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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 Form 10-K
 Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended:
    
    Commission file number:January 2, 2010
    
    000  30733
 AMERICAN MEDICAL SYSTEMS HOLDINGS, INC.
  Delaware
    
    41-1978822(State of Incorporation)
    
    (IRS Employer Identification No.)
 10700 Bren Road West
Minnetonka, Minnesota 55343
 952-930-6000
 
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class:
    
    Name of each exchange on which registered:Common stock, par value $.01 per share
    
    The Nasdaq Stock Market LLC(Nasdaq Global Select Market)
 Securities registered pursuant to Section 12(g) of the Act:
None
 þ o
 o þ
 þ o
 o o
 o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



AMERICAN MEDICAL SYSTEMS HOLDINGS, INC.
 FORM 10-K
 For the Fiscal Year Ended January 2, 2010
 TABLE OF CONTENTS
 Description
    
    PagePART IItem 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    10Item 1B. Unresolved Staff Comments
    
    
    18Item 2. Properties
    
    
    18Item 3. Legal Proceedings
    
    
    19Item 4. Submission of Matters to a Vote of Security Holders
    
    
    19PART IIItem 5. Market For American Medical Systems Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
    
    
    20Item 6. Selected Financial Data
    
    
    22Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    24Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    41Item 8. Financial Statements and Supplementary Data
    
    
    42Item 9. Changes In and Disagreements with Accountants on Accounting and Financial
Disclosure
    
    
    42Item 9A. Controls and Procedures
    
    
    42Item 9B. Other Information
    
    
    43PART IIIItem 10. Directors and Executive Officers of the Registrant
    
    
    44Item 11. Executive Compensation
    
    
    44Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    44Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    44Item 14. Principal Accountant Fees and Services
    
    
    44PART IVItem 15. Exhibits and Financial Statement Schedule
    
    
    45FINANCIAL STATEMENTS AND NOTES THERETO
    
    
    F-1EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-K
    
    
    E-1EX-10.24EX-10.26EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1




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FORWARD-LOOKING INFORMATION
 This Annual Report on Form 10-K contains forward-looking statements. Any statements not of
historical fact may be considered forward-looking statements. These statements by their nature
involve substantial risks and uncertainties, and actual results may differ materially from those
expressed in such forward-looking statements as a result of many factors, including, but not
limited to, those discussed under the Forward-Looking Statements section of Part II, Item 7,
Managements Discussion and Analysis of Financial Condition and Results of Operations.
  AMS 700 ®,
AMS 800 ®, AMS 700 LGX
®, AMS 800
®, AMS 700
® MS, InVance
® AdVance
®, InhibiZone
®,
Acticon®, UroLume
®, InhibiZone
®, Tactile Pump
®, Momentary Squeeze Pump, Spectra, GreenLight
HPS®, GreenLight PV
®, StoneLight
®, SureFlex, TherMatrx
®, MiniArc
®, Monarc
®, Acticon
®, Apogee
®,
Perigee®, InteXen
®, Elevate
® Viagra
®, Levitra
®, Cialis
®, Her Option®
 
 PART I
 
 Item 1.
    
    Business
 Overview
 th
   AMS 800 ® (our artificial urinary sphincter product) and the AMS 700 ® Elevate ® GreenLight HPS ® MiniArc ®
 1




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##### Table of Contents



Her Option® Notes to Consolidated Financial Statements  No. 5, Goodwill and Intangible Assets). Her Option® Notes
to Consolidated Financial Statements  No. 16, Subsequent Events).
 www.AmericanMedicalSystems.com.
 Markets and Products
     Viagra ® Levitra ® Cialis ®
 2




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MiniArc ® AMS
700 LGX ® Spectra Elevate ® GreenLight
HPS ® StoneLight ®
 Mens Health
  AMS 800 ® InVance ® AdVance ® AMS 800 ® InhibiZone ® UroLume ® Acticon ®
  AMS 700 ® MS  AMS 700 ® InhibiZone ® InhibiZone ® Tactile Pump ® Momentary Squeeze Pump
 3




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BPH Therapy
 GreenLight  GreenLight PV ® GreenLight
HPS ® GreenLight PV ® GreenLight
HPS ® GreenLight PV ® StoneLight ® SureFlex  StoneLight ® SureFlex 
 TherMatrx ®
 Womens Health
  Monarc ® MiniArc ® Monarc ® MiniArc ®
 Acticon ®
  4




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Apogee ® Perigee ® Apogee ® Perigee ® InteXen ® , Elevate ® Elevate ®
 Selling and Marketing
    Manufacturing and Supply
   Research and Development
  5




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Elevate ® InhibiZone ®
  Competition
  Intellectual Property
   Government Regulation
   6




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UroLume ® TherMatrx ®
  Third-Party Reimbursement
    Employees
  Accounting Periods
  7




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Financial Information about Geographic Areas
 Notes
to Consolidated Financial Statements  No. 12, Industry Segment Information and Foreign Operations
 Executive Officers of American Medical Systems Holdings, Inc.
  Name
    
    Age
    
    TitleAnthony P. Bihl, III
    
    
    53
    
    
    President and Chief Executive OfficerMark A. Heggestad
    
    
    51
    
    
    Executive Vice President and Chief Financial OfficerWhitney D. Erickson
    
    
    43
    
    
    Vice President, General Manager Mens HealthMaximillian D. Fiore
    
    
    55
    
    
    Senior Vice President and Chief Technology OfficerJeanne M. Forneris
    
    
    56
    
    
    Senior Vice President and General CounselFrancois X. Georgelin
    
    
    44
    
    
    Vice President, General Manager Europe/Middle East/Africa RegionJoe W. Martin
    
    
    57
    
    
    Senior Vice President, General Manager BPH TherapyJohn F. Nealon
    
    
    47
    
    
    Senior Vice President, General Manager Womens HealthThomas K. Rasmussen
    
    
    56
    
    
    Vice President Minnetonka Operations & Worldwide LogisticsRandall R. Ross
    
    
    47
    
    
    Senior Vice President, Human ResourcesMichael E. Ryan
    
    
    50
    
    
    Vice President, General Manager Asia Pacific/Latin America Region
 Anthony Tony P. Bihl, III
 Mark A. Heggestad
 8




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Whitney D. Erickson
 Maximillian D. Fiore
 Jeanne Forneris, J.D.
 Francois X. Georgelin
 Joe W. Martin
 John F. Nealon
 Thomas K. Rasmussen
 9




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Randall R. Ross
 Michael E. Ryan
 
 Item 1A.
    
    Risk Factors
  Our revenues and operating results may be negatively affected and we may not achieve future growth
projections if we fail to compete successfully against our competitors or fail to develop our
presence in new markets and technologies.
  Worldwide economic conditions may adversely affect our business, operating results and financial
condition.
  10




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Disruptions in the global financial markets could impact the ability of our counterparties and
others to perform their obligations to us and our ability to obtain future financing.
  Our sales may be adversely affected if physicians do not recommend, endorse or accept our products.
  Our growth will be slowed if new products are delayed or are not accepted.
  Our sales could decline if our procedures are not accepted by patients.
  Our products face the risk of technological obsolescence, which, if realized, could have a material
adverse effect on our business.
  11




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If our strategies to improve the performance of our laser therapy business are not effective in
sustaining long-term profitability and sales growth, our business, operating results and financial
condition could suffer.
  Changes in third party reimbursement for our products and therapies may influence our customers
purchasing activity.
  The impact of healthcare reform in the U.S. on us is uncertain and may adversely affect our
business.
  Conversion of our 2036 Notes and 2041 Notes into common stock could result in dilution to our
shareholders.
 12




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Liquidity and Capital Resources Part II, Item 7.
Managements Discussion and Analysis of Financial Condition and Results of Operations
 Failure to satisfy our Convertible Notes and Credit Facility obligations and maintain compliance
with the loan agreements and debt covenants could have a material adverse effect on our business.
 Part II, Item 8, Notes to Consolidated Financial Statements  No. 7, Debt
  
    
    requiring us to use a substantial portion of our cash to pay principal and interest
on our debt instead of utilizing those funds for other purposes such as working
capital, capital expenditures, and acquisitions;
 
    
    limiting our ability to obtain any necessary additional financing in the future for
working capital, capital expenditures, debt service requirements, or other purposes;
 
    
    decreasing our debt ratings and increasing our cost of borrowed funds;
 
    
    making us more vulnerable to a downturn in our business or the economy generally;
and
 
    
    subjecting us to the risk of being forced to refinance at higher interest rates when
these amounts are due.
 Our borrowing costs are sensitive to fluctuations in interest rates, and changes in interest rates
may affect our profitability.
  13




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We may not be able to supply products that incorporate materials or components which are single or
sole-sourced.
 TherMatrx ® InteXen ® IntePro ® GreenLight HPS ®
  Loss of our principal manufacturing and distribution facilities would adversely affect our
financial position.
  Inadequate data submissions or clinical study results which do not support a product approval may
delay or preclude a products commercialization.
  Our sale of products could be reduced if we are unable to comply with regulatory requirements or
obtain the regulatory approvals necessary to market our products in the United States and foreign
jurisdictions.
  14




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
    
    imposing fines and penalties on us;
 
    
    preventing us from manufacturing or distributing our products;
 
    
    bringing civil or criminal charges against us;
 
    
    delaying the introduction or denying marketing approval of our new products;
 
    
    recalling, withdrawing, or seizing our products; and
 
    
    requiring additional regulatory filings and/or approvals.
 In the event we fail to comply with manufacturing regulations, we could be prevented from selling
our products.
  We may experience an interruption in sales of a product and incur significant costs and negative
publicity if that product is recalled or withdrawn.
  Our business may suffer if our new products are not cleared to market in the United States or any
other market.
  
    
    ineffective or cause harmful side effects during preclinical testing or clinical trials;
 
    
    difficult to manufacture on a large scale; or
 
    
    uneconomical for the healthcare reimbursement system.
 Should financial results severely decline, we might have to record a significant goodwill
impairment charge.
  15




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We may be unable to adequately protect our intellectual property rights or obtain necessary
intellectual property rights from third parties which could adversely affect our business,
including losing market share to our competitors and the inability to operate our business
profitably.
   
    
    these agreements will not be breached;
 
    
    we will have adequate remedies for any breach; or
 
    
    our trade secrets will not otherwise become known to or independently developed by our
competitors.
  We could incur significant costs and/or be required to stop the sale of the related product as a
result of litigation or other proceedings relating to patent and other intellectual property
rights.
  We could incur significant costs or other negative impacts if significant product liability claims
are made against us.
  16




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We are required to comply with broad, pervasive and continually changing federal and state fraud
and abuse laws, and, if we are unable to fully comply with such laws, we could face substantial
penalties and our products could be excluded from government healthcare programs.
  
    
    the federal Anti-Kickback Statute, which prohibits persons from knowingly and willfully
soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash
or in kind, to induce either the referral of an individual, or the purchase, lease or order
(or the arranging for or recommending of the purchase, lease or order) of a good or
service, for which payment may be made under federal healthcare programs, such as the
Medicare and Medicaid programs, and corresponding state laws;
 
    
    the federal False Claims Act, which imposes civil and criminal liability on individuals
and entities who submit, or cause to be submitted, false or fraudulent claims for payment
to the government; and
 
    
    the federal False Statements Statute, which prohibits knowingly and willfully
falsifying, concealing or covering up a material fact or making any materially false
statement in connection with the delivery of or payment for healthcare benefits, items or
services.
  Our international operations expose us to various risks, including risks related to fluctuations in
foreign currency exchange rates.
  17




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The risks of selling and shipping our products and of purchasing components and products
internationally may adversely impact our revenues, results of operations and financial condition.
   
    
    the imposition of additional U.S. and foreign governmental controls or regulations;
 
    
    the imposition of costly and lengthy new export licensing requirements;
 
    
    the imposition of U.S. and/or international sanctions against a country, company,
person or entity with whom the company does business that would restrict or prohibit
continued business with the sanctioned country, company, person or entity;
 
    
    economic instability;
 
    
    changes in duties and tariffs, license obligations and other non-tariff barriers to
trade;
 
    
    the imposition of new trade restrictions;
 
    
    the imposition of restrictions on the activities of foreign agents, representatives
and distributors;
 
    
    scrutiny of foreign tax authorities which could result in significant fines,
penalties and additional taxes being imposed on us;
 
    
    pricing pressure that we may experience internationally;
 
    
    laws and business practices favoring local companies;
 
    
    difficulties in enforcing or defending intellectual property rights; and
 
    
    exposure to different legal and political standards due to our conducting business
in several foreign countries.
  
 Item 1B.
    
    Unresolved Staff Comments
  
 Item 2.
    
    Properties
  18




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Item 3.
    
    Legal Proceedings
  
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
  19




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PART II
 
 Item 5. Market for American Medical Systems Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
 Market Information
  2009
    
    2008High
    
    Low
    
    High
    
    LowFirst quarter
    
    $
    11.92
    
    
    $
    8.90
    
    
    $
    14.98
    
    
    $
    13.20Second quarter
    
    $
    16.40
    
    
    $
    11.06
    
    
    $
    15.87
    
    
    $
    13.99Third quarter
    
    $
    17.10
    
    
    $
    14.23
    
    
    $
    18.20
    
    
    $
    13.95Fourth quarter
    
    $
    19.49
    
    
    $
    15.27
    
    
    $
    17.93
    
    
    $
    8.25
 Holders
  Dividends
  Recent Sales of Unregistered Equity Securities
  Issuer Purchases of Equity Securities
  20




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Stock Performance Graph
   
 12/31/2004
    
    12/30/2005
    
    12/29/2006
    
    12/28/2007
    
    1/2/2009
    
    12/31/2009AMS Common Stock
    
    $
    100.00
    
    
    $
    85.29
    
    
    $
    88.59
    
    
    $
    69.46
    
    
    $
    42.76
    
    
    $
    92.27NASDAQ Market Index
    
    $
    100.00
    
    
    $
    102.20
    
    
    $
    112.68
    
    
    $
    124.57
    
    
    $
    74.71
    
    
    $
    108.56Medical Appliances
& Equipment
    
    $
    100.00
    
    
    $
    106.64
    
    
    $
    104.77
    
    
    $
    111.07
    
    
    $
    67.07
    
    
    $
    95.83
 21




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##### Table of Contents



Item 6.
    
    Selected Financial Data
  Statement of Operations Data
    
    2009
    
    2008
    
    2007
    
    2006
    
    2005Net sales
    
    $
    519,270
    
    
    $
    501,641
    
    
    $
    463,928
    
    
    $
    358,318
    
    
    $
    262,591Cost of sales
    
    
    92,211
    
    
    
    111,097
    
    
    
    105,592
    
    
    
    68,872
    
    
    
    46,111Gross profit
    
    
    427,059
    
    
    
    390,544
    
    
    
    358,336
    
    
    
    289,446
    
    
    
    216,480Operating expensesMarketing and selling
    
    
    173,854
    
    
    
    175,670
    
    
    
    169,495
    
    
    
    123,204
    
    
    
    92,001Research and development
    
    
    52,765
    
    
    
    46,247
    
    
    
    43,315
    
    
    
    33,877
    
    
    
    20,966In-process research and development (1)
    
    
    
    
    
    
    7,500
    
    
    
    7,500
    
    
    
    94,035
    
    
    
    9,220General and administrative
    
    
    45,196
    
    
    
    39,281
    
    
    
    43,070
    
    
    
    34,417
    
    
    
    21,713Integration costs (2)
    
    
    
    
    
    
    
    
    
    
    1,103
    
    
    
    1,712
    
    
    
    Litigation settlement (3)
    
    
    
    
    
    
    
    
    
    
    14,303
    
    
    
    
    
    
    
    Amortization of intangibles (4)
    
    
    13,161
    
    
    
    34,465
    
    
    
    18,264
    
    
    
    12,393
    
    
    
    7,884Total operating expenses
    
    
    284,976
    
    
    
    303,163
    
    
    
    297,050
    
    
    
    299,638
    
    
    
    151,784Operating income (expense)
    
    
    142,083
    
    
    
    87,381
    
    
    
    61,286
    
    
    
    (10,192
    )
    
    
    64,696Other (expense) incomeRoyalty and other
    
    
    1,632
    
    
    
    2,279
    
    
    
    8,099
    
    
    
    1,984
    
    
    
    500Interest income
    
    
    175
    
    
    
    747
    
    
    
    1,153
    
    
    
    2,754
    
    
    
    1,246Interest expense (5)
    
    
    (19,636
    )
    
    
    (27,398
    )
    
    
    (37,760
    )
    
    
    (18,395
    )
    
    
    (217
    )Amortization of financing costs (6)
    
    
    (15,790
    )
    
    
    (18,482
    )
    
    
    (16,145
    )
    
    
    (14,434
    )
    
    
    Gain on extinguishment of debt (7)
    
    
    10,125
    
    
    
    5,631
    
    
    
    
    
    
    
    
    
    
    
    Gain on sale of non-strategic assets (8)
    
    
    17,446
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
            -Total other (expense) income
    
    
    (6,048
    )
    
    
    (37,223
    )
    
    
    (44,653
    )
    
    
    (28,091
    )
    
    
    1,529Income (loss) from continuing operations
before income taxes
    
    
    136,035
    
    
    
    50,158
    
    
    
    16,633
    
    
    
    (38,283
    )
    
    
    66,225Provision for income taxes(9)
    
    
    51,197
    
    
    
    19,323
    
    
    
    11,888
    
    
    
    9,469
    
    
    
    26,950Net income (loss) from continuing operations
    
    
    84,838
    
    
    
    30,835
    
    
    
    4,745
    
    
    
    (47,752
    )
    
    
    39,275Loss from discontinued operations, net of tax
benefit of $0.4 million and $2.7 million for 2007
and 2006, respectively(10)
    
    
    
    
    
    
    
    
    
    
    (691
    )
    
    
    (5,435
    )
    
    
    Net income (loss)
    
    $
    84,838
    
    
    $
    30,835
    
    
    $
    4,054
    
    
    $
    (53,187
    )
    
    $
    39,275Net income (loss) per shareBasic net income (loss) from continuing
operations
    
    $
    1.14
    
    
    $
    0.42
    
    
    $
    0.07
    
    
    $
    (0.68
    )
    
    $
    0.57Discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    (0.01
    )
    
    
    (0.08
    )
    
    
    Basic net income (loss)
    
    $
    1.14
    
    
    $
    0.42
    
    
    $
    0.06
    
    
    $
    (0.76
    )
    
    $
    0.57Diluted net income (loss) from
continuing operations
    
    $
    1.14
    
    
    $
    0.42
    
    
    $
    0.06
    
    
    $
    (0.68
    )
    
    $
    0.55Discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    (0.01
    )
    
    
    (0.08
    )
    
    
    Diluted net income (loss)
    
    $
    1.14
    
    
    $
    0.42
    
    
    $
    0.06
    
    
    $
    (0.76
    )
    
    $
    0.55Balance Sheet Data
    
    
    2009
    
    
    
    2008
    
    
    
    2007
    
    
    
    2006
    
    
    
    2005Cash, cash equivalents, and short-term investments
    
    $
    50,538
    
    
    $
    42,965
    
    
    $
    35,181
    
    
    $
    29,541
    
    
    $
    46,390Working capital
    
    
    133,076
    
    
    
    130,999
    
    
    
    143,298
    
    
    
    135,635
    
    
    
    69,533Total assets
    
    
    1,047,151
    
    
    
    1,044,497
    
    
    
    1,115,868
    
    
    
    1,126,620
    
    
    
    359,326Long-term debt
    
    
    346,229
    
    
    
    484,582
    
    
    
    577,096
    
    
    
    611,539
    
    
    
    Stockholders equity
    
    
    545,359
    
    
    
    427,482
    
    
    
    383,371
    
    
    
    345,189
    
    
    
    302,879
 22




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##### Table of Contents



(1)
    
    In 2008 and 2007, we recognized $7.5 million each year for in-process research and development charges related to the
payments for achieving certain milestones related to our BioControl acquisition. In 2006, we recognized $25.6 million,
$2.1 million, $62.1 million and $4.3 million, respectively, for in-process research and development charges related to
the
acquisitions of BioControl, Solarant, Laserscope and Ovion. In 2005, we recognized in-process research and
development charges of $9.2 million related to the acquisition
of Ovion.(2)
    
    In 2007 and 2006, we recorded $1.1 million and $1.7 million, respectively, of integration costs associated with the 2006
Laserscope acquisition, primarily related to travel, legal, consulting and retention bonuses.(3)
    
    During 2007, we recorded a charge of $14.3 million for litigation settlements, primarily for the arbitration award to
the
former shareholders of CryoGen, Inc. (CryoGen) concerning an earnout payment related to our 2002 acquisition of
CryoGen. See Notes to Consolidated Financial Statements  No. 3, Litigation Settlementsfor more information.(4)
    
    In 2008, we recorded additional amortization expense of $17.1 million for the acceleration of amortization to adjust the
carrying value of certain intangible assets to their current fair values. For more information regarding this
acceleration of
of amortization, see Notes to Consolidated Financial Statements  No. 5, Goodwill and Intangible Assets.(5)
    
    During 2009, interest expense included interest incurred on our 2036 Notes and 2041 Notes. During 2008, 2007 and 2006,
interest expense included interest incurred on our 2036 Notes. In 2009, average borrowings under the 2036 Notes and
2041 Notes were $245.6 million and $71.4 million, respectively. Average borrowings under the 2036 Notes were $371.1
million during 2008, and $373.8 million during 2007 and 2006. Interest expense also included interest incurred on our
senior secured credit facility entered into on July 20, 2006. Our average borrowings under this facility were
approximately
$191.8 million, $281.7 million and $332.3 million during 2009, 2008 and 2007, respectively, and $366.0 million from
inception through December 30, 2006. We also incurred interest expense related to short-term borrowing activity during
2006. For a more complete description of these items, see Notes to Consolidated Financial Statements  No. 7, Debt.(6)
    
    Amortization of financing costs relates to the deferred financing costs and debt discount for our convertible notes and
our
senior secured credit facility. Charges during 2006 also include a $7.0 million commitment fee for a bridge loan of up
to
$180 million in preparation for the acquisition of Laserscope. We did not use this financing for the Laserscope
acquisition.
See Notes to Consolidated Financial Statements  No. 7, Debtfor more information.(7)
    
    In 2009, we recognized a $10.1 million gain on extinguishment of debt related to our extinguishment of $27.3 million
of 2036 Notes in the first quarter and our exchange of $250.0 million of 2036 Notes for 2041 Notes in the third quarter.
During the fourth quarter of 2008, we recognized a $5.6 million gain on extinguishment of $34.5 million of convertible
notes. See Notes to Consolidated Financial Statements  No. 7, Debtfor more information.(8)
    
    During the third quarter of 2009, we recognized a $17.4 million gain related to the sale of our Ovion technology.
See Notes to Consolidated Financial Statements  No. 5, Goodwill and Intangible Assetsfor more information.(9)
    
    In 2007, we experienced adverse tax effects from the $14.3 million of litigation settlement charges primarily resulting
from the resolution of the CryoGen arbitration (see Notes to Consolidated Financial Statements  No. 3, Litigation
Settlements). Partially offsetting this unfavorable impact was the favorable settlement of a tax audit for $0.9 million,
which allowed us to release a reserve for uncertain tax benefits. The in-process research and development charges
described above for 2005 and 2006 have no related tax benefit, except for BioControl. In 2006, we received a
$2.4 million tax refund associated with the favorable agreement reached with the IRS involving the review of our 2001
and 2002 federal income tax returns.(10)
    
    In conjunction with our acquisition of Laserscope in the third quarter of 2006, we committed to a plan to divest
Laserscopes aesthetics business. On January 16, 2007, we sold the aesthetics business to Iridex Corporation. The
financial results of the aesthetics business have been reported as discontinued operations beginning from the date of
acquisition of July 20, 2006 through the date of sale of January 16, 2007. The income tax benefit from the loss from
discontinued operations was $0.4 million and $2.7 million in 2007 and 2006, respectively. For a more complete
description of the discontinued operations and the related impact on our financial results, refer to Notes to
Consolidated Financial Statements  No. 2, Discontinued Operations and Sale of Aesthetics Business. 23




---



##### Table of Contents



Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introductory Overview
  th
  AMS 800 ® AMS ® Elevate ® GreenLight HPS ® MiniArc ®
   24




---



##### Table of Contents



Results of Operations
 Sales trends
  (in thousands)
    
    2009
    
    
    2008
    
    
    $ Increase
    
    
    % Increase
    
    
    2008
    
    
    2007
    
    
    $ Increase
    
    
    % IncreaseNet SalesProduct LineMens health
    
    $
    234,594
    
    
    $
    219,211
    
    
    $
    15,383
    
    
    
    7.0
    %
    
    $
    219,211
    
    
    $
    188,519
    
    
    $
    30,692
    
    
    
    16.3
    %BPH therapy
    
    
    114,468
    
    
    
    116,346
    
    
    
    (1,878
    )
    
    
    -1.6
    %
    
    
    116,346
    
    
    
    125,497
    
    
    
    (9,151
    )
    
    
    -7.3
    %Womens health
    
    
    170,208
    
    
    
    166,084
    
    
    
    4,124
    
    
    
    2.5
    %
    
    
    166,084
    
    
    
    149,912
    
    
    
    16,172
    
    
    
    10.8
    %Total
    
    $
    519,270
    
    
    $
    501,641
    
    
    $
    17,629
    
    
    
    3.5
    %
    
    $
    501,641
    
    
    $
    463,928
    
    
    $
    37,713
    
    
    
    8.1
    %GeographyUnited States
    
    $
    373,898
    
    
    $
    355,678
    
    
    $
    18,220
    
    
    
    5.1
    %
    
    $
    355,678
    
    
    $
    334,258
    
    
    $
    21,420
    
    
    
    6.4
    %International
    
    
    145,372
    
    
    
    145,963
    
    
    
    (591
    )
    
    
    -0.4
    %
    
    
    145,963
    
    
    
    129,670
    
    
    
    16,293
    
    
    
    12.6
    %Total
    
    $
    519,270
    
    
    $
    501,641
    
    
    $
    17,629
    
    
    
    3.5
    %
    
    $
    501,641
    
    
    $
    463,928
    
    
    $
    37,713
    
    
    
    8.1
    %Percent of net salesProduct LineMens health
    
    
    45.2
    %
    
    
    43.7
    %
    
    
    
    
    
    
    
    
    
    
    43.7
    %
    
    
    40.6
    %BPH therapy
    
    
    22.0
    %
    
    
    23.2
    %
    
    
    
    
    
    
    
    
    
    
    23.2
    %
    
    
    27.1
    %Womens health
    
    
    32.8
    %
    
    
    33.1
    %
    
    
    
    
    
    
    
    
    
    
    33.1
    %
    
    
    32.3
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    
    
    
    
    
    
    
    
    100.0
    %
    
    
    100.0
    %GeographyUnited States
    
    
    72.0
    %
    
    
    70.9
    %
    
    
    
    
    
    
    
    
    
    
    70.9
    %
    
    
    72.0
    %International
    
    
    28.0
    %
    
    
    29.1
    %
    
    
    
    
    
    
    
    
    
    
    29.1
    %
    
    
    28.0
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    
    
    
    
    
    
    
    
    100.0
    %
    
    
    100.0
    %
 Net Sales. , Elevate ® Elevate ® Elevate ® MiniArc ® GreenLight 
 , AdVance ® MiniArc ® InhibiZone ® AMS 800 ® AMS 700 ® MS 
 Mens health products
 InhibiZone ®
 25




---



##### Table of Contents



AdVance ® AMS 800 ® InhibiZone ®
 BPH therapy products.
 GreenLight  TherMatrx ®
 TherMatrx ®
 Womens health products.
 Elevate ® MiniArc ® Her Option ® Her Option ® Notes to Consolidated Financial Statements  No. 16, Subsequent Events
 MiniArc ® Her Option ®
 International sales and foreign exchange effects .
 26




---



##### Table of Contents



Customer location
    
    2009
    
    
    2008
    
    
    $ Increase
    
    
    % Increase
    
    
    2008
    
    
    2007
    
    
    $ Increase
    
    
    % IncreaseWithin U.S.
    
    $
    373,898
    
    
    $
    355,678
    
    
    $
    18,220
    
    
    
    5.1
    %
    
    $
    355,678
    
    
    $
    334,258
    
    
    $
    21,420
    
    
    
    6.4
    %InternationalBefore currency impact
    
    
    153,578
    
    
    
    145,963
    
    
    
    7,615
    
    
    
    5.2
    %
    
    
    141,109
    
    
    
    129,670
    
    
    
    11,439
    
    
    
    8.8
    %Subtotal
    
    
    527,476
    
    
    
    501,641
    
    
    
    25,835
    
    
    
    5.2
    %
    
    
    496,787
    
    
    
    463,928
    
    
    
    32,859
    
    
    
    7.1
    %Currency impact
    
    
    (8,206
    )
    
    
    
    
    
    
    (8,206
    )
    
    
    
    
    
    
    4,854
    
    
    
    
    
    
    
    4,854
    
    
    
    Total
    
    $
    519,270
    
    
    $
    501,641
    
    
    $
    17,629
    
    
    
    3.5
    %
    
    $
    501,641
    
    
    $
    463,928
    
    
    $
    37,713
    
    
    
    8.1
    %
   $ Increase
    
    
    %
    
    
    
    
    
    
    
    
    
    
    $ Increase
    
    
    %(in thousands)
    
    2009
    
    
    2008
    
    
    (Decrease)
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    (Decrease)
    
    
    ChangeNet sales
    
    $
    519,270
    
    
    $
    501,641
    
    
    $
    17,629
    
    
    
    3.5
    %
    
    $
    501,641
    
    
    $
    463,928
    
    
    $
    37,713
    
    
    
    8.1
    %Cost of sales
    
    
    92,211
    
    
    
    111,097
    
    
    
    (18,886
    )
    
    
    -17.0
    %
    
    
    111,097
    
    
    
    105,592
    
    
    
    5,505
    
    
    
    5.2
    %Gross profit
    
    
    427,059
    
    
    
    390,544
    
    
    
    36,515
    
    
    
    9.3
    %
    
    
    390,544
    
    
    
    358,336
    
    
    
    32,208
    
    
    
    9.0
    %Operating expensesMarketing and selling
    
    
    173,854
    
    
    
    175,670
    
    
    
    (1,816
    )
    
    
    -1.0
    %
    
    
    175,670
    
    
    
    169,495
    
    
    
    6,175
    
    
    
    3.6
    %Research and development
    
    
    52,765
    
    
    
    46,247
    
    
    
    6,518
    
    
    
    14.1
    %
    
    
    46,247
    
    
    
    43,315
    
    
    
    2,932
    
    
    
    6.8
    %In-process research & development
    
    
    
    
    
    
    7,500
    
    
    
    (7,500
    )
    
    
    n/a
    
    
    
    7,500
    
    
    
    7,500
    
    
    
    
    
    
    
    0.0
    %General and administrative
    
    
    45,196
    
    
    
    39,281
    
    
    
    5,915
    
    
    
    15.1
    %
    
    
    39,281
    
    
    
    43,070
    
    
    
    (3,789
    )
    
    
    -8.8
    %Integration costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    
    1,103
    
    
    
    (1,103
    )
    
    
    n/aLitigation settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    
    14,303
    
    
    
    (14,303
    )
    
    
    n/aAmortization of intangibles
    
    
    13,161
    
    
    
    34,465
    
    
    
    (21,304
    )
    
    
    -61.8
    %
    
    
    34,465
    
    
    
    18,264
    
    
    
    16,201
    
    
    
    88.7
    %Total operating expenses
    
    
    284,976
    
    
    
    303,163
    
    
    
    (18,187
    )
    
    
    -6.0
    %
    
    
    303,163
    
    
    
    297,050
    
    
    
    6,113
    
    
    
    2.1
    %Operating income
    
    
    142,083
    
    
    
    87,381
    
    
    
    54,702
    
    
    
    62.6
    %
    
    
    87,381
    
    
    
    61,286
    
    
    
    26,095
    
    
    
    42.6
    %Royalty income
    
    
    3,073
    
    
    
    4,474
    
    
    
    (1,401
    )
    
    
    -31.3
    %
    
    
    4,474
    
    
    
    5,028
    
    
    
    (554
    )
    
    
    -11.0
    %Interest income
    
    
    175
    
    
    
    747
    
    
    
    (572
    )
    
    
    -76.6
    %
    
    
    747
    
    
    
    1,153
    
    
    
    (406
    )
    
    
    -35.2
    %Interest expense
    
    
    (19,636
    )
    
    
    (27,398
    )
    
    
    (7,762
    )
    
    
    -28.3
    %
    
    
    (27,398
    )
    
    
    (37,760
    )
    
    
    (10,362
    )
    
    
    -27.4
    %Amortization of financing costs
    
    
    (15,790
    )
    
    
    (18,482
    )
    
    
    (2,692
    )
    
    
    -14.6
    %
    
    
    (18,482
    )
    
    
    (16,145
    )
    
    
    2,337
    
    
    
    14.5
    %Gain on extinguishment of debt
    
    
    10,125
    
    
    
    5,631
    
    
    
    4,494
    
    
    
    79.8
    %
    
    
    5,631
    
    
    
    
    
    
    
    5,631
    
    
    
    n/aGain on sale of non-strategic assets
    
    
    17,446
    
    
    
    
    
    
    
    17,446
    
    
    
    n/a
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    n/aOther (expense) income
    
    
    (1,441
    )
    
    
    (2,195
    )
    
    
    754
    
    
    
    -34.4
    %
    
    
    (2,195
    )
    
    
    3,071
    
    
    
    (5,266
    )
    
    
    -171.5
    %Income from continuing
operations before income taxes
    
    
    136,035
    
    
    
    50,158
    
    
    
    85,877
    
    
    
    171.2
    %
    
    
    50,158
    
    
    
    16,633
    
    
    
    33,525
    
    
    
    201.6
    %Provision for income taxes
    
    
    51,197
    
    
    
    19,323
    
    
    
    31,874
    
    
    
    165.0
    %
    
    
    19,323
    
    
    
    11,888
    
    
    
    7,435
    
    
    
    62.5
    %Net income from continuing
operations
    
    
    84,838
    
    
    
    30,835
    
    
    
    54,003
    
    
    
    175.1
    %
    
    
    30,835
    
    
    
    4,745
    
    
    
    26,090
    
    
    
    549.8
    %Loss from discontinued operations,
net of tax benefit of $0.4 million
for 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    
    (691
    )
    
    
    691
    
    
    
    n/aNet income
    
    $
    84,838
    
    
    $
    30,835
    
    
    $
    54,003
    
    
    
    175.1
    %
    
    $
    30,835
    
    
    $
    4,054
    
    
    $
    26,781
    
    
    
    n/a
 27




---



##### Table of Contents



2009
    
    
    2008
    
    
    2007Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    17.8
    %
    
    
    22.1
    %
    
    
    22.8
    %Gross profit
    
    
    82.2
    %
    
    
    77.9
    %
    
    
    77.2
    %Operating expensesMarketing and selling
    
    
    33.5
    %
    
    
    35.0
    %
    
    
    36.5
    %Research and development
    
    
    10.2
    %
    
    
    9.2
    %
    
    
    9.3
    %In-process research and development
    
    
    0.0
    %
    
    
    1.5
    %
    
    
    1.6
    %General and administrative
    
    
    8.7
    %
    
    
    7.8
    %
    
    
    9.3
    %Integration costs
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.2
    %Litigation settlement
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    3.1
    %Amortization of intangibles
    
    
    2.5
    %
    
    
    6.9
    %
    
    
    3.9
    %Total operating expenses
    
    
    54.9
    %
    
    
    60.4
    %
    
    
    64.0
    %Operating income
    
    
    27.4
    %
    
    
    17.4
    %
    
    
    13.2
    %Royalty income
    
    
    0.6
    %
    
    
    0.9
    %
    
    
    1.1
    %Interest income
    
    
    0.0
    %
    
    
    0.1
    %
    
    
    0.2
    %Interest expense
    
    
    -3.8
    %
    
    
    -5.5
    %
    
    
    -8.1
    %Amortization of financing costs
    
    
    -3.0
    %
    
    
    -3.7
    %
    
    
    -3.5
    %Gain on extinguishment of debt
    
    
    1.9
    %
    
    
    1.1
    %
    
    
    0.0
    %Other (expense) income
    
    
    -0.3
    %
    
    
    -0.4
    %
    
    
    0.7
    %Income from continuing operations before income taxes
    
    
    26.2
    %
    
    
    10.0
    %
    
    
    3.6
    %Provision for income taxes
    
    
    9.9
    %
    
    
    3.9
    %
    
    
    2.6
    %Net income from continuing operations
    
    
    16.3
    %
    
    
    6.1
    %
    
    
    1.0
    %Net income
    
    
    16.3
    %
    
    
    6.1
    %
    
    
    0.9
    %
 Cost of sales.
  Marketing and selling
  28




---



##### Table of Contents



Research and development
 In-process research and development.
   General and administrative.
  Integration costs.
 Litigation settlement. Notes to
Consolidated Financial Statements  No. 3, Litigation Settlements.)
 Amortization of intangibles TherMatrx ® GreenLight PV ® Notes to Consolidated Financial Statements  No. 5, Goodwill and Intangible Assets.)
 29




---



##### Table of Contents



TherMatrx ® GreenLight
PV ® Notes to Consolidated Financial
Statements  No. 5, Goodwill and Intangible Assets.)
 Royalty income.
  Interest income
  Interest expense Notes to Consolidated Financial Statements  7, Debt
 Notes to Consolidated Financial
Statements  No. , Debt.)
 Amortization of financing costs.
  Gain on extinguishment of debt
 30




---



##### Table of Contents



Gain on sale of non-strategic assets
 Other (expense) income.
  Provision for income taxes.
  Liquidity and Capital Resources
  Cash flows from operating activities
 Notes to Consolidated
Financial Statements  No. 3, Litigation Settlements)
   31




---



##### Table of Contents



Cash flows from investing activities
   Cash flows from financing activities
 Notes to Consolidated Financial Statements  No. 7, Debt
  2036 Notes.
  32




---



##### Table of Contents



2041 Notes.
    2036 Notes and 2041 Notes  Potential Dilution
  33




---



##### Table of Contents



If the average
    
    The number of common share equivalents potentially included in the computation ofmarket price
    

    of diluted EPS would be (1):
    
    Percent Dilution (2)of our stock is:
    
    2036 Notes
    
    2041 Notes
    
    Total
    
    2036 Notes
    
    
    2041 Notes
    
    
    Total$19.00
    
     (anti-dilutive)
    
     (anti-dilutive)
    
     (anti-dilutive)
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %$20.00
    
    0.1                  million
    
    0.4                  million
    
    0.5                  million
    
    
    0.1
    %
    
    
    0.5
    %
    
    
    0.6
    %$22.50
    
    0.4                  million
    
    1.8                  million
    
    2.2                  million
    
    
    0.6
    %
    
    
    2.3
    %
    
    
    2.9
    %$25.00
    
    0.7                  million
    
    2.9                  million
    
    3.6                  million
    
    
    0.9
    %
    
    
    3.7
    %
    
    
    4.6
    %$27.50
    
    0.9                  million
    
    3.8                  million
    
    4.7                  million
    
    
    1.2
    %
    
    
    4.8
    %
    
    
    6.0
    %$30.00
    
    1.1                  million
    
    4.5                  million
    
    5.6                  million
    
    
    1.5
    %
    
    
    5.7
    %
    
    
    7.2
    %
 
 (1)
    
    Common share equivalents are calculated using the treasury stock method. The formula to calculate the potentially dilutive shares related to
our Convertible Notes is as follows: (
    Principal Amount

    
    x
    
    Market price
    
    
    
    Principal
)
    =
    
    Potentially dilutive shares$19.406 conversion price

    
    
    
    of stock
    
    
    


    Amount
    
    
    included in EPSMarket price of stock
 
 (2)
    
    The percent dilution is based on 74,715,845 outstanding shares as of January 2, 2010.  Credit Facility.
 Notes to Consolidated Financial Statements  No. 3, Litigation Settlements)
  Notes to Consolidated Financial Statements  No. 7,
Debt)
  34




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##### Table of Contents



Financial Covenant
    
    Required Covenant
    
    Actual ResultTotal Leverage Ratio (1)
    
    3.50:1.00 (maximum)
    
    
    2.48Senior Leverage Ratio (2)
    
    2.00:1.00 (maximum)
    
    
    0.71Interest Coverage Ratio (3)
    
    4.00:1.00 (minimum)
    
    
    8.97Fixed Charge Coverage Ratio (4)
    
    1.50:1.00 (minimum)
    
    
    2.35Maximum Capital Expenditures (5)
    
    $17.5 million
    
    $5.9 million
 
 (1)
    
    Total outstanding debt to Consolidated Adjusted EBITDA for the trailing four quarters.(2)
    
    Total outstanding senior secured debt to Consolidated Adjusted EBITDA for the
trailing four quarters.(3)
    
    Ratio of Consolidated Adjusted EBITDA for the trailing four quarters to cash interest
expense for such period.(4)
    
    Ratio of Consolidated Adjusted EBITDA for the trailing four quarters to fixed charges
(cash interest expense, scheduled principal payments on debt, capital expenditures,
income taxes paid, earn-out and milestone payments) for such period.(5)
    
    Limit of capital expenditures for the full year.   Notes to Consolidated Financial Statements 
No. 7, Debt.
 Contractual Obligations
  Less than
    
    
    
    
    
    
    
    
    
    
    More than(in millions)
    
    Total
    
    
    1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 yearsLong-term debt obligations (1)
    
    $
    437.3
    
    
    $
    1.3
    
    
    $
    124.0
    
    
    $
    
    
    
    $
    312.0Operating lease commitments
    
    
    8.6
    
    
    
    3.4
    
    
    
    4.6
    
    
    
    0.6
    
    
    
    Total
    
    $
    445.9
    
    
    $
    4.7
    
    
    $
    128.6
    
    
    $
    0.6
    
    
    $
    312.0
 
 (1)
    
    Our 2036 Notes have a maturity of July 1, 2036 and our 2041 Notes have a
maturity of September 15, 2041 and thus the principal of the
Convertible Notes has been included in the more than 5 years
column in the table above. Holders of our 2036 Notes may require us to purchase all
or a portion of their 2036 Notes for cash on July 1, 2013, July 1, 2016, July 1, 2021,
July 1, 2026, and July 1, 2031. Holders of the 2041 Notes may require us to purchase
all or a portion of their 2041 Notes for cash on September 15, 2016.   35




---



##### Table of Contents



Critical Accounting Policies and Estimates
  Revenue Recognition Policy
    36




---



##### Table of Contents



Allowance for Doubtful Accounts
   Derivative Instruments Policy
 Item 7A, Quantitative and Qualitative
Disclosures about Market Risk, Notes to Consolidated Financial Statements  No. 11,
Derivative Instruments and Hedging Activities
 Inventories
  Purchase Accounting and Valuation of IPR&D
    37




---



##### Table of Contents



Goodwill
  Notes to Consolidated Financial Statements  No. 5, Goodwill and Intangible
Assets
 Other Intangible Assets
 Notes to Consolidated Financial Statements
 No. 5, Goodwill and Intangible Assets
 Warranty Accrual / Allowance
  38




---



##### Table of Contents



Product Liability Accrual
  Valuation of Share-Based Payments
   Notes to Consolidated Financial Statements  No. 8 Stock-Based Compensation
 Income Taxes
     39




---



##### Table of Contents



Recent Accounting Pronouncements
 Notes to Consolidated Financial Statements  No.1, Business Description and Significant
Accounting Policies.
 Forward-Looking Statements
    Part I, Item 1A, Risk Factors.
  40




---



##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures about Market Risk
  Interest Rates
  Currency
    Credit Risk
  41




---



##### Table of Contents



Inflation
  
 Item 8. Financial Statements and Supplementary Data
  
 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  Managements Report on Internal Control over Financial Reporting
  42




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##### Table of Contents



Internal Control  Integrated
Framework ,
  
 Item 9B. Other Information
  43




---



##### Table of Contents



PART III
 
 Item 10. Directors and Executive Officers of the Registrant
 Directors of the Registrant
  Executive Officers of the Registrant
  Compliance with Section 16(a) of the Exchange Act
  Audit Committee Financial Expert
  Identification of the Audit Committee
  Code of Ethics
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accountant Fees and Services
  44




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##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedule
 (a) Financial Statements
  Reports of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Statements of Operations for the years ended January 2, 2010,
January 3, 2009, and December 29, 2007
    
    
    F-3Consolidated Balance Sheets as of January 2, 2010 and January 3, 2009
    
    
    F-4Consolidated Statements of Changes in Stockholders Equity for the
years ended January 2, 2010, January 3, 2009, and December 29, 2007
    
    
    F-5Consolidated Statements of Cash Flows for the years ended January 2, 2010,
January 3, 2009, and December 29, 2007
    
    
    F-6Notes to Consolidated Financial Statements for the years ended January 2, 2010,
January 3, 2009, and December 29, 2007
    
    
    F-7
 (b) Financial Statement Schedule
  Schedule II  Valuation and Qualifying Accounts
    
    
    F-46
 (c) Exhibits
   1.
    
    Employment Agreement, dated December 18, 2006, between Mark A. Heggestad and American
Medical Systems, Inc.2.
    
    First Amendment to Employment Agreement, dated March 6, 2008, between Mark A. Heggestad
and American Medical Systems, Inc.3.
    
    Employment Agreement, dated as of April 22, 2008, between American Medical Systems,
Inc. and Anthony P. Bihl, III.4.
    
    Employment Agreement, dated October 20, 2008, between Francois Georgelin and American
Medical Systems Europe B.V.5.
    
    Employment Agreement, effective as of April 1, 2009, between Joe W. Martin and American
Medical Systems, Inc.6.
    
    Employment Agreement, effective as of August 3, 2009, between Maximillian Fiore and
American Medical Systems, Inc.7.
    
    Separation Agreement, dated June 9, 2009, by and between Jan Dick and American Medical
Systems, Inc.
 45




---



##### Table of Contents



8.
    
    2000 Equity Incentive Plan, as amended.9.
    
    Form of Incentive Stock Option Agreement under the 2000 Equity Incentive Plan, as
amended.10.
    
    Form of Non-Qualified Stock Option Agreement under the 2000 Equity Incentive Plan, as
amended.11.
    
    Employee Stock Purchase Plan as amended.12.
    
    2005 Stock Incentive Plan (As Amended and Restated).13.
    
    Form of Stock Option Certificate for Directors under the 2005 Stock Incentive Plan.14.
    
    Form of Stock Option Certificate for Executive Officers under the 2005 Stock Incentive
Plan.15.
    
    Form of Notice of Amendment to Stock Option Certificate/Agreement for Executive
Officers of American Medical Systems Holdings, Inc.16.
    
    Form of Stock Option Certificate for Executive Officers under the 2005 Stock Incentive
Plan (Version Modified in 2010).17.
    
    Form of Restricted Stock Award for Executive Officers under the 2005 Stock Incentive
Plan.18.
    
    Form of Indemnification Agreement with Executive Officers and Directors.19.
    
    Form of Change in Control Severance Agreement.20.
    
    Form of First Amendment to Change in Control Severance Agreement.21.
    
    Form of Change in Control Severance Agreement (Version Modified in 2009).22.
    
    Change in Control Severance Agreement, dated as of April 22, 2008, between American
Medical Systems Holdings, Inc. and Anthony P. Bihl, III.23.
    
    The American Medical Systems, Inc. Executive Severance Pay Plan24.
    
    Summary of Director Compensation.25.
    
    Summary of Named Executive Officer Compensation (2009).26.
    
    Summary of Named Executive Officer Compensation (2010).27.
    
    2010 Executive Variable Incentive Plan.
 46




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##### Table of Contents



FINANCIAL STATEMENTS AND NOTES THERETO
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON CONSOLIDATED
FINANCIAL STATEMENTS
 The Board of Directors and Stockholders
American Medical Systems Holdings, Inc.
    Internal Control-Integrated
Framework,
  
 F-1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL
CONTROL OVER FINANCIAL REPORTING
 The Board of Directors and Stockholders
American Medical Systems Holdings, Inc.
        
 F-2




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##### Table of Contents



American Medical Systems Holdings, Inc.
 
 Consolidated Statements of Operations
  2009
    
    
    2008
    
    
    2007Net sales
    
    $
    519,270
    
    
    $
    501,641
    
    
    $
    463,928Cost of sales
    
    
    92,211
    
    
    
    111,097
    
    
    
    105,592Gross profit
    
    
    427,059
    
    
    
    390,544
    
    
    
    358,336Operating expensesMarketing and selling
    
    
    173,854
    
    
    
    175,670
    
    
    
    169,495Research and development
    
    
    52,765
    
    
    
    46,247
    
    
    
    43,315In-process research and development
    
    
    
    
    
    
    7,500
    
    
    
    7,500General and administrative
    
    
    45,196
    
    
    
    39,281
    
    
    
    43,070Integration costs
    
    
    
    
    
    
    
    
    
    
    1,103Litigation settlement
    
    
    
    
    
    
    
    
    
    
    14,303Amortization of intangibles
    
    
    13,161
    
    
    
    34,465
    
    
    
    18,264Total operating expenses
    
    
    284,976
    
    
    
    303,163
    
    
    
    297,050Operating income
    
    
    142,083
    
    
    
    87,381
    
    
    
    61,286Other (expense) incomeRoyalty income
    
    
    3,073
    
    
    
    4,474
    
    
    
    5,028Interest income
    
    
    175
    
    
    
    747
    
    
    
    1,153Interest expense
    
    
    (19,636
    )
    
    
    (27,398
    )
    
    
    (37,760
    )Amortization of financing costs
    
    
    (15,790
    )
    
    
    (18,482
    )
    
    
    (16,145
    )Gain on extinguishment of debt
    
    
    10,125
    
    
    
    5,631
    
    
    
    Gain on sale of non-strategic assets
    
    
    17,446
    
    
    
    
    
    
    
    Other (expense) income
    
    
    (1,441
    )
    
    
    (2,195
    )
    
    
    3,071Total other (expense)
    
    
    (6,048
    )
    
    
    (37,223
    )
    
    
    (44,653
    )Income from continuing operations before income taxes
    
    
    136,035
    
    
    
    50,158
    
    
    
    16,633Provision for income taxes
    
    
    51,197
    
    
    
    19,323
    
    
    
    11,888Net income from continuing operations
    
    
    84,838
    
    
    
    30,835
    
    
    
    4,745Loss from discontinued operations, net of tax benefit
    
    
    
    
    
    
    
    
    
    
    (691
    )Net income
    
    $
    84,838
    
    
    $
    30,835
    
    
    $
    4,054Net income per shareBasic net income from continuing operations
    
    $
    1.14
    
    
    $
    0.42
    
    
    $
    0.07Discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    (0.01
    )Basic net income
    
    $
    1.14
    
    
    $
    0.42
    
    
    $
    0.06Diluted net income from continuing operations
    
    $
    1.14
    
    
    $
    0.42
    
    
    $
    0.06Discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    (0.01
    )Diluted net income
    
    $
    1.14
    
    
    $
    0.42
    
    
    $
    0.06Weighted average common shares used in calculationBasic
    
    
    74,097
    
    
    
    72,942
    
    
    
    72,061Diluted
    
    
    74,675
    
    
    
    73,899
    
    
    
    73,593The accompanying notes are an integral part of the consolidated financial statements.
 F-3




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##### Table of Contents



American Medical Systems Holdings, Inc.
 
 Consolidated Balance Sheets
  January 2, 2010
    
    
    January 3, 2009AssetsCurrent assetsCash and cash equivalents
    
    $
    30,670
    
    
    $
    11,642Short term investments
    
    
    19,868
    
    
    
    31,323Accounts receivable, net
    
    
    102,590
    
    
    
    93,078Inventories, net
    
    
    30,276
    
    
    
    38,500Deferred income taxes
    
    
    14,870
    
    
    
    12,908Other current assets
    
    
    6,067
    
    
    
    6,858Total current assets
    
    
    204,341
    
    
    
    194,309Property, plant and equipment, net
    
    
    44,120
    
    
    
    48,280Goodwill
    
    
    690,899
    
    
    
    690,097Developed and core technology, net
    
    
    51,631
    
    
    
    62,315Other intangibles, net
    
    
    49,937
    
    
    
    47,349Other long-term assets, net
    
    
    6,223
    
    
    
    2,147Total assets
    
    $
    1,047,151
    
    
    $
    1,044,497Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    9,114
    
    
    $
    7,830Income taxes payable
    
    
    4,495
    
    
    
    7,782Accrued compensation expenses
    
    
    29,603
    
    
    
    22,876Accrued warranty expense
    
    
    2,293
    
    
    
    3,287Other accrued expenses
    
    
    25,760
    
    
    
    21,535Total current liabilities
    
    
    71,265
    
    
    
    63,310Long-term debt
    
    
    346,229
    
    
    
    484,582Deferred income taxes
    
    
    62,347
    
    
    
    50,044Long-term income taxes payable
    
    
    18,206
    
    
    
    15,327Long-term employee benefit obligations
    
    
    3,745
    
    
    
    3,752Total liabilities
    
    
    501,792
    
    
    
    617,015Stockholders equityCommon stock, par value $.01 per share; authorized 200,000,000 shares;
issued and outstanding: 74,715,839 shares at January 2, 2010 and
73,668,415 shares at January 3, 2009
    
    
    747
    
    
    
    737Additional paid-in capital
    
    
    399,468
    
    
    
    369,594Accumulated other comprehensive income
    
    
    6,381
    
    
    
    3,226Retained earnings
    
    
    138,763
    
    
    
    53,925Total stockholders equity
    
    
    545,359
    
    
    
    427,482Total liabilities and stockholders equity
    
    $
    1,047,151
    
    
    $
    1,044,497
 The accompanying notes are an integral part of the consolidated financial statements.
 F-4




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##### Table of Contents



American Medical Systems Holdings, Inc.
 
 Consolidated Statements of Changes in Stockholders Equity
  AccumulatedCommon Stock





    
    Additional
    
    
    
    
    
    
    OtherPar
    
    
    Paid-In
    
    
    Retained
    
    
    ComprehensiveShares
    
    
    Value
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    TotalBalances at December 30, 2006
    
    
    71,059
    
    
    $
    711
    
    
    $
    321,024
    
    
    $
    19,299
    
    
    $
    4,155
    
    
    $
    345,189Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,054
    
    
    
    
    
    
    
    4,054Foreign currency translation adjustment, net of tax
of $0.3 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,251
    
    
    
    3,251Unrealized loss on available-for-sale securities, net of
tax benefit of $0.3 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (433
    )
    
    
    (433
    )Net change for post-retirement plan, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (63
    )
    
    
    (63
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,809Issuance of common stock:Stock options exercised
    
    
    604
    
    
    
    6
    
    
    
    8,324
    
    
    
    
    
    
    
    
    
    
    
    8,330Employee stock purchase plan
    
    
    164
    
    
    
    2
    
    
    
    2,498
    
    
    
    
    
    
    
    
    
    
    
    2,500Restricted stock awards
    
    
    60
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    InnovaQuartz settlement
    
    
    372
    
    
    
    4
    
    
    
    7,371
    
    
    
    
    
    
    
    
    
    
    
    7,375Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    12,700
    
    
    
    
    
    
    
    
    
    
    
    12,700Income tax benefit from stock option plans
    
    
    
    
    
    
    
    
    
    
    731
    
    
    
    
    
    
    
    
    
    
    
    731Adjustment to initially apply FASB Interpretation No. 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (263
    )
    
    
    
    
    
    
    (263
    )Balances at December 29, 2007
    
    
    72,259
    
    
    
    723
    
    
    
    352,648
    
    
    
    23,090
    
    
    
    6,910
    
    
    
    383,371Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,835
    
    
    
    
    
    
    
    30,835Foreign currency translation adjustment, net of tax
of $0.3 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,768
    )
    
    
    (1,768
    )Change in derivatives, net of tax of $1.2 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,982
    )
    
    
    (1,982
    )Recognition of previously unrealized losses on
available-for-sale securities, net of tax of $0.3 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    433
    
    
    
    433Unrealized loss on available-for-sale securities,
net of tax of $0.1 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (102
    )
    
    
    (102
    )Net change for post-retirement plan,
net of tax of $0.1 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (265
    )
    
    
    (265
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,151Issuance of common stock:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock options exercised
    
    
    1,017
    
    
    
    10
    
    
    
    5,441
    
    
    
    
    
    
    
    
    
    
    
    5,451Employee stock purchase plan
    
    
    306
    
    
    
    3
    
    
    
    3,420
    
    
    
    
    
    
    
    
    
    
    
    3,423Restricted stock awards
    
    
    86
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    8,818
    
    
    
    
    
    
    
    
    
    
    
    8,818Income tax benefit from stock option plans
    
    
    
    
    
    
    
    
    
    
    844
    
    
    
    
    
    
    
    

    
    
    
    844Repurchase of convertible notes, net of adjustments
    
    
    
    
    
    
    
    
    
    
    (1,577
    )
    
    
    
    
    
    
    
    
    
    
    (1,577
    )Balances at January 3, 2009
    
    
    73,668
    
    
    $
    737
    
    
    $
    369,594
    
    
    $
    53,925
    
    
    $
    3,226
    
    
    $
    427,482Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84,838
    
    
    
    
    
    
    
    84,838Foreign currency translation adjustment, net of tax
of $0.2 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,010
    
    
    
    2,010Change in derivatives, net of tax of $0.4 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    693
    
    
    
    693Unrealized gain on available-for-sale securities,
net of tax of $0.2 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    296
    
    
    
    296Net change for post-retirement plan,
net of tax of $0.1 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    156
    
    
    
    156Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87,993Issuance of common stock:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock options exercised
    
    
    716
    
    
    
    7
    
    
    
    7,381
    
    
    
    
    
    
    
    
    
    
    
    7,388Employee stock purchase plan
    
    
    271
    
    
    
    2
    
    
    
    2,800
    
    
    
    
    
    
    
    
    
    
    
    2,802Restricted stock awards
    
    
    61
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    8,988
    
    
    
    
    
    
    
    
    
    
    
    8,988Income tax benefit from stock option plans
    
    
    
    
    
    
    
    
    
    
    296


    
    
    
    
    
    
    
    

    
    
    
    296Issuance of convertible notes, net of tax of $28.8 million
    
    
    
    
    
    
    
    
    
    
    47,585
    
    
    
    
    
    
    
    

    
    
    
    47,585Repurchase of convertible notes, net of adjustments
    
    
    
    
    
    
    
    
    
    
    (37,176
    )
    
    
    
    
    
    
    
    
    
    
    (37,176
    )Balances at January 2, 2010
    
    
    74,716
    
    
    $
    747
    
    
    $
    399,468
    
    
    $
    138,763
    
    
    $
    6,381
    
    
    $
    545,359
 The accompanying notes are an integral part of the consolidated financial statements.
 F-5




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##### Table of Contents



American Medical Systems Holdings, Inc.
 
 Consolidated Statements of Cash Flows
  2009
    
    
    2008
    
    
    2007Cash flows from operating activitiesNet income
    
    $
    84,838
    
    
    $
    30,835
    
    
    $
    4,054Loss from discontinued operations, net of tax benefit
    
    
    
    
    
    
    
    
    
    
    (691
    )Income from continuing operations
    
    
    84,838
    
    
    
    30,835
    
    
    
    4,745Adjustments to reconcile net income from continuing operations
to net cash provided by operating activities:Depreciation
    
    
    10,025
    
    
    
    10,089
    
    
    
    8,587Gain on extinguishment of debt
    
    
    (10,125
    )
    
    
    (5,631
    )
    
    
    Gain on sale of non-strategic assets
    
    
    (17,446
    )
    
    
    
    
    
    
    Amortization of intangibles
    
    
    13,161
    
    
    
    34,465
    
    
    
    18,264Amortization of deferred financing costs
    
    
    15,790
    
    
    
    18,482
    
    
    
    16,145In-process research and development charges
    
    
    
    
    
    
    7,500
    
    
    
    7,500Non-cash impairment of available-for-sale securities
    
    
    
    
    
    
    843
    
    
    
    Net payments for settlement of derivative contracts
    
    
    556
    
    
    
    1,385
    
    
    
    Excess tax benefit from exercise of stock options
    
    
    (566
    )
    
    
    (1,498
    )
    
    
    (215
    )Tax benefit on exercised stock option arrangements
    
    
    1,613
    
    
    
    844
    
    
    
    731Change in net deferred income taxes
    
    
    (74
    )
    
    
    (4,035
    )
    
    
    7,951Stock-based compensation
    
    
    8,988
    
    
    
    8,942
    
    
    
    12,398Changes in operating assets and liabilities, net of acquired amounts:Accounts receivable
    
    
    (8,100
    )
    
    
    10,978
    
    
    
    (9,828
    )Inventories
    
    
    9,228
    
    
    
    20,947
    
    
    
    (30,516
    )Accounts payable and accrued expenses
    
    
    13,395
    
    
    
    (13,842
    )
    
    
    (3,868
    )Other assets
    
    
    1,513
    
    
    
    (4,547
    )
    
    
    15,857Net cash provided by operating activities
    
    
    122,796
    
    
    
    115,757
    
    
    
    47,751Cash flows from investing activitiesPurchase of property, plant and equipment
    
    
    (5,865
    )
    
    
    (6,101
    )
    
    
    (14,173
    )Purchase of business, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    (781
    )Disposal of business
    
    
    
    
    
    
    4,691
    
    
    
    22,116Sale of non-strategic assets, net
    
    
    18,982
    
    
    
    
    
    
    
    Purchase of investments in technology
    
    
    
    
    
    
    (7,500
    )
    
    
    (7,500
    )Purchase of other intangibles
    
    
    (5,927
    )
    
    
    (1,352
    )
    
    
    (382
    )Purchase of short-term investments
    
    
    (18,820
    )
    
    
    (70,505
    )
    
    
    (30,187
    )Sale of short-term investments
    
    
    30,755
    
    
    
    39,999
    
    
    
    29,570Net payments for settlement of derivative contracts
    
    
    (556
    )
    
    
    (1,385
    )
    
    
    Net cash provided by (used in) investing activities
    
    
    18,569
    
    
    
    (42,153
    )
    
    
    (1,337
    )Cash flows from financing activitiesIssuance of common stock
    
    
    10,190
    
    
    
    8,874
    
    
    
    10,830Excess tax benefit from exercise of stock options
    
    
    566
    
    
    
    1,498
    
    
    
    215Proceeds from short-term borrowings
    
    
    
    
    
    
    12,000
    
    
    
    Repayments of short-term borrowings
    
    
    
    
    
    
    (12,000
    )
    
    
    Debt issuance costs
    
    
    (7,697
    )
    
    
    
    
    
    
    Payments on senior secured credit facility
    
    
    (103,510
    )
    
    
    (85,202
    )
    
    
    (50,069
    )Repurchase of convertible senior subordinated notes
    
    
    (21,125
    )
    
    
    (23,373
    )
    
    
    Net cash used in financing activities
    
    
    (121,576
    )
    
    
    (98,203
    )
    
    
    (39,024
    )Cash provided by (used in) continuing operations
    
    
    19,789
    
    
    
    (24,599
    )
    
    
    7,390Cash used in discontinued operationsOperating activities
    
    
    
    
    
    
    
    
    
    
    (691
    )Cash used in discontinued operations
    
    
    
    
    
    
    
    
    
    
    (691
    )Effect of currency exchange rates on cash
    
    
    (761
    )
    
    
    2,197
    
    
    
    (1,706
    )Net increase (decrease) in cash and cash equivalents
    
    
    19,028
    
    
    
    (22,402
    )
    
    
    4,993Cash and cash equivalents at beginning of period
    
    
    11,642
    
    
    
    34,044
    
    
    
    29,051Cash and cash equivalents at end of period
    
    $
    30,670
    
    
    $
    11,642
    
    
    $
    34,044Supplemental disclosureCash paid for interest
    
    $
    15,733
    
    
    $
    37,646
    
    
    $
    39,075Cash paid (refunded) for taxes
    
    
    47,556
    
    
    
    13,710
    
    
    
    (11,662
    )Stock issued to settle contingent liabilities under InnovaQuartz purchase agreement
    
    
    
    
    
    
    
    
    
    
    7,375
 The accompanying notes are an integral part of the consolidated financial statements.
 F-6




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##### Table of Contents



1. Business Description and Significant Accounting Policies
 Business Description
  Note 2 Discontinued Operations and Sale of Aesthetics Business,
 Principles of Consolidation
  Accounting Periods
  Cash and Cash Equivalents
  Short-Term Investments
  January 2, 2010
    
    
    January 3, 2009Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Gains
    
    
    Value
    
    
    LossesMoney market funds
    
    $
    18,504
    
    
    $
    
    
    
    $
    30,846
    
    
    $
    Mutual fund
shares and short-term bonds with a maturity of less than one year
    
    
    709
    
    
    
    
    
    
    
    285
    
    
    
    Publicly traded equity securities
    
    
    655
    
    
    
    299
    
    
    
    192
    
    
    
    164Total
    
    $
    19,868
    
    
    $
    299
    
    
    $
    31,323
    
    
    $
    164
 Note 2, Discontinued Operations and Sale
of Aesthetics Business.
 F-7




---



##### Table of Contents



Concentration of Risks
     Allowance for Doubtful Accounts
  Inventories
  F-8




---



##### Table of Contents



Property, Plant and Equipment
  Asset class
    
    Useful livesBuilding
    
    15-30 yearsMachinery and equipment
    
    3-12 yearsFurniture, fixtures, and other
    
    3-12 yearsSoftware
    
    3-5 years
  In-Process Research and Development
     F-9




---



##### Table of Contents



Goodwill
  Note
5, Goodwill and Intangible Assets
 Other Intangible Assets
 Note 5, Goodwill and Intangible Assets
 Long-Lived Assets
 Note 5, Goodwill and Intangible Assets
 Revenue Recognition
    F-10




---



##### Table of Contents



Royalty Income
  Research and Development
  Advertising and Promotional Costs
  Product Warranty Costs
   Product Liability
  Software Development Costs
 .
 Capitalized Interest
  F-11




---



##### Table of Contents



Income Taxes
    Foreign Currency Translation
  Derivatives and Hedging Activities
 Note
11, Derivative Instruments and Hedging Activities
 Use of Estimates
  Stock-Based Compensation
  F-12




---



##### Table of Contents



Net Income per Share
 Note 7, Debt.
   (in thousands, except per share data)
    
    2009
    
    
    2008
    
    
    2007Net income from continuing operations
    
    $
    84,838
    
    
    $
    30,835
    
    
    $
    4,745Weighted-average shares outstanding for basic net income per share
    
    
    74,097
    
    
    
    72,942
    
    
    
    72,061Dilutive effect of stock options and restricted shares
    
    
    578
    
    
    
    957
    
    
    
    1,532Adjusted weighted-average shares outstanding fordiluted net income per share
    
    
    74,675
    
    
    
    73,899
    
    
    
    73,593Net income per shareBasic net earnings from continuing operations
    
    $
    1.14
    
    
    $
    0.42
    
    
    $
    0.07Diluted net earnings from continuing operations
    
    $
    1.14
    
    
    $
    0.42
    
    
    $
    0.06
  Comprehensive Income
 Note 11, Derivative Instruments and Hedging Activities
 F-13




---



##### Table of Contents



(in thousands)
    
    2009
    
    
    2008
    
    
    2007Net income
    
    $
    84,838
    
    
    $
    30,835
    
    
    $
    4,054Foreign currency translation gain (loss),
net of taxes of ($245), ($206) and ($264),
respectively
    
    
    2,010
    
    
    
    (1,768
    )
    
    
    3,251Fair value adjustment on derivatives designated as cash flow hedges,
net of taxes of $1,850 and $1,200, respectively
    
    
    (3,058
    )
    
    
    (1,982
    )
    
    
    Reclassification adjustments on cash flow hedges settled and included
in net income, net of tax of ($2,270)
    
    
    3,751
    
    
    
    
    
    
    
    Recognition of previously unrealized losses on
available-for-sale securities, net of tax of ($263)
    
    
    
    
    
    
    433
    
    
    
    Unrealized gain (loss) on available-for-sale securities,
net of taxes of ($179), $62 and $263, respectively
    
    
    296
    
    
    
    (102
    )
    
    
    (433
    )Prior service cost for post-retirement plan,
net of taxes of ($23), $14 and $15, respectively
    
    
    39
    
    
    
    (24
    )
    
    
    (24
    )Net gain (loss) for post-retirement plan,
net of taxes of ($71), $110 and $20, respectively
    
    
    117
    
    
    
    (241
    )
    
    
    (39
    )Comprehensive income
    
    $
    87,993
    
    
    $
    27,151
    
    
    $
    6,809
  Net Unrealized(Loss) onDerivative
    
    
    
    
    
    
    
    
    
    
    Net UnrealizedInstruments
    
    
    Post-retirement
    
    
    Foreign Currency
    
    
    (Loss) Gain on
    
    
    Total AccumulatedQualifying as
    
    
    Plan Liability
    
    
    Translation
    
    
    Available-for-sale
    
    
    Other Comprehensive(in thousands)
    
    Hedges
    
    
    Adjustment
    
    
    Adjustment
    
    
    Investments
    
    
    IncomeBalance at December 29, 2007
    
    $
    
    
    
    $
    85
    
    
    $
    7,258
    
    
    $
    (433
    )
    
    $
    6,910Balance at January 3, 2009
    
    $
    (1,982
    )
    
    $
    (180
    )
    
    $
    5,490
    
    
    $
    (102
    )
    
    $
    3,226Balance at January 2, 2010
    
    $
    (1,289
    )
    
    $
    (24
    )
    
    $
    7,500
    
    
    $
    194
    
    
    $
    6,381
 Recent Accounting Pronouncements
 The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principlesa replacement of FASB Statement No. 162
 Business Combinations
 F-14




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##### Table of Contents



Business Combinations
 Business Combinations,
 Derivatives and Hedging Activities Note 12, Derivative Instruments and Hedging Activities
 Debt
 Financial Instruments Note 10, Fair
Value Measurements
 Subsequent Events
 Revenue Recognition Multiple-Deliverable Revenue Arrangements
 F-15




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##### Table of Contents



2. Discontinued Operations and Sale of Aesthetics Business
    (in thousands)
    
    2007Net sales
    
    $
    515Loss from discontinued operations before income taxes
    
    
    (1,075
    )Income tax benefit
    
    
    384Loss from discontinued operations, net of taxes
    
    $
    (691
    )
  3. Litigation Settlements
  F-16




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##### Table of Contents



Her Option
 4. Balance Sheet Information
  2009
    
    
    2008Accounts receivableTrade accounts receivable
    
    $
    103,084
    
    
    $
    95,297Other receivables
    
    
    2,945
    
    
    
    1,317Allowance for doubtful accounts
    
    
    (3,439
    )
    
    
    (3,536
    )Net accounts receivable
    
    $
    102,590
    
    
    $
    93,078InventoriesRaw materials
    
    $
    10,117
    
    
    $
    11,611Work in process
    
    
    3,399
    
    
    
    4,841Finished goods
    
    
    21,791
    
    
    
    26,283Obsolescence allowance
    
    
    (5,031
    )
    
    
    (4,235
    )Net inventories
    
    $
    30,276
    
    
    $
    38,500Property, plant and equipmentLand and building
    
    $
    41,436
    
    
    $
    41,002Machinery and equipment
    
    
    12,108
    
    
    
    11,868Software
    
    
    20,863
    
    
    
    18,112Furniture, fixtures, and other
    
    
    19,108
    
    
    
    18,598Accumulated depreciation
    
    
    (49,395
    )
    
    
    (41,300
    )Net property, plant and equipment
    
    $
    44,120
    
    
    $
    48,280Accrued compensation expensesAccrued payroll
    
    $
    5,090
    
    
    $
    4,429Accrued bonuses and commissions
    
    
    14,031
    
    
    
    10,594Accrued vacation
    
    
    5,426
    
    
    
    4,069Accrued benefits and other compensation
    
    
    5,056
    
    
    
    3,784Total accrued compensation expenses
    
    $
    29,603
    
    
    $
    22,876Other accrued expensesAccrued interest
    
    $
    3,922
    
    
    $
    213Deferred revenue
    
    
    2,685
    
    
    
    2,183Accrued other
    
    
    19,153
    
    
    
    19,139Total other accrued expenses
    
    $
    25,760
    
    
    $
    21,535Long-term employee benefit obligationsAccumulated postretirement benefit obligation
    
    $
    3,631
    
    
    $
    3,623Other long-term benefit obligations
    
    
    114
    
    
    
    129Total long-term employee benefit obligations
    
    $
    3,745
    
    
    $
    3,752
 F-17




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##### Table of Contents



5. Goodwill and Intangible Assets
  (in thousands)
    
    2009
    
    
    2008| |Goodwill, beginning of the period
    
    $
    690,097
    
    
    $
    690,478Adjustments to goodwill from acquisitions
    
    
    
    
    
    
    759Effect of currency translation
    
    
    802
    
    
    
    (1,140
    )Goodwill, end of the period
    
    $
    690,899
    
    
    $
    690,097
  GreenLight StoneLight ®
  January 2, 2010
    
    
    January 3, 2009Weighted avg
    
    
    Gross
    
    
    
    
    
    
    
    
    
    
    Grossremaining life
    
    
    carrying
    
    
    Accumulated
    
    
    Net book
    
    
    carrying
    
    
    Accumulated
    
    
    Net book(in thousands)
    
    (years)
    
    
    amount
    
    
    amortization
    
    
    value
    
    
    amount
    
    
    amortization
    
    
    valueDeveloped and core technology
    
    
    5.6
    
    
    $
    137,553
    
    
    $
    (85,922
    )
    
    $
    51,631
    
    
    $
    137,553
    
    
    $
    (75,238
    )
    
    $
    62,315Other intangiblesAmortizedPatents
    
    
    5.9
    
    
    
    11,510
    
    
    
    (9,693
    )
    
    
    1,817
    
    
    
    11,510
    
    
    
    (9,317
    )
    
    
    2,193Licenses
    
    
    7.6
    
    
    
    15,913
    
    
    
    (9,034
    )
    
    
    6,879
    
    
    
    9,312
    
    
    
    (7,659
    )
    
    
    1,653Royalty agreement
    
    
    0.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,970
    
    
    
    (1,148
    )
    
    
    1,822Trademarks
    
    
    1.0
    
    
    
    2,208
    
    
    
    (1,767
    )
    
    
    441
    
    
    
    2,208
    
    
    
    (1,327
    )
    
    
    881Total
amortized other intangible assets
    
    
    7.0
    
    
    
    29,631
    
    
    
    (20,494
    )
    
    
    9,137
    
    
    
    26,000
    
    
    
    (19,451
    )
    
    
    6,549UnamortizedTrademarks
    
    
    n/a
    
    
    
    40,800
    
    
    
    
    
    
    
    40,800
    
    
    
    40,800
    
    
    
    
    
    
    
    40,800Total other intangibles
    
    
    
    
    
    
    70,431
    
    
    
    (20,494
    )
    
    
    49,937
    
    
    
    66,800
    
    
    
    (19,451
    )
    
    
    47,349Total intangible assets
    
    
    
    
    
    $
    207,984
    
    
    $
    (106,416
    )
    
    $
    101,568
    
    
    $
    204,353
    
    
    $
    (94,689
    )
    
    $
    109,664
    F-18




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##### Table of Contents



TherMatrx® GreenLight PV
® GreenLight HPS
® GreenLight PV
®
    Year
    
    Actual
    
    
    Expected2007
    
    $
    18,264
    
    
    $
    2008
    
    
    34,465
    
    
    
    2009
    
    
    13,161
    
    
    
    2010
    
    
    
    
    
    
    12,3062011
    
    
    
    
    
    
    11,5802012
    
    
    
    
    
    
    9,4012013
    
    
    
    
    
    
    8,8712014
    
    
    
    
    
    
    6,754
 6. Warranties
  (in thousands)
    
    2009
    
    
    2008Balance, beginning of period
    
    $
    3,287
    
    
    $
    3,001Provisions for warranty
    
    
    1,517
    
    
    
    5,577Claims processed
    
    
    (2,511
    )
    
    
    (5,291
    )Balance, end of period
    
    $
    2,293
    
    
    $
    3,287
 7. Debt
 Senior Secured Credit Facility
  F-19




---



##### Table of Contents



Note 3, Litigation Settlements)
      F-20




---



##### Table of Contents



Fiscal 2010
    
    $
    1,295Fiscal 2011
    
    
    31,732Fiscal 2012
    
    
    92,280Fiscal 2013
    
    
    Fiscal 2014
    
    
    
 Amendment of Credit Facility
  Convertible Senior Subordinated Notes Due 2036
      F-21




---



##### Table of Contents



Convertible Senior Subordinated Notes Due 2041
    F-22




---



##### Table of Contents



Supplemental Guarantor Information
   F-23




---



##### Table of Contents



American Medical Systems Holdings, Inc.
Notes to Consolidated Financial Statements  (Continued)
Condensed Consolidating Statement of Operations
 Year Ended Janaury 2, 2010AmericanMedical
    
    
    
    
    
    
    Non-Systems
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    ConsolidatedHoldings, Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalNet sales
    
    $
    
    
    
    $
    473,590
    
    
    $
    113,242
    
    
    $
    (67,562
    )
    
    $
    519,270Cost of sales
    
    
    
    
    
    
    91,205
    
    
    
    68,237
    
    
    
    (67,231
    )
    
    
    92,211Gross profit
    
    
    
    
    
    
    382,385
    
    
    
    45,005
    
    
    
    (331
    )
    
    
    427,059Operating expensesMarketing and selling
    
    
    
    
    
    
    137,014
    
    
    
    36,840
    
    
    
    
    
    
    
    173,854Research and development
    
    
    
    
    
    
    52,811
    
    
    
    (46
    )
    
    
    
    
    
    
    52,765General and administrative
    
    
    
    
    
    
    45,196
    
    
    
    
    
    
    
    
    
    
    
    45,196Amortization of intangibles
    
    
    
    
    
    
    13,161
    
    
    
    
    
    
    
    
    
    
    
    13,161Total operating expenses
    
    
    
    
    
    
    248,182
    
    
    
    36,794
    
    
    
    
    
    
    
    284,976Operating income
    
    
    
    
    
    
    134,203
    
    
    
    8,211
    
    
    
    (331
    )
    
    
    142,083Other (expense) incomeRoyalty income
    
    
    
    
    
    
    3,073
    
    
    
    
    
    
    
    
    
    
    
    3,073Interest income
    
    
    
    
    
    
    281
    
    
    
    57
    
    
    
    (163
    )
    
    
    175Interest expense
    
    
    (10,857
    )
    
    
    (8,753
    )
    
    
    (198
    )
    
    
    172
    
    
    
    (19,636
    )Amortization of financing costs
    
    
    (12,873
    )
    
    
    (2,917
    )
    
    
    
    
    
    
    
    
    
    
    (15,790
    )Gain on extinguishment of debt
    
    
    10,125
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,125Gain on sale of non-strategic
assets
    
    
    
    
    
    
    17,446
    
    
    
    
    
    
    
    
    
    
    
    17,446Other income (expense)
    
    
    
    
    
    
    (1,709
    )
    
    
    269
    
    
    
    (1
    )
    
    
    (1,441
    )Total other (expense) income
    
    
    (13,605
    )
    
    
    7,421
    
    
    
    128
    
    
    
    8
    
    
    
    (6,048
    )(Loss) income before income taxes
    
    
    (13,605
    )
    
    
    141,624
    
    
    
    8,339
    
    
    
    (323
    )
    
    
    136,035Provision for income taxes
    
    
    (5,130
    )
    
    
    53,236
    
    
    
    3,214
    
    
    
    (123
    )
    
    
    51,197Equity in earnings of subsidiary
    
    
    93,513
    
    
    
    5,125
    
    
    
    
    
    
    
    (98,638
    )
    
    
    Net income
    
    $
    85,038
    
    
    $
    93,513
    
    
    $
    5,125
    
    
    $
    (98,838
    )
    
    $
    84,838
 F-24




---



##### Table of Contents



American Medical Systems Holdings, Inc.
Notes to Consolidated Financial Statements  (Continued)
Condensed Consolidating Statement of Operations
 Year Ended Janaury 3, 2009AmericanMedical
    
    
    
    
    
    
    Non-Systems
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    ConsolidatedHoldings, Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalNet sales
    
    $
    
    
    
    $
    451,054
    
    
    $
    113,080
    
    
    $
    (62,493
    )
    
    $
    501,641Cost of sales
    
    
    
    
    
    
    109,873
    
    
    
    64,637
    
    
    
    (63,413
    )
    
    
    111,097Gross profit
    
    
    
    
    
    
    341,181
    
    
    
    48,443
    
    
    
    920
    
    
    
    390,544Operating expensesMarketing and selling
    
    
    
    
    
    
    136,340
    
    
    
    39,330
    
    
    
    
    
    
    
    175,670Research and development
    
    
    
    
    
    
    46,247
    
    
    
    
    
    
    
    
    
    
    
    46,247In-process research and
development
    
    
    
    
    
    
    7,500
    
    
    
    
    
    
    
    
    
    
    
    7,500General and administrative
    
    
    
    
    
    
    39,280
    
    
    
    1
    
    
    
    
    
    
    
    39,281Amortization of intangibles
    
    
    
    
    
    
    34,465
    
    
    
    
    
    
    
    
    
    
    
    34,465Total operating expenses
    
    
    
    
    
    
    263,832
    
    
    
    39,331
    
    
    
    
    
    
    
    303,163Operating income
    
    
    
    
    
    
    77,349
    
    
    
    9,112
    
    
    
    920
    
    
    
    87,381Other (expense) incomeRoyalty income
    
    
    
    
    
    
    2,974
    
    
    
    1,500
    
    
    
    
    
    
    
    4,474Interest income
    
    
    
    
    
    
    1,509
    
    
    
    104
    
    
    
    (866
    )
    
    
    747Interest expense
    
    
    (12,234
    )
    
    
    (15,140
    )
    
    
    (890
    )
    
    
    866
    
    
    
    (27,398
    )Amortization of financing costs
    
    
    (14,804
    )
    
    
    (3,678
    )
    
    
    
    
    
    
    
    
    
    
    (18,482
    )Gain on extinguishment of debt
    
    
    5,631
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,631Other income (expense)
    
    
    
    
    
    
    (860
    )
    
    
    (1,310
    )
    
    
    (25
    )
    
    
    (2,195
    )Total other (expense) income
    
    
    (21,407
    )
    
    
    (15,195
    )
    
    
    (596
    )
    
    
    (25
    )
    
    
    (37,223
    )(Loss) income before income taxes
    
    
    (21,407
    )
    
    
    62,154
    
    
    
    8,516
    
    
    
    895
    
    
    
    50,158Provision for income taxes
    
    
    (8,069
    )
    
    
    23,970
    
    
    
    3,084
    
    
    
    338
    
    
    
    19,323Equity in earnings of subsidiary
    
    
    43,616
    
    
    
    5,432
    
    
    
    
    
    
    
    (49,048
    )
    
    
    Net income
    
    $
    30,278
    
    
    $
    43,616
    
    
    $
    5,432
    
    
    $
    (48,491
    )
    
    $
    30,835
 F-25




---



##### Table of Contents



American Medical Systems Holdings, Inc.  Notes to Consolidated Financial Statements  (Continued)
Condensed Consolidating Statement of Operations
 Year Ended December 29, 2007AmericanMedical
    
    
    
    
    
    
    Non-Systems
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    ConsolidatedHoldings, Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalNet sales
    
    $
    
    
    
    $
    423,879
    
    
    $
    97,555
    
    
    $
    (57,506
    )
    
    $
    463,928Cost of sales
    
    
    
    
    
    
    103,964
    
    
    
    57,871
    
    
    
    (56,243
    )
    
    
    105,592Gross profit
    
    
    
    
    
    
    319,915
    
    
    
    39,684
    
    
    
    (1,263
    )
    
    
    358,336Operating expensesMarketing and selling
    
    
    
    
    
    
    135,960
    
    
    
    33,535
    
    
    
    
    
    
    
    169,495Research and development
    
    
    
    
    
    
    43,066
    
    
    
    249
    
    
    
    
    
    
    
    43,315In-process research and
development
    
    
    
    
    
    
    7,500
    
    
    
    
    
    
    
    
    
    
    
    7,500General and administrative
    
    
    
    
    
    
    42,997
    
    
    
    73
    
    
    
    
    
    
    
    43,070Integration costs
    
    
    
    
    
    
    1,103
    
    
    
    
    
    
    
    
    
    
    
    1,103Litigation settlement
    
    
    
    
    
    
    14,303
    
    
    
    
    
    
    
    
    
    
    
    14,303Amortization of intangibles
    
    
    
    
    
    
    14,783
    
    
    
    3,481
    
    
    
    
    
    
    
    18,264Total operating expenses
    
    
    
    
    
    
    259,712
    
    
    
    37,338
    
    
    
    
    
    
    
    297,050Operating income
    
    
    
    
    
    
    60,203
    
    
    
    2,346
    
    
    
    (1,263
    )
    
    
    61,286Other (expense) incomeRoyalty income
    
    
    
    
    
    
    5,028
    
    
    
    
    
    
    
    
    
    
    
    5,028Interest income
    
    
    
    
    
    
    1,401
    
    
    
    57
    
    
    
    (305
    )
    
    
    1,153Interest expense
    
    
    (11,921
    )
    
    
    (25,480
    )
    
    
    (659
    )
    
    
    300
    
    
    
    (37,760
    )Amortization of financing costs
    
    
    (13,397
    )
    
    
    (2,748
    )
    
    
    
    
    
    
    
    
    
    
    (16,145
    )Other income (expense)
    
    
    
    
    
    
    3,233
    
    
    
    (137
    )
    
    
    (25
    )
    
    
    3,071Total other (expense) income
    
    
    (25,318
    )
    
    
    (18,566
    )
    
    
    (739
    )
    
    
    (30
    )
    
    
    (44,653
    )(Loss)
income from continuing operations before income taxes
    
    
    (25,318
    )
    
    
    41,637
    
    
    
    1,607
    
    
    
    (1,293
    )
    
    
    16,633Provision for income taxes
    
    
    (8,756
    )
    
    
    20,524
    
    
    
    610
    
    
    
    (490
    )
    
    
    11,888Net (loss) income from continuing operations
    
    
    (16,562
    )
    
    
    21,113
    
    
    
    997
    
    
    
    (803
    )
    
    
    4,745Loss from discontinued operations, net of tax
    
    
    
    
    
    
    (691
    )
    
    
    
    
    
    
    
    
    
    
    (691
    )Equity in earnings of subsidiary
    
    
    21,419
    
    
    
    997
    
    
    
    
    
    
    
    (22,416
    )
    
    
    Net income
    
    $
    4,857
    
    
    $
    21,419
    
    
    $
    997
    
    
    $
    (23,219
    )
    
    $
    4,054
 F-26




---



##### Table of Contents



American Medical Systems Holdings, Inc.  Notes to Consolidated Financial Statements  (Continued)  Condensed Consolidating Balance Sheet
  As of January 2, 2010AmericanMedical
    
    
    
    
    
    
    Non-Systems
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    ConsolidatedHoldings, Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalAssetsCurrent assetsCash and cash equivalents
    
    $
    
    
    
    $
    16,973
    
    
    $
    13,697
    
    
    $
    
    
    
    $
    30,670Short-term investments
    
    
    4,834
    
    
    
    14,489
    
    
    
    545
    
    
    
    
    
    
    
    19,868Accounts receivable, net
    
    
    614,392
    
    
    
    58,359
    
    
    
    29,772
    
    
    
    (599,933
    )
    
    
    102,590Inventories, net
    
    
    
    
    
    
    27,750
    
    
    
    6,853
    
    
    
    (4,327
    )
    
    
    30,276Deferred income taxes
    
    
    
    
    
    
    13,466
    
    
    
    1,404
    
    
    
    
    
    
    
    14,870Other current assets
    
    
    
    
    
    
    4,947
    
    
    
    1,120
    
    
    
    
    
    
    
    6,067Total current assets
    
    
    619,226
    
    
    
    135,984
    
    
    
    53,391
    
    
    
    (604,260
    )
    
    
    204,341Property, plant and equipment, net
    
    
    
    
    
    
    42,661
    
    
    
    1,459
    
    
    
    
    
    
    
    44,120Goodwill
    
    
    
    
    
    
    628,193
    
    
    
    86,727
    
    
    
    (24,021
    )
    
    
    690,899Developed and core technology, net
    
    
    
    
    
    
    51,631
    
    
    
    
    
    
    
    
    
    
    
    51,631Other intangibles, net
    
    
    
    
    
    
    49,937
    
    
    
    
    
    
    
    
    
    
    
    49,937Investment in subsidiaries
    
    
    190,818
    
    
    
    45,579
    
    
    
    
    
    
    
    (236,397
    )
    
    
    Other long-term assets, net
    
    
    5,133
    
    
    
    839
    
    
    
    251
    
    
    
    
    
    
    
    6,223Total assets
    
    $
    815,177
    
    
    $
    954,824
    
    
    $
    141,828
    
    
    $
    (864,678
    )
    
    $
    1,047,151Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    (5,058
    )
    
    $
    558,217
    
    
    $
    72,015
    
    
    $
    (616,060
    )
    
    $
    9,114Accrued compensation expenses
    
    
    
    
    
    
    24,350
    
    
    
    5,253
    
    
    
    
    
    
    
    29,603Accrued warranty expense
    
    
    
    
    
    
    2,293
    
    
    
    
    
    
    
    
    
    
    
    2,293Income taxes payable
    
    
    (13,272
    )
    
    
    16,371
    
    
    
    1,396
    
    
    
    
    
    
    
    4,495Other accrued expenses
    
    
    3,885
    
    
    
    17,826
    
    
    
    4,049
    
    
    
    
    
    
    
    25,760Total current liabilities
    
    
    (14,445
    )
    
    
    619,057
    
    
    
    82,713
    
    
    
    (616,060
    )
    
    
    71,265Non-current liabilitiesLong-term debt
    
    
    223,876
    
    
    
    122,353
    
    
    
    
    
    
    
    
    
    
    
    346,229Intercompany loans payable
    
    
    
    
    
    
    
    
    
    
    12,221
    
    
    
    (12,221
    )
    
    
    Deferred income taxes
    
    
    60,387
    
    
    
    645
    
    
    
    1,315
    
    
    
    
    
    
    
    62,347Long-term income taxes payable
    
    
    
    
    
    
    18,206
    
    
    
    
    
    
    
    
    
    
    
    18,206Long-term employee benefit
obligations
    
    
    
    
    
    
    3,745
    
    
    
    
    
    
    
    
    
    
    
    3,745Total non-current liabilities
    
    
    284,263
    
    
    
    144,949
    
    
    
    13,536
    
    
    
    (12,221
    )
    
    
    430,527Total liabilities
    
    
    269,818
    
    
    
    764,006
    
    
    
    96,249
    
    
    
    (628,281
    )
    
    
    501,792Stockholders equityCommon stock
    
    
    747
    
    
    
    
    
    
    
    9
    
    
    
    (9
    )
    
    
    747Additional paid-in capital
    
    
    399,468
    
    
    
    3,424
    
    
    
    57,540
    
    
    
    (60,964
    )
    
    
    399,468Accumulated other
comprehensive income
    
    
    6,381
    
    
    
    (202
    )
    
    
    7,137
    
    
    
    (6,935
    )
    
    
    6,381Retained earnings (deficit)
    
    
    138,763
    
    
    
    187,596
    
    
    
    (19,107
    )
    
    
    (168,489
    )
    
    
    138,763Total stockholders equity
    
    
    545,359
    
    
    
    190,818
    
    
    
    45,579
    
    
    
    (236,397
    )
    
    
    545,359Total liabilities and stockholders equity
    
    $
    815,177
    
    
    $
    954,824
    
    
    $
    141,828
    
    
    $
    (864,678
    )
    
    $
    1,047,151
 F-27




---



##### Table of Contents



American Medical Systems Holdings, Inc.
Notes to Consolidated Financial Statements  (Continued)  Condensed Consolidating Balance Sheet
  As of January 3, 2009AmericanMedical
    
    
    
    
    
    
    Non-Systems
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    ConsolidatedHoldings, Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalAssetsCurrent assetsCash and cash equivalents
    
    $
    
    
    
    $
    3,143
    
    
    $
    8,499
    
    
    $
    
    
    
    $
    11,642Short-term investments
    
    
    15,756
    
    
    
    15,433
    
    
    
    134
    
    
    
    
    
    
    
    31,323Accounts receivable, net
    
    
    618,891
    
    
    
    68,158
    
    
    
    24,817
    
    
    
    (618,788
    )
    
    
    93,078Inventories, net
    
    
    
    
    
    
    36,521
    
    
    
    5,226
    
    
    
    (3,247
    )
    
    
    38,500Deferred income taxes
    
    
    
    
    
    
    12,412
    
    
    
    496
    
    
    
    
    
    
    
    12,908Other current assets
    
    
    
    
    
    
    5,832
    
    
    
    1,026
    
    
    
    
    
    
    
    6,858Total current assets
    
    
    634,647
    
    
    
    141,499
    
    
    
    40,198
    
    
    
    (622,035
    )
    
    
    194,309Property, plant and equipment, net
    
    
    
    
    
    
    46,751
    
    
    
    1,529
    
    
    
    
    
    
    
    48,280Goodwill
    
    
    
    
    
    
    628,193
    
    
    
    85,925
    
    
    
    (24,021
    )
    
    
    690,097Developed and core technology, net
    
    
    
    
    
    
    62,315
    
    
    
    
    
    
    
    
    
    
    
    62,315Other intangibles, net
    
    
    
    
    
    
    47,349
    
    
    
    
    
    
    
    
    
    
    
    47,349Investment in subsidiaries
    
    
    110,868
    
    
    
    32,824
    
    
    
    
    
    
    
    (143,692
    )
    
    
    Other long-term assets, net
    
    
    578
    
    
    
    1,418
    
    
    
    151
    
    
    
    
    
    
    
    2,147Total assets
    
    $
    746,093
    
    
    $
    960,349
    
    
    $
    127,803
    
    
    $
    (789,748
    )
    
    $
    1,044,497Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    11,461
    
    
    $
    556,362
    
    
    $
    70,944
    
    
    $
    (630,937
    )
    
    $
    7,830Accrued compensation expenses
    
    
    
    
    
    
    19,252
    
    
    
    3,624
    
    
    
    
    
    
    
    22,876Accrued warranty expense
    
    
    
    
    
    
    3,300
    
    
    
    (13
    )
    
    
    
    
    
    
    3,287Income taxes payable
    
    
    (980
    )
    
    
    6,657
    
    
    
    2,105
    
    
    
    
    
    
    
    7,782Other accrued expenses
    
    
    91
    
    
    
    18,504
    
    
    
    2,940
    
    
    
    
    
    
    
    21,535Total current liabilities
    
    
    10,572
    
    
    
    604,075
    
    
    
    79,600
    
    
    
    (630,937
    )
    
    
    63,310Non-current liabilitiesLong-term debt
    
    
    262,094
    
    
    
    222,488
    
    
    
    
    
    
    
    
    
    
    
    484,582Intercompany loans payable
    
    
    
    
    
    
    
    
    
    
    15,119
    
    
    
    (15,119
    )
    
    
    Deferred income taxes
    
    
    45,945
    
    
    
    3,839
    
    
    
    260
    
    
    
    
    
    
    
    50,044Long-term income taxes payable
    
    
    
    
    
    
    15,327
    
    
    
    
    
    
    
    
    
    
    
    15,327Long-term employee benefit
obligations
    
    
    
    
    
    
    3,752
    
    
    
    
    
    
    
    
    
    
    
    3,752Total non-current liabilities
    
    
    308,039
    
    
    
    245,406
    
    
    
    15,379
    
    
    
    (15,119
    )
    
    
    553,705Total liabilities
    
    
    318,611
    
    
    
    849,481
    
    
    
    94,979
    
    
    
    (646,056
    )
    
    
    617,015Stockholders equityCommon stock
    
    
    737
    
    
    
    
    
    
    
    9
    
    
    
    (9
    )
    
    
    737Additional paid-in capital
    
    
    369,594
    
    
    
    3,424
    
    
    
    67,368
    
    
    
    (70,792
    )
    
    
    369,594Accumulated other
comprehensive income
    
    
    3,226
    
    
    
    (1,334
    )
    
    
    4,367
    
    
    
    (3,033
    )
    
    
    3,226Retained earnings (deficit)
    
    
    53,925
    
    
    
    108,778
    
    
    
    (38,920
    )
    
    
    (69,858
    )
    
    
    53,925Total stockholders equity
    
    
    427,482
    
    
    
    110,868
    
    
    
    32,824
    
    
    
    (143,692
    )
    
    
    427,482Total liabilities and stockholders equity
    
    $
    746,093
    
    
    $
    960,349
    
    
    $
    127,803
    
    
    $
    (789,748
    )
    
    $
    1,044,497
 F-28




---



##### Table of Contents



American Medical Systems Holdings, Inc.
Notes to Consolidated Financial Statements  (Continued)
Condensed Consolidating Statement of Cash Flows
 Year Ended January 2, 2010AmericanMedical
    
    
    
    
    
    
    Non-Systems
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    ConsolidatedHoldings, Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalCash flows from operating activitiesNet cash provided by operating activities
    
    $
    18,066
    
    
    $
    98,005
    
    
    $
    6,725
    
    
    $
    
    
    
    $
    122,796Cash flows from investing activitiesPurchase of property, plant and equipment
    
    
    
    
    
    
    (5,493
    )
    
    
    (372
    )
    
    
    
    
    
    
    (5,865
    )Sale of non-strategic assets, net
    
    
    
    
    
    
    18,982
    
    
    
    
    
    
    
    
    
    
    
    18,982Purchase of other intangibles
    
    
    
    
    
    
    (5,927
    )
    
    
    
    
    
    
    
    
    
    
    (5,927
    )Purchase of short term investments
    
    
    
    
    
    
    (18,158
    )
    
    
    (662
    )
    
    
    
    
    
    
    (18,820
    )Sale of short-term investments
    
    
    
    
    
    
    30,500
    
    
    
    255
    
    
    
    
    
    
    
    30,755Net payments from settlement of derivative contracts
    
    
    
    
    
    
    (556
    )
    
    
    
    
    
    
    
    
    
    
    (556
    )Net cash provided by (used in) investing activities
    
    
    
    
    
    
    19,348
    
    
    
    (779
    )
    
    
    
    
    
    
    18,569Cash flows from financing activitiesIntercompany notes
    
    
    
    
    
    
    (14
    )
    
    
    14
    
    
    
    
    
    
    
    Issuance of common stock
    
    
    10,190
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,190Excess tax benefit from exercise of stock options
    
    
    566
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    566Debt issuance costs
    
    
    (7,697
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,697
    )Payments on senior secured credit facility
    
    
    
    
    
    
    (103,510
    )
    
    
    
    
    
    
    
    
    
    
    (103,510
    )Repurchase of convertible senior subordinated
notes
    
    
    (21,125
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,125
    )Net cash used in financing activities
    
    
    (18,066
    )
    
    
    (103,524
    )
    
    
    14
    
    
    
    
    
    
    
    (121,576
    )Effect of exchange rates on cash
    
    
    
    
    
    
    
    
    
    
    (761
    )
    
    
    
    
    
    
    (761
    )Net increase in cash and cash equivalents
    
    
    
    
    
    
    13,829
    
    
    
    5,199
    
    
    
    
    
    
    
    19,028Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    3,143
    
    
    
    8,499
    
    
    
    
    
    
    
    11,642Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    16,972
    
    
    $
    13,698
    
    
    $
    
    
    
    $
    30,670
 F-29




---



##### Table of Contents



American Medical Systems Holdings, Inc.
Notes to Consolidated Financial Statements  (Continued)
Condensed Consolidating Statement of Cash Flows
 `Year Ended January 3, 2009AmericanMedical
    
    
    
    
    
    
    Non-Systems
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    ConsolidatedHoldings, Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalCash flows from operating activitiesNet cash provided by (used in) operating
activities
    
    $
    12,969
    
    
    $
    107,771
    
    
    $
    (4,983
    )
    
    $
    
    
    
    $
    115,757Cash flows from investing activitiesPurchase of property, plant and equipment
    
    
    
    
    
    
    (5,468
    )
    
    
    (633
    )
    
    
    
    
    
    
    (6,101
    )Disposal of business
    
    
    
    
    
    
    4,691
    
    
    
    
    
    
    
    
    
    
    
    4,691Purchase of investments in technology
    
    
    
    
    
    
    (7,500
    )
    
    
    
    
    
    
    
    
    
    
    (7,500
    )Purchase of other intangibles
    
    
    
    
    
    
    (1,352
    )
    
    
    
    
    
    
    
    
    
    
    (1,352
    )Purchase of short-term investments
    
    
    
    
    
    
    (70,440
    )
    
    
    (65
    )
    
    
    
    
    
    
    (70,505
    )Sale of short-term investments
    
    
    
    
    
    
    39,731
    
    
    
    268
    
    
    
    
    
    
    
    39,999Net payments from settlement of derivative
contracts
    
    
    
    
    
    
    (1,385
    )
    
    
    
    
    
    
    
    
    
    
    (1,385
    )Net cash used in investing activities
    
    
    
    
    
    
    (41,723
    )
    
    
    (430
    )
    
    
    
    
    
    
    (42,153
    )Cash flows from financing activitiesIntercompany notes
    
    
    
    
    
    
    626
    
    
    
    (626
    )
    
    
    
    
    
    
    Issuance of common stock
    
    
    8,874
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,874Excess tax benefit from exercise of stock
options
    
    
    1,498
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,498Proceeds from short-term borrowings
    
    
    
    
    
    
    12,000
    
    
    
    
    
    
    
    
    
    
    
    12,000Repayments of short-term borrowings
    
    
    
    
    
    
    (12,000
    )
    
    
    
    
    
    
    
    
    
    
    (12,000
    )Payments on senior secured credit facility
    
    
    
    
    
    
    (85,202
    )
    
    
    
    
    
    
    
    
    
    
    (85,202
    )Repurchase of convertible senior subordinated
notes
    
    
    (23,373
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,373
    )Net cash used in financing activities
    
    
    (13,001
    )
    
    
    (84,576
    )
    
    
    (626
    )
    
    
    
    
    
    
    (98,203
    )Effect of exchange rates on cash
    
    
    
    
    
    
    
    
    
    
    2,197
    
    
    
    
    
    
    
    2,197Net decrease in cash and cash equivalents
    
    
    (32
    )
    
    
    (18,528
    )
    
    
    (3,842
    )
    
    
    
    
    
    
    (22,402
    )Cash and cash equivalents at beginning of period
    
    
    32
    
    
    
    21,671
    
    
    
    12,341
    
    
    
    
    
    
    
    34,044Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    3,143
    
    
    $
    8,499
    
    
    $
    
    
    
    $
    11,642
 F-30




---



##### Table of Contents



American Medical Systems Holdings, Inc.
Notes to Consolidated Financial Statements  (Continued)
Condensed Consolidating Statement of Cash Flows
 Year Ended December 29, 2007AmericanMedical
    
    
    
    
    
    
    Non-Systems
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    ConsolidatedHoldings, Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalCash flows from operating activitiesNet cash (used in) provided by operating activities
    
    $
    (12,151
    )
    
    $
    55,039
    
    
    $
    4,863
    
    
    $
    
    
    
    $
    47,751Cash flows from investing activitiesPurchase of property, plant and equipment
    
    
    
    
    
    
    (12,983
    )
    
    
    (1,190
    )
    
    
    
    
    
    
    (14,173
    )Purchase of business, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    (781
    )
    
    
    
    
    
    
    (781
    )Disposal of business
    
    
    
    
    
    
    22,116
    
    
    
    
    
    
    
    
    
    
    
    22,116Purchase of investments in technology
    
    
    
    
    
    
    (7,500
    )
    
    
    
    
    
    
    
    
    
    
    (7,500
    )Purchase of other intangibles
    
    
    
    
    
    
    (382
    )
    
    
    
    
    
    
    
    
    
    
    (382
    )Purchase of short-term investments
    
    
    
    
    
    
    (30,079
    )
    
    
    (108
    )
    
    
    
    
    
    
    (30,187
    )Sale of short-term investments
    
    
    
    
    
    
    29,560
    
    
    
    10
    
    
    
    
    
    
    
    29,570Net cash provided by (used in) investing activities
    
    
    
    
    
    
    732
    
    
    
    (2,069
    )
    
    
    
    
    
    
    (1,337
    )Cash flows from financing activitiesIntercompany notes
    
    
    
    
    
    
    2,089
    
    
    
    (2,089
    )
    
    
    
    
    
    
    Dividend from parent
    
    
    
    
    
    
    (8,334
    )
    
    
    8,334
    
    
    
    
    
    
    
    Issuance of common stock
    
    
    10,830
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,830Excess tax benefit from exercise of stock options
    
    
    215
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    215Payments on long-term debt
    
    
    
    
    
    
    (50,069
    )
    
    
    
    
    
    
    
    
    
    
    (50,069
    )Net cash provided by (used in) financing activities
    
    
    11,045
    
    
    
    (56,314
    )
    
    
    6,245
    
    
    
    
    
    
    
    (39,024
    )Cash used in discontinued operationsOperating activities
    
    
    
    
    
    
    (691
    )
    
    
    
    
    
    
    
    
    
    
    (691
    )Net cash used in discontinued operations
    
    
    
    
    
    
    (691
    )
    
    
    
    
    
    
    
    
    
    
    (691
    )Effect of exchange rates on cash
    
    
    
    
    
    
    
    
    
    
    (1,706
    )
    
    
    
    
    
    
    (1,706
    )Net (decrease) increase in cash and cash equivalents
    
    
    (1,106
    )
    
    
    (1,234
    )
    
    
    7,333
    
    
    
    
    
    
    
    4,993Cash and cash equivalents at beginning of period
    
    
    1,138
    
    
    
    22,905
    
    
    
    5,008
    
    
    
    
    
    
    
    29,051Cash and cash equivalents at end of period
    
    $
    32
    
    
    $
    21,671
    
    
    $
    12,341
    
    
    $
    
    
    
    $
    34,044
 F-31




---



##### Table of Contents



8. Stock-Based Compensation
   Year Ended
    
    
    Year Ended
    
    
    Year Ended(in thousands)
    
    January 2, 2010
    
    
    January 3, 2009
    
    
    December 29, 2007Stock-option awards
    
    $
    7,074
    
    
    $
    7,721
    
    
    $
    9,574Restricted stock awards
    
    
    1,073
    
    
    
    602
    
    
    
    2,228Employee stock purchase plan
    
    
    841
    
    
    
    619
    
    
    
    596Total share-based compensation expense
    
    $
    8,988
    
    
    $
    8,942
    
    
    $
    12,398
  Year Ended
    
    
    Year Ended
    
    
    Year Ended(in thousands)
    
    January 2, 2010
    
    
    January 3, 2009
    
    
    December 29, 2007Cost of sales
    
    $
    976
    
    
    $
    2,069
    
    
    $
    1,584Marketing and selling
    
    
    1,981
    
    
    
    3,454
    
    
    
    4,187Research and development
    
    
    1,208
    
    
    
    2,254
    
    
    
    2,766General and administrative
    
    
    4,823
    
    
    
    1,165
    
    
    
    3,861Total share-based compensation expense
    
    $
    8,988
    
    
    $
    8,942
    
    
    $
    12,398
      F-32




---



##### Table of Contents



Weighted average
    
    
    AggregateOptions
    
    
    exercise price
    
    
    Intrinsicoutstanding
    
    
    per share
    
    
    Value(in thousands)Balance at December 30, 2006
    
    
    7,255,574
    
    
    $
    14.25Granted
    
    
    1,401,600
    
    
    $
    18.50Exercised
    
    
    (603,698
    )
    
    $
    13.80Cancelled or expired
    
    
    (465,584
    )
    
    $
    18.44Balance at December 29, 2007
    
    
    7,587,892
    
    
    $
    14.82Granted
    
    
    1,453,040
    
    
    $
    14.41Exercised
    
    
    (1,016,891
    )
    
    $
    5.36Cancelled or expired
    
    
    (1,003,700
    )
    
    $
    19.06Balance at January 3, 2009
    
    
    7,020,341
    
    
    $
    15.50Granted
    
    
    1,713,874
    
    
    $
    12.11Exercised
    
    
    (715,864
    )
    
    $
    10.32Cancelled or expired
    
    
    (856,806
    )
    
    $
    16.53Balance at January 2, 2010
    
    
    7,161,545
    
    
    $
    15.08
    
    
    $
    31,676Options exercisable at January 2, 2010
    
    
    4,390,413
    
    
    $
    15.94
    
    
    $
    16,098
  Options Outstanding

    
    Options ExercisableWeighted
    
    
    Weighted
    
    
    
    
    
    
    Weightedaverage
    
    
    average
    
    
    
    
    
    
    averageNumber
    
    
    remaining
    
    
    exercise
    
    
    Number
    
    
    exerciseRange of exercise prices
    
    of shares
    
    
    contractual life
    
    
    price
    
    
    of shares
    
    
    price$0.83  $11.17
    
    
    1,895,785
    
    
    4.1 years
    
    $
    9.56
    
    
    
    984,310
    
    
    $
    8.62$11.35  $14.92
    
    
    1,799,439
    
    
    5.2 years
    
    
    14.04
    
    
    
    669,420
    
    
    
    14.27$14.94  $18.75
    
    
    1,857,364
    
    
    4.1 years
    
    
    17.28
    
    
    
    1,293,230
    
    
    
    17.60$18.87  $21.68
    
    
    1,608,957
    
    
    3.4 years
    
    
    20.22
    
    
    
    1,443,453
    
    
    
    20.24Total
    
    
    7,161,545
    
    
    4.2 years
    
    $
    15.08
    
    
    
    4,390,413
    
    
    $
    15.94
   F-33




---



##### Table of Contents



2009
    
    
    2008
    
    
    2007Fair value of options granted
    
    $
    4.18
    
    
    $
    5.00
    
    
    $
    6.50Risk free interest rate
    
    
    1.94
    %
    
    
    2.88
    %
    
    
    4.44
    %Expected dividend rate
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Stock price volatility
    
    
    36.61
    %
    
    
    34.81
    %
    
    
    32.88
    %Expected life of option
    
    5 years
    
    5 years
    
    5 years
 Expected life
 Expected volatility
 Risk-free rate of return
 Dividend yield
   Restricted Stock
   F-34




---



##### Table of Contents



Unvested Shares
    
    
    Weighted averageoutstanding
    
    
    grant date fair valueBalance at December 30, 2006
    
    
    120,526
    
    
    $
    18.49Granted
    
    
    197,322
    
    
    
    18.39Vested
    
    
    (60,125
    )
    
    
    18.72Cancelled
    
    
    (41,003
    )
    
    
    18.67Balance at December 29, 2007
    
    
    216,720
    
    
    
    18.30Granted
    
    
    94,800
    
    
    
    14.70Vested
    
    
    (86,601
    )
    
    
    18.50Cancelled
    
    
    (32,351
    )
    
    
    17.67Balance at January 3, 2009
    
    
    192,568
    
    
    
    16.54Granted
    
    
    127,150
    
    
    
    15.16Vested
    
    
    (60,579
    )
    
    
    16.99Cancelled
    
    
    (25,614
    )
    
    
    15.44Balance at January 2, 2010
    
    
    233,525
    
    
    $
    15.79
 Employee Stock Purchase Plan
  9. Commitments and Contingent Liabilities
 Product Liability
   F-35




---



##### Table of Contents



Operating Leases
  (in thousands)2010
    
    $
    3,4382011
    
    
    2,6342012
    
    
    1,9232013
    
    
    6252014
    
    
    142015 and beyond
    
    
    Total
    
    $
    8,634
  10. Fair Value Measurements
  Assets and Liabilities Measured at Fair Value on a Recurring Basis
  Fair Value Measurements as of January 2, 2010 UsingQuoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableDescription
    
    Identical Assets (Level 1)
    
    
    Inputs (Level 2)
    
    
    Inputs (Level 3)AssetsMoney market funds
    
    $
    18,504
    
    
    $
    
    
    
    $
    Available-for-sale securities
    
    
    655
    
    
    
    
    
    
    
    Other short-term investments
    
    
    163
    
    
    
    546
    
    
    
    Derivatives
    
    
    
    
    
    
    10
    
    
    
    Total
    
    $
    19,322
    
    
    $
    556
    
    
    $
    LiabilitiesDerivatives
    
    $
    
    
    
    $
    1,949
    
    
    $
    
    F-36




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##### Table of Contents



Note 11, Derivative Instruments and
Hedging Activities
 Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
  Fair Value of Debt
 Note 7, Debt)
  January 2, 2010
    
    
    January 3, 2009Carrying Value
    
    
    Fair Value
    
    
    Carrying Value
    
    
    Fair Value2036 Notes
    
    $
    61,985
    
    
    $
    70,270
    
    
    $
    339,250
    
    
    $
    229,9442041 Notes
    
    
    250,000
    
    
    
    304,983
    
    
    
    
    
    
    
    Credit Facility
    
    
    125,307
    
    
    
    123,230
    
    
    
    228,817
    
    
    
    193,003$
    437,292
    
    
    $
    498,483
    
    
    $
    568,067
    
    
    $
    422,947
 11. Derivative Instruments and Hedging Activities
    F-37




---



##### Table of Contents



Fair
Values  of Derivative instrumentsAsset Derivatives
    
    
    Liability DerivativesJanuary 2, 2010
    
    
    January 3, 2009
    
    
    January 2, 2010
    
    
    January 3, 2009Balance
    
    
    
    
    
    
    Balance
    
    
    
    
    
    
    Balance
    
    
    
    
    
    
    BalanceSheet
    
    
    Fair
    
    
    Sheet
    
    
    Fair
    
    
    Sheet
    
    
    Fair
    
    
    Sheet
    
    
    Fair(in thousands)
    
    Location
    
    
    Value
    
    
    Location
    
    
    Value
    
    
    Location
    
    
    Value
    
    
    Location
    
    
    ValueDerivatives designated as hedging instrumentsInterest rate swap contracts
    
    Other current assets
    
    $
    
    
    
    Other current assets
    
    $
    
    
    
    Other accrued expenses
    
    $
    299
    
    
    Other accrued  expenses
    
    $
    2,663Foreign exchange forward
contracts
    
    Other current assets
    
    
    
    
    
    Other current assets
    
    
    659
    
    
    Other accrued expenses
    
    
    1,650
    
    
    Other accrued expenses
    
    
    1,729Total derivatives designated as
hedging instruments
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    659
    
    
    
    
    
    
    $
    1,949
    
    
    
    
    
    
    $
    4,392Derivatives not designated as hedging instrumentsForeign exchange forward
contracts
    
    Other current assets
    
    $
    10
    
    
    Other current assets
    
    $
    223
    
    
    Other accrued expenses
    
    $
    
    
    
    Other accrued  expenses
    
    $
    Total derivatives not designated as
hedging instruments
    
    
    
    
    
    $
    10
    
    
    
    
    
    
    $
    223
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Total derivatives
    
    
    
    
    
    $
    10
    
    
    
    
    
    
    $
    882
    
    
    
    
    
    
    $
    1,949
    
    
    
    
    
    
    $
    4,392
  F-38




---



##### Table of Contents



The Effect of Derivative Instruments on the Consolidated Statement of Operations  for the Years Ended January 2, 2010 and January 3, 2009
 Location of GainDerivatives in
    
    Amount of Gain (Loss)
    
    
    (Loss) Reclassified
    
    
    Amount of Gain (Loss) ReclassifiedCash Flow
    

Recognized in OCI on Derivatives
    
    
    from Accumulated
    
    

from Accumulated OCI into IncomeHedging
    
    (Effective Portion)

    
    
    OCI into Income
    
    
(Effective
Portion)Relationships
    
    January 2, 2010
    
    
    January 3, 2009
    
    
    (Effective Portion)
    
    
    January 2, 2010
    
    
    January 3, 2009Interest rate swap
contracts
    
    $
    2,372
    
    
    $
    (2,662
    )
    
    Interest expense
    
    $
    (3,341
    )
    
    $
    (163
    )Interest rate swap
contracts
    
    
    
    
    
    
    
    
    
    Other (expense) income
    
    
    
    
    
    
    381
    (a)Foreign exchange
contracts
    
    
    (1,259
    )
    
    
    (519
    )
    
    Other (expense) income
    
    
    (2,680
    )
    
    
    832Total
    
    $
    1,113
    
    
    $
    (3,181
    )
    
    
    
    
    
    $
    (6,021
    )
    
    $
    1,050
 
 (a)
    
    This net gain on terminated interest rate swap contracts was immediately recognized in other (expense) income, as the original forecastedtransactions were no longer probable of occurring. Derivatives not
    
    Location of Gain (Loss)
    
    
    Amount of Gain (Loss) RecognizedDesignated as
    
    Recognize in Income
    
    
    in Income on DerivativesHedging Instruments
    
    on Derivatives
    
    
    January 2, 2010
    
    
    January 3, 2009Foreign exchange contracts
    
    Other (expense) income
    
    $
    (410
    )
    
    $
    (1,162
    )Total
    
    
    
    
    
    $
    (410
    )
    
    $
    (1,162
    )
 12. Industry Segment Information and Foreign Operations
 Note 2,
Discontinued Operations and Sale of Aesthetics Business).
   F-39




---



##### Table of Contents



(in thousands)
    
    2009
    
    2008
    
    2007United StatesNet sales
    
    $
    373,898
    
    
    $
    355,678
    
    
    $
    334,258Long-lived assets
    
    
    824,886
    
    
    
    833,095
    
    
    
    872,318InternationalNet sales
    
    
    145,372
    
    
    
    145,963
    
    
    
    129,670Long-lived assets
    
    
    17,924
    
    
    
    17,092
    
    
    
    18,165
 13. Postretirement Benefits
   2009
    
    
    2008
    
    
    2007Service cost
    
    $
    174
    
    
    $
    183
    
    
    $
    155Interest cost
    
    
    208
    
    
    
    208
    
    
    
    175Amortization of net prior service cost
    
    
    62
    
    
    
    (38
    )
    
    
    (38
    )Net benefit costs
    
    $
    444
    
    
    $
    353
    
    
    $
    292
  2009
    
    
    2008Change in benefit obligationBenefit obligation at beginning of year
    
    $
    3,886
    
    
    $
    3,272Service cost
    
    
    174
    
    
    
    183Interest cost
    
    
    208
    
    
    
    208Actuarial (gain) loss
    
    
    (187
    )
    
    
    386Benefit payments
    
    
    (217
    )
    
    
    (163
    )Benefit obligation at end of year
    
    $
    3,864
    
    
    $
    3,886Change in plan assetsFair value of assets at beginning of year
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    
    
    
    
    Employer contributions
    
    
    217
    
    
    
    163Benefit payments
    
    
    (217
    )
    
    
    (163
    )Fair value of plan assets at end of year
    
    $
    
    
    
    $
    
  2009
    
    
    2008Current
    
    $
    (233
    )
    
    $
    (263
    )Long term
    
    
    (3,631
    )
    
    
    (3,623
    )Net amount of accrued benefit cost
    
    $
    (3,864
    )
    
    $
    (3,886
    )
  2009
    
    
    2008Net actuarial loss (gain)
    
    $
    7
    
    
    $
    194Net prior service cost
    
    
    32
    
    
    
    94Total accumulated other comprehensive income
    
    $
    39
    
    
    $
    288
  F-40




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##### Table of Contents



2010
    
    $
    2402011
    
    
    2512012
    
    
    2612013
    
    
    2952014
    
    
    3112015-2019
    
    
    1,772
  2009
    
    
    2008Discount rate
    
    
    5.75
    %
    
    
    5.75
    %Rate of future compensation increase
    
    
    4.00
    %
    
    
    4.00
    %
  1-Percentage-
    
    1-Percentage-Point Increase
    
    Point DecreaseEffect on total of service and interest cost
    
    $
    4
    
    
    $
    (4
    )Effect on post-retirement benefit obligation
    
    
    44
    
    
    
    (41
    )
 14. Savings and Investment Plan
  15. Income Taxes
  Pretax income
    
    2009
    
    
    2008
    
    
    2007U.S.
    
    $
    127,504
    
    
    $
    43,140
    
    
    $
    11,323Foreign
    
    
    8,531
    
    
    
    7,018
    
    
    
    5,310Total
    
    $
    136,035
    
    
    $
    50,158
    
    
    $
    16,633
 F-41




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##### Table of Contents



Income tax expense
    
    2009
    
    
    2008
    
    
    2007CurrentFederal
    
    $
    40,762
    
    
    $
    17,190
    
    
    $
    433State
    
    
    7,173
    
    
    
    4,166
    
    
    
    1,796Foreign
    
    
    3,336
    
    
    
    2,002
    
    
    
    1,708DeferredFederal
    
    
    931
    
    
    
    (3,761
    )
    
    
    6,384State
    
    
    (973
    )
    
    
    (791
    )
    
    
    1,270Foreign
    
    
    (32
    )
    
    
    517
    
    
    
    297Total
    
    $
    51,197
    
    
    $
    19,323
    
    
    $
    11,888
  Income tax reconciliation
    
    2009
    
    
    2008
    
    
    2007Statutory rate
    
    $
    47,612
    
    
    $
    17,556
    
    
    $
    5,821State taxes
    
    
    4,030
    
    
    
    2,194
    
    
    
    1,994Manufacturing tax incentives
    
    
    (2,092
    )
    
    
    (851
    )
    
    
    Meals and entertainment
    
    
    565
    
    
    
    541
    
    
    
    618Foreign rate differential and other
    
    
    759
    
    
    
    80
    
    
    
    (64
    )Research and development credits
    
    
    (1,214
    )
    
    
    (917
    )
    
    
    (1,085
    )Stock-based compensation
    
    
    327
    
    
    
    738
    
    
    
    1,098Audit settlements and refund claim
    
    
    
    
    
    
    (712
    )
    
    
    (852
    )Litigation settlement
    
    
    
    
    
    
    
    
    
    
    4,256Other
    
    
    1,210
    
    
    
    694
    
    
    
    102Total
    
    $
    51,197
    
    
    $
    19,323
    
    
    $
    11,888
   Note 3, Litigation Settlements
 F-42




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##### Table of Contents



2009
    
    
    2008Deferred tax assets:Federal net operating loss carryforwards
    
    $
    8,938
    
    
    $
    9,618Reserves and allowances
    
    
    11,315
    
    
    
    9,730Workforce, patents and license
    
    
    2,124
    
    
    
    2,975Compensation accruals
    
    
    4,165
    
    
    
    3,888Accrued state tax and interest
    
    
    2,207
    
    
    
    1,593Stock-based compensation
    
    
    6,619
    
    
    
    5,464State net operating loss carryforwards and
other credits
    
    
    3,362
    
    
    
    4,387Convertible debt issuance and transaction costs
    
    
    3,144
    
    
    
    1,678Other
    
    
    2,705
    
    
    
    1,995Valuation allowance
    
    
    
    
    
    
    (504
    )Total deferred tax assets
    
    
    44,579
    
    
    
    40,824Deferred tax
liabilities:Goodwill
    
    
    11,076
    
    
    
    9,685Prepaid insurance and other
    
    
    1,979
    
    
    
    1,286Developed technology
    
    
    706
    
    
    
    2,969Trademarks and royalty agreements
    
    
    15,545
    
    
    
    16,397Contingent interest on debt
    
    
    62,750
    
    
    
    47,623Total deferred tax liabilities
    
    
    92,056
    
    
    
    77,960Net deferred tax liability
    
    $
    (47,477
    )
    
    $
    (37,136
    )
    F-43




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##### Table of Contents



UnrecognizedGross
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income TaxFederal,
    
    
    Accrued
    
    
    Gross UTBs,
    
    
    Deferred
    
    
    Benefits, Net ofState and
    
    
    Interest and
    
    
    including
    
    
    Federal and
    
    
    Deferred FederalForeign
    
    
    Penalties on
    
    
    interest and
    
    
    State Income
    
    
    and State(in thousands)
    
    UTBs
    
    
    UTBs
    
    
    penalties
    
    
    Tax Benefits
    
    
    BenefitsBalance at December 29, 2007
    
    $
    12,857
    
    
    $
    557
    
    
    $
    13,414
    
    
    $
    (1,766
    )
    
    $
    11,648Additions for tax positions related to a prior period
    
    
    2,664
    
    
    
    145
    
    
    
    2,809
    
    
    
    24
    
    
    
    2,833Additions for tax positions related to the current period
    
    
    944
    
    
    
    
    
    
    
    944
    
    
    
    (97
    )
    
    
    847Reductions related to the closing of Statutes of Limitations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Reductions related to settlements with tax authorities
    
    
    (1,514
    )
    
    
    (326
    )
    
    
    (1,840
    )
    
    
    246
    
    
    
    (1,594
    )Balance at January 3, 2009
    
    
    14,951
    
    
    
    376
    
    
    
    15,327
    
    
    
    (1,593
    )
    
    
    13,734Additions for tax positions related to a prior period
    
    
    1,500
    
    
    
    604
    
    
    
    2,104
    
    
    
    (547
    )
    
    
    1,557Additions for tax positions related to the current period
    
    
    993
    
    
    
    
    
    
    
    993
    
    
    
    (144
    )
    
    
    849Reductions related to the closing of Statutes of Limitations
    
    
    (182
    )
    
    
    (36
    )
    
    
    (218
    )
    
    
    77
    
    
    
    (141
    )Reductions related to settlements with tax authorities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balances at January 2, 2010
    
    
    17,262
    
    
    
    944
    
    
    
    18,206
    
    
    
    (2,207
    )
    
    
    15,999Less:UTBs attributable to timing items included above
    
    
    982
    
    
    
    
    
    
    
    982
    
    
    
    
    
    
    
    982Total UTBs that, if recognized, would impact the
effective income tax rate as of January 2, 2010
    
    $
    16,280
    
    
    $
    944
    
    
    $
    17,224
    
    
    $
    (2,207
    )
    
    $
    15,017
     16. Subsequent Events
 Her Option ®
 17. Quarterly Financial Data
  F-44




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##### Table of Contents



2009
    
    
    2008First
    
    
    Second
    
    
    Third
    
    
    Fourth
    
    
    First
    
    
    Second
    
    
    Third
    
    
    Fourth13 weeks
    
    
    13 weeks
    
    
    13 weeks
    
    
    13 weeks
    
    
    13 weeks
    
    
    13 weeks
    
    
    13 weeks
    
    
    14 weeksNet sales
    
    $
    123,638
    
    
    $
    126,388
    
    
    $
    123,231
    
    
    $
    146,013
    
    
    $
    120,362
    
    
    $
    129,797
    
    
    $
    117,468
    
    
    $
    134,014Gross profit
    
    
    100,296
    
    
    
    104,780
    
    
    
    101,947
    
    
    
    120,036
    
    
    
    91,372
    
    
    
    100,612
    
    
    
    92,605
    
    
    
    105,955Operating income
    
    
    30,093
    
    
    
    33,700
    
    
    
    33,207
    
    
    
    45,083
    
    
    
    20,489
    
    
    
    28,093
    
    
    
    17,557
    
    
    
    21,242Net income
    
    
    17,080
    
    
    
    16,865
    
    
    
    28,621
    
    
    
    22,272
    
    
    
    6,087
    
    
    
    11,818
    
    
    
    3,505
    
    
    
    9,425Net income per share:Basic net income
    
    $
    0.23
    
    
    $
    0.23
    
    
    $
    0.39
    
    
    $
    0.30
    
    
    $
    0.08
    
    
    $
    0.16
    
    
    $
    0.05
    
    
    $
    0.13Diluted net income
    
    $
    0.23
    
    
    $
    0.23
    
    
    $
    0.38
    
    
    $
    0.30
    
    
    $
    0.08
    
    
    $
    0.16
    
    
    $
    0.05
    
    
    $
    0.13
 Note 7, Debt Note 7, Debt
 Note 5, Goodwill and Intangible Assets Note 7, Debt)
   F-45




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##### Table of Contents



Financial
Statement Schedule Schedule II  Valuation and Qualifying Accounts
  Balance at
    
    
    Additions charged to:
    
    
    
    
    
    
    Balance atBeginning of
    
    
    Costs and
    
    
    Other
    
    
    
    
    
    
    End ofPeriod
    
    
    Expenses
    
    
    Accounts
    
    
    Deductions
    
    
    PeriodValuation Accounts:Year ended December 29, 2007Deducted from asset accountsAllowance for doubtful accounts
    
    $
    3,115
    
    
    $
    950
    
    
    $
    
    
    
    $
    967
    (1)
    
    $
    3,098Allowance for obsolete inventories
    
    $
    2,504
    
    
    $
    2,487
    
    
    $
    
    
    
    $
    2,103
    (2)
    
    $
    2,888Allowance for sales returns
    
    $
    1,816
    
    
    $
    13,814
    (4)
    
    $
    
    
    
    $
    13,319
    (3),(4)
    
    $
    2,311Year ended January 3, 2009Deducted from asset accountsAllowance for doubtful accounts
    
    $
    3,098
    
    
    $
    1,832
    
    
    $
    
    
    
    $
    1,394
    (1)
    
    $
    3,536Allowance for obsolete inventories
    
    $
    2,888
    
    
    $
    5,737
    
    
    $
    
    
    
    $
    4,390
    (2)
    
    $
    4,235Allowance for sales returns
    
    $
    2,311
    
    
    $
    13,664
    (4)
    
    $
    
    
    
    $
    13,398             (3),
    (4)
    
    $
    2,577Year ended January 2, 2010Deducted from asset accountsAllowance for doubtful accounts
    
    $
    3,536
    
    
    $
    1,648
    
    
    $
    
    
    
    $
    1,745
    (1)
    
    $
    3,439Allowance for obsolete inventories
    
    $
    4,235
    
    
    $
    4,281
    
    
    $
    
    
    
    $
    3,485
    (2)
    
    $
    5,031Allowance for sales returns
    
    $
    2,577
    
    
    $
    10,996
    
    
    $
    
    
    
    $
    11,434             (3)
    
    
    $
    2,139Qualifying Accounts:Year ended December 29, 2007Product liability allowance
    
    $
    548
    
    
    $
    797
    
    
    $
    
    
    
    $
    450
    (5)
    
    $
    895Accrued warranty expense
    
    $
    2,715
    
    
    $
    5,844
    (7)
    
    $
    
    
    
    $
    5,558             (6),
    (7)
    
    $
    3,001Year ended January 3, 2009Product liability allowance
    
    $
    895
    
    
    $
    201
    
    
    $
    
    
    
    $
    316
    (5)
    
    $
    780Accrued warranty expense
    
    $
    3,001
    
    
    $
    5,577
    (7)
    
    $
    
    
    
    $
    5,291             (6),
    (7)
    
    $
    3,287Year ended January 2, 2010Product liability allowance
    
    $
    780
    
    
    $
    837
    
    
    $
    
    
    
    $
    627
    (5)
    
    $
    990Accrued warranty expense
    
    $
    3,287
    
    
    $
    1,517
    
    
    $
    
    
    
    $
    2,511
    (6)
    
    $
    2,293
 
  (1)
    
    Uncollectable accounts written off, net of recoveries(2)
    
    Obsolete and excess inventory disposals(3)
    
    Returned product(4)
    
    Includes activity under capital equipment upgrade and even exchange programs, which has increased with the growth in
our capital equipment business.(5)
    
    Product liability claims(6)
    
    Product warranty claims(7)
    
    Includes reserves and claims for product rework issues related to the Greenlight HPS® console. F-46




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##### Table of Contents



Dated: March 1, 2010
    AMERICAN MEDICAL SYSTEMS HOLDINGS, INC.By
    /s/  Anthony P. Bihl, IIIAnthony P. Bihl, IIIPresident and Chief Executive Officer  Signature
    
    Title/s/
Anthony P. Bihl, III
    
    President and Chief Executive OfficerAnthony P. Bihl, III
    
    (Principal Executive Officer)/s/ Mark A. Heggestad
    
    Executive Vice President and Chief Financial OfficerMark A. Heggestad
    
    (Principal Financial and Accounting Officer)/s/ Richard B. Emmitt
    
    DirectorRichard B. Emmitt/s/ Albert Jay Graf
    
    DirectorAlbert Jay Graf/s/ Jane E. Kiernan
    
    DirectorJane E. Kiernan/s/ Robert McLellan, M.D.
    
    DirectorRobert McLellan, M.D./s/ Christopher H. Porter,
Ph.D.
    
    DirectorChristopher H. Porter, Ph.D./s/ D. Verne Sharma
    
    DirectorD. Verne Sharma/s/ Thomas E. Timbie
    
    DirectorThomas E. Timbie
 F-47




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##### Table of Contents



AMERICAN MEDICAL SYSTEMS HOLDINGS, INC.
 
 EXHIBIT INDEX TO ANNUAL REPORT
 ON FORM 10-K
 For the Year Ended January 2, 2010
 Item No.
    
    Item
    
    Filing Method2.1
    
    Agreement and Plan of Merger,
dated as of June 3, 2005, by and
among American Medical Systems,
Inc., Oak Merger Corp., Ovion
Inc., Jeffrey P. Callister, and W.
Stephen Tremulis, as Principal
Stockholders, and Jeffrey P.
Callister, as Stockholders
Representative.
    
    Incorporated by reference to Exhibit 10.1
of the Companys Form 8-K filed on June 6,
2005 (File No. 000-30733).2.2
    
    Asset Purchase Agreement, dated
April 26, 2006, between American
Medical Systems, Inc. and
BioControl Medical, Ltd.
    
    Incorporated by reference to Exhibit 10.1
of the Companys Form 8-K filed on April
27, 2006 (File No. 000-30733).2.3
    
    First Amendment to Asset Purchase
Agreement, dated August 8, 2008,
by and between American Medical
Systems, Inc. and Bio Control
Medical (B.C.M.), Ltd.
    
    Incorporated by reference to Exhibit 10.1
of the Companys Form 8-K filed on August
19, 2008 (File No. 000-30733).2.4
    
    Agreement and Plan of Merger,
dated as of May 8, 2006, by and
among American Medical Systems,
Inc., Xenon Merger Corp., a wholly
owned subsidiary of American
Medical Systems, Inc., Solarant
Medical, Inc., and Warburg Pincus
Equity Partners, L.P., as
stockholders representative.
    
    Incorporated by reference to Exhibit 10.1
of the Companys Form 8-K filed on May 9,
2006 (File No. 000-30733).2.5
    
    Asset Purchase Agreement, dated
November 30, 2006, by and among
American Medical Systems, Inc.,
Laserscope, and Iridex
Corporation.
    
    Incorporated by reference to Exhibit 10.1
of the Companys Form 8-K filed on
December 6, 2006 (File No. 000-30733).2.6
    
    Asset Purchase Agreement, dated as
of September 30, 2009, between
American Medical Systems, Inc. and
Conceptus, Inc.
    
    Incorporated by reference to Exhibit 2.1
of the Companys Form 10-Q for the Fiscal
Quarter Ended October 3, 2009 (File No.
000-30733).2.7
    
    Asset Purchase Agreement, dated as
of February 16, 2010, between
American Medical Systems, Inc. and
CooperSurgical, Inc.
    
    Incorporated by reference to
Exhibit 2.1 of the Companys Form 8-K filed on February 22, 2010
(File No. 000-30733).3.1
    
    Second Amended and Restated
Certificate of Incorporation of
the Company.
    
    Incorporated by reference to Exhibit 3.1
of the Companys Form S-3 filed on June
19, 2006 (File No. 333-135135).3.2
    
    Bylaws, as amended, of the Company.
    
    Incorporated by reference to Exhibit 3.2
of the Companys Form 10-K for the Fiscal
Year Ended January 3, 2004 (File No.
000-30733).
 E-1




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##### Table of Contents



Item No.
    
    Item
    
    Filing Method4.1
    
    Certificate of Incorporation of the Company.
    
    See Exhibit 3.1 above.4.2
    
    Bylaws, as amended, of the Company.
    
    See Exhibit 3.2 above.4.3
    
    Form of Indenture for Senior Debt Securities.
    
    Incorporated by
reference to Exhibit
4.2 of the Companys
Form S-3 filed on
August 12, 2009 (File
No. 333-161290).4.4
    
    Form of Senior Debt Security.
    
    Incorporated by
reference to Exhibit
4.3 of the Companys
Form S-3 filed on
August 12, 2009 (File
No. 333-161290).4.5
    
    Form of Indenture for Subordinated Debt
Securities.
    
    Incorporated by
reference to Exhibit
4.4 of the Companys
Form S-3 filed on
August 12, 2009 (File
No. 333-161290).4.6
    
    Form of Subordinated Debt Security.
    
    Incorporated by
reference to Exhibit
4.5 of the Companys
Form S-3 filed on
August 12, 2009 (File
No. 333-161290).4.7
    
    Indenture, dated as of June 27, 2006,
between American Medical Systems Holdings,
Inc., the Notes Guarantors (as defined
therein), and U.S. Bank National
Association, as trustee.
    
    Incorporated by
reference to Exhibit
4.1 of the Companys
Form 8-K filed on
June 28, 2006 (File
No. 000-30733).4.8
    
    Form of 3 1/4% Convertible Senior
Subordinated Note.
    
    Incorporated by
reference to Exhibit
4.2 of the Companys
Form 8-K filed on
June 28, 2006 (File
No. 000-30733).4.9
    
    First Supplemental Indenture, dated as of
September 6, 2006, by and between Laserscope
and U.S. Bank National Association, as
trustee.
    
    Incorporated by
reference to Exhibit
4.1 of the Companys
Form 8-K filed on
September 8, 2006
(File No. 000-30733).4.10
    
    Guarantee, dated as of September 6, 2006,
made by Laserscope in favor of U.S. Bank
National Association, as trustee.
    
    Incorporated by
reference to Exhibit
4.2 of the Companys
Form 8-K filed on
September 8, 2006
(File No. 000-30733).4.11
    
    Indenture, dated as of September 21, 2009,
between American Medical Systems Holdings,
Inc., the Subsidiary Guarantors (as defined
therein), and U.S. Bank National
Association, as trustee.
    
    Incorporated by
reference to Exhibit
4.1 of the Companys
Form 8-K filed on
September 22, 2009
(File No. 000-30733).4.12
    
    Form of 4.00% Convertible Senior
Subordinated Note due 2041.
    
    Incorporated by
reference to Exhibit
4.2 of the Companys
Form 8-K filed on
September 22, 2009
(File No. 000-30733).4.13
    
    Form of Subsidiary Guarantee entered into by
each of the Subsidiary Guarantors.
    
    Incorporated by
reference to Exhibit
4.3 of the Companys
Form 8-K filed on
September 22, 2009
(File No. 000-30733).
 E-2




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##### Table of Contents



Item No.
    
    Item
    
    Filing Method10.1
    
    Employment Agreement, dated December 18,
2006, between Mark A. Heggestad and
American Medical Systems, Inc.
    
    Incorporated by
reference to
Exhibit 10.4 of the
Companys Annual
Report on Form 10-K
for the Fiscal Year
Ended December 30,
2006 (File No.
000-30733).10.2
    
    First Amendment to Employment Agreement,
effective as of March 6, 2008, Mark A.
Heggestad and American Medical Systems,
Inc.
    
    Incorporated by
reference to
Exhibit 10.7 of the
Companys Annual
Report on Form 10-K
for the Fiscal Year
Ended January 3,
2009 (File No.
000-30733).10.3
    
    Employment Agreement, dated as of April
22, 2008, between American Medical
Systems, Inc. and Anthony P. Bihl, III.
    
    Incorporated by
reference to
Exhibit 10.1 of the
Companys Form 8-K
filed April 29,
2008 (File No.
000-30733).10.4
    
    Employment Agreement, dated October 20,
2008, between Francois Georgelin and
American Medical Systems Europe B.V.
    
    Incorporated by
reference to
Exhibit 10.2 of the
Companys Form 10-Q
for the Fiscal
Quarter Ended July
4, 2009 (File No.
000-30733).10.5
    
    Employment Agreement, effective as of
April 1, 2009, between Joe W. Martin and
American Medical Systems, Inc.
    
    Incorporated by
reference to
Exhibit 10.3 of the
Companys Form 10-Q
for the Fiscal
Quarter Ended July
4, 2009 (File No.
000-30733).10.6
    
    Employment Agreement, effective as of
August 3, 2009, between Maximillian
Fiore and American Medical Systems, Inc.
    
    Incorporated by
reference to
Exhibit 10.2 of the
Companys Form 10-Q
for the Fiscal
Quarter Ended
October 3, 2009
(File No.
000-30733).10.7
    
    Separation Agreement, dated June 9,
2009, by and between Jan Dick and
American Medical Systems, Inc.
    
    Incorporated by
reference to
Exhibit 10.3 of the
Companys Form 10-Q
for the Fiscal
Quarter Ended
October 3, 2009
(File No.
000-30733).10.8
    
    2000 Equity Incentive Plan, as amended.
    
    Incorporated by
reference to
Exhibit 10.1 of the
Companys Form 10-Q
for the Fiscal
Quarter Ended June
28, 2003 (File No.
000-30733).10.9
    
    Form of Incentive Stock Option Agreement
under the 2000 Equity Incentive Plan, as
amended.
    
    Incorporated by
reference to
Exhibit 10.10 of
the Companys
Registration
Statement on Form
S-1 (File No.
333-37488).10.10
    
    Form of Non-Qualified Stock Option
Agreement under the 2000 Equity
Incentive Plan, as amended.
    
    Incorporated by
reference to
Exhibit 10.11 of
the Companys
Registration
Statement on Form
S-1 (File No.
333-37488).10.11
    
    Employee Stock Purchase Plan, as amended.
    
    Incorporated by
reference to
Exhibit 10.2 of the
Companys Form 10-Q
for the Fiscal
Quarter Ended
October 1, 2005
(File No.
000-30733).
 E-3




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##### Table of Contents



Item No.
    
    Item
    
    Filing Method10.12
    
    2005 Stock Incentive Plan (As Amended and
Restated).
    
    Incorporated by
reference to
Exhibit 10.1 of the
Companys Form 10-Q
for the Fiscal
Quarter Ended April
4, 2009 (File No.
000-30733).10.13
    
    Form of Stock Option Certificate for
Directors under the 2005 Stock Incentive Plan
(As Amended and Restated)
    
    Incorporated by
reference to
Exhibit 10.20 of
the Companys
Annual Report on
Form 10-K for the
Fiscal Year Ended
December 31, 2005
(File No.
000-30733).10.14
    
    Form of Stock Option Certificate for
Executive Officers under the 2005 Stock
Incentive Plan (As Amended and Restated)
    
    Incorporated by
reference to
Exhibit 10.21 of
the Companys
Annual Report on
Form 10-K for the
Fiscal Year Ended
December 31, 2005
(File No.
000-30733).10.15
    
    Form of Notice of Amendment to Stock Option
Certificate/Agreement for Executive Officers
of American Medical Systems Holdings, Inc.
    
    Incorporated by
reference to
Exhibit 10.6 of the
Companys Form 10-Q
for the Fiscal
Quarter Ended July
2, 2006 (File No.
000-30733).10.16
    
    Form of Stock Option Certificate for
Executive Officers under the 2005 Stock
Incentive Plan (Version Modified in 2010).
    
    Incorporated by
reference to
Exhibit 10.1 of the
Companys Form 8-K
filed on February
19, 2010 (File No.
000-30733).10.17
    
    Form of Restricted Stock Award for Executive
Officers under the 2005 Stock Incentive Plan.
    
    Incorporated by
reference to
Exhibit 10.2 of the
Companys Form 8-K
filed on February
19, 2010 (File No.
000-30733).10.18
    
    Form of Indemnification Agreement with
Executive Officers and Directors.
    
    Incorporated by
reference to
Exhibit 10.22 of
the Companys
Annual Report on
Form 10-K for the
Fiscal Year Ended
December 31, 2005
(File No.
000-30733).10.19
    
    Form of Change in Control Severance Agreement.
    
    Incorporated by
reference to
Exhibit 10.3 of the
Companys Quarterly
Report on Form 10-Q
for the Fiscal
Quarter Ended March
31, 2007 (File No.
000-30733).10.20
    
    Form of First Amendment to Change in Control
Severance Agreement.
    
    Incorporated by
reference to
Exhibit 10.24 of
the Companys
Annual Report on
Form 10-K for the
Fiscal Year Ended
January 3, 2009
(File No.
000-30733).10.21
    
    Form of Change in Control Severance Agreement
(Version Modified in 2009).
    
    Incorporated by
reference to
Exhibit 10.1 of the
Companys Form 10-Q
for the Fiscal
Quarter Ended July
4, 2009 (File No.
000-30733).
 E-4




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##### Table of Contents



Item No.
    
    Item
    
    Filing Method10.22
    
    Change in Control Severance Agreement,
dated as of April 22, 2008, between
American Medical Systems Holdings,
Inc. and Anthony P. Bihl, III.
    
    Incorporated by reference to Exhibit 10.2
of the Companys Form 8-K filed April 29,
2008 (File No. 000-30733).10.23
    
    The American Medical Systems, Inc.
Executive Severance Pay Plan.
    
    Incorporated by reference to Exhibit 10.4
of the Companys Form 8-K filed on
February 19, 2010 (File No. 000-30733).10.24
    
    Summary of Director Compensation.
    
    Filed with this Annual Report on Form 10-K.10.25
    
    Summary of Named Executive Officer
Compensation (2009).
    
    Incorporated by reference to Exhibit 10.28
of the Companys Annual Report on Form
10-K for the Fiscal Year Ended January 3,
2009 (File No. 000-30733).10.26
    
    Summary of Named Executive Officer
Compensation (2010).
    
    Filed with this Annual Report on Form 10-K.10.27
    
    2010 Executive Variable Incentive Plan.
    
    Incorporated by reference to Exhibit 10.3
of the Companys Form 8-K filed on
February 19, 2010 (File No. 000-30733).10.28
    
    Amended and Restated License
Agreement, dated January 1, 2008,
between American Medical Systems, Inc.
and BioControl Medical, Ltd.
    
    Incorporated by reference to Exhibit 10.30
of the Companys Annual Report on Form
10-K for the Fiscal Year Ended January 3,
2009 (File No. 000-30733).10.29
    
    First Amendment to Amended and
Restated License Agreement dated
August 8, 2008, by and between
American Medical Systems, Inc. and Bio
Control Medical (B.C.M), Ltd.
    
    Incorporated by reference to Exhibit 10.2
of the Companys Form 8-K filed August 19,
2008 (File No. 000-30733).10.30
    
    Credit and Guaranty Agreement, dated
as of July 20, 2006, by and among
American Medical Systems, Inc., as
borrower, American Medical Systems
Holdings, Inc. and certain of its
subsidiaries, as guarantors, CIT
Capital Securities LLC, as co-lead
arranger and sole bookrunner, KeyBank
National Association, as co-lead
arranger and syndication agent, CIT
Healthcare LLC, as administrative
agent and collateral agent, General
Electric Capital Corporation, as
documentation agent, and various
lenders.
    
    Incorporated by reference to Exhibit 10.1
of the Companys Form 8-K filed on July
26, 2006 (File No. 000-30733).10.31
    
    First Amendment to Credit and Guaranty
Agreement, dated as of October 29,
2007, by and among American Medical
Systems, Inc., each of the other
credit parties which is a signatory
thereto and CIT Healthcare LLC, as
administrative agent.
    
    Incorporated by reference to Exhibit 10.1
of the Companys Form 8-K filed on October
29, 2007 (File No. 000-30733).
 E-5




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##### Table of Contents



Item No.
    
    Item
    
    Filing Method10.32
    
    Pledge and Security Agreement, dated
as of July 20, 2006, between each of
the grantors party thereto and CIT
Healthcare LLC, as administrative
agent and collateral agent.
    
    Incorporated by reference to Exhibit 10.2
of the Companys Form 8-K filed on July
26, 2006 (File No. 000-30733).10.33
    
    Mortgage, Security Agreement,
Assignment of Rents and Leases and
Fixture Financing Statement, dated as
of July 20, 2006, executed by American
Medical Systems, Inc. to and for the
benefit of CIT Healthcare LLC, as
administrative agent and collateral
agent.
    
    Incorporated by reference to Exhibit 10.3
of the Companys Form 8-K filed on July
26, 2006 (File No. 000-30733).10.34
    
    Net Lease Agreement, dated as of June
20, 2000, by and between Laserscope
and Realtec Properties.
    
    Incorporated by reference to Exhibit 10.6
of Laserscopes Annual Report on Form 10-K
filed on March 28, 2001 (File No.
000-18053).10.35
    
    Net Lease Agreement, dated as of
October 18, 2000, by and between
Laserscope and Realtec Properties.
    
    Incorporated by reference to Exhibit 10.6A
of Laserscopes Annual Report on Form 10-K
filed on March 28, 2001 (File No.
000-18053).10.36
    
    Settlement Agreement, dated as of
August 14, 2007, by and among Iridex
Corporation, American Medical Systems,
Inc. and Laserscope.
    
    Incorporated by reference to Exhibit 10.1
of the Companys Form 8-K filed on August
20, 2007 (File No. 000-30733).10.37
    
    Consent and Second Amendment to Credit
and Guaranty Agreement by and among
American Medical Systems, Inc., each
of the other Credit Parties which is a
signatory thereto and CIT Healthcare
LLC.
    
    Incorporated by reference to Exhibit 99.1
of the Companys Form 8-K filed on August
14, 2009 (File No. 000-30733).21.1
    
    Subsidiaries of American Medical
Systems Holdings, Inc.
    
    Filed with this Annual Report on Form 10-K.23.1
    
    Consent of Ernst & Young LLP.
    
    Filed with this Annual Report on Form 10-K.31.1
    
    Certification by Chief Executive
Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
    
    Filed with this Annual Report on Form 10-K.31.2
    
    Certification by Chief Financial
Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
    
    Filed with this Annual Report on Form 10-K.32.1
    
    Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act
of 2002.
    
    Filed with this Annual Report on Form 10-K.
 E-6