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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:December 29, 2007
    
    000  30733
 AMERICAN MEDICAL SYSTEMS HOLDINGS, INC.
  Delaware
(State of Incorporation)
    
    41-1978822
(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
 þ
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ




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##### 



AMERICAN MEDICAL SYSTEMS HOLDINGS, INC.
 FORM 10-K
 For the Fiscal Year Ended December 29, 2007
 TABLE OF CONTENTS
 Description
    
    PagePART IItem 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    8Item 1B. Unresolved Staff Comments
    
    
    16Item 2. Properties
    
    
    16Item 3. Legal Proceedings
    
    
    17Item 4. Submission of Matters to a Vote of Security Holders
    
    
    17Item 4A. Executive Officers of American Medical Systems
    
    
    17PART IIItem 5. Market For American Medical Systems Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    19Item 6. Selected Financial Data
    
    
    21Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    39Item 8. Financial Statements and Supplementary Data
    
    
    40Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    40Item 9A. Controls and Procedures
    
    
    40Item 9B. Other Information
    
    
    41PART IIIItem 10. Directors and Executive Officers of the Registrant
    
    
    42Item 11. Executive Compensation
    
    
    42Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    42Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    42Item 14. Principal Accountant Fees and Services
    
    
    42PART IVItem 15. Exhibits and Financial Statement Schedule
    
    
    43FINANCIAL STATEMENTS AND NOTES THERETO
    
    
    F-1EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-K
    
    
    E-1SubsidiariesConsent of Ernst & Young LLPCertification by Chief Executive OfficerCertification by Chief Financial OfficerSection 1350 Certification




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FORWARD-LOOKING INFORMATION
 This Annual Report on Form 10-K contains certain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Any statements not of historical fact may be
considered forward-looking statements. Written words such as, may, expect, believe,
anticipate, or estimate, or other variations of these or similar words, identify such
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. Factors known to us that could cause such material differences are
identified in this Annual Report on Form 10-K under Item 1A, Risk Factors, and in the Management
Discussion and Analysis of Financial Condition and Results of Operations. We undertake no
obligation to correct or update any forward-looking statements, whether as a result of new
information, future events, or otherwise. You are advised, however, to consult any future
disclosures we make on related subjects in future filings with the SEC.
 
 PART I
 
 Item 1. Business
 Overview
   AdVance AMS 700 MS, MiniArc Single
Incision Sling Her Option ® Apogee® Perigee®
 GreenLight HPS TherMatrx®
 1




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www.AmericanMedicalSystems.com.
 Markets and Products
     ® ® ®
 2




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MiniArc Single Incision Sling AMS 700 LGX AMS 700 MS AdVance GreenLight HPS StoneLight® Monarc MiniArc Single
Incision Sling Apogee Perigee
 Mens Health
  AMS 700 MS AMS 700 InhibiZone Tactile Pump Momentary Squeeze Pump
  AMS 800 InVance ® AdVance AMS 800 with InhibiZone Acticon
 3




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GreenLight GreenLight ® GreenLight HPS GreenLight HPS StoneLight SureFlex StoneLight SureFlex
 UroLume ®
 TherMatrx
 Womens Health
  AMS 800 In-Fast SPARC Monarc, BioArc MiniArc In-Fast SPARC SPARC Monarc BioArc SP ® BioArc SP SPARC
 4




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BioArc TO ® Monarcs BioArcs InteXen LP ® BioArc MiniArc Single-Incision Sling
 Acticon
 Apogee Perigee Apogee Perigee InteXen and IntePro
 Her Option Her Option
 Selling and Marketing
    Manufacturing and Supply
  5




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Research and Development
  Continuum Accessa, Apogee Perigee Ovion InhibiZone MiniArc
  Competition
   Intellectual Property
  6




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Government Regulation
    Her Option
  Third-Party Reimbursement
    7




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Employees
  Financial Information about Geographic Areas
 Notes to
Consolidated Financial Statements  No. 12, Industry Segment Information and Foreign Operations
 
 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.
  Our sales may be adversely affected if physicians do not recommend or endorse our products.
  Our growth will be slowed if new products are delayed or are not accepted.
  8




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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.
  Changes in third party reimbursement for our products and therapies may influence our customers
purchasing activity.
  In connection with our acquisition of Laserscope, we have substantially increased our debt
leverage.
 Notes to Consolidated Financial Statements  No. 9, Debt Notes to Consolidated Financial Statements  No. 9, Debt
 9




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
    
    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;
    
    placing us at a competitive disadvantage relative to our competitors who have lower
levels of debt;
    
    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 than
these amounts when due.
 Conversion of our Convertible Notes into common stock could result in dilution to our shareholders.
 Liquidity and Capital Resources Item 7.
Managements Discussion and Analysis of Financial Condition and Results of Operations
 Our Credit Facility contains financial covenants and other restrictions which may limit our ability
to operate our business.
  Proposed changes in the accounting method for convertible debt securities could, if implemented,
have an adverse impact on our reported and future financial results.
  10




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Our borrowing costs are sensitive to fluctuations in interest rates, and changes in interest rates
may affect our profitability.
  We could become obligated to make significant contingent payments or be subject to claims under
prior acquisition agreements.
  Transitioning our sales relationships for products outside the United States from independent
distributors to our direct sales force may be more costly than we anticipated.
  We may not be able to supply products that incorporate materials or components which are single or
sole-sourced.
 TherMatrx InteXen IntePro
 11




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GreenLight HPS
  Our efforts to manage inventory levels may lead to production shortfalls and lost revenues
  Loss of our principal manufacturing and distribution facilities would adversely affect our
financial position.
  Unforeseen impacts to the environment and employee health at any of our manufacturing sites and/or
changes to government regulations related to the environment and employee health may lead to the
inability to manufacture some product, which could lead to reduced sales and profitability.
 InhibiZone
 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.
  12




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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 costs 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.
 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.
  13




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
    
    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.
  14




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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 furnishing or arranging for
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.
  If physician malpractice insurance costs increase, at some point physicians may alter their
practice patterns and cease using our products.
  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.
  15




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
    
    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
   16




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Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 4A. Executive Officers of American Medical Systems
  Name
    
    Age
    
    TitleRoss A. Longhini
    
    
    46
    
    
    Chief Executive Officer

Executive Vice President and Chief Operating OfficerMark A. Heggestad
    
    
    49
    
    
    Executive Vice President and Chief Financial OfficerLawrence W. Getlin
    
    
    62
    
    
    Senior Vice President, Compliance, Quality Systems and LegalJanet L. Dick
    
    
    51
    
    
    Senior Vice President, Human ResourcesJohn F. Nealon
    
    
    45
    
    
    Senior Vice President, Business DevelopmentR. Scott Etlinger
    
    
    46
    
    
    Senior Vice President, Global OperationsAndrew E. Joiner
    
    
    46
    
    
    Vice President, General Manager Womens HealthWhitney D. Erickson
    
    
    41
    
    
    Vice President, General Manager Mens Health
 Ross A. Longhini
 Mark A. Heggestad
 Lawrence W. Getlin, J.D.
 Janet L. Dick
 17




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John F. Nealon
 R. Scott Etlinger
 Andrew E. Joiner
 Whitney D. Erickson
 18




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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
  2007
    
    2006High
    
    Low
    
    High
    
    LowFirst quarter
    
    $
    21.78
    
    
    $
    18.65
    
    
    $
    23.05
    
    
    $
    18.04Second quarter
    
    $
    21.75
    
    
    $
    17.33
    
    
    $
    22.31
    
    
    $
    15.14Third quarter
    
    $
    21.50
    
    
    $
    16.95
    
    
    $
    18.95
    
    
    $
    16.66Fourth quarter
    
    $
    17.31
    
    
    $
    12.03
    
    
    $
    18.97
    
    
    $
    16.63
 Holders
  Dividends
  Recent Sales of Unregistered Equity Securities
  Issuer Purchases of Equity Securities
  19




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Stock Performance Graph
   
 12/27/2002
    
    1/2/2004
    
    12/31/2004
    
    12/30/2005
    
    12/29/2006
    
    12/28/2007AMS Common Stock
    
    $
    100.00
    
    
    $
    134.75
    
    
    $
    257.61
    
    
    $
    219.72
    
    
    $
    228.22
    
    
    $
    178.93Comparable Company
    
    $
    100.00
    
    
    $
    127.51
    
    
    $
    144.76
    
    
    $
    154.38
    
    
    $
    151.66
    
    
    $
    160.79NASDAQ Market Index
    
    $
    100.00
    
    
    $
    150.36
    
    
    $
    163.00
    
    
    $
    166.58
    
    
    $
    183.68
    
    
    $
    201.91
 20




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Item 6. Selected Financial Data
  Statement of Operations Data
    
    2007
    
    2006
    
    2005
    
    2004
    
    2003Net sales
    
    $
    463,928
    
    
    $
    358,318
    
    
    $
    262,591
    
    
    $
    208,772
    
    
    $
    168,283Cost of sales
    
    
    105,592
    
    
    
    68,872
    
    
    
    46,111
    
    
    
    38,331
    
    
    
    27,353Gross profit
    
    
    358,336
    
    
    
    289,446
    
    
    
    216,480
    
    
    
    170,441
    
    
    
    140,930Operating expensesMarketing and selling
    
    
    169,495
    
    
    
    123,204
    
    
    
    92,001
    
    
    
    72,910
    
    
    
    63,107Research and development
    
    
    43,315
    
    
    
    33,877
    
    
    
    20,966
    
    
    
    15,786
    
    
    
    14,924In-process research and development (1)
    
    
    7,500
    
    
    
    94,035
    
    
    
    9,220
    
    
    
    35,000
    
    
    
    General and administrative
    
    
    43,070
    
    
    
    34,417
    
    
    
    21,713
    
    
    
    21,617
    
    
    
    17,099Integration costs (2)
    
    
    1,103
    
    
    
    1,712
    
    
    
    
    
    
    
    
    
    
    
    Litigation settlement (3)
    
    
    14,303
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of intangibles
    
    
    18,264
    
    
    
    12,393
    
    
    
    7,884
    
    
    
    5,708
    
    
    
    4,160Total operating expenses
    
    
    297,050
    
    
    
    299,638
    
    
    
    151,784
    
    
    
    151,021
    
    
    
    99,290Operating income (expense)
    
    
    61,286
    
    
    
    (10,192
    )
    
    
    64,696
    
    
    
    19,420
    
    
    
    41,640Other (expense) incomeRoyalty and other
    
    
    8,099
    
    
    
    1,984
    
    
    
    500
    
    
    
    2,249
    
    
    
    3,801Interest income
    
    
    1,153
    
    
    
    2,754
    
    
    
    1,246
    
    
    
    517
    
    
    
    476Interest expense (4)
    
    
    (37,760
    )
    
    
    (18,395
    )
    
    
    (217
    )
    
    
    (783
    )
    
    
    (1,828
    )Amortization of financing costs (5)
    
    
    (3,273
    )
    
    
    (8,302
    )
    
    
    
    
    
    
    
    
    
    
    Investment impairment (6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,500
    )
    
    
    Total other (expense) income
    
    
    (31,781
    )
    
    
    (21,959
    )
    
    
    1,529
    
    
    
    (2,517
    )
    
    
    2,449Income (loss) from continuing operations
before income taxes
    
    
    29,505
    
    
    
    (32,151
    )
    
    
    66,225
    
    
    
    16,903
    
    
    
    44,089Provision for income taxes(7)
    
    
    15,914
    
    
    
    11,731
    
    
    
    26,950
    
    
    
    20,023
    
    
    
    15,039Net income (loss) from continuing operations
    
    
    13,591
    
    
    
    (43,882
    )
    
    
    39,275
    
    
    
    (3,120
    )
    
    
    29,050Loss from discontinued operations, net of tax
benefit of $0.4 million and $2.7
million for 2007
and 2006, respectively(8)
    
    
    (691
    )
    
    
    (5,435
    )
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    12,900
    
    
    $
    (49,317
    )
    
    $
    39,275
    
    
    $
    (3,120
    )
    
    $
    29,050Net income (loss) per shareBasic net earnings (loss) from
continuing operations
    
    $
    0.19
    
    
    $
    (0.63
    )
    
    $
    0.57
    
    
    $
    (0.05
    )
    
    $
    0.44Discontinued operations, net of tax
    
    
    (0.01
    )
    
    
    (0.08
    )
    
    
    
    
    
    
    
    
    
    
    Basic net earnings (loss)
    
    $
    0.18
    
    
    $
    (0.70
    )
    
    $
    0.57
    
    
    $
    (0.05
    )
    
    $
    0.44Diluted net earnings (loss) from
continuing operations
    
    $
    0.18
    
    
    $
    (0.63
    )
    
    $
    0.55
    
    
    $
    (0.05
    )
    
    $
    0.42Discontinued operations, net of tax
    
    
    (0.01
    )
    
    
    (0.08
    )
    
    
    
    
    
    
    
    
    
    
    Diluted net earnings (loss)
    
    $
    0.18
    
    
    $
    (0.70
    )
    
    $
    0.55
    
    
    $
    (0.05
    )
    
    $
    0.42
 Balance Sheet Data
    
    2007
    
    2006
    
    2005
    
    2004
    
    2003Cash, cash equivalents, and short-term investments
    
    $
    35,181
    
    
    $
    29,541
    
    
    $
    46,390
    
    
    $
    51,168
    
    
    $
    58,953Working capital
    
    
    143,298
    
    
    
    135,635
    
    
    
    69,533
    
    
    
    79,575
    
    
    
    92,729Total assets
    
    
    1,116,433
    
    
    
    1,127,091
    
    
    
    359,326
    
    
    
    300,550
    
    
    
    279,327Long-term liabilities
    
    
    706,156
    
    
    
    743,396
    
    
    
    3,072
    
    
    
    3,126
    
    
    
    12,315Stockholders equity
    
    
    328,190
    
    
    
    281,162
    
    
    
    302,879
    
    
    
    249,172
    
    
    
    240,346
 
 (1)
    
    In 2007, we recognized $7.5 million for in-process research and development charges related to
the payment for achieving the second milestone for our BioControl acquisition. In 2006, we
recognized $25.6 million, $2.1 million, $62.1 million and $4.3 21




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million, respectively, for
in-process research and development charges related to the acquisitions of BioControl, Solarant,
Laserscope and Ovion. In 2005 and 2004, we recognized in-process research and development charges
of $9.2 million and $35.0 million, respectively, related to the acquisitions of Ovion and
TherMatrx. For a more complete description of these items and their impact on financial results,
see Notes to Consolidated Financial Statements  No. 2, Acquisitions.(2)
    
    In 2007 and 2006, we recorded $1.1 million and $1.7 million, respectively, of integration costs
associated with the Laserscope acquisition, primarily related to travel, legal, consulting and
retention bonuses. For more information regarding the Laserscope acquisition, see Notes to
Consolidated Financial Statements  No. 2, Acquisitions.(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. 4, Litigation Settlementsfor more information.(4)
    
    During 2007 and 2006, interest expense included interest incurred on $373.8 million principal
amount of convertible notes we issued on June 27, 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 $332.3 million during 2007 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 and their impact on
our financial results, see Notes to Consolidated Financial Statements  No. 9, Debt, and No. 8,
Credit Agreements.(5)
    
    Amortization of financing costs includes $3.3 million and $1.3 million during 2007 and 2006,
respectively, for the amortization of deferred financing costs and debt discount related to 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. For a more complete
description of these items, see Notes to Consolidated Financial Statements  No. 9, Debt and No. 8,
Credit Agreements.(6)
    
    During the fourth quarter of 2004, we recognized an investment impairment loss of $4.5 million
related to our investment in InjecTx, when we determined that the likelihood of commercialization
of the product had diminished dramatically.(7)
    
    During the third quarter of 2003, we applied for and recognized U.S. tax benefits related to
research and development and extraterritorial income exclusion tax credits for the years 1999
through 2002, resulting in a $1.1 million reduction in 2003 tax expense. In addition, with the
exception of BioControl, the in-process research and development charges described above for 2004
through 2006, as well as the investment impairment charge in 2004, have no related tax benefit. In
2006, we received a $2.4 million tax refund associated with the favorable agreement reached with
the IRS involving the review of the 2001 and 2002 domestic income tax returns. In 2007, we
experienced adverse tax effects from the $14.3 million of litigation settlement charges which
primarily resulted from the resolution of the CryoGen arbitration (see Notes to Consolidated
Financial Statements  No. 4, 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.(8)
    
    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. 3, Discontinued Operations and Sale of
Aesthetics Business. 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introductory Overview
  22




---



##### Table of Contents



AdVance AMS 700 MS, MiniArc Single
Incision Sling Her Option Apogee Perigee
 GreenLight HPS TherMatrx
   Results of Operations
 Sales trends
  23




---



##### Table of Contents



(in thousands)
    
    2007
    
    2006
    
    $ Increase
    
    % Increase
    
    2006
    
    2005
    
    $ Increase
    
    % IncreaseSalesProduct LineMens health
    
    $
    314,016
    
    
    $
    230,872
    
    
    $
    83,144
    
    
    
    36.0
    %
    
    $
    230,872
    
    
    $
    163,084
    
    
    $
    67,788
    
    
    
    41.6
    %Womens health
    
    
    149,912
    
    
    
    127,446
    
    
    
    22,466
    
    
    
    17.6
    %
    
    
    127,446
    
    
    
    99,507
    
    
    
    27,939
    
    
    
    28.1
    %Total
    
    $
    463,928
    
    
    $
    358,318
    
    
    $
    105,610
    
    
    
    29.5
    %
    
    $
    358,318
    
    
    $
    262,591
    
    
    $
    95,727
    
    
    
    36.5
    %GeographyUnited States
    
    $
    334,258
    
    
    $
    272,679
    
    
    $
    61,579
    
    
    
    22.6
    %
    
    $
    272,679
    
    
    $
    205,463
    
    
    $
    67,216
    
    
    
    32.7
    %International
    
    
    129,670
    
    
    
    85,639
    
    
    
    44,031
    
    
    
    51.4
    %
    
    
    85,639
    
    
    
    57,128
    
    
    
    28,511
    
    
    
    49.9
    %Total
    
    $
    463,928
    
    
    $
    358,318
    
    
    $
    105,610
    
    
    
    29.5
    %
    
    $
    358,318
    
    
    $
    262,591
    
    
    $
    95,727
    
    
    
    36.5
    %Percent of total salesProduct LineMens health
    
    
    67.7
    %
    
    
    64.4
    %
    
    
    
    
    
    
    
    
    
    
    64.4
    %
    
    
    62.1
    %Womens health
    
    
    32.3
    %
    
    
    35.6
    %
    
    
    
    
    
    
    
    
    
    
    35.6
    %
    
    
    37.9
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    
    
    
    
    
    
    
    
    100.0
    %
    
    
    100.0
    %GeographyUnited States
    
    
    72.0
    %
    
    
    76.1
    %
    
    
    
    
    
    
    
    
    
    
    76.1
    %
    
    
    78.2
    %International
    
    
    28.0
    %
    
    
    23.9
    %
    
    
    
    
    
    
    
    
    
    
    23.9
    %
    
    
    21.8
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    
    
    
    
    
    
    
    
    100.0
    %
    
    
    100.0
    %
 Net Sales. , GreenLight HPS MiniArc Single-Incision Sling InhibiZone AUS 800 AdVance AMS 700 MS
 GreenLight HPS AdVance AMS 700 MS
 Mens health products .
 AMS 700 MS, AUS 800 AdVance TherMatrx
 AMS 700 MS AUS 800 InVance AdVance GreenLight
 Womens health products .
 24




---



##### Table of Contents



Monarc MiniArc MiniArc Single-Incision Sling MiniArc Apogee and Perigee, Her Option
 Monarc BioArc
SP BioArc TO Monarc BioArc TO
 International sales and foreign exchange effects .
  Customer location
    
    2007
    
    2006
    
    $ Increase
    
    % Increase
    
    2006
    
    2005
    
    $ Increase
    
    % IncreaseWithin U.S.
    
    $
    334,258
    
    
    $
    272,679
    
    
    $
    61,579
    
    
    
    22.6
    %
    
    $
    272,679
    
    
    $
    205,463
    
    
    $
    67,216
    
    
    
    32.7
    %InternationalBefore currency impact
    
    
    122,083
    
    
    
    85,639
    
    
    
    36,444
    
    
    
    42.6
    %
    
    
    85,321
    
    
    
    57,128
    
    
    
    28,193
    
    
    
    49.4
    %Subtotal
    
    
    456,341
    
    
    
    358,318
    
    
    
    98,023
    
    
    
    27.4
    %
    
    
    358,000
    
    
    
    262,591
    
    
    
    95,409
    
    
    
    36.3
    %Currency impact
    
    
    7,587
    
    
    
    
    
    
    
    7,587
    
    
    
    
    
    
    
    318
    
    
    
    
    
    
    
    318
    
    
    
    Total
    
    $
    463,928
    
    
    $
    358,318
    
    
    $
    105,610
    
    
    
    29.5
    %
    
    $
    358,318
    
    
    $
    262,591
    
    
    $
    95,727
    
    
    
    36.5
    %
 Operating Expenses
  25




---



##### Table of Contents



$ Increase
    
    % Increase
    
    
    
    
    
    
    
    
    
    $ Increase
    
    % Increase(in thousands)
    
    2007
    
    2006
    
    (Decrease)
    
    (Decrease)
    
    2006
    
    2005
    
    (Decrease)
    
    (Decrease)Net sales
    
    $
    463,928
    
    
    $
    358,318
    
    
    $
    105,610
    
    
    
    29.5
    %
    
    $
    358,318
    
    
    $
    262,591
    
    
    $
    95,727
    
    
    
    36.5
    %Cost of sales
    
    
    105,592
    
    
    
    68,872
    
    
    
    36,720
    
    
    
    53.3
    %
    
    
    68,872
    
    
    
    46,111
    
    
    
    22,761
    
    
    
    49.4
    %Gross profit
    
    
    358,336
    
    
    
    289,446
    
    
    
    68,890
    
    
    
    23.8
    %
    
    
    289,446
    
    
    
    216,480
    
    
    
    72,966
    
    
    
    33.7
    %Operating expensesMarketing and selling
    
    
    169,495
    
    
    
    123,204
    
    
    
    46,291
    
    
    
    37.6
    %
    
    
    123,204
    
    
    
    92,001
    
    
    
    31,203
    
    
    
    33.9
    %Research and development
    
    
    43,315
    
    
    
    33,877
    
    
    
    9,438
    
    
    
    27.9
    %
    
    
    33,877
    
    
    
    20,966
    
    
    
    12,911
    
    
    
    61.6
    %In-process research &
development
    
    
    7,500
    
    
    
    94,035
    
    
    
    (86,535
    )
    
    
    -92.0
    %
    
    
    94,035
    
    
    
    9,220
    
    
    
    84,815
    
    
    
    919.9
    %General and administrative
    
    
    43,070
    
    
    
    34,417
    
    
    
    8,653
    
    
    
    25.1
    %
    
    
    34,417
    
    
    
    21,713
    
    
    
    12,704
    
    
    
    58.5
    %Integration costs
    
    
    1,103
    
    
    
    1,712
    
    
    
    (609
    )
    
    
    -35.6
    %
    
    
    1,712
    
    
    
    
    
    
    
    1,712
    
    
    
    n/aLitigation settlement
    
    
    14,303
    
    
    
    
    
    
    
    14,303
    
    
    
    n/a
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    n/aAmortization of intangibles
    
    
    18,264
    
    
    
    12,393
    
    
    
    5,871
    
    
    
    47.4
    %
    
    
    12,393
    
    
    
    7,884
    
    
    
    4,509
    
    
    
    57.2
    %Total operating expenses
    
    
    297,050
    
    
    
    299,638
    
    
    
    (2,588
    )
    
    
    -0.9
    %
    
    
    299,638
    
    
    
    151,784
    
    
    
    147,854
    
    
    
    97.4
    %Operating income (expense)
    
    
    61,286
    
    
    
    (10,192
    )
    
    
    71,478
    
    
    
    n/a
    
    
    
    (10,192
    )
    
    
    64,696
    
    
    
    (74,888
    )
    
    
    n/aRoyalty income
    
    
    5,028
    
    
    
    1,701
    
    
    
    3,327
    
    
    
    195.6
    %
    
    
    1,701
    
    
    
    1,929
    
    
    
    (228
    )
    
    
    -11.8
    %Interest income
    
    
    1,153
    
    
    
    2,754
    
    
    
    (1,601
    )
    
    
    -58.1
    %
    
    
    2,754
    
    
    
    1,246
    
    
    
    1,508
    
    
    
    121.0
    %Interest expense
    
    
    (37,760
    )
    
    
    (18,395
    )
    
    
    (19,365
    )
    
    
    105.3
    %
    
    
    (18,395
    )
    
    
    (217
    )
    
    
    (18,178
    )
    
    
    8377.0
    %Amortization of financing costs
    
    
    (3,273
    )
    
    
    (8,302
    )
    
    
    5,029
    
    
    
    -60.6
    %
    
    
    (8,302
    )
    
    
    
    
    
    
    (8,302
    )
    
    
    n/aOther income (expense)
    
    
    3,071
    
    
    
    283
    
    
    
    2,788
    
    
    
    985.2
    %
    
    
    283
    
    
    
    (1,429
    )
    
    
    1,712
    
    
    
    n/aIncome (loss) from continuing
operations before income
taxes
    
    
    29,505
    
    
    
    (32,151
    )
    
    
    61,656
    
    
    
    n/a
    
    
    
    (32,151
    )
    
    
    66,225
    
    
    
    (98,376
    )
    
    
    n/aProvision for income taxes
    
    
    15,914
    
    
    
    11,731
    
    
    
    4,183
    
    
    
    35.7
    %
    
    
    11,731
    
    
    
    26,950
    
    
    
    (15,219
    )
    
    
    -56.5
    %Net income (loss) from continuing
operations
    
    
    13,591
    
    
    
    (43,882
    )
    
    
    57,473
    
    
    
    n/a
    
    
    
    (43,882
    )
    
    
    39,275
    
    
    
    (83,157
    )
    
    
    n/aLoss from discontinued operations,
net of tax benefit of
$0.4 million
and $2.7 million for 2007
and
2006, respectively
    
    
    (691
    )
    
    
    (5,435
    )
    
    
    4,744
    
    
    
    -87.3
    %
    
    
    (5,435
    )
    
    
    
    
    
    
    (5,435
    )
    
    
    n/aNet income (loss)
    
    $
    12,900
    
    
    $
    (49,317
    )
    
    $
    62,217
    
    
    
    n/a
    
    
    $
    (49,317
    )
    
    $
    39,275
    
    
    $
    (88,592
    )
    
    
    n/a
 26




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##### Table of Contents



2007
    
    2006
    
    2005Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    22.8
    %
    
    
    19.2
    %
    
    
    17.6
    %Gross profit
    
    
    77.2
    %
    
    
    80.8
    %
    
    
    82.4
    %Operating expensesMarketing and selling
    
    
    36.5
    %
    
    
    34.4
    %
    
    
    35.0
    %Research and development
    
    
    9.3
    %
    
    
    9.5
    %
    
    
    8.0
    %In-process research and development
    
    
    1.6
    %
    
    
    26.2
    %
    
    
    3.5
    %General and administrative
    
    
    9.3
    %
    
    
    9.6
    %
    
    
    8.3
    %Integration costs
    
    
    0.2
    %
    
    
    0.5
    %
    
    
    0.0
    %Litigation settlement
    
    
    3.1
    %
    
    
    0.0
    %
    
    
    0.0
    %Amortization of intangibles
    
    
    3.9
    %
    
    
    3.5
    %
    
    
    3.0
    %Total operating expenses
    
    
    64.0
    %
    
    
    83.6
    %
    
    
    57.8
    %Operating income (expense)
    
    
    13.2
    %
    
    
    -2.8
    %
    
    
    24.6
    %Royalty income
    
    
    1.1
    %
    
    
    0.5
    %
    
    
    0.7
    %Interest income
    
    
    0.2
    %
    
    
    0.8
    %
    
    
    0.5
    %Interest expense
    
    
    -8.1
    %
    
    
    -5.1
    %
    
    
    -0.1
    %Amortization of financing costs
    
    
    -0.7
    %
    
    
    -2.3
    %
    
    
    0.0
    %Other income (expense)
    
    
    0.7
    %
    
    
    0.1
    %
    
    
    -0.5
    %Income (loss) from continuing operations before income taxes
    
    
    6.4
    %
    
    
    -9.0
    %
    
    
    25.2
    %Provision for income taxes
    
    
    3.4
    %
    
    
    3.3
    %
    
    
    10.3
    %Net income (loss) from continuing operations
    
    
    2.9
    %
    
    
    -12.2
    %
    
    
    15.0
    %Net income (loss)
    
    
    2.8
    %
    
    
    -13.8
    %
    
    
    15.0
    %
 Cost of sales. Her
Option GreenLight HPS
  Marketing and selling Her Option
  27




---



##### Table of Contents



Research and development GreenLight
 GreenLight HPS
 In-process research and development.
     General and administrative.
  28




---



##### Table of Contents



Integration costs.
 Litigation settlement. Notes to
Consolidated Financial Statements  No. 4, Litigation Settlements.)
 Amortization of intangibles Notes to Consolidated Financial Statements  No. 2, Acquisitions.)
  Royalty income.
  Interest income Notes to
Consolidated Financial Statements  No. 9, Debt)
 Interest expense Notes to Consolidated Financial Statements  No. 9, Debt.)
   Amortization of financing costs. Notes to Consolidated Financial Statements  No. 9, Debt.)
  29




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##### Table of Contents



Other income (expense).
  Provision for income taxes.
 Notes to Consolidated Financial Statements  No. 4,
Litigation Settlement
  Liquidity and Capital Resources
  Cash flows from operating activities
   Cash flows from investing activities
  30




---



##### Table of Contents



Cash flows from financing activities
      If the market price of
    
    The number of shares issued uponour stock is:
    
    full conversion would be (1):$25.00
    
    4.3 million$30.00
    
    6.8 million$35.00
    
    8.6 million
 
 (1)
    
    The formula to calculate the shares issued upon full conversion of our Convertible Notes is as follows: (
    
    $373.8 million principal
    
    x
    
    Market price of stock at time of conversion
    
    
    
    $373.8 million
principal
    
    )
    
    =
    
    Shares issued
upon full
conversion$19.406 conversion priceMarket price of stock at time of conversion
   31




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##### Table of Contents



The number of common share equivalentsIf the average market price of
    
    potentially included in the computation of
    
    Percentour stock is:
    
    diluted EPS would be (1):
    
    Dilution (2)$19.00
    
    
    
    
    (anti-dilutive)
    
    
    0.0
    %$25.00
    
    
    4.3
    
    million
    
    
    5.6
    %$30.00
    
    
    6.8
    
    million
    
    
    8.6
    %$35.00
    
    
    8.6
    
    million
    
    
    10.6
    %
 
 (1)
    
    Common share equivalents are calculated using the treasury stock method, in accordance with EITF 90-19,
Convertible Bonds with Issuer Option to Settle for Cash upon Conversion.(2)
    
    The percent dilution is based on 72,258,512 outstanding shares as of December 29, 2007.     32




---



##### Table of Contents



For The Fiscal
    
    Original
    
    AmendedFinancial
    
    Periods Ending
    
    Required
    
    RequiredCovenants
    
    Closest to
    
    Ratio
    
    RatioTotal Leverage Ratio
    
    12/31/07
    
    5.00:1.00 (maximum)
    
    5.50:1.00 (maximum)3/31/08
    
    4.75:1.00
    
    5.25:1.006/30/08
    
    4.50:1.00
    
    5.00:1.009/30/08
    
    4.25:1.00
    
    4.75:1.0012/31/08
    
    4.00:1.00
    
    4.50:1.00Reductions continuing until 6/30/10
    
    3.00:1.00
    
    3.00:1.00Senior Leverage Ratio
    
    12/31/07
    
    2.50:1.00 (maximum)
    
    2.50:1.00 (maximum)3/31/08
    
    2.50:1.00
    
    2.50:1.006/30/08
    
    2.50:1.00
    
    2.50:1.009/30/08
    
    2.50:1.00
    
    2.50:1.0012/31/08
    
    2.25:1.00
    
    2.25:1.00Reductions continuing until 3/31/09
    
    2.00:1.00
    
    2.00:1.00Interest Coverage Ratio
    
    12/31/07
    
    3.50:1.00 (minimum)
    
    3.25:1.00 (minimum)3/31/08
    
    3.50:1.00
    
    3.25:1.006/30/08
    
    3.50:1.00
    
    3.50:1.009/30/08
    
    3.75:1.00
    
    3.50:1.0012/31/08
    
    3.75:1.00
    
    3.75:1.00Increases continuing until 9/30/09
    
    4.00:1.00
    
    4.00:1.00Fixed Charge Coverage Ratio
    
    12/31/07
    
    1.25:1.00 (minimum)
    
    1.25:1.00 (minimum)3/31/08
    
    1.25:1.00
    
    1.25:1.006/30/08
    
    1.25:1.00
    
    1.25:1.009/30/08
    
    1.50:1.00
    
    1.40:1.0012/31/08
    
    1.50:1.00
    
    1.40:1.00Increases continuing until 3/31/09
    
    1.50:1.00
    
    1.50:1.00Maximum Capital Expenditures
    
    12/31/07
    
    $15.0 million
    
    $16.5 million12/31/08
    
    $15.0 million
    
    $15.0 million
  Financial Covenant
    
    Required Covenant
    
    Actual ResultTotal Leverage Ratio (1)
    
    5.50:1.00 (maximum)
    
    
    5.30Senior Leverage Ratio (2)
    
    2.50:1.00 (maximum)
    
    
    2.37Interest Coverage Ratio (3)
    
    3.25:1.00 (minimum)
    
    
    3.47Fixed Charge Coverage Ratio (4)
    
    1.25:1.00 (minimum)
    
    
    2.65Maximum Capital Expenditures (5)
    
    $16.5 million
    
    $14.2 million
 33




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##### Table of Contents



(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 EBITDA for the trailing four quarters to interest expense for such period.(4)
    
    Ratio of Consolidated 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)
    
    Includes expenditures of $6.3 million for the planned expansion of our corporate headquarters
building and $3.2 million for the implementation of a new enterprise resource planning system.
These projects were completed in the second quarter of 2007.   Notes to Consolidated Financial Statements 
No. 9, Debt.
 Contractual Obligations
  Less than
    
    
    
    
    
    
    
    
    
    More than(in millions)
    
    Total
    
    1 year
    
    1-3 years
    
    3-5 years
    
    5 yearsLong-term debt obligations
    
    $
    687.8
    
    
    $
    4.0
    
    
    $
    6.3
    
    
    $
    303.7
    
    
    $
    373.8Operating lease commitments
    
    
    9.4
    
    
    
    2.7
    
    
    
    4.0
    
    
    
    2.5
    
    
    
    0.2Litigation settlement
    
    
    14.3
    
    
    
    14.3
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    711.5
    
    
    $
    21.0
    
    
    $
    10.3
    
    
    $
    306.2
    
    
    $
    374.0
 TherMatrx
   34




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##### Table of Contents



Ovion
      35




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##### Table of Contents



Critical Accounting Policies and Estimates
  Adoption of SFAS 123(R), Share-Based Payment
 Share-Based Payment
  Notes to Consolidated
Financial Statements  No. 10 Stock-Based Compensation
 Revenue Recognition Policy
  Revenue Arrangements with Multiple Deliverables
 Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of
the Vendors Products)
 36




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##### Table of Contents



Allowance for Doubtful Accounts
   Inventories
  Warranty Accrual / Allowance
   Product Liability Accrual
  37




---



##### Table of Contents



Operating Leases
  Valuation of IPR&D, Goodwill and Other Intangible Assets
      38




---



##### Table of Contents



Income Taxes
    Notes to Consolidated Financial Statements  No. 15,
Income Taxes.
 Accounting for Uncertainty in Income
Taxes  an interpretation of FASB Statement No. 109, Accounting for Income Taxes
  Recent Accounting Pronouncements
 Notes to Consolidated Financial Statements  No.1, Business Description and Significant
Accounting Policies.
 
 Item 7A. Quantitative and Qualitative Disclosures about Market Risk
 Interest Rates
  39




---



##### Table of Contents



Currency
    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
  40




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##### Table of Contents



Managements Report on Internal Control over Financial Reporting
   Internal Control  Integrated
Framework ,
  
 Item 9B. Other Information
  41




---



##### 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
  42




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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 December 29, 2007,
December 30, 2006, and December 31, 2005
    
    
    F-3Consolidated Balance Sheets as of December 29, 2007 and December 30, 2006
    
    
    F-4Consolidated Statements of Changes in Stockholders Equity for the
years ended December 29, 2007, December 30, 2006, and December 31, 2005
    
    
    F-5Consolidated Statements of Cash Flows for the years ended December 29, 2007,
December 30, 2006, and December 31, 2005
    
    
    F-6Notes to Consolidated Financial Statements for the years ended December 29, 2007,
December 30, 2006, and December 31, 2005
    
    
    F-7
 (b) Financial Statement Schedule
  Schedule II  Valuation and Qualifying Accounts
    
    
    F-47
 (c) Exhibits
   1.
    
    Employment Agreement, dated April 26, 2004, between Martin J. Emerson and American
Medical Systems, Inc.2.
    
    First Amendment to Employment Agreement, dated January 5, 2005, between Martin J.
Emerson and American Medical Systems, Inc.3.
    
    Second Amendment to Employment Agreement, dated January 4, 2008, between Martin J.
Emerson and American Medical Systems, Inc.4.
    
    Employment Agreement, dated January 1, 2003, between Ross Longhini and American
Medical Systems, Inc.5.
    
    Employment Agreement, dated December 18, 2006, between Mark A. Heggestad and
American Medical Systems, Inc.6.
    
    Employment Offer Letter, dated March 31, 2005, between Stephen J. McGill and
American Medical Systems, Inc.7.
    
    Employment Agreement, dated April 7, 2005, between Stephen J. McGill and American
Medical Systems, Inc.
 43




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##### Table of Contents



8.
    
    Separation Agreement, executed January 18, 2008, between Martin J. Emerson and
American Medical Systems, Inc.9.
    
    2000 Equity Incentive Plan, as amended.10.
    
    Form of Incentive Stock Option Agreement under the 2000 Equity Incentive Plan, as amended.11.
    
    Form of Non-Qualified Stock Option Agreement under the 2000 Equity Incentive Plan,
as amended.12.
    
    Employee Stock Purchase Plan, as amended.13.
    
    2005 Stock Incentive Plan, as amended.14.
    
    Form of Stock Option Certificate for Directors under the 2005 Stock Incentive Plan,
as amended.15.
    
    Form of Stock Option Certificate for Executive Officers under the 2005 Stock
Incentive Plan, as amended.16.
    
    Form of Notice of Amendment to Stock Option Certificate/Agreement for Executive
Officers of American Medical Systems Holdings, Inc.17.
    
    Form of Indemnification Agreement with Executive Officers and Directors.18.
    
    Form of Change in Control Severance Agreement.19.
    
    Summary of Director Compensation.
 44




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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 of American Medical Systems Holdings, Inc.
    Share-Based Payments
 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 of American Medical Systems Holdings, Inc.
 Internal Control  Integrated Framework
       
 F-2




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##### Table of Contents



American Medical Systems Holdings, Inc.
Consolidated Statements of Operations
 2007
    
    
    2006
    
    
    2005Net sales
    
    $
    463,928
    
    
    $
    358,318
    
    
    $
    262,591Cost of sales
    
    
    105,592
    
    
    
    68,872
    
    
    
    46,111Gross profit
    
    
    358,336
    
    
    
    289,446
    
    
    
    216,480Operating expensesMarketing and selling
    
    
    169,495
    
    
    
    123,204
    
    
    
    92,001Research and development
    
    
    43,315
    
    
    
    33,877
    
    
    
    20,966In-process research and development
    
    
    7,500
    
    
    
    94,035
    
    
    
    9,220General and administrative
    
    
    43,070
    
    
    
    34,417
    
    
    
    21,713Integration costs
    
    
    1,103
    
    
    
    1,712
    
    
    
    Litigation settlement
    
    
    14,303
    
    
    
    
    
    
    
    Amortization of intangibles
    
    
    18,264
    
    
    
    12,393
    
    
    
    7,884Total operating expenses
    
    
    297,050
    
    
    
    299,638
    
    
    
    151,784Operating income (expense)
    
    
    61,286
    
    
    
    (10,192
    )
    
    
    64,696Other (expense) incomeRoyalty income
    
    
    5,028
    
    
    
    1,701
    
    
    
    1,929Interest income
    
    
    1,153
    
    
    
    2,754
    
    
    
    1,246Interest expense
    
    
    (37,760
    )
    
    
    (18,395
    )
    
    
    (217
    )Amortization of financing costs
    
    
    (3,273
    )
    
    
    (8,302
    )
    
    
    Other income (expense)
    
    
    3,071
    
    
    
    283
    
    
    
    (1,429
    )Total other (expense) income
    
    
    (31,781
    )
    
    
    (21,959
    )
    
    
    1,529Income (loss) from continuing operations before income taxes
    
    
    29,505
    
    
    
    (32,151
    )
    
    
    66,225Provision for income taxes
    
    
    15,914
    
    
    
    11,731
    
    
    
    26,950Net income (loss) from continuing operations
    
    
    13,591
    
    
    
    (43,882
    )
    
    
    39,275Loss from discontinued operations, net of tax benefit of $0.4
million and $2.7 million for 2007 and 2006, respectively
    
    
    (691
    )
    
    
    (5,435
    )
    
    
    Net income (loss)
    
    $
    12,900
    
    
    $
    (49,317
    )
    
    $
    39,275Net income (loss) per shareBasic net earnings (loss) from continuing operations
    
    $
    0.19
    
    
    $
    (0.63
    )
    
    $
    0.57Discontinued operations, net of tax
    
    
    (0.01
    )
    
    
    (0.08
    )
    
    
    Basic net earnings (loss)
    
    $
    0.18
    
    
    $
    (0.70
    )
    
    $
    0.57Diluted net earnings (loss) from continuing operations
    
    $
    0.18
    
    
    $
    (0.63
    )
    
    $
    0.55Discontinued operations, net of tax
    
    
    (0.01
    )
    
    
    (0.08
    )
    
    
    Diluted net earnings (loss)
    
    $
    0.18
    
    
    $
    (0.70
    )
    
    $
    0.55Weighted average common shares used in calculationBasic
    
    
    72,061
    
    
    
    70,152
    
    
    
    68,926Diluted
    
    
    73,593
    
    
    
    70,152
    
    
    
    71,682
 F-3




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##### Table of Contents



American Medical Systems Holdings, Inc.
Consolidated Balance Sheets
 December 29, 2007
    
    
    December 30, 2006AssetsCurrent assetsCash and cash equivalents
    
    $
    34,044
    
    
    $
    29,051Short term investments
    
    
    1,137
    
    
    
    490Accounts receivable, net
    
    
    106,457
    
    
    
    91,938Inventories, net
    
    
    60,707
    
    
    
    37,974Deferred income taxes
    
    
    13,105
    
    
    
    11,065Other current assets
    
    
    9,935
    
    
    
    21,572Assets of discontinued operations
    
    
    
    
    
    
    46,078Total current assets
    
    
    225,385
    
    
    
    238,168Property, plant and equipment, net
    
    
    53,126
    
    
    
    47,035Goodwill
    
    
    690,478
    
    
    
    677,053Developed and core technology, net
    
    
    94,452
    
    
    
    110,634Other intangibles, net
    
    
    49,337
    
    
    
    50,022Other long-term assets, net
    
    
    3,655
    
    
    
    4,179Total assets
    
    $
    1,116,433
    
    
    $
    1,127,091Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    13,364
    
    
    $
    15,430Accrued compensation expenses
    
    
    19,258
    
    
    
    17,019Accrued warranty expense
    
    
    3,001
    
    
    
    2,715Other accrued expenses
    
    
    46,464
    
    
    
    47,891Liabilities of discontinued operations
    
    
    
    
    
    
    19,478Total current liabilities
    
    
    82,087
    
    
    
    102,533Long-term debt
    
    
    666,234
    
    
    
    713,456Deferred income taxes
    
    
    23,333
    
    
    
    22,296Long-term income taxes payable
    
    
    13,414
    
    
    
    4,584Long-term employee benefit obligations
    
    
    3,175
    
    
    
    3,060Total liabilities
    
    
    788,243
    
    
    
    845,929Stockholders equityCommon stock, par value $.01 per share; authorized 220,000,000 shares;
issued and outstanding: 72,258,512 shares at December 29, 2007
and 71,059,312 shares at December 30, 2006
    
    
    723
    
    
    
    711Additional paid-in capital
    
    
    284,751
    
    
    
    253,127Accumulated other comprehensive income
    
    
    6,910
    
    
    
    4,155Retained earnings
    
    
    35,806
    
    
    
    23,169Total stockholders equity
    
    
    328,190
    
    
    
    281,162Total liabilities and stockholders equity
    
    $
    1,116,433
    
    
    $
    1,127,091
 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
 AccumulatedAdditional
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Paid-In
    
    
    Retained
    
    
    ComprehensiveShares
    
    
    Par Value
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    TotalBalances at January 1, 2005
    
    
    67,479
    
    
    $
    675
    
    
    $
    210,163
    
    
    $
    33,211
    
    
    $
    5,123
    
    
    $
    249,172Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,275
    
    
    
    
    
    
    
    39,275Foreign currency translation adjustment, net of tax
benefit of $0.6 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,709
    )
    
    
    (2,709
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,566Issuance of common stock:Stock options exercised
    
    
    1,958
    
    
    
    19
    
    
    
    10,165
    
    
    
    
    
    
    
    
    
    
    
    10,184Employee stock purchase plan
    
    
    88
    
    
    
    1
    
    
    
    1,354
    
    
    
    
    
    
    
    
    
    
    
    1,355Compensation cost of stock options issued to non-employees
    
    
    
    
    
    
    
    
    
    
    189
    
    
    
    
    
    
    
    
    
    
    
    189Income tax benefit from stock option plans
    
    
    
    
    
    
    
    
    
    
    5,413
    
    
    
    
    
    
    
    
    
    
    
    5,413Balances at December 31, 2005
    
    
    69,525
    
    
    
    695
    
    
    
    227,284
    
    
    
    72,486
    
    
    
    2,414
    
    
    
    302,879Comprehensive incomeNet loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49,317
    )
    
    
    
    
    
    
    (49,317
    )Foreign currency translation adjustment, net of tax
of $0.4 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,593
    
    
    
    1,593Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (47,724
    )Issuance of common stock:Stock options exercised
    
    
    1,414
    
    
    
    15
    
    
    
    8,154
    
    
    
    
    
    
    
    
    
    
    
    8,169Employee stock purchase plan
    
    
    120
    
    
    
    1
    
    
    
    1,764
    
    
    
    
    
    
    
    
    
    
    
    1,765Stock-based compensation cost under Statement of
Financial Accounting Standard No. 123(R)
    
    
    
    
    
    
    
    
    
    
    10,014
    
    
    
    
    
    
    
    
    
    
    
    10,014Income tax benefit from stock option plans
    
    
    
    
    
    
    
    
    
    
    5,911
    
    
    
    
    
    
    
    
    
    
    
    5,911Adjustment to initially apply Statement of Financial
Accounting Standard No. 158, net of tax of $0.1
million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148
    
    
    
    148Balances at December 30, 2006
    
    
    71,059
    
    
    
    711
    
    
    
    253,127
    
    
    
    23,169
    
    
    
    4,155
    
    
    
    281,162Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,900
    
    
    
    
    
    
    
    12,900Foreign 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
    )Prior service cost for post-retirement plan, net of tax of $0.0 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24
    )
    
    
    (24
    )Net loss for post-retirement plan, net of tax of $0.0 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39
    )
    
    
    (39
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,655Issuance 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 (see Note 2, Acquisitions)
    
    
    372
    
    
    
    4
    
    
    
    7,371
    
    
    
    
    
    
    
    
    
    
    
    7,375Stock-based compensation cost under Statement of
Financial Accounting Standard No. 123(R)
    
    
    
    
    
    
    
    
    
    
    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
    
    
    $
    284,751
    
    
    $
    35,806
    
    
    $
    6,910
    
    
    $
    328,190
 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 Flow
 2007
    
    2006
    
    2005Cash flows from operating activitiesNet income (loss)
    
    $
    12,900
    
    
    $
    (49,317
    )
    
    $
    39,275Loss from discontinued operations, net of tax benefit
    
    
    (691
    )
    
    
    (5,435
    )
    
    
    Income (loss) from continuing operations
    
    
    13,591
    
    
    
    (43,882
    )
    
    
    39,275Adjustments to reconcile net income (loss) from continuing operations
to net cash provided by operating activities:Depreciation
    
    
    8,587
    
    
    
    4,695
    
    
    
    5,135Loss on asset disposals
    
    
    26
    
    
    
    385
    
    
    
    601Amortization of intangibles
    
    
    18,264
    
    
    
    12,393
    
    
    
    7,884Amortization of deferred financing costs
    
    
    3,273
    
    
    
    1,347
    
    
    
    In-process research and development charges
    
    
    7,500
    
    
    
    94,035
    
    
    
    9,220Financing charges on credit facility
    
    
    
    
    
    
    6,955
    
    
    
    Non-cash deferred compensation
    
    
    
    
    
    
    
    
    
    
    189Excess tax benefit from exercise of stock options
    
    
    (215
    )
    
    
    (1,674
    )
    
    
    Tax benefit on exercised stock option arrangements
    
    
    731
    
    
    
    5,911
    
    
    
    5,413Change in net deferred income taxes
    
    
    11,977
    
    
    
    1,814
    
    
    
    882Stock based compensation
    
    
    12,398
    
    
    
    9,830
    
    
    
    Changes in operating assets and liabilities, net of acquired amounts:Accounts receivable
    
    
    (9,828
    )
    
    
    (22,218
    )
    
    
    (5,745
    )Inventories
    
    
    (30,516
    )
    
    
    (2,817
    )
    
    
    3,130Accounts payable and accrued expenses
    
    
    (3,868
    )
    
    
    23,863
    
    
    
    7,045Other assets
    
    
    15,831
    
    
    
    (16,583
    )
    
    
    (1,449
    )Net cash provided by operating activities
    
    
    47,751
    
    
    
    74,054
    
    
    
    71,580Cash flows from investing activitiesPurchase of property, plant and equipment
    
    
    (14,173
    )
    
    
    (21,923
    )
    
    
    (5,110
    )Purchase of business, net of cash acquired
    
    
    (781
    )
    
    
    (745,637
    )
    
    
    (81,516
    )Disposal of business
    
    
    22,116
    
    
    
    
    
    
    
    Purchase of investments in technology
    
    
    (7,500
    )
    
    
    (31,935
    )
    
    
    (1,620
    )Purchase of other intangibles
    
    
    (382
    )
    
    
    (2,050
    )
    
    
    Purchase of short-term investments
    
    
    (30,187
    )
    
    
    (155
    )
    
    
    (33,774
    )Sale of short-term investments
    
    
    29,570
    
    
    
    15,189
    
    
    
    33,743Net cash used in investing activities
    
    
    (1,337
    )
    
    
    (786,511
    )
    
    
    (88,277
    )Cash flows from financing activitiesProceeds from issuance of convertible notes, net of issuance costs
    
    
    
    
    
    
    361,185
    
    
    
    Proceeds from senior secured credit facility, net of issuance costs
    
    
    
    
    
    
    352,660
    
    
    
    Issuance of common stock
    
    
    10,830
    
    
    
    9,934
    
    
    
    11,539Excess tax benefit from exercise of stock options
    
    
    215
    
    
    
    1,674
    
    
    
    Proceeds from short-term borrowings
    
    
    
    
    
    
    25,000
    
    
    
    Repayments of short-term borrowings
    
    
    
    
    
    
    (25,000
    )
    
    
    Payments on long-term debt
    
    
    (50,069
    )
    
    
    (913
    )
    
    
    Financing charges paid on credit facility
    
    
    
    
    
    
    (6,955
    )
    
    
    Net cash (used in) provided by financing activities
    
    
    (39,024
    )
    
    
    717,585
    
    
    
    11,539Cash provided by (used in) continuing operations
    
    
    7,390
    
    
    
    5,128
    
    
    
    (5,158
    )Cash used in discontinued operationsOperating activities
    
    
    (691
    )
    
    
    (5,435
    )
    
    
    Cash used in discontinued operations
    
    
    (691
    )
    
    
    (5,435
    )
    
    
    Effect of currency exchange rates on cash
    
    
    (1,706
    )
    
    
    (1,527
    )
    
    
    354Net increase (decrease) in cash and cash equivalents
    
    
    4,993
    
    
    
    (1,834
    )
    
    
    (4,804
    )Cash and cash equivalents at beginning of period
    
    
    29,051
    
    
    
    30,885
    
    
    
    35,689Cash and cash equivalents at end of period
    
    $
    34,044
    
    
    $
    29,051
    
    
    $
    30,885Supplemental disclosureCash paid for interest
    
    $
    39,075
    
    
    $
    8,376
    
    
    $
    147Cash (refunded) paid for taxes
    
    
    (11,662
    )
    
    
    14,445
    
    
    
    15,036Stock 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



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Business Description and Significant Accounting Policies
 Business Description
  Note 3 Discontinued Operations and Sale of Aesthetics Business,
 Principles of Consolidation
  Accounting Periods
  Cash and Cash Equivalents
  Short-Term Investments
  December 29, 2007
    
    
    December 30, 2006Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesMutual fund shares and short term bonds with a
maturity of less than one year
    
    $
    633
    
    
    $
    
    
    
    $
    490
    
    
    $
    Publicly traded equity securities
    
    
    504
    
    
    
    696
    
    
    
    
    
    
    
    Total
    
    $
    1,137
    
    
    $
    696
    
    
    $
    490
    
    
    $
    
 Note 3, Discontinued Operations and Sale
of Aesthetics Business.
 F-7




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##### Table of Contents



Concentration of Risks
  Allowance for Doubtful Accounts
  Inventories
  Property, Plant and Equipment
  Asset class
    
    Useful livesBuilding
    
    15-20 yearsMachinery and equipment
    
    3-12 yearsFurniture, fixtures, and other
    
    3-12 yearsSoftware
    
    3-5 years
  In-Process Research and Development, Goodwill and Other Intangible Assets
   F-8




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##### Table of Contents



Goodwill and Other Intangible Assets
  Accounting for the Impairment and Disposal of
Long-Lived Assets
 Long-Lived Assets
 Accounting for the Impairment or
Disposal of Long-Lived Assets
 Revenue Recognition
  Revenue Arrangements with Multiple Deliverables
 F-9




---



##### Table of Contents



Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of
the Vendors Products)
  Royalty Income
  Research and Development
  Advertising and Promotional Costs
  Product Warranty Costs
   Product Liability
  Software Development Costs
 Accounting for Computer Software
Developed or Obtained for Internal Use.
 F-10




---



##### Table of Contents



Capitalized Interest
  Income Taxes
   Accounting for Uncertainty in
Income Taxes  an interpretation of FASB Statement No. 109, Accounting for Income Taxes.
 Foreign Currency Translation
  Derivatives and Hedging Activities
 Accounting for Derivative Instruments and Hedging Activities
 Use of Estimates
  Stock Based Compensation
 Note 10, Stock-Based Compensation,
 F-11




---



##### Table of Contents



Share-Based Payment, Accounting for Stock Issued to Employees, Accounting for
Stock-Based Compensation
  Net Income per Share
 Note 9, Debt.
   (in thousands, except per share data)
    
    2007
    
    2006
    
    2005Net income (loss) from continuing operations
    
    $
    13,591
    
    
    $
    (43,882
    )
    
    $
    39,275Weighted-average shares outstanding for basic net income per share
    
    
    72,061
    
    
    
    70,152
    
    
    
    68,926Dilutive effect of stock options and restricted shares
    
    
    1,532
    
    
    
    
    
    
    
    2,756Adjusted weighted-average shares outstanding and assumed conversions
for diluted net income (loss) per share
    
    
    73,593
    
    
    
    70,152
    
    
    
    71,682Net income (loss) per shareBasic net earnings (loss) from continuing operations
    
    $
    0.19
    
    
    
    ($0.63
    )
    
    $
    0.57Diluted net earnings (loss) from continuing operations
    
    $
    0.18
    
    
    
    ($0.63
    )
    
    $
    0.55
  Recent Accounting Pronouncements
 Fair Value Measurements. The Effective Date of FASB Statement No.
 F-12




---



##### Table of Contents



Accounting
for Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and
Development Activities
 Accounting for Collaborative Arrangements
 Business Combinations
 Reclassification
  2. Acquisitions
 Laserscope
     F-13




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##### Table of Contents



Note 3 Discontinued Operations and Sale of Aesthetics Business,
 Financing
 Note 9, Debt.
 Purchase Accounting
  (in thousands)
    
    AmountDeveloped and core technology
    
    $
    88,700Trademarks
    
    
    40,800In-process research and development
    
    
    62,100Assets sold, net of tax
    
    
    23,019Tangible assets acquired, net of liabilities assumed
    
    
    12,592Deferred tax liability on assets acquired, net of deferred tax assets
    
    
    (14,241
    )Goodwill
    
    
    516,847Estimated fair value of identifiable tangible and intangible assets
and goodwill, net of cash acquired and liabilites assumed
    
    $
    729,817
   Restructuring Costs
  F-14




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##### Table of Contents



Recognition of Liabilities in Connection with a
Purchase Business Combination
  Restructuring
    
    
    
    
    
    
    
    
    
    
    RestructuringLiability as of
    
    
    Adjustment to
    
    
    Cash Payments /
    
    
    Liability as of(in thousands)
    
    December 30, 2006
    
    
    Liability
    
    
    Settlements
    
    
    December 29, 2007Severance and benefits
    
    $
    7,204
    
    
    $
    (1,069
    )
    
    $
    (5,919
    )
    
    $
    216Contract terminations and other
    
    
    1,993
    
    
    
    6,978
    
    
    
    (5,067
    )
    
    
    3,904Total restructuring
    
    $
    9,197
    
    
    $
    5,909
    
    
    $
    (10,986
    )
    
    $
    4,120
 Integration Costs
   2006
    
    2005(in thousands except per share data)
    
    Reported
    
    Pro forma
    
    Reported
    
    Pro forma(Unaudited)
    
    
    
    
    
    (Unaudited)Revenues
    
    $
    358,318
    
    
    $
    406,658
    
    
    $
    262,591
    
    
    $
    353,393Net income (loss)
    
    $
    (49,317
    )
    
    $
    (25,814
    )
    
    $
    39,275
    
    
    $
    20,586Net income (loss) per share:Basic
    
    $
    (0.70
    )
    
    $
    (0.37
    )
    
    $
    0.57
    
    
    $
    0.30Diluted
    
    $
    (0.70
    )
    
    $
    (0.37
    )
    
    $
    0.55
    
    
    $
    0.29
  Solarant Medical, Inc .
  F-15




---



##### Table of Contents



(in thousands)
    
    AmountIn-process research and development (including $0.8 million in acquisition costs)
    
    $
    2,054Liabilities assumed, net of tangible assets acquired
    
    
    (88
    )Deferred tax asset acquired
    
    
    981Initial purchase price, net of cash acquired
    
    $
    2,947
 Goodwill and Other Intangible Assets
  BioControl Medical, Ltd.
  Goodwill and Other Intangible Assets
    F-16




---



##### Table of Contents



Ovion Inc .
  Ovion
   (in thousands)
    
    AmountIn-process research and development (including $0.7 million in acquisition costs)
    
    $
    13,554Intangible royalty agreement (including $0.2 million in acquisition costs)
    
    
    2,970Liabilities assumed, net of tangible assets acquired
    
    
    (732
    )Deferred tax liability on assets acquired
    
    
    (385
    )Purchase price, including earned contingent payments, net of cash acquired
    
    $
    15,407
 Goodwill and Other Intangible Assets,
  TherMatrx, Inc.
 TherMatrx
 F-17




---



##### Table of Contents



TherMatrx
  (in thousands)
    
    AmountDeveloped technology and other intangible assets
    
    $
    26,000Customer relationships
    
    
    5,000In-process research and development
    
    
    35,000Tangible assets acquired, net of liabilities assumed
    
    
    5,309Deferred tax liability on assets acquired
    
    
    (7,190
    )Goodwill
    
    
    70,134Purchase price, including earned contingent payments, net of cash acquired
    
    $
    134,253
   3. Discontinued Operations and Sale of Aesthetics Business
 Note 2, Acquisitions
   F-18




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##### Table of Contents



Accounting for Certain Investments in Debt and Equity Securities,
   (in thousands)
    
    2007
    
    2006Net sales
    
    $
    515
    
    
    $
    14,583Loss from discontinued operations before income taxes
    
    
    (1,075
    )
    
    
    (8,126
    )Income tax benefit
    
    
    384
    
    
    
    2,691Loss from discontinued operations, net of taxes
    
    $
    (691
    )
    
    $
    (5,435
    )
  Allocation of Interest to Discontinued Operations
   F-19




---



##### Table of Contents



Applying the Conditions in
Paragraph 42 of FASB Statement No. 144 in Determining Whether to Report Discontinued Operations
 4. Litigation settlements
 Her
Option
 F-20




---



##### Table of Contents



5. Balance Sheet Information
  2007
    
    2006Accounts receivableTrade accounts receivable
    
    $
    108,412
    
    
    $
    94,385Other receivables
    
    
    1,143
    
    
    
    668Allowance for doubtful accounts
    
    
    (3,098
    )
    
    
    (3,115
    )Net accounts receivable
    
    $
    106,457
    
    
    $
    91,938InventoriesRaw materials
    
    $
    21,335
    
    
    $
    13,321Work in process
    
    
    7,587
    
    
    
    10,878Finished goods
    
    
    34,673
    
    
    
    16,279Obsolescence allowance
    
    
    (2,888
    )
    
    
    (2,504
    )Net inventories
    
    $
    60,707
    
    
    $
    37,974Property, plant, and equipmentLand and building
    
    $
    39,129
    
    
    $
    24,338Machinery and equipment
    
    
    12,786
    
    
    
    25,323Construction in progress
    
    
    356
    
    
    
    15,181Software
    
    
    18,701
    
    
    
    9,747Furniture, fixtures, and other
    
    
    21,107
    
    
    
    4,131Accumulated depreciation
    
    
    (38,953
    )
    
    
    (31,685
    )Net property, plant, and equipment
    
    $
    53,126
    
    
    $
    47,035Accrued compensation expensesAccrued payroll
    
    $
    6,693
    
    
    $
    5,877Accrued bonuses
    
    
    4,498
    
    
    
    3,515Short-term benefit obligations
    
    
    2,639
    
    
    
    2,296Other accrued compensation
    
    
    5,428
    
    
    
    5,331Total accrued compensation expenses
    
    $
    19,258
    
    
    $
    17,019Other accrued expensesAccrued interest
    
    $
    9,968
    
    
    $
    10,903Accrued acquisition costs
    
    
    5,094
    
    
    
    18,270Accrued litigation settlements
    
    
    15,103
    
    
    
    800Accrued other
    
    
    16,299
    
    
    
    17,918Total other accrued expenses
    
    $
    46,464
    
    
    $
    47,891Long-term employee benefit obligationsAccumulated postretirement benefit obligation
    
    $
    3,046
    
    
    $
    2,907Other long-term benefit obligations
    
    
    129
    
    
    
    153Total long-term employee benefit obligations
    
    $
    3,175
    
    
    $
    3,060
 6. Goodwill and Intangible Assets
  (in thousands)
    
    2007
    
    2006Goodwill, beginning of the period
    
    $
    677,053
    
    
    $
    169,700Adjustments to goodwill from acquisitions
    
    
    11,865
    
    
    
    505,975Effect of currency translation
    
    
    1,560
    
    
    
    1,378Goodwill, end of the period
    
    $
    690,478
    
    
    $
    677,053
 F-21




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##### Table of Contents



Note 2, Acquisitions
   Weighted avg
    
    December 29, 2007
    
    December 30, 2006remaining life
    
    Gross carrying
    
    Accumulated
    
    Net book
    
    Gross carrying
    
    Accumulated
    
    Net book(in thousands)
    
    (years)
    
    amount
    
    amortization
    
    value
    
    amount
    
    amortization
    
    valueDeveloped and core technology
    
    
    7.0
    
    
    $
    137,553
    
    
    $
    (43,101
    )
    
    $
    94,452
    
    
    $
    137,553
    
    
    $
    (26,919
    )
    
    $
    110,634Other intangiblesAmortizedPatents
    
    
    7.8
    
    
    
    11,325
    
    
    
    (8,964
    )
    
    
    2,361
    
    
    
    10,127
    
    
    
    (8,761
    )
    
    
    1,366Licenses
    
    
    2.9
    
    
    
    9,158
    
    
    
    (6,507
    )
    
    
    2,651
    
    
    
    8,962
    
    
    
    (5,453
    )
    
    
    3,509Royalty agreement
    
    
    5.8
    
    
    
    2,970
    
    
    
    (767
    )
    
    
    2,203
    
    
    
    2,970
    
    
    
    (385
    )
    
    
    2,585Trademarks
    
    
    3.0
    
    
    
    2,208
    
    
    
    (886
    )
    
    
    1,322
    
    
    
    
    
    
    
    
    
    
    
    Total amortized other
intangible assets
    
    
    5.0
    
    
    
    25,661
    
    
    
    (17,124
    )
    
    
    8,537
    
    
    
    22,059
    
    
    
    (14,599
    )
    
    
    7,460UnamortizedTrademarks
    
    
    n/a
    
    
    
    40,800
    
    
    
    
    
    
    
    40,800
    
    
    
    42,562
    
    
    
    
    
    
    
    42,562Total other intangibles
    
    
    
    
    
    
    66,461
    
    
    
    (17,124
    )
    
    
    49,337
    
    
    
    64,621
    
    
    
    (14,599
    )
    
    
    50,022Total intangible assets
    
    
    
    
    
    $
    204,014
    
    
    $
    (60,225
    )
    
    $
    143,789
    
    
    $
    202,174
    
    
    $
    (41,518
    )
    
    $
    160,656
  Year
    
    Actual
    
    Expected2005
    
    $
    7,884
    
    
    $
    2006
    
    
    12,393
    
    
    
    2007
    
    
    18,264
    
    
    
    2008
    
    
    
    
    
    
    17,2352009
    
    
    
    
    
    
    17,0632010
    
    
    
    
    
    
    16,3072011
    
    
    
    
    
    
    15,5812012
    
    
    
    
    
    
    10,534
 7. Warranties
   F-22




---



##### Table of Contents



(in thousands)
    
    2007
    
    2006
    
    2005Balance, beginning of period
    
    $
    2,715
    
    
    $
    1,618
    
    
    $
    1,451Provisions for warranty
    
    
    5,844
    
    
    
    619
    
    
    
    599Warranty allowance from acquisition
    
    
    
    
    
    
    809
    
    
    
    Claims processed
    
    
    (5,558
    )
    
    
    (331
    )
    
    
    (432
    )Balance, end of period
    
    $
    3,001
    
    
    $
    2,715
    
    
    $
    1,618
 8. Credit Agreements
 Credit Agreement
 Note 9, Debt.
 Note 9, Debt
 Bridge Loan Commitment Fee
  9. Debt
 Senior Secured Credit Facility
    F-23




---



##### Table of Contents



Fiscal 2008
    
    $
    3,965Fiscal 2009
    
    
    3,172Fiscal 2010
    
    
    3,172Fiscal 2011
    
    
    77,711Fiscal 2012
    
    
    225,998
 F-24




---



##### Table of Contents



Amendment of Credit Facility
   Total Leverage RatioFiscal Quarter Ending
    
    
    12/31/07
    
    
    
    3/31/08
    
    
    
    6/30/08
    
    
    
    9/30/08
    
    
    
    12/31/08
    
    
    
    3/31/09
    
    
    
    6/30/09Original Covenant
    
    
    5.00
    
    
    
    4.75
    
    
    
    4.50
    
    
    
    4.25
    
    
    
    4.00
    
    
    
    4.00
    
    
    
    3.75Amended Covenant
    
    
    5.50
    
    
    
    5.25
    
    
    
    5.00
    
    
    
    4.75
    
    
    
    4.50
    
    
    
    4.25
    
    
    
    4.00Interest Coverage RatioFiscal Quarter Ending
    
    
    12/31/07
    
    
    
    3/31/08
    
    
    
    
    
    
    
    9/30/08Original Covenant
    
    
    3.50
    
    
    
    3.50
    
    
    
    
    
    
    
    3.75Amended Covenant
    
    
    3.25
    
    
    
    3.25
    
    
    
    
    
    
    
    3.50Fixed Charge Coverage
RatioFiscal Quarter Ending
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9/30/08
    
    
    
    12/31/08Original Covenant
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.50
    
    
    
    1.50Amended Covenant
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.40
    
    
    
    1.40Maximum Consolidated
Capital ExpendituresFiscal Year Ending
    
    
    12/31/07Original Limit
    
    $
    15.0MAmended Limit
    
    $
    16.5M
 Convertible Senior Subordinated Notes; Supplemental Guarantor Information
    F-25




---



##### Table of Contents



F-26




---



##### 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
    
    
    (525
    )
    
    
    (2,748
    )
    
    
    
    
    
    
    
    
    
    
    (3,273
    )Other income (expense)
    
    
    
    
    
    
    3,233
    
    
    
    (137
    )
    
    
    (25
    )
    
    
    3,071Total other (expense) income
    
    
    (12,446
    )
    
    
    (18,566
    )
    
    
    (739
    )
    
    
    (30
    )
    
    
    (31,781
    )(Loss) income from continuing operations
before income taxes
    
    
    (12,446
    )
    
    
    41,637
    
    
    
    1,607
    
    
    
    (1,293
    )
    
    
    29,505Provision for income taxes
    
    
    (4,730
    )
    
    
    20,524
    
    
    
    610
    
    
    
    (490
    )
    
    
    15,914Net (loss) income from continuing operations
    
    
    (7,716
    )
    
    
    21,113
    
    
    
    997
    
    
    
    (803
    )
    
    
    13,591Loss from discontinued operations, net of tax
    
    
    
    
    
    
    (691
    )
    
    
    
    
    
    
    
    
    
    
    (691
    )Equity in earnings of subsidiary
    
    
    21,419
    
    
    
    997
    
    
    
    
    
    
    
    (22,416
    )
    
    
    Net income
    
    $
    13,703
    
    
    $
    21,419
    
    
    $
    997
    
    
    $
    (23,219
    )
    
    $
    12,900
 F-27




---



##### Table of Contents



American Medical Systems Holdings, Inc.
Notes to Consolidated Financial Statements  (Continued)
Condensed Consolidating Statement of Operations
 Year Ended December 30, 2006AmericanMedical
    
    
    
    
    
    
    Non-Systems
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    ConsolidatedHoldings, Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalNet sales
    
    $
    
    
    
    $
    333,191
    
    
    $
    60,950
    
    
    $
    (35,823
    )
    
    $
    358,318Cost of sales
    
    
    
    
    
    
    69,178
    
    
    
    35,241
    
    
    
    (35,547
    )
    
    
    68,872Gross profit
    
    
    
    
    
    
    264,013
    
    
    
    25,709
    
    
    
    (276
    )
    
    
    289,446Operating expensesMarketing and selling
    
    
    
    
    
    
    100,040
    
    
    
    23,164
    
    
    
    
    
    
    
    123,204Research and development
    
    
    
    
    
    
    33,877
    
    
    
    
    
    
    
    
    
    
    
    33,877In-process research and development
    
    
    
    
    
    
    87,648
    
    
    
    6,387
    
    
    
    
    
    
    
    94,035General and administrative
    
    
    
    
    
    
    34,290
    
    
    
    127
    
    
    
    
    
    
    
    34,417Integration costs
    
    
    
    
    
    
    1,712
    
    
    
    
    
    
    
    
    
    
    
    1,712Amortization of intangibles
    
    
    
    
    
    
    9,033
    
    
    
    3,360
    
    
    
    
    
    
    
    12,393Total operating expenses
    
    
    
    
    
    
    266,600
    
    
    
    33,038
    
    
    
    
    
    
    
    299,638Operating loss
    
    
    
    
    
    
    (2,587
    )
    
    
    (7,329
    )
    
    
    (276
    )
    
    
    (10,192
    )Other (expense) incomeRoyalty income
    
    
    
    
    
    
    1,701
    
    
    
    
    
    
    
    
    
    
    
    1,701Interest income
    
    
    
    
    
    
    2,699
    
    
    
    55
    
    
    
    
    
    
    
    2,754Interest expense
    
    
    (6,291
    )
    
    
    (11,524
    )
    
    
    (580
    )
    
    
    
    
    
    
    (18,395
    )Amortization of financing costs
    
    
    (7,170
    )
    
    
    (1,132
    )
    
    
    
    
    
    
    
    
    
    
    (8,302
    )Other income (expense)
    
    
    
    
    
    
    (227
    )
    
    
    461
    
    
    
    49
    
    
    
    283Total other (expense) income
    
    
    (13,461
    )
    
    
    (8,483
    )
    
    
    (64
    )
    
    
    49
    
    
    
    (21,959
    )Loss from continuing operations before
income taxes
    
    
    (13,461
    )
    
    
    (11,070
    )
    
    
    (7,393
    )
    
    
    (227
    )
    
    
    (32,151
    )Provision for income taxes
    
    
    (4,966
    )
    
    
    17,151
    
    
    
    (371
    )
    
    
    (83
    )
    
    
    11,731Net loss from continuing operations
    
    
    (8,495
    )
    
    
    (28,221
    )
    
    
    (7,022
    )
    
    
    (144
    )
    
    
    (43,882
    )Loss from discontinued operations, net of tax
    
    
    
    
    
    
    (5,435
    )
    
    
    
    
    
    
    
    
    
    
    (5,435
    )Equity in (loss) earnings of subsidiary
    
    
    (40,678
    )
    
    
    (7,022
    )
    
    
    
    
    
    
    47,700
    
    
    
    Net (loss) income
    
    $
    (49,173
    )
    
    $
    (40,678
    )
    
    $
    (7,022
    )
    
    $
    47,556
    
    
    $
    (49,317
    )
 F-28




---



##### Table of Contents



American Medical Systems Holdings, Inc.
Notes to Consolidated Financial Statements  (Continued)
Condensed Consolidating Statement of Operations
 Year Ended December 31, 2005AmericanMedical
    
    
    
    
    
    
    Non-Systems
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    ConsolidatedHoldings, Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalNet sales
    
    $
    
    
    
    $
    242,827
    
    
    $
    49,510
    
    
    $
    (29,746
    )
    
    $
    262,591Cost of sales
    
    
    
    
    
    
    46,993
    
    
    
    28,349
    
    
    
    (29,231
    )
    
    
    46,111Gross profit
    
    
    
    
    
    
    195,834
    
    
    
    21,161
    
    
    
    (515
    )
    
    
    216,480Operating expensesMarketing and selling
    
    
    
    
    
    
    72,130
    
    
    
    19,871
    
    
    
    
    
    
    
    92,001Research and development
    
    
    
    
    
    
    20,966
    
    
    
    
    
    
    
    
    
    
    
    20,966In-process research and development
    
    
    
    
    
    
    
    
    
    
    9,220
    
    
    
    
    
    
    
    9,220General and administrative
    
    
    
    
    
    
    21,733
    
    
    
    (20
    )
    
    
    
    
    
    
    21,713Amortization of intangibles
    
    
    
    
    
    
    4,147
    
    
    
    3,737
    
    
    
    
    
    
    
    7,884Total operating expenses
    
    
    
    
    
    
    118,976
    
    
    
    32,808
    
    
    
    
    
    
    
    151,784Operating income (loss)
    
    
    
    
    
    
    76,858
    
    
    
    (11,647
    )
    
    
    (515
    )
    
    
    64,696Other (expense) incomeRoyalty income
    
    
    
    
    
    
    1,929
    
    
    
    
    
    
    
    
    
    
    
    1,929Interest income
    
    
    
    
    
    
    1,613
    
    
    
    54
    
    
    
    (421
    )
    
    
    1,246Interest expense
    
    
    
    
    
    
    (217
    )
    
    
    (421
    )
    
    
    421
    
    
    
    (217
    )Other income (expense)
    
    
    
    
    
    
    (1,228
    )
    
    
    (49
    )
    
    
    (152
    )
    
    
    (1,429
    )Total other (expense) income
    
    
    
    
    
    
    2,097
    
    
    
    (416
    )
    
    
    (152
    )
    
    
    1,529Income (loss) from continuing operations before
income taxes
    
    
    
    
    
    
    78,955
    
    
    
    (12,063
    )
    
    
    (667
    )
    
    
    66,225Provision for income taxes
    
    
    
    
    
    
    28,187
    
    
    
    (999
    )
    
    
    (238
    )
    
    
    26,950Net income (loss) from continuing operations
    
    
    
    
    
    
    50,768
    
    
    
    (11,064
    )
    
    
    (429
    )
    
    
    39,275Equity in earnings (loss) of subsidiaries
    
    
    39,704
    
    
    
    (11,064
    )
    
    
    
    
    
    
    (28,640
    )
    
    
    Net income (loss)
    
    $
    39,704
    
    
    $
    39,704
    
    
    $
    (11,064
    )
    
    $
    (29,069
    )
    
    $
    39,275
 F-29




---



##### Table of Contents



American Medical Systems Holdings, Inc.
Notes to Consolidated Financial Statements  (Continued)
Condensed Consolidating Balance Sheet
 As of December 29, 2007AmericanMedical
    
    
    
    
    
    
    Non-Systems
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    ConsolidatedHoldings, Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalAssetsCurrent assetsCash and cash equivalents
    
    $
    32
    
    
    $
    21,671
    
    
    $
    12,341
    
    
    $
    
    
    
    $
    34,044Short term investments
    
    
    
    
    
    
    792
    
    
    
    345
    
    
    
    
    
    
    
    1,137Accounts receivable, net
    
    
    637,000
    
    
    
    72,207
    
    
    
    34,094
    
    
    
    (636,844
    )
    
    
    106,457Inventories, net
    
    
    
    
    
    
    58,545
    
    
    
    7,314
    
    
    
    (5,152
    )
    
    
    60,707Deferred income taxes
    
    
    
    
    
    
    12,522
    
    
    
    583
    
    
    
    
    
    
    
    13,105Other current assets
    
    
    
    
    
    
    8,062
    
    
    
    1,873
    
    
    
    
    
    
    
    9,935Total current assets
    
    
    637,032
    
    
    
    173,799
    
    
    
    56,550
    
    
    
    (641,996
    )
    
    
    225,385Property, plant and equipment, net
    
    
    
    
    
    
    51,623
    
    
    
    1,503
    
    
    
    
    
    
    
    53,126Goodwill
    
    
    
    
    
    
    627,813
    
    
    
    86,686
    
    
    
    (24,021
    )
    
    
    690,478Developed and core technology, net
    
    
    
    
    
    
    74,173
    
    
    
    20,279
    
    
    
    
    
    
    
    94,452Other intangibles, net
    
    
    
    
    
    
    47,134
    
    
    
    2,203
    
    
    
    
    
    
    
    49,337Investment in subsidiaries
    
    
    80,318
    
    
    
    27,312
    
    
    
    
    
    
    
    (107,630
    )
    
    
    Other long-term assets, net
    
    
    1,346
    
    
    
    2,199
    
    
    
    110
    
    
    
    
    
    
    
    3,655Total assets
    
    $
    718,696
    
    
    $
    1,004,053
    
    
    $
    167,331
    
    
    $
    (773,647
    )
    
    $
    1,116,433Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    21,397
    
    
    $
    531,104
    
    
    $
    106,050
    
    
    $
    (645,187
    )
    
    $
    13,364Accrued compensation expenses
    
    
    
    
    
    
    16,419
    
    
    
    2,839
    
    
    
    
    
    
    
    19,258Accrued warranty expense
    
    
    
    
    
    
    3,001
    
    
    
    
    
    
    
    
    
    
    
    3,001Other accrued expenses
    
    
    6,005
    
    
    
    37,677
    
    
    
    2,782
    
    
    
    
    
    
    
    46,464Total current liabilities
    
    
    27,402
    
    
    
    588,201
    
    
    
    111,671
    
    
    
    (645,187
    )
    
    
    82,087Non-current liabilitiesLong term debt
    
    
    363,104
    
    
    
    303,130
    
    
    
    
    
    
    
    
    
    
    
    666,234Intercompany loans payable
    
    
    
    
    
    
    
    
    
    
    20,830
    
    
    
    (20,830
    )
    
    
    Deferred income taxes
    
    
    
    
    
    
    15,815
    
    
    
    7,518
    
    
    
    
    
    
    
    23,333Long-term income taxes payable
    
    
    
    
    
    
    13,414
    
    
    
    
    
    
    
    
    
    
    
    13,414Long-term employee benefit obligations
    
    
    
    
    
    
    3,175
    
    
    
    
    
    
    
    
    
    
    
    3,175Total non-current liabilities
    
    
    363,104
    
    
    
    335,534
    
    
    
    28,348
    
    
    
    (20,830
    )
    
    
    706,156Total liabilities
    
    
    390,506
    
    
    
    923,735
    
    
    
    140,019
    
    
    
    (666,017
    )
    
    
    788,243Stockholders equityCommon stock
    
    
    723
    
    
    
    
    
    
    
    9
    
    
    
    (9
    )
    
    
    723Additional paid-in capital
    
    
    284,751
    
    
    
    3,424
    
    
    
    75,683
    
    
    
    (79,107
    )
    
    
    284,751Accumulated other comprehensive income
    
    
    6,910
    
    
    
    242
    
    
    
    7,462
    
    
    
    (7,704
    )
    
    
    6,910Retained earnings (deficit)
    
    
    35,806
    
    
    
    76,652
    
    
    
    (55,842
    )
    
    
    (20,810
    )
    
    
    35,806Total stockholders equity
    
    
    328,190
    
    
    
    80,318
    
    
    
    27,312
    
    
    
    (107,630
    )
    
    
    328,190Total liabilities and stockholders equity
    
    $
    718,696
    
    
    $
    1,004,053
    
    
    $
    167,331
    
    
    $
    (773,647
    )
    
    $
    1,116,433
 F-30




---



##### Table of Contents



American Medical Systems Holdings, Inc.
Notes to Consolidated Financial Statements  (Continued)
Condensed Consolidating Balance Sheet
 As of December 30, 2006AmericanMedical
    
    
    
    
    
    
    Non-Systems
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    ConsolidatedHoldings, Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalAssetsCurrent assetsCash and cash equivalents
    
    $
    1,138
    
    
    $
    22,905
    
    
    $
    5,008
    
    
    $
    
    
    
    $
    29,051Short term investments
    
    
    
    
    
    
    274
    
    
    
    216
    
    
    
    
    
    
    
    490Accounts receivable, net
    
    
    606,821
    
    
    
    71,346
    
    
    
    20,520
    
    
    
    (606,749
    )
    
    
    91,938Inventories, net
    
    
    
    
    
    
    36,472
    
    
    
    5,592
    
    
    
    (4,090
    )
    
    
    37,974Deferred income taxes
    
    
    
    
    
    
    10,608
    
    
    
    457
    
    
    
    
    
    
    
    11,065Other current assets
    
    
    4,965
    
    
    
    14,544
    
    
    
    2,220
    
    
    
    (157
    )
    
    
    21,572Assets of discontinued operations
    
    
    
    
    
    
    46,078
    
    
    
    
    
    
    
    
    
    
    
    46,078Total current assets
    
    
    612,924
    
    
    
    202,227
    
    
    
    34,013
    
    
    
    (610,996
    )
    
    
    238,168Property, plant and equipment, net
    
    
    
    
    
    
    46,454
    
    
    
    581
    
    
    
    
    
    
    
    47,035Goodwill
    
    
    
    
    
    
    593,641
    
    
    
    83,933
    
    
    
    (521
    )
    
    
    677,053Developed and core technology, net
    
    
    
    
    
    
    86,601
    
    
    
    24,033
    
    
    
    
    
    
    
    110,634Other intangibles, net
    
    
    
    
    
    
    71,591
    
    
    
    1,931
    
    
    
    (23,500
    )
    
    
    50,022Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    1,804
    
    
    
    (1,804
    )
    
    
    Investment in subsidiaries
    
    
    59,073
    
    
    
    14,449
    
    
    
    
    
    
    
    (73,522
    )
    
    
    Other long-term assets, net
    
    
    1,329
    
    
    
    2,689
    
    
    
    161
    
    
    
    
    
    
    
    4,179Total assets
    
    $
    673,326
    
    
    $
    1,017,652
    
    
    $
    146,456
    
    
    $
    (710,343
    )
    
    $
    1,127,091Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    23,259
    
    
    $
    508,468
    
    
    $
    96,553
    
    
    $
    (612,850
    )
    
    $
    15,430Accrued compensation expenses
    
    
    
    
    
    
    15,433
    
    
    
    1,586
    
    
    
    
    
    
    
    17,019Accrued warranty expense
    
    
    
    
    
    
    2,715
    
    
    
    
    
    
    
    
    
    
    
    2,715Income taxes payable
    
    
    
    
    
    
    
    
    
    
    240
    
    
    
    (240
    )
    
    
    Other accrued expenses
    
    
    6,175
    
    
    
    39,835
    
    
    
    1,881
    
    
    
    
    
    
    
    47,891Liabilities of discontinued operations
    
    
    
    
    
    
    19,478
    
    
    
    
    
    
    
    
    
    
    
    19,478Total current liabilities
    
    
    29,434
    
    
    
    585,929
    
    
    
    100,260
    
    
    
    (613,090
    )
    
    
    102,533Non-current liabilitiesLong term debt
    
    
    362,730
    
    
    
    350,726
    
    
    
    
    
    
    
    
    
    
    
    713,456Intercompany loans payable
    
    
    
    
    
    
    
    
    
    
    21,927
    
    
    
    (21,927
    )
    
    
    Deferred income taxes
    
    
    
    
    
    
    14,280
    
    
    
    9,820
    
    
    
    (1,804
    )
    
    
    22,296Long-term income taxes payable
    
    
    
    
    
    
    4,584
    
    
    
    
    
    
    
    
    
    
    
    4,584Long-term employee benefit obligations
    
    
    
    
    
    
    3,060
    
    
    
    
    
    
    
    
    
    
    
    3,060Total non-current liabilities
    
    
    362,730
    
    
    
    372,650
    
    
    
    31,747
    
    
    
    (23,731
    )
    
    
    743,396Total liabilities
    
    
    392,164
    
    
    
    958,579
    
    
    
    132,007
    
    
    
    (636,821
    )
    
    
    845,929Stockholders equityCommon stock
    
    
    711
    
    
    
    
    
    
    
    9
    
    
    
    (9
    )
    
    
    711Additional paid-in capital
    
    
    253,127
    
    
    
    3,431
    
    
    
    67,332
    
    
    
    (70,763
    )
    
    
    253,127Accumulated other comprehensive income
    
    
    4,155
    
    
    
    146
    
    
    
    4,287
    
    
    
    (4,433
    )
    
    
    4,155Retained earnings (deficit)
    
    
    23,169
    
    
    
    55,496
    
    
    
    (57,179
    )
    
    
    1,683
    
    
    
    23,169Total stockholders equity
    
    
    281,162
    
    
    
    59,073
    
    
    
    14,449
    
    
    
    (73,522
    )
    
    
    281,162Total liabilities and stockholders equity
    
    $
    673,326
    
    
    $
    1,017,652
    
    
    $
    146,456
    
    
    $
    (710,343
    )
    
    $
    1,127,091
 F-31




---



##### 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-32




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##### Table of Contents



American Medical Systems Holdings, Inc.
Notes to Consolidated Financial Statements  (Continued)
Condensed Consolidating Statement of Cash Flows
 Year Ended December 30, 2006AmericanMedical
    
    
    
    
    
    Non-Systems
    
    Guarantor
    
    Guarantor
    
    
    
    
    
    ConsolidatedHoldings, Inc.
    
    Subsidiaries
    
    Subsidiaries
    
    Eliminations
    
    TotalCash flows from operating activitiesNet cash (used in) provided by operating activities
    
    $
    (5,082
    )
    
    $
    44,372
    
    
    $
    34,764
    
    
    $
    
    
    
    $
    74,054Cash flows from investing activitiesPurchase of property, plant and equipment
    
    
    
    
    
    
    (22,155
    )
    
    
    232
    
    
    
    
    
    
    
    (21,923
    )Purchase of business, net of cash acquired
    
    
    
    
    
    
    (718,555
    )
    
    
    (27,082
    )
    
    
    
    
    
    
    (745,637
    )Purchase of investments in technology
    
    
    
    
    
    
    (25,548
    )
    
    
    (6,387
    )
    
    
    
    
    
    
    (31,935
    )Purchase of other intangibles
    
    
    
    
    
    
    (2,050
    )
    
    
    
    
    
    
    
    
    
    
    (2,050
    )Purchase of short term investments
    
    
    
    
    
    
    (145
    )
    
    
    (10
    )
    
    
    
    
    
    
    (155
    )Sale of short term investments
    
    
    
    
    
    
    15,175
    
    
    
    14
    
    
    
    
    
    
    
    15,189Net cash used in investing activities
    
    
    
    
    
    
    (753,278
    )
    
    
    (33,233
    )
    
    
    
    
    
    
    (786,511
    )Cash flows from financing activitiesProceeds from issuance of convertible notes,
net of issuance costs
    
    
    361,185
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    361,185Proceeds from senior secured credit facility,
net of issuance costs
    
    
    
    
    
    
    352,660
    
    
    
    
    
    
    
    
    
    
    
    352,660Intercompany notes
    
    
    (361,185
    )
    
    
    363,748
    
    
    
    (2,563
    )
    
    
    
    
    
    
    Issuance of common stock
    
    
    9,934
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,934Excess tax benefit from exercise of stock options
    
    
    1,674
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,674Proceeds from short-term borrowings
    
    
    21,000
    
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    25,000Repayments of short-term borrowings
    
    
    (21,000
    )
    
    
    (4,000
    )
    
    
    
    
    
    
    
    
    
    
    (25,000
    )Payments on long-term debt
    
    
    
    
    
    
    (913
    )
    
    
    
    
    
    
    
    
    
    
    (913
    )Financing charges paid on credit facility
    
    
    (6,955
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,955
    )Net cash provided by (used in) financing activities
    
    
    4,653
    
    
    
    715,495
    
    
    
    (2,563
    )
    
    
    
    
    
    
    717,585Cash used in discontinued operationsOperating activities
    
    
    
    
    
    
    (5,435
    )
    
    
    
    
    
    
    
    
    
    
    (5,435
    )Net cash used in discontinued operations
    
    
    
    
    
    
    (5,435
    )
    
    
    
    
    
    
    
    
    
    
    (5,435
    )Effect of exchange rates on cash
    
    
    
    
    
    
    
    
    
    
    (1,527
    )
    
    
    
    
    
    
    (1,527
    )Net (decrease) increase in cash and cash equivalents
    
    
    (429
    )
    
    
    1,154
    
    
    
    (2,559
    )
    
    
    
    
    
    
    (1,834
    )Cash and cash equivalents at beginning of period
    
    
    1,567
    
    
    
    21,751
    
    
    
    7,567
    
    
    
    
    
    
    
    30,885Cash and cash equivalents at end of period
    
    $
    1,138
    
    
    $
    22,905
    
    
    $
    5,008
    
    
    $
    
    
    
    $
    29,051
 F-33




---



##### Table of Contents



American Medical Systems Holdings, Inc.
Notes to Consolidated Financial Statements  (Continued)
Condensed Consolidating Statement of Cash Flows
 Year Ended December 31, 2005AmericanMedical
    
    
    
    
    
    
    Non-Systems
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    ConsolidatedHoldings, Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalCash flows from operating activitiesNet cash (used in) provided by operating activities
    
    $
    (11,277
    )
    
    $
    84,491
    
    
    $
    (1,634
    )
    
    $
    
    
    
    $
    71,580Cash flows from investing activitiesPurchase of property, plant and equipment
    
    
    
    
    
    
    (5,099
    )
    
    
    (11
    )
    
    
    
    
    
    
    (5,110
    )Purchase of business, net of cash acquired
    
    
    
    
    
    
    (81,516
    )
    
    
    
    
    
    
    
    
    
    
    (81,516
    )Purchase of investments in technology
    
    
    
    
    
    
    (1,620
    )
    
    
    
    
    
    
    
    
    
    
    (1,620
    )Purchase of short term investments
    
    
    
    
    
    
    (33,754
    )
    
    
    (20
    )
    
    
    
    
    
    
    (33,774
    )Sale of short term investments
    
    
    
    
    
    
    33,342
    
    
    
    401
    
    
    
    
    
    
    
    33,743Net cash (used in) provided by investing activities
    
    
    
    
    
    
    (88,647
    )
    
    
    370
    
    
    
    
    
    
    
    (88,277
    )Cash flows from financing activitiesIssuance of common stock
    
    
    11,539
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,539Intercompany notes
    
    
    
    
    
    
    382
    
    
    
    (382
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    11,539
    
    
    
    382
    
    
    
    (382
    )
    
    
    
    
    
    
    11,539Effect of exchange rates on cash
    
    
    
    
    
    
    
    
    
    
    354
    
    
    
    
    
    
    
    354Net increase (decrease) in cash and cash equivalents
    
    
    262
    
    
    
    (3,774
    )
    
    
    (1,292
    )
    
    
    
    
    
    
    (4,804
    )Cash and cash equivalents at beginning of period
    
    
    1,305
    
    
    
    25,525
    
    
    
    8,859
    
    
    
    
    
    
    
    35,689Cash and cash equivalents at end of period
    
    $
    1,567
    
    
    $
    21,751
    
    
    $
    7,567
    
    
    $
    
    
    
    $
    30,885
 10. Stock-Based Compensation
 Note 1, Business Description and Significant Accounting Policies, Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation
 Share-Based Payment
  F-34




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##### Table of Contents



Year Ended
    
    Year Ended(in thousands)
    
    December 29, 2007
    
    December 30, 2006Stock-option awards
    
    $
    9,574
    
    
    $
    9,169Restricted stock awards
    
    
    2,228
    
    
    
    136Employee stock purchase plan
    
    
    596
    
    
    
    525Total share-based compensation expense
    
    $
    12,398
    
    
    $
    9,830
  Year Ended
    
    Year Ended(in thousands)
    
    December 29, 2007
    
    December 30, 2006Cost of sales
    
    $
    1,584
    
    
    $
    420Marketing and selling
    
    
    4,187
    
    
    
    3,330Research and development
    
    
    2,766
    
    
    
    2,113General and administrative
    
    
    3,861
    
    
    
    3,967Total share-based compensation expense
    
    $
    12,398
    
    
    $
    9,830
    (in thousands, except per share data)
    
    2005Net income, as reported
    
    $
    39,275Stock-based employee compensation expense included in reported income, net of tax
    
    
    Total stock-based employee compensation expense determined under fair-value based
method for all awards, net of tax
    
    
    (7,159
    )Pro forma net income
    
    $
    32,116Net income per shareAs reportedBasic
    
    $
    0.57Diluted
    
    $
    0.55Pro formaBasic
    
    $
    0.47Diluted
    
    $
    0.45
 F-35




---



##### Table of Contents



Weighted avgOptions
    
    exercise priceoutstanding
    
    per shareBalance at January 1, 2005
    
    
    8,214,968
    
    
    $
    8.51Granted
    
    
    2,104,637
    
    
    $
    19.40Exercised
    
    
    (1,958,695
    )
    
    $
    5.19Cancelled or expired
    
    
    (410,260
    )
    
    $
    12.98Balance at December 31, 2005
    
    
    7,950,650
    
    
    $
    11.97Granted
    
    
    1,403,550
    
    
    $
    19.43Exercised
    
    
    (1,414,220
    )
    
    $
    5.77Cancelled or expired
    
    
    (684,406
    )
    
    $
    15.91Balance 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
    
    
    $
    14.82
  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 - $10.60
    
    
    2,032,052
    
    
    3.5 years
    
    $
    6.12
    
    
    
    2,032,052
    
    
    $
    6.12$10.72 - $17.86
    
    
    1,965,512
    
    
    5.9 years
    
    
    14.72
    
    
    
    1,255,188
    
    
    
    14.27$17.92 - $19.72
    
    
    1,928,959
    
    
    5.7 years
    
    
    19.04
    
    
    
    937,351
    
    
    
    19.16$19.95 - $21.68
    
    
    1,661,369
    
    
    5.7 years
    
    
    20.66
    
    
    
    471,745
    
    
    
    20.89Total
    
    
    7,587,892
    
    
    5.2 years
    
    $
    14.82
    
    
    
    4,696,336
    
    
    $
    12.39
  F-36




---



##### Table of Contents



2007
    
    2006
    
    2005Fair value of options granted
    
    $
    6.50
    
    
    $
    7.48
    
    
    $
    7.48Risk free interest rate
    
    
    4.44
    %
    
    
    4.68
    %
    
    
    3.98
    %Expected dividend rate
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Stock price volatility
    
    
    32.88
    %
    
    
    35.29
    %
    
    
    38.23
    %Expected life of option
    
    5 years
    
    5 years
    
    5 years
 Expected life
 Expected volatility
 Risk-free rate of return
 Dividend yield
    F-37




---



##### Table of Contents



Restricted Stock
   Unvested Shares
    
    
    Weighted averageoutstanding
    
    
    grant date fair valueBalance at December 31, 2005
    
    
    
    
    
    $
    Granted
    
    
    123,326
    
    
    
    18.51Vested
    
    
    
    
    
    
    Cancelled
    
    
    (2,800
    )
    
    
    19.48Balance 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
    
    
    $
    18.30
 Employee Stock Purchase Plan
  11. Commitments and Contingent Liabilities
 Product Liability
   Operating Leases
  F-38




---



##### Table of Contents



(in thousands)2008
    
    $
    2,6762009
    
    
    2,2292010
    
    
    1,7952011
    
    
    1,4572012
    
    
    1,0272013 and beyond
    
    
    174Total
    
    $
    9,358
  Litigation
  Product Supply Agreement
 Note 3,
Discontinued Operations and Sale of Aesthetics Business,
 12. Industry Segment Information and Foreign Operations
 Note 3,
Discontinued Operations and Sale of Aesthetics Business).
   (in thousands)
    
    2007
    
    2006
    
    2005United StatesNet sales
    
    $
    334,258
    
    
    $
    272,679
    
    
    $
    205,463Long-lived assets
    
    
    872,882
    
    
    
    873,200
    
    
    
    217,997InternationalNet sales
    
    
    129,670
    
    
    
    85,639
    
    
    
    57,128Long-lived assets
    
    
    18,165
    
    
    
    15,723
    
    
    
    14,311
 F-39




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##### Table of Contents



13. Post-retirement Benefits
 Employers Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of
FASB Statements No. 87, 88, 106, and 132(R)
   2007
    
    2006
    
    2005Service cost
    
    $
    155
    
    
    $
    115
    
    
    $
    128Interest cost
    
    
    175
    
    
    
    163
    
    
    
    142Amortization of net prior service cost
    
    
    (38
    )
    
    
    (39
    )
    
    
    (134
    )Net benefit costs
    
    $
    292
    
    
    $
    239
    
    
    $
    136
  2007
    
    2006Change in benefit obligationBenefit obligation at beginning of year
    
    $
    3,071
    
    
    $
    3,146Service cost
    
    
    155
    
    
    
    115Interest cost
    
    
    175
    
    
    
    163Actuarial (gains) or losses
    
    
    59
    
    
    
    (205
    )Benefit payments
    
    
    (188
    )
    
    
    (148
    )Benefit obligation at end of year
    
    $
    3,272
    
    
    $
    3,071Change in plan assetsFair value of assets at beginning of year
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    
    
    
    
    Employer contributions
    
    
    188
    
    
    
    148Benefit payments
    
    
    (188
    )
    
    
    (148
    )Fair value of plan assets at end of year
    
    $
    
    
    
    $
    
 F-40




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##### Table of Contents



2007
    
    2006Current
    
    $
    (226
    )
    
    $
    (164
    )Long term
    
    
    (3,046
    )
    
    
    (2,907
    )Net amount of accrued benefit cost
    
    $
    (3,272
    )
    
    $
    (3,071
    )
  2007
    
    2006Net actuarial (gain)
    
    $
    (192
    )
    
    $
    (251
    )Net prior service cost
    
    
    55
    
    
    
    17Total accumulated other comprehensive income
    
    $
    (137
    )
    
    $
    (234
    )
   2008
    
    $
    2262009
    
    
    2392010
    
    
    2392011
    
    
    2332012
    
    
    2442013-2017
    
    
    1,369
  2007
    
    2006Discount 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
    
    $
    
    
    
    $
    (1
    )Effect on post-retirement benefit obligation
    
    
    8
    
    
    
    (8
    )
 F-41




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##### Table of Contents



14. Savings and Investment Plan
  15. Income Taxes
  Pretax income
    
    2007
    
    2006
    
    2005U.S.
    
    $
    24,195
    
    
    $
    (35,187
    )
    
    $
    65,405Foreign
    
    
    5,310
    
    
    
    3,036
    
    
    
    820Total
    
    $
    29,505
    
    
    $
    (32,151
    )
    
    $
    66,225
  Income tax expense
    
    2007
    
    2006
    
    2005CurrentFederal
    
    $
    433
    
    
    $
    6,262
    
    
    $
    23,416State
    
    
    1,796
    
    
    
    2,592
    
    
    
    2,353Foreign
    
    
    1,708
    
    
    
    1,063
    
    
    
    299DeferredFederal
    
    
    11,145
    
    
    
    2,366
    
    
    
    1,401State
    
    
    535
    
    
    
    (731
    )
    
    
    (369
    )Foreign
    
    
    297
    
    
    
    179
    
    
    
    (150
    )Total
    
    $
    15,914
    
    
    $
    11,731
    
    
    $
    26,950
  Income tax reconciliation
    
    2007
    
    2006
    
    2005Statutory rate
    
    $
    10,326
    
    
    $
    (11,253
    )
    
    $
    23,179State taxes
    
    
    1,515
    
    
    
    1,261
    
    
    
    1,358In-process research and development
    
    
    
    
    
    
    23,971
    
    
    
    3,227Manufacturing tax incentives
    
    
    
    
    
    
    (388
    )
    
    
    (753
    )Meals and entertainment
    
    
    618
    
    
    
    501
    
    
    
    391Foreign rate differential and other
    
    
    (64
    )
    
    
    253
    
    
    
    12Research and development credits
    
    
    (1,085
    )
    
    
    (1,044
    )
    
    
    (656
    )Stock-based compensation under SFAS 123(R)
    
    
    1,098
    
    
    
    1,276
    
    
    
    Audit settlement and refund claim
    
    
    (852
    )
    
    
    (2,455
    )
    
    
    Litigation settlement
    
    
    4,256
    
    
    
    
    
    
    
    Other
    
    
    102
    
    
    
    (391
    )
    
    
    192Total
    
    $
    15,914
    
    
    $
    11,731
    
    
    $
    26,950
 F-42




---



##### Table of Contents



Note 4, Litigation Settlements
  Note 3,
Discontinued Operations and Sale of Aesthetics Business
  Note 2, Acquisitions).
 Note 2, Acquisitions).
 Note 2, Acquisitions).
   F-43




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##### Table of Contents



2007
    
    2006Deferred tax assets:Federal net operating loss carryforwards
    
    $
    11,666
    
    
    $
    16,340Reserves and allowances
    
    
    8,877
    
    
    
    7,757Capital loss carryforwards
    
    
    
    
    
    
    1,710Foreign accruals and net operating loss carryforwards
    
    
    1,254
    
    
    
    2,980Workforce, patents and license
    
    
    3,174
    
    
    
    3,345Compensation accruals
    
    
    4,774
    
    
    
    7,022FIN 48 accrued state tax and interest
    
    
    1,766
    
    
    
    Stock-based compensation under SFAS 123(R)
    
    
    4,674
    
    
    
    2,331State net operating loss carryforwards and credits
    
    
    6,441
    
    
    
    3,658Federal credit carryforwards
    
    
    3,273
    
    
    
    3,188Other
    
    
    2,866
    
    
    
    Valuation allowance
    
    
    (1,354
    )
    
    
    (4,121
    )Total deferred tax assets
    
    
    47,411
    
    
    
    44,210Deferred tax
liabilities:Goodwill
    
    
    10,310
    
    
    
    8,737Prepaid insurance and other
    
    
    1,405
    
    
    
    1,268Developed technology
    
    
    16,157
    
    
    
    24,082Trademarks and royalty agreements
    
    
    16,706
    
    
    
    16,946Contingent interest on debt
    
    
    13,061
    
    
    
    4,408Total deferred tax liabilities
    
    
    57,639
    
    
    
    55,441Net deferred tax liability
    
    $
    (10,228
    )
    
    $
    (11,231
    )
      F-44




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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 31, 2006
    
    $
    7,577
    
    
    $
    354
    
    
    $
    7,931
    
    
    $
    (943
    )
    
    $
    6,988Additions for tax positions related to a prior period
    
    
    5,714
    
    
    
    331
    
    
    
    6,045
    
    
    
    (840
    )
    
    
    5,205Additions for tax positions related to the current period
    
    
    959
    
    
    
    
    
    
    
    959
    
    
    
    (82
    )
    
    
    877Reductions related to the closing of Statutes of Limitations
    
    
    (541
    )
    
    
    (128
    )
    
    
    (669
    )
    
    
    99
    
    
    
    (570
    )Reductions related to settlements with tax authorities
    
    
    (852
    )
    
    
    
    
    
    
    (852
    )
    
    
    
    
    
    
    (852
    )Balance at December 29, 2007
    
    
    12,857
    
    
    
    557
    
    
    
    13,414
    
    
    
    (1,766
    )
    
    
    11,648Less:UTBs attributable to timing items included above
    
    
    982
    
    
    
    
    
    
    
    982
    
    
    
    
    
    
    
    982UTBs that relate to acquired entities that
would  impact  goodwill  if  recognized
    
    
    6,610
    
    
    
    
    
    
    
    6,610
    
    
    
    (95
    )
    
    
    6,515Total UTBs that, if recognized, would impact the
effective income tax rate as of December 29, 2007
    
    $
    5,265
    
    
    $
    557
    
    
    $
    5,822
    
    
    $
    (1,671
    )
    
    $
    4,151
      16. Quarterly Financial Data
 Note 3, Discontinued Operations and Sale of Aesthetics Business).
 F-45




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##### Table of Contents



2007
    
    2006First
    
    Second
    
    Third
    
    Fourth
    
    First
    
    Second
    
    Third
    
    Fourth13 weeks
    
    13 weeks
    
    13 weeks
    
    13 weeks
    
    13 weeks
    
    13 weeks
    
    13 weeks
    
    13 weeksNet sales
    
    $
    108,385
    
    
    $
    116,453
    
    
    $
    109,041
    
    
    $
    130,049
    
    
    $
    73,624
    
    
    $
    78,782
    
    
    $
    90,500
    
    
    $
    115,412Gross profit
    
    
    82,030
    
    
    
    89,324
    
    
    
    84,600
    
    
    
    102,382
    
    
    
    61,894
    
    
    
    67,075
    
    
    
    71,635
    
    
    
    88,842Operating income (loss)
    
    
    14,746
    
    
    
    21,223
    
    
    
    17,760
    
    
    
    7,557
    
    
    
    17,963
    
    
    
    (5,562
    )
    
    
    (44,622
    )
    
    
    22,029Income (loss) from continuing operations
    
    
    4,383
    
    
    
    7,326
    
    
    
    6,925
    
    
    
    (5,043
    )
    
    
    11,472
    
    
    
    (8,095
    )
    
    
    (57,932
    )
    
    
    10,673Net income (loss)
    
    
    3,692
    
    
    
    7,326
    
    
    
    6,925
    
    
    
    (5,043
    )
    
    
    11,472
    
    
    
    (8,095
    )
    
    
    (58,604
    )
    
    
    5,910Net income (loss) per share:Basic net earnings (loss)
from continuing operations
    
    $
    0.06
    
    
    $
    0.10
    
    
    $
    0.10
    
    
    $
    (0.07
    )
    
    $
    0.16
    
    
    $
    (0.12
    )
    
    $
    (0.83
    )
    
    $
    0.15Discontinued operations, net of tax
    
    $
    (0.01
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (0.01
    )
    
    $
    (0.07
    )Basic net earnings (loss)
    
    $
    0.05
    
    
    $
    0.10
    
    
    $
    0.10
    
    
    $
    (0.07
    )
    
    $
    0.16
    
    
    $
    (0.12
    )
    
    $
    (0.84
    )
    
    $
    0.08Diluted net earnings (loss)
from continuing operations
    
    $
    0.06
    
    
    $
    0.10
    
    
    $
    0.09
    
    
    $
    (0.07
    )
    
    $
    0.16
    
    
    $
    (0.12
    )
    
    $
    (0.83
    )
    
    $
    0.15Discontinued operations, net of tax
    
    $
    (0.01
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (0.01
    )
    
    $
    (0.07
    )Diluted net earnings (loss)
    
    $
    0.05
    
    
    $
    0.10
    
    
    $
    0.09
    
    
    $
    (0.07
    )
    
    $
    0.16
    
    
    $
    (0.12
    )
    
    $
    (0.84
    )
    
    $
    0.08
 Note 9, Debt Note 4, Litigation
Settlements
 Note 2, Acquisitions).
   F-46




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##### Table of Contents



Financial Statement Schedules - 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 31, 2005Deducted from asset accountsAllowance for doubtful accounts
    
    $
    1,987
    
    
    $
    1,097
    
    
    $
    
    
    
    $
    1,067
    (1)
    
    $
    2,017Allowance for obsolete inventories
    
    $
    1,743
    
    
    $
    827
    
    
    $
    
    
    
    $
    1,253
    (2)
    
    $
    1,317Allowance for sales returns
    
    $
    2,346
    
    
    $
    2,329
    
    
    $
    
    
    
    $
    3,475
    (3)
    
    $
    1,200Year ended December 30, 2006Deducted from asset accountsAllowance for doubtful accounts
    
    $
    2,017
    
    
    $
    1,095
    
    
    $
    620
    (7)
    
    $
    617
    (1)
    
    $
    3,115Allowance for obsolete inventories
    
    $
    1,317
    
    
    $
    1,498
    
    
    $
    1,258
    (7)
    
    $
    1,569
    (2)
    
    $
    2,504Allowance for sales returns
    
    $
    1,200
    
    
    $
    5,256
    
    
    $
    50
    (7)
    
    $
    4,690
    (3)
    
    $
    1,816Year 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)
    
    $
    2,310Qualifying Accounts:Year ended December 31, 2005Product liability allowance
    
    $
    680
    
    
    $
    480
    
    
    $
    
    
    
    $
    376
    (5)
    
    $
    784Accrued warranty expense
    
    $
    1,451
    
    
    $
    599
    
    
    $
    
    
    
    $
    432
    (6)
    
    $
    1,618Year ended December 30, 2006Product liability allowance
    
    $
    784
    
    
    $
    220
    
    
    $
    
    
    
    $
    456
    (5)
    
    $
    548Accrued warranty expense
    
    $
    1,618
    
    
    $
    619
    
    
    $
    809
    (7)
    
    $
    331
    (6)
    
    $
    2,715Year ended December 29, 2007Product liability allowance
    
    $
    548
    
    
    $
    797
    
    
    $
    
    
    
    $
    450
    (5)
    
    $
    895Accrued warranty expense
    
    $
    2,715
    
    
    $
    5,844
    (8)
    
    $
    
    
    
    $
    5,558
    (6),(8)
    
    $
    3,001
 
 Notes:(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)
    
    Allowances and reserves on balance sheet of Laserscope (excluding the aesthetics business),
acquired in July 2006.(8)
    
    Includes reserves and claims for product rework issues related to the Greenlight HPS console. F-47




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##### Table of Contents



Acticon, Apogee, AMS Ambicor®, AMS 650, AMS 700, AMS 700 CX and Ultrex, AMS Urinary Control
System, BioArc, BioArc SP, BioArc TO, Dura II, Her Option, In-Fast, In-Fast Ultra, InhibiZone,
InteDerm®, InteGraft, InteMesh®, IntePro InteLata, InteXen, InVance, Monarc, Parylene, Perigee,
ProstaJect, Solutions for Life®, SPARC, Straight-In, TherMatrx, and UroLume are trademarks of AMS
or its subsidiaries.
 F-48




---



##### Table of Contents



SIGNATURES
  Dated: February 27, 2008
    
    AMERICAN MEDICAL SYSTEMS HOLDINGS, INC.By
    
    /s/ Ross A. LonghiniRoss A. LonghiniChief Executive Officer,Executive Vice President and Chief Operating Officer
  Signature
    
    Title/s/ Ross A. Longhini
    
    Chief Executive Officer,Ross A. Longhini
    
    Executive
Vice President and Chief Operating Officer(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




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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 December 29, 2007
 Item No.
    
    Item
    
    Filing Method1.1
    
    Purchase Agreement, dated as
of June 21, 2006, between
American Medical Systems
Holdings, Inc. and Piper
Jaffray & Co., as
representative of the
Underwriters listed in
Schedule I thereto.
    
    Incorporated by reference to
Exhibit 1.1 of the Companys
Form 8-K filed on June 28,
2006 (File No. 000-30733).2.1
    
    Agreement and Plan of Merger,
dated as of December 13,
2002, by and among American
Medical Systems, Inc.,
Snowball Acquisition Corp.,
Cryogen, Inc. and Robert
Knarr.
    
    Incorporated by reference to
Exhibit 2.1 of the Companys
Form 8-K filed on December
17, 2002 (File No.
000-30733).2.2
    
    First Amendment to Agreement
and Plan of Merger, dated
December 18, 2002, by and
among American Medical
Systems, Inc., Snowball
Acquisition Corp., Cryogen,
Inc. and Robert Knarr.
    
    Incorporated by reference to
Exhibit 2.1 of the Companys
Form 8-K filed on January 6,
2003 (File No. 000-30733).2.3
    
    Agreement and Plan of Merger,
dated as of June 15, 2004, by
and among American Medical
Systems, Inc.; Leio
Acquisition Corp.; TherMatrx,
Inc.; TherMatrx Investment
Holdings LLC and BSD Medical
Corporation, as Principal
Stockholders, and TherMatrx
Investments Holdings LLC, as
Stockholders Representative.
    
    Incorporated by reference to
Exhibit 2.1 of the Companys
Form 8-K filed on June 15,
2004 (File No. 000-30733).2.4
    
    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).2.5
    
    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).2.6
    
    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).2.7
    
    Agreement and Plan of Merger,
dated as of June 3, 2006, by
and among American Medical
Systems Holding, Inc.,
Laserscope and Kermit Merger
Corp.
    
    Incorporated by reference to
Exhibit 2.1 of the Companys
Current Report on Form 8-K
filed on June 5, 2006 (File
No. 000-30733).
 E-1




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##### Table of Contents



Item No.
    
    Item
    
    Filing Method2.8
    
    Amendment, dated as of July 10, 2006, to
Agreement and Plan of Merger, dated as of
June 3, 2006, by and among American Medical
Systems Holdings, Inc., Laserscope and
Kermit Merger Corp.
    
    Incorporated by
reference to Exhibit
2.1 of the Companys
Current Report on
Form 8-K filed on
July 11, 2006 (File
No. 000-30733).2.9
    
    Stock Purchase Agreement, dated as of April
30, 2006, by and among Laserscope,
InnovaQuartz, Inc., The Griffin Family
Revocable Trust, Steve Griffin and Brian
Barr.
    
    Incorporated by
reference to Exhibit
10.8 of the Companys
Form 10-Q for the
Fiscal Quarter Ended
September 30, 2006
(File No. 000-30733).2.10
    
    Termination Agreement, dated December 8,
2006, among American Medical Systems
Holdings, Inc., Laserscope, InnovaQuartz
Incorporated, Stephen Griffin, The Griffin
Family Revocable Trust, and Brian Barr.
    
    Incorporated by
reference to Exhibit
10.1 of the Companys
Form 8-K filed on
December 14, 2006
(File No. 000-30733).2.11
    
    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).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).4.1
    
    Certificate of Incorporation of the Company.
    
    See Exhibit 3.1 above.4.2
    
    Bylaws 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
June 19, 2006 (File
No. 333-135135).4.4
    
    Form of Senior Debt Security.
    
    Incorporated by
reference to Exhibit
4.3 of the Companys
Form S-3 filed on
June 19, 2006 (File
No. 333-135135).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
June 19, 2006 (File
No. 333-135135).4.6
    
    Form of Subordinated Debt Security.
    
    Incorporated by
reference to Exhibit
4.5 of the Companys
Form S-3 filed on
June 19, 2006 (File
No. 333-135135).4.7
    
    Form of Indenture for Senior Subordinated
Debt Securities.
    
    Incorporated by
reference to Exhibit
4.6 of the Companys
Form S-3 filed on
June 19, 2006 (File
No. 333-135135).
 E-2




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##### Table of Contents



Item No.
    
    Item
    
    Filing Method4.8
    
    Form of Senior Subordinated Debt Security.
    
    Incorporated by
reference to
Exhibit 4.7 of the
Companys Form S-3
filed on June 19,
2006 (File No.
333-135135).4.9
    
    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).4.10
    
    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).4.11
    
    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).4.12
    
    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).10.1
    
    Employment Agreement, dated April 26,
2004, between Martin J. Emerson and
American Medical Systems, Inc.
    
    Incorporated by
reference to
Exhibit 10.1 of the
Companys Form 10-Q
for the Fiscal
Quarter Ended April
2, 2004 (File No.
000-30733).10.2
    
    First Amendment to Employment Agreement,
dated January 5, 2005, between Martin J.
Emerson and American Medical Systems,
Inc.
    
    Incorporated by
reference to
Exhibit 10.2 of the
Companys Form 8-K
filed on January 5,
2005 (File No.
000-30733).10.3
    
    Second Amendment to Employment Agreement,
dated January 4, 2008, between Martin J.
Emerson and American Medical Systems,
Inc.
    
    Incorporated by
reference to
Exhibit 10.1 of the
Companys Form 8-K
filed on January
24, 2008 (File No.
000-30733).10.4
    
    Employment Agreement, dated January 1,
2003, between Ross Longhini and American
Medical Systems, Inc.
    
    Incorporated by
reference to
Exhibit 10.8 of the
Companys Annual
Report on Form 10-K
for the Fiscal Year
Ended December 28,
2002 (File No.
000-30733).10.5
    
    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).10.6
    
    Employment Offer Letter, dated March 31,
2005, between Stephen J. McGill and
American Medical Systems, Inc.
    
    Incorporated by
reference to
Exhibit 10.1 of the
Companys Quarterly
Report on Form 10-Q
for the Fiscal
Quarter Ended March
31, 2007 (File No.
000-30733).10.7
    
    Employment Agreement, dated April 7,
2005, between Stephen J. McGill and
American Medical Systems, Inc.
    
    Incorporated by
reference to
Exhibit 10.2 of the
Companys Quarterly
Report on Form 10-Q
for the Fiscal
Quarter Ended March
31, 2007 (File No.
000-30733).
 E-3




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##### Table of Contents



Item No.
    
    Item
    
    Filing Method10.8
    
    Separation Agreement, executed January
    
    Incorporated by reference to Exhibit 10.218, 2008, between Martin J. Emerson and
    
    of the Companys Form 8-K filed on JanuaryAmerican Medical Systems, Inc.
    
    24, 2008 (File No. 000-30733).10.9
    
    2000 Equity Incentive Plan, as amended.
    
    Incorporated by reference to Exhibit 10.1of the Companys Form 10-Q for the FiscalQuarter Ended June 28, 2003 (File No.000-30733).10.10
    
    Form of Incentive Stock Option Agreement
    
    Incorporated by reference to Exhibit 10.10under the 2000 Equity Incentive Plan, as
    
    of the Companys Registration Statement onamended.
    
    Form S-1 (File No. 333-37488).10.11
    
    Form of Non-Qualified Stock Option
    
    Incorporated by reference to Exhibit 10.11Agreement under the 2000 Equity
    
    of the Companys Registration Statement onIncentive Plan, as amended.
    
    Form S-1 (File No. 333-37488).10.12
    
    Employee Stock Purchase Plan, as amended.
    
    Incorporated by reference to Exhibit 10.2of the Companys Form 10-Q for the FiscalQuarter Ended October 1, 2005 (File No.000-30733).10.13
    
    2005 Stock Incentive Plan, as amended.
    
    Incorporated by reference to Exhibit 10.1of the Companys Form 10-Q for the FiscalQuarter Ended October 1, 2005 (File No.000-30733).10.14
    
    Form of Stock Option Certificate for
    
    Incorporated by reference to Exhibit 10.20Directors under the 2005 Stock Incentive
    
    of the Companys Annual Report on FormPlan, as amended.
    
    10-K for the Fiscal Year Ended December31, 2005 (File No. 000-30733).10.15
    
    Form of Stock Option Certificate for
    
    Incorporated by reference to Exhibit 10.21Executive Officers under the 2005 Stock
    
    of the Companys Annual Report on FormIncentive Plan, as amended.
    
    10-K for the Fiscal Year Ended December31, 2005 (File No. 000-30733).10.16
    
    Form of Notice of Amendment to Stock
    
    Incorporated by reference to Exhibit 10.6Option Certificate/Agreement for
    
    of the Companys Form 10-Q for the FiscalExecutive Officers of American Medical
    
    Quarter Ended July 2, 2006 (File No.Systems Holdings, Inc.
    
    000-30733).10.17
    
    Form of Indemnification Agreement with
    
    Incorporated by reference to Exhibit 10.22Executive Officers and Directors.
    
    of the Companys Annual Report on Form10-K for the Fiscal Year Ended December31, 2005 (File No. 000-30733).
 E-4




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##### Table of Contents



Item No.
    
    Item
    
    Filing Method10.18
    
    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).10.19
    
    Summary of Director Compensation.
    
    Incorporated by
reference to
Exhibit 10.14 of
the Companys
Annual Report on
Form 10-K for the
Fiscal year Ended
December 30, 2006
(File No.
000-30733).10.20
    
    License Agreement, dated April 26, 2006,
between American Medical Systems, Inc. and
BioControl Medical, Ltd.
    
    Incorporated by
reference to 10.2
of the Companys
Form 8-K filed on
April 27, 2006
(File No.
000-30733).10.21
    
    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).10.22
    
    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).10.23
    
    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).10.24
    
    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).10.25
    
    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).10.26
    
    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).
 E-5




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##### Table of Contents



Item No.
    
    Item
    
    Filing Method10.27
    
    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).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