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SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 Form 10-K
 Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended:
    
    Commission file number:December 31, 2005
    
    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: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
 þ o
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##### 



AMERICAN MEDICAL SYSTEMS HOLDINGS, INC.
 FORM 10-K
 For the Fiscal Year Ended December 31, 2005
 TABLE OF CONTENTS
  
 Description
    
    PagePART IItem 1. Business
    
    1Item 1A. Risk Factors
    
    8Item 1B. Unresolved Staff Comments
    
    12Item 2. Properties
    
    12Item 3. Legal Proceedings
    
    12Item 4. Submission of Matters to a Vote of Security Holders
    
    12Item 4A. Executive Officers of the Registrant
    
    12PART IIItem 5. Market For Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
    
    15Item 6. Selected Financial Data
    
    16Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    17Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    26Item 8. Financial Statements and Supplementary Data
    
    26Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
    
    26Item 9A. Controls and Procedures
    
    26Item 9B. Other Information
    
    27PART IIIItem 10. Directors and Executive Officers of the Registrant
    
    28Item 11. Executive Compensation
    
    28Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    28Item 13. Certain Relationships and Related Transactions
    
    28Item 14. Principal Accountant Fees and Services
    
    28PART IVItem 15. Exhibits and Financial Statement Schedules
    
    29FINANCIAL STATEMENTS AND NOTES THERETO
    
    F-1EXHIBIT INDEX
    
    E-12006 Executive Variable Incentive PlanSummary of Director CompensationSummary of Named Executive Officer CompensationForm of Stock Option Certificate for DirectorsForm of Stock Option Certificate for Executive OfficersForm of Indemnification AgreementSubsidiaries of the RegistrantConsent of Ernst & Young LLPCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification Pursuant to Section 906




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FORWARD-LOOKING INFORMATION
 This Annual Report on Form 10-K contains certain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Any statements not of historical fact may be
considered forward-looking statements. Written words such as, may, expect, believe,
anticipate, or estimate, or other variations of these or similar words, identify such
forward-looking statements. These statements by their nature involve substantial risks and
uncertainties, and actual results may differ materially from those expressed in such
forward-looking statements. Factors known to us that could cause such material differences are
identified in this Annual Report on Form 10-K under Item 1A,
Risk Factors, and in the Management
Discussion and Analysis of Financial Condition and Results of
Operations, of this Annual Report on
Form 10-K. We undertake no obligation to correct or update any forward-looking statements, whether
as a result of new information, future events, or otherwise. You are advised, however, to consult
any future disclosures we make on related subjects in future filings with the SEC.
 
 PART I
 
 Item 1. Business
 Overview
  www.AmericanMedicalSystems.com.
 Markets and Products
    1




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AMS 700® Tactile Pump Monarc® Apogee Perigee Her Option®
 Mens Pelvic Health
  2




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##### Table of Contents



AMS 700 CX Ultrex AMS 700 Parylene InhibiZone® Tactile Pump
  AMS 800 Urinary Control System InVance®
 UroLume®
 TherMatrx
 Womens Pelvic Health
  3




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##### Table of Contents



AMS 800 Urinary
Control System In-Fast SPARC® Monarc, BioArc® In-Fast SPARC SPARC SPARC Monarc BioArc SP BioArc SP BioArc SP SPARC BioArc TO Monarcs BioArcs InteXen® LP BioArc
 Acticon®
 Apogee Perigee Apogee Perigee InteGraft®
 Her
Option Her
Option Her Option Her Option Her Option
 4




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Selling and Marketing
    Manufacturing and Supply
  InhibiZone
  Research and Development
  AMS 700
 5




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Her Option
  Competition
   Intellectual Property
   Government Regulation
  6




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Third-Party Reimbursement
    7




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Employees
  Financial Information about Geographic Areas
 Notes to Consolidated
Financial Statements  No. 10
 
 Item 1A. Risk Factors
  Our sales may be adversely affected if physicians do not recommend or endorse our products.
  Our growth will be slowed if new products are delayed or are not accepted.
  Our sales could decline if our procedures are not accepted by patients.
  Changes in third party reimbursement for our products and therapies may influence our customers
purchasing activity.
  8




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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.
  We may experience an interruption in sales of a product and incur costs if that product is
recalled.
  We may not be able to supply products that incorporate materials or components which are single- or
sole-sourced.
 InhibiZone
 Inadequate data submissions or clinical study results which do not support a product approval may
delay or preclude a products commercialization.
  Our sale of products could be reduced if we are unable to 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 our products;
 9




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
    
    bringing civil or criminal charges against us;
    
    delaying the introduction of our new products into the market;
    
    recalling or seizing our products;
    
    disrupting the manufacture or distribution of our products; or
    
    withdrawing or denying approvals for our products.
 In the event we fail to comply with manufacturing regulations, we could be prevented from selling
our products.
  Our business may suffer if our new products are not cleared to market in the United States or any
other market.
  
    
    ineffective or cause harmful side effects during preclinical testing or clinical trials;
    
    difficult to manufacture on a large scale; or
    
    uneconomical for the healthcare reimbursement system.
 We may lose market share to our competitors and be unable to operate our business profitably in the
event our patents and other intellectual property rights do not adequately protect our products and
therapies.
   
    
    these agreements will not be breached;
    
    we will have adequate remedies for any breach; or
    
    trade secrets will not otherwise become known to or independently developed by our
competitors.
 In the event of a claim that we infringe upon anothers intellectual property rights, we could
incur significant costs and/or be required to stop the sale of the related product.
  10




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We could incur significant costs or other negative impacts if significant product liability claims
are made against us.
  If physician malpractice insurance costs increase, at some point physicians may alter their
practice patterns and cease using our products.
  If we are unsuccessful in integrating acquisitions, our business and financial condition could be
adversely affected.
  
    
    difficulties in assimilating any acquired companies and products into our existing
business;
    
    delays in realizing the benefits of the acquired company or products;
    
    diversion of our managements time and attention from other business concerns;
    
    lack of or limited direct experience in new markets we may enter; or
    
    difficulties in retaining key employees of the acquired business necessary to manage these
acquisitions.
  Loss of our manufacturing facility would adversely affect our financial position.
  Changes in international stability or foreign exchange rates could negatively impact our sales.
  11




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An inability to meet the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 could
adversely affect investor confidence and, as a result, our stock price.
  Stock option expensing could impact investors confidence in our stock price.
 Share-Based
Payment
 
 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 the Registrant
  Name
    
    Age
    
    TitleDouglas W. Kohrs
    
    
    48
    
    
    Chairman of the Board; DirectorMartin J. Emerson
    
    
    42
    
    
    President and Chief Executive Officer; DirectorCarmen L. Diersen
    
    
    45
    
    
    Executive Vice President, Chief Financial Officer and Corporate SecretaryRoss A. Longhini
    
    
    44
    
    
    Executive Vice President and Chief Technology OfficerLawrence W. Getlin
    
    
    60
    
    
    Senior Vice President, Regulatory, Medical Affairs and Quality Systems and
Corporate Compliance Officer
 12




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##### Table of Contents



Name
    
    Age
    
    TitleJanet L. Dick
    
    
    49
    
    
    Senior Vice President, Human ResourcesJohn F. Nealon
    
    
    43
    
    
    Senior Vice President, Business DevelopmentStephen J. McGill
    
    
    44
    
    
    Vice President, Global Sales
 Douglas W. Kohrs
 Martin J. Emerson
 Carmen L. Diersen
 Ross A. Longhini
 Lawrence W. Getlin, J.D.
 Janet L. Dick
 13




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John F.
Nealon
 Stephen J. McGill
 14




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PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
 Market Information
  2005
    
    
    2004High
    
    
    Low
    
    
    High
    
    
    LowFirst quarter
    
    $
    20.59
    
    
    $
    16.70
    
    
    $
    15.29
    
    
    $
    10.60Second quarter
    
    $
    20.97
    
    
    $
    17.01
    
    
    $
    17.02
    
    
    $
    12.27Third quarter
    
    $
    23.51
    
    
    $
    17.75
    
    
    $
    18.70
    
    
    $
    14.25Fourth quarter
    
    $
    19.96
    
    
    $
    15.20
    
    
    $
    21.84
    
    
    $
    16.31
 Holders
  Dividends
  15




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##### Table of Contents



Item 6. Selected Financial Data
  Statement of Operations Data
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Net sales
    
    $
    262,591
    
    
    $
    208,772
    
    
    $
    168,283
    
    
    $
    141,648
    
    
    $
    117,938Cost of sales(1)
    
    
    46,111
    
    
    
    38,331
    
    
    
    27,353
    
    
    
    24,605
    
    
    
    23,140Gross profit
    
    
    216,480
    
    
    
    170,441
    
    
    
    140,930
    
    
    
    117,043
    
    
    
    94,798Operating expensesMarketing and selling
    
    
    92,001
    
    
    
    72,910
    
    
    
    63,107
    
    
    
    50,152
    
    
    
    44,931Research and development
    
    
    20,966
    
    
    
    15,786
    
    
    
    14,924
    
    
    
    11,858
    
    
    
    11,899In-process research and
development (2)
    
    
    9,220
    
    
    
    35,000
    
    
    
    
    
    
    
    
    
    
    
    General and administrative
    
    
    21,713
    
    
    
    21,617
    
    
    
    17,099
    
    
    
    13,186
    
    
    
    12,047Amortization of intangibles
    
    
    7,884
    
    
    
    5,708
    
    
    
    4,160
    
    
    
    3,775
    
    
    
    9,374Transition and reorganization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000Total operating expenses
    
    
    151,784
    
    
    
    151,021
    
    
    
    99,290
    
    
    
    78,971
    
    
    
    79,251Operating income
    
    
    64,696
    
    
    
    19,420
    
    
    
    41,640
    
    
    
    38,072
    
    
    
    15,547Other income (expense) incomeRoyalty and other
    
    
    500
    
    
    
    2,249
    
    
    
    3,801
    
    
    
    4,172
    
    
    
    3,187Interest, net
    
    
    1,029
    
    
    
    (266
    )
    
    
    (1,352
    )
    
    
    (1,628
    )
    
    
    (2,932
    )Investment impairment (3)
    
    
    
    
    
    
    (4,500
    )
    
    
    
    
    
    
    
    
    
    
    (3,400
    )Total other income (expense)
    
    
    1,529
    
    
    
    (2,517
    )
    
    
    2,449
    
    
    
    2,544
    
    
    
    (3,145
    )Income before income taxes
    
    
    66,225
    
    
    
    16,903
    
    
    
    44,089
    
    
    
    40,616
    
    
    
    12,402Provision for income taxes(4)
    
    
    26,950
    
    
    
    20,023
    
    
    
    15,039
    
    
    
    15,730
    
    
    
    5,872Net income (loss)
    
    $
    39,275
    
    
    $
    (3,120
    )
    
    $
    29,050
    
    
    $
    24,886
    
    
    $
    6,530Net income (loss) per share(5)Basic
    
    $
    0.57
    
    
    $
    (0.05
    )
    
    $
    0.44
    
    
    $
    0.39
    
    
    $
    0.11Diluted
    
    $
    0.55
    
    
    $
    (0.05
    )
    
    $
    0.42
    
    
    $
    0.36
    
    
    $
    0.10
 
 (1)
    
    During the fourth quarters of 2003 and 2002, we reduced our warranty allowance by $3.1 million and $2.9 million,
respectively, and reduced cost of sales, increasing operating income by the same amounts.(2)
    
    In the third quarters of 2005 and 2004, we recognized $9.2 million and $35.0 million, respectively, for in-process research
and development charges related to the acquisitions of Ovion and TherMatrx. For a more complete description
of these items and their impact on financial results see Notes to Consolidated Financial Statements  No. 2.(3)
    
    During the fourth quarter of 2004, we recognized an investment impairment loss of $4.5 million related to our investment
in InjecTx. For a more complete description of this item and its impact on financial results see Notes to Consolidated
Financial Statements  No. 5.(4)
    
    During the third quarter of 2003, we applied for and recognized U.S. tax benefits related to research and development and
extraterritorial income exclusion tax credits for the years 1999 through 2002, resulting in a $1.1 million reduction in 2003
tax expense. The in-process research and development charges and
investment impairment charge described above have no related tax benefit.(5)
    
    Amounts per share have been adjusted to give retroactive effect to the March 21, 2005 stock split for all periods presented. Balance Sheet Data
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Cash, cash equivalents, and
short-term investments
    
    $
    46,390
    
    
    $
    51,168
    
    
    $
    58,953
    
    
    $
    79,429
    
    
    $
    28,755Working capital
    
    
    69,533
    
    
    
    79,575
    
    
    
    92,729
    
    
    
    100,371
    
    
    
    54,030Total assets
    
    
    359,326
    
    
    
    300,550
    
    
    
    279,327
    
    
    
    251,645
    
    
    
    235,151Long-term liabilities
    
    
    3,072
    
    
    
    3,126
    
    
    
    12,315
    
    
    
    21,945
    
    
    
    29,006Stockholders equity
    
    
    302,879
    
    
    
    249,172
    
    
    
    240,346
    
    
    
    204,262
    
    
    
    174,087
 16




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introductory Overview
  Results of Operations
 Sales trends
  (in thousands)
    
    2005
    
    2004
    
    $ Increase
    
    % Increase
    
    2004
    
    2003
    
    $ Increase
    
    % IncreaseSalesProduct LineMens pelvic healthErectile restoration
    
    $
    80,917
    
    
    $
    74,070
    
    
    $
    6,847
    
    
    
    9.2
    %
    
    $
    74,070
    
    
    $
    72,385
    
    
    $
    1,685
    
    
    
    2.3
    %Male continence
    
    
    53,912
    
    
    
    48,242
    
    
    
    5,670
    
    
    
    11.8
    %
    
    
    48,242
    
    
    
    39,758
    
    
    
    8,484
    
    
    
    21.3
    %Prostate treatments
    
    
    28,255
    
    
    
    14,697
    
    
    
    13,558
    
    
    
    92.3
    %
    
    
    14,697
    
    
    
    4,923
    
    
    
    9,774
    
    
    
    198.5
    %Total mens pelvic health
    
    
    163,084
    
    
    
    137,009
    
    
    
    26,075
    
    
    
    19.0
    %
    
    
    137,009
    
    
    
    117,066
    
    
    
    19,943
    
    
    
    17.0
    %Womens pelvic health
    
    
    99,507
    
    
    
    71,763
    
    
    
    27,744
    
    
    
    38.7
    %
    
    
    71,763
    
    
    
    51,217
    
    
    
    20,546
    
    
    
    40.1
    %Total
    
    $
    262,591
    
    
    $
    208,772
    
    
    $
    53,819
    
    
    
    25.8
    %
    
    $
    208,772
    
    
    $
    168,283
    
    
    $
    40,489
    
    
    
    24.1
    %GeographyUnited States
    
    $
    205,463
    
    
    $
    165,140
    
    
    $
    40,323
    
    
    
    24.4
    %
    
    $
    165,140
    
    
    $
    136,765
    
    
    $
    28,375
    
    
    
    20.7
    %International
    
    
    57,128
    
    
    
    43,632
    
    
    
    13,496
    
    
    
    30.9
    %
    
    
    43,632
    
    
    
    31,518
    
    
    
    12,114
    
    
    
    38.4
    %Total
    
    $
    262,591
    
    
    $
    208,772
    
    
    $
    53,819
    
    
    
    25.8
    %
    
    $
    208,772
    
    
    $
    168,283
    
    
    $
    40,489
    
    
    
    24.1
    %Percent of total salesProduct LineMens pelvic healthErectile restoration
    
    
    30.8
    %
    
    
    35.5
    %
    
    
    
    
    
    
    
    
    
    
    35.5
    %
    
    
    43.0
    %Male continence
    
    
    20.5
    %
    
    
    23.1
    %
    
    
    
    
    
    
    
    
    
    
    23.1
    %
    
    
    23.6
    %Prostate treatments
    
    
    10.8
    %
    
    
    7.0
    %
    
    
    
    
    
    
    
    
    
    
    7.0
    %
    
    
    2.9
    %Total mens pelvic health
    
    
    62.1
    %
    
    
    65.6
    %
    
    
    
    
    
    
    
    
    
    
    65.6
    %
    
    
    69.6
    %Womens pelvic health
    
    
    37.9
    %
    
    
    34.4
    %
    
    
    
    
    
    
    
    
    
    
    34.4
    %
    
    
    30.4
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    
    
    
    
    
    
    
    
    100.0
    %
    
    
    100.0
    %GeographyUnited States
    
    
    78.2
    %
    
    
    79.1
    %
    
    
    
    
    
    
    
    
    
    
    79.1
    %
    
    
    81.3
    %International
    
    
    21.8
    %
    
    
    20.9
    %
    
    
    
    
    
    
    
    
    
    
    20.9
    %
    
    
    18.7
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    
    
    
    
    
    
    
    
    100.0
    %
    
    
    100.0
    %
 17




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##### Table of Contents



Mens pelvic health products AMS 700 Tactile Pump Tactile Pump
  UroLume
 Womens pelvic health products. Apogee Perigee Monarc and BioArc TO Her Option
 International sales and foreign exchange effects .
 Customer location
    
    2005
    
    2004
    
    $ Increase
    
    % Increase
    
    2004
    
    2003
    
    $ Increase
    
    % IncreaseWithin U.S.
    
    $
    205,463
    
    
    $
    165,140
    
    
    $
    40,323
    
    
    
    24.4
    %
    
    $
    165,140
    
    
    $
    136,765
    
    
    $
    28,375
    
    
    
    20.7
    %InternationalBefore currency impact
    
    
    55,767
    
    
    
    43,632
    
    
    
    12,135
    
    
    
    27.8
    %
    
    
    40,098
    
    
    
    31,518
    
    
    
    8,580
    
    
    
    27.2
    %Subtotal
    
    
    261,230
    
    
    
    208,772
    
    
    
    52,458
    
    
    
    25.1
    %
    
    
    205,238
    
    
    
    168,283
    
    
    
    36,955
    
    
    
    22.0
    %Currency impact
    
    
    1,361
    
    
    
    
    
    
    
    1,361
    
    
    
    
    
    
    
    3,534
    
    
    
    
    
    
    
    3,534
    
    
    
    Total
    
    $
    262,591
    
    
    $
    208,772
    
    
    $
    53,819
    
    
    
    25.8
    %
    
    $
    208,772
    
    
    $
    168,283
    
    
    $
    40,489
    
    
    
    24.1
    %
 18




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##### Table of Contents



Operating Expenses
  $ Increase
    
    % Increase
    
    
    
    
    
    
    
    
    
    $ Increase
    
    % Increase(in thousands)
    
    2005
    
    2004
    
    (Decrease)
    
    (Decrease)
    
    2004
    
    2003
    
    (Decrease)
    
    (Decrease)Net sales
    
    $
    262,591
    
    
    $
    208,772
    
    
    $
    53,819
    
    
    
    25.8
    %
    
    $
    208,772
    
    
    $
    168,283
    
    
    $
    40,489
    
    
    
    24.1
    %Cost of sales
    
    
    46,111
    
    
    
    38,331
    
    
    
    7,780
    
    
    
    20.3
    %
    
    
    38,331
    
    
    
    27,353
    
    
    
    10,978
    
    
    
    40.1
    %Gross profit
    
    
    216,480
    
    
    
    170,441
    
    
    
    46,039
    
    
    
    27.0
    %
    
    
    170,441
    
    
    
    140,930
    
    
    
    29,511
    
    
    
    20.9
    %Operating expensesMarketing and selling
    
    
    92,001
    
    
    
    72,910
    
    
    
    19,091
    
    
    
    26.2
    %
    
    
    72,910
    
    
    
    63,107
    
    
    
    9,803
    
    
    
    15.5
    %Research and development
    
    
    20,966
    
    
    
    15,786
    
    
    
    5,180
    
    
    
    32.8
    %
    
    
    15,786
    
    
    
    14,924
    
    
    
    862
    
    
    
    5.8
    %In-process research &
development
    
    
    9,220
    
    
    
    35,000
    
    
    
    (25,780
    )
    
    
    n/a
    
    
    
    35,000
    
    
    
    
    
    
    
    35,000
    
    
    
    n/aGeneral and administrative
    
    
    21,713
    
    
    
    21,617
    
    
    
    96
    
    
    
    0.4
    %
    
    
    21,617
    
    
    
    17,099
    
    
    
    4,518
    
    
    
    26.4
    %Amortization of intangibles
    
    
    7,884
    
    
    
    5,708
    
    
    
    2,176
    
    
    
    38.1
    %
    
    
    5,708
    
    
    
    4,160
    
    
    
    1,548
    
    
    
    37.2
    %Total operating expenses
    
    
    151,784
    
    
    
    151,021
    
    
    
    763
    
    
    
    0.5
    %
    
    
    151,021
    
    
    
    99,290
    
    
    
    51,731
    
    
    
    52.1
    %Operating income
    
    
    64,696
    
    
    
    19,420
    
    
    
    45,276
    
    
    
    233.1
    %
    
    
    19,420
    
    
    
    41,640
    
    
    
    (22,220
    )
    
    
    -53.4
    %Royalty income
    
    
    1,929
    
    
    
    2,079
    
    
    
    (150
    )
    
    
    -7.2
    %
    
    
    2,079
    
    
    
    2,797
    
    
    
    (718
    )
    
    
    -25.7
    %Interest income
    
    
    1,246
    
    
    
    517
    
    
    
    729
    
    
    
    141.0
    %
    
    
    517
    
    
    
    476
    
    
    
    41
    
    
    
    8.6
    %Interest expense
    
    
    (217
    )
    
    
    (783
    )
    
    
    566
    
    
    
    72.3
    %
    
    
    (783
    )
    
    
    (1,828
    )
    
    
    1,045
    
    
    
    57.2
    %Investment impairment
    
    
    
    
    
    
    (4,500
    )
    
    
    4,500
    
    
    
    n/a
    
    
    
    (4,500
    )
    
    
    
    
    
    
    (4,500
    )
    
    
    n/aOther (expense) income
    
    
    (1,429
    )
    
    
    170
    
    
    
    (1,599
    )
    
    
    -940.6
    %
    
    
    170
    
    
    
    1,004
    
    
    
    (834
    )
    
    
    -83.1
    %Income before income taxes
    
    
    66,225
    
    
    
    16,903
    
    
    
    49,322
    
    
    
    291.8
    %
    
    
    16,903
    
    
    
    44,089
    
    
    
    (27,186
    )
    
    
    -61.7
    %Provision for income taxes
    
    
    26,950
    
    
    
    20,023
    
    
    
    6,927
    
    
    
    34.6
    %
    
    
    20,023
    
    
    
    15,039
    
    
    
    4,984
    
    
    
    33.1
    %Net income (loss)
    
    $
    39,275
    
    
    $
    (3,120
    )
    
    $
    42,395
    
    
    
    -1358.8
    %
    
    $
    (3,120
    )
    
    $
    29,050
    
    
    $
    (32,170
    )
    
    
    -110.7
    %
  2005
    
    
    2004
    
    
    2003Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    17.6
    %
    
    
    18.4
    %
    
    
    16.3
    %Gross profit
    
    
    82.4
    %
    
    
    81.6
    %
    
    
    83.7
    %Operating expensesMarketing and selling
    
    
    35.0
    %
    
    
    34.9
    %
    
    
    37.5
    %Research and development
    
    
    8.0
    %
    
    
    7.6
    %
    
    
    8.9
    %In-process research & development
    
    
    3.5
    %
    
    
    16.8
    %
    
    
    0.0
    %General and administrative
    
    
    8.3
    %
    
    
    10.4
    %
    
    
    10.2
    %Amortization of intangibles
    
    
    3.0
    %
    
    
    2.7
    %
    
    
    2.5
    %Total operating expenses
    
    
    57.8
    %
    
    
    72.3
    %
    
    
    59.0
    %Operating income
    
    
    24.6
    %
    
    
    9.3
    %
    
    
    24.7
    %Royalty income
    
    
    0.7
    %
    
    
    1.0
    %
    
    
    1.7
    %Interest income
    
    
    0.5
    %
    
    
    0.2
    %
    
    
    0.3
    %Interest expense
    
    
    -0.1
    %
    
    
    -0.4
    %
    
    
    -1.1
    %Investment impairment
    
    
    0.0
    %
    
    
    -2.2
    %
    
    
    0.0
    %Other income (expense)
    
    
    -0.5
    %
    
    
    0.1
    %
    
    
    0.6
    %Income before income taxes
    
    
    25.2
    %
    
    
    8.1
    %
    
    
    26.2
    %Provision for income taxes
    
    
    10.3
    %
    
    
    9.6
    %
    
    
    8.9
    %Net income (loss)
    
    
    15.0
    %
    
    
    -1.5
    %
    
    
    17.3
    %
 19




---



##### Table of Contents



Cost of goods sold.
  Marketing and selling
 Research and development
 In-process research and development.
 TherMatrx
 General and administrative
 Amortization of intangibles
 20




---



##### Table of Contents



Notes to
Consolidated Financial Statements  No. 2.
 Other income (expense)
 Royalty income.
 Interest income Notes
to Consolidated Financial Statements  No. 2 Notes to Consolidated Financial Statements  No. 7) (see Notes to Consolidated Financial
Statements  No. 2).
 Interest expense
 Investment impairment. Notes to Consolidated Financial Statements 
No. 5.
 Other income (expense).
 Provision for income taxes
   Liquidity and Capital Resources
  Cash flows from operating activities
  21




---



##### Table of Contents



Cash flows from investing activities
  Cash flows from financing activities
    Credit facilityCovenant
    
    requirements
    
    
    ActualLeverage ratio
    
    < 2.75 to 1.00
    
    
    .29 to 1.00Interest coverage ratio
    
    > 3.00 to 1.00
    
    
    348.7 to 1.00
  Contractual Obligations
 Notes to Consolidated Financial Statements  No. 7)
 Less than
    
    
    
    
    
    
    
    
    
    More than(in thousands)
    
    Total
    
    1 year
    
    1-3 years
    
    3-5 years
    
    5 yearsCredit facility (commitment fees)
    
    $
    660
    
    
    $
    165
    
    
    $
    330
    
    
    $
    165
    
    
    
    Operating lease commitments
    
    
    2,302
    
    
    
    1,099
    
    
    
    1,011
    
    
    
    78
    
    
    
    114Purchased inventory commitments
    
    
    468
    
    
    
    468
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    3,430
    
    
    $
    1,732
    
    
    $
    1,341
    
    
    $
    243
    
    
    $
    114
 22




---



##### Table of Contents



Notes to
Consolidated Financial Statements  No. 2
  Critical Accounting Policies and Estimates
  Revenue Recognition Policy
   Allowance for Doubtful Accounts
  23




---



##### Table of Contents



Inventory Valuation
  Warranty Accrual / Allowance
    Product Liability Accrual
  24




---



##### Table of Contents



Operating Leases
  Valuation of IPR&D, Goodwill and Other Intangible Assets
    Income Taxes
   Notes to Consolidated Financial Statements  No. 13).
 25




---



##### Table of Contents



Recent Accounting Pronouncements
 Notes to Consolidated Financial Statements  No.1, Recent Accounting Pronouncements.
 
 Item 7A. Quantitative and Qualitative Disclosures about Market Risk
 Interest Rates
  Currency
    Inflation
  
 Item 8. Financial Statements and Supplementary Data
  
 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 Disclosure Controls and Procedures
  26




---



##### Table of Contents



Managements Report on Internal Control over Financial Reporting
   Internal Control  Integrated
Framework
  
 Item 9B. Other Information
  27




---



##### 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
  
 Item 14. Principal Accountant Fees and Services
  28




---



##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedule
 (a) Financial Statements
  Reports of Independent Registered Public Accounting Firm
    
    F-1Consolidated Balance Sheets as of December 31, 2005 and January 1, 2005
    
    F-3Consolidated Statements of Operations for the years ended December 31, 2005, January 1, 2005, and January 3, 2004
    
    F-4Consolidated Statements of Changes in Stockholders Equity for years ended December 31, 2005, January 1, 2005, and January 3, 2004
    
    F-5Consolidated Statements of Cash Flows for the years ended December 31, 2005, January 1, 2005, and January 3, 2004
    
    F-7Notes to Consolidated Financial Statements for the years ended December 31, 2005, January 1, 2005, and January 3, 2004
    
    F-8
 (b) Financial Statement Schedule
  Schedule II  Valuation and Qualifying Accounts
    
    F-26
 (c) Exhibits
   1.
    
    Amended and Restated Employment Agreement, dated January 5, 2005, between Douglas W.
Kohrs and American Medical Systems, Inc.2.
    
    Employment Agreement, dated April 26, 2004, between Martin J. Emerson and American
Medical Systems, Inc.3.
    
    First Amendment to Employment Agreement, dated January 5, 2005, between Martin J.
Emerson and American Medical Systems, Inc.4.
    
    Stock Option Agreement, dated April 23, 1999, between Douglas Kohrs and American
Medical Systems, Inc.5.
    
    Employment Agreement, dated January 1, 2003, between Ross Longhini and American Medical
Systems, Inc.6.
    
    Employment Agreement, dated March 9, 2004, between Carmen L. Diersen and American
Medical Systems, Inc.7.
    
    2000 Equity Incentive Plan, as amended.
 
 29




---



##### Table of Contents



8.
    
    Form of Incentive Stock Option Agreement under the 2000 Equity Incentive Plan, as
amended.9.
    
    Form of Non-Qualified Stock Option Agreement under the 2000 Equity Incentive Plan, as
amended.10.
    
    Employee Stock Purchase Plan, as amended.11.
    
    2006 Executive Variable Incentive Plan.12.
    
    2005 Stock Incentive Plan, as amended.13.
    
    Form of Stock Option Certificate for Executive Officers under the 2005 Stock Incentive
Plan, as amended.14.
    
    Form of Stock Option Certificate for Directors under the 2005 Stock Incentive Plan, as
amended.15.
    
    Form of Indemnification Agreement with Executive Officers and Directors.16.
    
    Summary of Director Compensation.17.
    
    Summary of Named Executive Officer Compensation.
 30




---



##### Table of Contents



FINANCIAL STATEMENTS AND NOTES THERETO
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal Control  Integrated Framework
       
 F-1




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Internal
Control-Integrated Framework
  
 F-2




---



##### Table of Contents



American Medical Systems Holdings, Inc.
 
 Consolidated Balance Sheets
  December 31, 2005
    
    
    January 1, 2005AssetsCurrent assetsCash and cash equivalents
    
    $
    30,885
    
    
    $
    35,689Short term investments
    
    
    15,505
    
    
    
    15,479Accounts receivable, net
    
    
    51,058
    
    
    
    46,984Inventories, net
    
    
    18,191
    
    
    
    21,719Deferred income taxes
    
    
    3,197
    
    
    
    4,855Other current assets
    
    
    4,072
    
    
    
    3,101Total current assets
    
    
    122,908
    
    
    
    127,827Property, plant and equipment, net
    
    
    21,371
    
    
    
    22,065Goodwill
    
    
    169,700
    
    
    
    102,365Intangibles, net
    
    
    40,578
    
    
    
    44,792Deferred income taxes
    
    
    4,110
    
    
    
    2,911Investment in technology and other assets
    
    
    659
    
    
    
    590Total assets
    
    $
    359,326
    
    
    $
    300,550Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    3,688
    
    
    $
    4,237Accrued compensation expenses
    
    
    11,480
    
    
    
    10,783Accrued warranty expense
    
    
    1,618
    
    
    
    1,451Income taxes payable
    
    
    2,387
    
    
    
    2,982Other accrued expenses
    
    
    8,214
    
    
    
    8,835Contingent liability on acquisition and accrued earn-out payments
    
    
    25,988
    
    
    
    19,964Total current liabilities
    
    
    53,375
    
    
    
    48,252Accumulated post retirement benefit obligation
    
    
    3,072
    
    
    
    3,126Stockholders equityCommon stock, par value $.01 per share; authorized
220,000,000 shares; issued and outstanding:69,525,169 shares at December 31, 2005
and 67,478,544 shares at January 1, 2005
    
    
    695
    
    
    
    675Additional paid-in capital
    
    
    227,284
    
    
    
    210,163Accumulated other comprehensive income
    
    
    2,414
    
    
    
    5,123Retained earnings
    
    
    72,486
    
    
    
    33,211Total stockholders equity
    
    
    302,879
    
    
    
    249,172Total liabilities and stockholders equity
    
    $
    359,326
    
    
    $
    300,550
 The accompanying notes are an integral part of the consolidated financial statements.
 F-3




---



##### Table of Contents



American Medical Systems Holdings, Inc.
 
 Consolidated Statements of Operations
  2005
    
    
    2004
    
    
    2003Net sales
    
    $
    262,591
    
    
    $
    208,772
    
    
    $
    168,283Cost of sales
    
    
    46,111
    
    
    
    38,331
    
    
    
    27,353Gross profit
    
    
    216,480
    
    
    
    170,441
    
    
    
    140,930Operating expensesMarketing and selling
    
    
    92,001
    
    
    
    72,910
    
    
    
    63,107Research and development
    
    
    20,966
    
    
    
    15,786
    
    
    
    14,924In-process research and
development
    
    
    9,220
    
    
    
    35,000
    
    
    
    General and administrative
    
    
    21,713
    
    
    
    21,617
    
    
    
    17,099Amortization of intangibles
    
    
    7,884
    
    
    
    5,708
    
    
    
    4,160Total operating expenses
    
    
    151,784
    
    
    
    151,021
    
    
    
    99,290Operating income
    
    
    64,696
    
    
    
    19,420
    
    
    
    41,640Other income (expense)Royalty income
    
    
    1,929
    
    
    
    2,079
    
    
    
    2,797Interest income
    
    
    1,246
    
    
    
    517
    
    
    
    476Interest expense
    
    
    (217
    )
    
    
    (783
    )
    
    
    (1,828
    )Investment impairment
    
    
    
    
    
    
    (4,500
    )
    
    
    Other income
    
    
    (1,429
    )
    
    
    170
    
    
    
    1,004Total other income (expense)
    
    
    1,529
    
    
    
    (2,517
    )
    
    
    2,449Income before income taxes
    
    
    66,225
    
    
    
    16,903
    
    
    
    44,089Provision for income taxes
    
    
    26,950
    
    
    
    20,023
    
    
    
    15,039Net income (loss)
    
    $
    39,275
    
    
    $
    (3,120
    )
    
    $
    29,050Net income (loss) per shareBasic
    
    $
    0.57
    
    
    $
    (0.05
    )
    
    $
    0.44Diluted
    
    $
    0.55
    
    
    $
    (0.05
    )
    
    $
    0.42Weighted average common
shares used in calculationBasic
    
    
    68,926
    
    
    
    67,006
    
    
    
    65,708Diluted
    
    
    71,682
    
    
    
    67,006
    
    
    
    68,626
 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
  AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Paid-In
    
    
    Retained
    
    
    Deferred
    
    
    ComprehensiveShares
    
    
    Par Value
    
    
    Capital
    
    
    Earnings
    
    
    Compensation
    
    
    (Loss) Income
    
    
    TotalBalances at December 28, 2002
    
    
    64,999
    
    
    $
    650
    
    
    $
    197,666
    
    
    $
    7,281
    
    
    $
    (198
    )
    
    $
    (1,137
    )
    
    $
    204,262Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,050
    
    
    
    
    
    
    
    
    
    
    
    29,050Net loss on derivative financial
instruments, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    (5
    )Amounts reclassified to interest
expense during the period from
derivative and hedging activities,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    460
    
    
    
    460Foreign currency translation adjustment,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,049
    
    
    
    2,049Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,554Issuance of common stockStock options exercised
    
    
    1,154
    
    
    
    12
    
    
    
    1,901
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,913Employee stock purchase plan
    
    
    116
    
    
    
    1
    
    
    
    775
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    776Direct grants
    
    
    2
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11Compensation cost of stock
options issued to non-employees
    
    
    
    
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24Income tax benefit
from stock option plans
    
    
    
    
    
    
    
    
    
    
    1,670
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,670Amortization of
deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136
    
    
    
    
    
    
    
    136Deferred compensation forfeitures
    
    
    
    
    
    
    
    
    
    
    (38
    )
    
    
    
    
    
    
    38
    
    
    
    
    
    
    
    Balances at January 3, 2004
    
    
    66,271
    
    
    $
    663
    
    
    $
    202,009
    
    
    $
    36,331
    
    
    $
    (24
    )
    
    $
    1,367
    
    
    $
    240,346Comprehensive incomeNet loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,120
    )
    
    
    
    
    
    
    
    
    
    
    (3,120
    )Foreign currency translation adjustment,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,772
    
    
    
    3,772Unrealized (loss) on available-for-sale
securities, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16
    )
    
    
    (16
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    636Issuance of common stock:Stock options exercised
    
    
    1,124
    
    
    
    11
    
    
    
    5,095
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,106Employee stock purchase plan
    
    
    84
    
    
    
    1
    
    
    
    959
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    960Compensation cost of stock
options issued to non-employees
    
    
    
    
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54Income tax benefit
from stock option plans
    
    
    
    
    
    
    
    
    
    
    2,047
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,047Amortization of
deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    23Deferred compensation forfeitures
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    Balances at January 1, 2005
    
    
    67,479
    
    
    $
    675
    
    
    $
    210,163
    
    
    $
    33,211
    
    
    $
    
    
    
    $
    5,123
    
    
    $
    249,172
 F-5




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##### Table of Contents



American Medical Systems Holdings, Inc.
Consolidated Statements of Changes in Stockholders Equity (continued)
 AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Paid-In
    
    
    Retained
    
    
    Deferred
    
    
    ComprehensiveShares
    
    
    Par Value
    
    
    Capital
    
    
    Earnings
    
    
    Compensation
    
    
    Income
    
    
    TotalBalances at January 1, 2005
    
    
    67,479
    
    
    $
    675
    
    
    $
    210,163
    
    
    $
    33,211
    
    
    $
    
    
    
    $
    5,123
    
    
    $
    249,172Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,275
    
    
    
    
    
    
    
    
    
    
    
    39,275Foreign currency translation adjustment,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,709
    )
    
    
    (2,709
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,566Issuance of common stock:Stock options exercised
    
    
    1,958
    
    
    
    19
    
    
    
    10,165
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,184Employee stock purchase plan
    
    
    88
    
    
    
    1
    
    
    
    1,354
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,355Compensation cost of stock
options issued to non-employees
    
    
    
    
    
    
    
    
    
    
    189
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    189Income tax benefit
from stock option plans
    
    
    
    
    
    
    
    
    
    
    5,413
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,413Balances at December 31, 2005
    
    
    69,525
    
    
    $
    695
    
    
    $
    227,284
    
    
    $
    72,486
    
    
    $
    
    
    
    $
    2,414
    
    
    $
    302,879
 The accompanying notes are an integral part of the consolidated financial statements.
 F-6




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##### Table of Contents



American Medical Systems Holdings, Inc.
 
 Consolidated Statements of Cash Flow
  2005
    
    
    2004
    
    
    2003Cash flows from operating activitiesNet income (loss)
    
    $
    39,275
    
    
    $
    (3,120
    )
    
    $
    29,050Adjustments to reconcile net income (loss) to
net cash provided by operating activities:Depreciation
    
    
    5,135
    
    
    
    7,052
    
    
    
    6,487Loss on asset disposals
    
    
    601
    
    
    
    243
    
    
    
    224Amortization of intangibles
    
    
    7,884
    
    
    
    5,708
    
    
    
    4,160Amortization of deferred financing costs
    
    
    
    
    
    
    450
    
    
    
    270Non-cash in-process research and development charge
    
    
    9,220
    
    
    
    35,000
    
    
    
    Non-cash investment impairment
    
    
    
    
    
    
    4,500
    
    
    
    Non-cash deferred compensation
    
    
    189
    
    
    
    77
    
    
    
    171Income tax benefit related to stock option plans
    
    
    5,413
    
    
    
    2,047
    
    
    
    1,670Change in net deferred taxes
    
    
    882
    
    
    
    2,529
    
    
    
    3,117Changes in operating assets and liabilities, net of acquisitions:Accounts receivable
    
    
    (5,745
    )
    
    
    (7,009
    )
    
    
    (3,906
    )Inventories
    
    
    3,130
    
    
    
    (369
    )
    
    
    (3,108
    )Accounts payable and accrued expenses
    
    
    7,045
    
    
    
    1,835
    
    
    
    (3,526
    )Other assets
    
    
    (1,449
    )
    
    
    250
    
    
    
    (473
    )Net cash provided by operating activities
    
    
    71,580
    
    
    
    49,193
    
    
    
    34,136Cash flows from investing activitiesPurchase of property, plant and equipment
    
    
    (5,110
    )
    
    
    (3,686
    )
    
    
    (6,450
    )Purchase of business, net of cash acquired
    
    
    (81,516
    )
    
    
    (39,418
    )
    
    
    (44,135
    )Purchase of investments in technology
    
    
    (1,620
    )
    
    
    (2,500
    )
    
    
    Purchase of short-term investments
    
    
    (33,774
    )
    
    
    (19,633
    )
    
    
    Sale of short-term investments
    
    
    33,743
    
    
    
    4,154
    
    
    
    Net cash (used in) investing activities
    
    
    (88,277
    )
    
    
    (61,083
    )
    
    
    (50,585
    )Cash flows from financing activitiesIssuance of common stock
    
    
    11,539
    
    
    
    6,066
    
    
    
    2,689Payments on long-term debt
    
    
    
    
    
    
    (16,364
    )
    
    
    (7,636
    )Net cash provided by (used in) financing activities
    
    
    11,539
    
    
    
    (10,298
    )
    
    
    (4,947
    )Effect of exchange rates on cash
    
    
    354
    
    
    
    (1,076
    )
    
    
    920Net (decrease) in cash and cash equivalents
    
    
    (4,804
    )
    
    
    (23,264
    )
    
    
    (20,476
    )Cash and cash equivalents at beginning of period
    
    $
    35,689
    
    
    $
    58,953
    
    
    $
    79,429Cash and cash equivalents at end of period
    
    $
    30,885
    
    
    $
    35,689
    
    
    $
    58,953Supplemental disclosureCash paid for interest
    
    $
    147
    
    
    $
    358
    
    
    $
    1,643Cash paid for taxes
    
    $
    15,036
    
    
    $
    14,807
    
    
    $
    9,255
 The accompanying notes are an integral part of the consolidated financial statements.
 F-7




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Business Description and Significant Accounting Policies
 Business Description
  Principles of Consolidation
  Accounting Periods
  Stock Split
 .
 Cash and Cash Equivalents
  Short-Term Investments
   (in thousands)
    
    Fair Value
    
    
    MaturityMutual fund shares, short term bonds
    
    $
    430
    
    
    Less than 1 yearMunicipal variable rate
    
    
    1,340
    
    
    5 to 10 yearsMunicipal variable rate
    
    
    13,735
    
    
    Greater than 10 yearsShort-term investments
    
    $
    15,505
 Concentration of Risks
  F-8




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##### Table of Contents



Allowance for Doubtful Accounts
  Inventories
  Property, Plant and Equipment
  Asset class
    
    Useful livesBuilding
    
    15-20 yearsMachinery and equipment
    
    5-12 yearsFurniture, fixtures, and other
    
    3-12 yearsSoftware
    
    3-5 years
  In-Process Research and Development, Goodwill and Other Intangible Assets
  Goodwill and Other Intangible Assets
  F-9




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##### Table of Contents



Accounting for the Impairment and Disposal of
Long-Lived Assets
 Long-Lived Assets
  Revenue Recognition
   Royalty Income
  Research and Development
  Advertising and Promotional Costs
  Product Warranty Costs
   F-10




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##### Table of Contents



Product Liability
  Software Development Costs
 Accounting for Computer Software
Developed For or Obtained for Internal Use.
 Income Taxes
   Foreign Currency Translation
  Derivatives and Hedging Activities
 Accounting for Derivative Instruments and Hedging Activities
 Use of Estimates
  F-11




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##### Table of Contents



Stock Based Compensation
 Notes to Consolidated Financial Statements  No. 8 Accounting for Stock Issued to Employees,
   2005
    
    2004
    
    2003Risk free interest rate
    
    
    3.98
    %
    
    
    3.71
    %
    
    
    3.81
    %Expected dividend rate
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Stock price volatility
    
    
    38.23
    %
    
    
    41.45
    %
    
    
    43.20
    %Expected life of option
    
    5 years
    
    7 years
    
    7 years
  Accounting for Stock-Based Compensation,
 (in thousands, except per share data)
    
    2005
    
    
    2004
    
    
    2003Net income (loss), as reported
    
    $
    39,275
    
    
    $
    (3,120
    )
    
    $
    29,050Stock-based employee compensation expense
included in reported income, net of tax
    
    
    
    
    
    
    15
    
    
    
    84Total stock-based employee compensation
expense determined under fair-value based
method for all awards, net of tax
    
    
    (7,159
    )
    
    
    (4,984
    )
    
    
    (3,093
    )Pro forma net income (loss)
    
    $
    32,116
    
    
    $
    (8,089
    )
    
    $
    26,041Net income (loss) per shareAs reportedBasic
    
    $
    0.57
    
    
    $
    (0.05
    )
    
    $
    0.44Diluted
    
    $
    0.55
    
    
    $
    (0.05
    )
    
    $
    0.42Pro formaBasic
    
    $
    0.47
    
    
    $
    (0.12
    )
    
    $
    0.40Diluted
    
    $
    0.45
    
    
    $
    (0.12
    )
    
    $
    0.38
 Net Income per Share
  F-12




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##### Table of Contents



(in thousands, except per share data)
    
    2005
    
    2004
    
    2003Net income (loss)
    
    $
    39,275
    
    
    $
    (3,120
    )
    
    $
    29,050Weighted-average shares
outstanding for basic net income per share
    
    
    68,926
    
    
    
    67,006
    
    
    
    65,708Dilutive effect of stock options
    
    
    2,756
    
    
    
    
    
    
    
    2,918Adjusted weighted-average
shares outstanding and assumed conversions
for diluted net income (loss) per share
    
    
    71,682
    
    
    
    67,006
    
    
    
    68,626Net income (loss) per shareBasic
    
    $
    0.57
    
    
    $
    (0.05
    )
    
    $
    0.44Diluted
    
    $
    0.55
    
    
    $
    (0.05
    )
    
    $
    0.42
  Recent Accounting Pronouncements
 Inventory
Costs Inventory Pricing.
 Share-based Payment
  F-13




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##### Table of Contents



Accounting for Stock Issued to Employees Notes to Consolidated Financial Statements  No. 1.
 Accounting for Income Taxes, to the Tax Deduction on Qualified
Production Activities Provided by the American Jobs Creation Act of 2004.
 Accounting Changes and Error Corrections, Accounting Changes, Reporting
Accounting Changes in Interim Financial Statements.
 Reclassification
  2. Acquisitions
 Ovion Inc.
  Ovion
  F-14




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##### Table of Contents



(in thousands)
    
    AmountIn-process research and development
    
    $
    9,220Intangible royalty agreement
    
    
    2,050Liabilities assumed
    
    
    (732
    )Deferred tax liability on assets acquired
    
    
    (131
    )Initial purchase price, net of cash acquired
    
    $
    10,407
 Goodwill and Other
Intangible Assets
  TherMatrx, Inc.
  TherMatrx
 TherMatrx
  (in thousands)
    
    AmountDeveloped technology and other intangible assets
    
    $
    26,000Customer relationships
    
    
    5,000In-process research and development
    
    
    35,000Tangible assets acquired, net of liabilities assumed
    
    
    5,721Deferred tax liability on assets acquired
    
    
    (7,763
    )Goodwill
    
    
    69,142Purchase price, including earned contingent payments, net of cash acquired,
accrued through December 31, 2005
    
    $
    133,100
 F-15




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##### Table of Contents



2004
    
    2003(in thousands, except per share data)
    
    Reported
    
    Pro forma
    
    Reported
    
    Pro formaRevenue
    
    $
    208,772
    
    
    $
    219,232
    
    
    $
    168,283
    
    
    $
    181,265Net income (loss)
    
    $
    (3,120
    )
    
    $
    (9,708
    )
    
    $
    29,050
    
    
    $
    28,267Net income (loss) per share:Basic
    
    $
    (0.05
    )
    
    $
    (0.14
    )
    
    $
    0.44
    
    
    $
    0.43Diluted
    
    $
    (0.05
    )
    
    $
    (0.14
    )
    
    $
    0.42
    
    
    $
    0.41
   F-16




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##### Table of Contents



3. Balance Sheet Information
  2005
    
    2004Accounts ReceivableTrade accounts receivable
    
    $
    51,407
    
    
    $
    46,993Other receivables
    
    
    1,668
    
    
    
    1,978Allowance for doubtful accounts
    
    
    (2,017
    )
    
    
    (1,987
    )Net accounts receivable
    
    $
    51,058
    
    
    $
    46,984InventoriesRaw materials
    
    $
    4,252
    
    
    $
    5,191Work in process
    
    
    2,394
    
    
    
    2,405Finished goods
    
    
    12,862
    
    
    
    15,866Obsolescence allowance
    
    
    (1,317
    )
    
    
    (1,743
    )Net inventories
    
    $
    18,191
    
    
    $
    21,719Property, plant, and equipmentLand and building
    
    $
    19,088
    
    
    $
    16,434Machinery and equipment
    
    
    19,944
    
    
    
    21,386Software
    
    
    8,253
    
    
    
    7,338Furniture, fixtures, and other
    
    
    3,126
    
    
    
    3,631Accumulated depreciation
    
    
    (29,040
    )
    
    
    (26,724
    )Net property, plant, and
equipment
    
    $
    21,371
    
    
    $
    22,065
 4. Goodwill and Intangible Assets
  2005
    
    2004Goodwill, beginning of year, net
    
    $
    102,365
    
    
    $
    98,989Additions
    
    
    69,142
    
    
    
    Effect of currency translation
    
    
    (1,807
    )
    
    
    3,376Goodwill, end of year, net
    
    $
    169,700
    
    
    $
    102,365
   Weighted avg
    
    December 31, 2005
    
    January 1, 2005remaining life
    
    Gross carrying
    
    Accumulated
    
    Net book
    
    Gross carrying
    
    Accumulated
    
    Net book(in thousands)
    
    (years)
    
    amount
    
    amortization
    
    value
    
    amount
    
    amortization
    
    valueAmortizedPatents
    
    
    5.7
    
    
    $
    10,127
    
    
    $
    (7,708
    )
    
    $
    2,419
    
    
    $
    10,127
    
    
    $
    (6,581
    )
    
    $
    3,546Licenses
    
    
    2.9
    
    
    
    6,911
    
    
    
    (3,847
    )
    
    
    3,064
    
    
    
    5,291
    
    
    
    (1,529
    )
    
    
    3,762Developed technology
    
    
    8.2
    
    
    
    48,853
    
    
    
    (17,454
    )
    
    
    31,399
    
    
    
    48,853
    
    
    
    (13,140
    )
    
    
    35,713Royalty agreements
    
    
    7.1
    
    
    
    2,050
    
    
    
    (125
    )
    
    
    1,925
    
    
    
    
    
    
    
    
    
    
    
    Total
amortized intangible assets
    
    
    7.5
    
    
    
    67,941
    
    
    
    (29,134
    )
    
    
    38,807
    
    
    
    64,271
    
    
    
    (21,250
    )
    
    
    43,021UnamortizedTrademarks
    
    
    n/a
    
    
    
    2,233
    
    
    
    (462
    )
    
    
    1,771
    
    
    
    2,233
    
    
    
    (462
    )
    
    
    1,771Total intangible assets
    
    
    
    
    
    $
    70,174
    
    
    $
    (29,596
    )
    
    $
    40,578
    
    
    $
    66,504
    
    
    $
    (21,712
    )
    
    $
    44,792
 F-17




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##### Table of Contents



Year
    
    Actual
    
    Expected2003
    
    $
    4,160
    
    
    
    2004
    
    
    5,708
    
    
    
    2005
    
    
    7,884
    
    
    
    2006
    
    
    
    
    
    $
    6,7482007
    
    
    
    
    
    
    4,9052008
    
    
    
    
    
    
    4,9812009
    
    
    
    
    
    
    4,8232010
    
    
    
    
    
    
    4,141
 Patent
Cross License Agreement
  5. Investment in Technology
  ProstaJect® ProstaJect
 Notes to Consolidated Financial Statements  No. 13
 6. Warranties
  F-18




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##### Table of Contents



(in thousands)
    
    2005
    
    2004
    
    2003Balance, beginning of period
    
    $
    1,451
    
    
    $
    1,338
    
    
    $
    4,526Adjustment to allowance
    
    
    
    
    
    
    75
    
    
    
    (3,069
    )Provisions for warranty
    
    
    599
    
    
    
    334
    
    
    
    150Claims processed
    
    
    (432
    )
    
    
    (296
    )
    
    
    (269
    )Balance, end of period
    
    $
    1,618
    
    
    $
    1,451
    
    
    $
    1,338
 7. Long-Term Debt and Senior Credit Facility
  Credit Agreement
   8. Stockholders Equity
 Stock Incentive Plan
   F-19




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##### Table of Contents



Weighted avgOptions
    
    
    exercise priceoutstanding
    
    
    per shareBalance at December 28, 2002
    
    
    6,830,240
    
    
    $
    4.47Granted
    
    
    2,169,104
    
    
    $
    8.33Exercised
    
    
    (1,153,748
    )
    
    $
    1.66Cancelled or expired
    
    
    (296,618
    )
    
    $
    8.10Balance at January 3, 2004
    
    
    7,548,978
    
    
    $
    5.86Granted
    
    
    2,258,700
    
    
    $
    15.48Exercised
    
    
    (1,124,136
    )
    
    $
    4.55Cancelled or expired
    
    
    (468,574
    )
    
    $
    8.99Balance at January 1, 2005
    
    
    8,214,968
    
    
    $
    8.51Granted
    
    
    2,104,637
    
    
    $
    19.40Exercised
    
    
    (1,958,695
    )
    
    $
    5.19Cancelled or expired
    
    
    (410,260
    )
    
    $
    12.98Balance at December 31, 2005
    
    
    7,950,650
    
    
    $
    11.97
  Options Outstanding

    
    Options ExercisableWeighted avg
    
    Weighted avg
    
    
    
    
    
    Weighted avgNumber
    
    remaining
    
    exercise
    
    Number
    
    exerciseRange of exercise prices
    
    of shares
    
    contractual life
    
    price
    
    of shares
    
    price$.83 - $8.00
    
    
    2,166,868
    
    
    4.7 years
    
    $
    3.79
    
    
    
    1,982,863
    
    
    $
    3.41$8.03 - $14.43
    
    
    2,347,733
    
    
    7.0 years
    
    $
    10.64
    
    
    
    1,677,751
    
    
    $
    10.20$14.81 - $19.06
    
    
    2,065,487
    
    
    8.2 years
    
    $
    16.77
    
    
    
    575,320
    
    
    $
    15.90$19.69 - $20.93
    
    
    1,370,562
    
    
    7.4 years
    
    $
    19.97
    
    
    
    261,248
    
    
    $
    19.97Total
    
    
    7,950,650
    
    
    6.7 years
    
    $
    11.97
    
    
    
    4,497,182
    
    
    $
    8.50
 Employee Stock Purchase Plan
  9. Commitments and Contingent Liabilities
 Product Liability
   F-20




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##### Table of Contents



Operating Leases
  10. Industry Segment Information and Foreign Operations
    (in thousands)
    
    2005
    
    2004
    
    2003United StatesNet sales
    
    $
    205,463
    
    
    $
    165,140
    
    
    $
    136,765Long-lived assets
    
    $
    217,997
    
    
    $
    153,528
    
    
    $
    134,682InternationalNet sales
    
    $
    57,128
    
    
    $
    43,632
    
    
    $
    31,518Long-lived assets
    
    $
    14,311
    
    
    $
    16,285
    
    
    $
    12,260
 11. Post-Retirement Benefits
  2005
    
    2004
    
    2003Service cost
    
    $
    128
    
    
    $
    112
    
    
    $
    118Interest cost
    
    
    142
    
    
    
    132
    
    
    
    132Amortization of net actuarial losses
    
    
    (134
    )
    
    
    (142
    )
    
    
    (143
    )Net benefit costs
    
    $
    136
    
    
    $
    102
    
    
    $
    107
 F-21




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##### Table of Contents



Other benefits2005
    
    2004Change in benefit obligationBenefit obligation at beginning of year
    
    $
    2,450
    
    
    $
    2,288Service cost
    
    
    109
    
    
    
    112Interest cost
    
    
    142
    
    
    
    132Plan amendements
    
    
    414
    
    
    
    Actuarial (gains) or losses
    
    
    171
    
    
    
    (16
    )Benefit payments
    
    
    (140
    )
    
    
    (66
    )Settlements
    
    
    
    
    
    
    Benefit obligation at end of year
    
    $
    3,146
    
    
    $
    2,450Change in plan assetsFair value of assets at beginning of year
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    
    
    
    
    Employer contributions
    
    
    140
    
    
    
    66Benefit payments
    
    
    (140
    )
    
    
    (66
    )Fair value of plan assets at end of year
    
    $
    
    
    
    $
    Funded statusFunded status
    
    $
    (3,146
    )
    
    $
    (2,450
    )Unrecognized prior service cost
    
    
    (22
    )
    
    
    (570
    )Unrecognized net actuarial gain
    
    
    (46
    )
    
    
    (198
    )Net amount of accrued benefit cost
    
    $
    (3,214
    )
    
    $
    (3,218
    )Current
    
    $
    (142
    )
    
    $
    (92
    )Long term
    
    
    (3,072
    )
    
    
    (3,126
    )Net amount of accrued benefit cost
    
    $
    (3,214
    )
    
    $
    (3,218
    )
   2006
    
    $
    1422007
    
    
    1732008
    
    
    1992009
    
    
    2062010
    
    
    2112011 - 2015
    
    $
    1,360
  2005
    
    2004Discount rate
    
    
    5.50
    %
    
    
    5.75
    %Rate of future compensation increase
    
    
    4.00
    %
    
    
    4.00
    %
   F-22




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##### Table of Contents



12. Savings and Investment Plan
  13. Income Taxes
  Pretax income
    
    2005
    
    2004
    
    2003U.S.
    
    $
    65,405
    
    
    $
    16,771
    
    
    $
    44,229Foreign
    
    
    820
    
    
    
    132
    
    
    
    (140
    )Total
    
    $
    66,225
    
    
    $
    16,903
    
    
    $
    44,089
  Income tax expense
    
    2005
    
    2004
    
    2003CurrentU.S.Federal
    
    $
    23,416
    
    
    $
    14,989
    
    
    $
    10,338State
    
    
    2,353
    
    
    
    1,852
    
    
    
    1,384Foreign
    
    
    299
    
    
    
    653
    
    
    
    200DeferredU.S.Federal
    
    
    1,401
    
    
    
    2,976
    
    
    
    2,995State
    
    
    (369
    )
    
    
    88
    
    
    
    122Foreign
    
    
    (150
    )
    
    
    (535
    )
    
    
    Total
    
    $
    26,950
    
    
    $
    20,023
    
    
    $
    15,039
  Income tax reconciliation
    
    2005
    
    2004
    
    2003Statutory rate
    
    $
    23,179
    
    
    $
    5,916
    
    
    $
    15,430In-process research and development
    
    
    3,227
    
    
    
    12,250
    
    
    
    Domestic manufacturing deduction
    
    
    (401
    )
    
    
    
    
    
    
    Investment write-off
    
    
    
    
    
    
    1,678
    
    
    
    Meals and entertainment
    
    
    391
    
    
    
    245
    
    
    
    255Prior year tax credits
    
    
    
    
    
    
    
    
    
    
    (1,100
    )Foreign
    
    
    12
    
    
    
    79
    
    
    
    121Current year tax credits
    
    
    (1,442
    )
    
    
    (1,138
    )
    
    
    (780
    )Other
    
    
    626
    
    
    
    (272
    )
    
    
    103State taxes
    
    
    1,358
    
    
    
    1,265
    
    
    
    1,010Total
    
    $
    26,950
    
    
    $
    20,023
    
    
    $
    15,039
 Notes to Consolidated Financial
Statements No 2).
 F-23




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##### Table of Contents



Notes to Consolidated
Financial Statements  No.2
     2005
    
    2004Deferred tax assets:Federal net operating loss carryforwards
    
    $
    13,021
    
    
    $
    14,873Intellectual property
    
    
    6,733
    
    
    
    7,537Other, primarily allowances
    
    
    2,706
    
    
    
    2,424Capital loss carryforwards
    
    
    1,710
    
    
    
    1,710Post retirement benefit liability
    
    
    1,170
    
    
    
    1,449Foreign net operating loss carryforwards
    
    
    1,677
    
    
    
    1,213Workforce and patents
    
    
    1,162
    
    
    
    1,003Compensation accruals
    
    
    805
    
    
    
    776Accrued warranty expenses
    
    
    597
    
    
    
    554Foreign
    
    
    416
    
    
    
    298Acquisition assets
    
    
    
    
    
    
    222Valuation allowance
    
    
    (2,974
    )
    
    
    (2,647
    )Total deferred tax assets
    
    
    27,023
    
    
    
    29,412Deferred tax liabilities:Acquisition step-up
    
    
    10,389
    
    
    
    12,406Goodwill
    
    
    7,208
    
    
    
    6,375Acquired technology
    
    
    1,388
    
    
    
    1,405Currency translation adjustment
    
    
    
    
    
    
    789Prepaid insurance and other
    
    
    731
    
    
    
    671Total deferred tax liabilities
    
    
    19,716
    
    
    
    21,646Net deferred tax
asset
    
    $
    7,307
    
    
    $
    7,766
 F-24




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##### Table of Contents



14. Quarterly Financial Data
 2005
    
    2004First
    
    Second
    
    Third
    
    Fourth
    
    First
    
    Second
    
    Third
    
    Fourth13 weeks
    
    13 weeks
    
    13 weeks
    
    13 weeks
    
    13 weeks
    
    13 weeks
    
    13 weeks
    
    13 weeksNet sales
    
    $
    62,145
    
    
    $
    65,637
    
    
    $
    61,738
    
    
    $
    73,071
    
    
    $
    47,313
    
    
    $
    49,093
    
    
    $
    52,326
    
    
    $
    60,040Gross profit
    
    
    51,125
    
    
    
    53,683
    
    
    
    50,582
    
    
    
    61,090
    
    
    
    38,383
    
    
    
    40,046
    
    
    
    42,818
    
    
    
    49,194Operating income (loss)
    
    
    17,252
    
    
    
    18,168
    
    
    
    6,609
    
    
    
    22,667
    
    
    
    12,369
    
    
    
    12,951
    
    
    
    (21,806
    )
    
    
    15,906Net income (loss)
    
    
    11,243
    
    
    
    12,007
    
    
    
    1,415
    
    
    
    14,610
    
    
    
    8,027
    
    
    
    8,429
    
    
    
    (26,302
    )
    
    
    6,726Net income (loss) per share:Basic
    
    $
    0.17
    
    
    $
    0.17
    
    
    $
    0.02
    
    
    $
    0.21
    
    
    $
    0.12
    
    
    $
    0.13
    
    
    $
    (0.39
    )
    
    $
    0.10Diluted
    
    $
    0.16
    
    
    $
    0.17
    
    
    $
    0.02
    
    
    $
    0.20
    
    
    $
    0.12
    
    
    $
    0.12
    
    
    $
    (0.39
    )
    
    $
    0.10
 Notes to Consolidated Financial Statements  No.2 Notes to Consolidated Financial
Statements  No.2 Notes to Consolidated Financial Statements
 No. 5
   F-25




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##### Table of Contents



Financial
Statement Schedules  Schedule II  Valuation and Qualifying Accounts
  Balance at
    
    Additions charged to:
    
    
    
    
    
    Balance atBeginning of
    
    Costs and
    
    Other
    
    
    
    
    
    End ofPeriod
    
    Expenses
    
    Accounts
    
    Deductions
    
    PeriodValuation Accounts:Year ended January 3, 2004Deducted from asset accountsAllowance for doubtful accounts
    
    $
    956
    
    
    $
    847
    
    
    
    
    
    
    $
    770
    (1)
    
    $
    1,033Allowance for obsolete inventories
    
    $
    2,748
    
    
    $
    1,083
    
    
    
    
    
    
    $
    1,883
    (2)
    
    $
    1,948Allowance for sales returns
    
    $
    413
    
    
    $
    3,927
    
    
    
    
    
    
    $
    2,561
    (3)
    
    $
    1,779Year ended January 1, 2005Deducted from asset accountsAllowance for doubtful accounts
    
    $
    1,033
    
    
    $
    1,801
    
    
    $
    111
    (8)
    
    $
    958
    (1)
    
    $
    1,987Allowance for obsolete inventories
    
    $
    1,948
    
    
    $
    1,283
    
    
    $
    25
    (8)
    
    $
    1,513
    (2)
    
    $
    1,743Allowance for sales returns
    
    $
    1,779
    
    
    $
    2,298
    
    
    
    
    
    
    $
    1,731
    (3)
    
    $
    2,346Year ended December 31, 2005Deducted from asset accountsAllowance for doubtful accounts
    
    $
    1,987
    
    
    $
    1,097
    
    
    
    
    
    
    $
    1,067
    (1)
    
    $
    2,017Allowance for obsolete inventories
    
    $
    1,743
    
    
    $
    827
    
    
    
    
    
    
    $
    1,253
    (2)
    
    $
    1,317Allowance for sales returns
    
    $
    2,346
    
    
    $
    2,329
    
    
    
    
    
    
    $
    3,475
    (3)
    
    $
    1,200Qualifying Accounts:Year ended January 3, 2004Product liability allowance
    
    $
    1,138
    
    
    $
    360
    
    
    
    
    
    
    $
    190
    (4)
    
    $
    1,308Product warranty allowance
    
    $
    4,526
    
    
    $
    (2,919
    ) (6)
    
    
    
    
    
    $
    269
    (5)
    
    $
    1,338Year ended January 1, 2005Product liability allowance
    
    $
    1,308
    
    
    $
    (294
    ) (7)
    
    
    
    
    
    $
    334
    (4)
    
    $
    680Product warranty allowance
    
    $
    1,338
    
    
    $
    334
    
    
    $
    75
    (8)
    
    $
    296
    (5)
    
    $
    1,451Year ended December 31, 2005Product liability allowance
    
    $
    680
    
    
    $
    480
    
    
    
    
    
    
    $
    376
    (4)
    
    $
    784Product warranty allowance
    
    $
    1,451
    
    
    $
    599
    
    
    
    
    
    
    $
    432
    (5)
    
    $
    1,618
  
 (1)
    
    Uncollectable accounts written off, net of recoveries(2)
    
    Obsolete and excess inventory
disposals(3)
    
    Returned product(4)
    
    Product liability claims(5)
    
    Product warranty claims(6)
    
    Reduction of warranty allowance (net of provision) recorded as a reduction in cost of goods sold(7)
    
    Reduction of product liability recorded to reflect identified claims and lawsuits in ending balance of $0.6 million,
net of current year provision of $0.3 million. Recorded as a reduction to general and administrative expenses.(8)
    
    Allowances and reserves on balance sheet of TherMatrx, acquired in July 2004. Acticon,
Apogee, AMS Ambicor ®, AMS 650, AMS 700 ®, AMS 700 CX and Ultrex  , AMS Urinary Control System, BioArc, BioArc SP, BioArc TO, Dura II , Her Option, In-Fast,
In-Fast Ultra , InhibiZone, InteDerm ®, InteGraft,
InteMesh ®, IntePro ®, InteLata ,
InteXen, InVance, Monarc, Parylene, Perigee, ProstaJect, Solutions
for Life ®, SPARC,
Straight-In , TherMatrx, and UroLume are trademarks of AMS or its subsidiaries.
 F-26




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##### Table of Contents



SIGNATURES
  Dated: March 8, 2006
    
    AMERICAN MEDICAL SYSTEMS HOLDINGS, INC.By /s/ Martin J. EmersonMartin J. EmersonPresident and Chief Executive Officer
  Signature
    
    
    
    Title/s/
    
    Martin J. Emerson
    
    
    
    President and Chief Executive OfficerMartin J. Emerson
    
    
    
    (Principal Executive Officer) and Director/s/
    
    Carmen L. Diersen
    
    
    
    Executive Vice President, Chief
Financial Officer and Corporate SecretaryCarmen L. Diersen
    
    
    
    (Principal Financial and Accounting Officer)/s/
    
    Douglas W. Kohrs
    
    
    
    Chairman of the Board and DirectorDouglas W. Kohrs/s/
    
    Richard B. Emmitt
    
    
    
    DirectorRichard B. Emmitt/s/
    
    Albert Jay Graf
    
    
    
    DirectorAlbert Jay Graf/s/
    
    Christopher H. Porter, Ph.D.
    
    
    
    DirectorChristopher H. Porter, Ph.D./s/
    
    Thomas E. Timbie
    
    
    
    DirectorThomas E. Timbie/s/
    
    Elizabeth H. Weatherman
    
    
    
    DirectorElizabeth H. Weatherman




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##### Table of Contents



AMERICAN MEDICAL SYSTEMS HOLDINGS, INC.
EXHIBIT INDEX TO ANNUAL REPORT
 
 ON FORM 10-K
For the Year Ended December 31, 2005
 Item No.
    
    Item
    
    Filing Method3.1
    
    Amended and Restated Certificate of
Incorporation, 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 1, 2005 (File No.
000-30733).3.2
    
    Bylaws, as amended, of the Company.
    
    Incorporated by reference to Exhibit 3.2
of the Companys Form 10-K for the Fiscal
Year Ended January 3, 2004 (File No.
000-30733).4.1
    
    Registration Rights Agreement, dated June
30, 2000, among the investors listed on
Schedule 1 to the Agreement and American
Medical Systems Holdings, Inc.
    
    Incorporated by reference to Exhibit 4.1
of the Companys Registration Statement on
Form S-1 (File No. 333-37488).4.2
    
    Certificate of Incorporation of the Company.
    
    See Exhibit 3.1 above.4.3
    
    Bylaws of the Company.
    
    See Exhibit 3.2 above.10.1
    
    Amended and Restated Employment Agreement,
dated January 5, 2005, between Douglas
Kohrs and American Medical Systems, Inc.
    
    Incorporated by reference to Exhibit 10.3
of the Companys Current Report on Form
8-K filed on January 5, 2005 (File No.
000-30733).10.2
    
    Stock Option Agreement, dated April 23,
1999, between Douglas Kohrs and American
Medical Systems, Inc.
    
    Incorporated by reference to Exhibit 10.4
of the Companys Registration Statement on
Form S-1 (File No. 333-37488).10.3
    
    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, 2004.10.4
    
    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 Current Report on Form
8-K filed on January 5, 2005 (File No.
000-30733).10.5
    
    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 year ended December 28, 2002
(File No. 000-30733).10.6
    
    Employment Agreement, dated March 9, 2004,
between Carmen Diersen and American Medical
Systems, Inc.
    
    Incorporated by reference to Exhibit 10.8
of the Companys Annual Report on Form
10-K for the year ended January 3, 2004
(File No. 000-30733).10.7
    
    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).
 E-1




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##### Table of Contents



Item No.
    
    Item
    
    Filing Method10.8
    
    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).10.9
    
    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).10.10
    
    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).10.11
    
    2006 Executive Variable Incentive Plan.
    
    Filed with this Annual Report on Form 10-K.10.12
    
    Summary of Director Compensation.
    
    Filed with this Annual Report on Form 10-K.10.13
    
    Summary of Named Executive Officer
Compensation.
    
    Filed with this Annual Report on Form 10-K.10.14
    
    Agreement and Plan of Merger, dated as of
December 13, 2002, by and among American
Medical Systems, Inc., Snowball Acquisition
Corp., Cryogen, Inc. and Robert Knarr.
    
    Incorporated by reference to Exhibit 2.1
of the Companys Current Report on Form
8-K filed on December 17, 2002 (File No.
000-30733).10.15
    
    First Amendment to Agreement and Plan of
Merger, dated December 18, 2002, by and
among American Medical Systems, Inc.,
Snowball Acquisition Corp., Cryogen, Inc.
and Robert Knarr.
    
    Incorporated by reference to Exhibit 2.1
of the Companys Current Report on Form
8-K filed on January 6, 2003 (File No.
000-30733).10.16
    
    Agreement and Plan of Merger, dated as of
June 15, 2004, by and among American
Medical Systems, Inc.; Leio Acquisition
Corp.; TherMatrx, Inc.; TherMatrx
Investment Holdings LLC and BSD Medical
Corporation, as Principal Stockholders, and
TherMatrx Investments Holdings LLC, as
Stockholders Representative.
    
    Incorporated by reference to Exhibit 2.1
of the Companys Current Report on Form
8-K filed on June 15, 2004 (File No.
000-30733).10.17
    
    Credit Agreement, dated as of January 20,
2005, among American Medical Systems
Holdings, Inc., American Medical Systems,
Inc., KeyBank National Association, as
Administrative Agent, Swing Line Lender,
and L/C Issuer, and the lenders from time
to time party thereto.
    
    Incorporated by reference to Exhibit 10.1
of the Companys Current Report on Form
8-K filed on January 20, 2005 (File No.
000-30733).10.18
    
    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 Current Report on Form
8-K filed on June 6, 2005 (File No.
000-30733).
 E-2




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##### Table of Contents



Item No.
    
    Item
    
    Filing Method10.19
    
    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).10.20
    
    Form of Stock Option Certificate
for Directors under the 2005 Stock
Incentive Plan, as amended.
    
    Filed with this Annual Report on Form 10-K.10.21
    
    Form of Stock Option Certificate
for Executive Officers under the 2005 Stock Incentive
Plan, as amended.
    
    Filed with this Annual Report on Form 10-K.10.22
    
    Form of Indemnification Agreement with
Executive Officers and Directors.
    
    Filed with this Annual Report on Form 10-K.21.1
    
    Subsidiaries of American Medical Systems
Holdings, Inc.
    
    Filed with this Annual Report on Form 10-K.23.1
    
    Consent of Ernst & Young LLP.
    
    Filed with this Annual Report on Form 10-K.31.1
    
    Certification of 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 of 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-3