	be	used	for	all	business	combinations	and	for	an acquirer	to	be	identified	for	each	business	combination.	SFAS	141(R)	requires	an	acquirer	to	recognize	the	assets	acquired,	the	liabilities	assumed,	and	any noncontrolling	interest	in	the	acquiree	at	the	acquisition	date,	measured	at	their	fair	values	as	of	that	date,	with	limited	exceptions	specified	in	the	Statement.	That replaces	SFAS	141's	cost-allocation	process,	which	required	the	cost	of	an	acquisition	to	be	allocated	to	the	individual	assets	acquired	and	liabilities	assumed	based	on their	estimated	fair	values.	The	Statement	retains	the	guidance	in	SFAS	141	for

identifying	and	recognizing	intangible	assets	separately	from	goodwill.	SFAS	141(R)	will	now	require	acquisition	costs	to	be	expensed	as	incurred,	restructuring	costs associated	with	a	business	combination	to	be	expensed	prior	to	the	acquisition	date	and	changes	in	deferred	tax	asset	valuation	allowances	and	income	tax	uncertainties after	the	acquisition	date	generally	to	affect	income	tax	expense.	SFAS	141(R)	applies	prospectively	to	business	combinations	for	which	the	acquisition	date	is	on	or after	the	beginning	of	the	first	annual	reporting	period	beginning	on	or	after	December	15,	2008,	which	is	the	Company's	2010	fiscal	year.	Early	adoption	is	prohibited. The	Company	is	currently	evaluating	the	impact	that	the	adoption	of	SFAS	141(R)	will	have	on	its	consolidated	financial	statements.

In	December	2007,	the	FASB	issued	SFAS	No.	160	("SFAS	160"),	Noncontrolling	Interests	in	Consolidated	Financial	Statements—An	amendment	of	ARB No.	51.	SFAS	160	amends	Accounting	Research	Bulletin	("ARB")	No.	51	to	establish	accounting	and	reporting	standards	for	the	noncontrolling	interest	in	a	subsidiary and	for	the	deconsolidation	of	a	subsidiary.	It	clarifies	that	a	noncontrolling	interest	in	a	subsidiary	is	an	ownership	interest	in	the	consolidated	entity	that	should	be reported	as	equity	in	the	consolidated	financial	statements.	The	amount	of	net	income	attributable	to	the	noncontrolling	interest	will	be	included	in	consolidated	net income	on	the	face	of	the	income	statement.	SFAS	160	clarifies	that	changes	in	a	parent's	ownership	interest	in	a	subsidiary	that	do	not	result	in	deconsolidation	are equity	transactions	if	the	parent	retains	its	controlling	financial	interest.	In	addition,	this	Statement	requires	that	a	parent	recognize	a	gain	or	loss	in	net	income	when	a subsidiary	is	deconsolidated.	SFAS	160	is	effective	for	fiscal	years,	and	interim	periods	within	those	fiscal	years,	beginning	on	or	after	December	15,	2008,	which	is	the Company's	2010	fiscal	year.	Early	adoption	is	prohibited.

In	March	2008,	the	FASB	issued	SFAS	No.	161	("SFAS	161"),	Disclosures	about	Derivative	Instruments	and	Hedging	Activities,	which	amends	SFAS	133,	by requiring	expanded	disclosures	about	an	entity's	derivative	instruments	and	hedging	activities.	SFAS	161	requires	increased	qualitative,	quantitative,	and	credit-risk disclosures,	including	(a)	how	and	why	an	entity	uses	derivative	instruments,	(b)	how	derivative	instruments	and	related	hedged	items	are	accounted	for	under	SFAS	133 and	its	related	interpretations,	and	(c)	how	derivative	instruments	and	related	hedged	items	affect	an	entity's	financial	position,	financial	performance,	and	cash	flows. The	Company	is	required	to	adopt	SFAS	161	effective	for	the	quarter	ending	March	31,	2009.	The	Company	is	currently	evaluating	the	impact	that	the	adoption	of SFAS	161	will	have	on	its	consolidated	financial	statements.

•	 The	weighted-average	period	prior	to	the	next	renewal	or	extension	(whether	explicit	and	implicit)	for	each	major	intangible	asset	class

•	 The	entity's	accounting	policy	for	the	treatment	of	costs	incurred	to	renew	or	extend	the	term	of	a	recognized	intangible	asset •	 For	intangible	assets	renewed	or	extended	during	the	period:

The	FSP	is	effective	for	financial	statements	for	fiscal	years	beginning	after	December	15,	2008,	which	will	be	the	beginning	of	fiscal	2010	for	the	Company.	The guidance	for	determining	the	useful	life	of	a	recognized	intangible	asset	must	be	applied	prospectively	to	intangible	assets	acquired	after	the	effective	date.	Early adoption	is	prohibited.	Accordingly,	the	FSP	would	not	serve	as	a	basis	to	change	the	useful	life	of	an	intangible	asset	that	was	acquired	prior	to	the	effective	date. However,	the	incremental	disclosure	requirements	described	above	would	apply	to	all	intangible	assets,	including	those	recognized	in	periods	prior	to	the	effective	date of	the	FSP.	The	Company	is	currently	evaluating	the	impact	that	the	adoption	of	this	FSP	will	have	on	its	consolidated	financial	statements.

In	May	2008,	the	FASB	issued	FASB	Staff	Position	("FSP")	No.	APB	14-1,	Accounting	for	Convertible	Debt	Instruments	That	May	Be	Settled	in	Cash	upon Conversion	(Including	Partial	Cash	Settlement).	This	FSP	applies	to	convertible	debt	instruments	that,	by	their	stated	terms,	may	be	settled	in	cash	(or	other	assets)	upon conversion,	including	partial	cash	settlement,	unless	the	embedded	conversion	option	is	required	to	be	separately	accounted	for	as	a	derivative	under	SFAS	133.	The liability	and	equity	components	of	convertible	debt	instruments	within	the	scope	of	this	FSP	must	be	separately	accounted	for	in	a	manner	that	will	reflect	the	entity's nonconvertible	debt	borrowing	rate	when	interest	cost	is	recognized	in	subsequent	periods.	The	excess	of	the	principal	amount	of	the	debt	over	the	amount	ultimately allocated	to	the	liability	component	is	required	to	be	amortized	to	interest	expense	using	the	interest	method.	This	FSP	is	effective	for	financial	statements	issued	for fiscal	years	beginning	after	December	15,	2008,	and	interim	periods	within	those	fiscal	years.	As	a	result,	the	Company	will	adopt	this	standard	at	the	beginning	of	fiscal 2010.	This	FSP	must	be	applied	retrospectively	to	all	periods	presented.	The	retrospective	adoption	of	this	FSP	will	increase	the	Company's	historical	reported	interest expense	from	December	10,	2007	(issuance	date	of	the	Convertible	Notes—See	Note	6)	forward.

The	adoption	of	FSP	APB	14-1	will	have	no	impact	on	the	Company's	actual	past	or	future	cash	flows.	However,	upon	adoption	in	fiscal	2010	the	Company	will restate	prior	periods	by	reclassifying	approximately	$470,000	of	its	Convertible	Notes	to	additional	paid-in	capital,	resulting	in	a	debt	discount.	The	Company's	fiscal 2008	non-cash	interest	expense	will	increase	by	approximately	$48,200,	resulting	in	a	restated	diluted	net	loss	per	share	of	approximately	$1.69	per	share,	net	of	tax.

On	May	5,	2008,	Statement	of	Financial	Accounting	Standard	No.	162,	the	Hierarchy	of	Generally	Accepted	Accounting	Principles	("SFAS	162")	was	issued. This	standard	identifies	the	sources	of	accounting	principles	and	the	framework	for	selecting	the	principles	to	be	used	in	the	preparation	of	financial	statements	that	are presented	in	conformity	with	generally	accepted	accounting	principles	in	the	U.S.	The	Company	does	not	expect	the	adoption	of	this	standard	to	have	a	material	impact on	its	consolidated	financial	statements.

In	June	2008,	the	FASB	ratified	the	consensus	reached	on	EITF	Issue	No.	07-05,	Determining	Whether	an	Instrument	(or	Embedded	Feature)	Is	Indexed	to	an Entity's	Own	Stock.	EITF	Issue	No.	07-05	clarifies	the	determination	of	whether	an	instrument	(or	an	embedded	feature)	is	indexed	to	an	entity's	own	stock,	which would	qualify	as	a	scope	exception	under	SFAS	No.	133,	Accounting	for	Derivative	Instruments	and	Hedging	Activities.	EITF	Issue	No.	07-05	is	effective	for	financial statement	issued	for	fiscal	years	beginning	after	December	15,	2008.	Early	adoption	for	an	existing	instrument	is	not	permitted.	The	Company	has	concluded	that	upon the	adoption	of	this	standard,	the	embedded	derivative	option	in	the	Company's	Convertible	Notes	(See	Note	6)	will	continue	to	be	considered	indexed	to	the Company's	own	stock.	As	a	result,	the	adoption	of	EITF	Issue	No.	07-05	is	not	expected	to	have	a	material	impact	on	the	Company's	financial	condition	or	results	of operations.

# 3. Business	Combinations

# Acquisition	of	Third	Wave	Technologies,	Inc.

On	July	24,	2008	the	Company	completed	its	acquisition	of	Third	Wave	Technologies,	Inc.	("Third	Wave")	pursuant	to	a	definitive	agreement	dated	June	8,	2008. The	Company	has	concluded	that	the	acquisition	of	Third	Wave	does	not	represent	a	material	business	combination	and	therefore	no	pro	forma	financial	information	has been	provided	herein.	Subsequent	to	the	acquisition	date,	the	Company's	results	of	operations	include	the	results	of	Third	Wave,	which	has	been	reported	as	a component	of	the	Company's	Diagnostics	reporting	segment.

Third	Wave,	located	in	Madison,	Wisconsin,	develops	and	markets	molecular	diagnostic	reagents	for	a	wide	variety	of	DNA	and	RNA	analysis	applications	based on	its	proprietary	Invader	chemistry.	Third	Wave's	current	clinical	diagnostic	offerings	consist	of	products	for	conditions	such	as	Cystic	Fibrosis,	Hepatitis	C, cardiovascular	risk	and	other	diseases.	Third	Wave	recently	submitted	to	the	U.S.	Food	and	Drug	Administration	("FDA")	pre-market	approval	("PMA")	applications for	two	human	papillomavirus	("HPV")	tests.

The	Company	paid	$11.25	per	share	of	Third	Wave,	for	an	aggregate	purchase	price	of	approximately	$591,200	(subject	to	adjustment)	consisting	of approximately	$575,400	in	cash	in	exchange	for	stock	and	warrants;	approximately	668	of	fully	vested	stock	options	granted	to	Third	Wave	employees	in	exchange	for their	vested	Third	Wave	stock	options,	with	an	estimated	fair	value	of	approximately	$8,100;	and	approximately	$7,700	for	acquisition	related	fees	and	expenses.	There are	no	potential	contingent	consideration	arrangements	payable	to	the	former	shareholders	in	connection	with	this	transaction.	Additionally,	the	Company	granted approximately	315	unvested	stock	options	in	exchange	for	unvested	Third	Wave	stock	options,	with	an	estimated	fair	value	of	approximately	$5,100,	which	will	be recognized	as	compensation	expense	over	the	vesting	period.

The	Company	determined	the	fair	value	of	the	options	issued	in	connection	with	the	acquisition	in	accordance	with	EITF	Issue	No.	99-12,	Determination	of	the Measurement	Date	for	the	Market	Price	of	Acquirer	Securities	Issued	in	a	Purchase	Business	Combination").	The	Company	determined	the	measurement	date	to	be July	24,	2008,	the	date	the	transaction	was	completed,	as	the	number	of	shares	to	be	issued	according	to	the	exchange	ratio	was	not	fixed	until	this	date.	The	Company valued	the	securities	based	on	the	average	market	price	for	two	days	before	the	measurement	date	and	the	measurement	date	itself.	The	weighted	average	stock	price	was determined	to	be	approximately	$23.54.

# The	preliminary	purchase	price	is	as	follows:

The	fair	value	of	vested	Hologic	common	stock	options	exchanged	for	vested	Third	Wave	options	was	included	in	the	purchase	price	as	such	options	were	fully vested.	The	Company	estimated	the	fair	value	of	these	stock	options	using	the	Binomial	Option	Pricing	Model.	The	Company	estimated	the	fair	value	of	the	stock options	assuming	no	expected	dividends	and	the	following	weighted-average	assumptions:

The	allocation	of	the	purchase	price	is	based	upon	preliminary	estimates	of	the	fair	value	of	assets	acquired	and	liabilities	assumed	as	of	July	24,	2008.	The Company	is	in	the	process	of	gathering	information	to	finalize	its	valuation	of	certain	assets	and	liabilities.	The	purchase	price	allocation	is	preliminary	and	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:

Subsequent	to	the	close	of	the	Third	Wave	acquisition	through	September	27,	2008,	stock	options,	originally	issued	by	Third	Wave	and	converted	into	options	to purchase	Hologic	common	stock,	were	exercised.	The	Company	recorded	the	estimated	tax	benefit	of	approximately	$368	related	to	the	exercise	of	these	options	as	a reduction	to	goodwill	as	of	September	27,	2008.

As	part	of	the	preliminary	purchase	price	allocation,	all	intangible	assets	that	were	a	part	of	the	acquisition	were	identified	and	valued.	It	was	determined	that	only developed	technology	had	separately	identifiable	values.	The	fair	value	of	the	developed	technology	intangible	assets	was	determined	through	the	application	of	the income	approach.	Developed	technology	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.

As	part	of	the	preliminary	purchase	price	allocation	for	Third	Wave,	approximately	$195,200	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	utilizing	a	discount	rate	of	20%	that	have	not	yet	reached	technological	feasibility	and	have	no	alternative	future	uses	as	of	the	date of	the	merger.	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	was	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	most	significant	acquired	in-process	technology	related	to	the	HPV	Cervista	HR,	for	which	the	Company	has	estimated	a	value	of	approximately	$151,200. The	Company	currently	sells	HPV	reagents	that	detect	certain	high	risk	HPV	types	as	Analyte	Specific	Reagents	("ASRs").	In	2006,	Third	Wave	began	clinical	trials	for PMA	submissions	to	the	FDA	for	Cervista	HR.	The	Company	submitted	the	PMA	in	April	2008.	Subsequent	to	receiving	FDA	approval,	management	expects	to discontinue	selling	the	HPV	ASRs	and	only	sell	HPV	In	Vitro	Diagnostics	("IVDs").	As	such,	the	HPV	IPR&D	relates	only	to	the	HPV	IVDs	and	the	HPV	ASR's	were valued	as	developed	technology.	The	estimated	cost	to	complete	this	technology	is	approximately	$19,300.

The	estimated	cost	to	complete	Third	Wave's	remaining	in-process	research	and	development	projects	in	the	aggregate	is	$9,800.

# Cytyc	Corporation	Business	Combination.

On	October	22,	2007	the	Company	completed	its	merger	with	Cytyc	Corporation	("Cytyc")	pursuant	to	the	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)1.04	shares	of	common	stock	of	the	Company	(as	adjusted	for	the	stock	split	effected	on	April	2,	2008)	and	(ii)$16.50	in	cash.	In	accordance	with	Statement	of Financial	Accounting	Standards	("SFAS")	No.	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	control	and	represent	a	majority	of	the	board	of	directors	and	senior	management of	the	combined	company,	as	well	as	the	terms	of	the	merger	consideration,	pursuant	to	which	the	Cytyc	stockholders	received	a	premium	over	the	fair	market	value	of 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	diagnostics	and	surgical	products.	Cytyc	products	cover	a	range	of	cancer	and	women's	health	applications,	including	cervical	cancer screening,	prenatal	diagnostics,	treatment	of	excessive	menstrual	bleeding	and	radiation	treatment	of	early-stage	breast	cancer.

Upon	the	close	of	the	merger,	Cytyc	shareholders	received	an	aggregate	of	132,038	shares	of	Hologic	common	stock	and	approximately	$2,094,800	in	cash.	In connection	with	the	close	of	the	merger,	the	Company	entered	into	a	credit	agreement	relating	to	a	senior	secured	credit	facility	(the	"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	this	Credit	Agreement.	See	Note	6(a)	for	further discussion.

The	estimated	aggregate	purchase	price	of	approximately	$6,156,900	includes	$2,094,800	in	cash;	132,038	shares	of	Hologic	common	stock	at	an	estimated	fair value	of	$3,671,500;	approximately	16,465	of	fully	vested	stock	options	granted	to	Cytyc	employees	in	exchange	for	their	vested	Cytyc	stock	options,	with	an	estimated fair	value	of	approximately	$241,400;	the	fair	value	of	Cytyc's	outstanding	convertible	notes	assumed	in	the	merger	of	approximately	$125,000;	and	approximately $24,200	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	132,038	shares	of	the	Company	common	stock	issued	as	consideration	in	connection	with	the	merger	under EITF	99-12.	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	to	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	$27.81.

# (i)	Purchase	price

The	fair	value	of	vested	Hologic	common	stock	options	exchanged	for	vested	Cytyc	options	was	included	in	the	purchase	price	as	such	options	were	fully	vested. The	Company	estimated	the	fair	value	of	these	stock	options	using	the	Binomial	Option	Pricing	Model.	The	Company	estimated	the	fair	value	of	the	stock	options assuming	no	expected	dividends	and	the	following	weighted-average	assumptions:

# (ii)	Purchase	Price	Allocation

The	allocation	of	the	purchase	price	is	based	upon	estimates	of	the	fair	value	of	assets	acquired	and	liabilities	assumed	as	of	October	22,	2007.	As	a	result	of	the merger,	the	Company	has	assumed	Cytyc's	obligation	to	Adiana's	former	stockholders	to	make	contingent	earn-out	payments	based	on	the	achievement	of	milestones. The	Company	has	considered	the	provision	of	EITF	Issue	No.	95-8,	Accounting	for	Contingent	Consideration	Paid	to	the	Shareholders	of	an	Acquired	Enterprise	in	a Purchase	Business	Combination,	and	concluded	that	this	contingent	consideration	will	represent	additional	purchase	price.	As	a	result,	goodwill	will	be	increased	by	the amount	of	the	additional	consideration,	if	any,	when	it	becomes	due	and	payable.	As	of	September	27,	2008,	the	Company	has	not	recorded	any	amounts	for	the potential	earn-outs.	The	Company	has	formulated	and	undertaken	a	plan	to	restructure	certain	of	Cytyc's	activities.	The	Company	has	recorded	a

liability	of	approximately	$2,800	in	accordance	with	EITF	Issue	No.	95-3	("EITF	95-3"),	Recognition	of	Liabilities	in	Connection	with	a	Purchase	Business Combination,	primarily	related	to	the	termination	of	certain	employees,	minimum	inventory	purchase	commitments	and	other	contractual	obligations	for	which	the related	business	activities	have	been	discontinued.

# (iii)	Valuation	of	Intangible	Assets	and	Goodwill

The	purchase	price	for	the	merger	with	Cytyc	has	been	allocated	to	assets	acquired	and	liabilities	assumed	based	on	management's	estimate	of	their	estimated	fair values.	Management	has	allocated	the	purchase	price	in	excess	of	net	tangible	assets	acquired	to	identifiable	intangible	assets	and	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.	The	Company	reduced	goodwill	related	to	the	Cytyc	merger	in	the	amount	of	approximately $14,200	during	the	year	ended	September	27,	2008.	The	reduction	was	primarily	related	to	a	$16,800	increase	in	the	preliminary	valuation	of	net	assets	acquired (primarily	related	to	deferred	tax	assets	acquired),	a	$1,845	increase	in	the	preliminary	valuation	of	certain	tangible	assets	and	a	$1,700	increase	in	the	preliminary valuation	of	certain	intangible	assets	which	were	partially	offset	by	a	$5,900	increase	in	the	preliminary	estimate	of	deferred	tax	liabilities	assumed	(primarily	related	to current	tax	liabilities)	and	$200	increase	in	the	preliminary	estimate	of	acquisition	costs	and	expenses.

As	part	of	the	preliminary	purchase	price	allocation,	the	Company	determined	that	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	Food	and	Drug	Administration	("FDA").	Cytyc's	customer	relationship	assets	relate	to	relationships	that	Cytyc's sales	force	has	developed	with	obstetricians/gynecologists	and	gynecological	surgeons,	breast	surgeons,	radiation	oncologists,	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,	which	ranged	between	10.5%	and	13.5%,	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	is	amortizing	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.

As	part	of	the	preliminary	purchase	price	allocation	for	Cytyc,	approximately	$370,000	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	merger.	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	was	expensed	at	the	time	of	the	merger.	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	research	and	development	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	were	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	the	Company	and	its	competitors.	The	resulting	net	cash	flows	from	such	projects	were based	on	management's	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	of	12.5%	to	13.5%	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	acquired	in-process	research	and	development	of	Cytyc	related	to	the	following	research	and	development	projects:	Adiana	Complete	TransCervical Sterilization	("TCS")	System	and	expanded	labeling	of	the	NovaSure	System,	Gestiva,	the	ThinPrep	Imaging	System,	the	ThinPrep	Processor	and	the	Helica	Thermal Coagulator	System	("Helica").

The	most	significant	acquired	in-process	technology	related	to	the	Adiana	Complete	TCS	System	for	which	the	Company	has	estimated	a	value	of	approximately $220,000.	The	TCS	product	is	an	incisionless	trans-cervical	permanent	sterilization	device	intended	to	be	used	during	an	office	or	hospital	based	procedure.	The	system consists	of	three	different	parts:	a	disposable	applicator,	an	implantable	polymer	matrix	and	a	radio	frequency	controller.	The	procedure	can	be	performed	in	a	hospital	or physician's	office,	and	should	generally	take	twelve	minutes,	with	a	thirty	to	forty	minute	recovery	time.	As	of	September	27,	2008	the	estimated	remaining	costs	to complete	the	clinical	trials	were	expected	to	be	approximately	$600.

Cytyc's	other	in-process	research	and	development	projects	were	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	Pre-Market	Approval	("PMA")	and	drug	applications.	FDA	approval	or	clearance	had	not	been granted	for	any	of	the	products	classified	as	in-process	research	and	development,	nor	had	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	could	be	marketed.	As	of	September	27,	2008,	the	estimated	cash	requirements	in	the	aggregate	to	complete	these	remaining	products	were expected	to	be	approximately	$5,700.	Certain	of	these	projects	that	have	been	discontinued	or	delayed	are	not	included	in	this	estimate	as	their	cost	to	complete	and timing	of	completion	are	unknown	at	this	time.	Certain	of	the	projects	included	in	this	estimated	cash	requirement	have	been	delayed	to	fiscal	2010	and	the	estimated costs	for	these	projects	have	been	increased	accordingly.

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	PMA 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	Part	I,	Item	1A	of	this	report.

The	preliminary	purchase	price	allocation	resulted	in	goodwill	of	approximately	$3,844,100	as	of	October	22,	2007,	the	date	of	the	merger.	The	Company	reduced this	allocation	in	the	amount	of	approximately	$14,200	during	fiscal	2008.	The	reduction	was	primarily	related	to	a	$16,800	increase	in	the	preliminary	valuation	of assets	acquired	(primarily	related	to	deferred	tax	assets	acquired),	a	$1,845	increase	in	the	preliminary	valuation	of	certain	tangible	assets	and	a	$1,700	increase	in	the preliminary	valuation	of	certain	intangible	assets	which	were	partially	offset	by	a	$5,900	increase	in	the	preliminary	estimate	of	liabilities	assumed	(primarily	related	to current	tax	liabilities)	and	a	$200	increase	in	the	preliminary	estimate	of	acquisition	costs	and	expenses.

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.

Subsequent	to	the	close	of	the	Cytyc	merger	through	September	27,	2008,	vested	stock	options,	originally	issued	by	Cytyc	and	converted	into	options	to	purchase Hologic	common	stock,	were	exercised.	The	Company	recorded	the	estimated	tax	benefit	of	approximately	$49,300	related	to	the	exercise	of	these	options	as	a reduction	to	goodwill	as	of	September	27,	2008.

Goodwill	as	of	September	27,	2008	related	to	the	Cytyc	merger	was	approximately	$3,780,600.

# Supplemental	Pro-forma	Information

The	following	unaudited	pro-forma	information	presents	the	consolidated	results	of	operations	of	the	Company	and	Cytyc	as	if	the	transaction	had	occurred	at	the beginning	of	each	period	presented,	with	pro-forma	adjustments	to	give	effect	to	amortization	of	intangible	assets,	an	increase	in	interest	expense	on	acquisition financing,	subsequent	refinancing	and	certain	other	adjustments	together	with	related	tax	effects:

| (approximate	amounts	in	thousands	except	per	share	data) | September	27,<br>2008 | September	29,<br>2007 |
| :--- | :--- | :--- |
| Net\trevenue | $1,711,405 | $1,472,400 |
| Net\tincome | $658,678 | $62,600 |
| Net\tincome\tper\tcommon\tshare: |  |  |
| Basic | $0.85 | $0.26 |
| Diluted | $0.83 | $0.25 |

The	$370,000	charge	for	acquired	in-process	research	and	development,	the	fair	value	of	the	inventory	step-up	of	$42,300,	stock-based	compensation	of approximately	$60,000,	direct	acquisition	fees	and	expenses	of	approximately	$28,000	and	change	of	control	payments	of	approximately	$18,600	that	were	a	direct result	of	the	transaction	are	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	merger	with	Cytyc	occurred	at	the	beginning	of	the	periods	presented.	The	$195,200	charge	for	acquired	in-process	research and	development	and	the	fair	value	of	the	inventory	step-up	of	$3,933	that	were	a	direct	result	of	the	acquisition	of	Third	Wave	have	been	excluded	from	the	unaudited pro	forma	information	above.	The	Company	has	not	reflected	any	other	pro	forma	adjustments	related	to	Third	Wave	as	it	was	not	considered	a	material	acquisition.

Prior	to	the	close	of	the	merger,	the	Board	of	Directors	of	Cytyc	approved	a	modification	to	certain	outstanding	equity	awards	for	Cytyc	employees,	which	was consented	to	by	Hologic.	The	modification	provided	for	the	acceleration	of	vesting	upon	the	close	of	the	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	consented	to	by	the	Company	so	that	the	Company	would	not	incur	stock- based	compensation	charges	that	it	otherwise	would	have	if	the	awards	had	continued	to	vest	under	their	original	terms.

# Acquisition	of	BioLucent,	Inc.

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,	consisting	of	approximately	$6,800	in	cash	and	2,314	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	an	Acquired Enterprise	in	a	Purchase	Business	Combination,	and	concluded	that	this	contingent	consideration	will	represent	additional	purchase	price.	As	a	result,	goodwill	will	be increased	by	the	amount	of	the	additional	consideration,	if	any,	when	it	becomes	due	and	payable.	As	of	September	27,	2008,	the	Company	has	not	recorded	any amounts	for	these	potential	earn-outs.	The	allocation	of	the	purchase	price	is	based	upon	estimates	of	the	fair	value	of	assets	acquired	and	liabilities	assumed	as	of September	18,	2007.	The	components	and	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 | 12,300 |
| Customer\trelationship | 17,000 |
| Trade\tname | 2,800 |
| Deferred\tincome\ttax\tliabilities,\tnet | (9,500) |
| Goodwill | 47,800 |
| Final\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	is	expected	to	purchase	the	disposable	MammoPad	product	on	a regular	basis.	Trade	name	represents	the

BioLucent	product	name	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	reduction	was	primarily	related	to	a	change	in	the preliminary	valuation	of	certain	liabilities	acquired	based	on	information	received	during	the	period.	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.

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.

# Acquisition	of	AEG	Elektrofotografie	GmbH

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	consisting	of	$24,100	in	cash	and	220	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	220	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	was	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	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	8,800	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-how | 39,500 |
| Customer\trelationship | 15,700 |
| Trade\tname | 3,300 |
| Order\tbacklog | 800 |
| Deferred\tincome\ttaxes | 6,700 |
| Goodwill | 143,200 |
| Final\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	$2,300	and	$400	during	the	years	ended	September	27,	2008	and September	29,	2007,	respectively.	The	reduction	in	2007	was	primarily	related	to	a	change	in	the	preliminary	valuation	of	certain	assets	and	liabilities	acquired	based	on information	received	during	the	year.	The	decrease	in	goodwill	in	2008	was	related	to	the	reduction	of	an	income	tax	liability.	The	final	purchase	price	allocations	were completed	and	the	adjustments	did	not	have	a	material	impact	on	the	Company's	financial	position	or	results	of	operation.

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	4,600	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	final	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.	The	Company	also	accrued	$24,500	for	the	second	and	final	earn-out	related	to	Suros'	incremental	revenue	growth	during	the fourth	quarter	of	fiscal	2008,	with	an	increase	to	goodwill,	of	which	$24,400	had	been	paid	as	of	September	27,	2008.	In	addition	to	the	earn-out	discussed	above,	the Company	decreased	goodwill	in	the	amount	of	$1,300	during	the	year	ended	September	27,	2008	and	increased	goodwill	in	the	amount	of	$210	during	the	year	ended September	29,	2007.	The	increase	in	2007	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	was	paid	during	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.	The	decrease	in	goodwill	during	2008	was	related	to	the	reduction	of	an	income	tax liability.	There	have	been	no	other	material	changes	to	purchase	price	allocations.

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	represents	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 they	are	substantially	complete	as	of	September	27,	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. Sale	of	Gestiva

On	January	16,	2008,	the	Company	entered	into	a	definitive	agreement	pursuant	to	which	it	has	agreed	to	sell	full	U.S.	and	world-wide	rights	to	Gestiva	to	K-V Pharmaceutical	Company	upon	approval	of	the	pending	Gestiva	new	drug	application	(the	"Gestiva	NDA")	by	the	FDA.

The	purchase	price	to	be	paid	to	the	Company	as	a	result	of	the	transaction	is	$82,000	in	cash,	$7,500	of	which	was	paid	on	February	21,	2008,	$2,000	of	which was	paid	on	May	22,	2008	and	the	balance	of	which	is	payable	upon	final	approval	by	the	FDA	of	the	Gestiva	NDA	and	the	production	of	a	quantity	of	Gestiva	suitable

to	enable	the	commercial	launch	of	the	product.	The	Company	has	agreed	to	continue	its	efforts	to	obtain	FDA	approval	of	the	NDA	for	Gestiva	as	part	of	this arrangement.	All	costs	incurred	in	these	efforts	will	be	reimbursed	by	K-V	Pharmaceutical	and	will	be	recorded	as	a	credit	against	research	and	development	expenses. These	costs	were	immaterial	during	fiscal	2008.	The	Company	has	recorded	the	$9,500	as	a	deferred	gain	within	current	liabilities	in	the	accompanying	Consolidated Balance	Sheet.	The	gain	will	be	recognized	upon	the	closing	of	the	transaction	following	final	FDA	approval	of	the	Gestiva	NDA.

The	development	of	Gestiva,	a	drug	that,	if	approved	by	the	FDA,	could	be	used	in	the	prevention	of	preterm	birth	in	pregnant	women	with	a	history	of	at	least one	spontaneous	preterm	birth,	was	originally	begun	by	Adeza	Biomedical	Corporation,	which	was	acquired	by	Cytyc	on	April	2,	2007.	On	October	22,	2007,	the Company	completed	its	business	combination	transaction	with	Cytyc	and	as	a	result	acquired	all	rights	to	Gestiva.	The	Company	has	allocated	$53,400	to	acquired	in- process	research	and	development	as	part	of	the	initial	purchase	price	allocation.

# Credit	Agreement

On	October	22,	2007,	the	Company	and	certain	of	its	domestic	subsidiaries	entered	into	a	senior	secured	credit	agreement	(the	"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 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	used	the	proceeds	from	the	credit	facilities	to	pay	the	cash	consideration	of	the	Cytyc	merger,	and	to	pay	fees,	commissions	and expenses	incurred	by	the	Company	in	connection	with	the	Cytyc	merger	and	the	Credit	Agreement.	In	addition,	the	Company	used	the	proceeds	of	the	credit	facilities, together	with	the	Company's	available	cash,	to	pay	the	cash	due	upon	conversion	of	Cytyc's	2.25%	Senior	Convertible	Notes	due	2024	that	were	outstanding	after	the closing	of	the	Cytyc	merger.

The	credit	facilities	under	the	Credit	Agreement	consisted	of:

•	 $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.

The	Company	applied	the	net	proceeds	from	its	convertible	notes	offering	described	below	to	repay	amounts	outstanding	under	the	Credit	Agreement,	including all	of	the	remaining	amounts	outstanding	under	Term	Loan	X	and	Term	Loan	B-2,	$1,100,000	and	$250,000,	respectively,	all	of	which	was	outstanding	immediately prior	to	the	issuance	of	the	convertible	notes.	Additionally,	the	Company	repaid	a	pro	rata	portion	of	the	Company's	Term	Loan	A	in	the	amount	of	$251,000	and	Term Loan	B-1	in	the	amount	of	$104,000.	During	fiscal	2008,	the	Company	also	made	voluntary	prepayments	of	the	remaining	principal	under	its	Term	Loan	X,	Term	Loan A	and	Term	Loan	B-1	of	$150,000,	$349,000	and	$146,000,	respectively.	There	were	no	amounts	outstanding	under	these	term	notes	as	of	September	27,	2008.

All	amounts	outstanding	under	the	credit	facilities	accrued	interest,	at	the	Company's	option,	initially,	with	respect	to	all	loans	made	under	the	revolving	facility and	the	Term	Loan	A	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	the	Base	Rate	plus	1.5%	per	annum;	or	(ii)	at	the	reserve	adjusted	Eurodollar	Rate	plus	2.50%;	and	with	respect	to	loans made	under	the	Term	Loan	X	facility:	(i)	at	the	Base	Rate	plus	0.75%	per	annum;	or	(ii)	at	the	reserve	adjusted	Eurodollar	Rate	plus	1.75%	per	annum.

The	Credit	Agreement	contained	affirmative	and	negative	covenants	customarily	applicable	to	senior	secured	credit	facilities,	including	requirements	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	Company	was	in compliance	with	all	covenants	through	the	term	of	the	agreement.

Borrowings	outstanding	under	the	credit	agreement	from	initial	drawdown	through	final	repayment	in	June,	2008	had	a	weighted	average	interest	rate	of	6.72%. Interest	expense	under	these	credit	facilities	totaled	$40,200	during	fiscal	2008,	which	included	non-cash	interest	expense	of	approximately	$12,300	related	to	the amortization	of	the	capitalized	deferred	financing	costs	related	to	the	Amended	Credit	Agreement.	As	of	September	27,	2008,	all	of	these	capitalized	deferred	financing costs	have	been	amortized,	with	the	exception	of	$3,464	of	remaining	capitalized	deferred	financing	costs	allocated	to	the	revolving	credit	facility,	as	all	Term	Loan borrowings	had	been	fully	repaid.

In	connection	with	its	acquisition	of	Third	Wave,	on	July	17,	2008,	the	Company	entered	into	an	amended	and	restated	credit	agreement	with	certain	of	the Lenders	(the	"Amended	Credit	Agreement").	The	Amended	Credit	Agreement	amended	and	restated	the	Company's	existing	credit	agreement	with	Goldman	Sachs Credit	Partners	L.P.	and	the	lenders	named	therein,	dated	as	of	October	22,	2007.

Pursuant	to	the	terms	and	conditions	of	the	Amended	Credit	Agreement,	the	Lenders	have	committed	to	provide	senior	secured	financing	in	an	aggregate	amount of	up	to	$800,000.

•	 $200,000	senior	secured	revolving	credit	facility	(the	"revolving	facility").

Under	the	Amended	Credit	Agreement,	the	amounts	under	the	Term	Loan	A	and	the	Term	Loan	B	are	available	to	the	Company	in	multiple	drawdowns	until	the earlier	of	the	consummation	of	the	Third	Wave	acquisition	or	December	5,	2008.	In	order	to	consummate	the	offer	for	the	shares	of	Third	Wave	and	to	complete	the acquisition	of	Third	Wave	through	acquisition,	the	Company	borrowed	$540,000	under	the	credit	facilities	on	July	17,	2008,	consisting	of	$400,000	under	the	Term Loan	A	and	$140,000	under	the	Term	Loan	B.	During	the	fourth	quarter	of	fiscal	2008,	the	Company	repaid	a	pro	rata	portion	of	the	Company's	Term	Loan	A	in	the amount	of	approximately	$56,000	and	Term	Loan	B	in	the	amount	of	approximately	$19,000.

As	of	September	27,	2008,	the	Company	had	an	aggregate	of	$465,000	of	principal	outstanding	under	this	credit	facility	of	which	approximately	$344,000	was under	the	Term	Loan	A	and	approximately	$121,000	was	under	the	Term	Loan	B.	The	long-term	portion	of	the	Term	Loan	A	and	Term	Loan	B	loans	were approximately	$310,000	and	$119,000,	respectively,	at	September	27,	2008.

The	domestic	subsidiaries	of	the	Company	which	are	party	to	the	Amended	Credit	Agreement	(including	Third	Wave,	which	joined	as	a	party	to	the	Amended Credit	Agreement	on	July	24,	2008)	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	the	Company	and	all	subsidiaries	party	to	the	Amended	Credit	Agreement,	a	first	priority	security interest	in	100%	of	the	capital	stock	issued	by	each	guarantor,	65%	of	the	capital	stock	issued	by	certain	first-tier	foreign	subsidiaries	of	the	Company	and	all intercompany	debt.	The	security	interests	are	evidenced	by	an	Amended	and	Restated	Pledge	and	Security	Agreement	by	and	among	Goldman	Sachs	Credit	Partners L.P.,	as	collateral	agent,	Hologic	and	the	other	parties	therein	named	(the	"Amended	Pledge	and	Security	Agreement").	The	Amended	Pledge	and	Security	Agreement amended	and	restated	Hologic's	existing	Pledge	and	Security	Agreement	by	and	among	Goldman	Sachs	Credit	Partners	L.P.,	as	collateral	agent,	Hologic	and	the	other parties	therein	named,	dated	as	of	October	22,	2007.

The	final	maturity	dates	for	the	credit	facilities	will	be	as	follows:

The	Company	is	required	to	make	scheduled	principal	payments	under	the	Term	Loan	A	facility	in	increasing	amounts	ranging	from	$10,000	per	quarter commencing	with	the	quarter	ending	September	30,	2008	to	$15,000	per	quarter	commencing	with	the	quarter	ending	September	30,	2010,	and	under	the	Term	Loan	B facility,	in	equal	quarterly	installments	of	$500	beginning	on	the	quarter	ending	September	30,	2008,	with	the	remaining	balance	of	each	term	loan	facility	due	at	the maturity	of	the	applicable	term	loan	facility.	These	minimum	scheduled	principal	payments	are	reduced	on	a	prorata	basis	as	the	Company	makes	voluntary	repayments against	the	outstanding	principal	amounts.	The	revolving	credit	facility	will	become	due	at	maturity.	No	scheduled	amortizations	are	required	under	the	revolving 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.

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).

The	Company	had	no	amounts	outstanding	and	no	scheduled	required	payments	under	its	revolving	facility	and,	therefore,	had	full	availability	of	the	$200,000 revolving	facility	as	of	September	27,	2008.

All	amounts	outstanding	under	the	amended	credit	facilities	will	bear	interest,	at	Hologic's	option,	as	follows:

Initially,	with	respect	to	loans	made	under	the	revolving	facility	and	the	Term	Loan	A	facility:

With	respect	to	loans	made	under	the	Term	Loan	B	facility:

The	margin	applicable	to	loans	under	the	revolving	credit	facility	and	the	Term	Loan	A	facility	is	subject	to	specified	changes	based	on	certain	changes	in	the leverage	ratio	as	specified	in	the	Amended	Credit	Agreement.

Interest	accruing	at	the	base	rate	generally	is	payable	by	the	Company	on	a	quarterly	basis.	Interest	accruing	at	the	Eurodollar	Rate	is	payable	on	the	last	day	of selected	interest	periods	(which	shall	be	one,	two,	three	and	six	months	and	in	certain	circumstances,	nine	or	twelve	months)	unless	the	interest	period	exceeds	three months,	in	which	case,	interest	will	be	due	at	the	end	of	every	three	months.

The	Company	will	pay	a	quarterly	commitment	fee,	at	a	per	annum	rate	of	0.50%,	on	the	undrawn	commitments	available	under	the	revolving	credit	facility, which	per	annum	rate	is	subject	to	reduction	based	on	a	leverage	ratio	as	specified	in	the	Amended	Credit	Agreement.

The	credit	facilities	contain	affirmative	and	negative	covenants	customarily	applicable	to	senior	secured	credit	facilities,	including	covenants	restricting	the	ability of	the	Hologic	loan	parties,	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	facilities	require	the	Hologic	loan	parties	to	maintain	maximum	leverage	and	minimum	interest	coverage	ratios,	as	of	the	last	day	of	each	fiscal	quarter. The	maximum	leverage	ratio	is	5.50:1.00	beginning	on	the	Company's	fiscal	quarter	ending	September	27,	2008,	and	then	decreases	over	time	to	3:00:1.00	for	the	fiscal quarter	ending	September	25,	2010	and	each	fiscal	quarter	thereafter.	The	minimum	interest	coverage	ratio	is	2.25:1.00	beginning	with	the	Company's	fiscal	quarter ending	September	27,	2008,	and	then	increases	over	time	to	2.75:1.00	for	the	fiscal	quarter	ending	September	25,	2010	and	each	fiscal	quarter	thereafter.	The	leverage ratio	is	defined	as	the	ratio	of	Hologic'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	consolidated	adjusted	EBITDA	for	the	applicable	periods	to	the	Company's consolidated	interest	expense.	These	terms,	and	the	calculation	thereof,	are	defined	in	further	detail	in	the	Amended	Credit	Agreement.	The	Company	was	in	compliance with	its	financial	covenants	as	of	September	27,	2008.

Borrowings	outstanding	under	the	Amended	Credit	Agreement	from	initial	drawdown	to	September	27,	2008	had	a	weighted	average	interest	rate	of	5.24%.	The interest	rate	on	the	outstanding	Term	Loan	A	and	Term	Loan	B	borrowings	at	September	27,	2008	was	5.25%	and	6.0%,	respectively.	Interest	expense	under	the Amended	Credit	Agreement	totaled	$8,148	during	fiscal	2008,	which	included	non-cash	interest	expense	of	approximately	$2,718	related	to	the	amortization	of	the capitalized	deferred	financing	costs	related	to	the	Amended	Credit	Agreement.

Future	scheduled	minimum	payments	under	these	credit	facilities	are	as	follows:

| Fiscal	2009 | $36,167 |
| :--- | :--- |
| Fiscal\t2010 | 36,167 |
| Fiscal\t2011 | 53,389 |
| Fiscal\t2012 | 226,041 |
| Fiscal\t2013 | 113,236 |
| Total | $465,000 |

# Convertible	Notes

On	December	10,	2007,	the	Company	issued	and	sold	$1,725,000	aggregate	original	principal	amount	of	2.00%	Convertible	Senior	Notes	due	2037	(the "Convertible	Notes").	The	Convertible	Notes	were	registered	under	an	effective	Registration	Statement	and	were	issued	pursuant	to	an	Indenture	between	the	Company and	Wilmington	Trust	Company,	as	Trustee	(the	"Indenture")	and	a	First	Supplemental	Indenture	thereto	(the	"Supplemental	Indenture"),	both	dated	December	10, 2007.

The	net	proceeds	from	the	offering	of	approximately	$1,689,000,	after	deducting	the	underwriters'	discounts	of	$34,500	and	estimated	offering	expenses	of approximately	$1,500	payable	by	the	Company,	were	used	to	repay	the	Company's	outstanding	senior	secured	indebtedness	under	its	Credit	Agreement,	including	all	of the	Company's	Term	Loan	X	and	Term	Loan	B-2,	$1,100,000	and	$250,000,	respectively,	all	of	which	was	outstanding	immediately	prior	to	the	issuance	of	the Convertible	Notes,	and	a	pro	rata	portion	of	the	Company's	Term	Loan	A	and	Term	Loan	B-1.

Holders	may	require	the	Company	to	repurchase	the	Convertible	Notes	on	December	13	of	2013,	and	each	of	December	15,	2017,	2022,	2027	and	2032	at	a repurchase	price	equal	to	100%	of	their	accreted	principal	amount,	plus	accrued	and	unpaid	interest.	The	Company	may	redeem	any	of	the	Convertible	Notes	beginning December	18,	2013,	by	giving	holders	at	least	30	days'	notice.	The	Company	may	redeem	the	Convertible	Notes	either	in	whole	or	in	part	at	a	redemption	price	equal	to 100%	of	their	principal	amount,	plus	accrued	and	unpaid	interest,	including	contingent	interest	and	liquidated	damages,	if	any,	to,	but	excluding,	the	redemption	date.

The	Convertible	Notes	bear	interest	at	a	rate	of	2.00%	per	year	on	the	principal	amount,	payable	semi-annually	in	arrears	in	cash	on	June	15	and	December	15	of each	year,	beginning	June	15,	2008	and	ending	on	December	15,	2013.	The	Convertible	Notes	will	accrete	principal	from	December	15,	2013	at	a	rate	that	provides holders	with	an	aggregate	annual	yield	to	maturity	of	2.00%	per	year.	Beginning	with	the	six	month	interest	period	commencing	December	15,	2013,	the	Company	will pay	contingent	interest	during	any	six	month	interest	period	to	the	holders	of	Convertible	Notes	if	the	"trading	price",	as	defined,	of	the	Convertible	Notes	for	each	of	the five	trading	days	ending	on	the	second	trading	day	immediately	preceding	the	first	day	of	the	applicable	six	month	interest	period	equals	or	exceeds	120%	of	the	accreted principal	amount	of	the	Convertible	Notes.	Interest	expense	under	the	Convertible	Notes	totaled	$27,696	during	fiscal	2008,	which	included	non-cash	interest	expense	of $4,775	related	to	the	amortization	of	the	capitalized	deferred	financing	costs	related	to	the	Convertible	Notes	Agreement.

The	holders	of	the	Convertible	Notes	may	convert	the	notes	into	shares	of	the	Company's	common	stock	at	a	conversion	price	of	approximately	$38.60	per	share, subject	to	adjustment,	prior	to	the	close	of	business	on	September	15,	2037,	subject	to	prior	redemption	or	repurchase	of	the	notes,	under	any	of	the	following circumstances:	(1)	during	any	calendar	quarter	after	the	calendar	quarter	ended	December	31,	2007	if	the	last	reported	sale	price	of	the	Company's	common	stock exceeds	130%	of	the	conversion	price	for	at	least	20	trading	days	in	the	30	consecutive	trading	days	ending	on	the	last	trading	day	of	the	preceding	calendar	quarter; (2)	during	the	five	business	day	period	after	any	five	consecutive	trading	day	period	in	which	the	trading	price	per	note	for	each	day	of	such	period	was	less	than	98%	of the	product	of	the	last	reported	sale	price	of	the	Company's	common	stock	and	the	conversion	rate	on	each	such	day;	(3)	if	the	notes	have	been	called	for	redemption;	or (4)	upon	the	occurrence	of	specified	corporate	events.	None	of	these	triggering	events	had	occurred	as	of	September	27,	2008.

In	lieu	of	delivery	of	shares	of	the	Company's	common	stock	in	satisfaction	of	the	Company's	obligation	upon	conversion	of	the	Convertible	Notes,	the	Company may	elect	to	deliver	cash	or	a	combination	of	cash	and	shares	of	the	Company's	common	stock.	If	the	Company	elects	to	satisfy	its	conversion	obligation	solely	in	cash,

the	Company	will	deliver	cash	in	an	amount	as	provided	in	the	Indenture.	If	the	Company	elects	to	satisfy	its	conversion	obligation	in	a	combination	of	cash	and	shares of	the	Company's	common	stock,	the	Company	will	deliver	up	to	a	specified	dollar	amount	of	cash	per	$1,000	original	principal	amount	of	Convertible	Notes,	and	will settle	the	remainder	of	its	conversion	obligation	in	shares	of	its	common	stock,	in	each	case	as	provided	in	the	Indenture.	In	addition,	at	any	time	on	or	prior	to	the	35th scheduled	trading	day	prior	to	the	maturity	date	of	the	Convertible	Notes,	the	Company	may	make	an	irrevocable	election	to	settle	conversions	of	the	notes	either	solely in	cash	or	in	a	combination	of	cash	and	shares	of	its	common	stock	with	a	specified	cash	amount	at	least	equal	to	the	accreted	principal	amount	of	the	notes.	This	net share	settlement	election	is	in	the	Company's	sole	discretion	and	does	not	require	the	consent	of	holders	of	the	Convertible	Notes.	It	is	the	Company's	current	intent	and policy	to	settle	any	conversion	of	the	Convertible	Notes	as	if	the	Company	had	elected	to	make	the	net	share	settlement	election.

The	Convertible	Notes	are	the	Company's	senior	unsecured	obligations	and	rank	equally	with	all	of	the	Company's	existing	and	future	senior	unsecured	debt	and prior	to	all	future	subordinated	debt.	The	Convertible	Notes	are	effectively	subordinated	to	any	future	secured	indebtedness	to	the	extent	of	the	collateral	securing	such indebtedness,	and	structurally	subordinated	to	all	indebtedness	and	other	liabilities	(including	trade	payables)	of	the	Company's	subsidiaries.

If	an	event	of	default,	as	defined,	relates	to	the	Company's	failure	to	comply	with	the	reporting	obligations	in	the	Convertible	Notes,	if	the	Company	so	elects,	the sole	remedy	of	the	holders	of	the	Convertible	Notes	for	the	first	90	days	following	such	event	of	default	consists	exclusively	of	the	right	to	receive	an	extension	fee	on the	notes	in	an	amount	equal	to	0.25%	of	the	accreted	principal	amount	of	the	Convertible	Notes.

Based	on	the	Company's	evaluation	of	the	Convertible	Notes	in	accordance	with	EITF	Issue	No.	00-19,	Accounting	for	Derivative	Financial	Instruments	Indexed to,	and	Potentially	Settled	in,	a	Company's	Own	Stock,	and	SFAS	No.	133	("SFAS	133"),	Accounting	for	Derivative	Instruments	and	Hedging	Activities,	the	Company determined	that	the	Convertible	Notes	contained	a	single	embedded	derivative,	comprising	both	the	contingent	interest	feature	and	the	filing	failure	penalty	payment requiring	bifurcation	as	the	features	were	not	clearly	and	closely	related	to	the	host	instrument.	The	Company	has	determined	that	the	value	of	this	embedded	derivative was	nominal	as	of	December	10,	2007	and	September	27,	2008.

As	of	September	27,	2008,	upon	conversion,	including	the	potential	premium	that	could	be	payable	on	a	fundamental	change	(as	defined),	the	Company	would issue	a	maximum	of	approximately	56,000	common	shares	to	the	Convertible	Note	holders.

Please	See	Note	2,	"Summary	of	Significant	Accounting	Policies—Recently	Issued	Accounting	Pronouncements"	for	a	discussion	related	to	the	impact	of	the adoption	of	FSP	APB	14-1,	"Accounting	for	Convertible	Debt	Instruments	that	May	Be	Settled	in	Cash	upon	Conversion	(Including	Partial	Cash	Settlement)"	in	fiscal 2010.

# AEG	Debt

The	Company's	AEG	subsidiary	has	$10,602	outstanding	at	September	27,	2008	under	certain	debt	agreements.	The	terms	of	the	agreements	have	various maturities	through	March	30,	2014.	Outstanding	borrowings	had	weighted	average	interest	rates	of	6.26%,	6.34%	and	5.82%	during	the	years	ended	September	27, 2008,	September	29,	2007	and	September	30,	2006,	respectively.	Interest	expense	incurred	under	these	debt	agreements	totaled	$755,	$1,208	and	$307	in	fiscal	2008, 2007	and	2006,	respectively.

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

| Fiscal	2009 | $2,015 |
| :--- | :--- |
| Fiscal\t2010 | 2,015 |
| Fiscal\t2011 | 4,518 |
| Fiscal\t2012 | 884 |
| Fiscal\t2013 | 585 |
| Thereafter | 585 |
| Total | $10,602 |

# Cytyc	Convertible	Notes

In	connection	with	the	Cytyc	merger,	the	Company	assumed	the	obligations	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	"Cytyc	Indenture").	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	of	the	Cytyc	merger	with	the	Company,	the	Company,	Cytyc	and	the	Trustee	entered	into	the	First	Supplemental	Indenture	(the	"Cytyc Supplemental	Indenture")	as	required	by	the	Cytyc	Supplemental	Indenture	as	a	result	of	the	merger	in	order	to	provide,	among	other	things,	that	the	Company	guarantee the	obligations	under	the	Cytyc	Notes	and	the	Cytyc	Supplemental	Indenture,	and	as	a	result	of	the	merger,	the	Cytyc	Notes	ceased	to	be	convertible	into	shares	of	Cytyc common	stock	but	rather	into	the	kind	and	amount	of	shares	of	stock	and	cash	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	35.06	shares	of	Hologic	common	stock.	Pursuant	to	the	terms	of	the	Cytyc Supplemental	Indenture,	the	Company	offered	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	Cytyc Supplemental	Indenture	and	bankruptcy	and	insolvency	related	defaults.	The	Cytyc	Supplemental	Indenture	further	provides	that	at	any	time	after	March	20,	2009,	the Cytyc	Notes	may	be	redeemed	by	the	Company	at	a	cash	redemption	price	equal	to	the	principal	amount	of	the	Cytyc	Notes,	plus	accrued	and	unpaid	interest.

As	of	the	close	of	the	Cytyc	merger,	the	Company	assumed	the	outstanding	principal	amount	under	the	Cytyc	Notes	of	$73,258.	Subsequent	to	the	close	of	the merger	through	September	27,	2008,	Cytyc	Notes	in	the	principal	amount	of	$72,960	were	submitted	for	conversion	upon	which	the	Company	issued	2,557	shares	of	its common	stock	and	made	cash	payments	in	the	amount	of	$40,574.	No	holder	of	a	Cytyc	Note	accepted	the	Company's	offer	to	repurchase	the	Cytyc	Notes,	which	offer expired	in	November	2007.	As	of	September	27,	2008,	Cytyc	Notes	with	an	aggregate	principal	amount	of	$298	remain	outstanding	which	are	convertible	into approximately	10	shares	of	Hologic	common	stock	and	cash	in	the	amount	of	$166.

# 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	(the	"Pension	Benefits").	As	of	September	29,	2007	the	Company	adopted	SFAS	No.	158	("SFAS	158"),	Employers'	Accounting	for	Defined

Benefit	Pension	and	Other	Postretirement	Plans,	an	amendment	of	FASB	Statements	No.	87,	88,	106	and	132(R)	using	a	prospective	approach.	The	adoption	of	SFAS 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	27,	2008	and	September	29,	2007,	the	Company	has	recorded	a	pension	liability	of	approximately	$7,323	and	$7,627,	respectively,	primarily	as a	component	of	long-term	liabilities	in	the	accompanying	Consolidated	Balance	Sheets.	Under	German	law,	there	are	no	rules	governing	investment	or	statutory supervision	of	the	pension	plan.	As	such,	there	is	no	minimum	funding	requirement	imposed	on	employers.	Pension	benefits	are	safeguarded	by	the	Pension	Guaranty Fund,	a	form	of	compulsory	reinsurance	that	guarantees	an	employee	will	receive	vested	pension	benefits	in	the	event	of	insolvency.

The	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 | September	27,<br>2008 | September	29,<br>2007 | September	30,<br>2006 |
| :--- | :--- | :--- | :--- |
| Benefit\tobligation\tat\tbeginning\tof\tyear\t(as\tof\tacquisition\tdate\tMay\t2,\t2006) | $(7,627) | $(8,005) | $(8,635) |
| Service\tcost | — | — | (1) |
| Interest\tcost | (424) | (397) | (141) |
| Plan\tparticipants'\tcontributions | — | — | — |
| Actuarial\tgain | 665 | 1,455 | 677 |
| Foreign\texchange | (229) | (947) | — |
| Benefits\tpaid | 292 | 267 | 95 |
| Benefit\tobligation\tat\tend\tof\tyear | (7,323) | (7,627) | (8,005) |
| Plan\tassets | — | — | — |
| Funded\tstatus | $(7,323) | $(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.

| Components	of	Net	Periodic	Benefit	Cost | 2008 | 2007 | 2006 |
| :--- | :--- | :--- | :--- |
| Service\tcost | $— | $— | $— |
| Interest\tcost | 424 | 397 | \t 355 |
| Expected\treturn\ton\tplan\tassets | — | — | \t — |
| Amortization\tof\tprior\tservice\tcost | — | — | \t — |
| Recognized\tnet\tactuarial\tgain | (93) | (91) | (1) |
| Net\tperiodic\tbenefit\tcost | $331 | $306 | $354 |

|  | Pension	Benefits |  |  |
| :--- | :--- | :--- | :--- |
| Weighted-Average\tNet\tPeriodic\tBenefit\tCost\tAssumptions | 2008 | 2007 | 2006 |
| Discount\trate | 6.5% | 5.5% | 4.5% |
| Expected\treturn\ton\tplan\tassets | 0% | 0% | 0% |
| Rate\tof\tcompensation\tincrease | 0% | 0% | 0% |

The	projected	benefit	obligation	for	the	German	Pension	Benefits	plans	with	projected	benefit	obligations	in	excess	of	plan	assets	was	$7,323	and	$7,627	at September	27,	2008	and	September	29,	2007,	respectively	and	the	accumulated	benefit	obligation	for	the	German	Pension	Benefits	plans	was	$7,323	and	$7,627	at September	27,	2008	and	September	29,	2007,	respectively.

There	also	exists	the	obligation	to	pay	long-term	service	awards	benefits.	The	projected	benefit	obligation	for	long-term	service	awards	was	$601	and	$554	at September	27,	2008	and	September	29,	2007,	respectively.

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

|  | Pension<br>Benefits |
| :--- | :--- |
| 2009 | $328 |
| 2010 | 359 |
| 2011 | 377 |
| 2012 | 397 |
| 2013 | 421 |
| 2014\tto\t2018 | \t 2,405 |

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	2008	and	2007	were	$179	and	$175,	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	Operations	consists	of	the	following:

|  | September	27,<br>2008 | September	29,<br>2007 | September	30,<br>2006 |
| :--- | :--- | :--- | :--- |
| Federal: |  |  |  |
| Current | $102,212 | $39,096 | $26,164 |
| Deferred | (10,835) | 6,053 | (3,540) |
|  | 91,377 | 45,149 | 22,624 |
| State: |  |  |  |
| Current | 10,411 | 6,735 | 4,240 |
| Deferred | 265 | (2,101) | (630) |
|  | 10,676 | 4,634 | 3,610 |
| Foreign: |  |  |  |
| Current | 4,218 | 6,167 | 196 |
| Deferred | 205 | (2,039) | (630) |
|  | 4,423 | 4,128 | (434) |
|  | $106,476 | $53,911 | $25,800 |

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

|  |  | Years	ended |  |
| :--- | :--- | :--- | :--- |
|  | September\t27,\n2008 | September\t29,\n2007 | September\t30,\n2006 |
| Income\ttax\tprovision\tat\tfederal\tstatutory\trate | (35.0%) | 35.0% | 35.0% |
| Increase\t(decrease)\tin\ttax\tresulting\tfrom: |  |  |  |
| Change\tin\tValuation\tAllowance | — | (0.4) | 1.3 |
| Section\t199\tManufacturing\tDeduction | (2.2) | — | — |
| State\ttax\tprovision,\tnet\tof\tfederal\tbenefit | 2.5 | 3.3 | 4.0 |
| In-process\tresearch\tand\tdevelopment | 71.2 | — | 10.3 |
| State\tLaw\tChange | 0.8 | — | — |
| Tax\tCredits | (0.6) | (1.4) | (0.2) |
| Permanent\tdifferences | 1.0 | (0.7) | (1.7) |
| Other | 0\t.4 | 0.5 | (0.2) |
|  | 38.1% | 36.3% | 48.5% |

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

|  |  | Years	ended |  |
| :--- | :--- | :--- | :--- |
|  | September\t27,\n2008 | September\t29,\n2007 | September\t30,\n2006 |
| Domestic | $(275,091) | $137,659 | $54,542 |
| Foreign | (4,050) | 10,830 | (1,319) |
|  | $(279,141) | $148,489 | $53,223 |

The	components	of	the	deferred	tax	liabilities	and	deferred	tax	assets	as	of	September	27,	2008	and	September	29,	2007	recognized	in	the	accompanying Consolidated	Balance	Sheets	are	as	follows:

|  | September	27,<br>2008 | September	29,<br>2007 |
| :--- | :--- | :--- |
| Deferred\tTax\tAssets |  |  |
| Net\toperating\tloss\tcarryforwards | $111,769 | $30,761 |
| Nondeductible\taccruals | 19,038 | 6,153 |
| Nondeductible\treserves | 7,068 | 8,954 |
| FAS\t123R | 10,373 | — |
| Other\ttemporary\tdifferences | 4,837 | (8,370) |
| Research\tand\tother\tcredits | 8,698 | 4,681 |
|  | $161,783 | $42,179 |
| Deferred\tTax\tLiabilities |  |  |
| Depreciation\t&amp;\tAmortization | (985,955) | (58,736) |
| Original\tIssue\tDiscount | (36,904) | — |
|  | $(861,076) | $(16,557) |
| Valuation\tallowance | (6,102) | (9,059) |
|  | $(867,178) | $(25,616) |

The	deferred	provision	includes	a	charge	of	$1,498	related	to	the	Company's	U.S.	based	deferred	tax	assets	and	liabilities	resulting	from	newly	enacted	State legislation.	In	accordance	with	FAS	109,	the	adjustment	for	the	effect	of	the	change	in	state	tax	law	is	included	in	the	tax	provision	for	the	period	that	includes	the enactment	date.

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.	The	Company	believes	it	is	more	likely	than	not	that	these	state	tax	assets	will	expire	unutilized.

The	Company	recorded	a	$13,109	increase	to	additional	paid	in	capital	and	a	$49,630	decrease	to	goodwill	related	to	the	excess	tax	benefit	of	stock	options exercised	in	the	current	year.

As	of	September	27,	2008	the	Company	had	total	net	operating	loss	and	credit	carryforwards	of	approximately	$311,410	and	$8,698,	respectively.	Included	in	the $311,410	of	loss	carryforwards	are	$66,268	acquired	in	the	merger	with	Cytyc	and	$186,872	acquired	in	the	purchase	of	Third	Wave.	The	following	table	summarizes the	expiration	periods	of	the	net	operating	loss	and	credit	carryforwards:

|  | 2009-2015 | 2016-2020 | 2021-2025 | 2026-2030 | No	expiration | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Net\toperating\tloss | $1,359 | $85,917 | $148,750 | $74,878 | $— | $310,904 |
| R&amp;D\tcredit | $— | $2,028 | $2,435 | $39 | $— | $4,502 |
| CA\tCredits | $— | $— | $— | $— | $1,520 | $1,520 |
| CT\tcredit | $18 | $958 | $271 | $—\t\t\t\t $— | $—\t\t\t\t $— | $1,247 |
| CT\tNOL | $3 | $— | $— | $503 | $— | $506 |
| MA\tcredits | $144 | $688 | $283 | $— | $314 | $1,429 |

On	September	30,	2007,	the	Company	adopted	Financial	Accounting	Standards	Board	("FASB")	Interpretation	("FIN")	No.	48,	Accounting	for	Uncertainty	in Income	Taxes—an	interpretation	of	FASB	Statement	No.	109,	which	clarifies	the	accounting	for	uncertainty	in	income	taxes	recognized	in	an	enterprise's	financial statements	in	accordance	with	FASB	Statement	No.	109,	Accounting	for	Income	Taxes.	FIN	No.	48	prescribes	a	recognition	threshold	and	measurement	criteria	for	the financial	statement	recognition	and	measurement	of	a	tax	position	taken	or	expected	to	be	taken	in	a	tax	return.	FIN	No.	48	also	provides	guidance	on	derecognition, classification,	interest	and	penalties,	accounting	in	interim	periods,	disclosure,	and	transition	and	defines	the	criteria	that	must	be	met	for	the	benefits	of	a	tax	position	to be	recognized.	As	a	result	of	its	adoption	of	FIN	No.	48,	the	Company	recorded	the	cumulative	effect	of	the	change	in	accounting	principle	of	$480	as	a	decrease	to opening	retained	earnings.

The	Company	had	gross	unrecognized	tax	benefits,	including	interest	of	approximately	$20,154	as	of	September	27,	2008	and	$6,300	as	of	September	30,	2007. At	September	27,	2008,	$5,576	represents	the	amount	of	unrecognized	tax	benefits	that,	if	recognized,	would	result	in	a	reduction	of	the	Company's	effective	tax	rate. However,	upon	the	adoption	of	SFAS	No.	141(R),	changes	in	unrecognized	tax	benefits	following	an	acquisition	generally	will	affect	income	tax	expense,	including	any changes	associated	with	acquisitions	that	occurred	prior	to	the	effective	date	of	SFAS	No.	141(R).	The	increase	in	unrecognized	tax	benefits	at	September	27,	2008	is primarily	due	to	the	merger	with	Cytyc.	In	the	next	twelve	months	it	is	reasonably	possible	that	the	Company	will	reduce	the	balance	of	their	unrecognized	tax	benefits by	$1,152	due	to	expiration	of	statute	of	limitations	and	settlements	with	taxing	authorities,	of	which	$1,039	will	reduce	goodwill	and	$113	will	reduce	the	Company's effective	tax	rate.

The	Company's	unrecognized	income	tax	benefits	are	as	follows:

| Beginning	balance,	upon	adoption	as	of	September	30,	2007 | $6,200 |
| :--- | :--- |
| Tax\tpositions\trelated\tto\tcurrent\tyear: | — |
| Additions | 1,173 |
| Reductions | — |
| Tax\tpositions\trelated\tto\tprior\tyears: |  |
| Additions\trelated\tto\tchange\tin\testimate | 363 |
| Reductions | — |
| Settlements | — |
| Lapses\tin\tstatutes\tof\tlimitations | (545) |
| Acquired\ttax\tpositions: |  |
| Additions\trelated\tto\treserves\tacquired\tfrom\tCytyc | 12,256 |
| Ending\tbalance\tas\tof\tSeptember\t27,\t2008 | $19,447 |

The	Company's	policy	is	to	recognize	accrued	interest	and	penalties	related	to	unrecognized	tax	benefits	and	income	tax	liabilities,	when	applicable,	as	part	of income	tax	expense	in	its	Consolidated	Statements	of	Operations.	As	of	September	27,	2008	and	September	30,	2007,	accrued	interest	was	approximately	$707	and $100,	respectively,	net	of	federal	benefit.	As	of	September	27,	2008,	no	penalties	have	been	accrued.

The	Company	and	its	subsidiaries	are	subject	to	United	States	federal	income	tax,	as	well	as	income	tax	of	multiple	state	income	and	foreign	jurisdictions.	The current	tax	returns	are	open	for	audit	through	fiscal	2012.

The	Company	currently	has	a	tax	holiday	in	Costa	Rica	that	is	scheduled	to	expire	in	2015.	This	tax	holiday	does	not	materially	reduce	the	Company's	income	tax provision	for	fiscal	2008.

The	Company	intends	to	reinvest,	indefinitely,	approximately	$13,745	of	unremitted	earnings.	It	is	not	practical	to	estimate	the	amount	of	additional	taxes	that might	be	payable	upon	repatriation	of	foreign	earnings.

# 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	180,000	to	600,000.	At	the	Company's	March	11,	2008	Annual	Meeting	of	Stockholders,	an	increase	in	the	number	of	authorized	shares	of	common stock	from	600,000	to	750,000	was	approved.

# Stock	Option	Plans

The	Company	has	one	share-based	compensation	plan	pursuant	to	which	awards	are	currently	being	made	–	the	2008	Equity	Incentive	Plan.

The	Company	has	five	share-based	compensation	plans	pursuant	to	which	outstanding	awards	have	been	made,	but	from	which	no	further	awards	can	or	will	be made	–	i)	the	1995	Combination	Stock	Option	Plan;	ii)	the	1997	Employee	Equity	Incentive	Plan;	iii)	the	1999	Equity	Incentive	Plan;	and	iv)	the	2000	Acquisition Equity	Incentive	Plan.

At	the	Company's	March	11,	2008	Annual	Meeting	of	Stockholders,	the	Company's	2008	Equity	Incentive	Plan	(the	"2008	Equity	Plan")	was	approved.	In connection	with	this	approval,	the	Company's	1999	Second	Amended	and	Restated	Equity	Incentive	Plan	was	terminated.	The	purpose	of	the	2008	Equity	Plan	is	to provide	stock	options,	stock	issuances	and	other	equity	interests	in	the	Company	to	employees,	officers,	directors,	consultants	and	advisors	of	the	Company	and	its parents	and	subsidiaries,	and	any	other	person	who	is	determined	by	the	Board	of	Directors	to	have	made	(or	is	expected	to	make)	contributions	to	the	Company.	The 2008	Equity	Plan	is	administered	by	the	Board	of	Directors	of	the	Company,	and	a	total	of	20,000	shares	were	reserved	for	issuance	under	this	Plan.	As	of	September	27, 2008,	the	Company	had	19,977	shares	available	for	future	grant	under	this	plan.

The	Company	has	certain	other	plans	that	were	assumed	by	the	Company	in	fiscal	2008	upon	merger	with	Cytyc	and	Third	Wave.	As	of	September	28,	2008,	the Company	had	no	shares	available	for	future	grant	under	these	plans.

The	following	table	summarizes	all	stock	option	activity	under	all	of	the	plans	for	the	three	years	in	the	period	ended	September	27,	2008:

|  |  |  | Weighted- | Aggregate |
| :--- | :--- | :--- | :--- | :--- |
|  | Number | Per\tShare | Average | Intrinsic |
|  | of\tShares | Exercise\tPrice | Exercise\tPrice | Value |
| Outstanding\tat\tSeptember\t24,\t2005 | 9,411 | $0.98\t–13.22 | $3.79 |  |
| Granted | 1,904 | \t 13.19\t–\t27.64 | 20.37 |  |
| Terminated | (132) | 1.25\t–\t26.84 | 7.03 |  |
| Exercised | (2,853) | 0.98\t–\t13.87 | 3.70 | $50,713 |
| Outstanding\tat\tSeptember\t30,\t2006 | 8,330 | 0.98\t–\t27.64 | 7.56 | \t 120,030 |
| Granted | 306 | 21.45\t–\t31.13 | 25.68 |  |
| Terminated | (221) | 2.25\t–\t30.84 | 19.85 |  |
| Exercised | (2,695) | 0.98\t–\t24.65 | 3.93 | 63,477 |
| Outstanding\tat\tSeptember\t29,\t2007 | 5,720 | 0.98\t–\t31.13 | 9.77 | \t 118,599 |
| Cytyc\toptions\tconverted\tat\tmerger | 16,465 | 0.29\t–\t30.99 | 16.10 |  |
| Third\tWave\toptions\tconverted\tat\tacquisition | 983 | 2.97\t–\t23.32 | 10.59 |  |
| Granted | 3,224 | 8.23\t–\t35.26 | 32.84 |  |
| Terminated | (501) | 1.60\t–\t33.58 | 20.15 |  |
| Exercised | (11,398) | 0.29\t–\t30.99 | 15.01 | \t 196,960 |
| Outstanding\tat\tSeptember\t27,\t2008 | 14,493 | $0.29\t–\t35.26 | $17.22 | $84,165 |
| Exercisable\tat\tSeptember\t27,\t2008 | 11,036 | $0.29\t–\t32.82 | $13.47 | $80,680 |
| Exercisable\tat\tSeptember\t29,\t2007 | 3,382 | $0.98\t–\t27.64 | $5.55 | $84,384 |
| Exercisable\tat\tSeptember\t30,\t2006 | 4,887 | $0.98\t–\t18.96 | $3.79 | $87,836 |
| Vested\tand\texpected\tto\tvest\tat\tSeptember\t27,\t2008\t(1) | 13,940 |  |  |  |
| Available\tfor\tgrant\tat\tSeptember\t27,\t2008 | 19,977 |  |  |  |

(1) This	represents	the	number	of	vested	stock	options	as	of	September	27,	2008	plus	the	unvested	outstanding	options	at	September	27,	2008	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	27,	2008;	however,	the	table	excludes	1,461 restricted	stock	units:

| Options	Outstanding | Options	Outstanding | Options	Outstanding | Options	Outstanding | Options	Exercisable | Options	Exercisable |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | Weighted- |  |  |  |
|  |  | Average |  |  |  |
|  |  | Remaining | Weighted- |  | Weighted- |
|  |  | Contractual | Average |  | Average |
| Range\tof | Options | Life | Exercise | Options | Exercise |
| Exercise\tPrice | Outstanding | (Years) | Price | Exercisable | Price |
| $\t\t0.29–$\t\t0.98 | 24 | 0.90 | $0.84 | 24 | $0.84 |
| $\t\t1.01–$\t\t1.47 | 165 | 2.42 | 1.26 | 165 | 1.26 |
| $\t\t1.49–$\t\t2.21 | 209 | 3.63 | 1.87 | 209 | 1.87 |
| $\t\t2.31–$\t\t3.30 | 867 | 3.67 | 2.49 | 866 | 2.49 |
| $\t\t3.31–$\t\t4.92 | 1,206 | 4.43 | 3.86 | 1,205 | 3.86 |
| $\t\t4.96–$\t\t7.33 | 903 | 3.40 | 5.66 | 763 | 5.60 |
| $\t\t7.40–$10.95 | 1,028 | 3.20 | 8.67 | 923 | 8.59 |
| $11.04–$16.41 | 2,398 | 4.88 | 14.62 | 2,356 | 14.64 |
| $16.42–$24.61 | 4,570 | 5.23 | 20.18 | 4,043 | 19.86 |
| $24.65–$35.26 | 3,123 | 7.37 | 32.31 | 482 | 29.68 |
| $\t\t0.29–$35.26 | 14,493 | 5.16 | $17.22 | 11,036 | $13.47 |

A	summary	of	the	Company's	Restricted	Stock	Units	(the	Company's	only	non-vested	shares)	activity	during	the	three	years	ended	September	27,	2008,	is presented	below:

| Non-vested	Shares | Number	of<br>Shares | Date	Fair<br>Value |
| :--- | :--- | :--- |
| Non-vested\tat\tSeptember\t25,\t2005 | — | $— |
| Granted. | 108 | 23.19 |
| Vested | — | — |
| Forfeited | — | — |
| Non-vested\tat\tSeptember\t30,\t2006 | 108 | 23.19 |
| Granted. | 62 | 24.15 |
| Vested | — | — |
| Forfeited | (2) | 24.15 |
| Non-vested\tat\tSeptember\t29,\t2007 | 168 | 23.53 |
| Granted. | 1,227 | 33.21 |
| Third\tWave\tshares\tconverted\tat\tacquisition | 347 | 23.54 |
| Vested | (83) | 24.20 |
| Forfeited | (198) | 26.49 |
| Non-vested\tat\tSeptember\t27,\t2008 | 1,461 | $31.23 |

# Employee	Stock	Purchase	Plan

At	the	Company's	March	11,	2008	Annual	Meeting	of	Stockholders,	the	Company's	2008	Employee	Stock	Purchase	Plan	(the	"ESP	Plan")	was	approved.	The plan	meets	the	criteria	set	forth	in	SFAS	123(R)'s	definition	of	a	non-compensatory	plan	and	will,	therefore,	not	give	rise	to	recognizable	compensation	expense. Employees	who	have	completed	three	consecutive	months,	or	two	years,	whether	or	not	consecutive,	of	employment	with	the	Company	or	any	of	its	participating subsidiaries	are	eligible	to	participate	in	the	ESP	Plan.	The	ESP	Plan	allows	participants	to	purchase	common	stock	of	the	Company	at	95%	of	the	fair	market	value,	as defined.	A	total	of	400	shares	may	be	issued	under	the	ESP	Plan;	however	no	shares	have	been	issued	to	date.

# Rights	Agreement

On	April	2,	2008,	the	Company	entered	into	an	Amended	and	Restated	Rights	Agreement	(the	"Amended	and	Restated	Rights	Agreement")	between	the Company	and	American	Stock	Transfer	&	Trust	Company	as	Rights	Agent	(the	"Rights	Agent").	The	Amended	and	Restated	Rights	Agreement	amends	and	restates	the Company's	rights	agreement,	dated	as	of	September	17,	2002,	as	amended	on	May	21,	2007,	between	the	Company	and	the	Rights	Agent.

On	April	2,	2008,	the	Company	effected	a	two-for-one	stock	split	in	the	form	of	a	stock	dividend	to	stockholders	as	of	March	21,	2008.	Pursuant	to	the	Amended and	Restated	Rights	Agreement,	the	Company	amended	the	terms	of	the	rights	issued	and	issuable	under	the	agreement	("Rights"),	effective	as	of	April	3,	2008	(after the	stock	dividend),	to	reset	the	Rights	such	that	each	share	of	Common	Stock	is	entitled	to	receive	one	Right,	to	retain	the	purchase	price	of	each	Right	at	$60	per	Right, and	to	provide	that	each	Right	will	entitle	the	holder	to	purchase	one	twenty-five	thousandth	of	a	share	of	Series	A	Junior	Participating	Preferred	Stock	(the	"Series	A Preferred	Stock").	Conforming	changes	have	also	been	made	to	the	Company's	certificate	of	designation	for	the	Series	A	Preferred	Stock	to	provide	that	each	share	of Series	A	Preferred	Stock	carries	25,000

times	the	dividend,	liquidation	and	voting	rights	of	the	Company's	Common	Stock.	Other	modifications	have	also	been	made	in	the	Amended	and	Restated	Rights Agreement	to	update	the	agreement	for	certain	developments,	including	the	recent	amendments	to	the	Company's	by-laws	permitting	stockholders	to	hold	and	transfer shares	of	the	Company's	capital	stock	in	book	entry	form.	The	expiration	date	of	the	Rights	has	remained	unchanged	at	January	1,	2013.

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	$5,305,	$1,572	and	$1,200	as	a	provision	for	the	profit	sharing	contribution	for	fiscal	2008,	2007	and 2006,	respectively.

# 11. Supplemental	Executive	Retirement	Plan

Effective	March	15,	2006,	the	Company	adopted	a	SERP,	to	provide	non-qualified	retirement	benefits	to	a	select	group	of	executive	officers,	senior	management and	highly	compensated	employees	of	the	Company.	Eligible	employees	may	elect	to	contribute	up	to	75%	of	their	annual	base	salary	and	100%	of	their	annual	bonus	to the	SERP.	In	addition,	the	Company	may	elect	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	one	third	vested	each	year	and	is	fully	vested	three	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	both	October	30,	2006	and	October	22,	2007,	the	Compensation	Committee	of	the	Board	of	Directors	approved	a	$1,500	discretionary	cash	contribution	to	the SERP	for	each	year	respectively.	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	$876	and	$442	in	the	years	ended	September	27,	2008	and September	29,	2007,	respectively.	The	full	amount	of	the	discretionary	contribution,	net	of	forfeitures,	has	been	recorded	as	a	component	of	accrued	expenses	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	$5,575	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	contracts,	which	were immaterial	in	fiscal	2008	and	2007,	are	recorded	as	a	component	of	other	income	(expense),	net	in	the	accompanying	Consolidated	Statement	of	Operations.

# 12. Related	Party	Transactions

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	(the	"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	108	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	units.	As	a	result,	the	Company	recorded	stock-based	compensation expense	of	$938,	$937	and	$391	during	the	years	ended	September	27,	2008,	September	29,	2007	and	September	30,	2006,	respectively.	The	retention	and	severance agreements	also	provide	these	executives	with	certain	cash	payments	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.

In	connection	with	entering	into	the	merger	agreement	with	Cytyc,	each	of	John	W.	Cumming,	Chief	Executive	Officer,	Glenn	P.	Muir,	Executive	Vice	President Finance	and	Administration	and	Robert	A.	Cascella,	President	and	Chief	Operating	Officer,	agreed	to	conditionally	waive,	solely	with	respect	to	the	change	of	control resulting	from	the	merger	with	Cytyc,	the	change	of	control	payment	and	special	bonus	they	would	have	been	entitled	to	receive	under	their	respective	change	of	control agreements	and	any	accelerated	vesting	of	the	stock	options	and	restricted	stock	units	that	were	entitled	to	fully	vest	in	connection	with	the	merger.

On	October	22,	2007,	the	Company	entered	into	retention	and	severance	agreements	with	certain	executives	of	the	Company.	The	Company	has	determined	that	it is	probable	that	these	amounts	will	be	paid	and,	therefore,	is	accruing	these	amounts	ratably	over	the	applicable	retention	period.	In	addition,	these	executives	were awarded	76	restricted	stock	units	with	an	aggregate	value	of	$2,500.	The	restricted	stock	units	cliff	vest	at	the	end	of	the	applicable	retention	period.	The	Company	is recording	the	$2,500	of	stock-based	compensation	over	the	vesting	period	of	the	restricted	stock	units.	The	Company	recorded	stock-based	compensation	expense	of $1,811	during	the	year	ended	September	27,	2008,	related	to	these	restricted	stock	units,	of	which	$1,174	recorded	in	the	third	quarter	was	a	restructuring	charge	as described	below.

On	May	20,	2008,	the	Company	entered	into	a	Separation	and	Release	Agreement	(the	"Separation	Agreement")	with	Patrick	J.	Sullivan,	Chairman	of	the	Board of	Directors	of	the	Company.	The	Separation	Agreement	required	the	Company	to	pay	Mr.	Sullivan	a	total	of	$4,442	and	continue	to	pay	Mr.	Sullivan's	premiums	for COBRA	continuation	coverage	under	the	Company's	group	medical	plan	for	eighteen	months	following	the	effective	date	of	the	separation.	In	addition,	the	Separation Agreement	provided	that	Mr.	Sullivan's	45,710	restricted	stock	units	granted	pursuant	to	a	Restricted	Stock	Unit	Agreement	dated	October	22,	2007	would	become	fully vested,	and	Mr.	Sullivan's	options	to	purchase	the	Company's	Common	Stock,	all	of	which	were	fully	vested,	would	be	extended	so	as	to	remain	exercisable	until August	31,	2009.	The	acceleration	of	the	restricted	stock	units	and	modification	of	options	resulted	in	a	stock-based	compensation	charge	of	$1,941.	The	Company recorded	the	lump	sum	payment	and	stock-based	compensation	charge	totaling	approximately	$6,400	as	a	restructuring	charge	in	the	accompanying	Consolidated Statement	of	Operations	during	the	twelve	months	ended	September	27,	2008.

On	November	10,	2008,	the	Company	entered	into	Change	of	Control	Agreements	with	each	Senior	Vice	President	of	the	Company	(the	"SVP	Change	of	Control Agreements")	who	was	not	as	of	such	time	already	party	to	a	change	of	control	agreement	with	the	company.	The	SVP	Change	of	Control	Agreements	provide	that	if	the Company	consummates	a	change	of	control	and	during	the	two	year	period	following	the	consummation	of	such	change	of	control	the	Company	terminates	the employment	of	the	senior	vice	president	for	reasons	other	than	death,	disability	or	cause,	the	senior	vice	president	shall	be	entitled	to	receive	certain	cash	payments	and unvested	stock	options,	restricted	stock	or	stock	appreciation	rights	held	by	the	senior	vice	president	shall	become	immediately	exercisable	following	the	senior	vice president's	termination	date.

# 13. Commitments	and	Contingencies

# Contingent	Earn-Out	Payments

As	a	result	of	the	Cytyc	merger,	the	Company	assumed	the	obligation	to	the	former	Adiana	stockholders	to	make	contingent	earn-out	payments	tied	to	the achievement	of	milestones.	The	milestone	payments	include	potential	contingent	payments	of	up	to	$155,000,	based	on	the	achievement	of	certain	FDA	milestones	and on	incremental	sales	growth	of	the	Adiana	permanent	contraception	product	during	the	four-year	period	following	FDA	approval	of	this	product.

The	Company	satisfied	its	obligation	for	a	second	and	final	earn-out	to	the	former	Suros	Surgical	stockholders	related	to	Suros'	incremental	revenue	growth	for revenues	earned	through	July	31,	2008.	The	Company	accrued	an	amount	of	approximately	$24,500	for	this	second	annual	earn-out	in	the	fourth	quarter	of	2008,	with an	increase	to	goodwill,	of	which	$24,400	was	paid	as	of	September	27,	2008.	The	Company	had	also	made	a	payment	of	approximately	$19,000	to	the	former	Suros stockholders	in	the	fourth	quarter	of	fiscal	2007	for	the	first	year	earn-out.

See	Note	3	for	discussion	of	the	Company's	earn-out	obligation	related	to	the	BioLucent	acquisition.

# Finance	Lease	Obligations

As	a	result	of	the	Cytyc	merger,	the	Company	assumed	the	obligation	to	a	non-cancelable	lease	agreement	for	a	building	with	approximately	164,000	square	feet located	in	Alajuela,	Costa	Rica,	to	be	used	as	a	manufacturing	and	office	facility	to	replace	its	current	Costa	Rica	facility,	the	lease	for	which	expires	on	December	31, 2008.	The	Company	was	responsible	for	a	significant	portion	of	the	construction	costs	and	therefore	was	deemed,	for	accounting	purposes,	to	be	the	owner	of	the building	during	the	construction	period,	in	accordance	with	EITF	No.	97-10	("EITF	97-10"),	The	Effect	of	Lessee	Involvement	in	Asset	Construction.	During	the	year ended	September	27,	2008,	the	Company	recorded	an	additional	$4,400	in	fair	market	value	of	the	building,	which	was	completed	in	fiscal	2008.	This	is	in	addition	to the	$3,000	fair	market	value	of	the	land	and	the	$7,700	fair	market	value	related	to	the	building	constructed	that	Cytyc	had	recorded	as	of	October	22,	2007.	The Company	has	recorded	such	fair	market	value	within	property	and	equipment	on	its	Consolidated	Balance	Sheet.	At	September	27,	2008,	the	Company	has	recorded $1,400	in	accrued	expenses	and	$16,000	in	other	long-term	liabilities	related	to	this	obligation	in	the	Consolidated	Balance	Sheet.	The	term	of	the	lease	is	for	a	period	of approximately	ten	years	with	the	option	to	extend	for	two	consecutive	five-year	terms.	The	lease	term	commenced	in	May	2008,	at	which	time	the	Company	began transferring	the	Company's	Costa	Rican	operations	to	this	facility.	It	is	expected	that	this	process	will	be	complete	by	February	2009.

At	the	completion	of	the	construction	period,	the	Company	reviewed	the	lease	for	potential	sale-leaseback	treatment	in	accordance	with	SFAS	No.	98	("SFAS 98"),	Accounting	for	Leases:	Sale-Leaseback	Transactions	Involving	Real	Estate,	Sales-Type	Leases	of	Real	Estate,	Definition	of	the	Lease	Term,	and	Initial	Direct Costs	of

Direct	Financing	Leases—an	amendment	of	Financial	Accounting	Standards	Board	("FASB")	Statements	No.	13,	66,	and	91	and	a	rescission	of	FASB	Statement No.	26	and	Technical	Bulletin	No.	79-11.	Based	on	its	analysis,	the	Company	determined	that	the	lease	did	not	qualify	for	sale-leaseback	treatment.	Therefore,	the building,	leasehold	improvements	and	associated	liabilities	will	remain	on	the	Company's	financial	statements	throughout	the	lease	term,	and	the	building	and	leasehold improvements	will	be	depreciated	on	a	straight	line	basis	over	their	estimated	useful	lives	of	35	years.	During	the	year	ended	September	27,	2008,	the	Company	has recorded	$135	and	$82	in	depreciation	expenses	related	to	the	building	and	leasehold	improvements,	respectively,	in	the	Consolidated	Statement	of	Operations.

Future	minimum	lease	payments,	including	principal	and	interest,	under	this	lease	were	as	follows	at	September	27,	2008:

|  | Amount |
| :--- | :--- |
| Fiscal\t2009 | $1,442 |
| Fiscal\t2010 | 1,492 |
| Fiscal\t2011 | 1,544 |
| Fiscal\t2012 | 1,598 |
| Fiscal\t2013 | 1,654 |
| Thereafter | 8,924 |
| Total\tminimum\tpayments | \t 16,654 |
| Less-amount\trepresenting\tinterest | (7,187) |
| Total | $9,467 |

As	a	result	of	the	Cytyc	merger,	the	Company	assumed	the	obligation	to	a	non-cancelable	lease	agreement	for	a	building	with	approximately	146,000	square	feet located	in	Marlborough,	Massachusetts,	to	be	principally	used	as	an	additional	manufacturing	facility.	In	2011,	the	Company	will	have	an	option	to	lease	an	additional 30,000	square	feet.	As	part	of	the	lease	agreement,	the	lessor	agreed	to	allow	the	Company	to	make	significant	renovations	to	the	facility	to	prepare	the	facility	for	the Company's	manufacturing	needs.	The	Company	was	responsible	for	a	significant	amount	of	the	construction	costs	and	therefore	was	deemed,	for	accounting	purposes,	to be	the	owner	of	the	building	during	the	construction	period	in	accordance	with	EITF	97-10.	The	$13,200	fair	market	value	of	the	facility	is	included	within	property	and equipment,	net	on	the	Company's	Consolidated	Balance	Sheet.	At	September	27,	2008,	the	Company	has	recorded	$900	in	accrued	expenses	and	$15,000	in	other	long- term	liabilities	related	to	this	obligation	in	the	Consolidated	Balance	Sheet.	Cytyc	began	occupying	a	portion	of	the	facility	effective	June	1,	2007.	The	term	of	the	lease is	for	a	period	of	approximately	12	years	commencing	on	November	14,	2006	with	the	option	to	extend	for	two	consecutive	5-year	terms.	Based	on	its	SFAS	98	analysis, the	Company	determined	that	the	lease	did	not	qualify	for	sale-leaseback	treatment.	Therefore,	the	improvements	and	associated	liabilities	will	remain	on	the Company's	financial	statements	throughout	the	lease	term,	and	the	leasehold	improvements	will	be	depreciated	on	a	straight	line	basis	over	their	estimated	useful	lives.

|  | Amount |
| :--- | :--- |
| Fiscal\t2009\nFiscal\t2010\nFiscal\t2011\nFiscal\t2012\nFiscal\t2013\nThereafter | $924\n982\n982\n982\n1,091\n6,086 |
| Total\tminimum\tpayments | \t 11,047 |
| Less-amount\trepresenting\tinterest | (4,342) |
| Total | $6,705 |

# Long-Term	Supply	Contract

As	a	result	of	the	merger	with	Cytyc,	the	Company	assumed	on	a	consolidated	basis	certain	non-cancelable	supply	contracts.	For	reasons	of	quality	assurance,	sole source	availability	or	cost	effectiveness,	certain	key	components	and	raw	materials	are	available	only	from	a	sole	supplier.	Cytyc	had	entered	into	certain	long-term supply	contracts,	assumed	by	the	Company	as	a	result	of	the	merger	with	Cytyc,	to	assure	continuity	of	supply	while	maintaining	high	quality	and	reliability.	In	certain of	these	contracts,	a	minimum	purchase	commitment	has	been	established.

Future	supply	commitments	under	the	Company's	long-term	supply	contracts,	assumed	as	a	result	of	the	Cytyc	merger,	are	as	follows	as	of	September	27,	2008:

# 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	$6,361	through	December	31,	2008.	The	Company	has	accrued	$3,500	of	this	obligation	as	of	September	27,	2008.

# Concentration	of	Suppliers

The	Company	purchases	certain	components	of	the	Company's	products	from	a	single	or	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.

# 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.

As	a	result	of	the	merger	with	Cytyc,	the	Company	assumed	all	outstanding	operating	leases	of	which	the	most	significant	operating	leases	pertain	to	Cytyc's headquarters	located	in	Marlborough,	Massachusetts,	which	has	a	15	year	term	that	expires	on	December	31,	2018	and	Cytyc's	warehouse	in	Methuen,	Massachusetts which	has	a	10	year	term	that	expires	on	March	31,	2013.	In	addition,	the	Company	is	required	to	maintain	the	facilities	during	the	term	of	the	leases	and	to	pay	all proportionate	shares	of	taxes,	insurance,	utilities	and	other	costs	associated	with	these	facilities.

As	a	result	of	the	acquisition	of	Third	Wave	on	July	24,	2008,	the	Company	assumed	Third	Wave's	operating	leases,	the	most	significant	of	which	is	related	to	the Company's	corporate	facility	in	Madison,	Wisconsin,	which	is	effective	through	September	2014.

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	2008,	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:

| Fiscal	Years	Ending | Amount |
| :--- | :--- |
| September\t26,\t2009 | $18,528 |
| September\t25,\t2010 | 17,157 |
| September\t24,\t2011 | 16,006 |
| September\t29,\t2012 | 14,504 |
| September\t28,\t2013 | 12,695 |
| Thereafter | 63,615 |
| Total\t(not\treduced\tby\tminimum\tsublease\trentals\tof\t$1,621) | $142,505 |

The	Company	subleased	a	portion	of	its	Bedford	and	Santa	Clara	facilities	and	has	received	rental	income	of	$247,	$158	and	$290	for	fiscal	years	2008,	2007	and 2006,	respectively,	which	has	been	recorded	as	an	offset	to	rent	expense	in	the	accompanying	Consolidated	Statements	of	Operations.

As	a	result	of	the	Cytyc	merger,	the	Company	assumed	an	arrangement	in	which	the	Company	is	sub-leasing	all	of	its	Mountain	View	facility	to	a	third	party	for	a term	of	approximately	five	years,	a	period	of	time	equivalent	to	the	remainder	of	the	Company's	lease	of	this	facility.	The	sub-lease	commenced	on	July	1,	2007.

The	Company	subleases	a	portion	of	its	Newark,	DE	facility	and	received	rental	income	of	$1,531,	$1,551	and	$1,600	for	fiscal	2008,	2007	and	2006, respectively,	which	has	been	recorded	as	an	offset	to	rent	expense	in	the	accompanying	Consolidated	Statements	of	Operations.	The	future	minimum	annual	rental income	payments	under	these	sublease	agreements	are	approximately	as	follows:

| Fiscal	Years	Ending | Amount |
| :--- | :--- |
| September\t26,\t2009 | $1,531 |
| September\t25,\t2010 | 1,531 |
| September\t24,\t2011 | 1,531 |
| September\t29,\t2012 | 1,531 |
| September\t28,\t2013 | 1,531 |
| Thereafter | 2,425 |
| Total | $10,080 |

The	majority	of	this	sublease	income	is	from	one	tenant	and	this	income	is	being	accounted	for	on	a	straight-line	basis.

# 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.	As	a	result	of	the	Cytyc	merger,	the	Company	reassessed	its	segment	reporting	based	on	the	operating	and	reporting	structure	of the	combined	company.	Beginning	in	fiscal	2008,	the	Company	combined	its	previously	reported	Other	Business	segment	with	its	Breast	Health	(formerly Mammography/Breast	Care)	and	Skeletal	Health	(formerly	Osteoporosis)	segments,	to	better	reflect	how	the	Company	views	its	operations	and	manages	its	business. The	Company's	Other	Business	segment	previously	included	AEG,	mini	C-arm,	extremity	MRI,	conventional	general	radiography	service	and	digital	general radiography	systems	businesses.	The	AEG	business	is	now	part	of	Breast	Health	while	the	remaining	reporting	units	are	part	of	Skeletal	Health.

In	addition,	the	Company	is	reporting	two	new	operating	segments:	Diagnostics	and	GYN	Surgical.	Diagnostics	includes	the	ThinPrep	Products	and	the	FullTerm Fetal	Fibronectin	test,	acquired	as	part	of	Cytyc's	purchase	of	Adeza	Biomedical	Corporation	in	March	2007,	as	well	as	the	Company's	proprietary	Invader	chemistry and	two	HPV	tests	that	are	currently	awaiting	FDA	approval	from	the	Third	Wave	acquisition.	GYN	Surgical	includes	the	NovaSure	system	and	the	Adiana	TCS	system under	development.	The	MammoSite	Radiation	Therapy	system,	previously	part	of	Cytyc's	surgical	reporting	segment,	which	is	a	single-use	device	for	the	treatment	of early-stage	breast	cancer,	is	now	part	of	the	Company's	Breast	Health	segment.	The	Diagnostic	segment	also	includes	the	results	of	Third	Wave	acquired	in	the	fourth quarter	of	fiscal	2008.

As	a	result	of	these	changes,	the	Company	now	reports	its	business	as	four	segments:	Breast	Health,	Diagnostics,	GYN	Surgical	and	Skeletal	Health.	Identifiable assets	for	the	four	principal	operating	segments	consist	of	inventories,	intangible	assets,	and	property	and	equipment.	The	Company	has	presented	all	other	identifiable assets	as	corporate	assets.	Intersegment	sales	and	transfers	are	not	significant.	Segment	information	for	fiscal	years	2008,	2007	and	2006	is	as	follows:

|  | September	27,<br>2008 | September	29,<br>2007 | September	30,<br>2006 |
| :--- | :--- | :--- | :--- |
| Total\trevenues: |  |  |  |
| Breast\tHealth | $860,848 | $638,898 | $355,364 |
| Diagnostics | 485,004 | — | — |
| GYN\tSurgical | 221,069 | — | — |
| Skeletal\tHealth | 107,578 | 99,470 | 107,316 |
|  | $1,674,499 | $738,368 | $462,680 |
| Operating\t(loss)\tincome: |  |  |  |
| Breast\tHealth | $211,704 | $146,907 | $42,027 |
| Diagnostics | (172,538) | — | — |
| GYN\tSurgical | (241,450) | — | — |
| Skeletal\tHealth | 4,742 | 845 | 8,312 |
|  | $(197,542) | $147,752 | $50,339 |
| Depreciation\tand\tamortization: |  |  |  |
| Breast\tHealth | $38,990 | $26,891 | $13,181 |
| Diagnostics | 97,282 | — | — |
| GYN\tSurgical | 30,702 | — | — |
| Skeletal\tHealth | 5,976 | 4,271 | 2,952 |
|  | $172,950 | $31,162 | $16,133 |
| Capital\texpenditures: |  |  |  |
| Breast\tHealth | $17,493 | $15,570 | $7,768 |
| Diagnostics | 10,333 | — | — |
| GYN\tSurgical | 14,119 | — | — |
| Skeletal\tHealth | 11,339 | 7,270 | 5,221 |
|  | $53,284 | $22,840 | $12,989 |
| Identifiable\tassets: |  |  |  |
| Breast\tHealth | $1,435,674 | $718,155 | $578,972 |
| Diagnostics | 349,949 | — | — |
| GYN\tSurgical | 3,080,365 | — | — |
| Skeletal\tHealth | 25,151 | 29,531 | 68,173 |
| Corporate | 3,243,493 | 318,663 | 209,060 |
|  | $8,134,632 | $1,066,349 | $856,205 |

Export	sales	from	the	United	States	to	unaffiliated	customers,	primarily	in	Europe,	Asia	and	Latin	America	during	fiscal	2008,	2007	and	2006	totaled approximately	$297,287,	$158,827	and	$109,749,	respectively.

Products	sold	by	the	Company	internationally	are	manufactured	at	domestic	and	international	manufacturing	locations	such	as	Costa	Rica,	where	much	of	the GYN	Surgical	products	are	currently	being	manufactured.

Transfers	between	the	Company	and	its	subsidiaries	are	generally	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	27,<br>2008 | September	29,<br>2007 | September	30,<br>2006 |
| :--- | :--- | :--- | :--- |
| Europe | 12% | 15% | 17% |
| Asia | 4 | 5 | 7 |
| All\tothers | 4 | 5 | 4 |
|  | 20% | 25% | 28% |

# 15. Accrued	Expenses	and	Other	Long-Term	Liabilities

Accrued	expenses	and	other	long-term	liabilities	consist	of	the	following:

|  | September	27,<br>2008 | September	29,<br>2007 |
| :--- | :--- | :--- |
| Accrued\tExpense |  |  |
| Accrued\tcompensation\tand\temployee\tbenefits | $68,204 | $35,053 |
| Accrued\tcommissions | 15,768 | 9,989 |
| Accrued\tincome\tand\tother\ttaxes | 11,744 | 22,356 |
| Accrued\tinterest | 11,284 | 129 |
| Accrued\twarranty,\tcurrent\tportion | 9,080 | 11,871 |
| Other\taccrued\texpenses | 38,666 | 9,179 |
|  | $154,746 | $88,577 |

|  | September	27,<br>2008 | September	29,<br>2007 |
| :--- | :--- | :--- |
| Other\tLong-Term\tLiabilities |  |  |
| Accrued\tlease\tobligation—long-term | $31,164 | $— |
| Reserve\tfor\tincome\ttax\tuncertainties | 12,307 | — |
| Pension\tliabilities\t–\tlong-term | 6,995 | 7,322 |
| Other | 6,987 | 469 |
|  | $57,453 | $7,791 |

# 16. Litigation	and	Other	Matters

On	October	5,	2007	Ethicon	Endo-Surgery,	Inc.,	a	Johnson	&	Johnson	operating	company,	filed	a	complaint	against	us	and	the	Company's	wholly-owned subsidiary	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	us and	Suros	infringe	four	Ethicon	patents.	An	amended	complaint	filed	January	11,	2008	additionally	asserts	claims	of	unfair

competition.	Through	the	complaint	Ethicon	seeks	to	enjoin	us	and	Suros	from	the	alleged	conduct	including	the	acts	of	unfair	competition	and	infringement	of	the patents	and	additionally	seeks	recovery	of	unspecified	damages	and	costs.

On	January	9,	2008,	Tissue	Extraction	Devices,	LLC	filed	a	complaint	against	the	Company	and	Suros	in	the	United	States	District	Court	for	the	Northern	District of	Illinois,	alleging	infringement	of	US	Patent	No.	7,316,726	by	certain	of	the	ATEC	biopsy	systems	manufactured	and	sold	by	us	and	Suros.	The	complaint	seeks	to enjoin	the	Company	and	Suros	from	infringing	the	patents	as	well	as	the	recovery	of	damages	and	costs	resulting	from	the	alleged	infringement.	On	May	20,	2008,	the judge	in	Illinois	granted	the	Company's	motion	to	transfer	the	case	to	the	United	States	District	Court	for	the	Southern	District	of	Indiana.

As	of	September	27,	2008	the	Company	does	not	believe	a	loss	is	probable	in	any	of	the	matters	disclosed	above.	The	Company	is	a	party	to	various	other	legal proceedings	arising	out	of	the	ordinary	course	of	its	business.	The	Company	believes	that	except	for	those	described	above	there	are	no	other	proceedings	pending against	it	the	ultimate	resolution	of	which	would	have	a	material	adverse	effect	on	its	financial	condition	or	results	of	operations.

# 17. Quarterly	Statement	of	Operations	Information	(Unaudited)

The	following	table	presents	a	summary	of	quarterly	results	of	operations	for	2008	and	2007:

| First<br>Quarter | Second<br>Quarter | Third<br>Quarter | Fourth<br>Quarter |
| :--- | :--- | :--- | :--- |
| $371,445 | $ 431,048 | $429,492 | $442,513 |
| 167,835 | 239,638 | 244,763 | 240,281 |
| (358,608) | 55,986 | 61,379 | (144,374) |
| $(1.65) | $0.22 | $0.24 | $(0.56) |

| First<br>Quarter | Second<br>Quarter | Third<br>Quarter | Fourth<br>Quarter |
| :--- | :--- | :--- | :--- |
| $163,212 | $ 181,086 | $191,505 | $202,564 |
| 74,227 | 83,509 | 90,078 | 97,514 |
| 16,086 | 21,634 | 24,748 | 32,110 |
| $0.15 | $0.20 | $0.22 | $0.29 |

(1) The	sum	of	the	quarterly	total	revenue	does	not	agree	with	the	Consolidated	Statements	of	Operations	due	to	rounding.

(2) See	Note	3	for	further	discussion	of	in-process	research	and	development	expenses	incurred	in	the	first	and	fourth	quarters	of	fiscal	2008	related	to	the	Cytyc merger	and	Third	Wave	acquisition.

(3) See	Note	2	for	reclassification	adjustments.

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.

# 18. Valuation	and	Qualifying	Accounts

| 18.<br>Valuation	and	Qualifying	Accounts | Balance	at<br>Beginning<br>of	Period | Acquisition<br>and	Other<br>Adjustments | Charged	to<br>Costs	and<br>Expenses | Payments | Balance	at<br>End	of<br>Period |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Accounts\tReceivable\tReserves\t(1) |  |  |  |  |  |
| Period\tEnded: |  |  |  |  |  |
| September\t27,\t2008 | $4,598 | $— | $2,109 | $(175) | $6,532 |
| September\t29,\t2007 | 3,712 | (20) | 947 | (41) | 4,598 |
| September\t30,\t2006 | 2,592 | 852 | 320 | (52) | 3,712 |
| Restructuring\tAccrual |  |  |  |  |  |
| Period\tEnded: |  |  |  |  |  |
| September\t27,\t2008 | $105 | $11,296 | $2,840 | $(12,050) | $2,191 |
| September\t29,\t2007 | 1,848 | 310 | — | (2,053) | 105 |
| September\t30,\t2006 | — | 2,896 | — | (1,048) | 1,848 |

# Exhibit	Index

* Management	compensation	plan	or	arrangement



Question: what is the estimated price of hologic common stock used in r2 acquisition?
Calculation:   price = 205500
 shares_repurchased = 8800
average_price = price / shares_repurchased
answer = average_price
Answer: 23.4