Hologic(HOLX) - 2024 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents Hologic, Inc.'s unaudited consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Consolidated Financial Statements (unaudited) This section presents Hologic, Inc.'s unaudited consolidated financial statements and comprehensive notes for the three and nine months ended June 29, 2024 Consolidated Statements of Income Net income significantly increased for both three and nine months ended June 29, 2024, driven by higher gross profit and operating income Consolidated Statements of Income (in millions, except per share data): | Metric | Three Months Ended June 29, 2024 | Three Months Ended July 1, 2023 | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---|:---|:---| | Total Revenues | $1,011.4 | $984.4 | $3,042.3 | $3,085.1 | | Gross Profit | $560.3 | $367.5 | $1,670.1 | $1,571.2 | | Income from Operations | $244.0 | $1.4 | $652.6 | $535.9 | | Net Income (Loss) | $194.5 | $(40.5) | $610.9 | $365.4 | | Basic EPS | $0.83 | $(0.16) | $2.58 | $1.48 | | Diluted EPS | $0.82 | $(0.16) | $2.57 | $1.47 | Consolidated Statements of Comprehensive Income (Loss) Comprehensive income was positive for current three and nine-month periods, influenced by net income and foreign currency adjustments Consolidated Statements of Comprehensive Income (Loss) (in millions): | Metric | Three Months Ended June 29, 2024 | Three Months Ended July 1, 2023 | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---|:---|:---| | Net Income (Loss) | $194.5 | $(40.5) | $610.9 | $365.4 | | Changes in foreign currency translation adjustment | $(2.8) | $1.1 | $17.4 | $130.2 | | Changes in value of hedged interest rate swaps, net of tax | $0.3 | $3.7 | $(9.3) | $(5.6) | | Other comprehensive income (loss) | $(2.5) | $4.8 | $8.1 | $124.6 | | Comprehensive income (loss) | $192.0 | $(35.7) | $619.0 | $490.0 | Consolidated Balance Sheets Total assets and liabilities decreased from September 30, 2023, to June 29, 2024, with reduced cash and current long-term debt Consolidated Balance Sheets (in millions): | Asset/Liability | June 29, 2024 | September 30, 2023 | |:---|:---|:---| | Cash and cash equivalents | $2,439.1 | $2,722.5 | | Total current assets | $3,997.0 | $4,184.5 | | Total assets | $8,890.1 | $9,139.3 | | Current portion of long-term debt | $37.5 | $287.0 | | Total current liabilities | $1,002.4 | $1,207.3 | | Long-term debt, net of current portion | $2,505.6 | $2,531.2 | | Total liabilities and stockholders' equity | $8,890.1 | $9,139.3 | | Total stockholders' equity | $4,950.9 | $5,016.9 | Consolidated Statements of Stockholders' Equity Stockholders' equity slightly decreased due to stock-based compensation, net income, and significant share repurchases, including an ASR agreement Consolidated Statements of Stockholders' Equity (in millions, except shares in thousands): | Metric | September 30, 2023 | June 29, 2024 | |:---|:---|:---| | Common Stock (shares issued) | 299,940 | 300,787 | | Additional Paid-in Capital | $6,141.2 | $6,213.1 | | Retained Earnings | $2,056.3 | $2,667.2 | | Treasury Stock (shares) | 58,231 | 68,731 | | Treasury Stock (amount) | $(3,036.0) | $(3,792.9) | | Total Stockholders' Equity | $5,016.9 | $4,950.9 | - The company repurchased 5.6 million shares of common stock for $500 million under an accelerated share repurchase (ASR) agreement launched in November 2023, with an additional 1.4 million shares received upon final settlement in February 2024[189] - Stock-based compensation expense for the nine months ended June 29, 2024, was $69.1 million, up from $60.6 million in the prior year[171] Consolidated Statements of Cash Flows Net cash decreased for the nine months ended June 29, 2024, due to financing activities, despite strong operating cash flow Consolidated Statements of Cash Flows (in millions): | Activity | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---| | Net cash provided by operating activities | $918.2 | $792.5 | | Net cash used in investing activities | $(185.3) | $(96.1) | | Net cash used in financing activities | $(1,051.8) | $(272.6) | | Net (decrease) increase in cash and cash equivalents | $(316.6) | $425.5 | | Cash and cash equivalents, end of period | $2,439.1 | $2,765.0 | - Cash used in financing activities increased significantly to $1,051.8 million, primarily due to $776.8 million for common stock repurchases (including a $500 million ASR program) and $278.1 million for debt principal payments (including a $250 million voluntary prepayment)[323] - Investing activities used $185.3 million, mainly for capital expenditures ($99.9 million), strategic investments ($42.5 million), and a net payment of $31.3 million for the sale of the SSI ultrasound business[295] Notes to Consolidated Financial Statements Detailed disclosures on accounting policies, estimates, and financial statement line items provide context to the consolidated financial statements (1) Basis of Presentation Unaudited consolidated financial statements include the Company and subsidiaries, prepared under SEC rules and GAAP, relying on management estimates - The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, with all intercompany transactions and balances eliminated[5] - Management makes significant estimates and assumptions in preparing financial statements, and actual results could differ[41] Subsequent Events Consideration The Company acquired Endomagnetics Ltd (Endomag) for approximately $310.0 million on July 25, 2024, following an April 26, 2024 agreement - On April 26, 2024, the Company executed an agreement to acquire Endomagnetics Ltd (Endomag) for approximately $310.0 million, which closed on July 25, 2024[6] (2) Revenue Revenue is generated from product sales and services, disaggregated by segment, region, and type, with remaining obligations for support and maintenance Revenue by Business Segment (in millions): | Business | Three Months Ended June 29, 2024 | Three Months Ended July 1, 2023 | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---|:---|:---| | Diagnostics | $440.8 | $439.7 | $1,338.7 | $1,463.6 | | Breast Health | $385.0 | $360.3 | $1,147.3 | $1,079.9 | | GYN Surgical | $166.6 | $157.3 | $484.8 | $456.2 | | Skeletal Health | $19.0 | $27.1 | $71.5 | $85.4 | | Total | $1,011.4 | $984.4 | $3,042.3 | $3,085.1 | Revenue by Geographic Region (in millions): | Region | Three Months Ended June 29, 2024 | Three Months Ended July 1, 2023 | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---|:---|:---| | United States | $765.3 | $750.1 | $2,278.4 | $2,342.5 | | Europe | $127.9 | $128.5 | $407.7 | $427.3 | | Asia-Pacific | $65.0 | $62.9 | $193.2 | $191.9 | | Rest of World | $53.2 | $42.9 | $163.0 | $123.4 | | Total | $1,011.4 | $984.4 | $3,042.3 | $3,085.1 | Revenue by Type (in millions): | Type | Three Months Ended June 29, 2024 | Three Months Ended July 1, 2023 | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---|:---|:---| | Disposables | $623.2 | $609.0 | $1,871.0 | $1,963.3 | | Capital equipment, components and software | $188.0 | $190.1 | $596.2 | $559.6 | | Service | $196.8 | $180.4 | $560.6 | $546.7 | | Other | $3.4 | $4.9 | $14.5 | $15.5 | | Total | $1,011.4 | $984.4 | $3,042.3 | $3,085.1 | Practical Expedients Costs to obtain customer contracts are expensed as incurred if the amortization period is one year or less, mainly sales commissions - The Company applies a practical expedient to expense costs to obtain a contract with a customer as incurred when the amortization period would have been one year or less, primarily sales commissions[9] Variable Consideration Variable consideration like discounts and returns are estimated as revenue reductions and recorded as current liabilities, generally immaterial - The Company estimates variable consideration (volume discounts, sales rebates, product returns) as a reduction to revenue, recorded as a current liability, and these estimates are generally not material[25] Remaining Performance Obligations Estimated future revenue from unsatisfied performance obligations was approximately $880.0 million as of June 29, 2024, mainly for support and maintenance - As of June 29, 2024, estimated future revenue from unsatisfied performance obligations was approximately $880.0 million, primarily for support and maintenance in Breast Health and Skeletal Health[26] Expected Revenue Recognition from Remaining Performance Obligations: | Fiscal Year | Percentage of $880.0 million | |:---|:---| | 2024 | 14% | | 2025 | 42% | | 2026 | 25% | | 2027 | 12% | | Thereafter | 7% | Contract Assets and Liabilities Contract assets were immaterial, while contract liabilities (deferred revenue) primarily relate to advance payments for support and maintenance - Contract assets were immaterial, while contract liabilities (deferred revenue) primarily relate to advance payments for support and maintenance contracts and extended warranties[27][28] Revenue Recognized from Contract Liability Balance (in millions): | Period | Revenue Recognized from Sept 30, 2023 Balance | Revenue Recognized from Sept 24, 2022 Balance | |:---|:---|:---| | Three Months Ended June 29, 2024 | $22.8 | N/A | | Nine Months Ended June 29, 2024 | $124.4 | N/A | | Three Months Ended July 1, 2023 | N/A | $21.0 | | Nine Months Ended July 1, 2023 | N/A | $122.2 | (3) Leases The Company leases diagnostics instruments to customers, with lease revenue consistently representing less than 3% of consolidated revenue - The Company leases diagnostics instruments to customers, with lease revenue representing less than 3% of consolidated revenue for all periods presented[11] (4) Fair Value Measurements Assets and liabilities are measured at fair value (Level 1, 2, or 3), including recurring measurements for investments and derivatives, and nonrecurring for impairments - The Company's financial instruments include cash and cash equivalents, U.S. Treasury bills, commercial paper, accounts receivable, equity investments, interest rate swaps, forward foreign currency contracts, insurance contracts, accounts payable, and debt obligations[70] Assets/Liabilities Measured and Recorded at Fair Value on a Recurring Basis Recurring fair value measurements include Level 1 assets (money market funds, U.S. Treasury bills) and Level 2 derivatives, with Level 3 for contingent consideration - Investments in money market funds, U.S. Treasury bills, and commercial paper are classified as Level 1 fair value measurements[12] - Derivative instruments (interest rate swaps and forward foreign currency contracts) are valued using Level 2 inputs[13] - A contingent consideration liability is recorded at fair value based on Level 3 inputs[13] Liabilities Measured and Recorded at Fair Value on a Recurring Basis Contingent consideration liabilities, measured using Level 3 inputs, decreased from $2.0 million to $1.1 million due to payments Contingent Consideration (Level 3) Fair Value Changes (in millions): | Metric | Three Months Ended June 29, 2024 | Three Months Ended July 1, 2023 | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---|:---|:---| | Balance at beginning of period | $1.1 | $3.4 | $2.0 | $23.4 | | Fair value adjustments | — | — | $1.7 | $(12.4) | | Payments | — | — | $(2.6) | $(7.6) | | Balance at end of period | $1.1 | $4.5 | $1.1 | $4.5 | Assets Measured and Recorded at Fair Value on a Nonrecurring Basis Significant nonrecurring impairment charges were recorded for BioZorb intangible assets ($13.3 million, $0.4 million, $25.9 million, $0.9 million) and Mobidiag lease assets ($12.5 million) - During Q3 fiscal 2024, the Company recorded intangible asset impairment charges of $13.3 million and $0.4 million related to BioZorb developed technology and trade name intangible assets, reducing their carrying value to zero[32] - During Q2 fiscal 2024, intangible asset impairment charges of $25.9 million and $0.9 million were recorded for BioZorb developed technology and trade name intangible assets[32] - In Q1 fiscal 2024, a $12.5 million impairment charge was recorded for right-of-use lease assets due to the closure of Mobidiag facilities in Finland and France[32] Disclosure of Fair Value of Financial Instruments Carrying amounts of short-term financial instruments approximate fair value, while U.S. Treasury bills, commercial paper, and derivatives are recorded at fair value - The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximate their fair value due to their short-term nature[70] - U.S. Treasury bills, commercial paper, interest rate swaps, and forward foreign currency contracts are recorded at fair value[70] Cash and Cash Equivalents (in millions) as of June 29, 2024: | Item | Cost/Fair Value | |:---|:---| | Cash | $1,620.3 | | Money market mutual funds | $371.2 | | U.S. Treasury bills | $398.1 | | Commercial paper | $49.5 | | Total | $2,439.1 | (5) Business Combinations The Company acquired Endomagnetics Ltd for $310.0 million in July 2024, following fiscal 2023 acquisitions of JW Medical and Normedi Nordic Fiscal 2024 Acquisitions Hologic agreed to acquire Endomagnetics Ltd (Endomag) for approximately $310.0 million on April 26, 2024, closing on July 25, 2024 - The Company executed an agreement on April 26, 2024, to acquire Endomagnetics Ltd (Endomag) for approximately $310.0 million, which closed on July 25, 2024[126] Fiscal 2023 Acquisitions Fiscal 2023 acquisitions included JW Medical Corporation assets for $6.7 million and Normedi Nordic AS for $7.7 million, including contingent consideration - On July 3, 2023, the Company acquired assets from JW Medical Corporation for $6.7 million, primarily allocated to a customer relationship intangible asset[100] - On April 3, 2023, the Company acquired Normedi Nordic AS for $7.7 million, which included $1.1 million for contingent consideration based on incremental revenue growth[101] Contingent Consideration Acessa Health contingent consideration resulted in a $1.7 million loss in Q1 fiscal 2024 and a final $2.6 million payment in Q2 fiscal 2024 - The primary contingent consideration liability was related to the Acessa Health, Inc. acquisition, with payments based on incremental revenue growth over a three-year period ending December 2023[102] - A $1.7 million loss was recorded in Q1 fiscal 2024 to increase the contingent consideration liability to fair value based on actual revenue results in the final earn-out period[102] - A final payment of $2.6 million was made during the second quarter of fiscal 2024 for the Acessa contingent consideration[102] (6) Strategic Investment The Company invested $24.5 million for a 45% stake in Maverix Medical LLC in November 2023, accounted for under the equity method - On November 13, 2023, the Company invested $24.5 million for a 45% ownership in Maverix Medical LLC, a new entity formed with KKR Comet, LLC, to develop lung cancer technologies[129] - The investment is accounted for under the equity method, and the Company's proportionate share of Maverix's net loss for the three and nine months ended June 29, 2024, was immaterial[129] (7) Disposition The SSI ultrasound imaging business was sold for $1.9 million in October 2023, resulting in a $51.7 million charge in Q4 fiscal 2023 - On September 29, 2023, the Company agreed to sell its SSI ultrasound imaging business for $1.9 million in cash, with the sale completed on October 3, 2023[104] - A charge of $51.7 million was recorded in Q4 fiscal 2023 to record the asset group at its fair value less costs to sell[104] - The disposal did not qualify as a discontinued operation as it was not deemed a strategic shift with a major effect on operations and financial results[105] Sale of SuperSonic Imagine Ultrasound Imaging Business The SSI ultrasound imaging business sale involved $33.2 million cash, $4.5 million receivables, $16.2 million inventory, and $8.6 million prepaid expenses Assets and Liabilities Disposed of (in millions): | Item | Amount | |:---|:---| | Assets: | | | Cash | $33.2 | | Accounts receivable | $4.5 | | Inventory | $16.2 | | Prepaid expenses and other assets | $8.6 | | Valuation allowance | $(50.6) | | Total assets disposed of | $11.9 | | Liabilities: | | | Accounts payable | $3.1 | | Accrued expenses | $5.1 | | Total liabilities disposed of | $8.2 | (8) Restructuring Restructuring activities include Mobidiag business strategy refinement, facility closures, asset impairments, and employee terminations, alongside the Danbury facility closure - The Company refined its Mobidiag business strategy, discontinuing certain products, closing facilities in Finland and France, and moving operations to San Diego[107] - This resulted in accelerated depreciation of $7.2 million and a lease asset impairment charge of $12.5 million in Q1 fiscal 2024[107] - Total estimated severance charges for Mobidiag employees are approximately $13.1 million, with $3.9 million and $7.9 million recorded in the three and nine months ended June 29, 2024, respectively[107] - The closure of the Danbury, Connecticut facility for Breast Health capital equipment manufacturing is expected to be completed by Q3 fiscal 2025, with severance charges of $0.9 million and $2.7 million recorded in the current three and nine months, respectively[134] (9) Borrowings and Credit Arrangements Total debt obligations were $2,543.1 million at June 29, 2024, including a $1.2 billion Term Loan and $1.35 billion in Senior Notes Debt Obligations (in millions): | Debt Type | June 29, 2024 | September 30, 2023 | |:---|:---|:---| | Current debt obligations (Term Loan) | $37.5 | $287.0 | | Long-term debt (Term Loan) | $1,168.0 | $1,195.6 | | Long-term debt (2028 Senior Notes) | $397.3 | $396.8 | | Long-term debt (2029 Senior Notes) | $940.3 | $938.8 | | Total debt obligations | $2,543.1 | $2,818.2 | 2021 Credit Agreement The $1.5 billion Term Loan under the 2021 Credit Agreement had $1.2 billion outstanding at 6.44% interest, with a $250.0 million prepayment in Q1 fiscal 2024 - The 2021 Credit Agreement includes a $1.5 billion secured term loan and a $2.0 billion revolving credit facility[137] - As of June 29, 2024, $1.2 billion was outstanding on the Term Loan at a 6.44% interest rate, and no amounts were outstanding on the Revolver[137] - The Company made a $250.0 million voluntary prepayment on the 2021 Term Loan during Q1 fiscal 2024 and was in compliance with financial covenants[137][110] 2028 Senior Notes The Company holds $400 million of 4.625% Senior Notes due 2028, with interest expense of $4.8 million for the three months - The Company has $400 million aggregate principal of 4.625% Senior Notes due 2028, maturing on February 1, 2028[139] 2028 Senior Notes Interest Expense (in millions): | Period | Interest Expense | |:---|:---| | Three Months Ended June 29, 2024 | $4.8 | | Three Months Ended July 1, 2023 | $4.8 | | Nine Months Ended June 29, 2024 | $14.4 | | Nine Months Ended July 1, 2023 | $14.8 | 2029 Senior Notes The Company holds $950 million of 3.250% Senior Notes due 2029, with interest expense of $8.2 million for the three months - The Company has $950 million aggregate principal of 3.250% Senior Notes due 2029, maturing on February 15, 2029[161] 2029 Senior Notes Interest Expense (in millions): | Period | Interest Expense | |:---|:---| | Three Months Ended June 29, 2024 | $8.2 | | Three Months Ended July 1, 2023 | $8.2 | | Nine Months Ended June 29, 2024 | $24.7 | | Nine Months Ended July 1, 2023 | $25.3 | (10) Trade Receivables and Allowance for Credit Losses Allowance for credit losses increased to $41.4 million at June 29, 2024, from $38.5 million, applying ASU No. 2016-13 - The Company applies ASU No. 2016-13 for trade receivables, using an estimated loss rate method based on historical experience, current conditions, and forecasts[162] Allowance for Credit Losses (in millions): | Metric | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---| | Balance at Beginning of Period | $38.5 | $37.7 | | Credit Loss Provisions | $5.8 | $2.2 | | Settlements/Adjustments/Write-offs, and Foreign Exchange | $(2.9) | $(0.8) | | Balance at End of Period | $41.4 | $39.1 | (11) Derivatives The Company uses interest rate swaps as cash flow hedges and non-hedge forward foreign currency contracts to manage market risks Interest Rate Swaps - Cash Flow Hedge A $1.0 billion notional interest rate swap expired in Q1 fiscal 2024, replaced by a new $500 million swap fixing SOFR at 3.46% - A $1.0 billion notional interest rate swap, hedging variable rate debt, expired during Q1 fiscal 2024[141][165] - A new $500 million notional interest rate swap fixes the SOFR component of the variable interest rate at 3.46% from December 2023 to December 2024[142] - The fair value of these swaps was an asset position of $14.7 million as of June 29, 2024[142] Forward Foreign Currency Exchange Contracts and Foreign Currency Option Contracts Forward foreign currency contracts and options mitigate operational exposures but are not hedge-designated, causing fair value changes to impact earnings - The Company uses forward foreign currency exchange contracts and foreign currency option contracts to mitigate operational exposures from foreign currency exchange rates[143][166] - These contracts are not designated for hedge accounting, and changes in their fair value are recognized directly in earnings as a component of other income (expense), net[143][167] Realized and Unrealized Gains/Losses from Foreign Currency Contracts (in millions): | Metric | Three Months Ended June 29, 2024 | Three Months Ended July 1, 2023 | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---|:---|:---| | Realized gain (loss) | $1.7 | $0.2 | $3.5 | $(4.0) | | Unrealized gain (loss) | $(0.5) | $1.0 | $(6.2) | $(20.6) | | Total gain (loss) recognized in income | $1.2 | $1.2 | $(2.7) | $(24.6) | Financial Instrument Presentation Derivative financial instruments are presented on the balance sheet, with interest rate swaps at $14.7 million and forward foreign currency contracts at $2.2 million net asset Fair Value of Derivative Financial Instruments (in millions): | Instrument | Balance Sheet Location | June 29, 2024 | September 30, 2023 | |:---|:---|:---|:---| | Assets: | | | | | Interest rate swap contracts (cash flow hedge) | Prepaid expenses and other current assets | $8.5 | $16.2 | | Interest rate swap contracts (cash flow hedge) | Other assets | $6.2 | $10.7 | | Forward foreign currency contracts (non-hedge) | Prepaid expenses and other current assets | $2.6 | $8.4 | | Liabilities: | | | | | Forward foreign currency contracts (non-hedge) | Accrued expenses | $0.4 | $0.0 | Gain (Loss) Recognized in Other Comprehensive Income (AOCI) for Interest Rate Swaps (net of taxes, in millions): | Period | Amount | |:---|:---| | Three Months Ended June 29, 2024 | $0.3 | | Three Months Ended July 1, 2023 | $3.7 | | Nine Months Ended June 29, 2024 | $(9.3) | | Nine Months Ended July 1, 2023 | $(5.6) | (12) Commitments and Contingencies The Company faces legal proceedings, including BioZorb product liability complaints, with outcomes currently unassessable and legal costs expensed as incurred - The Company faces product liability complaints regarding the BioZorb 3D Bioabsorbable Marker, alleging undisclosed side effects[145] - Complaints have been filed on behalf of 88 plaintiffs in Massachusetts state court and U.S. District Court[145] - The Company believes it has valid defenses but cannot reasonably assess the outcome at this early stage[145] Litigation and Related Matters The Company evaluates legal proceedings under ASC 450, expensing costs, and believes only the BioZorb matter could materially impact financials - The Company is involved in various legal proceedings, claims, and investigations arising from ordinary business operations[169] - Loss contingencies are accrued if an adverse outcome is probable and reasonably estimable under ASC 450[147] - Management believes no other proceedings, apart from those described, are reasonably likely to have a material adverse effect on financial condition or results of operations[169] (13) Net Income (Loss) Per Share Basic and diluted net income per share are calculated using weighted average common shares and equivalents, with dilutive securities considered for net income periods Net Income (Loss) Per Share (shares in thousands): | Metric | Three Months Ended June 29, 2024 | Three Months Ended July 1, 2023 | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---|:---|:---| | Basic weighted average common shares outstanding | 234,604 | 246,908 | 236,373 | 247,319 | | Weighted average common stock equivalents | 1,862 | — | 1,708 | 2,074 | | Diluted weighted average common shares outstanding | 236,466 | 246,908 | 238,081 | 249,393 | | Weighted-average anti-dilutive shares | 933 | 2,936 | 1,372 | 1,786 | (14) Stock-Based Compensation Stock-based compensation expense was $69.1 million for the nine months ended June 29, 2024, with various equity awards granted and unrecognized expense remaining Stock-Based Compensation Expense (in millions): | Category | Three Months Ended June 29, 2024 | Three Months Ended July 1, 2023 | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---|:---|:---| | Cost of revenues | $2.6 | $2.1 | $8.5 | $7.7 | | Research and development | $2.2 | $2.1 | $8.4 | $8.6 | | Selling and marketing | $3.5 | $2.9 | $10.4 | $9.2 | | General and administrative | $6.3 | $9.8 | $41.8 | $35.1 | | Total | $14.6 | $16.9 | $69.1 | $60.6 | - The Company granted 0.6 million stock options (weighted-average exercise price $72.32) and 0.7 million RSUs (weighted-average grant date fair value $72.03) during the nine months ended June 29, 2024[149][203] - Unrecognized compensation expense totaled $12.4 million for stock options and $55.5 million for stock units (RSUs, PSUs, FCF PSUs, MSUs) as of June 29, 2024, to be recognized over weighted-average periods of 2.3 and 1.8 years, respectively[173] (15) Inventories and Property, Plant and Equipment Inventories increased to $665.5 million and net property, plant, and equipment to $528.8 million at June 29, 2024 Inventories (in millions): | Category | June 29, 2024 | September 30, 2023 | |:---|:---|:---| | Raw materials | $263.2 | $238.6 | | Work-in-process | $58.4 | $66.3 | | Finished goods | $343.9 | $312.7 | | Total Inventories | $665.5 | $617.6 | Property, Plant and Equipment, Net (in millions): | Category | June 29, 2024 | September 30, 2023 | |:---|:---|:---| | Equipment | $388.4 | $380.0 | | Equipment under customer usage agreements | $507.7 | $508.1 | | Building and improvements | $243.7 | $230.0 | | Leasehold improvements | $42.0 | $44.4 | | Land | $40.8 | $41.1 | | Furniture and fixtures | $23.6 | $19.2 | | Finance lease right-of-use asset | $8.4 | $8.2 | | Total Gross PP&E | $1,254.6 | $1,231.0 | | Less – accumulated depreciation and amortization | $(725.8) | $(714.0) | | Net Property, Plant and Equipment | $528.8 | $517.0 | (16) Business Segments and Geographic Information The Company operates in four segments, with performance evaluated by revenues and operating income, and the U.S. remains the largest market - The Company operates in four reportable segments: Diagnostics, Breast Health, GYN Surgical, and Skeletal Health[175] Total Revenues by Segment (in millions): | Segment | Three Months Ended June 29, 2024 | Three Months Ended July 1, 2023 | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---|:---|:---| | Diagnostics | $440.8 | $439.7 | $1,338.7 | $1,463.6 | | Breast Health | $385.0 | $360.3 | $1,147.3 | $1,079.9 | | GYN Surgical | $166.6 | $157.3 | $484.8 | $456.2 | | Skeletal Health | $19.0 | $27.1 | $71.5 | $85.4 | | Total | $1,011.4 | $984.4 | $3,042.3 | $3,085.1 | Revenues by Geography as a Percentage of Total Revenues: | Region | Three Months Ended June 29, 2024 | Three Months Ended July 1, 2023 | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---|:---|:---| | United States | 75.7% | 76.2% | 74.9% | 75.9% | | Europe | 12.6% | 13.1% | 13.4% | 13.9% | | Asia-Pacific | 6.4% | 6.4% | 6.4% | 6.2% | | Rest of World | 5.3% | 4.3% | 5.3% | 4.0% | | Total | 100.0% | 100.0% | 100.0% | 100.0% | (17) Income Taxes Effective tax rates were 19.2% (three months) and 5.1% (nine months), lower due to deductions, geographic mix, and a $107.2 million tax benefit - The effective tax rate for the three months ended June 29, 2024, was 19.2%, and for the nine months, it was 5.1%[208] - The lower effective tax rates are primarily due to the U.S. deduction for foreign derived intangible income, geographic mix of international income, and federal and state tax credits[178] - The nine-month effective tax rate also benefited from a $107.2 million discrete tax benefit related to a worthless stock deduction on an investment in an international subsidiary[178] Non-Income Tax Matters The Company faces ongoing non-income tax examinations in multiple jurisdictions, with potential for additional charges beyond current estimates - The Company is subject to tax examinations for value added, sales-based, payroll, and other non-income tax items in various jurisdictions[210] - Loss contingencies are recorded pursuant to ASC 450, and while current estimates are reasonable, additional charges could be recorded in the future[210] (18) Intangible Assets Net intangible assets totaled $687.6 million at June 29, 2024, with significant impairment charges for BioZorb and Mobidiag assets Intangible Assets (in millions): | Description | Gross Carrying Value (June 29, 2024) | Accumulated Amortization (June 29, 2024) | Gross Carrying Value (Sept 30, 2023) | Accumulated Amortization (Sept 30, 2023) | |:---|:---|:---|:---|:---| | Developed technology | $4,375.4 | $3,786.6 | $4,411.0 | $3,649.5 | | In-process research and development | $21.9 | — | $25.7 | — | | Customer relationships | $600.6 | $564.4 | $600.0 | $550.6 | | Trade names | $252.5 | $222.9 | $253.6 | $212.8 | | Total acquired intangible assets | $5,250.4 | $4,573.9 | $5,290.3 | $4,412.9 | | Internal-use software | $25.5 | $20.0 | $24.0 | $17.8 | | Capitalized software embedded in products | $29.7 | $24.1 | $27.7 | $22.7 | | Total intangible assets | $5,305.6 | $4,618.0 | $5,342.0 | $4,453.4 | - During Q3 fiscal 2024, the Company recorded impairment charges of $13.3 million and $0.4 million for BioZorb developed technology and trade names, fully writing off the assets, following a Class I recall classification by the FDA[181] - During Q1 fiscal 2024, a $4.3 million impairment charge was recorded for the Mobidiag in-process research and development intangible asset, reducing its fair value to $22.4 million[212] (19) Product Warranties Product warranty balance increased to $9.2 million at June 29, 2024, with $7.2 million in provisions and $6.3 million in settlements Product Warranty Activity (in millions): | Metric | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---| | Balance at Beginning of Period | $8.3 | $8.0 | | Provisions | $7.2 | $4.9 | | Settlements/Adjustments | $(6.3) | $(5.4) | | Balance at End of Period | $9.2 | $7.5 | (20) Accumulated Other Comprehensive Income (Loss) AOCI was $(139.5) million at June 29, 2024, primarily due to foreign currency translation and hedged interest rate swaps Accumulated Other Comprehensive Income (Loss) (in millions): | Component | Beginning Balance (Sept 30, 2023) | OCI (Loss) before Reclassifications (9 months) | Ending Balance (June 29, 2024) | |:---|:---|:---|:---| | Foreign Currency Translation | $(147.8) | $(2.8) | $(150.6) | | Pension Plans | $0.3 | — | $0.3 | | Hedged Interest Rate Swaps | $10.5 | $0.3 | $10.8 | | Total | $(137.0) | $(2.5) | $(139.5) | (21) Share Repurchase A $1.0 billion stock repurchase program had $248.6 million remaining, with 1.4 million and 3.5 million shares repurchased for $100.0 million and $250.0 million - A $1.0 billion stock repurchase program was authorized in September 2022, with $248.6 million remaining available as of June 29, 2024[218] - During the three and nine months ended June 29, 2024, the Company repurchased 1.4 million and 3.5 million shares, respectively, for $100.0 million and $250.0 million, excluding ASR shares[218] - An accelerated share repurchase (ASR) agreement for $500 million was completed in February 2024, resulting in the repurchase of approximately 7.0 million shares[189] (22) New Accounting Pronouncements The Company is evaluating new FASB ASUs on Segment Reporting and Income Taxes, while the SEC's climate disclosure rule is stayed - FASB ASU No. 2023-07 (Segment Reporting) and ASU No. 2023-09 (Income Taxes) are effective for the Company in fiscal 2025, with early adoption permitted[190][219] - The SEC's final climate disclosure rule, requiring Scope 1 and Scope 2 greenhouse gas emissions disclosure, is currently stayed pending judicial review[220] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, results of operations, liquidity, capital resources, and critical accounting estimates, including forward-looking statements CAUTIONARY STATEMENT Forward-looking statements involve known and unknown risks and uncertainties that could cause actual results to differ materially, requiring careful consideration - Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially[62][221] - Factors that could cause differences include macroeconomic uncertainties, acquisitions, new competitive technologies, demand for products, cybersecurity threats, supply chain constraints, regulatory approvals, and legal proceedings[194][252] OVERVIEW Hologic, a women's health product supplier across four segments, recently acquired Endomagnetics Ltd and divested its SSI ultrasound business - Hologic is a developer, manufacturer, and supplier of premium diagnostics products, medical imaging systems, and surgical products focused on women's health[196] - The Company operates in four segments: Diagnostics, Breast Health, GYN Surgical, and Skeletal Health[196] ACQUISITION Hologic acquired Endomagnetics Ltd (Endomag) for approximately $310.0 million on July 25, 2024, specializing in breast surgery technologies - On April 26, 2024, Hologic agreed to acquire Endomagnetics Ltd (Endomag) for approximately $310.0 million, with the transaction closing on July 25, 2024[200] DISPOSITION Hologic sold its SSI ultrasound imaging business for $1.9 million in October 2023, incurring a $51.7 million charge in Q4 fiscal 2023 - On September 29, 2023, Hologic agreed to sell its SSI ultrasound imaging business for $1.9 million in cash, with the sale completed on October 3, 2023[227] - A charge of $51.7 million was recorded in Q4 fiscal 2023 to record the SSI ultrasound imaging asset group at its fair value less costs to sell[227] RESULTS OF OPERATIONS Results show mixed segment performance, with product revenues impacted by COVID-19 assay sales, while service revenues increased, and operating expenses varied Product Revenues Product revenues increased 1.5% (three months) but decreased 2.2% (nine months), driven by lower SARS-CoV-2 assay sales and Skeletal Health stop-ship Product Revenues by Segment (in millions): | Segment | Three Months Ended June 29, 2024 | Change % | Nine Months Ended June 29, 2024 | Change % | |:---|:---|:---|:---|:---| | Diagnostics | $406.9 | (0.7)% | $1,246.8 | (9.6)% | | Breast Health | $228.9 | 6.7% | $696.7 | 10.3% | | GYN Surgical | $165.4 | 5.8% | $479.6 | 5.9% | | Skeletal Health | $10.0 | (46.2)% | $44.1 | (26.0)% | | Total Product Revenues | $811.2 | 1.5% | $2,467.2 | (2.2)% | - Diagnostics product revenues decreased primarily due to a $163.4 million decline in SARS-CoV-2 assay sales in the nine-month period, offset by increases in BV/CV and Fusion respiratory products[91] - Skeletal Health product revenues decreased significantly due to a temporary stop-ship of Horizon DXA systems caused by a non-conformance pertaining to electromagnetic compatibility requirements[64] Service and Other Revenues Service and other revenues increased 8.0% (three months) and 2.3% (nine months), driven by Breast Health and Biotheranostics growth Service and Other Revenues (in millions): | Metric | Three Months Ended June 29, 2024 | Change % | Nine Months Ended June 29, 2024 | Change % | |:---|:---|:---|:---|:---| | Service and Other Revenues | $200.2 | 8.0% | $575.1 | 2.3% | - The increase in service and other revenue was primarily due to an increase in Breast Health service contract revenue and higher lab testing volumes from the Biotheranostics business, attributed to greater adoption of the Breast Cancer Index test[232] Cost of Product Revenues Cost of product revenues as a percentage increased to 37.0% due to lower SARS-CoV-2 assay sales and inventory reserves, with Skeletal Health impacted by $5.0 million repair charges Cost of Product Revenues (in millions): | Metric | Three Months Ended June 29, 2024 | % of Product Revenue | Nine Months Ended June 29, 2024 | % of Product Revenue | |:---|:---|:---|:---|:---| | Cost of Product Revenues | $298.2 | 36.8% | $913.9 | 37.0% | | Amortization of Acquired Intangible Assets | $44.4 | 5.5% | $134.9 | 5.5% | | Impairment of Intangible Assets and Equipment | $13.3 | 1.6% | $39.2 | 1.6% | | Total | $355.9 | 43.9% | $1,088.0 | 44.1% | - Cost of product revenues as a percentage of revenue was higher in the current nine-month period primarily due to a decrease in sales of higher-margin SARS-CoV-2 assays[265] - Skeletal Health's product costs as a percentage of revenue increased due to a $5.0 million charge to repair Horizon DXA units for electromagnetic compatibility non-conformance[235] Cost of Service and Other Revenues Service and other revenues gross margin increased to 52.4% (three months) and 50.6% (nine months), driven by higher-margin lab testing Cost of Service and Other Revenues (in millions): | Metric | Three Months Ended June 29, 2024 | % of Service Revenue | Nine Months Ended June 29, 2024 | % of Service Revenue | |:---|:---|:---|:---|:---| | Cost of Service and Other Revenue | $95.2 | 47.5% | $284.2 | 49.4% | - Gross margin for service and other revenues increased due to higher lab testing revenue from Biotheranostics, which has higher margins, and a decrease in service department costs[271] Operating Expenses Operating expenses decreased 13.6% (three months) and 1.7% (nine months) due to lower R&D and selling & marketing, despite increased G&A Operating Expenses (in millions): | Expense Category | Three Months Ended June 29, 2024 | Change % | Nine Months Ended June 29, 2024 | Change % | |:---|:---|:---|:---|:---| | Research and development | $64.1 | (11.7)% | $205.5 | (7.2)% | | Selling and marketing | $146.3 | (2.3)% | $439.4 | (3.6)% | | General and administrative | $94.0 | 4.2% | $306.2 | 2.2% | | Amortization of intangible assets | $5.3 | (25.4)% | $24.3 | 11.0% | | Impairment of intangible assets and Equipment | $0.4 | ** | $5.6 | (87.4)% | | Contingent consideration - fair value adjustment | — | ** | $1.7 | 113.7% | | Restructuring charges | $6.2 | ** | $34.8 | ** | | Total Operating Expenses | $316.3 | (13.6)% | $1,017.5 | (1.7)% | Research and Development Expenses R&D expenses decreased 11.7% (three months) and 7.2% (nine months) due to lower compensation and SSI divestiture, partially offset by IP purchase - R&D expenses decreased due to lower compensation and benefits, reduced project spend, and the elimination of expenses from the SSI ultrasound business ($2.7 million and $8.7 million for three and nine months, respectively)[117] - Decreases were partially offset by lower credits from the BARDA grant ($3.2 million and $5.5 million for three and nine months, respectively) and a $10.0 million charge for intellectual property purchase in Diagnostics (nine-month period)[117] Selling and Marketing Expenses Selling and marketing expenses decreased 2.3% (three months) and 3.6% (nine months) due to reduced advertising, SSI divestiture, and lower travel - Selling and marketing expenses decreased due to lower spending on advertising and marketing initiatives, elimination of SSI ultrasound business expenses ($1.5 million and $5.2 million for three and nine months, respectively), and lower travel expenses[241][274] General and Administrative Expenses G&A expenses increased 4.2% (three months) and 2.2% (nine months) due to higher legal expenses, compensation, and bad debt, partially offset by other factors - Three-month increase in G&A expenses was due to higher legal expenses, compensation and benefits from higher headcount, and acquisition transaction costs[94] - Nine-month increase was due to higher compensation and benefits (stock compensation, deferred compensation plan), increased legal expenses (offsetting a $7.4 million prior year settlement benefit), and a $3.6 million increase in bad debt expense[94] - Partially offsetting the nine-month increase were a $10.0 million decrease in charitable contributions and an $8.9 million charge for a business dispute in the prior year[94] Amortization of Intangible Assets Amortization of intangible assets decreased in the three-month period but increased in the nine-month period due to accelerated Mobidiag asset amortization - Amortization expense decreased in the current three-month period due to lower Mobidiag intangible asset values from prior impairment charges and accelerated amortization[243] - Amortization expense increased in the current nine-month period primarily due to accelerated amortization of customer relationship and trade name intangible assets from the Mobidiag acquisition[243] Impairment of Intangible Assets and Equipment Impairment charges of $26.8 million and $13.7 million were recorded for BioZorb, and $4.3 million for Mobidiag IPR&D asset - Impairment charges of $26.8 million and $13.7 million were recorded for the BioZorb product line in Q2 and Q3 fiscal 2024, respectively, primarily allocated to developed technology and trade names[275] - A $4.3 million impairment charge was recorded for the Mobidiag IPR&D asset in Q1 fiscal 2024 due to reduced forecasted revenues and project timing delays[275] Contingent Consideration Fair Value Adjustments A $1.7 million loss was recorded in Q1 fiscal 2024 for Acessa contingent consideration, contrasting with a $12.4 million gain in Q2 fiscal 2023 - A $1.7 million loss was recorded in Q1 fiscal 2024 to increase the Acessa contingent consideration liability to fair value based on actual revenue results[244] - In Q2 fiscal 2023, a $12.4 million gain was recorded to reduce the liability's fair value due to decreased forecasted revenues[244] Restructuring Charges Restructuring charges significantly increased to $6.2 million (three months) and $34.8 million (nine months), including Mobidiag and Danbury severance - Restructuring charges were $6.2 million for the three months and $34.8 million for the nine months ended June 29, 2024[272] - Severance charges related to Mobidiag facility closures totaled $7.9 million for the nine months ended June 29, 2024[107] - Severance charges for the Danbury, Connecticut facility closure were $2.7 million for the nine months ended June 29, 2024[134] Interest Income Interest income decreased 12.6% (three months) and 5.1% (nine months) due to lower average cash balances, despite higher interest rates Interest Income (in millions): | Metric | Three Months Ended June 29, 2024 | Change % | Nine Months Ended June 29, 2024 | Change % | |:---|:---|:---|:---|:---| | Interest Income | $28.4 | (12.6)% | $80.3 | (5.1)% | - Interest income decreased due to lower average cash balances, partially offset by higher interest rates[246] Interest Expense Interest expense increased 15.2% (three months) and 8.7% (nine months) due to higher variable rates and lower swap benefits, partially offset by debt prepayment Interest Expense (in millions): | Metric | Three Months Ended June 29, 2024 | Change % | Nine Months Ended June 29, 2024 | Change % | |:---|:---|:---|:---|:---| | Interest Expense | $(31.9) | 15.2% | $(90.2) | 8.7% | - Interest expense increased due to higher variable interest rates under the 2021 Credit Agreement and lower amounts received from interest rate swap agreements[247] - The increase was partially offset by a lower principal balance outstanding due to a $250.0 million voluntary prepayment on the 2021 Credit Agreement[247] Other Income (Expense), net Other income (expense), net, decreased to $0.2 million (three months) but increased to $0.8 million (nine months), influenced by life insurance gains and foreign currency losses Other Income (Expense), net (in millions): | Metric | Three Months Ended June 29, 2024 | Change % | Nine Months Ended June 29, 2024 | Change % | |:---|:---|:---|:---|:---| | Other Income (Expense), net | $0.2 | (96.6)% | $0.8 | ** | - For the nine-month period, this account primarily consisted of a $10.9 million gain from the change in cash surrender value of life insurance contracts, partially offset by $7.2 million in net foreign currency exchange losses and a $2.3 million ownership share loss from the Maverix Medical investment[248] Provision for Income Taxes Provision for income taxes decreased 12.2% (three months) and 80.3% (nine months), with effective rates of 19.2% and 5.1% due to a $107.2 million tax benefit Provision for Income Taxes (in millions): | Metric | Three Months Ended June 29, 2024 | Change % | Nine Months Ended June 29, 2024 | Change % | |:---|:---|:---|:---|:---| | Provision for Income Taxes | $46.2 | (12.2)% | $32.6 | (80.3)% | - Effective tax rates for the three and nine months ended June 29, 2024, were 19.2% and 5.1%, respectively, compared to 434.7% and 31.1% in the prior year[281] - The lower nine-month effective tax rate was primarily due to a $107.2 million discrete tax benefit from a worthless stock deduction on an investment in an international subsidiary[250] Segment Results of Operations Segment performance, measured by revenues and operating income, shows Diagnostics and Breast Health improvements, while GYN Surgical and Skeletal Health had mixed or declining results - Segment performance is measured based on total revenues and operating income[282] Diagnostics Diagnostics revenues slightly increased (three months) but decreased (nine months), while operating income significantly increased due to higher gross profit and lower expenses Diagnostics Segment Performance (in millions): | Metric | Three Months Ended June 29, 2024 | Change % | Nine Months Ended June 29, 2024 | Change % | |:---|:---|:---|:---|:---| | Total Revenues | $440.8 | 0.3% | $1,338.7 | (8.5)% | | Operating Income | $89.7 | (179.0)% | $210.1 | 47.1% | | Operating Income as a % of Segment Revenue | 20.3% | | 15.7% | | - Operating income increased due to a $162.8 million Mobidiag impairment charge in the prior year, lower intangible asset amortization, reduced manufacturing costs, and increased sales of Women's Health Aptima and Fusion assays[315] Breast Health Breast Health revenues increased 6.9% (three months) and 6.2% (nine months), with operating income also rising due to higher product sales and service revenue Breast Health Segment Performance (in millions): | Metric | Three Months Ended June 29, 2024 | Change % | Nine Months Ended June 29, 2024 | Change % | |:---|:---|:---|:---|:---| | Total Revenues | $385.0 | 6.9% | $1,147.3 | 6.2% | | Operating Income | $102.4 | 61.8% | $296.2 | 26.7% | | Operating Income as a % of Segment Revenue | 26.6% | | 25.8% | | - Gross margin was 54.3% for both the three and nine months, driven by increased sales of 3Dimensions systems, lower intangible asset amortization, and slight increases in biopsy disposable prices and European product prices[316] GYN Surgical GYN Surgical revenues increased 5.9% (three months) and 6.3% (nine months), with operating income up in three months but down in nine months GYN Surgical Segment Performance (in millions): | Metric | Three Months Ended June 29, 2024 | Change % | Nine Months Ended June 29, 2024 | Change % | |:---|:---|:---|:---|:---| | Total Revenues | $166.6 | 5.9% | $484.8 | 6.3% | | Operating Income | $56.7 | 16.9% | $144.3 | (3.5)% | | Operating Income as a % of Segment Revenue | 34.0% | | 29.8% | | - Gross margin was 69.6% for the three months (up from 68.7%) due to improved margins on CoolSeal disposable products from manufacturing efficiencies[318] - Nine-month operating income decreased due to increased operating expenses, including a prior year gain from Acessa contingent consideration and a Minerva litigation settlement[290] Skeletal Health Skeletal Health revenues decreased 29.9% (three months) and 16.3% (nine months) due to a Horizon DXA stop-ship, leading to an operating loss Skeletal Health Segment Performance (in millions): | Metric | Three Months Ended June 29, 2024 | Change % | Nine Months Ended June 29, 2024 | Change % | |:---|:---|:---|:---|:---| | Total Revenues | $19.0 | (29.9)% | $71.5 | (16.3)% | | Operating Income | $(4.8) | (254.8)% | $2.0 | (79.6)% | | Operating Income as a % of Segment Revenue | (25.2)% | | 2.8% | | - Operating income decreased primarily due to a decrease in gross profit and an increase in operating expenses, with gross margin at 4.9% and 27.9% for the three and nine months, respectively[121] - The decrease in gross margin was primarily due to a $5.0 million charge to repair Horizon DXA units and a decrease in sales volume due to a temporary stop-ship[121] LIQUIDITY AND CAPITAL RESOURCES Liquidity is supported by $2,994.6 million working capital and $2,439.1 million cash, with $918.2 million from operations and $1,051.8 million used in financing - Working capital was $2,994.6 million and cash and cash equivalents totaled $2,439.1 million at June 29, 2024[293] - Operating activities provided $918.2 million in cash for the first nine months of fiscal 2024[321] - Financing activities used $1,051.8 million, primarily for $776.8 million in common stock repurchases and $278.1 million in debt principal payments[323] - Total recorded debt outstanding was $2.54 billion at June 29, 2024[324] Debt Total debt includes a $1.2 billion Term Loan and $1.35 billion in Senior Notes, with the Company in compliance with all debt covenants - Total recorded debt outstanding was $2.54 billion at June 29, 2024, comprising the 2021 Term Loan ($1.21 billion), 2029 Senior Notes ($940.3 million), and 2028 Senior Notes ($397.3 million)[324] 2021 Credit Agreement The $1.5 billion Term Loan had $1.2 billion outstanding at 6.44% interest, with a $250.0 million prepayment in Q1 fiscal 2024, and no Revolver borrowings - The 2021 Credit Agreement includes a $1.5 billion secured term loan and a $2.0 billion secured revolving credit facility[325] - As of June 29, 2024, the outstanding principal balance of the 2021 Term Loan was $1.2 billion, with an interest rate of 6.44% per annum[327][297] - The Company was in compliance with the total net leverage ratio and interest coverage ratio covenants as of June 29, 2024[299] 2028 Senior Notes The Company holds $400.0 million in 4.625% Senior Notes due 2028, which are redeemable at specified premiums - The total aggregate principal balance of the 2028 Senior Notes is $400.0 million, bearing interest at 4.625% per year, payable semi-annually[328] - The 2028 Senior Notes mature on February 1, 2028, and are redeemable at various premiums depending on the redemption date[328] 2029 Senior Notes The Company holds $950.0 million in 3.250% Senior Notes due 2029, which are redeemable at specified premiums - The total aggregate principal balance of the 2029 Senior Notes is $950.0 million, bearing interest at 3.250% per year, payable semi-annually[351] - The 2029 Senior Notes mature on February 15, 2029, and are redeemable at various premiums depending on the redemption date[351] Stock Repurchase Program A $1.0 billion stock repurchase program, authorized in September 2022, had $248.6 million remaining as of June 29, 2024 - A $1.0 billion stock repurchase program was authorized in September 2022, replacing a previous authorization[301] - As of June 29, 2024, $248.6 million remained available under this authorization[301] - Repurchases may be made through open market purchases, privately negotiated transactions, accelerated share repurchase agreements, or Rule 10b5-1 plans[352] Acquisition The Company acquired Endomagnetics Ltd (Endomag) for approximately $310.0 million on July 25, 2024 - On April 26, 2024, the Company agreed to acquire Endomagnetics Ltd (Endomag) for approximately $310.0 million, which closed on July 25, 2024[302] Legal Contingencies The Company is involved in legal proceedings, with loss contingencies accrued if probable and estimable, as detailed in Note 12 - The Company is involved in several legal proceedings, claims, and governmental/regulatory inspections arising from ordinary business[303] - Management reviews estimates of potential costs, and loss contingencies are accrued if an adverse outcome is probable and reasonably estimable[303] Future Liquidity Considerations Current liquidity sources are expected to fund operations and debt for the next twelve months, with longer-term liquidity dependent on future performance - The Company believes its current liquidity sources will be sufficient to fund normal operations and debt payments over the next twelve months[332] - Longer-term liquidity is contingent upon future operating performance, and additional capital may be required for future capital expenditures, debt repayment, acquisitions, or strategic transactions[332] CRITICAL ACCOUNTING POLICIES AND ESTIMATES Financial statements rely on critical accounting estimates for revenue, allowances, valuations, and tax reserves, with no material changes since September 30, 2023 - The preparation of consolidated financial statements requires estimates and judgments affecting reported amounts of assets, liabilities, revenues, and expenses[355] - Critical accoun