##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 Form 10-K
 Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended:
    
    Commission file number:January 3, 2009
    
    000  30733
 AMERICAN MEDICAL SYSTEMS HOLDINGS, INC.
  Delaware
    
    41-1978822(State of Incorporation)
    
    (IRS Employer Identification No.)
 10700 Bren Road West
Minnetonka, Minnesota 55343
 952-930-6000
 
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class:
    
    Name of each exchange on which registered:Common stock, par value $.01 per share
    
    The Nasdaq Stock Market LLC(Nasdaq Global Select Market)
 Securities registered pursuant to Section 12(g) of the Act:
None
 þ o
 o þ
 þ o
 o
  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




---



##### 



AMERICAN MEDICAL SYSTEMS HOLDINGS, INC.
 FORM 10-K
 For the Fiscal Year Ended January 3, 2009
 TABLE OF CONTENTS
 Description
    
    PagePART IItem 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    8Item 1B. Unresolved Staff Comments
    
    
    17Item 2. Properties
    
    
    17Item 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
    
    
    20Item 6. Selected Financial Data
    
    
    22Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    23Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    41Item 8. Financial Statements and Supplementary Data
    
    
    42Item 9. Changes In and Disagreements with Accountants on Accounting and Financial
Disclosure
    
    
    42Item 9A. Controls and Procedures
    
    
    42Item 9B. Other Information
    
    
    43PART IIIItem 10. Directors and Executive Officers of the Registrant
    
    
    44Item 11. Executive Compensation
    
    
    44Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    44Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    44Item 14. Principal Accountant Fees and Services
    
    
    44PART IVItem 15. Exhibits and Financial Statement Schedule
    
    
    45FINANCIAL STATEMENTS AND NOTES THERETO
    
    
    F-1EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-K
    
    
    E-1EX-10.5EX-10.7EX-10.24EX-10.26EX-10.28EX-10.29EX-10.30EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1




---



##### Table of Contents



FORWARD-LOOKING INFORMATION
 This Annual Report on Form 10-K contains forward-looking statements. Any statements not of
historical fact may be considered forward-looking statements. These statements by their nature
involve substantial risks and uncertainties, and actual results may differ materially from those
expressed in such forward-looking statements as a result of many factors, including, but not
limited to, those discussed under the Forward-Looking Statements section of Part II, Item 7,
Managements Discussion and Analysis of Financial Condition and Results of Operations.
 
 PART I
 
 Item 1. Business
 Overview
  th
  AdVance ® MiniArc ® Single Incision Sling GreenLight HPS ® TherMatrx ® Apogee ® Perigee ® Elevate ® Her Option ®
  1




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



InteXen ® , Elevate ® Elevate ®
 Her Option ® Her
Option ®
 Selling and Marketing
    Manufacturing and Supply
 Item 1A. Risk Factors: We may not be able to supply products that incorporate materials or
components which are single or sole-sourced
  Research and Development
  5




---



##### Table of Contents



Accessa
 AMS
800 ® GreenLight Elevate ® Topas Continuum Accessa
 Continuum GreenLight HPS ® MiniArc ® Apogee ® Perigee ®
  Competition
  Intellectual Property
   6




---



##### Table of Contents



Government Regulation
    Her Option ®
  Third-Party Reimbursement
    Employees
  7




---



##### Table of Contents



Accounting Periods
  Financial Information about Geographic Areas
 Notes to
Consolidated Financial Statements  No. 13, 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.
  Current worldwide economic conditions may adversely affect our business, operating results and
financial condition.
  8




---



##### Table of Contents



Disruptions in the global financial markets could impact the ability of our counterparties and
others to perform their obligations to us and our ability to obtain future financing.
  If our strategies to improve the performance of our laser therapy business are unsuccessful, our
growth and profitability may be negatively impacted.
  Our sales may be adversely affected if physicians do not recommend, endorse or accept our products.
  Our growth will be slowed if new products are delayed or are not accepted.
  Our sales could decline if our procedures are not accepted by patients.
  9




---



##### Table of Contents



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.
  Failure to satisfy our debt obligations could have a material adverse effect on our business.
 Notes to Consolidated Financial
Statements  No. 9, Debt
 10




---



##### Table of Contents




    
    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 Part II,
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.
  Our borrowing costs are sensitive to fluctuations in interest rates, and changes in interest rates
may affect our profitability.
  11




---



##### Table of Contents



We could become obligated to make significant contingent payments or be subject to claims under
prior acquisition agreements.
  We may not be able to supply products that incorporate materials or components which are single or
sole-sourced.
 TherMatrx ® InteXen ® IntePro ® GreenLight HPS ®
  Loss of our principal manufacturing and distribution facilities would adversely affect our
financial position.
  Inadequate data submissions or clinical study results which do not support a product approval may
delay or preclude a products commercialization.
  12




---



##### Table of Contents



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.
  
    
    imposing fines and penalties on us;
    
    preventing us from manufacturing or distributing our products;
    
    bringing civil or criminal charges against us;
    
    delaying the introduction or denying marketing approval of our new products;
    
    recalling, withdrawing, or seizing our products; and
    
    requiring additional regulatory filings and/or approvals.
 In the event we fail to comply with manufacturing regulations, we could be prevented from selling
our products.
  We may experience an interruption in sales of a product and incur significant costs and negative
publicity if that product is recalled or withdrawn.
  Our business may suffer if our new products are not cleared to market in the United States or any
other market.
  
    
    ineffective or cause harmful side effects during preclinical testing or clinical trials;
    
    difficult to manufacture on a large scale; or
    
    uneconomical for the healthcare reimbursement system.
 13




---



##### Table of Contents



We may be unable to adequately protect our intellectual property rights or obtain necessary
intellectual property rights from third parties which could adversely affect our business,
including losing market share to our competitors and the inability to operate our business
profitably.
   
    
    these agreements will not be breached;
    
    we will have adequate remedies for any breach; or
    
    our trade secrets will not otherwise become known to or independently developed by our
competitors.
  Should financial results severely decline, we might have to record a significant goodwill
impairment charge.
 Goodwill and Other Intangible Assets
 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.
  14




---



##### Table of Contents



We could incur significant costs or other negative impacts if significant product liability claims
are made against us.
  We are required to comply with broad, pervasive and continually changing federal and state fraud
and abuse laws, and, if we are unable to fully comply with such laws, we could face substantial
penalties and our products could be excluded from government healthcare programs.
  
    
    the federal Anti-Kickback Statute, which prohibits persons from knowingly and willfully
soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash
or in kind, to induce either the referral of an individual, or the purchase, lease or order
(or the arranging for or recommending of the purchase, lease or order) of a good or
service, for which payment may be made under federal healthcare programs, such as the
Medicare and Medicaid programs, and corresponding state laws;
    
    the federal False Claims Act, which imposes civil and criminal liability on individuals
and entities who submit, or cause to be submitted, false or fraudulent claims for payment
to the government; and
    
    the federal False Statements Statute, which prohibits knowingly and willfully
falsifying, concealing or covering up a material fact or making any materially false
statement in connection with the delivery of or payment for healthcare benefits, items or
services.
  15




---



##### Table of Contents



Our international operations expose us to various risks, including risks related to fluctuations in
foreign currency exchange rates.
   The risks of selling and shipping our products and of purchasing components and products
internationally may adversely impact our revenues, results of operations and financial condition.
   
    
    the imposition of additional U.S. and foreign governmental controls or regulations;
    
    the imposition of costly and lengthy new export licensing requirements;
    
    the imposition of U.S. and/or international sanctions against a country, company,
person or entity with whom the company does business that would restrict or prohibit
continued business with the sanctioned country, company, person or entity;
    
    economic instability;
    
    changes in duties and tariffs, license obligations and other non-tariff barriers to
trade;
    
    the imposition of new trade restrictions;
    
    the imposition of restrictions on the activities of foreign agents, representatives
and distributors;
    
    scrutiny of foreign tax authorities which could result in significant fines,
penalties and additional taxes being imposed on us;
    
    pricing pressure that we may experience internationally;
    
    laws and business practices favoring local companies;
    
    difficulties in enforcing or defending intellectual property rights; and
    
    exposure to different legal and political standards due to our conducting business
in several foreign countries.
  16




---



##### Table of Contents



Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
   
 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
    
    TitleAnthony P. Bihl, III
    
    
    52
    
    
    President and Chief Executive OfficerRoss A. Longhini
    
    
    47
    
    
    Executive Vice President and Chief Operating OfficerMark A. Heggestad
    
    
    50
    
    
    Executive Vice President and Chief Financial OfficerLawrence W. Getlin
    
    
    63
    
    
    Senior Vice President, Corporate Compliance, Quality and LegalJanet L. Dick
    
    
    52
    
    
    Senior Vice President, Human ResourcesJohn F. Nealon
    
    
    46
    
    
    Senior Vice President, General Manager Womens HealthWhitney D. Erickson
    
    
    42
    
    
    Vice President, General Manager Mens HealthFrancois Georgelin
    
    
    43
    
    
    Vice President, General Manager Europe Middle East Africa RegionMichael E. Ryan
    
    
    49
    
    
    Vice President, General Manager Asia Pacific/Latin America Region
 Anthony Tony P. Bihl, III
 17




---



##### Table of Contents



Ross A. Longhini
 Mark A. Heggestad
 Lawrence W. Getlin, J.D.
 Janet L. Dick
 John F. Nealon
 Whitney D. Erickson
 Francois Georgelin
 Michael E. Ryan
 18




---



##### Table of Contents



19




---



##### Table of Contents



PART II
 
 Item 5. Market for American Medical Systems Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
 Market Information
  2008
    
    2007High
    
    Low
    
    High
    
    LowFirst quarter
    
    $
    14.98
    
    
    $
    13.20
    
    
    $
    21.78
    
    
    $
    18.65Second quarter
    
    $
    15.87
    
    
    $
    13.99
    
    
    $
    21.75
    
    
    $
    17.33Third quarter
    
    $
    18.20
    
    
    $
    13.95
    
    
    $
    21.50
    
    
    $
    16.95Fourth quarter
    
    $
    17.93
    
    
    $
    8.25
    
    
    $
    17.31
    
    
    $
    12.03
 Holders
  Dividends
  Recent Sales of Unregistered Equity Securities
  Issuer Purchases of Equity Securities
 Common Stock
  20




---



##### Table of Contents



% Convertible Notes
  ApproximateDollar Value ofTotal Number of
    
    Units That MayUnits Purchased as
    
    Yet Be PurchasedTotal Number of
    
    
    
    
    Part of Publicly
    
    Under the PubliclyUnits Purchased
    
    Average Price Paid
    
    Announced Plans
    
    Announced PlansFiscal Period
    
    (1)
    
    Per Unit (2)
    
    or Programs
    
    or ProgramsSeptember 28 -
October 25, 2008
    
    
    
    
    
    
    
    
    
    
    
    October 26 -
November 22, 2008
    
    
    
    
    
    
    
    
    
    
    
    November 23 -
January 3, 2009
    
    
    34,500,000
    
    $
    0.67749
    
    
    
    
    
    Total
    
    
    34,500,000
    
    $
    0.67749
    
    
    
    
    
    
 
 (1)
    
    The amounts shown represent the aggregate principal amount, in dollars, of our Convertible
Notes that we repurchased in open-market transactions.(2)
    
    We repurchased Convertible Notes with a principal amount of $34.5 million for a cash payment
of $23.4 million. Stock Performance Graph
   
 1/2/2004
    
    12/31/2004
    
    12/30/2005
    
    12/29/2006
    
    12/28/2007
    
    1/2/2009AMS Common Stock
    
    $
    100.00
    
    
    $
    191.18
    
    
    $
    163.05
    
    
    $
    169.36
    
    
    $
    132.78
    
    
    $
    81.76Comparable Company
    
    $
    100.00
    
    
    $
    113.53
    
    
    $
    121.07
    
    
    $
    118.94
    
    
    $
    126.10
    
    
    $
    76.15NASDAQ Market Index
    
    $
    100.00
    
    
    $
    108.41
    
    
    $
    110.79
    
    
    $
    122.16
    
    
    $
    134.29
    
    
    $
    79.25
 21




---



##### Table of Contents



Item 6. Selected Financial Data
  Statement of Operations Data
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Net sales
    
    $
    501,641
    
    
    $
    463,928
    
    
    $
    358,318
    
    
    $
    262,591
    
    
    $
    208,772Cost of sales
    
    
    111,097
    
    
    
    105,592
    
    
    
    68,872
    
    
    
    46,111
    
    
    
    38,331Gross profit
    
    
    390,544
    
    
    
    358,336
    
    
    
    289,446
    
    
    
    216,480
    
    
    
    170,441Operating expensesMarketing and selling
    
    
    175,670
    
    
    
    169,495
    
    
    
    123,204
    
    
    
    92,001
    
    
    
    72,910Research and development
    
    
    46,247
    
    
    
    43,315
    
    
    
    33,877
    
    
    
    20,966
    
    
    
    15,786In-process research and development (1)
    
    
    7,500
    
    
    
    7,500
    
    
    
    94,035
    
    
    
    9,220
    
    
    
    35,000General and administrative
    
    
    39,281
    
    
    
    43,070
    
    
    
    34,417
    
    
    
    21,713
    
    
    
    21,617Integration costs (2)
    
    
    
    
    
    
    1,103
    
    
    
    1,712
    
    
    
    
    
    
    
    Litigation settlement (3)
    
    
    
    
    
    
    14,303
    
    
    
    
    
    
    
    
    
    
    
    Amortization of intangibles (4)
    
    
    34,465
    
    
    
    18,264
    
    
    
    12,393
    
    
    
    7,884
    
    
    
    5,708Total operating expenses
    
    
    303,163
    
    
    
    297,050
    
    
    
    299,638
    
    
    
    151,784
    
    
    
    151,021Operating income (expense)
    
    
    87,381
    
    
    
    61,286
    
    
    
    (10,192
    )
    
    
    64,696
    
    
    
    19,420Other (expense) incomeRoyalty and other
    
    
    2,279
    
    
    
    8,099
    
    
    
    1,984
    
    
    
    500
    
    
    
    2,249Interest income
    
    
    747
    
    
    
    1,153
    
    
    
    2,754
    
    
    
    1,246
    
    
    
    517Interest expense (5)
    
    
    (27,398
    )
    
    
    (37,760
    )
    
    
    (18,395
    )
    
    
    (217
    )
    
    
    (783
    )Amortization of financing costs (6)
    
    
    (4,099
    )
    
    
    (3,273
    )
    
    
    (8,302
    )
    
    
    
    
    
    
    Gain on extinguishment of debt (7)
    
    
    10,055
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Investment impairment (8)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,500
    )Total other (expense) income
    
    
    (18,416
    )
    
    
    (31,781
    )
    
    
    (21,959
    )
    
    
    1,529
    
    
    
    (2,517
    )Income (loss) from continuing operations
before income taxes
    
    
    68,965
    
    
    
    29,505
    
    
    
    (32,151
    )
    
    
    66,225
    
    
    
    16,903Provision for income taxes(9)
    
    
    26,413
    
    
    
    15,914
    
    
    
    11,731
    
    
    
    26,950
    
    
    
    20,023Net income (loss) from continuing operations
    
    
    42,552
    
    
    
    13,591
    
    
    
    (43,882
    )
    
    
    39,275
    
    
    
    (3,120
    )Loss from discontinued operations, net of tax
benefit of $0.4 million and $2.7
million for 2007
and 2006, respectively(10)
    
    
    
    
    
    
    (691
    )
    
    
    (5,435
    )
    
    
    
    
    
    
    Net income (loss)
    
    $
    42,552
    
    
    $
    12,900
    
    
    $
    (49,317
    )
    
    $
    39,275
    
    
    $
    (3,120
    )Net income (loss) per shareBasic net income (loss) from
continuing operations
    
    $
    0.58
    
    
    $
    0.19
    
    
    $
    (0.63
    )
    
    $
    0.57
    
    
    $
    (0.05
    )Discontinued operations, net of tax
    
    
    
    
    
    
    (0.01
    )
    
    
    (0.08
    )
    
    
    
    
    
    
    Basic net income (loss)
    
    $
    0.58
    
    
    $
    0.18
    
    
    $
    (0.70
    )
    
    $
    0.57
    
    
    $
    (0.05
    )Diluted net income (loss) from
continuing operations
    
    $
    0.58
    
    
    $
    0.18
    
    
    $
    (0.63
    )
    
    $
    0.55
    
    
    $
    (0.05
    )Discontinued operations, net of tax
    
    
    
    
    
    
    (0.01
    )
    
    
    (0.08
    )
    
    
    
    
    
    
    Diluted net income (loss)
    
    $
    0.58
    
    
    $
    0.18
    
    
    $
    (0.70
    )
    
    $
    0.55
    
    
    $
    (0.05
    )Balance Sheet Data
    
    
    2008
    
    
    
    2007
    
    
    
    2006
    
    
    
    2005
    
    
    
    2004Cash, cash equivalents, and short-term investments
    
    $
    42,965
    
    
    $
    35,181
    
    
    $
    29,541
    
    
    $
    46,390
    
    
    $
    51,168Working capital
    
    
    130,999
    
    
    
    143,298
    
    
    
    135,635
    
    
    
    69,533
    
    
    
    79,575Total assets
    
    
    1,045,097
    
    
    
    1,116,433
    
    
    
    1,127,091
    
    
    
    359,326
    
    
    
    300,550Long-term liabilities
    
    
    596,192
    
    
    
    706,156
    
    
    
    743,396
    
    
    
    3,072
    
    
    
    3,126Stockholders equity
    
    
    385,595
    
    
    
    328,190
    
    
    
    281,162
    
    
    
    302,879
    
    
    
    249,172
 22




---



##### Table of Contents



(1)
    
    In 2008 and 2007, we recognized $7.5 million each year for in-process research and development charges related to the
payments for achieving certain milestones related to our BioControl acquisition. In 2006, we recognized $25.6 million,
$2.1 million, $62.1 million and $4.3 million, respectively, for in-process research and development charges related to the
acquisitions of BioControl, Solarant, Laserscope and Ovion. In 2005 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.(2)
    
    In 2007 and 2006, we recorded $1.1 million and $1.7 million, respectively, of integration costs associated with the 2006
Laserscope acquisition, primarily related to travel, legal, consulting and retention bonuses.(3)
    
    During 2007, we recorded a charge of $14.3 million for litigation settlements, primarily for the arbitration award to the
former shareholders of CryoGen, Inc. (CryoGen) concerning an earnout payment related to our 2002 acquisition of
CryoGen. See Notes to Consolidated Financial Statements  No. 4, Litigation Settlementsfor more information.(4)
    
    In 2008, we recorded additional amortization expense of $17.1 million for the acceleration of amortization to adjust the
carrying value of certain intangible assets to their current fair values. For more information regarding this acceleration of
of amortization, see Notes to Consolidated Financial Statements  No. 6, Goodwill and Intangible Assets.(5)
    
    During 2008, 2007 and 2006, interest expense included interest incurred on $373.8 million principal amount of convertible
notes we issued on June 27, 2006. Average borrowings under the convertible notes were $371.1 million during 2008, and
$373.8 million during 2007 and 2006. Interest expense also included interest incurred on our senior secured credit facility
entered into on July 20, 2006. Our average borrowings under this facility were approximately $281.7 million and
$332.3 million during 2008 and 2007, respectively, and $366.0 million from inception through December 30, 2006.
We also incurred interest expense related to short-term borrowing activity during 2006. For a more complete description
of these items, see Notes to Consolidated Financial Statements  No. 9, Debt, and No. 8  Credit Agreements.(6)
    
    Amortization of financing costs relates to the deferred financing costs and debt discount for our convertible notes and our
senior secured credit facility. Charges during 2006 also include a $7.0 million commitment fee for a bridge loan of up to
$180 million in preparation for the acquisition of Laserscope. We did not use this financing for the Laserscope acquisition.
See Notes to Consolidated Financial Statements  No. 9, Debt and No. 8  Credit Agreementsfor more information.(7)
    
    During the fourth quarter of 2008, we recognized a $10.1 million gain on extinguishment of $34.5 million of convertible
notes. See Notes to Consolidated Financial Statements  No. 9, Debtfor more information.(8)
    
    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.(9)
    
    In 2007, we experienced adverse tax effects from the $14.3 million of litigation settlement charges primarily resulting
from the resolution of the CryoGen arbitration (see Notes to Consolidated Financial Statements  No. 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. 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,
except for BioControl. In 2006, we received a $2.4 million tax refund associated with the favorable agreement reached
with the IRS involving the review of our 2001 and 2002 federal income tax returns.(10)
    
    In conjunction with our acquisition of Laserscope in the third quarter of 2006, we committed to a plan to divest
Laserscopes aesthetics business. On January 16, 2007, we sold the aesthetics business to Iridex Corporation. The
financial results of the aesthetics business have been reported as discontinued operations beginning from the date of
acquisition of July 20, 2006 through the date of sale of January 16, 2007. The income tax benefit from the loss from
discontinued operations was $0.4 million and $2.7 million in 2007 and 2006, respectively. For a more complete
description of the discontinued operations and the related impact on our financial results, refer to Notes to
Consolidated Financial Statements  No. 3, Discontinued Operations and Sale of Aesthetics Business. 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introductory Overview
  23




---



##### Table of Contents



th
  AdVance ® MiniArc ® Single Incision Sling GreenLight HPS ® TherMatrx ® Apogee ® Perigee ® Elevate ® Her Option ®
   24




---



##### Table of Contents



Results of Operations
 Sales trends
  (in thousands)
    
    2008
    
    2007
    
    $ Increase
    
    % Increase
    
    2007
    
    2006
    
    $ Increase
    
    % IncreaseNet SalesProduct LineMens health
    
    $
    219,211
    
    
    $
    188,519
    
    
    $
    30,692
    
    
    
    16.3
    %
    
    $
    188,519
    
    
    $
    160,436
    
    
    $
    28,083
    
    
    
    17.5
    %BPH therapy
    
    
    116,346
    
    
    
    125,497
    
    
    
    (9,151
    )
    
    
    -7.3
    %
    
    
    125,497
    
    
    
    70,436
    
    
    
    55,061
    
    
    
    78.2
    %Womens health
    
    
    166,084
    
    
    
    149,912
    
    
    
    16,172
    
    
    
    10.8
    %
    
    
    149,912
    
    
    
    127,446
    
    
    
    22,466
    
    
    
    17.6
    %Total
    
    $
    501,641
    
    
    $
    463,928
    
    
    $
    37,713
    
    
    
    8.1
    %
    
    $
    463,928
    
    
    $
    358,318
    
    
    $
    105,610
    
    
    
    29.5
    %GeographyUnited States
    
    $
    355,678
    
    
    $
    334,258
    
    
    $
    21,420
    
    
    
    6.4
    %
    
    $
    334,258
    
    
    $
    272,679
    
    
    $
    61,579
    
    
    
    22.6
    %International
    
    
    145,963
    
    
    
    129,670
    
    
    
    16,293
    
    
    
    12.6
    %
    
    
    129,670
    
    
    
    85,639
    
    
    
    44,031
    
    
    
    51.4
    %Total
    
    $
    501,641
    
    
    $
    463,928
    
    
    $
    37,713
    
    
    
    8.1
    %
    
    $
    463,928
    
    
    $
    358,318
    
    
    $
    105,610
    
    
    
    29.5
    %Percent of net salesProduct LineMens health
    
    
    43.7
    %
    
    
    40.6
    %
    
    
    
    
    
    
    
    
    
    
    40.6
    %
    
    
    44.8
    %BPH therapy
    
    
    23.2
    %
    
    
    27.1
    %
    
    
    
    
    
    
    
    
    
    
    27.1
    %
    
    
    19.7
    %Womens health
    
    
    33.1
    %
    
    
    32.3
    %
    
    
    
    
    
    
    
    
    
    
    32.3
    %
    
    
    35.5
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    
    
    
    
    
    
    
    
    100.0
    %
    
    
    100.0
    %GeographyUnited States
    
    
    70.9
    %
    
    
    72.0
    %
    
    
    
    
    
    
    
    
    
    
    72.0
    %
    
    
    76.1
    %International
    
    
    29.1
    %
    
    
    28.0
    %
    
    
    
    
    
    
    
    
    
    
    28.0
    %
    
    
    23.9
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    
    
    
    
    
    
    
    
    100.0
    %
    
    
    100.0
    %
 Net Sales. , AdVance ® MiniArc ® Single-Incision Sling InhibiZone ® AMS 800 ® AMS 700 ® MS 
 GreenLight HPS ® MiniArc ® Single-Incision Sling InhibiZone ® AMS 800 ® AdVance ® AMS 700 ® MS 
 Mens health products .
 25




---



##### Table of Contents



AdVance ® AMS 800 ® InhibiZone ®
 AMS 700 ® MS, AMS
800 ® AdVance ®
 BPH therapy products .
 TherMatrx ®
 TherMatrx ®
 Womens health products .
 MiniArc ® MiniArc ® Single-Incision Sling MiniArc ® Elevate ® Her Option ®
 Monarc ® MiniArc ® Apogee ® Perigee ® , Her
Option ®
 International sales and foreign exchange effects .
  Customer location
    
    2008
    
    2007
    
    $ Increase
    
    % Increase
    
    2007
    
    2006
    
    $ Increase
    
    % IncreaseWithin U.S.
    
    $
    355,678
    
    
    $
    334,258
    
    
    $
    21,420
    
    
    
    6.4
    %
    
    $
    334,258
    
    
    $
    272,679
    
    
    $
    61,579
    
    
    
    22.6
    %InternationalBefore
currency impact
    
    
    141,109
    
    
    
    129,670
    
    
    
    11,439
    
    
    
    8.8
    %
    
    
    122,083
    
    
    
    85,639
    
    
    
    36,444
    
    
    
    42.6
    %Subtotal
    
    
    496,787
    
    
    
    463,928
    
    
    
    32,859
    
    
    
    7.1
    %
    
    
    456,341
    
    
    
    358,318
    
    
    
    98,023
    
    
    
    27.4
    %Currency impact
    
    
    4,854
    
    
    
    
    
    
    
    4,854
    
    
    
    
    
    
    
    7,587
    
    
    
    
    
    
    
    7,587
    
    
    
    Total
    
    $
    501,641
    
    
    $
    463,928
    
    
    $
    37,713
    
    
    
    8.1
    %
    
    $
    463,928
    
    
    $
    358,318
    
    
    $
    105,610
    
    
    
    29.5
    %
 26




---



##### Table of Contents



Operating Expenses
  $ Increase
    
    %
    
    
    
    
    
    
    
    
    
    $ Increase
    
    %(in thousands)
    
    2008
    
    2007
    
    (Decrease)
    
    Change
    
    2007
    
    2006
    
    (Decrease)
    
    ChangeNet sales
    
    $
    501,641
    
    
    $
    463,928
    
    
    $
    37,713
    
    
    
    8.1
    %
    
    $
    463,928
    
    
    $
    358,318
    
    
    $
    105,610
    
    
    
    29.5
    %Cost of sales
    
    
    111,097
    
    
    
    105,592
    
    
    
    5,505
    
    
    
    5.2
    %
    
    
    105,592
    
    
    
    68,872
    
    
    
    36,720
    
    
    
    53.3
    %Gross profit
    
    
    390,544
    
    
    
    358,336
    
    
    
    32,208
    
    
    
    9.0
    %
    
    
    358,336
    
    
    
    289,446
    
    
    
    68,890
    
    
    
    23.8
    %Operating expensesMarketing and selling
    
    
    175,670
    
    
    
    169,495
    
    
    
    6,175
    
    
    
    3.6
    %
    
    
    169,495
    
    
    
    123,204
    
    
    
    46,291
    
    
    
    37.6
    %Research and development
    
    
    46,247
    
    
    
    43,315
    
    
    
    2,932
    
    
    
    6.8
    %
    
    
    43,315
    
    
    
    33,877
    
    
    
    9,438
    
    
    
    27.9
    %In-process research & development
    
    
    7,500
    
    
    
    7,500
    
    
    
    
    
    
    
    0.0
    %
    
    
    7,500
    
    
    
    94,035
    
    
    
    (86,535
    )
    
    
    -92.0
    %General and administrative
    
    
    39,281
    
    
    
    43,070
    
    
    
    (3,789
    )
    
    
    -8.8
    %
    
    
    43,070
    
    
    
    34,417
    
    
    
    8,653
    
    
    
    25.1
    %Integration costs
    
    
    
    
    
    
    1,103
    
    
    
    (1,103
    )
    
    
    n/a
    
    
    
    1,103
    
    
    
    1,712
    
    
    
    (609
    )
    
    
    -35.6
    %Litigation settlement
    
    
    
    
    
    
    14,303
    
    
    
    (14,303
    )
    
    
    n/a
    
    
    
    14,303
    
    
    
    
    
    
    
    14,303
    
    
    
    n/aAmortization of intangibles
    
    
    34,465
    
    
    
    18,264
    
    
    
    16,201
    
    
    
    88.7
    %
    
    
    18,264
    
    
    
    12,393
    
    
    
    5,871
    
    
    
    47.4
    %Total operating expenses
    
    
    303,163
    
    
    
    297,050
    
    
    
    6,113
    
    
    
    2.1
    %
    
    
    297,050
    
    
    
    299,638
    
    
    
    (2,588
    )
    
    
    -0.9
    %Operating income (expense)
    
    
    87,381
    
    
    
    61,286
    
    
    
    26,095
    
    
    
    42.6
    %
    
    
    61,286
    
    
    
    (10,192
    )
    
    
    71,478
    
    
    
    n/aRoyalty income
    
    
    4,474
    
    
    
    5,028
    
    
    
    (554
    )
    
    
    -11.0
    %
    
    
    5,028
    
    
    
    1,701
    
    
    
    3,327
    
    
    
    195.6
    %Interest income
    
    
    747
    
    
    
    1,153
    
    
    
    (406
    )
    
    
    -35.2
    %
    
    
    1,153
    
    
    
    2,754
    
    
    
    (1,601
    )
    
    
    -58.1
    %Interest expense
    
    
    (27,398
    )
    
    
    (37,760
    )
    
    
    (10,362
    )
    
    
    -27.4
    %
    
    
    (37,760
    )
    
    
    (18,395
    )
    
    
    19,365
    
    
    
    105.3
    %Amortization of financing costs
    
    
    (4,099
    )
    
    
    (3,273
    )
    
    
    826
    
    
    
    25.2
    %
    
    
    (3,273
    )
    
    
    (8,302
    )
    
    
    (5,029
    )
    
    
    -60.6
    %Gain on extinguishment of debt
    
    
    10,055
    
    
    
    
    
    
    
    10,055
    
    
    
    n/a
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    n/aOther income (expense)
    
    
    (2,195
    )
    
    
    3,071
    
    
    
    (5,266
    )
    
    
    n/a
    
    
    
    3,071
    
    
    
    283
    
    
    
    2,788
    
    
    
    985.2
    %Income (loss) from continuing
operations before income taxes
    
    
    68,965
    
    
    
    29,505
    
    
    
    39,460
    
    
    
    133.7
    %
    
    
    29,505
    
    
    
    (32,151
    )
    
    
    61,656
    
    
    
    n/aProvision for income taxes
    
    
    26,413
    
    
    
    15,914
    
    
    
    10,499
    
    
    
    66.0
    %
    
    
    15,914
    
    
    
    11,731
    
    
    
    4,183
    
    
    
    35.7
    %Net income (loss) from continuing
operations
    
    
    42,552
    
    
    
    13,591
    
    
    
    28,961
    
    
    
    213.1
    %
    
    
    13,591
    
    
    
    (43,882
    )
    
    
    57,473
    
    
    
    n/aLoss from discontinued operations,
net of tax benefit of $0.4 million
and $2.7 million for 2007 and
2006, respectively
    
    
    
    
    
    
    (691
    )
    
    
    691
    
    
    
    n/a
    
    
    
    (691
    )
    
    
    (5,435
    )
    
    
    (4,744
    )
    
    
    -87.3
    %Net income (loss)
    
    $
    42,552
    
    
    $
    12,900
    
    
    $
    29,652
    
    
    
    229.9
    %
    
    $
    12,900
    
    
    $
    (49,317
    )
    
    $
    62,217
    
    
    
    n/a
 27




---



##### Table of Contents



2008
    
    2007
    
    2006Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    22.1
    %
    
    
    22.8
    %
    
    
    19.2
    %Gross profit
    
    
    77.9
    %
    
    
    77.2
    %
    
    
    80.8
    %Operating expensesMarketing and selling
    
    
    35.0
    %
    
    
    36.5
    %
    
    
    34.4
    %Research and development
    
    
    9.2
    %
    
    
    9.3
    %
    
    
    9.5
    %In-process research and development
    
    
    1.5
    %
    
    
    1.6
    %
    
    
    26.2
    %General and administrative
    
    
    7.8
    %
    
    
    9.3
    %
    
    
    9.6
    %Integration costs
    
    
    0.0
    %
    
    
    0.2
    %
    
    
    0.5
    %Litigation settlement
    
    
    0.0
    %
    
    
    3.1
    %
    
    
    0.0
    %Amortization of intangibles
    
    
    6.9
    %
    
    
    3.9
    %
    
    
    3.5
    %Total operating expenses
    
    
    60.4
    %
    
    
    64.0
    %
    
    
    83.6
    %Operating income (expense)
    
    
    17.4
    %
    
    
    13.2
    %
    
    
    -2.8
    %Royalty income
    
    
    0.9
    %
    
    
    1.1
    %
    
    
    0.5
    %Interest income
    
    
    0.1
    %
    
    
    0.2
    %
    
    
    0.8
    %Interest expense
    
    
    -5.5
    %
    
    
    -8.1
    %
    
    
    -5.1
    %Amortization of financing costs
    
    
    -0.8
    %
    
    
    -0.7
    %
    
    
    -2.3
    %Gain on extinguishment of debt
    
    
    2.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Other income (expense)
    
    
    -0.4
    %
    
    
    0.7
    %
    
    
    0.1
    %Income (loss) from continuing operations before income taxes
    
    
    13.7
    %
    
    
    6.4
    %
    
    
    -9.0
    %Provision for income taxes
    
    
    5.3
    %
    
    
    3.4
    %
    
    
    3.3
    %Net income (loss) from continuing operations
    
    
    8.5
    %
    
    
    2.9
    %
    
    
    -12.2
    %Net income (loss)
    
    
    8.5
    %
    
    
    2.8
    %
    
    
    -13.8
    %
 Cost of sales.
 Her Option ® GreenLight HPS ®
 Marketing and selling
 28




---



##### Table of Contents



Her Option ®
 Research and development
 GreenLight ®
 In-process research and development.
     General and administrative.
 29




---



##### Table of Contents



Integration costs.
 Litigation settlement. Notes to
Consolidated Financial Statements  No. 4, Litigation Settlements.)
 Amortization of intangibles TherMatrx ® GreenLight PV ® Notes to Consolidated Financial Statements  No. 6, Goodwill
and Intangible Assets.)
  Royalty income.
  Interest income
 Notes to
Consolidated Financial Statements  No. 9, Debt)
 Interest expense Notes to Consolidated
Financial Statements  No. 9, Debt.)
 Notes to Consolidated Financial Statements  No. 9, Debt.)
 Amortization of financing costs. Notes to Consolidated Financial Statements  No. 9, Debt.) Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including
Partial Cash Settlement).
 30




---



##### 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
   31




---



##### Table of Contents



Notes to Consolidated Financial Statements  No. 4, Litigation Settlements)
  Cash flows from investing activities
   Cash flows from financing activities
     32




---



##### Table of Contents



If the market price of
    
    The number of shares issued uponour stock is:
    
    full conversion would be (1):$25.00
    
    3.9 million$30.00
    
    6.2 million$35.00
    
    7.8 million
 
 (1)
    
    The formula to calculate the shares issued upon full conversion of our Convertible Notes is as follows: 
     The number of common share equivalentsIf the average market
    
    potentially included in the computation of
    
    Percentprice of our stock is:
    
    diluted EPS would be (1):
    
    Dilution (2)$19.00
    
    
    (anti-dilutive)
    
    
    0.0%$25.00
    
    3.9
    million
    
    
    5.0%$30.00
    
    6.2
    million
    
    
    7.7%$35.00
    
    7.8
    million
    
    
    9.6%
 
 (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 73,668,415 outstanding shares as of January 3, 2009.  33




---



##### Table of Contents



Notes to Consolidated Financial Statements  No. 11, Litigation Settlements)
    For The Fiscal
    
    AmendedFinancial
    
    Periods Ending
    
    RequiredCovenants
    
    Closest to
    
    RatioTotal Leverage Ratio
    
    12/31/08
    
    4.50:1.00 (maximum)3/31/09
    
    4.25:1.006/30/09
    
    4.00:1.009/30/09
    
    3.75:1.00Reductions continuing until 6/30/10
    
    3.00:1.00Senior Leverage Ratio
    
    12/31/08
    
    2.25:1.00 (maximum)3/31/09
    
    2.00:1.00Thereafter
    
    2.00:1.00Interest Coverage Ratio
    
    12/31/08
    
    3.75:1.00 (minimum)3/31/09
    
    3.75:1.006/30/09
    
    3.75:1.009/30/09
    
    4.00:1.00Thereafter
    
    4.00:1.00Fixed Charge Coverage Ratio
    
    12/31/08
    
    1.40:1.00 (minimum)3/31/09
    
    1.50:1.00Thereafter
    
    1.50:1.00Maximum Capital Expenditures
    
    12/31/08
    
    $15.0 million12/31/09
    
    $17.5 million
 34




---



##### Table of Contents



Financial Covenant
    
    Required Covenant
    
    Actual ResultTotal Leverage Ratio (1)
    
    4.50:1.00 (maximum)
    
    3.71Senior Leverage Ratio (2)
    
    2.25:1.00 (maximum)
    
    1.50Interest Coverage Ratio (3)
    
    3.75:1.00 (minimum)
    
    5.58Fixed Charge Coverage Ratio (4)
    
    1.40:1.00 (minimum)
    
    2.10Maximum Capital Expenditures (5)
    
    $15.0 million
    
    $6.1 million
 
 (1)
    
    Total outstanding debt to Consolidated Adjusted EBITDA for
the trailing four quarters.(2)
    
    Total outstanding senior secured debt to Consolidated
Adjusted EBITDA for the trailing four quarters.(3)
    
    Ratio of Consolidated EBITDA for the trailing four
quarters to cash 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)
    
    Limit of capital expenditures for the full year.   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
    
    $
    568.1
    
    
    $
    2.3
    
    
    $
    59.7
    
    
    $
    166.8
    
    
    $
    339.3Operating lease commitments
    
    
    8.1
    
    
    
    2.9
    
    
    
    3.9
    
    
    
    1.3
    
    
    
    Total
    
    $
    576.2
    
    
    $
    5.2
    
    
    $
    63.6
    
    
    $
    168.1
    
    
    $
    339.3
   35




---



##### Table of Contents



Ovion
   Critical Accounting Policies and Estimates
  Revenue Recognition Policy
  Revenue Arrangements with Multiple Deliverables
 36




---



##### Table of Contents



Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of
the Vendors Products)
  Allowance for Doubtful Accounts
   Derivative Instruments Policy
 Item 7A, Quantitative and Qualitative
Disclosures about Market Risk, Notes to Consolidated Financial Statements  No. 12,
Fair Value Measurements and Derivative Financial Instruments
 Inventories
  Purchase Accounting and Valuation of IPR&D, Goodwill and Other Intangible Assets
  37




---



##### Table of Contents



Note 6, Goodwill and Intangible
Assets.
 Warranty Accrual / Allowance
   Product Liability Accrual
  38




---



##### Table of Contents



Valuation of Share-Based Payments
 Share-Based Payment
  Notes to Consolidated Financial Statements  No. 10 Stock-Based Compensation
 Income Taxes
    Accounting for Uncertainty in Income
Taxes  an interpretation of FASB Statement No. 109, Accounting for Income Taxes
  39




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



Item 9B. Other Information
  43




---



##### Table of Contents



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




---



##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedule
 (a) Financial Statements
  Reports of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Statements of Operations for the years ended January 3, 2009,December 29, 2007, and December 30, 2006
    
    
    F-3Consolidated Balance Sheets as of January 3, 2009 and December 29, 2007
    
    
    F-4Consolidated Statements of Changes in Stockholders Equity for the
years ended January 3, 2009, December 29, 2007, and December 30, 2006
    
    
    F-5Consolidated Statements of Cash Flows for the years ended January 3, 2009,
December 29, 2007, and December 30, 2006
    
    
    F-6Notes to Consolidated Financial Statements for the years ended January 3, 2009,
December 29, 2007, and December 30, 2006
    
    
    F-7
 (b) Financial Statement Schedule
  Schedule II  Valuation and Qualifying Accounts
    
    
    F-46
 (c) Exhibits
   1.
    
    Employment Agreement, dated April 22, 2008, between Anthony P. Bihl, III, and American
Medical Systems, Inc.2.
    
    Employment Agreement, dated January 1, 2003, between Ross Longhini and American Medical
Systems, Inc.3.
    
    First Amendment to Employment Agreement, dated March 6, 2008, between Ross A. Longhini
and American Medical Systems, Inc.4.
    
    Employment Agreement, dated December 18, 2006, between Mark A. Heggestad and American
Medical Systems, Inc.5.
    
    First Amendment to Employment Agreement, dated March 6, 2008, between Mark A. Heggestad
and American Medical Systems, Inc.6.
    
    Employment Agreement, dated April 26, 2004, between Martin J. Emerson and American
Medical Systems, Inc.
 45




---



##### Table of Contents



7.
    
    First Amendment to Employment Agreement, dated January 5, 2005, between Martin J.
Emerson and American Medical Systems, Inc.8.
    
    Second Amendment to Employment Agreement, dated January 4, 2008, between Martin J.
Emerson and American Medical Systems, Inc.9.
    
    Separation Agreement, executed January 18, 2008, between Martin J. Emerson and American
Medical Systems, Inc.10.
    
    Settlement Agreement and Limited Waiver, dated July 15, 2008, among American Medical
Systems Holdings, Inc., Galil Ltd., and Martin J. Emerson.11.
    
    Employment Offer Letter, dated March 31, 2005, between Stephen J. McGill and American
Medical Systems, Inc.12.
    
    Employment Agreement, dated April 7, 2005, between Stephen J. McGill and American
Medical Systems, Inc.13.
    
    Confidential Separation Agreement, dated May 5, 2008, between American Medical Systems,
Inc., and Stephen J. McGill.14.
    
    2000 Equity Incentive Plan, as amended.15.
    
    Form of Incentive Stock Option Agreement under the 2000 Equity Incentive Plan, as
amended.16.
    
    Form of Non-Qualified Stock Option Agreement under the 2000 Equity Incentive Plan, as
amended.17.
    
    Employee Stock Purchase Plan, as amended.18.
    
    2005 Stock Incentive Plan, as amended.19.
    
    Form of Stock Option Certificate for Directors under the 2005 Stock Incentive Plan, as
amended.20.
    
    Form of Stock Option Certificate for Executive Officers under the 2005 Stock Incentive
Plan, as amended.21.
    
    Form of Notice of Amendment to Stock Option Certificate/Agreement for Executive
Officers of American Medical Systems Holdings, Inc.22.
    
    Form of Indemnification Agreement with Executive Officers and Directors.23.
    
    Form of Change in Control Severance Agreement.24.
    
    Form of First Amendment to Change in Control Severance Agreement.25.
    
    Change in Control Severance Agreement, dated as of April 22, 2008, between American
Medical Systems Holdings, Inc. and Anthony P. Bihl, III.26.
    
    Summary of Director Compensation.27.
    
    Summary of Named Executive Officer Compensation (2008).28.
    
    Summary of Named Executive Officer Compensation (2009).29.
    
    2009 Executive Variable Incentive Plan.
 46




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



American Medical Systems Holdings, Inc.
Consolidated Statements of Operations
 2008
    
    
    2007
    
    
    2006Net sales
    
    $
    501,641
    
    
    $
    463,928
    
    
    $
    358,318Cost of sales
    
    
    111,097
    
    
    
    105,592
    
    
    
    68,872Gross profit
    
    
    390,544
    
    
    
    358,336
    
    
    
    289,446Operating expensesMarketing and selling
    
    
    175,670
    
    
    
    169,495
    
    
    
    123,204Research and development
    
    
    46,247
    
    
    
    43,315
    
    
    
    33,877In-process research and development
    
    
    7,500
    
    
    
    7,500
    
    
    
    94,035General and administrative
    
    
    39,281
    
    
    
    43,070
    
    
    
    34,417Integration costs
    
    
    
    
    
    
    1,103
    
    
    
    1,712Litigation settlement
    
    
    
    
    
    
    14,303
    
    
    
    Amortization of intangibles
    
    
    34,465
    
    
    
    18,264
    
    
    
    12,393Total operating expenses
    
    
    303,163
    
    
    
    297,050
    
    
    
    299,638Operating income (expense)
    
    
    87,381
    
    
    
    61,286
    
    
    
    (10,192
    )Other (expense) incomeRoyalty income
    
    
    4,474
    
    
    
    5,028
    
    
    
    1,701Interest income
    
    
    747
    
    
    
    1,153
    
    
    
    2,754Interest expense
    
    
    (27,398
    )
    
    
    (37,760
    )
    
    
    (18,395
    )Amortization of financing costs
    
    
    (4,099
    )
    
    
    (3,273
    )
    
    
    (8,302
    )Gain on extinguishment of debt
    
    
    10,055
    
    
    
    
    
    
    
    Other income (expense)
    
    
    (2,195
    )
    
    
    3,071
    
    
    
    283Total other (expense) income
    
    
    (18,416
    )
    
    
    (31,781
    )
    
    
    (21,959
    )Income (loss) from continuing operations before income taxes
    
    
    68,965
    
    
    
    29,505
    
    
    
    (32,151
    )Provision for income taxes
    
    
    26,413
    
    
    
    15,914
    
    
    
    11,731Net income (loss) from continuing operations
    
    
    42,552
    
    
    
    13,591
    
    
    
    (43,882
    )Loss 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)
    
    $
    42,552
    
    
    $
    12,900
    
    
    $
    (49,317
    )Net income (loss) per shareBasic net income (loss) from continuing operations
    
    $
    0.58
    
    
    $
    0.19
    
    
    $
    (0.63
    )Discontinued operations, net of tax
    
    
    
    
    
    
    (0.01
    )
    
    
    (0.08
    )Basic net income (loss)
    
    $
    0.58
    
    
    $
    0.18
    
    
    $
    (0.70
    )Diluted net income (loss) from continuing operations
    
    $
    0.58
    
    
    $
    0.18
    
    
    $
    (0.63
    )Discontinued operations, net of tax
    
    
    
    
    
    
    (0.01
    )
    
    
    (0.08
    )Diluted net income (loss)
    
    $
    0.58
    
    
    $
    0.18
    
    
    $
    (0.70
    )Weighted average common shares used in calculationBasic
    
    
    72,942
    
    
    
    72,061
    
    
    
    70,152Diluted
    
    
    73,899
    
    
    
    73,593
    
    
    
    70,152
 The accompanying notes are an integral part of the consolidated financial statements.
 F-3




---



##### Table of Contents



American Medical Systems Holdings, Inc.
Consolidated Balance Sheets
 January 3, 2009
    
    
    December 29, 2007AssetsCurrent assetsCash and cash equivalents
    
    $
    11,642
    
    
    $
    34,044Short term investments
    
    
    31,323
    
    
    
    1,137Accounts receivable, net
    
    
    93,078
    
    
    
    106,457Inventories, net
    
    
    38,500
    
    
    
    60,707Deferred income taxes
    
    
    12,908
    
    
    
    13,105Other current assets
    
    
    6,858
    
    
    
    9,935Total current assets
    
    
    194,309
    
    
    
    225,385Property, plant and equipment, net
    
    
    48,280
    
    
    
    53,126Goodwill
    
    
    690,097
    
    
    
    690,478Developed and core technology, net
    
    
    62,315
    
    
    
    94,452Other intangibles, net
    
    
    47,349
    
    
    
    49,337Other long-term assets, net
    
    
    2,747
    
    
    
    3,655Total assets
    
    $
    1,045,097
    
    
    $
    1,116,433Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    7,830
    
    
    $
    13,364Income taxes payable
    
    
    7,782
    
    
    
    Accrued compensation expenses
    
    
    22,876
    
    
    
    19,258Accrued warranty expense
    
    
    3,287
    
    
    
    3,001Other accrued expenses
    
    
    21,535
    
    
    
    46,464Total current liabilities
    
    
    63,310
    
    
    
    82,087Long-term debt
    
    
    552,416
    
    
    
    666,234Deferred income taxes
    
    
    24,697
    
    
    
    23,333Long-term income taxes payable
    
    
    15,327
    
    
    
    13,414Long-term employee benefit obligations
    
    
    3,752
    
    
    
    3,175Total liabilities
    
    
    659,502
    
    
    
    788,243Stockholders equityCommon stock, par value $.01 per share; authorized 200,000,000 shares;
issued and outstanding: 73,668,415 shares at January 3, 2009 and
72,258,512 shares at December 29, 2007
    
    
    737
    
    
    
    723Additional paid-in capital
    
    
    303,274
    
    
    
    284,751Accumulated other comprehensive income
    
    
    3,226
    
    
    
    6,910Retained earnings
    
    
    78,358
    
    
    
    35,806Total stockholders equity
    
    
    385,595
    
    
    
    328,190Total liabilities and stockholders equity
    
    $
    1,045,097
    
    
    $
    1,116,433
 The accompanying notes are an integral part of the consolidated financial statements.
 F-4




---



##### Table of Contents



American Medical Systems Holdings, Inc.
Consolidated Statements of Changes in Stockholders Equity
 AccumulatedCommon Stock
    
    
    Additional
    
    
    
    
    
    
    OtherPar
    
    
    Paid-In
    
    
    Retained
    
    
    ComprehensiveShares
    
    
    Value
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    TotalBalances at December 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
    
    
    
    
    
    
    
    
    
    
    10,014
    
    
    
    
    
    
    
    
    
    
    
    10,014Income tax benefit from stock option plans
    
    
    
    
    
    
    
    
    
    
    5,911
    
    
    
    
    
    
    
    
    
    
    
    5,911Initial
application of Statement of Financial Accounting Standards 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
    )Net change for post-retirement plan, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (63
    )
    
    
    (63
    )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
    
    
    372
    
    
    
    4
    
    
    
    7,371
    
    
    
    
    
    
    
    
    
    
    
    7,375Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    12,700
    
    
    
    
    
    
    
    
    
    
    
    12,700Income tax benefit from stock option plans
    
    
    
    
    
    
    
    
    
    
    731
    
    
    
    
    
    
    
    
    
    
    
    731Adjustment to initially apply FASB Interpretation No. 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (263
    )
    
    
    
    
    
    
    (263
    )Balances at December 29, 2007
    
    
    72,259
    
    
    
    723
    
    
    
    284,751
    
    
    
    35,806
    
    
    
    6,910
    
    
    
    328,190Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,552
    
    
    
    
    
    
    
    42,552Foreign currency translation adjustment, net of tax
of $0.3 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,768
    )
    
    
    (1,768
    )Unrealized loss on foreign exchange derivatives,
net of tax of $0.2 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (323
    )
    
    
    (323
    )Unrealized loss on interest rate swap derivatives,
net of tax of $1.0 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,659
    )
    
    
    (1,659
    )Recognition of previously unrealized losses on
available-for-sale securities, net of tax of $0.3 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    433
    
    
    
    433Unrealized loss on available-for-sale securities,
net of tax of $0.1 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (102
    )
    
    
    (102
    )Net change for post-retirement plan,
net of tax of $0.1 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (265
    )
    
    
    (265
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,868Issuance of common stock:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock options exercised
    
    
    1,017
    
    
    
    10
    
    
    
    5,441
    
    
    
    
    
    
    
    
    
    
    
    5,451Employee stock purchase plan
    
    
    306
    
    
    
    3
    
    
    
    3,420
    
    
    
    
    
    
    
    
    
    
    
    3,423Restricted stock awards
    
    
    86
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    8,818
    
    
    
    
    
    
    
    
    
    
    
    8,818Income tax benefit from stock option plans
    
    
    
    
    
    
    
    
    
    
    844
    
    
    
    
    
    
    
    
    
    
    
    844Balances at January 3, 2009
    
    
    73,668
    
    
    $
    737
    
    
    $
    303,274
    
    
    $
    78,358
    
    
    $
    3,226
    
    
    $
    385,595
 The accompanying notes are an integral part of the consolidated financial statements.
 F-5




---



##### Table of Contents



American Medical Systems Holdings, Inc.Consolidated Statements of Cash Flow(In thousands) 2008
    
    2007
    
    2006Cash flows from operating activitiesNet income (loss)
    
    $
    42,552
    
    
    $
    12,900
    
    
    $
    (49,317
    )Loss from discontinued operations, net of tax benefit
    
    
    
    
    
    
    (691
    )
    
    
    (5,435
    )Income (loss) from continuing operations
    
    
    42,552
    
    
    
    13,591
    
    
    
    (43,882
    )Adjustments to reconcile net income (loss) from continuing operations
to net cash provided by operating activities:Depreciation
    
    
    10,089
    
    
    
    8,587
    
    
    
    4,695Gain on extinguishment of debt
    
    
    (10,055
    )
    
    
    
    
    
    
    Loss on asset disposals
    
    
    688
    
    
    
    26
    
    
    
    385Amortization of intangibles
    
    
    34,465
    
    
    
    18,264
    
    
    
    12,393Amortization of deferred financing costs
    
    
    4,099
    
    
    
    3,273
    
    
    
    1,347In-process research and development charges
    
    
    7,500
    
    
    
    7,500
    
    
    
    94,035Non-cash impairment of available-for-sale securities
    
    
    843
    
    
    
    
    
    
    
    Net payments for settlement of derivative contracts
    
    
    1,385
    
    
    
    
    
    
    
    Financing charges on credit facility
    
    
    
    
    
    
    
    
    
    
    6,955Excess tax benefit from exercise of stock options
    
    
    (1,498
    )
    
    
    (215
    )
    
    
    (1,674
    )Tax benefit on exercised stock option arrangements
    
    
    844
    
    
    
    731
    
    
    
    5,911Change in net deferred income taxes
    
    
    3,055
    
    
    
    11,977
    
    
    
    1,814Stock based compensation
    
    
    8,942
    
    
    
    12,398
    
    
    
    9,830Changes in operating assets and liabilities, net of acquired amounts:Accounts receivable
    
    
    10,978
    
    
    
    (9,828
    )
    
    
    (22,218
    )Inventories
    
    
    20,947
    
    
    
    (30,516
    )
    
    
    (2,817
    )Accounts payable and accrued expenses
    
    
    (13,842
    )
    
    
    (3,868
    )
    
    
    23,863Other assets
    
    
    (5,235
    )
    
    
    15,831
    
    
    
    (16,583
    )Net cash provided by operating activities
    
    
    115,757
    
    
    
    47,751
    
    
    
    74,054Cash flows from investing activitiesPurchase of property, plant and equipment
    
    
    (6,101
    )
    
    
    (14,173
    )
    
    
    (21,923
    )Purchase of business, net of cash acquired
    
    
    
    
    
    
    (781
    )
    
    
    (745,637
    )Disposal of business
    
    
    4,691
    
    
    
    22,116
    
    
    
    Purchase of investments in technology
    
    
    (7,500
    )
    
    
    (7,500
    )
    
    
    (31,935
    )Purchase of other intangibles
    
    
    (1,352
    )
    
    
    (382
    )
    
    
    (2,050
    )Purchase of short-term investments
    
    
    (70,505
    )
    
    
    (30,187
    )
    
    
    (155
    )Sale of short-term investments
    
    
    39,999
    
    
    
    29,570
    
    
    
    15,189Net payments for settlement of derivative contracts
    
    
    (1,385
    )
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (42,153
    )
    
    
    (1,337
    )
    
    
    (786,511
    )Cash flows from financing activitiesProceeds from issuance of convertible notes, net of issuance costs
    
    
    
    
    
    
    
    
    
    
    361,185Proceeds from senior secured credit facility, net of issuance costs
    
    
    
    
    
    
    
    
    
    
    352,660Issuance of common stock
    
    
    8,874
    
    
    
    10,830
    
    
    
    9,934Excess tax benefit from exercise of stock options
    
    
    1,498
    
    
    
    215
    
    
    
    1,674Proceeds from short-term borrowings
    
    
    12,000
    
    
    
    
    
    
    
    25,000Repayments of short-term borrowings
    
    
    (12,000
    )
    
    
    
    
    
    
    (25,000
    )Payments on senior secured credit facility
    
    
    (85,202
    )
    
    
    (50,069
    )
    
    
    (913
    )Repurchase of convertible senior subordinated notes
    
    
    (23,373
    )
    
    
    
    
    
    
    Financing charges paid on credit facility
    
    
    
    
    
    
    
    
    
    
    (6,955
    )Net cash (used in) provided by financing activities
    
    
    (98,203
    )
    
    
    (39,024
    )
    
    
    717,585Cash provided by (used in) continuing operations
    
    
    (24,599
    )
    
    
    7,390
    
    
    
    5,128Cash used in discontinued operationsOperating activities
    
    
    
    
    
    
    (691
    )
    
    
    (5,435
    )Cash used in discontinued operations
    
    
    
    
    
    
    (691
    )
    
    
    (5,435
    )Effect of currency exchange rates on cash
    
    
    2,197
    
    
    
    (1,706
    )
    
    
    (1,527
    )Net increase (decrease) in cash and cash equivalents
    
    
    (22,402
    )
    
    
    4,993
    
    
    
    (1,834
    )Cash and cash equivalents at beginning of period
    
    
    34,044
    
    
    
    29,051
    
    
    
    30,885Cash and cash equivalents at end of period
    
    $
    11,642
    
    
    $
    34,044
    
    
    $
    29,051Supplemental disclosureCash paid for interest
    
    $
    37,646
    
    
    $
    39,075
    
    
    $
    8,376Cash (refunded) paid for taxes
    
    
    13,710
    
    
    
    (11,662
    )
    
    
    14,445Stock 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




---



##### 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
  January 3, 2009
    
    
    December 29, 2007Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesMoney market funds
    
    $
    30,846
    
    
    $
    
    
    
    $
    
    
    
    $
    Mutual fund shares and short term bonds with a
maturity of less than one year
    
    
    285
    
    
    
    
    
    
    
    633
    
    
    
    Publicly traded equity securities
    
    
    192
    
    
    
    164
    
    
    
    504
    
    
    
    696Total
    
    $
    31,323
    
    
    $
    164
    
    
    $
    1,137
    
    
    $
    696
 Note 3, Discontinued Operations and Sale
of Aesthetics Business.
 F-7




---



##### Table of Contents



Concentration of Risks
    Allowance for Doubtful Accounts
  Inventories
  Property, Plant and Equipment
  Asset class
    
    Useful livesBuilding
    
    15-30 yearsMachinery and equipment
    
    3-12 yearsFurniture, fixtures, and other
    
    3-12 yearsSoftware
    
    3-5 years
  F-8




---



##### Table of Contents



In-Process Research and Development, Goodwill and Other Intangible Assets
    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
 F-9




---



##### Table of Contents



Note 6, Goodwill and Intangible Assets
 Revenue Recognition
  Revenue Arrangements with Multiple Deliverables
 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
  F-10




---



##### Table of Contents



Product Liability
  Software Development Costs
 Accounting for Computer Software
Developed or Obtained for Internal Use.
 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
 F-11




---



##### Table of Contents



Note 12, Fair Value Measurements and
Derivative Financial Instruments
 Use of Estimates
  Stock-Based Compensation
 Share-Based
Payment,
  Net Income per Share
 Note 9, Debt.
   (in thousands, except per share data)
    
    2008
    
    2007
    
    2006Net income (loss) from continuing operations
    
    $
    42,552
    
    
    $
    13,591
    
    
    $
    (43,882
    )Weighted-average shares outstanding for basic net income per share
    
    
    72,942
    
    
    
    72,061
    
    
    
    70,152Dilutive effect of stock options and restricted shares
    
    
    957
    
    
    
    1,532
    
    
    
    Adjusted weighted-average shares outstanding and assumed conversions
for diluted net income (loss) per share
    
    
    73,899
    
    
    
    73,593
    
    
    
    70,152Net income (loss) per shareBasic net earnings (loss) from continuing operations
    
    $
    0.58
    
    
    $
    0.19
    
    
    $
    (0.63
    )Diluted net earnings (loss) from continuing operations
    
    $
    0.58
    
    
    $
    0.18
    
    
    $
    (0.63
    )
 F-12




---



##### Table of Contents



Comprehensive Income (Loss)
 Note 12, Fair Value Measurements and Derivative Financial Instruments
  (in thousands)
    
    2008
    
    2007
    
    2006Net income (loss)
    
    $
    42,552
    
    
    $
    12,900
    
    
    $
    (49,317
    )Foreign currency translation (loss) gain, net of taxes
    
    
    (1,768
    )
    
    
    3,251
    
    
    
    1,593Unrealized loss on derivative financial instruments:Net change in periodic revaluations, net of tax
    
    
    (1,982
    )
    
    
    
    
    
    
    Recognition of previously unrealized losses on
available-for-sale securities, net of taxes
    
    
    433
    
    
    
    
    
    
    
    Unrealized loss on available-for-sale securities,
net of taxes
    
    
    (102
    )
    
    
    (433
    )
    
    
    Prior service cost for post-retirement plan, net of tax
    
    
    (24
    )
    
    
    (24
    )
    
    
    Net loss for post-retirement plan, net of tax
    
    
    (241
    )
    
    
    (39
    )
    
    
    Comprehensive income (loss)
    
    $
    38,868
    
    
    $
    15,655
    
    
    $
    (47,724
    )
  Net UnrealizedGain (Loss) on
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalDerivative
    
    
    
    
    
    Foreign
    
    Net Unrealized
    
    AccumulatedInstruments
    
    Post-retirement
    
    Currency
    
    (Loss) Gain on
    
    OtherQualifying as
    
    Plan Liability
    
    Translation
    
    Available-for-sale
    
    Comprehensive(in thousands)
    
    Hedges
    
    Adjustment
    
    Adjustment
    
    Investments
    
    IncomeBalance at December 30, 2006
    
    $
    
    
    
    $
    148
    
    
    $
    4,007
    
    
    $
    
    
    
    $
    4,155Balance at December 29, 2007
    
    $
    
    
    
    $
    85
    
    
    $
    7,258
    
    
    $
    (433
    )
    
    $
    6,910Balance at January 3, 2009
    
    $
    (1,982
    )
    
    $
    (180
    )
    
    $
    5,490
    
    
    $
    (102
    )
    
    $
    3,226
 Recent Accounting Pronouncements
 Fair Value Measurements The Effective Date of FASB Statement No. 157
 F-13




---



##### Table of Contents



Note 6, Goodwill and
Intangible Assets Note 12, Fair Value Measurements and Derivative Financial Instruments,
 Accounting for Nonrefundable
Advance Payments for Goods or Services Received for Use in Future Research and Development
Activities.
 Business Combinations Business Combinations
 Accounting for Convertible
Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement).
 F-14




---



##### Table of Contents



2. Acquisitions
 Laserscope
   Note 3 Discontinued Operations and Sale of Aesthetics Business,
 Restructuring Costs
  Recognition of Liabilities in Connection with a Purchase Business Combination
 F-15




---



##### Table of Contents



Restructuring
    
    
    
    
    
    
    
    
    
    
    RestructuringLiability as of
    
    
    Adjustment to
    
    
    Cash Payments /
    
    
    Liability as of(in thousands)
    
    December 29, 2007
    
    
    Liability
    
    
    Settlements
    
    
    January 3, 2009Severance and benefits
    
    $
    216
    
    
    $
    (44
    )
    
    $
    (172
    )
    
    $
    Contract terminations and other
    
    
    3,904
    
    
    
    1,081
    
    
    
    (4,985
    )
    
    
    Total restructuring
    
    $
    4,120
    
    
    $
    1,037
    
    
    $
    (5,157
    )
    
    $
    
 Integration Costs
  BioControl Medical, Ltd.
 Goodwill and Other Intangible Assets
   3. Discontinued Operations and Sale of Aesthetics Business
 Note 2, Acquisitions
 F-16




---



##### Table of Contents



Accounting for the Impairment or Disposal of Long-Lived Assets
 (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
    )
 Applying the Conditions in
Paragraph 42 of FASB Statement No. 144 in Determining Whether to Report Discontinued Operations
 4. Litigation settlements
 Her
Option ®
 F-17




---



##### Table of Contents



5. Balance Sheet Information
  2008
    
    2007Accounts receivableTrade accounts receivable
    
    $
    95,297
    
    
    $
    108,412Other receivables
    
    
    1,317
    
    
    
    1,143Allowance for doubtful accounts
    
    
    (3,536
    )
    
    
    (3,098
    )Net accounts receivable
    
    $
    93,078
    
    
    $
    106,457InventoriesRaw materials
    
    $
    11,611
    
    
    $
    21,335Work in process
    
    
    4,841
    
    
    
    7,587Finished goods
    
    
    26,283
    
    
    
    34,673Obsolescence allowance
    
    
    (4,235
    )
    
    
    (2,888
    )Net inventories
    
    $
    38,500
    
    
    $
    60,707Property, plant and equipmentLand and building
    
    $
    41,002
    
    
    $
    39,129Machinery and equipment
    
    
    11,868
    
    
    
    12,786Construction in progress
    
    
    
    
    
    
    356Software
    
    
    18,112
    
    
    
    18,701Furniture, fixtures, and other
    
    
    18,598
    
    
    
    21,107Accumulated depreciation
    
    
    (41,300
    )
    
    
    (38,953
    )Net property, plant and equipment
    
    $
    48,280
    
    
    $
    53,126Accrued compensation expensesAccrued payroll
    
    $
    4,429
    
    
    $
    2,700Accrued bonuses and commissions
    
    
    10,594
    
    
    
    8,122Accrued vacation
    
    
    4,069
    
    
    
    3,993Other accrued compensation
    
    
    3,784
    
    
    
    4,443Total accrued compensation expenses
    
    $
    22,876
    
    
    $
    19,258Other accrued expensesAccrued interest
    
    $
    213
    
    
    $
    9,968Accrued acquisition costs
    
    
    2,128
    
    
    
    5,094Accrued litigation settlements
    
    
    
    
    
    
    15,103Accrued other
    
    
    19,194
    
    
    
    16,299Total other accrued expenses
    
    $
    21,535
    
    
    $
    46,464Long-term employee benefit obligationsAccumulated postretirement benefit obligation
    
    $
    3,623
    
    
    $
    3,046Other long-term benefit obligations
    
    
    129
    
    
    
    129Total long-term employee benefit obligations
    
    $
    3,752
    
    
    $
    3,175
 F-18




---



##### Table of Contents



6. Goodwill and Intangible Assets
  (in thousands)
    
    2008
    
    2007Goodwill, beginning of the period
    
    $
    690,478
    
    
    $
    677,053Adjustments to goodwill from acquisitions
    
    
    759
    
    
    
    11,865Effect of currency translation
    
    
    (1,140
    )
    
    
    1,560Goodwill, end of the period
    
    $
    690,097
    
    
    $
    690,478
    January 3, 2009
    
    December 29, 2007Weighted avg
    
    Gross
    
    
    
    
    
    
    
    
    
    Grossremaining life
    
    carrying
    
    Accumulated
    
    Net book
    
    carrying
    
    Accumulated
    
    Net book(in thousands)
    
    (years)
    
    amount
    
    amortization
    
    value
    
    amount
    
    amortization
    
    valueDeveloped and core technology
    
    
    6.5
    
    
    $
    137,553
    
    
    $
    (75,238
    )
    
    $
    62,315
    
    
    $
    137,553
    
    
    $
    (43,101
    )
    
    $
    94,452Other intangiblesAmortizedPatents
    
    
    6.7
    
    
    
    11,510
    
    
    
    (9,317
    )
    
    
    2,193
    
    
    
    11,325
    
    
    
    (8,964
    )
    
    
    2,361Licenses
    
    
    2.4
    
    
    
    9,312
    
    
    
    (7,659
    )
    
    
    1,653
    
    
    
    9,158
    
    
    
    (6,507
    )
    
    
    2,651Royalty agreement
    
    
    4.8
    
    
    
    2,970
    
    
    
    (1,148
    )
    
    
    1,822
    
    
    
    2,970
    
    
    
    (767
    )
    
    
    2,203Trademarks
    
    
    2.0
    
    
    
    2,208
    
    
    
    (1,327
    )
    
    
    881
    
    
    
    2,208
    
    
    
    (886
    )
    
    
    1,322Total amortized other
intangible assets
    
    
    4.4
    
    
    
    26,000
    
    
    
    (19,451
    )
    
    
    6,549
    
    
    
    25,661
    
    
    
    (17,124
    )
    
    
    8,537UnamortizedTrademarks
    
    
    n/a
    
    
    
    40,800
    
    
    
    
    
    
    
    40,800
    
    
    
    40,800
    
    
    
    
    
    
    
    40,800Total other intangibles
    
    
    
    
    
    
    66,800
    
    
    
    (19,451
    )
    
    
    47,349
    
    
    
    66,461
    
    
    
    (17,124
    )
    
    
    49,337Total intangible assets
    
    
    
    
    
    $
    204,353
    
    
    $
    (94,689
    )
    
    $
    109,664
    
    
    $
    204,014
    
    
    $
    (60,225
    )
    
    $
    143,789
 GreenLight HPS ®
 F-19




---



##### Table of Contents



Year
    
    Actual
    
    Expected2006
    
    $
    12,393
    
    
    $
    2007
    
    
    18,264
    
    
    
    2008
    
    
    34,465
    
    
    
    2009
    
    
    
    
    
    
    12,8012010
    
    
    
    
    
    
    12,0242011
    
    
    
    
    
    
    11,2992012
    
    
    
    
    
    
    9,1202013
    
    
    
    
    
    
    8,504
 7. Warranties
  (in thousands)
    
    2008
    
    2007Balance, beginning of period
    
    $
    3,001
    
    
    $
    2,715Provisions for warranty
    
    
    5,577
    
    
    
    5,844Claims processed
    
    
    (5,291
    )
    
    
    (5,558
    )Balance, end of period
    
    $
    3,287
    
    
    $
    3,001
 8. Credit Agreements
 Credit Agreement
 Note 9, Debt.
 Note 9, Debt
 Bridge Loan Commitment Fee
  9. Debt
 Senior Secured Credit Facility
  F-20




---



##### Table of Contents



Note 4, Litigation Settlements)
      F-21




---



##### Table of Contents



Fiscal 2009
    
    $
    2,341Fiscal 2010
    
    
    2,341Fiscal 2011
    
    
    57,350Fiscal 2012
    
    
    166,785Fiscal 2013
    
    
    
 Amendment of Credit Facility
  Convertible Senior Subordinated Notes; Supplemental Guarantor Information
     F-22




---



##### Table of Contents



F-23




---



##### Table of Contents



American Medical Systems Holdings, Inc.
Notes to Consolidated Financial Statements  (Continued)
Condensed Consolidating Statement of Operations
  Year Ended January 3, 2009AmericanMedical
    
    
    
    
    
    
    Non-Systems
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    ConsolidatedHoldings, Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalNet sales
    
    $
    
    
    
    $
    451,054
    
    
    $
    113,080
    
    
    $
    (62,493
    )
    
    $
    501,641Cost of sales
    
    
    
    
    
    
    109,873
    
    
    
    64,637
    
    
    
    (63,413
    )
    
    
    111,097Gross profit
    
    
    
    
    
    
    341,181
    
    
    
    48,443
    
    
    
    920
    
    
    
    390,544Operating expensesMarketing and selling
    
    
    
    
    
    
    136,340
    
    
    
    39,330
    
    
    
    
    
    
    
    175,670Research and development
    
    
    
    
    
    
    46,247
    
    
    
    
    
    
    
    
    
    
    
    46,247In-process research and
development
    
    
    
    
    
    
    7,500
    
    
    
    
    
    
    
    
    
    
    
    7,500General and administrative
    
    
    
    
    
    
    39,280
    
    
    
    1
    
    
    
    
    
    
    
    39,281Amortization of intangibles
    
    
    
    
    
    
    34,465
    
    
    
    
    
    
    
    
    
    
    
    34,465Total operating expenses
    
    
    
    
    
    
    263,832
    
    
    
    39,331
    
    
    
    
    
    
    
    303,163Operating income
    
    
    
    
    
    
    77,349
    
    
    
    9,112
    
    
    
    920
    
    
    
    87,381Other (expense) incomeRoyalty income
    
    
    
    
    
    
    2,974
    
    
    
    1,500
    
    
    
    
    
    
    
    4,474Interest income
    
    
    
    
    
    
    1,509
    
    
    
    104
    
    
    
    (866
    )
    
    
    747Interest expense
    
    
    (12,234
    )
    
    
    (15,140
    )
    
    
    (890
    )
    
    
    866
    
    
    
    (27,398
    )Amortization of financing costs
    
    
    (421
    )
    
    
    (3,678
    )
    
    
    
    
    
    
    
    
    
    
    (4,099
    )Gain on extinguishment of debt
    
    
    10,055
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,055Other income (expense)
    
    
    
    
    
    
    (860
    )
    
    
    (1,310
    )
    
    
    (25
    )
    
    
    (2,195
    )Total other (expense) income
    
    
    (2,600
    )
    
    
    (15,195
    )
    
    
    (596
    )
    
    
    (25
    )
    
    
    (18,416
    )(Loss) income before income taxes
    
    
    (2,600
    )
    
    
    62,154
    
    
    
    8,516
    
    
    
    895
    
    
    
    68,965Provision for income taxes
    
    
    (979
    )
    
    
    23,970
    
    
    
    3,084
    
    
    
    338
    
    
    
    26,413Equity in earnings of subsidiary
    
    
    43,616
    
    
    
    5,432
    
    
    
    
    
    
    
    (49,048
    )
    
    
    Net income
    
    $
    41,995
    
    
    $
    43,616
    
    
    $
    5,432
    
    
    $
    (48,491
    )
    
    $
    42,552
 F-24




---



##### 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-25




---



##### 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-26




---



##### Table of Contents



American Medical Systems Holdings, Inc.
Notes to Consolidated Financial Statements  (Continued)
Condensed Consolidating Balance Sheet
  As of January 3, 2009AmericanMedical
    
    
    
    
    
    
    Non-Systems
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    ConsolidatedHoldings, Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalAssetsCurrent assetsCash and cash equivalents
    
    $
    
    
    
    $
    3,143
    
    
    $
    8,499
    
    
    $
    
    
    
    $
    11,642Short term investments
    
    
    15,756
    
    
    
    15,433
    
    
    
    134
    
    
    
    
    
    
    
    31,323Accounts receivable, net
    
    
    618,891
    
    
    
    68,158
    
    
    
    24,817
    
    
    
    (618,788
    )
    
    
    93,078Inventories, net
    
    
    
    
    
    
    36,521
    
    
    
    5,226
    
    
    
    (3,247
    )
    
    
    38,500Deferred income taxes
    
    
    
    
    
    
    12,412
    
    
    
    496
    
    
    
    
    
    
    
    12,908Other current assets
    
    
    
    
    
    
    5,832
    
    
    
    1,026
    
    
    
    
    
    
    
    6,858Total current assets
    
    
    634,647
    
    
    
    141,499
    
    
    
    40,198
    
    
    
    (622,035
    )
    
    
    194,309Property, plant and equipment, net
    
    
    
    
    
    
    46,751
    
    
    
    1,529
    
    
    
    
    
    
    
    48,280Goodwill
    
    
    
    
    
    
    628,193
    
    
    
    85,925
    
    
    
    (24,021
    )
    
    
    690,097Developed and core technology, net
    
    
    
    
    
    
    62,315
    
    
    
    
    
    
    
    
    
    
    
    62,315Other intangibles, net
    
    
    
    
    
    
    47,349
    
    
    
    
    
    
    
    
    
    
    
    47,349Investment in subsidiaries
    
    
    110,868
    
    
    
    32,824
    
    
    
    
    
    
    
    (143,692
    )
    
    
    Other long-term assets, net
    
    
    1,178
    
    
    
    1,418
    
    
    
    151
    
    
    
    
    
    
    
    2,747Total assets
    
    $
    746,693
    
    
    $
    960,349
    
    
    $
    127,803
    
    
    $
    (789,748
    )
    
    $
    1,045,097Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    11,461
    
    
    $
    556,362
    
    
    $
    70,944
    
    
    $
    (630,937
    )
    
    $
    7,830Accrued compensation expenses
    
    
    
    
    
    
    19,252
    
    
    
    3,624
    
    
    
    
    
    
    
    22,876Accrued warranty expense
    
    
    
    
    
    
    3,300
    
    
    
    (13
    )
    
    
    
    
    
    
    3,287Income taxes payable
    
    
    (980
    )
    
    
    6,657
    
    
    
    2,105
    
    
    
    
    
    
    
    7,782Other accrued expenses
    
    
    91
    
    
    
    18,504
    
    
    
    2,940
    
    
    
    
    
    
    
    21,535Total current liabilities
    
    
    10,572
    
    
    
    604,075
    
    
    
    79,600
    
    
    
    (630,937
    )
    
    
    63,310Non-current liabilitiesLong term debt
    
    
    329,928
    
    
    
    222,488
    
    
    
    
    
    
    
    
    
    
    
    552,416Intercompany loans payable
    
    
    
    
    
    
    
    
    
    
    15,119
    
    
    
    (15,119
    )
    
    
    Deferred income taxes
    
    
    20,598
    
    
    
    3,839
    
    
    
    260
    
    
    
    
    
    
    
    24,697Long-term income taxes payable
    
    
    
    
    
    
    15,327
    
    
    
    
    
    
    
    
    
    
    
    15,327Long-term employee benefit
obligations
    
    
    
    
    
    
    3,752
    
    
    
    
    
    
    
    
    
    
    
    3,752Total non-current liabilities
    
    
    350,526
    
    
    
    245,406
    
    
    
    15,379
    
    
    
    (15,119
    )
    
    
    596,192Total liabilities
    
    
    361,098
    
    
    
    849,481
    
    
    
    94,979
    
    
    
    (646,056
    )
    
    
    659,502Stockholders equityCommon stock
    
    
    737
    
    
    
    
    
    
    
    9
    
    
    
    (9
    )
    
    
    737Additional paid-in capital
    
    
    303,274
    
    
    
    3,424
    
    
    
    67,368
    
    
    
    (70,792
    )
    
    
    303,274Accumulated other
comprehensive income
    
    
    3,226
    
    
    
    (1,334
    )
    
    
    4,367
    
    
    
    (3,033
    )
    
    
    3,226Retained earnings (deficit)
    
    
    78,358
    
    
    
    108,778
    
    
    
    (38,920
    )
    
    
    (69,858
    )
    
    
    78,358Total stockholders equity
    
    
    385,595
    
    
    
    110,868
    
    
    
    32,824
    
    
    
    (143,692
    )
    
    
    385,595Total liabilities and stockholders equity
    
    $
    746,693
    
    
    $
    960,349
    
    
    $
    127,803
    
    
    $
    (789,748
    )
    
    $
    1,045,097
 F-27




---



##### 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-28




---



##### Table of Contents



American Medical Systems Holdings, Inc.
Notes to Consolidated Financial Statements  (Continued)
Condensed Consolidating Statement of Cash Flows
 Year Ended January 3, 2009AmericanMedical
    
    
    
    
    
    
    Non-Systems
    
    
    Guarantor
    
    
    Guarantor
    
    
    
    
    
    
    ConsolidatedHoldings, Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalCash flows from operating activitiesNet cash provided by (used in) operating activities
    
    $
    12,969
    
    
    $
    107,771
    
    
    $
    (4,983
    )
    
    $
    
    
    
    $
    115,757Cash flows from investing activitiesPurchase of property, plant and equipment
    
    
    
    
    
    
    (5,468
    )
    
    
    (633
    )
    
    
    
    
    
    
    (6,101
    )Disposal of business
    
    
    
    
    
    
    4,691
    
    
    
    
    
    
    
    
    
    
    
    4,691Purchase of investments in technology
    
    
    
    
    
    
    (7,500
    )
    
    
    
    
    
    
    
    
    
    
    (7,500
    )Purchase of other intangibles
    
    
    
    
    
    
    (1,352
    )
    
    
    
    
    
    
    
    
    
    
    (1,352
    )Purchase of short term investments
    
    
    
    
    
    
    (70,440
    )
    
    
    (65
    )
    
    
    
    
    
    
    (70,505
    )Sale of short term investments
    
    
    
    
    
    
    39,731
    
    
    
    268
    
    
    
    
    
    
    
    39,999Net payments from settlement of derivative contracts
    
    
    
    
    
    
    (1,385
    )
    
    
    
    
    
    
    
    
    
    
    (1,385
    )Net cash used in investing activities
    
    
    
    
    
    
    (41,723
    )
    
    
    (430
    )
    
    
    
    
    
    
    (42,153
    )Cash flows from financing activitiesIntercompany notes
    
    
    
    
    
    
    626
    
    
    
    (626
    )
    
    
    
    
    
    
    Issuance of common stock
    
    
    8,874
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,874Excess tax benefit from exercise of stock options
    
    
    1,498
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,498Proceeds from short-term borrowings
    
    
    
    
    
    
    12,000
    
    
    
    
    
    
    
    
    
    
    
    12,000Repayments of short-term borrowings
    
    
    
    
    
    
    (12,000
    )
    
    
    
    
    
    
    
    
    
    
    (12,000
    )Payments on senior secured credit facility
    
    
    
    
    
    
    (85,202
    )
    
    
    
    
    
    
    
    
    
    
    (85,202
    )Repurchase of convertible senior subordinated notes
    
    
    (23,373
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,373
    )Net cash used in financing activities
    
    
    (13,001
    )
    
    
    (84,576
    )
    
    
    (626
    )
    
    
    
    
    
    
    (98,203
    )Effect of exchange rates on cash
    
    
    
    
    
    
    
    
    
    
    2,197
    
    
    
    
    
    
    
    2,197Net decrease in cash and cash equivalents
    
    
    (32
    )
    
    
    (18,528
    )
    
    
    (3,842
    )
    
    
    
    
    
    
    (22,402
    )Cash and cash equivalents at beginning of period
    
    
    32
    
    
    
    21,671
    
    
    
    12,341
    
    
    
    
    
    
    
    34,044Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    3,143
    
    
    $
    8,499
    
    
    $
    
    
    
    $
    11,642
 F-29




---



##### 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-30




---



##### 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-31




---



##### Table of Contents



10. Stock-Based Compensation
   Year Ended
    
    Year Ended
    
    Year Ended(in thousands)
    
    January 3, 2009
    
    December 29, 2007
    
    December 30, 2006Stock-option awards
    
    $
    7,721
    
    
    $
    9,574
    
    
    $
    9,169Restricted stock awards
    
    
    602
    
    
    
    2,228
    
    
    
    136Employee stock purchase plan
    
    
    619
    
    
    
    596
    
    
    
    525Total share-based
compensation expense
    
    $
    8,942
    
    
    $
    12,398
    
    
    $
    9,830
  Year Ended
    
    Year Ended
    
    Year Ended(in thousands)
    
    January 3, 2009
    
    December 29, 2007
    
    December 30, 2006Cost of sales
    
    $
    2,069
    
    
    $
    1,584
    
    
    $
    420Marketing and selling
    
    
    3,454
    
    
    
    4,187
    
    
    
    3,330Research and development
    
    
    2,254
    
    
    
    2,766
    
    
    
    2,113General and administrative
    
    
    1,165
    
    
    
    3,861
    
    
    
    3,967Total share-based compensation expense
    
    $
    8,942
    
    
    $
    12,398
    
    
    $
    9,830
      F-32




---



##### Table of Contents



Weighted average
    
    
    AggregateOptions
    
    
    exercise price
    
    
    Intrinsicoutstanding
    
    
    per share
    
    
    Value(in thousands)Balance 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
    
    
    $
    14.82Granted
    
    
    1,453,040
    
    
    $
    14.41Exercised
    
    
    (1,016,891
    )
    
    $
    5.36Cancelled or expired
    
    
    (1,003,700
    )
    
    $
    19.06Balance at January 3, 2009
    
    
    7,020,341
    
    
    $
    15.50
    
    
    $
    1,431Options exercisable at January 3, 2009
    
    
    4,499,761
    
    
    $
    15.17
    
    
    $
    1,431
  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 - $13.84
    
    
    1,769,162
    
    
    3.8 years
    
    $
    9.19
    
    
    
    1,555,062
    
    
    $
    8.73$13.90 - $14.94
    
    
    1,771,157
    
    
    5.9 years
    
    
    14.48
    
    
    
    445,548
    
    
    
    14.83$15.62 - $19.56
    
    
    1,823,548
    
    
    5.2 years
    
    
    18.14
    
    
    
    1,227,827
    
    
    
    18.08$19.69 - $21.68
    
    
    1,656,474
    
    
    4.3 years
    
    
    20.41
    
    
    
    1,271,324
    
    
    
    20.38Total
    
    
    7,020,341
    
    
    4.8 years
    
    $
    15.50
    
    
    
    4,499,761
    
    
    $
    15.17
   F-33




---



##### Table of Contents



2008
    
    2007
    
    2006Fair value of options granted
    
    $
    5.00
    
    
    $
    6.50
    
    
    $
    7.48Risk free interest rate
    
    
    2.88
    %
    
    
    4.44
    %
    
    
    4.68
    %Expected dividend rate
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Stock price volatility
    
    
    34.81
    %
    
    
    32.88
    %
    
    
    35.29
    %Expected life of option
    
    5 years
    
    
    5 years
    
    
    5 years
 Expected life
 Expected volatility
 Risk-free rate of return
 Dividend yield
    Restricted Stock
  F-34




---



##### Table of Contents



Unvested Shares
    
    
    Weighted averageoutstanding
    
    
    grant date fair valueBalance at December 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
    
    
    
    18.30Granted
    
    
    94,800
    
    
    
    14.70Vested
    
    
    (86,601
    )
    
    
    18.50Cancelled
    
    
    (32,351
    )
    
    
    17.67Balance at January 3, 2009
    
    
    192,568
    
    
    $
    16.54
 Employee Stock Purchase Plan
  11. Commitments and Contingent Liabilities
 Product Liability
   F-35




---



##### Table of Contents



Operating Leases
  (in thousands)2009
    
    $
    2,8832010
    
    
    2,2352011
    
    
    1,6942012
    
    
    1,1652013
    
    
    1892014 and beyond
    
    
    Total
    
    $
    8,166
  12. Fair Value Measurements and Derivative Financial Instruments
 Fair Value Measurements,
  Level 1
 Level 2
 
    
    Quoted prices for similar assets or liabilities in active markets;
    
    Quoted prices for identical or similar assets or liabilities in non-active markets;
    
    Inputs other than quoted prices that are observable for substantially the full term of
the asset or liability; and
    
    Inputs that are derived principally from or corroborated by observable market data for
substantially the full term of the asset or liability.
 Level 3
 F-36




---



##### Table of Contents



Assets and Liabilities Measured at Fair Value on a Recurring Basi s
  Fair Value Measurements at Reporting Date UsingQuoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableDescription
    
    Identical Assets (Level 1)
    
    
    Inputs (Level 2)
    
    
    Inputs (Level 3)AssetsMoney market funds
    
    $
    30,846
    
    
    $
    
    
    
    $
    Available-for-sale securities
    
    
    192
    
    
    
    
    
    
    
    Other short-term investments
    
    
    151
    
    
    
    134
    
    
    
    Derivatives
    
    
    
    
    
    
    882
    
    
    
    Total
    
    $
    31,189
    
    
    $
    1,016
    
    
    $
    LiabilitiesDerivatives
    
    $
    
    
    
    $
    4,392
    
    
    $
    
  Note 3 Discontinued Operations and Sale of Aesthetics Business
     Accounting for Derivative Instruments and Hedging
Activity
 F-37




---



##### Table of Contents



13. Industry Segment Information and Foreign Operations
 Note 3,
Discontinued Operations and Sale of Aesthetics Business).
   (in thousands)
    
    2008
    
    2007
    
    2006United StatesNet sales
    
    $
    355,678
    
    
    $
    334,258
    
    
    $
    272,679Long-lived assets
    
    
    833,695
    
    
    
    872,882
    
    
    
    873,200InternationalNet sales
    
    
    145,963
    
    
    
    129,670
    
    
    
    85,639Long-lived assets
    
    
    17,092
    
    
    
    18,165
    
    
    
    15,723
 14. Postretirement Benefits
 Employers Accounting for Defined Benefit Pension
and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R)
 F-38




---



##### Table of Contents



2008
    
    2007
    
    2006Service cost
    
    $
    183
    
    
    $
    155
    
    
    $
    115Interest cost
    
    
    208
    
    
    
    175
    
    
    
    163Amortization of net prior service cost
    
    
    (38
    )
    
    
    (38
    )
    
    
    (39
    )Net benefit costs
    
    $
    353
    
    
    $
    292
    
    
    $
    239
  2008
    
    2007Change in benefit obligationBenefit obligation at beginning of year
    
    $
    3,272
    
    
    $
    3,071Service cost
    
    
    183
    
    
    
    155Interest cost
    
    
    208
    
    
    
    175Actuarial losses
    
    
    386
    
    
    
    59Benefit payments
    
    
    (163
    )
    
    
    (188
    )Benefit obligation at end of year
    
    $
    3,886
    
    
    $
    3,272Change in plan assetsFair value of assets at beginning of year
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    
    
    
    
    Employer contributions
    
    
    163
    
    
    
    188Benefit payments
    
    
    (163
    )
    
    
    (188
    )Fair value of plan assets at end of year
    
    $
    
    
    
    $
    
  2008
    
    2007Current
    
    $
    (263
    )
    
    $
    (226
    )Long term
    
    
    (3,623
    )
    
    
    (3,046
    )Net amount of accrued benefit cost
    
    $
    (3,886
    )
    
    $
    (3,272
    )Amounts recognized in accumulated other comprehensive income consist of:2008
    
    2007Net actuarial loss (gain)
    
    $
    194
    
    
    $
    (192
    )Net prior service cost
    
    
    94
    
    
    
    55Total accumulated other comprehensive income
    
    $
    288
    
    
    $
    (137
    )
  F-39




---



##### Table of Contents



2009
    
    $
    2642010
    
    
    2572011
    
    
    2602012
    
    
    2692013
    
    
    2952014-2018
    
    
    1,790
  2008
    
    2007Discount 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
    
    $
    6
    
    
    $
    (6
    )Effect on post-retirement benefit obligation
    
    
    57
    
    
    
    (55
    )
 15. Savings and Investment Plan
  16. Income Taxes
  Pretax income
    
    2008
    
    2007
    
    2006U.S.
    
    $
    61,947
    
    
    $
    24,195
    
    
    $
    (35,187
    )Foreign
    
    
    7,018
    
    
    
    5,310
    
    
    
    3,036Total
    
    $
    68,965
    
    
    $
    29,505
    
    
    $
    (32,151
    )
 F-40




---



##### Table of Contents



Income tax expense
    
    2008
    
    2007
    
    2006CurrentFederal
    
    $
    17,190
    
    
    $
    433
    
    
    $
    6,262State
    
    
    4,166
    
    
    
    1,796
    
    
    
    2,592Foreign
    
    
    2,002
    
    
    
    1,708
    
    
    
    1,063DeferredFederal
    
    
    2,547
    
    
    
    11,145
    
    
    
    2,366State
    
    
    (9
    )
    
    
    535
    
    
    
    (731
    )Foreign
    
    
    517
    
    
    
    297
    
    
    
    179Total
    
    $
    26,413
    
    
    $
    15,914
    
    
    $
    11,731
  Income tax reconciliation
    
    2008
    
    2007
    
    2006Statutory rate
    
    $
    24,138
    
    
    $
    10,326
    
    
    $
    (11,253
    )State taxes
    
    
    2,702
    
    
    
    1,515
    
    
    
    1,261In-process research and development
    
    
    
    
    
    
    
    
    
    
    23,971Manufacturing tax incentives
    
    
    (851
    )
    
    
    
    
    
    
    (388
    )Meals and entertainment
    
    
    541
    
    
    
    618
    
    
    
    501Foreign rate differential and other
    
    
    80
    
    
    
    (64
    )
    
    
    253Research and development credits
    
    
    (917
    )
    
    
    (1,085
    )
    
    
    (1,044
    )Stock-based compensation under SFAS 123(R)
    
    
    738
    
    
    
    1,098
    
    
    
    1,276Audit settlements and refund claim
    
    
    (712
    )
    
    
    (852
    )
    
    
    (2,455
    )Litigation settlement
    
    
    
    
    
    
    4,256
    
    
    
    Other
    
    
    694
    
    
    
    102
    
    
    
    (391
    )Total
    
    $
    26,413
    
    
    $
    15,914
    
    
    $
    11,731
    Note 4, Litigation Settlements
  F-41




---



##### Table of Contents



2008
    
    2007Deferred tax assets:Federal net operating loss carryforwards
    
    $
    9,618
    
    
    $
    11,666Reserves and allowances
    
    
    9,730
    
    
    
    8,877Workforce, patents and license
    
    
    2,975
    
    
    
    3,174Compensation accruals
    
    
    3,888
    
    
    
    4,774FIN 48 accrued state tax and interest
    
    
    1,593
    
    
    
    1,766Stock-based compensation under SFAS 123(R)
    
    
    5,464
    
    
    
    4,674State net operating loss carryforwards and other credits
    
    
    4,387
    
    
    
    6,441Federal credit carryforwards
    
    
    
    
    
    
    3,273Other
    
    
    1,995
    
    
    
    4,120Valuation allowance
    
    
    (504
    )
    
    
    (1,354
    )Total deferred tax assets
    
    
    39,146
    
    
    
    47,411Deferred tax liabilities:Goodwill
    
    
    9,685
    
    
    
    10,310Prepaid insurance and other
    
    
    1,286
    
    
    
    1,405Developed technology
    
    
    2,969
    
    
    
    16,157Trademarks and royalty agreements
    
    
    16,397
    
    
    
    16,706Contingent interest on debt
    
    
    20,598
    
    
    
    13,061Total deferred tax liabilities
    
    
    50,935
    
    
    
    57,639Net deferred tax liability
    
    $
    (11,789
    )
    
    $
    (10,228
    )
     F-42




---



##### 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
    )
    
    
    11,648Additions for tax positions related to a prior period
    
    
    2,664
    
    
    
    145
    
    
    
    2,809
    
    
    
    24
    
    
    
    2,833Additions for tax positions related to the current period
    
    
    944
    
    
    
    
    
    
    
    944
    
    
    
    (97
    )
    
    
    847Reductions related to the closing of Statutes of Limitations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Reductions related to settlements with tax authorities
    
    
    (1,514
    )
    
    
    (326
    )
    
    
    (1,840
    )
    
    
    246
    
    
    
    (1,594
    )Total UTBs that, if recognized, would impact the
effective income tax rate as of January 3, 2009
    
    $
    14,951
    
    
    $
    376
    
    
    $
    15,327
    
    
    $
    (1,593
    )
    
    $
    13,734
     F-43




---



##### Table of Contents



17. Quarterly Financial Data
 Note 3, Discontinued Operations and Sale of Aesthetics Business).
 2008
    
    2007First
    
    Second
    
    Third
    
    Fourth
    
    First
    
    Second
    
    Third
    
    Fourth13 weeks
    
    13 weeks
    
    13 weeks
    
    14 weeks
    
    13 weeks
    
    13 weeks
    
    13 weeks
    
    13 weeksNet sales
    
    $
    120,362
    
    
    $
    129,797
    
    
    $
    117,468
    
    
    $
    134,014
    
    
    $
    108,385
    
    
    $
    116,453
    
    
    $
    109,041
    
    
    $
    130,049Gross profit
    
    
    91,372
    
    
    
    100,612
    
    
    
    92,605
    
    
    
    105,955
    
    
    
    82,030
    
    
    
    89,324
    
    
    
    84,600
    
    
    
    102,382Operating income
    
    
    20,489
    
    
    
    28,093
    
    
    
    17,557
    
    
    
    21,242
    
    
    
    14,746
    
    
    
    21,223
    
    
    
    17,760
    
    
    
    7,557Income (loss) from continuing operations
    
    
    8,211
    
    
    
    13,994
    
    
    
    5,734
    
    
    
    14,613
    
    
    
    4,383
    
    
    
    7,326
    
    
    
    6,925
    
    
    
    (5,043
    )Net income (loss)
    
    
    8,211
    
    
    
    13,994
    
    
    
    5,734
    
    
    
    14,613
    
    
    
    3,692
    
    
    
    7,326
    
    
    
    6,925
    
    
    
    (5,043
    )Net income (loss) per share:Basic net income (loss)
from continuing operations
    
    $
    0.11
    
    
    $
    0.19
    
    
    $
    0.08
    
    
    $
    0.20
    
    
    $
    0.06
    
    
    $
    0.10
    
    
    $
    0.10
    
    
    $
    (0.07
    )Discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.01
    )
    
    
    
    
    
    
    
    
    
    
    Basic net income (loss)
    
    $
    0.11
    
    
    $
    0.19
    
    
    $
    0.08
    
    
    $
    0.20
    
    
    $
    0.05
    
    
    $
    0.10
    
    
    $
    0.10
    
    
    $
    (0.07
    )Diluted net income (loss)
from continuing operations
    
    $
    0.11
    
    
    $
    0.19
    
    
    $
    0.08
    
    
    $
    0.20
    
    
    $
    0.06
    
    
    $
    0.10
    
    
    $
    0.09
    
    
    $
    (0.07
    )Discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.01
    )
    
    
    
    
    
    
    
    
    
    
    Diluted net income (loss)
    
    $
    0.11
    
    
    $
    0.19
    
    
    $
    0.08
    
    
    $
    0.20
    
    
    $
    0.05
    
    
    $
    0.10
    
    
    $
    0.09
    
    
    $
    (0.07
    )
 Note 9, Debt) Note 6, Goodwill and Intangible Assets Note 9, Debt)
  F-44




---



##### Table of Contents



Note 4, Litigation Settlements
   F-45




---



##### 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 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)
    
    $
    2,311Year ended January 3, 2009Deducted from asset accountsAllowance for doubtful accounts
    
    $
    3,098
    
    
    $
    1,832
    
    
    $
    
    
    
    $
    1,394
    (1)
    
    $
    3,536Allowance for obsolete inventories
    
    $
    2,888
    
    
    $
    5,737
    
    
    $
    
    
    
    $
    4,390
    (2)
    
    $
    4,235Allowance for sales returns
    
    $
    2,311
    
    
    $
    13,664
    (4)
    
    $
    
    
    
    $
    13,398
    (3),(4)
    
    $
    2,577Qualifying Accounts:Year 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)
    
    $
    3,001Year ended January 3, 2009Product liability allowance
    
    $
    895
    
    
    $
    201
    
    
    $
    
    
    
    $
    316
    (5)
    
    $
    780Accrued warranty expense
    
    $
    3,001
    
    
    $
    5,577
    (8)
    
    $
    
    
    
    $
    5,291
    (6),(8)
    
    $
    3,287
 
 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-46




---



##### Table of Contents



Accessa , Acticon ®  , AdVance ® , AMS 700 ® , AMS 700 LGX ® ,
AMS 700 ® MS , AMS 800 ® , Apogee ® , Continuum ,
Elevate ® ,
GreenLight, GreenLight HPS ® , GreenLight PV ® , Her Option ® ,
InhibiZone ® ,
IntePro ® , InteXen ® ,
InVance ® ,
MiniArc ® , Momentary Squeeze Pump, Monarc ® , Ovion , Perigee ® ,
StoneLight ® , SureFlex, Tactile Pump ® , TherMatrx ® ,
TherMatrx ® Dose Optimized Therapy, Topas, and UroLume ® are trademarks of
AMS or its subsidiaries.
 F-47




---



##### Table of Contents



SIGNATURES
  Dated: March 3, 2009
    AMERICAN MEDICAL SYSTEMS HOLDINGS, INC.By                        /s/  Anthony P. Bihl, IIIAnthony P. Bihl, IIIPresident and Chief Executive Officer  Signature
    
    Title/s/ Anthony P. Bihl, III

     Anthony P. Bihl, III
    
    President and Chief Executive Officer
(Principal Executive Officer)/s/ Mark A. Heggestad

     Mark A. Heggestad
    
    Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)/s/ Richard B. Emmitt

     Richard B. Emmitt
    
    Director/s/ Albert Jay Graf

     Albert Jay Graf
    
    Director/s/ Jane E. Kiernan

     Jane E. Kiernan
    
    Director/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




---



##### Table of Contents



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




---



##### Table of Contents



Item No.
    
    Item
    
    Filing Method4.1
    
    Certificate of Incorporation of the Company.
    
    See Exhibit 3.1 above.4.2
    
    Bylaws, as amended, of the Company.
    
    See Exhibit 3.2 above.4.3
    
    Form of Indenture for Senior Debt Securities.
    
    Incorporated by
reference to Exhibit
4.2 of the Companys
Form S-3 filed on
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).4.8
    
    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).
 E-2




---



##### Table of Contents



Item No.
    
    Item
    
    Filing Method10.1
    
    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
    
    First Amendment to
Employment
Agreement,
effective as of
March 6, 2008,
between Ross A.
Longhini and
American Medical
Systems, Inc.
    
    Filed with this Annual Report on Form 10-K.10.6
    
    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).10.7
    
    First Amendment to
Employment
Agreement,
effective as of
March 6, 2008, Mark
A. Heggestad and
American Medical
Systems, Inc.
    
    Filed with this Annual Report on Form 10-K.10.8
    
    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).10.9
    
    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).10.10
    
    Confidential
Separation
Agreement, dated
May 5, 2008,
between American
Medical Systems,
Inc. and Stephen J.
McGill.
    
    Incorporated by reference to Exhibit 10.1
of the Companys Form 8-K filed May 30,
2008 (File No. 000-30733).10.11
    
    Employment
Agreement, dated as
of April 22, 2008,
between American
Medical Systems,
Inc. and Anthony P.
Bihl, III.
    
    Incorporated by reference to Exhibit 10.1
of the Companys Form 8-K filed April 29,
2008 (File No. 000-30733).
 E-3




---



##### Table of Contents



Item No.
    
    Item
    
    Filing Method10.12
    
    Separation Agreement, executed January
18, 2008, 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
24, 2008 (File No.
000-30733).10.13
    
    Settlement Agreement and Limited Waiver
dated July 15, 2008, among American
Medical Systems Holdings, Inc., Galil
Ltd., and Martin J. Emerson.
    
    Incorporated by
reference to
Exhibit 10.1 of the
Companys Form 8-K
filed July 21, 2008
(File No.
000-30733).10.14
    
    2000 Equity Incentive Plan, as amended.
    
    Incorporated by
reference to
Exhibit 10.1 of the
Companys Form 10-Q
for the Fiscal
Quarter Ended June
28, 2003 (File No.
000-30733).10.15
    
    Form of Incentive Stock Option Agreement
under the 2000 Equity Incentive Plan, as
amended.
    
    Incorporated by
reference to
Exhibit 10.10 of
the Companys
Registration
Statement on Form
S-1 (File No.
333-37488).10.16
    
    Form of Non-Qualified Stock Option
Agreement under the 2000 Equity
Incentive Plan, as amended.
    
    Incorporated by
reference to
Exhibit 10.11 of
the Companys
Registration
Statement on Form
S-1 (File No.
333-37488).10.17
    
    Employee Stock Purchase Plan, as amended.
    
    Incorporated by
reference to
Exhibit 10.2 of the
Companys Form 10-Q
for the Fiscal
Quarter Ended
October 1, 2005
(File No.
000-30733).10.18
    
    2005 Stock Incentive Plan, as amended.
    
    Incorporated by
reference to
Exhibit 10.1 of the
Companys Form 10-Q
for the Fiscal
Quarter Ended
October 1, 2005
(File No.
000-30733).10.19
    
    Form of Stock Option Certificate for
Directors under the 2005 Stock Incentive
Plan, as amended.
    
    Incorporated by
reference to
Exhibit 10.20 of
the Companys
Annual Report on
Form 10-K for the
Fiscal Year Ended
December 31, 2005
(File No.
000-30733).10.20
    
    Form of Stock Option Certificate for
Executive Officers under the 2005 Stock
Incentive Plan, as amended.
    
    Incorporated by
reference to
Exhibit 10.21 of
the Companys
Annual Report on
Form 10-K for the
Fiscal Year Ended
December 31, 2005
(File No.
000-30733).10.21
    
    Form of Notice of Amendment to Stock
Option Certificate/Agreement for
Executive Officers of American Medical
Systems Holdings, Inc.
    
    Incorporated by
reference to
Exhibit 10.6 of the
Companys Form 10-Q
for the Fiscal
Quarter Ended July
2, 2006 (File No.
000-30733).10.22
    
    Form of Indemnification Agreement with
Executive Officers and Directors.
    
    Incorporated by
reference to
Exhibit 10.22 of
the Companys
Annual Report on
Form 10-K for the
Fiscal Year Ended
December 31, 2005
(File No.
000-30733).
 E-4




---



##### Table of Contents



Item No.
    
    Item
    
    Filing Method10.23
    
    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).10.24
    
    Form of First Amendment to Change in Control
Severance Agreement.
    
    Filed with this Annual Report on Form 10-K.10.25
    
    Change in Control Severance Agreement, dated
as of April 22, 2008, between American
Medical Systems Holdings, Inc. and Anthony P.
Bihl, III.
    
    Incorporated by reference to Exhibit 10.2
of the Companys Form 8-K filed April 29,
2008 (File No. 000-30733).10.26
    
    Summary of Director Compensation.
    
    Filed with this Annual Report on Form 10-K.10.27
    
    Summary of Named Executive Officer
Compensation (2008).
    
    Incorporated by reference to Exhibit 10.3
of the Companys Form 10-Q filed May 8,
2008 the Fiscal Quarter Ended March 29,
2008 (File No. 000-30733).10.28
    
    Summary of Named Executive Officer
Compensation (2009).
    
    Filed with this Annual Report on Form 10-K.10.29
    
    2009 Executive Variable Incentive Plan.
    
    Filed with this Annual Report on Form 10-K.10.30
    
    Amended and Restated License Agreement, dated
January 1, 2008, between American Medical
Systems, Inc. and BioControl Medical, Ltd.
    
    Filed with this Annual Report on Form 10-K.10.31
    
    First Amendment to Amended and Restated
License Agreement dated August 8, 2008, by
and between American Medical Systems, Inc.
and Bio Control Medical (B.C.M), Ltd.
    
    Incorporated by reference to Exhibit 10.2
of the Companys Form 8-K filed August 19,
2008 (File No. 000-30733).10.32
    
    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).10.33
    
    First Amendment to Credit and Guaranty
Agreement, dated as of October 29, 2007, by
and among American Medical Systems, Inc.,
each of the other credit parties which is a
signatory thereto and CIT Healthcare LLC, as
administrative agent.
    
    Incorporated by reference to Exhibit 10.1
of the Companys Form 8-K filed on October
29, 2007 (File No. 000-30733).
 E-5




---



##### Table of Contents



Item No.
    
    Item
    
    Filing Method10.34
    
    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).10.35
    
    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).10.36
    
    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).10.37
    
    Net Lease Agreement, dated as of October 18,
2000, by and between Laserscope and Realtec
Properties.
    
    Incorporated by reference to Exhibit 10.6A
of Laserscopes Annual Report on Form 10-K
filed on March 28, 2001 (File No.
000-18053).10.38
    
    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).
 E-6




---



##### Table of Contents



Item No.
    
    Item
    
    Filing Method21.1
    
    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-7