CAUTIONARY STATEMENT Some of the statements contained in this report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements involve known and unknown risks, uncertainties and other factors which may cause our or our industry's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements may include, but are not limited to, statements regarding:
• the effect of the continuing worldwide macroeconomic uncertainty,
including the
on our business and results of operations;
• the effect of the current trade war between the
most notably
products in those countries and potential increased costs we may incur to
purchase materials from our suppliers to manufacture our products; • the development of new competitive technologies and products, and the impact and anticipated benefits of completed acquisitions; • the ability to consolidate certain of our manufacturing and other operations on a timely basis and within budget, without disrupting our business and to achieve anticipated cost synergies related to such actions;
• the ability to successfully manage ongoing organizational and strategic
changes, including our ability to attract, motivate and retain key employees; • regulatory approvals and clearances for our products, including the implementation of the new European Union Medical Device Regulations;
• potential cybersecurity threats and targeted computer crime;
• the coverage and reimbursement decisions of third-party payors;
• the uncertainty of the impact of cost containment efforts and federal
healthcare reform legislation on our business and results of operations;
• the guidelines, recommendations, and studies published by various organizations relating to the use of our products;
• the effect of consolidation in the healthcare industry;
• production schedules for our products;
• the anticipated development of markets we sell our products into and the
success of our products in these markets;
• the anticipated performance and benefits of our products;
• business strategies;
• estimated asset and liability values;
• the impact and costs and expenses of any litigation we may be subject to
now or in the future;
• our compliance with covenants contained in our debt agreements;
• anticipated trends relating to our financial condition or results of
operations, including the impact of interest rate and foreign currency
exchange fluctuations, including the potential impact of the proposed
phase out of LIBOR by the end of 2021; and
• our liquidity, capital resources and the adequacy thereof.
In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "could," "would," "expects," "plans," "anticipates," "believes," "estimates," "projects," "predicts," "potential" and similar expressions intended to identify forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this report. Except as otherwise required by law, we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained in this report to reflect any change in our expectations or any change in events, conditions or circumstances on which any of our forward-looking statements are based. Factors that could cause or contribute to differences in our future financial results include the cautionary statements set forth herein and in our other filings with theSecurities and Exchange Commission , including those set forth under "Risk Factors" set forth in Part II, Item 1A of this Quarterly Report, if any, as well as those described in our Annual Report on Form 10-K for the fiscal year ended 34
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September 28, 2019 or any other of our subsequently filed reports. We qualify all of our forward-looking statements by these cautionary statements. OVERVIEW We are a developer, manufacturer and supplier of premium diagnostics products, medical imaging systems, surgical products and light-based aesthetic and medical treatments systems with an emphasis on women's health. During the first quarter of fiscal 2020, we operated in five segments: Diagnostics,Breast Health , GYN Surgical,Medical Aesthetics and Skeletal Health . We sell and service our products through a combination of direct sales and service personnel and a network of independent distributors and sales representatives. We offer a wide range of diagnostic products which are used primarily to aid in the diagnosis of human diseases. Our primary diagnostics products include ourAptima family of molecular diagnostic assays, which run on our advanced instrumentation systems (Panther and Tigris), our ThinPrep cytology system, and the Rapid Fetal Fibronectin Test. TheAptima family of molecular diagnostic assays is used to detect, among other things, the infectious microorganisms that cause the common sexually transmitted diseases, or STDs, such as chlamydia and gonorrhea, certain high-risk strains of human papillomavirus, or HPV, and Trichomonas vaginalis, the parasite that causes trichomoniasis. In addition, theAptima portfolio includes quantitative viral load tests for HIV, Hepatitis C and Hepatitis B. TheAptima portfolio also includes diagnostic tests for a range of acute respiratory ailments that are run on the Panther Fusion system, a field upgradeable instrument addition to the Panther. The ThinPrep System is primarily used in cytology applications, such as cervical cancer screening, and the Rapid Fetal Fibronectin Test assists physicians in assessing the risk of pre-term birth. OurBreast Health products include a broad portfolio of solutions for breast cancer care for radiology, pathology and surgery. These solutions include breast imaging and analytics, such as our 2D and 3D mammography systems and reading workstations, minimally invasive breast biopsy guidance systems and devices, breast biopsy site markers and localization, specimen radiology, ultrasound and connectivity solutions. Our most advanced breast imaging platform, Selenia Dimensions and 3Dimensions, utilizes a technology called tomosynthesis to produce 3D images that show multiple contiguous slice images of the breast, which we refer to as the Genius 3D Mammography exam, as well as conventional 2D full field digital mammography images. Our clinical results for FDA approval demonstrated that conventional 2D digital mammography with the addition of 3D tomosynthesis is superior to 2D digital mammography alone for both screening and diagnostics for women of all ages and breast densities. In addition, through our acquisitions ofFaxitron Bioptics, LLC ("Faxitron") and Focal we have expanded our product portfolio to include breast conserving surgery products. Our GYN Surgical products include our NovaSure Endometrial Ablation System, or NovaSure, and our MyoSure Hysteroscopic Tissue Removal System, or MyoSure, as well as our Fluent Fluid Management system, or Fluent. The NovaSure portfolio is comprised of the NovaSure CLASSIC and NovaSure ADVANCED devices and involves a trans-cervical procedure for the treatment of abnormal uterine bleeding. The MyoSure suite of devices offers four options to provide incision-less removal of fibroids, polyps, and other pathology within the uterus. The Fluent system is a fluid management system that provides liquid distention during diagnostic and operative hysteroscopic procedures. Our Medical Aesthetics segment offered a portfolio of aesthetic treatment systems, including SculpSure, PicoSure andMonaLisa Touch , that enable plastic surgeons, dermatologists and other medical practitioners to perform non-invasive and minimally invasive procedures to remove hair, treat vascular and benign pigmented lesions, remove multi-colored tattoos, revitalize the skin, reduce fat through laser lipolysis, reduce cellulite, clear nails infected by toe fungus, ablate sweat glands and improve gynecologic health. This segment also marketed our TempSure radio frequency, or RF, energy sourced platform that offered both non-surgical and surgical aesthetic treatments and procedures. OnNovember 20, 2019 , we entered into a definitive agreement to sell our Medical Aesthetics business toClayton Dubilier & Rice ("CD&R") for a sales price of$205.0 million in cash, less certain adjustments. The sale was completed onDecember 30, 2019 (the beginning of the second quarter of fiscal 2020), and the Company received cash proceeds of$153.4 million . The sales price remains subject to adjustment upon finalization pursuant to the terms of the definitive agreement. As a result, we recorded a$30.2 million impairment charge in the first quarter of fiscal 2020 to record the asset group to its fair value less costs to dispose as it met the assets held-for-sale criteria. See Note 6 to our consolidated financial statements included herein. Following the sale of our Medical Aesthetics business, we do not anticipate to receive any further revenue related to this business, although additional expenses may be incurred. In addition, we will be providing transition services for a period of up to 15 months. OurSkeletal Health segment's products includes the Horizon DXA, a dual energy x-ray system, which evaluates bone density and performs body composition assessments, and the Fluoroscan Insight FD mini C-arm, which assists in performing minimally invasive orthopedic surgical procedures on a patient's extremities, such as the hand, wrist, knee, foot, and ankle. 35 -------------------------------------------------------------------------------- Unless the context otherwise requires, references to we, us, Hologic or our company refer toHologic, Inc. and its consolidated subsidiaries. Trademark Notice Hologic is a trademark ofHologic, Inc. Other trademarks, logos, and slogans registered or used by Hologic and its divisions and subsidiaries inthe United States and other countries include, but are not limited to, the following: 2D Dimensions, 3Dimensions, 3D Mammography, 3D Performance,Aptima , ATEC, BioZorb, Clarity HD, Classic, Dimensions, Emsor,Eviva , Faxitron, Fluent, Fluoroscan, Focal, Fusion, Insight FD, Intelligent 2D, Genius, Genius 3D Mammography, GYN Surgical, Horizon DXA, MyoSure, NovaSure, NovaSure ADVANCED, PAC, Panther, Panther Fusion, Selenia, SmartCurve, SuperSonic Imagine, ThinPrep, and Tigris. Cynosure,MonaLisa Touch , PicoSure, SculpSure, and TempSure remain trademarks of Cynosure, which we no longer own following the sale of our Medical Aesthetics business onDecember 30, 2019 . 36 --------------------------------------------------------------------------------
ACQUISITIONS SuperSonic Imagine OnAugust 1, 2019 , we acquired approximately 46% of the outstanding shares of SuperSonic Imagine S. A., or SSI. SSI, headquartered inFrance , specializes in ultrasound imaging and designs, develops and markets an ultrasound platform used in the non-invasive care path for the characterization of breast, liver or prostate diseases. We initially accounted for this investment as an equity method investment. OnNovember 21, 2019 , we acquired an additional 7.6 million shares of SSI for$12.6 million . As a result, we owned approximately 78% of the outstanding shares of SSI atNovember 21, 2019 and controlled SSI's voting interest and operations. We performed purchase accounting as ofNovember 21, 2019 and beginning on that date the financial results of SSI are included within our consolidated financial statements. We remeasured the initial investment of 46% of the outstanding shares of SSI to its fair value at the acquisition date, resulting in a gain of$3.2 million in the first quarter of fiscal 2020. The total purchase price was$69.3 million , which consisted of$17.9 million for the equity method investment in SSI,$12.6 million for shares acquired onNovember 21, 2019 ,$30.2 million for loans we provided to SSI prior to the acquisition that are considered forgiven, and$8.6 million representing the fair value of the noncontrolling interests as ofNovember 21, 2019 . Based on our preliminary purchase price allocation, we have allocated$39.8 million of the purchase price to the preliminary value of intangibles and$28.7 million to goodwill. The allocation of the purchase price is preliminary as we continue to gather information supporting the acquired assets and liabilities. RESULTS OF OPERATIONS All dollar amounts in tables are presented in millions. Product Revenues Three Months Ended December 28, 2019 December 29, 2018 Change % of % of Total Total Amount Revenue Amount Revenue Amount % Product Revenues Diagnostics$ 306.5 36.0 %$ 290.1 34.9 %$ 16.4 5.7 % Breast Health 208.0 24.5 % 205.7 24.8 % 2.3 1.1 % GYN Surgical 118.6 14.0 % 108.2 13.0 % 10.4 9.6 % Medical Aesthetics 49.7 5.8 % 64.8 7.8 % (15.1 ) (23.3 )% Skeletal Health 16.5 1.9 % 14.3 1.7 % 2.2 15.4 %$ 699.3 82.2 %$ 683.1 82.2 %$ 16.2 2.4 % We generated an increase in product revenues of 2.4% compared to the corresponding period in the prior year. In the current quarter, we had increases across all our business segments except Medical Aesthetics, our recently divested segment, which experienced a decline in volume of Icon, SculpSure andMonaLisa Touch system sales. In the current quarter, Diagnostics product revenues increased$16.4 million or 5.7% primarily due to increases inMolecular Diagnostics of$15.3 million and in Cytology & Perinatal of$2.7 million partially offset by a decline of$1.6 million from blood screening, which we divested in the second quarter of fiscal 2017 but for which we continue to provide long-term access to Panther instrumentation and certain supplies.Molecular Diagnostics product revenue (excluding blood screening) was$176.6 million in the current quarter compared to$161.3 million in the corresponding period in the prior year. The increase was primarily attributable to sales volume of ourAptima family of assays, which increased$9.3 million on a worldwide basis primarily due to our increased installed base of Panther instruments. This installed base is driving higher volumes of assay testing, which is partially offset by a slight decline in average selling prices. In addition, we had an increase in worldwide sales of our virology products and our newer Fusion assays. Cytology & Perinatal product revenue increased in the current quarter primarily due to higher international ThinPrep test volumes partially offset by lower domestic ThinPrep test volumes, which we primarily attribute to screening interval expansion as well as a slight decline in average selling prices. The increase in revenues was partially offset by the negative foreign currency exchange impact of the strengtheningU.S. dollar against a number of currencies. 37
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Breast Health product revenues increased$2.3 million or 1.1% in the current quarter compared to the corresponding period in the prior year primarily due the inclusion of SSI which contributed$5.7 million of product revenue in the current quarter. We obtained control of SSI and began consolidating their results for the last fiscal month of the quarter. In addition, we had increased sales of our interventional breast solutions ATEC andEviva disposables and from our breast conserving surgery products, primarily the products from the Faxitron acquisition. Overall, our digital mammography systems and related components revenue decreased in the current quarter compared to the prior year corresponding quarter. While we experienced increased unit volumes of our newest 3Dimensions and 3D Performance systems, this was more than offset by lower volumes of our older 3D systems and 3D software upgrades, a slight decline in average selling prices of our 3D units, and sale declines of our workflow products, consisting of Intelligent 2D, Clarity HD, and SmartCurve upgrades. The increase in revenues was partially offset by the negative foreign currency exchange impact of the strengtheningU.S. dollar against a number of currencies. GYN Surgical product revenues increased$10.4 million or 9.6% in the current quarter compared to the corresponding period in the prior year primarily due to increases in the volume of MyoSure system sales of$6.0 million and increases in Fluent systems sales of$4.1 million . These increases were partially offset by decreases in NovaSure systems sales of$1.9 million in the current quarter compared to the corresponding period in the prior year. We attribute the decrease in NovaSure sales primarily to increased competition and a stagnant market for endometrial ablation in theU.S. In addition, we have experienced a slight reduction in average selling prices across many of our MyoSure and Novasure devices, which were partially offset by an increase in sales volume for the higher priced NovaSure ADVANCED device. Medical Aesthetics product revenue decreased$15.1 million or (23.3)% in the current quarter compared to the corresponding period in the prior year which we believe is largely due to deal disruption and uncertainty with our customers created by our announcement that we were selling this business, as well as increased competition for body contouring products, continued challenges in our domestic sales force, and the continued negative impact of the FDA pubic letter regarding the efficacy of devices used for so called "vaginal rejuvenation" procedures. On a worldwide basis, sales were down across all of the business's key product lines. The revenue decline was also due to the negative foreign currency exchange impact of the strengtheningU.S. dollar against a number of currencies. As noted above, we divested the Medical Aesthetics segment onDecember 30, 2019 , the beginning of our second quarter of fiscal 2020.Skeletal Health product revenues increased$2.2 million or 15.4% in the current quarter compared to the corresponding period in the prior year primarily due to an increase in sales volume of our Horizon DXA systems, which was partially offset by lower sales volume of our Insight FD mini C-arm system. Product revenues by geography as a percentage of total product revenues were as follows: Three Months Ended December 28, 2019 December 29, 2018 United States 73.6 % 73.9 % Europe 13.3 % 12.5 % Asia-Pacific 8.4 % 8.7 % Rest of World 4.7 % 4.9 % 100.0 % 100.0 % In the current quarter compared to the corresponding period in the prior year, the percentage of product revenue derived from theU.S. decreased while the Rest of World increased which we primarily attributed to strong international growth in molecular diagnostics and revenue from SSI, which is predominantly based inEurope andChina . Service and Other Revenues Three Months Ended December 28, 2019 December 29, 2018 Change % of % of Total Total Amount Revenue Amount Revenue Amount % Service and Other Revenues$ 151.2 17.8 %$ 147.6 17.8 %$ 3.6 2.4 % 38
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Service and other revenues consist primarily of revenue generated from our field service organization to provide ongoing service, installation and repair of our products. The majority of these revenues are generated within ourBreast Health segment, and to a lesser extent, the Medical Aesthetics business.The Breast Health business continues to convert a high percentage of our installed base of digital mammography systems to service contracts upon expiration of the warranty period. The Medical Aesthetics business represented 10.3% and 10.2% of service and other revenues in the current quarter and corresponding period in the prior year, respectively. Service revenues increased 2.4% in the current quarter compared to the corresponding period in the prior year primarily due to higher installation services and service contract conversion and renewal rates for ourBreast Health business. Cost of Product Revenues Three Months Ended December 28, 2019 December 29, 2018 Change % of % of Product Product Amount Revenue Amount Revenue Amount % Cost of Product Revenues$ 237.5 34.0 %$ 232.1 34.0 %$ 5.4 2.3 % Amortization of Intangible Assets 63.6 9.1 % 81.0 11.9 % (17.4 ) (21.5 )% Impairment of Intangible Assets 25.8 3.7 % - - % 25.8 100.0 %$ 326.9 46.8 %$ 313.1 45.9 %$ 13.8 4.4 % Cost of Product Revenues. The cost of product revenues as a percentage of product revenues was 34.0% in the current quarter compared to 34.0% in the corresponding period in the prior year. Diagnostics' product costs as a percentage of revenue decreased in the current quarter compared to the corresponding period in the prior year primarily due toMolecular Diagnostics' improved gross margin from increased volume ofAptima assays and viral assays and favorable manufacturing variances. These cost decreases were partially offset by the impact of the adoption of the new lease rules in the first quarter of fiscal 2020 for a small number of reagent rental contracts that were classified as sales-type leases resulting in additional up-front costs without corresponding revenue and higher field service costs as the installed base of equipment continues to grow.Breast Health's product costs as a percentage of revenue increased in the current quarter compared to the corresponding periods in the prior year primarily due to a decrease in our higher-margin workflow products, consisting of Intelligent 2D, Clarity HD, and SmartCurve upgrades, a decrease in 3D software upgrades, and a slight decline in average selling prices of our 3D systems. The increase in costs as a percentage of revenue was partially offset by favorable manufacturing and purchase price variances and the prior year period included an additional charge of$1.8 million related to the impact of stepping-up the acquired inventory to fair value in purchase accounting for the Focal acquisition in the first quarter of fiscal 2019. GYN Surgical's product costs as a percentage of revenue increased in the current quarter compared to the corresponding period in the prior year primarily due to increased sales of Fluent, which is a lower-margin product, and continued product mix shift. This trend was partially offset by an increase in sales volume in the current quarter for the higher margin NovaSure ADVANCED device compared to the Classic device. Medical Aesthetics' product costs as a percentage of revenue increased in the current quarter compared to the corresponding period in the prior year primarily due to lower sales volume, unfavorable product mix as we sold fewer units of our higher margin SculpSure laser and related PAC keys andMonaLisa Touch device, and unfavorable manufacturing variances.Skeletal Health's product costs as a percentage of revenue were consistent in the current quarter compared to the corresponding period in the prior year with increased sales volume of our Horizon DXA systems at consistent margins. Amortization of Intangible Assets. Amortization of intangible assets relates to acquired developed technology, which is generally amortized over its estimated useful life of between 5 and 15 years using a straight-line method or, if reliably determinable, based on the pattern in which the economic benefits of the assets are expected to be consumed. Amortization expense decreased in the current quarter compared to the corresponding period in the prior year primarily due to lower amortization from intangible assets acquired in the Cynosure acquisition which were written down in fiscal 2019 (partially offset by shortening the remaining life of certain assets) and lower amortization of intangible assets acquired in theCytyc acquisition which reduce over time. 39
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Impairment of Intangible Assets. As discussed in Note 6 to the consolidated financial statements, we recorded an aggregate impairment charge of$30.2 million during the first quarter of fiscal 2020. The impairment charge was allocated to the Medical Aesthetics long-lived assets, of which$25.8 million was allocated to developed technology assets and written off to cost of revenues. Cost of Service and Other Revenues Three Months Ended December 28, 2019 December 29, 2018 Change % of % of Service Service Amount Revenue Amount Revenue Amount % Cost of Service and Other Revenue$ 89.8 59.4 %$ 83.5 56.6 %$ 6.3 7.5 % Service and other revenues gross margin decreased to 40.6% in the current quarter compared to 43.4% in the corresponding period in the prior year primarily due increased field service and parts costs inBreast Health and increase freight and field service costs in Medical Aesthetics. Operating Expenses Three Months Ended December 28, 2019 December 29, 2018 Change % of % of Total Total Amount Revenue Amount Revenue Amount % Operating Expenses Research and development$ 61.2 7.2 %$ 53.2 6.4 %$ 8.0 15.1 % Selling and marketing 144.9 17.0 % 146.0 17.6 % (1.1 ) (0.8 )% General and administrative 88.5 10.4 % 78.6 9.5 % 9.9 12.6 % Amortization of intangible assets 9.1 1.1 % 14.1 1.7 % (5.0 ) (35.5 )% Impairment of intangible assets and equipment 4.4 0.5 % - - % 4.4 - % Restructuring charges 0.9 0.1 % 1.7 0.2 % (0.8 ) (47.1 )%$ 309.0 36.3 %$ 293.6 35.3 %$ 15.4 5.2 % Research and Development Expenses. Research and development expenses increased 15.1% in the current quarter compared to the corresponding period in the prior year primarily due to higher compensation expense inBreast Health and Diagnostics primarily due to increased headcount, increased consulting and project spend, and higher software development expenses in Diagnostics. At any point in time, we have a number of different research projects and clinical trials being conducted and the timing of these projects and related costs can vary from period to period. Selling and Marketing Expenses. Selling and marketing expenses decreased (0.8)% in the current quarter compared to the corresponding period in the prior year primarily due to a reduction in marketing initiatives, trade show expenses and consulting expenses and lower commissions in Medical Aesthetics, partially offset by an increase in commissions and third-party commissions inBreast Health and Surgical from higher revenues and related expenses attributable to SSI. General and Administrative Expenses. General and administrative expenses increased 12.6% in the current quarter compared to the corresponding period in the prior year primarily due to higher compensation and benefits principally driven by our deferred compensation plan, project expenses incurred related to the disposition of Medical Aesthetics, an increase in acquisition-related expenses for due diligence, consulting and contingent consideration. These increases were partially offset by acquisition-related holdback and accrual reversals and lower legal expenses as the prior year period included higher litigation costs related to the Fuji, Enzo and Minerva lawsuits. Amortization of Intangible Assets. Amortization of intangible assets results from customer relationships, trade names, distributor relationships and business licenses related to our acquisitions. These intangible assets are generally amortized over their estimated useful lives of between 2 and 30 years using a straight-line method or, if reliably determinable, based on the pattern in which the economic benefits of the assets are expected to be consumed utilizing expected undiscounted future cash flows. 40
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Amortization expense decreased in the current quarter compared to the corresponding period in the prior year primarily due to lower amortization from the intangible assets acquired in the Cynosure acquisition which were written down in fiscal 2019. Impairment of Intangible Assets. As discussed in Note 6 to the consolidated financial statements, we recorded an aggregate impairment charge of$30.2 million during the first quarter of fiscal 2020. The impairment charge was allocated to the Medical Aesthetics long-lived assets of which$4.4 million was written off to operating expenses. Restructuring Charges. We have implemented various cost reduction initiatives to align our cost structure with our operations and related to integration activities. These actions have primarily resulted in the termination of employees. As a result, we recorded severance benefit charges of$0.9 million in the current quarter. In the prior year, we recorded severance benefit charges of$1.9 million , which was partially offset by a benefit of$0.2 million related to a lease termination contract. Interest Expense Three Months Ended December 28, December 29, 2019 2018 Change Amount Amount Amount % Interest Expense$ (32.8 ) $ (36.1 ) $ 3.3 (9.1 )% Interest expense consists primarily of the cash interest costs and the related amortization of the debt discount and deferred issuance costs on our outstanding debt. Interest expense in the current quarter decreased primarily due a decrease in LIBOR year over year, the basis for determining interest expense under our 2018 Credit Agreement, and overall lower debt balances in the current year partially offset by lower proceeds received under our interest rate cap agreements that hedge the variable interest rate under our credit facilities in the current quarter compared to the corresponding period in the prior year. Debt Extinguishment Loss Three Months Ended December 28, December 29,
2019 2018 Change Amount Amount Amount % Debt Extinguishment Loss $ -$ (0.8 ) $ 0.8 - % In the first quarter of fiscal 2019, we entered into the 2018 Credit Agreement withBank of America, N.A . The proceeds under the 2018 Agreement were used to pay off the Term Loan and Revolver outstanding under the 2017 Credit Agreement. In connection with this transaction, we recorded a debt extinguishment loss of$0.8 million in the first quarter of fiscal 2019. Other Income (Expense), net Three Months Ended December 28, December 29, 2019 2018 Change Amount Amount Amount %
Other Income (Expense), net $ 3.3
For the current quarter, this account primarily consisted of a gain of$2.9 million on the cash surrender value of life insurance contracts related to our deferred compensation plan driven primarily by stock market gains and net gain of$3.2 million to reflect an adjustment to remeasure our initial investment in SSI in connection with purchase accounting, partially offset and net foreign currency exchange losses of$1.7 million primarily from mark-to-market of outstanding forward foreign currency exchange contracts, partially offset by realized gains from settling forward foreign currency contracts. For the first quarter of fiscal 2019, this account primarily consisted of a loss of$5.4 million on the cash surrender value of life insurance contracts related to our deferred compensation plan driven by stock market losses partially offset by net foreign currency exchange gains of$4.2 million primarily 41
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from the market-to-market of outstanding forward foreign currency exchange
contracts, and a gain of
Three Months Ended December 28, December 29, 2019 2018 Change Amount Amount
Amount %
(Benefit) Provision for Income Taxes
** Percentage not meaningful Our effective tax rate for the three months endedDecember 28, 2019 was a benefit of 296.1% compared to a provision of 5.5% for the corresponding period in the prior year. The effective tax rate for the three months endedDecember 28, 2019 differed from the statutory tax rate primarily due to a$312.2 million discrete tax benefit related to the Medical Aesthetics business outside basis difference, partially offset by an increase in the Medical Aesthetics business valuation allowance. The outside basis difference is the difference between the carrying amount of an entity's investment for financial reporting purposes, and the underlying tax basis in that investment. An outside tax-over-book basis difference in an investment in a subsidiary results in the recognition of a deferred tax asset only when it becomes apparent that the reversal of the temporary difference will occur in the foreseeable future. As the Medical Aesthetics business met the assets held-for-sale criteria during the three months endedDecember 28, 2019 , the requirement for recognition of the deferred tax asset for the outside basis difference was also met. For the three months endedDecember 29, 2018 , the effective tax rate differed from the statutory tax rate primarily due to a$20.0 million discrete tax benefit recorded in the quarter related to an internal restructuring, earnings in jurisdictions subject to lower tax rates, and a$5.0 million benefit reduction from finalizing the computations under the Tax Cuts and Jobs Act enacted onDecember 22, 2017 (first quarter of fiscal 2018). Segment Results of Operations We report our business as five segments: Diagnostics,Breast Health , GYN Surgical,Medical Aesthetics and Skeletal Health . The accounting policies of the segments are the same as those described in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year endedSeptember 28, 2019 . We measure segment performance based on total revenues and operating income (loss). Revenues from product sales of each of these segments are described in further detail above. The discussion that follows is a summary analysis of total revenues and the primary changes in operating income or loss by segment. Diagnostics Three Months Ended December 28, December 29, 2019 2018 Change Amount Amount Amount % Total Revenues $ 311.5 $ 296.6$ 14.9 5.0 % Operating Income $ 49.5 $ 43.3$ 6.2 14.3 % Operating Income as a % of Segment Revenue 15.9 % 14.6 %
Diagnostics revenues increased in the current quarter compared to the corresponding period in the prior year primarily due to the fluctuations in product revenues discussed above.
Operating income for this business segment increased in the current quarter compared to the corresponding period in the prior year due to an increase in gross profit from higher revenues with higher gross margins partially offset by an increase in operating expenses. Gross margin was 49.0% and 47.3% in the current quarter and corresponding prior year period, respectively. The increase in gross profit was primarily due to increased sales of ourAptima family of assays, viral assays and favorable product mix. The increase in operating expenses was primarily due to higher compensation expense, which were from 42
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increased headcount and increased research and development spend including software development expenses, partially offset by a decrease in marketing initiatives and a reduction in legal expenses.Breast Health Three Months Ended December 28, December 29, 2019 2018 Change Amount Amount Amount % Total Revenues $ 331.1 $ 324.7$ 6.4 1.9 % Operating Income $ 93.9 $ 97.8$ (3.9 ) (4.0 )% Operating Income as a % of Segment Revenue 28.4 % 30.1 %
Operating income for this business segment decreased in the current quarter compared to the corresponding period in the prior year due to an increase in operating expenses partially offset by an increase in gross profit. Gross margin was 57.4% and 57.8% in the current quarter and corresponding prior year period, respectively. The decrease in gross margin was primarily due to a decrease in our higher-margin workflow products, consisting of Intelligent 2D, Clarity HD, and SmartCurve upgrades, a decrease in 3D software upgrades, and a slight decline in average selling prices of our 3D systems, partially offset by favorable manufacturing and purchase price variances. The prior year period also included an additional charge of$1.8 million related to the impact of stepping-up the acquired inventory to fair value in purchase accounting for the Focal acquisition in the first quarter of fiscal 2019. Operating expenses increased in the current quarter compared to the corresponding period in the prior year primarily due to increased compensation expenses from higher headcount in the R&D department, increase in R&D project spend, increase in commissions and third party commissions, acquisition and integration expenses and the inclusion of$3.4 million of expenses from the SSI acquisition. These increases were partially offset by acquisition related holdback and accrual reversals and a decrease in legal expenses as a result of settling the Fuji litigation in the second quarter of fiscal 2019. GYN Surgical Three Months Ended December 28, December 29, 2019 2018 Change Amount Amount Amount % Total Revenues $ 119.1 $ 108.4$ 10.7 9.9 % Operating Income $ 31.5 $ 27.0$ 4.5 16.6 % Operating Income as a % of Segment Revenue 26.4 % 24.9 % GYN Surgical revenues increased in the current quarter compared to the corresponding period in the prior year primarily due to the increase in product revenues discussed above. Operating income for this business segment increased in the current quarter compared to the corresponding period in the prior year primarily due to increased gross profit driven by higher revenue and higher gross margin partially offset by an increase in operating expenses. Gross margin was 66.3% and 65.4% in the current quarter and corresponding prior year period, respectively. The increase in gross margin was primarily due to lower intangible amortization expense in the current quarter, partially offset by lower product margins primarily due to product mix shift. Operating expenses increased in the current 43
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quarter compared to the corresponding period in the prior year primarily due to increased compensation from higher sales headcount and increased commissions partially offset by decreased marketing initiative spend and lower legal expenses. Medical Aesthetics Three Months Ended December 28, December 29, 2019 2018 Change Amount Amount Amount % Total Revenues $ 65.3 $ 79.8$ (14.5 ) (18.2 )% Operating Loss $ (51.0 ) $ (25.2 )$ (25.8 ) 102.4 % Operating Loss as a % of Segment Revenue (78.1 )% (31.6 )% Medical Aesthetics revenue decreased in the current quarter compared to the corresponding period in the prior year primarily due to the fluctuations in product revenue discussed above. The operating loss for this business segment increased in the current quarter compared to the corresponding period in the prior year primarily due to an impairment charge of$30.2 million described above and the reduction in revenues and associated gross profit. In the current quarter we also incurred expenses related to the project to dispose of the Medical Aesthetics business. The lower gross profit and the disposition expenses (exclusive of the impairment charge) were largely offset by lower sales expense primarily due to lower commissions and lower intangible asset amortization expense.Skeletal Health Three Months Ended December 28, December 29, 2019 2018 Change Amount Amount Amount % Total Revenues $ 23.5 $ 21.2$ 2.3 10.9 % Operating Income (Loss) $ 0.9 $ (2.4 )$ 3.3 ** Operating Income (Loss) as a % of Segment Revenue 3.8 % (11.3 )% ** Percentage not meaningfulSkeletal Health revenues increased in the current quarter compared to the corresponding periods in the prior year primarily due to the fluctuations in product revenues discussed above. This business segment had operating income in the current quarter compared to operating loss in the corresponding period in the prior year primarily due to increased gross profit driven by higher product revenue, higher gross margin and a decrease in operating expenses. The overall gross margin was 42.0% compared to 38.2% in the corresponding period in the prior year. The increase in gross margin was primarily due to increased sales volume of our Horizon DXA systems. Operating expenses decreased in the current quarter compared to the corresponding period in the prior year primarily due to a decrease in corporate allocations. Partially offsetting the decrease was an increase in consulting fees. LIQUIDITY AND CAPITAL RESOURCES AtDecember 28, 2019 , our cash and cash equivalents totaled$381.5 million , which included$10.7 million of cash classified as assets held-for-sale. Including cash classified as assets held-for-sale, our cash and cash equivalents balance decreased by$220.3 million during the first three months of fiscal 2020 primarily due to cash used in financing and investing activities related to repurchases of common stock and capital expenditures, partially offset by cash generated from operating activities. 44 -------------------------------------------------------------------------------- In the first three months of fiscal 2020, our operating activities provided cash of$113.9 million , primarily due to net income of$385.8 million , non-cash charges for depreciation and amortization aggregating$94.4 million , the Medical Aesthetics non-cash intangible asset impairment charge of$30.2 million and stock-based compensation expense of$18.1 million . These adjustments to net income were partially offset by a decrease in net deferred tax liabilities of$327.9 million primarily due to the recognition of the outside basis difference related to the sale of the Medical Aesthetics business. Cash provided by operations was negatively impacted by a net cash outflow of$87.2 million from changes in our operating assets and liabilities. The net cash outflow was driven primarily by a decrease in accounts payable of$55.4 million due to timing of payments, a decrease in accrued expenses of$22.6 million primarily due to annual bonus payments and commission payments, a decrease in deferred revenue of$10.3 million , and an increase in inventory of$14.9 million to meet anticipated demand. These outflows were partially offset by a decrease in accounts receivable of$17.6 million as a result of lower revenues in the first quarter of fiscal 2020 compared to the fourth quarter of fiscal 2019 while days sales outstanding remained consistent. In the first three months of fiscal 2020, our investing activities used cash of$45.7 million primarily related to capital expenditures of$31.6 million , which primarily consisted of the placement of equipment under customer usage agreements and purchases of manufacturing equipment and computer hardware and software, and net cash payments of$11.8 million related to the SSI acquisition. In the first three months of fiscal 2020, our financing activities used cash of$289.9 million primarily related to executing an accelerated share repurchase agreement for$205.0 million to repurchases of our common stock,$80.9 million for repurchases of our common stock on the open market, payments of$16.6 million for holdback payments related to the Faxitron and Focal acquisitions, and$10.9 million for employee-related taxes withheld for the net share settlement of vested restricted stock units. Partially offsetting these uses of cash were proceeds of$18.7 million from our equity plans and$16.0 million borrowed under our securitization program Debt We had total recorded debt outstanding of$3.07 billion atDecember 28, 2019 , which was comprised of amounts outstanding under our 2018 Credit Agreement of$1.48 billion (principal of$1.49 billion ), 2025 Senior Notes of$937.8 million (principal of$950.0 million ), 2028 Senior Notes of$394.1 million (principal of$400.0 million ), amounts outstanding under the accounts receivable securitization program of$250.0 million , and debt of$8.6 million assumed from SSI. 2018 Credit Agreement OnDecember 17, 2018 , we refinanced our term loan and revolving credit facility by entering into an Amended and Restated Credit and Guaranty Agreement as ofDecember 17, 2018 (the "2018 Credit Agreement") withBank of America, N.A . in its capacity as Administrative Agent, SwingLine Lender and L/C Issuer, and certain other lenders. The 2018 Credit Agreement amended and restated the Company's prior credit and guaranty agreement, amended and restated as ofOctober 3, 2017 ("2017 Credit Agreement").
The credit facilities under the 2018 Credit Agreement consisted of:
• A$1.5 billion secured term loan ("2018 Amended Term Loan") with a maturity date ofDecember 17, 2023 ; and • A secured revolving credit facility (the "2018 Amended Revolver") under which the Company may borrow up to$1.5 billion , subject to certain sublimits, with a maturity date ofDecember 17, 2023 . The borrowings of the 2018 Amended Term Loan bear interest at an annual rate equal to the Eurocurrency Rate (i.e., the LIBOR rate) plus an Applicable Rate, which was equal to 1.250% as ofDecember 28, 2019 . The borrowings of the 2018 Amended Revolver bear interest at a rate equal to the LIBOR Daily Floating Rate plus an Applicable Rate, which was equal to 1.250% as ofDecember 28, 2019 . As ofDecember 28, 2019 , we had no amounts outstanding under our 2018 Amendment Revolver and the interest rate under our 2018 Amended Term Loan was 3.04%. We are required to make scheduled principal payments under the 2018 Amended Term Loan in increasing amounts ranging from$9.375 million per three-month period commencing with the three-month period ending onDecember 27, 2019 to$28.125 million per three-month period commencing with the three-month period ending onDecember 29, 2022 and ending onSeptember 29, 2023 . The remaining balance of the 2018 Amended Term Loan after the scheduled principal payments, which is$1.2 billion as ofSeptember 28, 2019 , and any amounts outstanding under the 2018 Amended Revolver are due at maturity. In addition, subject to the terms and conditions set forth in the 2018 Credit Agreement, we may be required to make certain mandatory prepayments from the net proceeds of specified types of asset sales (subject to certain reinvestment rights), debt issuances and insurance recoveries (subject to certain reinvestment rights). These mandatory prepayments are required to be applied by us, first, to the 2018 Amended Term Loan, second, to any outstanding amount under any Swing Line Loans, third, to 45 -------------------------------------------------------------------------------- the 2018 Amended Revolver, fourth to prepay any outstanding reimbursement obligations with respect to Letters of Credit and fifth, to cash collateralize any Letters of Credit. Subject to certain limitations, the Company may voluntarily prepay any of the 2018 Credit Facilities without premium or penalty. Borrowings are secured by first-priority liens on, and a first-priority security interest in, substantially all of the assets of the Company and itsU.S. subsidiaries, with certain exceptions. For example, borrowings under the 2018 Credit Agreement are not secured by those accounts receivable that are transferred to the special purpose entity under the Company's Accounts Receivable Securitization program (discussed below). The 2018 Credit Agreement contains affirmative and negative covenants customarily applicable to senior secured credit facilities, including covenants restricting our ability, subject to negotiated exceptions, to incur additional indebtedness and grant additional liens on its assets, engage in mergers or acquisitions or dispose of assets, enter into sale-leaseback transactions, pay dividends or make other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments, and change the nature of their businesses. In addition, the 2018 Credit Agreement requires us to maintain certain financial ratios. The 2018 Credit Agreement also contains customary representations and warranties and events of default, including payment defaults, breach of representations and warranties, covenant defaults, cross defaults and an event of default upon a change of control of the company. The 2018 Credit Agreement contains two financial covenants (a total net leverage ratio and an interest coverage ratio) measured as of the last day of each fiscal quarter. As ofDecember 28, 2019 , we were in compliance with these covenants.
2025 Senior Notes
The total aggregate principal balance of 2025 Senior Notes is$950.0 million . The 2025 Senior Notes are general senior unsecured obligations of the Company and are guaranteed on a senior unsecured basis by certain of the Company's domestic subsidiaries. The 2025 Senior Notes were issued pursuant to an indenture, dated as ofOctober 10, 2017 and a supplement to such indenture, dated as ofJanuary 19, 2018 , each among the Company, the guarantors andWells Fargo Bank, National Association , as trustee. The 2025 Senior Notes mature onOctober 15, 2025 and bear interest at the rate of 4.375% per year, payable semi-annually onApril 15 andOctober 15 of each year, commencing onApril 15, 2018 . We may redeem the 2025 Senior Notes at any time prior toOctober 15, 2020 at a price equal to 100% of the aggregate principal amount so redeemed, plus accrued and unpaid interest, if any, to the redemption date and a make-whole premium set forth in the Indenture. We may also redeem up to 35% of the aggregate principal amount of the 2025 Senior Notes with the net cash proceeds of certain equity offerings at any time and from time to time beforeOctober 15, 2020 , at a redemption price equal to 104.375% of the aggregate principal amount so redeemed, plus accrued and unpaid interest, if any, to the redemption date. We also have the option to redeem the 2025 Senior Notes on or after:October 15, 2020 throughOctober 14, 2021 at 102.188% of par;October 15, 2021 throughOctober 14, 2022 at 101.094% of par; andOctober 15, 2022 and thereafter at 100% of par. In addition, if there is a change of control coupled with a decline in ratings, as provided in the indenture, we will be required to make an offer to purchase each holder's 2025 Senior Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the repurchase date. 2028 Senior Notes The total aggregate principal balance of the 2028 Senior Notes is$400.0 million . The 2028 Senior Notes are general senior unsecured obligations of the Company and are guaranteed on a senior unsecured basis by certain of the Company's domestic subsidiaries. The 2028 Senior Notes were issued pursuant to an indenture, dated as ofJanuary 19, 2018 , among the Company, the guarantors andWells Fargo Bank, National Association , as trustee. The 2028 Senior Notes mature onFebruary 1, 2028 and bear interest at the rate of 4.625% per year, payable semi-annually onFebruary 1 andAugust 1 of each year, commencing onAugust 1, 2018 . We may redeem the 2028 Senior Notes at any time prior toFebruary 1, 2023 at a price equal to 100% of the aggregate principal amount so redeemed, plus accrued and unpaid interest, if any, to the redemption date and a make-whole premium set forth in the indenture. We may also redeem up to 35% of the aggregate principal amount of the 2028 Senior Notes with the net cash proceeds of certain equity offerings at any time and from time to time beforeFebruary 1, 2021 , at a redemption price equal to 104.625% of the aggregate principal amount so redeemed, plus accrued and unpaid interest, if any, to the redemption date. We also have the option to redeem the 2028 Senior Notes on or after:February 1, 2023 throughFebruary 1, 2024 at 102.312% of par;February 1, 2024 throughFebruary 1, 2025 at 101.541% of par;February 1, 2025 throughFebruary 1, 2026 at 100.770% of par; andFebruary 1, 2026 and thereafter at 100% of par. In addition, if there is a change of control coupled with a decline in ratings, as provided in the indenture, we will be required to make an offer to purchase each holder's 2028 Senior Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the repurchase date. 46 --------------------------------------------------------------------------------
Accounts Receivable Securitization Program
OnApril 25, 2016 , we entered into a one-year$200.0 million accounts receivable securitization program (the "Securitization Program") with several of our wholly owned subsidiaries and certain financial institutions. The Securitization Program provides for annual renewals. Under the terms of the Securitization Program, we and certain of our wholly-owned subsidiaries sell our customer receivables to a bankruptcy remote special purpose entity, which is wholly-owned by us. The special purpose entity, as borrower, and we, as servicer, have entered into a Credit and Security Agreement with several lenders pursuant to which the special purpose entity may borrow from the lenders up to the maximum borrowing amount allowed, with the loans secured by the receivables. The amount that the special purpose entity may borrow at a given point in time is determined based on the amount of qualifying receivables that are present in the special purpose entity at such point in time. The assets of the special purpose entity secure the amounts borrowed and cannot be used to pay our other debts or liabilities.
Effective
The Credit and Security Agreement contains customary representations and warranties and events of default, including payment defaults, breach of representations and warranties, covenant defaults, and an event of default upon a change of control. As ofDecember 28, 2019 , we were in compliance with these covenants. Stock Repurchase Program OnJune 13, 2018 , the Board of Directors authorized a share repurchase plan to repurchase up to$500.0 million of our outstanding common stock. This share repurchase plan was effectiveAugust 1, 2018 and expires onMarch 27, 2020 . Under this authorization, during the first quarter of fiscal 2020, we repurchased 1.5 million shares of our common stock for a total consideration of$80.9 million . As ofDecember 28, 2019 ,$130.6 million was available under this authorization. Subsequent toDecember 28, 2019 , we repurchased 0.9 million shares of our common stock for a total consideration of$50.0 million . OnNovember 19, 2019 , the Board of Directors authorized the repurchase of up to$205 million of our outstanding shares pursuant to an accelerated share repurchase ("ASR") agreement. OnNovember 22, 2019 , we executed the ASR agreement withGoldman Sachs & Co. ("Goldman Sachs") pursuant to which we will repurchase$205 million of our common stock. The initial delivery, of approximately 80% of the shares under the ASR, was 3.3 million shares for which we initially allocated$164.0 million of the$205 million paid to Goldman Sachs. The number of shares of our common stock that we may receive, or may be required to remit, upon final settlement under the agreement will be based upon the average daily volume weighted-average price of our common stock during the term of the program, less a negotiated discount. Final settlement of the transaction under the ASR is expected to occur in the second quarter of fiscal 2020. If we are obligated to make an adjustment payment to Goldman Sachs under the ASR, we are able to satisfy such obligation in shares of our common stock or cash. We evaluated the nature of the forward contract aspect of the ASR under ASC 815 and concluded equity classification was appropriate. OnNovember 19, 2019 , the Board of Directors also authorized a new share repurchase plan to repurchase up to$500.0 million of our outstanding common stock, effective at the beginning of the third quarter of fiscal 2020. Legal Contingencies We are currently involved in several legal proceedings and claims. In connection with these legal proceedings and claims, management periodically reviews estimates of potential costs to be incurred by us in connection with the adjudication or settlement, if any, of these proceedings. These estimates are developed, as applicable in consultation with outside counsel, and are based on an analysis of potential litigation outcomes and settlement strategies. In accordance with ASC 450, Contingencies, loss contingencies are accrued if, in the opinion of management, an adverse outcome is probable and such financial outcome can be reasonably estimated. It is possible that future results for any particular quarter or annual period may be materially affected by changes in our assumptions or the effectiveness of our strategies relating to these proceedings. Information with respect to this disclosure may be found in Note 9 to the Consolidated Financial Statements in this Quarterly Report on Form 10-Q, which information is incorporated herein by reference.
Future Liquidity Considerations
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We expect to continue to review and evaluate potential strategic transactions and alliances that we believe will complement our current or future business. Subject to the "Risk Factors" set forth in Part II, Item 1A of this Quarterly Report, if any, as well as those described in our Annual Report on Form 10-K for the fiscal year endedSeptember 28, 2019 or any other of our subsequently filed reports, and the general disclaimers set forth in our Special Note Regarding Forward-Looking Statements at the outset of this MD&A, we believe that our cash and cash equivalents, cash flows from operations, the cash available under our 2018 Amended Revolver and our Securitization Program will provide us with sufficient funds in order to fund our expected normal operations and debt payments over the next twelve months. Our longer-term liquidity is contingent upon future operating performance. We may also require additional capital in the future to fund capital expenditures, repayment of debt, acquisitions, strategic transactions or other investments. As described above, we have significant indebtedness outstanding under our 2018 Credit Agreement, 2025 Senior Notes, 2028 Senior Notes and the Securitization Program. These capital requirements could be substantial. For a description of risks to our operating performance and our indebtedness, see "Risk Factors" in Part I, Item 1A in our Annual Report on Form 10-K for the fiscal year endedSeptember 28, 2019 . CRITICAL ACCOUNTING POLICIES AND ESTIMATES The discussion and analysis of our financial condition and results of operations are based upon our interim consolidated financial statements, which have been prepared in accordance withU.S. generally accepted accounting principles ("GAAP"). The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to revenue recognition for multiple element arrangements, allowance for doubtful accounts, reserves for excess and obsolete inventories, valuations, purchase price allocations and contingent consideration related to business combinations, expected future cash flows including growth rates, discount rates, terminal values and other assumptions used to evaluate the recoverability of long-lived assets and goodwill, estimated fair values of intangible assets and goodwill, amortization methods and periods, warranty reserves, certain accrued expenses, restructuring and other related charges, stock-based compensation, contingent liabilities, tax reserves and recoverability of our net deferred tax assets and related valuation allowances. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates if past experience or other assumptions do not turn out to be substantially accurate. Any differences may have a material impact on our financial condition and results of operations. For a discussion of how these and other factors may affect our business, see the "Cautionary Statement" above and "Risk Factors" set forth in Part II, Item 1A of this Quarterly Report as well as those described in our Annual Report on Form 10-K for the fiscal year endedSeptember 28, 2019 or any other of our subsequently filed reports. The critical accounting estimates that we believe affect our more significant judgments and estimates used in the preparation of our consolidated financial statements presented in this report are described in Management's Discussion and Analysis of Financial Condition and Results of Operations and in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year endedSeptember 28, 2019 . There have been no material changes to our critical accounting policies or estimates from those set forth in our Annual Report on Form 10-K for the fiscal year endedSeptember 28, 2019 .
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