Robert Cascella - Chief Executive Officer, President and Director Deborah Gordon - Vice President of Investor Relations Steven Williamson - Senior Vice President of GYN Surgical Glenn Muir - Chief Financial Officer, Executive Vice President of Finance & Administration, Treasurer and Director Howard Doran - Senior Vice President of Diagnostics Products

Peter Bye - Jefferies & Company, Inc. William Quirk - Piper Jaffray Companies Bill Bonello - RBC Capital Markets Corporation Tycho Peterson - JP Morgan Chase & Co Vincent Ricci - Wells Fargo Securities, LLC David Lewis - Morgan Stanley Thomas Kouchoukos - Stifel, Nicolaus & Co., Inc. Sameer Harish - Needham & Company, LLC Amit Bhalla - Citigroup Inc

Good afternoon. Welcome to the Hologic Inc. Second Quarter Fiscal Year 2010 Earnings Conference Call. My name is Nancy, and I am your operator for today's call. [Operator Instructions] I would now like to introduce Ms. Deborah Gordon, Vice President, Investor Relations, to begin the call.

Thank you, Nancy. Good afternoon, and thank you for joining us for Hologic Second Quarter Fiscal Year 2010 Earnings Conference Call. I encourage everyone to visit Hologic's Investor Relations page of our website in order to view the PowerPoint presentation related to the comments that Glenn Muir, Hologic's Chief Financial Officer, will be making in his opening remarks. The replay of this conference call will be archived on our website through Friday, May 21. Please also note that a copy of the press release discussing our second quarter results, as well as our third quarter and fiscal year 2010 guidance, is available in the Investor Relations section of our website under the heading Financial Results. Before we begin, I would like to remind you of our Safe Harbor statements. Certain statements made by management of Hologic Inc. during the course of this conference call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause actual results, performance or achievements of Hologic to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include among other those details from time-to-time in the company's filings with the Securities and Exchange Commission. We expressly disclaim any obligation or undertaking to publicly release any updates or revision to any forward-looking statements to reflect any change in our expectations or any change in events, conditions or circumstances on which any such statement is based. Also during this call, we will be discussing certain financial measures not prepared in accordance with Generally Accepted Accounting Principles, or GAAP. A reconciliation of these non-GAAP financial measures to the related GAAP financial measures can be found in Hologic's second quarter 2010 earnings release, including the financial tables in the release. Please note that today's call will consist of approximately 30 minutes of opening remarks from management followed by a 30-minute question-and-answer session. We therefore ask each participant to limit his or her questions to just one with one follow-up as necessary. Before I turn the call over to Rob Cascella, I would like to inform you of several Investor Conferences Hologic management will be participating in this month and next. Glenn Muir will be presenting at the Citi 2010 Global Healthcare Conference on May 26 in New York City. During the second week of June, we'll be participating in the Jefferies 2010 Global Life Sciences Conference and the Ninth Annual Needham Healthcare Conference, both of which will be in New York. Lastly, on June 23, we'll be attending the Wells Fargo Securities Healthcare Conference in Boston. All of these presentations will be webcast. The details of which will be found on the IR section of our website. I would now like to turn the call over to Mr. Rob Cascella, President and Chief Executive Officer.

Thanks, Deb. Good afternoon, and thank you for dialing in to our second quarter conference call. Joining me on the call is Glenn Muir, our Executive Vice President and CFO; Howard Doran, Head of Diagnostics Group; Steve Williamson, Head of our GYN Surgical Group; and David Harding, Head of our International Businesses. All of us will be available during the question-and-answer session. Our agenda for today's call is as follows: I will review our business performance in the recently completed second quarter and Glenn will discuss in more detail our financial results, as well as provide our guidance for the third quarter and full year. We will then open up the call for Q&A. As Deb stated, we will conclude this call in about an hour. I'm pleased to report that, once again, our quarterly revenues exceeded and our adjusted earnings were in line with our guidance. As stated in our earnings release, Q2 of 2010 revenues were approximately $418 million, a 4% increase from Q2 of '09, and up 1.4% from Q1 sequentially. This compares favorably to our guidance of $410 million to $415 million. Our second quarter growth was broad based with Breast Health, Diagnostic, Surgical and Service revenues, all contributing to the increase over the last year's second quarter, slightly offset by a decline in Skeletal Health. For the first time since the economic contraction began, Breast Health posted positive year-over-year revenue growth, largely due to an increase in service revenues, related to our larger installed base of digital mammography systems and to a lesser extent, to sales of our 2D/3D Selenia Dimensions and our Eviva breast biopsy product. Our revenue mix remained strongly weighted towards our Service and Consumable businesses namely, Diagnostics, Surgical and Breast Biopsy which represented approximately 75% of total revenues. Second quarter non-GAAP earnings per diluted share were $0.29 meeting our guidance. This compares to our non-GAAP EPS of $0.29 for the same period last year. Our earnings were impacted by a mix shift with more capital equipment sales shipped internationally. In addition, we continue to invest heavily in clinical trials across multiple product lines and expense we believe necessary to strengthen our foundation for future growth. I would now like to review our revenue performance in each of our four segments. In Breast Health, we exceeded our revenue expectations and recorded revenues of $189.5 million, an increase of approximately 5% from the $180 million for the same quarter a year ago. Sequentially, revenues rose 5.8%. As I've previously mentioned, the year-over-year increase was primarily the result of strong growth in Service revenues, as well as sales of our 2D/3D Selenia Dimensions. Unit volumes of our Selenia mammography systems were up over last year, particularly in international market, although a lower ASP resulted in modest revenue decline versus the prior year. This decline in ASP is due to the ongoing shift to sales of less-featured systems and to strong shipments to international markets, which inherently carry lower selling prices. Thus, ASPs continue to be affected by product and geographic mix consistent with recent trends. However, we expect product mix in ASPs will change favorably, as the replacement market in the U.S. emerges, which we continue to believe will occur over the next 12 to 18 months. As for the U.S. market, order rates in the first half of the year signaled early signs of stabilization in hospital capital spending. Although we did experience some order delays in the quarter, which we believe have already recovered in early Q3 activity. Also in Breast Health, we continue to see positive increases in revenue from our Eviva breast biopsy product and believe we are continuing to take share in the stereo tactic market. Relative to the second quarter last year, we have heard from many of our customers that there was a slight reduction in a number of screening mammography, and as a result, a reduction in biopsy procedures. We believe this is primarily due to the high levels of unemployment and resetting deductibles and co-pays, leading to the decreased wellness business and, to a lesser extent, the severe weather in the U.S., particularly in the Northeast and mid-Atlantic region. However, we remained optimistic about the organic growth of our interventional Breast business and the likelihood for increase mammography procedures over the mid to long term as employment conditions improve. Finally, as a result of our phasing our two products, which we discussed more fully in our earnings release, we recorded $5.7 million less in revenues from these products in the second quarter of this year, as compared to the same quarter last year. Turning now to Diagnostics. We posted revenues of $140 million, an increase of approximately 4% from $135 million in Q2 of '09, and basically flat sequentially. All of our major products were up with Cervista HPV and international ThinPrep test being the most notable drivers of the quarter's growth. We are especially pleased with the progress of the Cervista rollout, thus far, as our test volumes and account conversions are on track with our internal objectives, with all Third Wave product lines of nearly 24% over the prior year second quarter. Global ThinPrep test remained fairly steady this quarter, paced by increased volume internationally, slightly offset by a decline in the U.S. Domestic ThinPrep volumes fell short of recent trends, due largely to a deferral in wellness visits and the ongoing higher unemployment rate. We also believe, as in our other product lines, that weather had a factor in both the Northeast and mid-Atlantic regions. In GYN Surgical, revenues totaled $67 million, an increase of 5% compared to $64 million in Q2 of '09, and a decline of 6% sequentially. The improvement versus last year is primarily the result of domestic Adiana sales and double-digit NovaSure growth, internationally. We witnessed a reduction in physician office visits in the second quarter, consistent with historical seasonality as many deductibles are reset in the March quarter, further magnified by the effects of unemployment on wellness visits. Even though Adiana wants to remain controlled in the second quarter, we were pleased with the performance and are looking forward to the balance of the year as our launched activities continue to expand. As of today, we have our full sales team focused on training doctors and selling the Adiana product into our target accounts. Skeletal Health revenues totaled $21.5 million compared to $23.1 million in Q2 of '09, a decline of 6.7% and flat sequentially. This decrease was primarily the result of fewer mini C-arm system sold. On a positive side, recent reimbursement changes should have a favorable impact for abundance cytometry systems as the new reimbursement rates are at a level far or economically attractive than recent expectations would have suggested. These rates are effective immediately and there is a possibility that they may even be retroactive through the beginning of the calendar year. I would now like to turn to our two topics of interest. On the first, of course, being the economy and healthcare reform. As you know, as the economic crisis and resulting recession developed, we saw an immediate reduction in demand for our capital equipment businesses last year. The good news is that we do see signs of stabilization in equipment sales. However, we are cautious about the effects unemployment is having on the healthcare consumer. As we have mentioned in today's discussion, we have seen indications that wellness exams are being deferred in favor of addressing the mandatory healthcare needs of a family. This is translating into lighter procedure volumes for our domestic ThinPrep, NovaSure and breast biopsy products. We believe the fundamentals of these businesses are sound and its recent softness is short term in nature. With respect to healthcare reform, we do believe the inclusion of additional lives entering the healthcare system and an emphasis on early detection and prevention could result in increased exams. Although the exact timing of the impact remains unknown, the likelihood of increased availability is appositive. On the other hand, the medical device excise tax that begins calendar year 2013 is not appositive. Our initial calculation find the 2.3% tax based on a current year's product sales, with result in an incremental annual tax of approximately $26 million or roughly $0.06 per share. We will update you in the future as we gain more clarity on the impact of the reform, including changes in reimbursement rates and our reference to preserve and enhance our profitability in the face of these changes. On a more detailed basis, I'll provide an update on Tomo which I am happy to report our clinical trials are progressing quite well, both from an enrollment perspective and overall clinical results. As you will recall, we are running multiple clinical trials designed to provide a wide range of clinical data to the FDA. This clinical strategies partly defensive to provide the agency with alternatives relative to the products indications for use, and partly offensive to provide a series of products and procedures configurations, addressing both screening and diagnostic indications, which we are confident can prove to be a distinct competitive advantage in the market. Regarding our conversations with the FDA, we have met with the agency on multiple locations and are encouraged with our dialogue, thus far. Without more specific indications from the agency, we remained committed to obtaining some level of approval in 2011. I'd like to now cover some of our new products, and I'll begin with an update on Cervista which we've launched in the latter part of fiscal 2009. We continue to see signed new labs at a steady pace and are experiencing advances in testing volumes. The launch of Cervista HPV is accelerated by the release last quarter of our first phase of workflow processing, involving vial-to-plate transfer and extraction. So far, we have received a great deal of positive feedback on the benefits of faster processing and reduce hands on time. We expect adoption of Cervista HPV to be further accelerated by our high-throughput automation, or HTA system, for which we expect approval by mid-fiscal 2011. HTA is designed to enable labs to considerably reduce the amount of time and technician spends with the instrument, down to 30 minutes from the 90 minutes with our current Phase I level of automation. And importantly, down sharply from the 4 1/2 hours needed for our semi-automated systems. We believe this will prove to be a very compelling and competitive solution for high-volume labs, and that we expect to be first market with such high-throughput technology for HPV testing. We remain very pleased with the strong momentum among labs and the solid progress we have made in gaining market share with Cervista HPV. Based on the contracts we have signed as of the end of fiscal Q2, we estimate our market share's approaching double digits. We are very optimistic about Cervista serving as a key growth driver to our revenues. Regarding Adiana, we considerably expanded our launch activities, as discussed earlier, and as of today, have our full sales team focused on training doctors and selling the product. The feedback we have received from those clinicians who have used Adiana gets better with each experience. We estimated our current market share is high-single digits. Now turning to our plans to position NovaSure for accelerated long-term growth. As we have stated in the past, there are two key gating variables in achieving broader adoption of NovaSure. The first is the ability to make it easier to perform procedures in the office; and the second is making more women aware such a procedure exist. With respect to the first variable, we are currently providing solutions to physicians on reimbursement, process flow and anesthesia to support the ability to quickly and safely perform office-based procedures. Regarding patient awareness, we are preparing to launch a campaign to increase awareness of NovaSure among women and to make them aware of the therapeutic alternatives available for treating this prevalent and debilitating condition. I firmly believe the market for NovaSure is substantial, and we've only scratched the surface of its tremendous long-term potential. After an international update, as we discussed last quarter, part of our strategy to enhance our International business was to appoint David Harding to the position of Senior Vice President and General Manager of International, and to focus a 100% of Jack Cumming's time on many of these opportunities. David is responsible for reshaping and redirecting our international operations. His objective is to identify emerging opportunities for growth, better align our products, specific to each opportunity to make certain we have the infrastructure necessary to execute. Jack's efforts are complimentary to David that is to identify and analyze opportunities for future growth. Although we have been successful growing our International business, we firmly believe greater potential exist in our current markets for our newer products, while we seek to develop emerging markets with all of our product lines. Thus, we continue to add resources and infrastructure where revenue potential justifies this investment, and we look to cultivate emerging market where longer-term growth can be realized. Over the next few years, international will clearly be an important contributor to the overall growth of Hologic. With that, allow me to summarize. I'm very encouraged by Hologic's performance in the second quarter, although I do acknowledge the near- to mid-term path for our Device businesses will continue to be impacted by factors such as the economy, and more specifically, unemployment. Although our Capital Equipment business is stabilizing, we remain cautious with respect to the dynamics of a mature market and its effects on pricing. Nonetheless, we are tracking to plan for fiscal 2010 and we continue to deliver year-over-year growth in our major businesses. Moreover, I remained confident in Hologic's longer-term growth prospects, particularly as our new products mature and increasingly contribute to our revenue and earnings, and as we continue to build our international infrastructure in order to grow our business outside the U.S. I will now turn the call over to Glenn to provide the second quarter financial details and guidance for the third quarter and full year.

Thank you, Rob. As Rob stated, consolidated revenues performed above our expectations, primarily as a result of the strong performance in our Breast Health segment. Our mix of domestic and international product sales is approximately 78% domestic and 22% international. Foreign currency translation had a modest positive impact on our reported revenue growth of less than 1% year-over-year, primarily within the Diagnostics and Surgical segment, as most of this international sales are denominated in local currency. Turning to the rest of the P&L, our gross margins on a non-GAAP basis were 61.5%, down 150 basis points from the first quarter and down 110 basis points from last year. This excludes $43.5 million of amortization of intangibles and is in line with our guidance range of 61% to 62%. The year-over-year change in gross margin was due primarily to the significant increase in Service revenues versus the much smaller increase in product sales. Service gross margins are now at 38% which is a significant increase over the last couple of years. However, they are still quite a bit lower than product gross margins. In addition, we are seeing a continued shift in sales of our Selenia digital mammography systems to lower margin configuration, as well as an increased level of lower ASP international sales. On a GAAP basis, gross margins were 51.1%, also in line with the 51% to 52% we guided to. Our operating expenses on a non-GAAP basis of $125.5 million, primarily excluding amortization of intangibles of approximately $13.6 million and the one-time litigation settlement payment to Ethicon of $12.5 million, came in $5 million below our first quarter non-GAAP expenses, and up 3% compared to last year. This was below our guidance range of $128 million to $131 million. This decrease from the first quarter primarily resulted from higher cost incurred in Q1 related to seasonally higher sales and marketing expenses. These decreases were partially offset by increased R&D cost related to clinical studies and next-generation products. In the first quarter of fiscal 2010, the company adopted a new standard that change the accounting for convertible debt instruments with cash settlement features. The additional charge resulting from the adoption of these accounting guidance was $18.1 million this quarter and $16.7 million in the second quarter of last year. This non-cash interest expense charge has been excluded from our non-GAAP results of operations for all carriers presented. In addition, in February of this year, we entered into a settlement agreement with Ethicon. The settlement agreement relates to two patent infringement lawsuits previously filed by Ethicon and one we previously filed. As a result of the settlement agreement, all outstanding litigation between the parties was dismissed and we paid Ethicon $12.5 million. We recorded a charge of $12.5 million related to that settlement in our results of operations for Q2 and excluded that charge from our non-GAAP results of operations. Absent the acquisition related and other charges, pretax earnings this quarter were $118.7 million. Using our annual effective tax rate of 36%, non-GAAP net income was $76 million versus non-GAAP net income of $74.7 million last year, an increase of 1.7%. We reported fully diluted non-GAAP EPS this quarter of $0.29 versus $0.29 a year ago and equal to the guidance we gave last quarter. Our total dollar backlog for all of our products was $297 million at the end of March, down from $326 million at the end of December. This decrease was primarily in Breast Health and related to fewer Selenia orders than the prior quarter. We believe timing was the culprit at quarter end and the decrease is not indicative of a trend as evidenced by the strength in our April order rate. We experienced a higher Selenia order rate than any recent first month of a quarter. We continue to believe that mammography business has stabilized. Turning to the balance sheet. During the second quarter, we repaid $72.5 million on the $540 million term loan borrowed in connection with our acquisition of Third Wave, and we paid off the remaining $47 million in April. We, therefore, have fully repaid this loan, well within the 2 1/2 years we originally guided to. Regarding free cash flow, we generated $95 million in the second quarter of fiscal 2010 comprised of approximately $107 million of cash flow from operations, less capital expenditures of $12 million. Our free cash flow excludes the $70 million cash payments received from KV for the pending sale of our Gestiva assets. Moving on to guidance. For the third quarter of fiscal 2010, ending on June 26, we are expecting revenues in the range of $415 million to $420 million, comparable to the second quarter. We expect gross margins of approximately 61% to 62% on a non-GAAP basis. We are expecting operating expenses, excluding the amortization of intangibles, to increase slightly on a sequential basis from Q2 to $128 million to $130 million, or approximately 31% of revenue. We expect interest expense to be approximately $32 million in Q3, including approximately $18.5 million of non-cash interest expense, as a result of our adopting the new accounting guidance in fiscal 2010 related to our convert. Our effective tax rate is expected to be 36%, and we expect non-GAAP earnings per share of approximately $0.29 per diluted share. For fiscal 2010, which ends on September 25, we are reaffirming our total revenue and non-GAAP EPS guidance. We are guiding to full year total revenue of $1.64 billion to $1.665 billion, reflecting the current level of stabilization as experienced during the first half of fiscal 2010 and the outlook for flat-to-slightly increased revenues for the remainder of the year. And we are guiding to non-GAAP adjusted EPS of $1.16 to $1.20 per share. This guidance reflects stable gross margin of 61% to 62% for the year. We continue to expect operating expenses to be in the range of $490 million to $500 million, up approximately 2% to 4% from fiscal '09, and excluding the amortization of intangibles. We expect interest expense to be approximately $125 million, including $73 million of non-cash interest expense, resulting from adopting the new accounting guidance related to our convert. And we are expecting an effective tax rate of 36%. Turning to cash flow guidance. In fiscal 2010, we continue to expect to generate close to $500 million of free cash flow, excluding the $70 million payment from KV we received in January. Capital expenditures are not a big part of our business, and we are expecting CapEx of close to $60 million, and depreciation of approximately $75 million for the year. In summary, we are pleased with our second quarter performance and the phase that reduced doctor visits caused by economic factors impacting unemployment and insurance payments. Despite these headwinds, we were able to increase our revenues, which we believe has resulted in us taking up additional market share for our products. We still remained cautiously optimistic about the economy, recognize there is still external pressure and therefore, continue to be conservative in our outlook. Now with that, let me turn the call back to Rob.

Thanks, Glenn. To wrap up, with the first half of the fiscal year behind us, we are solidly on track to meet our full year guidance. I am proud to say, as I have in the past, that one of the hallmarks of Hologic is that we remained steadfast in our commitment to deliver the finest quality products in the world and uncompromising when it comes to exceeding our expectations. Moreover, our mid- to long-term success is further enhanced by the tireless dedication of our Hologic associates, further by the strength of our products, our obsession with market leadership and our potential for future growth. This now concludes our opening remarks. We will be happy to answer any of your questions. With that, operator, please open up the call for 30 minutes of Q&A.

[Operator Instructions] We'll take our first question from Amit Bhalla from Citi. Amit Bhalla - Citigroup Inc: First question is on the Breast Health business. I was wondering if you could give us some more detail in the U.S. on the types of accounts that you're selling to right now. Are these replacement systems in the U.S.? Because it looks the U.S. unit volumes are down, I think, you even mentioned that. And also give us a little bit of color on Selenia Dimensions overseas. You highlighted that as part of the growth in the quarter.

The domestic units, if we think about the market, we are at the level of market maturity relative to penetration of digital. So that the remaining buyers, those that have not converted to digital yet are really buying at the very low end. And we are competing for products against the lower-end offerings of the likes of GE or Siemens and certainly to some extent, Fuji CR. There are some bright spots in the U.S. market and that is that some of the aging early installs of digital are converting to new systems, and those new systems tend to be the Dimensions product. So we are having relatively good success with the Dimensions 2D in the U.S., albeit on a small percentage. As we've said in my script, the replacement market in the U.S. is expected to accelerate over the next 12 to 18 months. So although we are picking up systems, it's probably 10% of the Selenias that are being sold, our Dimension types that are being sold into replacement customers, I should say. On an international basis, we're selling both the 2D and 3D versions of the product, and we remain pleased with the progress that we're making in tomosynthesis, but we're also realistic it does require significant clinical efforts in each market that we are targeting, and in fact, have four or five clinical studies going on right now in places like Oslo, right outside of Paris, outside of London and so on and so forth. And we're doing so in order to gain some clinical validation, but also to then use that clinical validation for public sector support and reimbursement. So we're happy with the progress. But again, the international markets and if we particularly focus on Europe, is one that is slower to move within the public sector for the reasons I just gave. Amit Bhalla - Citigroup Inc: My follow-up is on the Diagnostics business, I know you said you grew year-over-year 24%, but did it grow in revenues quarter-over-quarter? And can you tell us about Cervista adoption, HR versus the 1618 in the accounts?

Amit, this is Howard. So the first part of your question is did we grow quarter-over-quarter, the answer is yes, from a total revenue perspective. On how it's going is, we continue each and every month to bring on new customers that begin offering Cervista high-risk out in the marketplace and the amount of customers we brought on this past quarter are pretty much in line with the last couple. In addition this past quarter, the national accounts both launched Cervista 1618 on a national scale. They've been working for the last few months on validations that were concluded in our sales team, how the physician level in combination with both of those customers are out, talking about the change in guidelines and how 16 and 18 can fit within those. So we're very encouraged by the traction as far as new customers. We're very excited to now have a national presence with 1618, and I think I answered your revenue question.

We'll move on to our next question from Thomas Kouchoukos from Stifel, Nicolaus. Thomas Kouchoukos - Stifel, Nicolaus & Co., Inc.: I wanted to ask you on the Surgical side with respect to NovaSure, I think, obviously you pointed out to the economy being an issue and unemployment bringing in fewer women for wellness exams. Are you seeing any increased competition in that space? Do you feel comfortable with your health share? And then as a follow-up, maybe just talk about you're increasing the awareness level, it sounds like some direct advertising, but I also wanted to see what your strategy or approach would be with respect to bundling NovaSure, Adiana and then also your new hysteroscopy tower?

When we look into the market for market share, obviously, as you mentioned, the office visits were down for the quarter. And we always go up, there's different ways that we can check to see what the market share percentages are. We do some checks through our sales channels. We also go out to outside sources and all the checks that we did actually showed that we're growing our percentage share or holding it. So they were all very positive checks for us. When you look into -- you've mentioned different things that we might be doing to drive patient awareness. We've really been focusing our programs to increase patient awareness since the inception of the product. It's something global endometrial ablation is really a procedure that a lot of women don't know about. Now moving forward, we'll plan to invest more and more money into these programs until we find that optimal investment level that provides the greatest return for us. So in the coming months and quarters we'll continue to play with the mix to make sure that we are getting the optimal return for the investment there. And then finally, I believe your third question was about bundling NovaSure and Adiana. We'll provide combined contracts where customers require them. And we see that limited areas across the country, but we really believe that each product stands on its own economically, and they don't really need to subsidize each other. But for customers that want to do serial user, used both products we're happy to work with them in any way that we can.

We'll move on to our next question from David Lewis from Morgan Stanley. David Lewis - Morgan Stanley: Howard, just a quick question on Diagnostics, obviously, given the procedure have slowdown we've seen across multiple providers, it's hard to say whether that is their procedure or industry related or was tied to kind of share loss. Do you think you held share, gain or loss share in the quarter, specifically for ThinPrep in the U.S. and internationally?

David, we certainly grew internationally because we had an increase in test volume, as far as in the states. We get a lot of data from larger laboratories and many regional ones as well that are very open in sharing volumes with us. We also track wins and losses, and I can tell you, the wins are always very low -- the wins are actually well ahead of the losses. So I really don't think this is share shift at all the competition. I just think we were dealing with, obviously, many labs reported weather being a problem this past quarter. And we still think there's a lingering effect with economy as folks have lost benefits throughout the long duration of unemployment. David Lewis - Morgan Stanley: Glenn, just a quick financial nit here. Did guidance for free cash changed incrementally here sequentially greater than $500 million to almost $500 million?

Yes, David. We're around that $500 million figure. I think, we're a little bit coming out of the gate a little bit behind where we thought we might have been at the beginning of the year on the earnings side just a little. And we have a little bit of a timing difference on some of our tax payments between Q2 and Q3. So that puts us down back a little bit in Q2. But at the end of the day, we expect to be around that $500 million for fiscal 2010. David Lewis - Morgan Stanley: If you are a little bit behind, would say that it's time to grow incremental gross margin pressures on the top or is it tied to increased spending in the middle income statement?

It is not on the OpEx side, David. I mean, we've done a fairly good job of controlling the expenses and coming in under. Where we're seeing the pressure right now, even though revenues are increasing, is on the gross margin side. And it is a combination of things. I pointed out that number one, our fastest-growing segment of the business right now is Service. But Service is also our lowest gross margin item, even though it increased dramatically over the past couple of years. It's still much lower than even product gross margins. And Rob certainly pointed out that when we look at the Capital Equipment business and Selenia in particular, there is today, still that continued pressure to the lower configuration unit, and then also a pickup in some of our International business. So it is clearly on the gross margin side of the business that we're seeing a little bit of pressure today.

And we'll move on to our next question from Bill Quirk from Piper Jaffray. William Quirk - Piper Jaffray Companies: First off, given the impact of both weather as well as deductibles resetting in the quarter, why should we be thinking about the third quarter top line being more or less flat with the second?

Could you restate your question. You expected the quarter would be higher? William Quirk - Piper Jaffray Companies: That's right. We shouldn't have the weather effect, we should as we progress through the years, deductible should be incrementally less than a headwind for us?

I think that certainly makes a lot of sense. I think we are approaching this on the basis that we certainly want to maintain a level of conservatism going into Q3 for the reasons that we gave earlier, and that is are we seeing any kind of effect on the consumer side of this healthcare model, which we then relate to ongoing a little procedure volumes. We see some recovery, but we also have seen as evidenced in Q2 that there was a defined drop in procedure volumes that we responded to by, we think, greater market share. But nonetheless, it is not yet clear to us as to whether or not we'll see an ongoing and persistent effect from unemployment. So we did take a more conservative view of Q3. William Quirk - Piper Jaffray Companies: If we think about the Third Wave instrument launch. Obviously, the initial product is conceived [ph] on HPV side. How should we think about the menu expanding from there. I assume you guys are considering things like chlamydia, gonorrhea, trichomonas, et cetera?

I mean, if you're certainly -- and just think about the various tests that can come out of the temperate [ph] vile out of our solution. You just hit the nail on the head, the two most obvious are CT/NG [chlamydia and gonorrhea] and trich. Those are things that we'll be looking at in the future. And obviously, we're looking at other areas as well. But those are the two that have the greatest market potential in regards to the amount of screening for those that are done today. So those are the two most opportunistic, and those would be after we're heading down.

We'll take our next question from Vincent Ricci from Wells Fargo. Vincent Ricci - Wells Fargo Securities, LLC: So my first question in the back of the PowerPoint, you guys referenced the limited launch of a next-generation NovaSure system. Can you just walk us through what that is a little bit?

Sure. Steve, why don't you... A little bit of a description of our next-generation NovaSure system that we're just introducing into the market.

We're actually in a limited market release with this next-generation NovaSure device. It's got a couple of different benefits to it. Some refer to physician, some refer to patient. It actually improved the safety mechanism that we've built in, so that it's a little bit easier for physicians to pass the assessment check that takes place before the procedure. There is some ergonomic benefits that have been made to the device as well. And then lastly, we've actually put smooth access tips on the end of the electrode array, which allow the device to open smoothly within the patient's cavity. Now we've got an excellent feedback from the physicians that have used the product so far. And as I mentioned, we're in a limited market release in our physician offices right now, and we'll expect to have a broader release as we go into ACOG and beyond that. Vincent Ricci - Wells Fargo Securities, LLC: Now with the term loan paid down, can you just remind us what are your primary uses of your cash and how do you intend to address the convert, albeit we're pretty far below the strike price right now?

Yes, Vincent. We've talked for quite sometime now about our number one focus being paying down the term loan. We now have to change that a little bit. We've always talked about our desire to increase our cash balance, which is what we plan to do right now. We have a number of different options. As you know, that convertible will come due in December in 2013, and we have to recognize that. At the same time, there's other good uses of our cash as well and we're a little bit hesitant to go into too much detail. We're still trying to formulate exactly what has to go down. But in the meantime, we are very comfortable that we do generate quite a bit of cash flow and we're going to continue to build up that cash balance.

The next question comes from Peter Bye from Jefferies & Company. Peter Bye - Jefferies & Company, Inc.: I'll push you a little bit more on the gross margins. Specifically, I appreciate the greater service revenue in Breast Health, but it's a pretty big sequential decline and you did grow Breast Health Service revenue in Q1 $12 million. So you only have to $2.5 million, sort of on a gross basis, sequentially. The PGM is down a lot. Is this the new level or was last quarter sort of an anomaly, in terms of what the gross profit is out of that, given from what you see from a backlog even with an improving April?

If we try to dissect the quarter, it was a combination of higher service revenue at the effective gross margins that Glenn summarized. But in addition to that, we really have a mix shift and we can't forget about that. And that mix shift is a higher content of Capital Equipment as well as our higher content of Capital Equipment being shipped outside the United States. All of which create what would appear to be gross margin erosion. So I don't want to put a stake in the ground and say that's our new level because as soon as we say that, we'll have a shift in the other direction and the Device businesses will have an up quarter or represent a higher percentage of our total revenues. And as a result, we'll have 100 basis point shift in gross margins for the positive. I think what we mean is the variability of this business from quarter-to-quarter. Peter Bye - Jefferies & Company, Inc.: You mean the Device business within Breast Health?

No, I mean, the Device businesses as represented by biopsy devices, surgical devices and to a lesser extent, ThinPrep. And what we have was a shift to capital in the quarter. So we shift more capital, and we shift more capital outside the United States. That's what created margin erosion compounded by a higher content of service. In the following quarter, we can have a pickup in the Device businesses, meaning breast biopsy, GYN Surgical and the like. And we'll have 100 basis point improvement in gross margin. I think, what we need to do when looking at Hologic is understand the diversity of the four segments and understand what happens when there is a change of the volumes in each of those businesses because they all are different and varying profit levels. And we have different profit levels when we shift in the states versus outside the states. So I guess what I'm saying is I think what we saw in the quarter is the reality of what happen relative to the nature of the sales in this quarter. That does not necessarily mean that the sales will follow that same nature from a profitability perspective next quarter. Peter Bye - Jefferies & Company, Inc.: I was actually more talking specifically in the Breast Health gross margin. We do model it by division. So that was down a fair amount sequentially. So that's pretty much as the international mix in the ASP there?

Yes. Peter Bye - Jefferies & Company, Inc.: A quick follow-up on, again, about from maybe some of the benefits you might start seeing out of whether volumes increase or not out of your facility, south of the border, how is that going? Can you talk to us about, was that something we'll see more fiscal 11 even if some offices stay maybe softer in fiscal Q3, fiscal Q4, we can get some offset from down there, and maybe just qualitatively or quantitatively or both?

Our sense is that we'll start seeing improvements in 2011 as we work through volume pickups on the Adiana product line. We think we've seen some absorption benefits on a NovaSure line of recent. We expect those to continue at a much higher level. But what we don't want to do is to shift the overhead problem from one product to the other. So in order to really, fully appreciate and benefit from Costa Rica, we have to get Adiana up to a reasonable volume level. Peter Bye - Jefferies & Company, Inc.: You mentioned on the backlog, April has improved. If you're going to pick now, May 3, are we talking it's better than the end of 297, which is 300 or is it closer to flat quarter-over-quarter if you sort of going to normalized it?

No, we felt that the backlog was a little bit of an anomaly seeing it drop at the end of Q2, the March quarter. And we saw a very strong tick up in April that we directly attributed to deals that we thought would close in March, for no real reason. So this would just add timing for a week or so. We don't feel that there's any kind of trend whatsoever. So I feel like the backlog even though we reported it down $20 million, $20-some million was really fairly flat between the two quarters.

Now we'll move to our next question from Tycho Peterson from JPMorgan. Tycho Peterson - JP Morgan Chase & Co: Maybe just kicking off with another question on Cervista. Can you just talk a little bit about your go-to-market strategy fleet? I know HTA fully-automated analyzer. I'm just trying to get a sense as to how much pent-up demand are maybe out there, if you could talk about it for a little while here?

Yes. I think, certainly, we have labs that are highly anticipating it and are waiting for it. With that being said, the majority of our customers have seen the offering that we have to our class one devices, our multipurpose instruments. And I think as they weigh the other benefits or the products that we've talked about numerous times as they sit there and they look at the results they provide a clinicians from a QNS perspective, grey zone, et cetera. I think, what they do is they look at what we have today. And they think that's a very fair offering, and it does cut the workflow from four hours and annual with our competitor to four and a half on our semi-automated and they can drop down to approximately 90 minutes. So they see workflow advantages to date even with what we have. Yes, they like the HTA in the future, but I really think they're looking at this as an opportunity to go out to the OB-GYN and differentiate themselves based on the benefit at that level which is again, QNS and grey zone. And I don't think the lack of having HTA is a deal breaker, although it will cost some customers to wait, but I think we are very competitive today without it. Tycho Peterson - JP Morgan Chase & Co: And will it be a full commercial rollout or will it be somewhat controlled a day. Are you talking a minute ago about NovaSure Gen 2 being controlled. Is it the same strategy or is it going to be for launch?

No, I think we'll go basically in the full launch. We have concluded plenty of testing by that time, both internally and externally, and we will be very confident in the instrument. So I would not see us putting ourselves into a position where we could not put enough hard work to meet the demand in the marketplace. Tycho Peterson - JP Morgan Chase & Co: I'm wondering if you could talk a little bit about just the competitive dynamic in mammo. It sounds like Philips has gone a little bit more aggressive in Europe. Can you just talk as to whether there's any kind of change in a competitive dynamic, both within the existing landscape, but also from modalities such as breast MRI?

I think that if we stay within Breast Imaging side and restricted the mammo for the moment. I think we're seeing pretty aggressive competition abroad. And that's primarily Siemens, and I think that's primarily Europe. I think if we move out to Asia, it's a GE and Fuji competitive threat. I think here in the states, it's really been a combination of GE into a lesser extent, Fuji on the CR front. I don't think the competitive dynamics have changed significantly, even six months ago. I think what's changing is that obviously, we're all scrambling over the same few stragglers now that haven't converted on a first-time digital perspective. So with respect to that, I think it certainly becomes a price battle and that is not something that we're particularly good at. But we have seem to prevail because of new configurations that we introduce in the market and the like. So I mean, I think it will get tougher when and if the FDA pronouncement about lowering the regulations here in the states occurs. I also think that it will get tougher. Siemens gets approval on the new platform here in the States. But I would say that as we look at the market, I don't see that as being a dramatic change as of yet. What was your second point, Tycho? Tycho Peterson - JP Morgan Chase & Co: Are you seeing more competitive threat from breast MRI?

You know what? I think there's a place for other modalities, be it functional imaging or breast MR. I think that the notion of there are always being a place for that kind of technology and that the quality that it brings to an improved diagnostic. We're screening for that matter and a dense breast sort of high-risk women. I truly believe that if anything, although there is a greater utilization of it, we will segment the market and the breast imaging market. We'll always use X-ray, at least for the foreseeable future because it is so efficient to use and it's at a price point that makes it easily adaptable to high volumes of screening. We also believe that with the introduction of tomo, that we at some point, when that becomes a reality in the United States that we'll have an opportunity to offload the magnet, particularly with those women that have dense breast and are in routine screening with what we believe to be the benefits of that technology for breast density. Tycho Peterson - JP Morgan Chase & Co: Just one last quick one on MammoSite. ML, are you viewing that as a market expander to kind of go into more complex cases or can you just talk about how you're viewing that market opportunity?

I think that we keep getting more conservative about what we think the overall market opportunity is for breast brachy, but we do believe that we open up an opportunity that puts us on an equal footing, if not better footing, than some of our competitors. And in fact, when we recover some of the share that we lost without having that product, we will focus on broader market adoption as well. But I would say that our opinion about the market is that it's probably the extent of that market is less than what we initially thought, and we say that because of recent guideline changes, some of the economics that surround external beam and so on and so forth.

And we'll move to our next question from Sameer Harish from Needham & Company. Sameer Harish - Needham & Company, LLC: Quick question on Adiana. Can you talk about where the share gains are coming from or is it coming competitively or do you think you're opening a few markets there?

This is Steve. We're pretty much taking competitive gains right now. We've gone into many accounts that currently use NovaSure and use our competitors' products as well. And those are the ones that have been quick to trial the products, and those are the ones where we're seeing the most gain. Sameer Harish - Needham & Company, LLC: And just in terms of the long-term outlook on gross margins. As you're balancing the international growth in some of the new products with higher margin, your faster growth at NovaSure and contribution from Adiana and the like. Where do you see gross margins sort of moving long term from here? Do you think international will be a drag as it gets larger or is it going to be offset by the newer higher-margin products?

Sameer, it's Glenn. I think today, as we look through for the balance of this fiscal year, we're in the 61% to 62% range. Now some of the things that are going to positively impact us, we believe will really hit in 2011 and that's really revenue growth. And that's going to be the number one item for us as we begin to cover more overhead. So if we think about the new products that'll be coming out over time, many of those products are the higher-margin disposable products as well, the Cervista, the Adiana, the new NovaSure product. We're all in the 70% gross margin range. So we do believe that when we do come out with '11 guidance, we'll be able to move the gross margin up as long as everything else has basically stabilized. And then hopefully, we get down to a point where we begin to see more Dimensions in the 2D mammography and then Dimensions in the 3D tomo that would take it another step even higher than that. But that's probably the 2011 plus time frame. Sameer Harish - Needham & Company, LLC: If I could just follow up with one extra on NovaSure, we talked a lot about the trends as far as patients load to the tradition. Can you talk about controller placements, how that's tracking versus the last couple of quarters?

Control placements are interestingly not that vis-a-vis indicator for our business. They're not really a KPI that we track. The majority of the surgeons out there that are doing global endometrial ablation already have access to some form of a NovaSure controller, whether it be at the hospital or in ambulatory surgery center or we've got several different programs that we put in place to get them in the physician's office as well. So it's really not the best metric to track. Unfortunately, there's not a whole lot of information beyond that.

And we have time for one last question and that will come from Bill Bonello from RBC. Bill Bonello - RBC Capital Markets Corporation: I just wanted to go back to Cervista one more time and make sure I understand. The timing that you mentioned in the high throughput automation, is that a change from what you had been planning earlier?

Yes, Bill. This is Howard. Yes, it's a change. At least, I would say the main purpose or the main cause is we've expanded some of the testing that we're actually doing to the validation phase of our product development process. And we're doing it -- I really think just to strengthen this submission before send it to the FDA. As we're becoming aware with all of our products, with stronger package you're sending on the front end, the higher probability you're going to have succes. And we're just taking the extra time to make sure that we have real tight clean package when we submit. It's just going to take a little bit longer period of time. Bill Bonello - RBC Capital Markets Corporation: And you're still thinking that's probably a 510(k) though?

No, it's a PMAs supplement? Bill Bonello - RBC Capital Markets Corporation: Any additional color you can give? You talked about the national labs, sort of rolling out the 1618 genotyping and I guess I was kind of under the impression that they've been doing that or offering that already, and so maybe if you can just give a little bit more color, what sort of adopting at a national level means versus what they had been doing?

Well, I think, what you probably heard is that they were in validation. And an active full-scale launch with our sales reps included started at the tail end of this past quarter. So there was a lot of infrastructure, reps being updated, test codes needed to be out there and so forth. And I just took time as well as the validation with the laboratory, but now both organization that's in combination with our sales team are actually really out pressing at the OB-GYN level this new offering. And I think before we get crazy, excited about the testing volumes, this is a very narrow indication of where you'll use genotyping, but I think its impactful, however, though it will be clinicians now exposed to just the Cervista brand for the first time and leveraging 1618 allows us to have a more global discussion about Cervista high risk as well. So we view this as a tremendous opportunity.

Thank you. That is all the time we have for questions today. This now concludes Hologic's Second Quarter Fiscal 2010 Earnings Call. Have a good evening.