CAUTIONARY STATEMENT Some of the statements contained in this report and documents incorporated by reference herein 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, as amended (the "Exchange Act"). 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 ongoing and possible future effects of the global COVID-19 pandemic and associated economic disruptions on our business, financial condition, results of operations and cash flows and our ability to draw down our revolver; •the ongoing and possible future effects of the global COVID-19 pandemic on our customers and suppliers; •continued demand for our COVID-19 assays; •the timing, scope and effect of furtherU.S. and international governmental, regulatory, fiscal, monetary and public health responses to the COVID-19 pandemic; •our ability to manufacture, on a scale necessary to meet demand, our COVID-19 assays as well as the systems on which the assays run; •our ability to predict accurately the demand for our products, and products under development and to develop strategies to address markets successfully; •the effect of the continuing worldwide macroeconomic uncertainty, including theUK's decision to leave theEuropean Union (known as Brexit), on our business and results of operations; •the impact and anticipated benefits of completed acquisitions, and acquisitions we may complete in the future •the effect of the current trade war between theU.S. and other nations, most notablyChina , and the impending impact of tariffs on the sale of our 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 and acquisitions we may complete in the future; •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 and maintain engagement and efficiency in remote work environments; •our ability to obtain regulatory approvals and clearances for our products, including the implementation of the new European Union Medical Device Regulations, and maintain compliance with complex and evolving 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; •the possibility of interruptions or delays at our manufacturing facilities, or the failure to secure alternative suppliers if any of our sole source third-party manufacturers fail to supply us; •our ability to meet production and delivery schedules for our products; •our ability to protect our intellectual property rights; •the possibility that products may contain undetected errors or defects or otherwise not perform as anticipated; •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; •conducting business internationally; •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; 35 -------------------------------------------------------------------------------- Table of Contents •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 2023; 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," "intends," "anticipates," "believes," "estimates," "projects," "predicts," "likely," "future," "strategy." "potential," "seeks," "goal" 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, as well as those described in our Annual Report on Form 10-K for the fiscal year endedSeptember 26, 2020 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, and surgical products focused on women's health and well-being through early detection and treatment. 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 operate in four segments: Diagnostics,Breast Health ,GYN Surgical and Skeletal Health . UntilDecember 30, 2019 , our product portfolio included aesthetic and medical treatments systems sold by our former Medical Aesthetic business. We completed the sale of our Medical Aesthetics segment onDecember 30, 2019 (the first day of the second quarter of fiscal 2020). Through our Diagnostics segment, we offer a wide range of diagnostics products, which are used primarily to aid in the screening and diagnosis of human diseases. Our primary Diagnostics products include our molecular diagnostic assays, which run on our advanced instrumentation systems (Panther, Panther Fusion and Tigris), our ThinPrep cytology system, and the Rapid Fetal Fibronectin Test. OurAptima 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, or CTGC, certain high-risk strains of human papillomavirus, or HPV, and Trichomonas vaginalis, the parasite that causes trichomoniasis. In addition, in 2017 and 2018 we introduced theAptima quantitative viral load tests for HIV, Hepatitis C and Hepatitis B. Our assay portfolio also includes diagnostic tests for a range of acute respiratory infections, including SARS-CoV-2, as well as a test for the detection of Group B Streptococcus, or GBS, that are run on the Panther Fusion system, a field upgradeable instrument addition to the base Panther system. In 2020, in response to the COVID-19 global pandemic, we developed and launched the Aptima SARS-CoV-2 assay (which runs on our standard Panther system) and the Panther Fusion SARS-CoV-2 assay (which runs on our Panther Fusion system). The Panther Fusion SARS-CoV-2 assay and the Aptima SARS-CoV-2 assay were launched at the end of our second quarter and in the third quarter of fiscal 2020, respectively. 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 segment offers 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 digital 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 and breast conserving surgery products. Our most advanced breast imaging platforms, Selenia Dimensions and 3Dimensions, utilize 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. With the acquisition of SuperSonic Imagine in the first quarter of fiscal 2020, we now offer premium ultrasound imaging, further connecting Hologic capabilities across the continuum of breast care from screening to diagnosis and treatment. 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 36 -------------------------------------------------------------------------------- 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. 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. Unless the context otherwise requires, references to we, us, Hologic or our company refer toHologic, Inc. and its consolidated subsidiaries. COVID-19 Considerations The global COVID-19 pandemic has created significant volatility, uncertainty, and economic disruption in the markets we sell our products into, primarily theU.S. ,Europe andAsia-Pacific . Starting in the second quarter of fiscal 2020, the spread of COVID-19 negatively impacted business and healthcare activity globally. In particular, due to government measures, elective procedures and exams were delayed or cancelled, there were significant reductions in physician office visits, and hospitals postponed or canceled capital purchases as well as limited or eliminated services; however, in the second half of the third quarter of fiscal 2020, we started to see a recovery of elective procedures and exams as economies were opened back up and restrictions eased, which has continued through the third quarter of fiscal 2021. The reductions in testing and procedures had a negative impact on our operating results and cash flows in fiscal 2020, however, the impact of the commercial release of our COVID-19 assays more than offset those negative impacts as we generated significant revenue from the sales of these assays starting in the third quarter of fiscal 2020 through the third quarter of fiscal 2021. While our results of operations and cash flows since the third quarter of fiscal 2020 have been positively impacted by the sale of our COVID-19 assays as well the continued recovery of our other primary product lines and businesses to pre-COVID levels, the COVID-19 pandemic could have an adverse impact on our operating results, cash flows and financial condition in the future. The factors that could create such adverse impact include: continued demand for COVID-19 testing; competition from existing and new COVID-19 testing technologies and products as well as the timing and effectiveness of distributing vaccines; the severity and duration of the COVID-19 pandemic; the resurgence of COVID-19 infections; the emergence of new COVID strain variants; the COVID-19 pandemic's impact on theU.S. and international healthcare systems, theU.S. economy and worldwide economy; and the timing, scope and effectiveness ofU.S. and international governmental, regulatory, fiscal, monetary and public health responses to the COVID-19 pandemic and associated economic disruptions. We expect that as the current COVID-19 pandemic subsides, there may be a significantly reduced demand for ongoing testing, and thus, for our COVID-19 assays. As expected in the third quarter of fiscal 2021, revenues generated from the sale of our COVID-19 assays decreased significantly in theU.S. compared to the prior year period and the first and second quarters of fiscal 2021 as the population of vaccinated people continues to grow in theU.S. We expect this trend to continue in the fourth quarter of fiscal 2021. In response to the negative impact of COVID-19 on our business, inApril 2020 , we initiated cost-cutting measures, which included not only reducing discretionary and variable spend, such as travel, marketing programs and the use of contractors, consultants and temporary help, but we also implemented employee furloughs, salary cuts primarily in theU.S. , reduced hours and in certain instances, employee terminations. Further inApril 2020 , we shut down certain manufacturing facilities temporarily and implemented reduced work-week schedules in response to lower near-term demand for many of our products. As of the end of the third quarter of fiscal 2020, substantially all of the Company's employee cost-cutting measures ceased, and the majority of the impacted manufacturing facilities were back to pre-COVID-19 pandemic levels. We have also taken and continue to take measures to ensure the safety of our employees and to comply with governmental orders. These measures could require that our employees continue to work remotely or otherwise refrain from reporting to their normal workplace for extended periods of time, which in turn could result in a decrease in our commercial and marketing activities. 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: 3Dimensions, 3D Mammography, Acessa,Acessa Health , Acessa ProVu, Affirm, Affirm Prone, Amplidiag, Alpha Imaging,Aptima ,Biotheranostics , Brevera, Clarity HD, Diagenode, Fluent, Fluoroscan, Genius 3D, Genius 3D Mammography, Health Beacons, Hologic, Horizon DXA, Insight, Intelligent 2D, LOCalizer, Mobidiag, MyoSure, Novodiag, NovaSure, NXC Imaging, Panther, 37 -------------------------------------------------------------------------------- Panther Fusion, Rapid fFN, Selenia, Selenia Dimensions, SmartCurve, Somatex, SuperSonic Imagine, ThinPrep, Tigris, and Tumark. All other brand names or trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners. Hologic's use or display of other parties' trademarks, trade dress or products in this offering circular does not imply that Hologic has a relationship with, or endorsement or sponsorship of, the trademark or trade dress owners. ACQUISITIONS The following sets forth descriptions of acquisitions and dispositions we have completed in fiscal 2021 and 2020. Mobidiag OnJune 17, 2021 , we completed the acquisition ofMobidiag Oy , or Mobidiag, for a purchase price of$729.6 million . Mobidiag, located inFinland , manufactures molecular diagnostic solutions for gastrointestinal infections, antimicrobial resistance management and other infections. This acquisition expands our molecular diagnostics portfolio into the near-patient testing market. Mobidiag's results of operations are reported in the our Diagnostics segment.Biotheranostics OnFebruary 22, 2021 , we completed the acquisition ofBiotheranostics, Inc. , orBiotheranostics , for a purchase price of$231.3 million .Biotheranostics , located inSan Diego, California , manufactures molecular diagnostic tests for breast and metastatic cancers and performs lab testing procedures at its facility.Biotheranostics' results of operations are included in our Diagnostics segment and its revenues are reported within Service and other revenue in our Consolidated Statements of Income. Diagenode OnMarch 1, 2021 , we completed the acquisition ofDiagenode SA , or Diagenode, for a purchase price of$155.1 million . Diagenode, located inBelgium , is a developer and manufacturer of molecular diagnostic assays based on PCR technology to detect infectious diseases of bacterial, viral or parasite origin. Diagenode's results of operations are included in our Diagnostics segment. Somatex Medical Technologies OnDecember 30, 2020 , we completed the acquisition ofSomatex Medical Technologies GmbH , or Somatex, for a purchase price of$62.9 million . Somatex, located inGermany , is a manufacturer of biopsy site markers, including the Tumark product line of tissue markers, which we distributed in theU.S. prior to the acquisition. Somatex's results of operations are included in ourBreast Health segment.
NXC Imaging
OnSeptember 28, 2020 , we completed the acquisition of assets from NXC Imaging, for a purchase price of$5.6 million . NXC Imaging was a long-standing distributor of our Breast and Skeletal products in theU.S. NXC's results of operations are included in ourBreast Health and Skeletal segment, as applicable to their operations.Acessa Health OnAugust 23, 2020 , we completed the acquisition ofAcessa Health, Inc. , or Acessa, for a purchase price of$161.3 million , which included contingent consideration and was estimated at$81.8 million as of the measurement date. Acessa, located inAustin, Texas , manufactures and markets the Acessa ProVu system, a laparoscopic radio frequency ablation system for use in treatment of uterine fibroids. Acessa's results of operations are included in our GYN Surgical segment. The contingent consideration is based on annual incremental revenue growth over a three-year period ending annually in December. The contingent consideration is payable after each annual measurement period. We remeasure the contingent consideration liability on a quarterly basis, and for the nine months ended we recorded a gain of$10.1 million to decrease the liability to its fair value. The reduction in fair value was primarily due to a decrease in forecasted revenues over the measurement period.
Health Beacons
38 -------------------------------------------------------------------------------- OnFebruary 3, 2020 , we completed the acquisition ofHealth Beacons, Inc. , or Health Beacons, for a purchase price of$19.7 million . Health Beacons manufactures the LOCalizer product and its results of operations are included in ourBreast Health segment. Alpha Imaging OnDecember 30, 2019 , we completed the acquisition of assets fromAlpha Imaging, LLC , or Alpha Imaging, for a purchase price of$18.0 million . Alpha Imaging was a long-standing distributor of ourBreast and Skeletal Health products in theU.S. Alpha Imaging's result of operations are included in ourBreast Health and Skeletal segment, as applicable to their operations.
SuperSonic Imagine
OnAugust 1, 2019 , we acquired approximately 46% of the outstanding shares ofSuperSonic Imagine S.A. , or SSI, which is headquartered inFrance . SSI specializes in ultrasound imaging and designs, and develops and markets an ultrasound platform used in the non-invasive care path for the characterization of breast, liver and 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 within ourBreast Health segment. 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 recorded in Other income (expense), net in the first quarter of fiscal 2020. During the third quarter of fiscal 2021, we acquired the remaining 4.8 million shares outstanding of SSI for$8.5 million . As ofJune 26, 2021 , we owned 100% of SSI. Accordingly we have recorded an adjustment to our net income for the non-controlling interest we did not own of$0.3 million and$1.8 million for the three and nine months endedJune 26, 2021 , respectively, and$1.5 million and$3.4 million for the three and nine months endedJune 27, 2020 , respectively.
Disposition
OnDecember 30, 2019 , we completed the sale of our Medical Aesthetics business. At the closing, we received cash proceeds of$153.4 million . The sales price was finalized in the fourth quarter of fiscal 2020, and we repaid$3.4 million , resulting in a final sales price of$150.0 million . As a result of the sale, we recorded a$30.2 million impairment charge in the first quarter of fiscal 2020 to record the asset group at fair value less costs to dispose as it met the assets held-for-sale criteria. For additional information, see Note 6 to our consolidated financial statements included herein. Following the sale of our Medical Aesthetics business, we have not generated any further product revenue related to this business, although additional expenses will be incurred primarily in connection with the indemnification of legal and tax matters that existed as of the date of disposition. In addition, we agreed to provide transition services for a period of up to 15 months, which ended inMarch 2021 . RESULTS OF OPERATIONS All dollar amounts in tables are presented in millions. 39 --------------------------------------------------------------------------------
Table of Contents Product Revenues Three Months Ended Nine Months Ended June 26, 2021 June 27, 2020 Change June 26, 2021 June 27, 2020 Change % of % of % of % of Total Total Total Total Amount Revenue Amount Revenue Amount % Amount Revenue Amount Revenue Amount % Product Revenues Diagnostics$ 637.3 54.6 %$ 528.7 64.2 %$ 108.6 20.5 %$ 2,793.9 64.7 %$ 1,149.5 47.3 %$ 1,644.4 143.1 %Breast Health 211.7 18.1 % 111.6 13.6 % 100.1 89.8 % 617.7 14.3 % 506.8 20.9 % 110.9 21.9 % GYN Surgical 127.4 10.9 % 51.3 6.2 % 76.1 148.3 % 365.2 8.5 % 275.0 11.3 % 90.2 32.8 %Skeletal Health 18.8 1.6 % 10.0 1.2 % 8.8 88.0 % 52.6 1.2 % 43.5 1.8 % 9.1 20.9 % Medical Aesthetics - - % - - % - - % - - % 49.7 2.0 % (49.7) (100.0) %$ 995.2 85.2 %$ 701.6 85.3 %$ 293.6 41.8 %$ 3,829.4 88.7 %$ 2,024.5 83.3 %$ 1,804.9 89.2 % We generated an increase in product revenues in both the current three and nine month periods of 41.8% and 89.2%, respectively, compared to the corresponding periods in the prior year primarily due to the significant increase in revenues in the Diagnostics business, which for the current nine month period was principally from sales of our two COVID-19 assays, one of which was launched near the end of the second quarter of fiscal 2020 and the other in the third quarter of fiscal 2020. Excluding sales of our COVID-19 assays, product revenues in the prior year periods were adversely impacted by the COVID-19 pandemic, and product revenues in the current year periods have increased across our divisions. We primarily attribute this increase to recovery of elective procedures and exams as economies were opened back up and restrictions eased. In the current three month period, the increases in product revenues were partially offset by a reduction in sales of our COVID-19 assays. We attribute this decrease primarily to reduced testing resulting from the extensive distribution of vaccines in theU.S. The increase in product revenues in the current nine month period compared to the corresponding prior year period was partially offset by no revenues from the Medical Aesthetics business in the current fiscal year as we disposed of this business segment onDecember 30, 2019 , the beginning of our second quarter of fiscal 2020. Diagnostics product revenues increased$108.6 million and$1,644.4 million , or 20.5% and 143.1%, respectively, in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to increases inMolecular Diagnostics of$52.2 million and$1,585.9 million , respectively, and increases in Cytology & Perinatal of$51.5 million and$58.4 million , respectively. Blood Screening product revenue increased$4.9 million in the current three month period and was flat in the current nine month period compared to the corresponding periods in the prior year. While we divested our Blood Screening business in the second quarter of fiscal 2017, we continue to provide long-term access to Panther instrumentation and certain supplies to the purchaser of that business.Molecular Diagnostics product revenue was$511.1 million and$2,410.6 million , respectively, in the current three and nine month periods compared to$459.0 million and$824.7 million in the corresponding periods in the prior year. The increase in the current three month period compared to the corresponding period in the prior year was primarily attributable to sales of ourAptima assays (exclusive of our Aptima SARS-CoV-2 assay), which primarily consist of our CTGC, HPV and Trichomonas vaginalis assays, on a worldwide basis, as well as an increase in collection kits due to a return to pre-COVID testing levels and the prior year periods sales were adversely impacted due to the COVID-19 pandemic and related lockdowns across the globe. These increases were partially offset by a decrease in revenue from our two SARS-CoV-2 assays in theU.S. in the current quarter compared to the corresponding period in the prior year as volumes declined and to a lesser extent average sales prices declined, as well as lower sales of Panther instruments. Sales of our COVID-19 assays declined to$291.2 million in the current three month period compared to$324.0 million in the corresponding period in the prior year. We primarily attribute this decline to lower COVID-19 testing in theU.S. resulting from the continued distribution of vaccines and higher inventory levels at our laboratory customers. This decline was partially offset by increased international revenues, as the distribution of vaccines has been slower outside of theU.S. The increase in the current nine month period compared to the corresponding period in the prior year was primarily attributable to sales of our COVID-19 assays, which increased to$1,716.2 million in the current nine month period compared to$328.1 million in the corresponding period in the prior year, an increase in ourAptima assays, an increase in collection kits and Panther and Panther Fusion instrument sales primarily due to demand for increased testing capacity for COVID-19. However, we do expect that sales of our COVID-19 assays will continue to decline, primarily in theU.S. in the fourth quarter of fiscal 2021 compared to the current quarter due to the continued distribution of vaccines and higher inventory levels at our laboratory customers. Cytology & Perinatal product revenue increased in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to higher ThinPrep test volumes in theU.S. andAsia-Pacific , which we primarily attribute to the recovery of wellness office visits that had previously been delayed or cancelled in response to the COVID-19 pandemic, and the prior year periods sales were adversely impacted due to the COVID-19 pandemic and related 40 -------------------------------------------------------------------------------- Table of Contents lockdowns across the globe, partially offset by lower average selling prices and lower Perinatal product volumes. The inclusion of Diagenode contributed$10.1 million and$13.6 million of product revenue in the current three and nine month periods, respectively. We also experienced an increase in revenue from the favorable foreign currency exchange impact of the weakenedU.S. dollar against a number of currencies in both the current three and nine month periods.Breast Health product revenues increased$100.1 million and$110.9 million , or 89.8% and 21.9%, respectively, in the current three and nine month periods compared to the corresponding periods in the prior year as product revenues in the prior year periods were adversely impacted by the COVID-19 pandemic and related lockdowns across the globe. These increases were primarily due to an increase in sales volume of our digital mammography systems and related workflow products (primarily Intelligent 2D, Clarity HD and SmartCurve), Affirm Prone breast biopsy tables, and our interventional breast solutions products, primarilyEviva , ATEC, and Brevera disposables (relaunched in the fourth quarter of fiscal 2020). In addition, we had higher sales of our breast conserving surgery products and ultrasound imaging products. We primarily attribute the increase in revenues to hospitals and imaging centers purchasing capital equipment to fulfill their budgets and demand has increased in sequential quarters, which we attribute to the recovery of elective procedures and exams as elective procedures and wellness visits have recovered from the initial cancellation and deferrals due to the COVID-19 pandemic in fiscal 2020. We also experienced an increase in revenue from the favorable foreign currency exchange impact of the weakenedU.S. dollar against a number of currencies in both the current three and nine month periods. GYN Surgical product revenues increased$76.1 million and$90.2 million , or 148.3% and 32.8 %, respectively, in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to the GYN Surgical business recovering as a result of the recovery of elective medical visits and procedures that had previously been delayed or cancelled in response to the COVID-19 pandemic and to a lesser extent healthcare providers increasing their inventory levels to ensure there are no supply constraints. These increases were primarily due to increases in the sales volume of MyoSure systems, NovaSure systems, Fluent Fluid Management systems and to a lesser extent sales of ProVu systems, acquired in the Acessa acquisition in the fourth quarter of fiscal 2020. We also experienced an increase in revenue from the favorable foreign currency exchange impact of the weakenedU.S. dollar against a number of currencies.Skeletal Health product revenues increased$8.8 million and$9.1 million , or 88.0% and 20.9%, respectively, in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to an increase in sales volume of both our Insight FD mini C-arm and Horizon DXA systems. We primarily attribute this increase to the increase in wellness visits and healthcare screenings in 2021 as a result of the ongoing recovery from the COVID-19 pandemic. We divested the Medical Aesthetics segment onDecember 30, 2019 , the beginning of our second quarter of fiscal 2020. 41 -------------------------------------------------------------------------------- Table of Contents Product revenues by geography as a percentage of total product revenues were as follows: Three Months Ended Nine Months Ended June 26, 2021 June 27, 2020 June 26,
2021
United States 61.7 % 80.2 % 67.4 % 76.3 % Europe 26.4 % 12.7 % 23.0 % 13.8 % Asia-Pacific 8.1 % 5.1 % 6.3 % 6.4 % Rest of World 3.8 % 2.0 % 3.3 % 3.5 % 100.0 % 100.0 % 100.0 % 100.0 % In the current three and nine month periods compared to the corresponding periods in the prior year, the percentage of product revenue derived from theU.S. decreased whileEurope increased, which we primarily attributed to strong sales of our SARS-CoV-2 assays inEurope and growth in ourAptima assays inEurope as we expanded our customer base and increased sales from the adoption of co-testing for cervical cancer screening inGermany and to a lesser extent in theUK .Asia-Pacific product revenue as a percentage of total product revenue increased in the current three month period compared to the corresponding period in the prior year primarily due to an increase in sales of our SARS-CoV-2 assays in the region, an increase in sales of our mammography systems and growth in ThinPrep andMolecular Diagnostics primarily due to the recovery of wellness office visits that had previously been delayed or cancelled in response to the COVID-19 pandemic. Service and Other Revenues Three Months Ended Nine Months EndedJune 26, 2021 June 27, 2020 ChangeJune 26, 2021 June 27, 2020 Change % of % of % of % of Total Total Total Total Amount Revenue Amount Revenue Amount % Amount Revenue Amount Revenue Amount % Service and Other Revenues$ 173.1 14.8 %$ 121.3 14.7 %$ 51.8 42.7 %$ 486.3 11.3 %$ 405.0 16.7 %$ 81.3 20.1 % 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. The increase in service and other revenue in the current three and nine month periods compared to the corresponding periods in the prior year was primarily due to an increase inBreast Health service contract revenue as theBreast Health business continued to convert a high percentage of our installed base of digital mammography systems to service contracts upon expiration of the warranty period, as well as additions from our distributor acquisitions. We also experienced an increase in spare parts revenue in the current three and nine month periods for services that had previously been delayed or cancelled due to the COVID-19 pandemic. In our Diagnostics business, we had additional royalty revenue in the current three and nine month periods of$9.8 million , and$32.6 million , respectively, from Grifols related to licensing our intellectual property to our COVID-19 assays for their sale inSpain . In addition, the inclusion ofBiotheranostics added$13.2 million and$17.2 million in the current three and nine month periods, respectively. These increases were partially offset by the sale of the Medical Aesthetics business which contributed$15.6 million of revenue in the prior year nine month period. Cost of Product Revenues Three Months Ended Nine Months EndedJune 26, 2021 June 27, 2020 ChangeJune 26, 2021 June 27, 2020 Change % of % of % of % of Product Product Product Product Amount Revenue Amount Revenue Amount % Amount Revenue Amount Revenue Amount % Cost of Product Revenues$ 303.9 30.5 %$ 225.1 32.1 %$ 78.8 35.0 %$ 889.1 23.2 %$ 685.9 33.9 %$ 203.2 29.6 % Amortization of Intangible Assets 68.1 6.8 % 62.9 9.0 % 5.2 8.3 % 194.2 5.1 % 189.4 9.4 % 4.8 2.5 % Impairment of Intangible Assets and Equipment - - % - - % - - % - - % 25.8 1.3 % (25.8) (100.0) %$ 372.0 37.3 %$ 288.0 41.1 %$ 84.0 29.3 %$ 1,083.3 28.3 %$ 901.1 44.5 %$ 182.2 20.2 % 42
-------------------------------------------------------------------------------- Table of Contents Cost of Product Revenues. The cost of product revenues as a percentage of product revenues was 30.5% and 23.2% in the current three and nine month periods, respectively, compared to 32.1% and 33.9% in the corresponding periods in the prior year, respectively. Cost of product revenues as a percentage of revenue decreased in the current three and nine month periods primarily due to sales of our SARS-CoV-2 assays, which have higher gross margins compared to our other diagnostic products, and comprised 29.3% and 44.8% of total product revenue in the current three and nine month periods, respectively, compared to 46.2% and 16.2% in the corresponding periods in the prior year, respectively. Also benefiting gross margin in the current year period was higher sales volumes from our other businesses and product lines as they have continued to recover from the COVID-19 pandemic as economies opened back up and restrictions eased and the disposition of Medical Aesthetics, which had lower gross margins compared to our remaining businesses. Partially offsetting these decreases were higher field service costs for our expanded instrument installed base for the Diagnostics business and higher freight costs. Diagnostics' product costs as a percentage of revenue increased in the current three month period compared to the corresponding period in the prior year primarily due to lower sales of our SARS-CoV-2 assays, an increase in reserves, higher field service costs for our expanded instrument installed base, increased amortization of placed instruments, higher freight charges and a slight decline in average selling prices. These increases were partially offset by increased volumes of ourAptima assays and ThinPrep Pap Test. Diagnostics' product costs as a percentage of revenue decreased in the current nine month period compared to the corresponding period in the prior year primarily due to higher sales of our SARS-CoV-2 assays and higher overall production of ourAptima assays and ThinPrep Pap Test reducing fixed overhead on a unit basis, partially offset by higher field service costs for our expanded instrument installed base, freight charges, inventory reserves and a slight decline in average selling prices.Breast Health's product costs as a percentage of revenue decreased in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to the impact of the COVID-19 pandemic in the prior year periods, which resulted in decreased sales volume across the majority of our product lines, period costs for temporary facility shut-downs and reduced manufacturing utilization and increased inventory reserves. In the current three and nine month periods sales volumes have increased for our higher margin 3Dimensions systems, higher-margin workflow products, consisting of Intelligent 2D, Clarity HD and SmartCurve upgrades, and our breast biopsy and breast conserving surgery disposable products. GYN Surgical's product costs as a percentage of revenue decreased in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to the impact of the COVID-19 pandemic in the prior year periods, which resulted in significant decreases in sales volume of our NovaSure and MyoSure devices, period costs for the temporary shutdown of our manufacturing facility and reduced manufacturing utilization. In the current three and nine month periods, the Surgical business has recovered to which significantly improved margins, partially offset by product mix of higher volumes of lower margin products, including our Fluent Fluid Management systems and ProVu systems, acquired in the Acessa acquisition.Skeletal Health's product costs as a percentage of revenue decreased in the current three and nine month periods compared to the corresponding periods in the prior year due to higher sales volume of both our Insight FD mini C-arm and Horizon DXA systems and higher inventory reserves in the prior year periods. We divested the Medical Aesthetics segment onDecember 30, 2019 , the beginning of our second quarter of fiscal 2020. 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 increased in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to intangible assets acquired in theBiotheranostics , Diagenode, Somatex and Acessa acquisitions, partially offset by lower amortization of intangible assets acquired in theCytyc acquisition which reduces over time. Impairment of Intangible Assets and Equipment. 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$25.8 million was allocated to developed technology assets and written off to cost of revenues. 43 -------------------------------------------------------------------------------- Table of Contents Cost of Service and Other Revenues Three Months Ended Nine Months EndedJune 26, 2021 June 27, 2020 ChangeJune 26, 2021 June 27, 2020 Change % of % of % of % of Service Service Service Service Amount Revenue Amount Revenue Amount % Amount Revenue Amount Revenue Amount % Cost of Service and Other Revenue$ 94.7 54.7 %$ 68.8 56.8 %$ 25.9 37.6 %$ 264.7 54.4 %$ 232.7 57.5 %$ 32.0 13.8 % Service and other revenues gross margin increased to 45.3% and 45.6%, respectively, in the current three and nine month periods compared to 43.2% and 42.5%, respectively, in the corresponding periods in the prior year. The increase in the current year periods was primarily due to additional royalty revenue from Grifols related to licensing our intellectual property related to our COVID-19 assays for their sale inSpain , which has a high margin. In addition, in the current year periods theBreast Health business had an increase in service contract revenue which benefited gross margin as service contract revenue has higher margins compared to revenue from spare parts, installation and training. Operating Expenses Three Months Ended Nine Months EndedJune 26, 2021 June 27, 2020 ChangeJune 26, 2021 June 27, 2020 Change % of % of % of % of Total Total Total Total Amount Revenue
Amount Revenue Amount % Amount Revenue Amount Revenue Amount % Operating Expenses Research and development$ 69.0 5.9 %$ 55.1 6.7 %$ 13.9 25.2 %$ 199.8 4.6 %$ 165.5 6.8 %$ 34.3 20.7 % Selling and marketing 142.7 12.2 % 103.5 12.6 % 39.2 37.9 % 402.2 9.3 % 359.0 14.8 % 43.2 12.0 % General and administrative 117.3 10.0 % 105.3 12.8 % 12.0 11.4 % 297.7 6.9 % 259.9 10.7 % 37.8 14.5 % Amortization of intangible assets 10.4 0.9 % 10.2 1.2 % 0.2 2.0 % 30.7 0.7 % 29.5 1.2 % 1.2 4.1 % Impairment of intangible assets and equipment - - % - - % - - % - - % 4.4 0.2 % (4.4) (100.0) % Contingent consideration - fair value adjustment - - % - - % - - % (10.1) (0.2) % 0.4 - % (10.5) ** Restructuring and Divestiture charges 3.6 0.3 % 1.0 0.1 % 2.6 260.0 % 6.6 0.2 % 4.8 0.2 % 1.8 37.5 %$ 343.0 29.4 %$ 275.1 33.4 %$ 67.9 24.7 %$ 926.9 21.5 %$ 823.5 33.9 %$ 103.4 12.6 % **Percentage not meaningful Research and Development Expenses. Research and development expenses increased 25.2% and 20.7% in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to higher R&D project spend in Diagnostics,Breast Health and Surgical, the inclusion of expenses from the Acessa,Biotheranostics , Diagenode and Somatex acquisitions, higher consulting spending and increased spending to implement the European Medical Device Regulation (MDR) and In Vitro Diagnostic Regulation (IVDR) requirements. In the current nine month period, we recorded a$7.0 million charge related to the purchase of intellectual property inBreast Health . Partially offsetting these increases in the current nine month period was the reduction of expense due to the disposition of the Medical Aesthetics business which contributed$7.3 million of expense in the prior year nine month period. In addition, in the current three and nine month periods we recorded a credit to research and development expenses of$2.4 million and$10.1 million , respectively, from theBiomedical Advanced Research and Development Authority (BARDA) in connection with a grant to expand manufacturing capacity and obtain FDA approval of our SARS-CoV-2 assays compared to a credit of$4.7 million in the prior year three and nine month periods. 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. 44 -------------------------------------------------------------------------------- Table of Contents Selling and Marketing Expenses. Selling and marketing expenses increased 37.9% and 12.0% in the current three and nine months periods, respectively, compared to the corresponding periods in the prior year primarily due to an increase in commissions inBreast Health , Surgical and Diagnostics from higher revenues, an increase in marketing initiatives and consulting spending, and the inclusion of expenses in the aggregate from the Acessa,Biotheranostics , Diagenode and Somatex acquisitions of$12.2 million and$20.9 million in the current three and nine month periods, respectively. Partially offsetting these increases in the current nine month period was the disposition of the Medical Aesthetics business which contributed$23.7 million of expense in the prior year nine month period, lower travel expenses in response to the COVID pandemic and decreases in meeting expenses primarily related to cancelling our national sales meeting and not having an in-person RSNA conference as a result of the COVID pandemic. General and Administrative Expenses. General and administrative expenses increased 11.4% and 14.5% in the current three and nine month periods, respectively, compared to the corresponding periods in the prior year primarily due to the inclusion of expenses from the Acessa,Biotheranostics , Diagenode and Somatex acquisitions, increased acquisition transaction costs including$11.5 million for a transfer tax related to the Mobidiag acquisition, higher litigation and settlement costs, increased consulting spend for corporate initiatives and information system implementation projects, higher salary expenses due to pay reductions and furloughs implemented inApril 2020 due to the COVID pandemic, and lower credits in the current year periods of$5.7 million and$3.5 million , respectively, related to transition services provided to Cynosure, partially offset by lower bonus and stock-based compensation, and lower bad debt expense. In the current three month period, we had lower charitable donations. In the current nine month period, we had higher expense from our deferred compensation plan, partially offset by the disposition of the Medical Aesthetics business, which contributed$5.5 million of expenses in the prior year period, expenses incurred to separate and dispose of that business, and a$3.3 million benefit due to reversal of a tax reserve. 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. Amortization expense was relatively consistent in both periods compared to the prior year periods as we had increases from recent acquisitions offset by assets from older acquisitions becoming fully amortized. Contingent Consideration Fair Value Adjustments. In connection with the acquisition of Acessa, we are obligated to make contingent earn-out payments. The payments are based on achieving incremental revenue growth over a three-year period ending annually in December. As of the acquisition date for Acessa, we recorded a contingent consideration liability for the estimated fair value of the amount we expected to pay to the former shareholders of the acquired business. This liability is not contingent on future employment, and we recorded our estimate of the fair value of the contingent consideration liability utilizing the Monte Carlo simulation based on future revenue projections of Acessa, comparable companies revenue growth rates, implied volatility and applying a risk adjusted discount rate. Increases or decreases in the fair value of contingent consideration liabilities can result from the passage of time, changes in discount rates, and changes in the timing, probabilities and amount of revenue estimates. No adjustment was made to the liability in the current quarter, and for the current nine month period we recorded a gain of$10.1 million to decrease the liability to its fair value. The reduction in fair value was primarily due to a decrease in forecasted revenues over the measurement period. 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 and Divestiture Charges. We have implemented various cost reduction initiatives to align our cost structure with our operations and related integration activities. These actions have primarily resulted in the termination of employees. As a result, we recorded charges of$3.6 million and$6.6 million in the current three and nine month periods, respectively, and$1.0 million and$4.8 million in the corresponding prior year periods, respectively, primarily related to severance benefits. 45 -------------------------------------------------------------------------------- Table of Contents Interest Expense Three Months Ended Nine Months Ended June 26, June 27, June 26, June 27, 2021 2020 Change 2021 2020 Change Amount Amount Amount % Amount Amount Amount %
Interest Expense$ (21.6) $ (27.4) $ 5.8 (21.2) %$ (70.9) $ (91.5) $ 20.6 (22.5) % 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 three and nine month periods decreased primarily due to a decrease in LIBOR year over year, the basis for determining interest expense under our 2018 Credit Agreement, lower interest rates on our Senior Notes due to issuing our 2029 Senior Notes and paying off our 2025 Senior Notes, and the pay-off of amounts outstanding under our accounts receivable asset securitization agreement in the prior year, partially offset by issuance costs expensed from the issuance of the 2029 Senior Notes and higher interest rate swap expenses. Debt Extinguishment Loss Three Months Ended Nine Months Ended June 26, June 27, June 26, June 27, 2021 2020 Change 2021 2020 Change Amount Amount Amount % Amount Amount Amount %
Debt Extinguishment Loss $ - $ - $ -
- %$ (21.6) $ -$ (21.6) 100.0 % In the first quarter of 2021, we completed a private placement of$950 million aggregate principal amount of our 2029 Senior Notes. The proceeds under the 2029 Senior Notes offering, together with available cash, were used to redeem our 2025 Senior Notes in the same principal amount. In connection with this transaction, we recorded a debt extinguishment loss of$21.6 million in the first quarter of fiscal 2021. Other Income (Expense), net Three Months Ended Nine Months Ended June 26, June 27, June 26, June 27, 2021 2020 Change 2021 2020 Change Amount Amount Amount % Amount Amount Amount % Other Income (Expense), net$ 0.1 $ 4.3 $ (4.2) (97.7) %$ 1.1 $ 0.1 $ 1.0 1,000.0 % For the current three month period, this account primarily consisted of a gain of$3.4 million on the cash surrender value of life insurance contracts related to our deferred compensation plan driven by stock market gains, partially offset by net foreign currency exchange losses of$3.9 million , primarily from the mark-to-market of outstanding forward foreign currency exchange and foreign currency option contracts. For the third quarter of fiscal 2020, this account primarily consisted of a gain of$5.8 million on the cash surrender value of life insurance contracts, partially offset by net foreign currency exchange losses of$1.4 million , primarily from the mark-to-market and settling of outstanding forward foreign currency exchange and foreign currency option contracts. For the current nine month period, this account primarily consisted of a gain of$12.2 million on the cash surrender value of life insurance contracts related to our deferred compensation plan, partially offset by net foreign currency exchange losses of$11.4 million , primarily from the mark-to-market and settling of outstanding forward foreign currency exchange and foreign currency option contracts. For the prior year corresponding nine month period, this account primarily consisted of net foreign currency exchange losses of$3.1 million primarily from mark-to-market of outstanding forward foreign currency and foreign currency option exchange contracts, partially offset by a net gain of$3.2 million to reflect an adjustment to remeasure our initial investment in SSI in connection with purchase accounting. 46 -------------------------------------------------------------------------------- Table of Contents Provision (Benefit) for Income Taxes Three Months Ended Nine Months Ended June 26, June 27, June 26, June 27, 2021 2020 Change 2021 2020 Change Amount Amount Amount % Amount Amount Amount % Provision (Benefit) for Income Taxes$ 69.4 $ 32.0 $ 37.4 116.9 %$ 409.6 $ (232.1) $ 641.7 ** **Percentage not meaningful Our effective tax rate for the three and nine months endedJune 26, 2021 was a provision of 20.6% and 21.0%, respectively, compared to a provision of 19.0% and a net benefit of 60.3%, respectively, for the corresponding periods in the prior year. Our effective tax rate for the three months endedJune 26, 2021 was lower than theU.S. statutory tax rate primarily due to the impact of theU.S. deduction for foreign derived intangible income and the geographic mix of income earned by our international subsidiaries, which are taxed at rates lower than theU.S. statutory tax rate, and federal and state tax credits, partially offset by state income taxes. Our effective tax rate for the nine months endedJune 26, 2021 was equal to theU.S. statutory tax rate as the impact of theU.S. deduction for foreign derived intangible income and the geographic mix of income earned by our international subsidiaries, which are taxed at rates lower than theU.S. statutory tax rate, were offset by state income taxes. Our effective tax rate for the three months endedJune 27, 2020 was lower than theU.S. statutory tax rate primarily due to the geographic mix of income earned by our international subsidiaries which are taxed at rates lower than theU.S. statutory tax rate, including the impact of theU.S. tax imposed on global intangible low-taxed income and theU.S. deduction for foreign derived intangible income, and reserve releases resulting from statute of limitations expirations, partially offset by unbenefited foreign losses. Our effective tax rate for the nine months endedJune 27, 2020 differed from the statutory tax rate primarily due to a$312.8 million discrete net tax benefit related to the loss on the sale of the Medical Aesthetics business. Segment Results of Operations We operate in four segments: Diagnostics,Breast Health ,GYN Surgical and Skeletal Health . UntilDecember 30, 2019 , our product portfolio included aesthetic and medical treatments systems sold by our former Medical Aesthetic business. We completed the disposition of the Medical Aesthetics segment onDecember 30, 2019 (the first day of the second quarter of fiscal 2020). The accounting policies of the segments are the same as those described in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year endedSeptember 26, 2020 . We measure segment performance based on total revenues and operating income (loss). Revenues from product sales of each of these segments are described in further detail above. The discussion that follows is a summary analysis of total revenues and the primary changes in operating income or loss by segment. Diagnostics Three Months Ended Nine Months Ended June 26, June 27, June 26, June 27, 2021 2020 Change 2021 2020 Change Amount Amount Amount % Amount Amount Amount % Total Revenues$ 665.5 $ 532.2 $ 133.3 25.0 %$ 2,858.2 $ 1,163.2 $ 1,695.0 145.7 % Operating Income$ 260.1 $ 233.9 $ 26.2 11.2 %$ 1,745.1 $ 340.7 $ 1,404.4 412.2 % Operating Income as a % of Segment Revenue 39.1 % 43.9 % 61.1 % 29.3 % Diagnostics revenues increased in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to the increase in product revenues from the recovery of our core product lines and current year acquisitions, and an increase in royalty revenue from Grifols related to licensing our intellectual property to our COVID-19 assays for their sale inSpain . In addition, revenues were higher in the current nine month period from the introduction of our SARS-CoV-2 assays in the prior year, however revenue from our COVID-19 assays were lower in the current three month period due to a decline in volume in theU.S. as discussed above, 47
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Operating income for this business segment increased in the current three and nine month periods compared to the corresponding periods in the prior year due to an increase in gross profit from higher revenues, partially offset by an increase in operating expenses. Gross margin was 62.5% and 74.9% in the current three and nine month periods, respectively, compared to 64.9% and 55.8% in the corresponding periods in the prior year, respectively. The increase in gross profit in the current three and nine month periods was primarily due to sales of ourAptima assays and ThinPrep Pap Test, partially offset by an increase in freight costs to ship product internationally, an increase in inventory reserves, higher field service costs and an increase in amortization of placed Panther instruments as the installed base has increased significantly year over year. In addition, gross profit in the current nine month period was higher due to sales volume of our SARS-CoV-2 assays, however, in the current three month period the increase in gross profit was partially offset by lower volumes of our SARS-CoV-2 assays. Operating expenses increased in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to higher compensation and benefits driven by our deferred compensation plan and salary, an increase in headcount in the operations and sales departments, an increase in marketing initiatives, an increase in R&D project spend, a lower BARDA credit of$2.3 million in the current three month period, higher acquisition transaction expenses, which included$11.5 million for a transfer tax related to the Mobidiag acquisition, and additional expenses from theBiotheranostics and Diagenode acquisitions. In addition, in the current nine month period we had higher bad debt expense. These increases were partially offset by a higher BARDA credit of$5.4 million in the current nine month period, lower bonus expense and a decrease in spending for travel.Breast Health Three Months Ended Nine Months Ended June 26, June 27, June 26, June 27, 2021 2020 Change 2021 2020 Change Amount Amount Amount % Amount Amount Amount % Total Revenues$ 349.0 $ 224.0 $ 125.0 55.8 %$ 1,018.0 $ 862.8 $ 155.2 18.0 % Operating Income$ 81.0 $ (11.1) $ 92.1 **$ 235.1 $ 158.6 $ 76.5 48.2 % Operating Income as a % of Segment Revenue 23.2 % (5.0) % 23.1 % 18.4 % **Percentage not meaningfulBreast Health revenues increased in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to an increase of$100.1 million and$110.9 million in product revenue, respectively, discussed above and an increase of$24.9 and$44.4 million in service revenue, respectively. The increase in service revenue in the current three and nine month periods was primarily due to an increase in service contract revenue as theBreast Health business continued to convert a high percentage of our installed base of digital mammography systems to service contracts upon expiration of the warranty period, the addition of service contracts from the NXC Imaging acquisition and an increase in spare parts revenue. Operating income for this business segment increased in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to an increase in gross profit from higher product and service revenues, partially offset by an increase in operating expenses. Gross margin was 56.9% in both the current three and nine month periods compared to 45.4% and 53.5% in the corresponding periods in the prior year, respectively. The increase in gross profit was primarily due to the increase in product revenue and service revenue discussed above, partially offset by a charge of$2.3 million related to the impact of stepping-up the acquired inventory to fair value in purchase accounting for the Somatex acquisition. In addition, gross profit in the corresponding prior year periods was impacted by the COVID-19 pandemic, which resulted in decreased sales volume across the majority of our product lines, period costs for temporary facility shut-downs and reduced manufacturing utilization and increased inventory reserves. Operating expenses increased in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to higher compensation and benefits driven by higher commissions from increased sales and our deferred compensation plan, a$7.0 million charge related to the purchase of intellectual property in the current quarter, an increase in R&D project spend, an increase in marketing initiatives and an increase in consulting spend. These increases were partially offset by lower bonus expense, a decrease in travel, meetings, trade show expenses and bad debt expense. The increase in the current nine month period is also a result of the corresponding prior year period including a benefit from the reversal of acquisition related accruals and a holdback. 48 -------------------------------------------------------------------------------- Table of Contents GYN Surgical Three Months Ended Nine Months Ended June 26, June 27, June 26, June 27, 2021 2020 Change 2021 2020 Change Amount Amount Amount % Amount Amount Amount % Total Revenues$ 127.9 $ 51.5 $ 76.4 148.4 %$ 366.2 $ 275.9 $ 90.3 32.7 % Operating Income$ 18.2 $ (23.4) $ 41.6 **$ 60.5 $ 32.0 $ 28.5 89.1 % Operating Income as a % of Segment Revenue 14.2 % (45.4) % 16.5 % 11.6 % **Percentage not meaningful GYN Surgical revenues increased in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to the increase in product revenues discussed above. Operating income for this business segment increased in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to an increase in gross profit from higher revenues, partially offset by an increase in operating expenses. Gross margin was 62.5% and 61.6% in the current three and nine month periods, respectively, compared to 36.7% and 59.2% in the corresponding periods in the prior year, respectively. The increase in gross margin was primarily due to the increased sales volume in the current year periods as the GYN Surgical business recovered to pre-COVID levels and the impact of the COVID-19 pandemic on the prior year periods, which resulted in decreased sales volume across the majority of our product lines, period costs for temporary facility shut-downs and reduced manufacturing utilization and increased inventory reserves. The increase in gross margin was partially offset by unfavorable product mix discussed above and higher intangible asset amortization expense from the Acessa acquisition. Operating expenses increased in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to the inclusion in of Acessa expenses of$3.7 million and$11.6 million , respectively, increased spending on research and development projects, higher marketing initiative spend, higher consulting spend, higher compensation and benefits driven by our deferred compensation plan and higher commissions from the increase in sales, partially offset by a gain of$10.1 million in the current nine month period related to the fair value adjustments for contingent consideration related to the Acessa acquisition.Skeletal Health Three Months Ended Nine Months Ended June 26, June 27, June 26, June 27, 2021 2020 Change 2021 2020 Change Amount Amount Amount % Amount Amount Amount % Total Revenues$ 25.9 $ 15.2 $ 10.7 70.4 %$ 73.3 $ 62.3 $ 11.0 17.7 % Operating Income$ (0.7) $ (7.4) $ 6.7 90.5 %$ 0.1 $ (4.8) $ 4.9
**
Operating Income as a % of Segment Revenue (2.7) % (48.7) % 0.1 % (7.7) % **Percentage not meaningfulSkeletal Health revenues increased in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to the change in product revenues discussed above. Operating income for this business segment increased in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to an increase in gross profit from higher revenues. Gross margin was 28.5% and 33.1% in the current three and nine month periods, respectively, compared to 2.8% and 31.2% in the corresponding periods in the prior year, respectively. The increase in gross margin was primarily due to higher sales volume of our products and higher inventory reserves in the prior year periods. Operating expenses were consistent in the current three and nine month periods compared to the corresponding periods in the prior year. 49 -------------------------------------------------------------------------------- Table of Contents Medical Aesthetics Three Months Ended Nine Months Ended June 26, June 27, June 26, June 27, 2021 2020 Change 2021 2020 Change Amount Amount Amount % Amount Amount Amount % Total Revenues $ - $ - $ - - % $ -$ 65.3 $ (65.3) (100.0) % Operating Loss $ -$ (1.0) $ 1.0 (100.0) % $ -$ (54.3) $ 54.3 (100.0) % Operating Loss as a % of Segment Revenue - % (100.0) % - % (83.2) % Medical Aesthetics revenue and operating loss decreased in the current three and nine month periods compared to the corresponding periods in the prior year due to the divestiture of the Medical Aesthetics segment onDecember 30, 2019 , the first day of our second quarter of fiscal 2020. The operating loss in fiscal 2020 included an intangible assets and equipment impairment charges of$30.2 million . LIQUIDITY AND CAPITAL RESOURCES AtJune 26, 2021 , we had$1,019.3 million of working capital and our cash and cash equivalents totaled$827.6 million . Our cash and cash equivalents balance increased by$126.6 million during the first nine months of fiscal 2021 primarily due to cash generated from operating activities, partially offset by cash used in investing and financing activities. In the first nine months of fiscal 2021, our operating activities provided cash of$1,865.0 million , primarily due to net income of$1,540.9 million , non-cash charges for depreciation and amortization aggregating$289.1 million , stock-based compensation expense of$51.0 million , and a debt extinguishment loss of$21.6 million , partially offset by a decrease in deferred income taxes of$44.3 million primarily due to the amortization of intangible assets. Cash provided by operations was negatively impacted by a net cash outflow of$13.1 million from changes in our operating assets and liabilities. The net cash outflow was primarily driven by a$82.4 million increase in inventory primarily due to an increase in Diagnostics inventory to support the SARS-CoV-2 assay demand and production as well as an increase inBreast Health to support the increase in mammography systems, a decrease in accrued expenses of$27.6 million primarily due to payments for federal income taxes and value-added tax payments, partially offset by an increase in accrued compensation and employee benefits, an increase in prepaid income taxes of$24.3 and an increase in prepaid expenses and other assets of$22.3 million primarily due to an increase in technology implementation costs and the timing of value-added tax receivables. These cash outflows were partially offset by a decrease in accounts receivable of$111.5 million primarily due to payments received from customers that had large balances from COVID-19 assay sales in our Diagnostics division and lower revenues in the third quarter of fiscal 2021 compared to the fourth quarter of fiscal 2020, and an increase in accounts payable of$9.4 million primarily due to the timing of payments. In the first nine months of fiscal 2021, our investing activities used cash of$1,286.5 million primarily related to net cash paid for our fiscal 2021 acquisitions ofBiotheranostics , Diagenode,Somatex and Mobidiag Oy of$1,163.3 million and net capital expenditures of$114.6 million , which primarily consisted of the placement of equipment under customer usage agreements and purchases of manufacturing equipment to expand capacity of our molecular diagnostics manufacturing facilities. In the first nine months of fiscal 2021, our financing activities used cash of$447.8 million primarily related to$970.8 million for the repayment of our 2025 Senior Notes,$250.0 million for the net repayment of amounts borrowed under our revolving credit line,$409.7 million for repurchases of our common stock,$56.3 million for scheduled principal payments under our 2018 Credit Agreement and$46.9 million for the payment of employee taxes withheld for the net share settlement of vested restricted stock units. Partially offsetting these uses of cash were net proceeds of$950.0 million under our 2029 Senior Notes,$320.0 million of proceeds under the accounts receivable securitization agreement that we restarted in the third quarter of fiscal 2021 to partially fund the Mobidiag acquisition, and$39.6 million from our equity plans, primarily from the exercise of stock options. Debt We had total recorded debt outstanding of$3.12 billion atJune 26, 2021 , which was comprised of amounts outstanding under our 2018 Credit Agreement of$1.40 billion (principal of$1.41 billion ), 2029 Senior Notes of$934.0 million (principal of$950.0 million ), 2028 Senior Notes of$395.2 million (principal of$400.0 million ), Securitization Program of$320.0 million , and$66.0 million in debt acquired in the Mobidiag acquisition. 50 -------------------------------------------------------------------------------- 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 1.0% as ofJune 26, 2021 . The borrowings of the 2018 Amended Revolver bear interest at a rate equal to the LIBOR Daily Floating Rate plus an Applicable Rate equal to 1.0% as ofJune 26, 2021 . AtJune 26, 2021 , borrowings under the 2018 Amended Term Loan were subject to an interest rate of 1.11%. 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 was$1.2 billion as ofJune 26, 2021 , and any amount 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 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 a qualifying accounts receivable securitization program. 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 ofJune 26, 2021 , we were in compliance with these covenants.The UK Financial Conduct Authority announced in 2017 that it intended to phase out LIBOR by the end of 2021, which has been extended toJune 30, 2023 . If changes are made to the method of calculating LIBOR or LIBOR ceases to exist, we may need to amend certain contracts, including our 2018 Credit Agreement, and we cannot predict what alternative rate or benchmark would be negotiated or the extent to which this would adversely affect our interest rate and the effectiveness of our interest rate hedging activity.
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 51 -------------------------------------------------------------------------------- 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. 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. 2029 Senior Notes The total aggregate principal balance of the 2029 Senior Notes is$950.0 million . The 2029 Senior Notes are general senior unsecured obligations of the Company and are guaranteed on a senior unsecured basis by certain domestic subsidiaries. The 2029 Senior Notes mature onFebruary 15, 2029 and bear interest at the rate of 3.250% per year, payable semi-annually onFebruary 15 andAugust 15 of each year, commencing onFebruary 15, 2021 . We may redeem the 2029 Senior Notes at any time prior toSeptember 28, 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 40% of the aggregate principal amount of the 2029 Senior Notes with the net cash proceeds of certain equity offerings at any time and from time to time beforeSeptember 28, 2023 , at a redemption price equal to 103.250% of the aggregate principal amount so redeemed, plus accrued and unpaid interest, if any, to the redemption date. We have the option to redeem the 2029 Senior Notes on or after:September 28, 2023 throughSeptember 27, 2024 at 101.625% of par;September 28, 2024 throughSeptember 27, 2025 at 100.813% of par; andSeptember 28, 2025 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 2029 Senior Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the repurchase date.
Accounts Receivable Securitization Program
OnApril 25, 2016 , we entered into a one-year 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. In response to the market uncertainties created by the COVID-19 pandemic, onMarch 26, 2020 , we paid-off the total amount outstanding of$250.0 million previously borrowed. OnApril 13, 2020 , we amended the Credit and Security agreement with the lenders, temporarily suspending the ability to borrow and the need to comply with covenants for up to a year. OnJune 11, 2021 , we amended and restated the Credit and Security agreement to restart the Securitization Program and increase the maximum borrowing amount to$320.0 million . Loans outstanding under the Securitization Program bear interest at LIBOR plus an applicable margin for defined tranches. As ofJune 26, 2021 , there was$320.0 million outstanding under this program. The weighted average interest rate under the Securitization Program was 0.78% as ofJune 26, 2021 .
Contingent Consideration Earn-Out Payments
In connection with certain of our acquisitions, we have incurred the obligation to make contingent earn-out payments tied to performance criteria, principally revenue growth of the acquired business over a specified period. In addition, contractual provisions relating to these contingent earn-out obligations may result in the risk of litigation relating to the calculation of the amount due or our operation of the acquired business. Such litigation could be expensive and divert management attention and resources. Our obligation to make contingent payments may also result in significant operating expenses. 52 -------------------------------------------------------------------------------- Contingent consideration arrangements are recorded as either additional purchase price or compensation expense if continuing employment is required to receive such payments. Pursuant to ASC 805, contingent consideration that is deemed to be part of the purchase price is recorded as a liability based on the estimated fair value of the consideration we expect to pay to the former shareholders of the acquired business as of the acquisition date. This liability is re-measured each reporting period with the change in fair value recorded through a separate line item within our Consolidated Statements of Income. Increases or decreases in the fair value of contingent consideration liabilities can result from changes in discount rates, changes in the timing, probabilities and amount of revenue estimates, and accretion of the liability for the passage of time. Our primary contingent consideration liability is from our Acessa acquisition. We have an obligation to the former Acessa shareholders to make contingent payments based on a multiple of annual incremental revenue growth over a three-year period ending annually in December. There is no maximum earnout. Pursuant to ASC 805, the contingent consideration was deemed to be part of the purchase price, and we recorded our estimate of the fair value of the contingent consideration liability utilizing the Monte Carlo simulation based on future revenue projections of the business, comparable companies revenue growth rates, implied volatility and applying a risk adjusted discount rate. AtJune 26, 2021 this liability was recorded at its fair value of$71.7 million , and no contingent payments have been earned or made. Stock Repurchase Program OnDecember 9, 2020 , the Board of Directors authorized a new five-year share repurchase plan, to purchase up to$1.0 billion of our outstanding common stock. The prior plan was terminated in connection with this new authorization. During the third quarter of fiscal 2021, we repurchased 3.0 million shares of our common stock for a total consideration of$188.4 million . As ofJune 26, 2021 ,$691.6 million remained available under this authorization. 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 10 to the Consolidated Financial Statements in this Quarterly Report on Form 10-Q, which information is incorporated herein by reference.
Future Liquidity Considerations
We expect to continue to review and evaluate potential strategic transactions 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 26, 2020 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, and the cash available under our 2018 Amended Revolver 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, 2028 Senior Notes, 2029 Senior Notes and 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 26, 2020 . 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. 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 53
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Table of Contents 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 26, 2020 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 26, 2020 . 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 26, 2020 .
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