Hologic, Inc.

Hologic, Inc.

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Medical - Instruments & Supplies

Hologic, Inc. (HOLX) Q1 2012 Earnings Call Transcript

Published at 2012-01-30 22:10:07
Executives
Deborah R. Gordon - Vice President of Investor Relations Robert A. Cascella - Chief Executive Officer, President and Director Glenn P. Muir - Chief Financial Officer, Executive Vice President of Finance & Administration and Director David P. Harding - Senior Vice President and General Manager of International Steven Williamson - Senior Vice President and General Manager of GYN Surgical Products Peter K. Soltani - Senior Vice President and General Manager of Breast Health Line of Business
Analysts
Amit Bhalla - Citigroup Inc, Research Division Anthony Petrone - Jefferies & Company, Inc., Research Division Tycho W. Peterson - JP Morgan Chase & Co, Research Division Jayson T. Bedford - Raymond James & Associates, Inc., Research Division William Carlile - Morgan Stanley, Research Division Sara Michelmore - Brean Murray, Carret & Co., LLC, Research Division Matthew Hewitt - Craig-Hallum Capital Group LLC, Research Division Isaac Ro - Goldman Sachs Group Inc., Research Division William R. Quirk - Piper Jaffray Companies, Research Division Richard Newitter - Leerink Swann LLC, Research Division Bill Bonello - RBC Capital Markets, LLC, Research Division Thomas Kouchoukos - Stifel, Nicolaus & Co., Inc., Research Division Jason R. Mills - Canaccord Genuity, Research Division
Operator
Good afternoon, and welcome to the Hologic Inc. First Quarter Fiscal 2012 Earnings Conference Call. My name is Melissa and I'm your operator for today's call. Today's conference is being recorded. [Operator Instructions] I would now like to introduce Deborah Gordon, Vice President, Investor Relations to begin the call. Please go ahead, Ms. Gordon. Deborah R. Gordon: Thank you, Melissa. Good afternoon, and thank you for joining us for Hologic's First Quarter Fiscal 2012 Earnings 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 will be made during today's opening remarks. The replay of this call will be archived on our website through Friday, February 17. Please also note that a copy of the press release discussing our first quarter fiscal 2012 results, as well as our second quarter and fiscal 2012 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 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 others, those detailed 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 update or revisions 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 first quarter 2012 earnings release, including the financial tables in the release. Please note, today's call will consist of 30 minutes of opening remarks from management followed by a 30-minute question-and-answer session. [Operator Instructions] I would now like to turn the call over to Rob Cascella, President and Chief Executive Officer. Robert A. Cascella: Thanks, Deb. Good afternoon, and thank you for dialing in to our first quarter earnings call. Joining me on the call is Glenn Muir, our Executive Vice President and Chief Financial Officer; Steve Williamson, our General Manager of our GYN Surgical business; Peter Soltani, our General Manager of our Breast Health business; and David Harding, our General Manager of our International Operations. Today, I'm going to cover just a brief summary of the first quarter performance. I'll provide some insight into what we experienced in terms of procedural volumes and capital equipment trends, update you on the launch of our Dimensions 3D tomo unit as well as provide an update on the growth in our digital mammography business overall. I'll provide an update on some of our key growth drivers and review our four-part growth strategy with you. Glenn will then discuss the financial results in greater detail and provide some color on our second quarter and fiscal '12 guidance, including increasing our fiscal year earnings guidance. We'll then open up the call for 30 minutes of Q&A. While we started fiscal '12 off very, very strongly with growth in all 4 of our operating segments, including robust double-digit revenue growth in Breast Health, Diagnostics and Skeletal, for the ninth consecutive quarter, we achieved record revenues. In Q1, revenues of $473 million increased 9% over the prior year's first quarter. We also improved year-over-year our non-GAAP gross margins in 3 of our operating segments. Our non-GAAP earnings per share were $0.34, $0.02 ahead of guidance and 13% above last year. We continue to execute on bringing new products to market with the FDA approval of our Cervista HTA; CE Marking of C-View; and the SFDA approval of our China manufacturing product, the Selenia -- the Serenity products, excuse me. Subsequent to the end of the quarter, we also announced the favorable outcome of our injunction hearing with Conceptus. And lastly, tomosynthesis was voted the hottest clinical procedure in 2011 as discussed in an AuntMinnie broadcast. AuntMinnie is a website that serves radiologists and imaging professionals. We're very proud to have our new product recognized by this panel of experts in a field through 2 rounds of voting. And now I want to spend a little bit of time addressing some of the economic trends that have impacted our business. As we previously stated, typical capital equipment spending trends in the U.S. are not relevant when a superior successor technology is introduced to a market. We are certainly seeing this with our tomo product and, to a lesser extent, with our Dimensions 2D. On an international basis, we are seeing solid growth especially in emerging markets. However, some developed countries are generally struggling, which puts pressure on buying patterns as well as pricing. Another concern is the further weakening in the euro and the impact this will have on dollar-denominated businesses. With respect to patient business in GYN exams, recent IMS reports are suggesting growth on a year-over-year basis, which has created a level of stability in such businesses when compared to a year ago. The belief is this trend will continue into 2012, which should help our ThinPrep business. On an o U.S. basis, the trends for screening exams have improved. Although they are as much consideration over the use of liquid-based cytology versus HPV on a global basis, there is not an immediate determination in sight, and consequently, our Diagnostic business is benefited by same. As we stated last quarter, however, treatment procedures for non-urgent care continue to face headwinds. This is largely due to unemployment in the United States and a generally weak global economy. Having stated this, market data would suggest for the first time in several quarters an increase in the number of U.S. office visits focused specifically on excessive menstrual bleeding. In short, there is more stability in certain markets in slow recovery. And while the situation in Europe will continue for some time, any negative impact on our business over recent quarters has been offset by emerging market growth. I'd now like to update you on some of the business units and I'll start with Breast Health. We continue to be very pleased what the traction both 2D and 3D tomo achieved in the quarter. Overall sales of Dimensions in the quarter were solid and we remain very optimistic about the long-term potential of this technology. In the U.S., a lower-end digital mammography business has all but ended. This market is mature with fewer and fewer systems being placed. The good news is the market is shifting to more full-featured systems capable of 3D. Our sense is no one is replacing a digital mammography system with one that is not at least tomo-ready. The result is an increase in ASPs, which we believe will fuel growth this year. Internationally, the situation is mixed as digital penetration varies greatly from market to market. In more developed countries, the interest in higher-end tomo-capable systems is present, while those markets that are still largely analog are converting to more entry-level systems, the exception being private pay centers where the latest technology is usually very appealing. Consistent with the information we provided last quarter, I'd like to update you on a few tomo specifics. We remain solidly on plan. We are approximately 27% of the way towards our 500 to 700 2-year unit goal of early adopters after only 9 months of a formal U.S. launch. Over the course of '12, we continue to expect 3D penetration to accelerate and to finish the year at 60%, which is the number we stated last quarter to you. We find it encouraging that the profile of tomo adopters is broader than we first expected. Although still early adopters, we're seeing the profile of buyers ranging from university research types to community-based hospitals or private imaging centers. All are vying for different reasons and not the least of which to gain share with the competitive edge provided by this technology. Tomo uptake outside the U.S. has also been steady. In the quarter, we exceeded expectations. We believe the introduction of C-View, which is our reconstructed 2D, will be one of the most important features in the acceleration of the technology. C-View addresses the Europeans' sensitivity towards those while still providing the benefits of a 2D image for reviewing priors and efficiently analyzing calcifications. Perhaps surprisingly, we are not seeing reimbursement as a primary gaining item in the acceleration of tomo here in the states. The fundamentals of what's going to be necessary to fuel growth are 2 things essentially. One is the ongoing clinical validation of the technology and the second is the market dynamic of regional competition by providers. We're working on both of these to assist our customers, but realistically, this will take some time to implement. Turning to an update on reimbursement. Let me start by saying that we remain on track with our strategy and we are experiencing some notable progress. As we discussed, we are currently working with our tomo customers to help them with implementing the American College of Radiology's guidelines on the use of our miscellaneous coding structure. We are finding around 70% of our U.S. customers are submitting claims that are being reimbursed anywhere from $30 to $70 for the tomo portion of the exam on top of the 2D portion and on the first pass. In fact, 65% to 70% of claims that are being submitted for 3D are successfully receiving reimbursement. We're very pleased also with the American Congress of Obstetrics and Gynecologists their belief and now being appropriate for them to educate their members on the benefits of this technology. We believe this will help in consumer referrals to sites using tomo. We're also pleased to report we are working cooperatively with the American College of Radiology on really routine and very positive constructive dialogue on the use of tomosynthesis. In addition, discussions with both Komen and the ACS regarding their support of this technology are moving positively as well. And confirming what we said last quarter, our estimated timeframe for reimbursement is unchanged. We believe that we'll secure code and an amount by the first half of calendar 2013. In order to garner the support of these organizations, however, continued validation of this technology is going to be necessary. To this end, we're extremely pleased about the level of clinical trial activity taking place and the eventual submission of results to peer-reviewed journals. The first of which was our FDA trial, which was submitted by Dr. Elizabeth Rafferty of Mass General, who is the principal investigator. The Oslo study, which was presented in summary at RSNA, is also progressing extremely well. They've imaged over 12,000 patients and they've experienced a meaningful increase in the cancer detection rate. And these are early-stage cancers. They're invasive cancers and they, in fact, were node-negative. So very early stage. And all of this was accomplished by even a slight reduction in the recall rate. So impressive cancer detection improvement with a reduction in recall. There are also several other studies underway, some of which are going to be presented at the upcoming European Congress of Radiology Conference in March. Now I'd like to discuss the status of some of our other important growth drivers. While tomo is certainly attracting a considerable amount of attention, there are many other businesses that we focus on in terms of the future of Hologic, the first of which being our Diagnostic business. This franchise is a great example of a strong market-leading cash flow business complemented by a rapidly growing emerging technology. The conventional Diagnostic business, our ThinPrep franchise, has been particularly resilient over these challenging times. Glenn will share with you the growth specifics, but in general, we're seeing a strong recovery with growth fueled by international successes and a much more stable U.S. market. We stated in the past that we thought the U.S. business will erode at a rate of about 2% to 3% a year, but that's not the case this year. The reality over the last year has been a slowly recovering volume with relatively stable pricing. We also think we've gained some additional share with competitive takeaways. The result has been a domestic ThinPrep business at flat volume levels. Internationally, we have seen solid growth, led mainly by the incremental dollars from our TCT acquisition and pockets of growth in Brazil, Japan and selected European markets. We expect the international growth to be sustained throughout fiscal '12 especially as we continue to penetrate more emerging markets. This is simply a strong ThinPrep quarter. In fact, on a unit basis, we had our second highest quarter in the product line's history. With respect to molecular, the business grew over 25% on a year-over-year basis with Cervista contributing nicely. We once again posted impressive revenue growth for Cervista on a year-over-year basis driven by new customer account wins, growth at existing accounts and higher international volumes. We now have over 230 lab customers in the U.S., most have been competitive takeaways and all without our fall automation product. We believe the approval of our HTA or High Throughput Automation system dramatically changes the competitive landscape in this business and allows us to now compete at a much higher level of penetration, seeking to garner accounts from the mid- to high-volume labs and expand our market opportunity. Given the advantages of the HTA system in streamlining the extraction, analyses and detection steps, we believe we are well-positioned to leverage the early successes of our semi-automated tests. We now have the advantage of a well-proven assay and first-class automation, leveraged by the significant market presence of ThinPrep and the extension of reach of our physician sales team. Our objective is to grow this market and we now have the building blocks in place to do so. Internationally, we believe our Medium Throughput Automation product, which received CE marking in Europe last quarter, is an appropriate level of automation for the small- to mid-sized labs predominant to these regions. We are happy with the progress to date and have already placed several systems for evaluation at critical customer sites. In addition, we are excited to have SFDA approval in China for Cervista and to now have this product offering in this very exciting geographical market. From a product development perspective, we continue to invest heavily in proprietary assays and expanded functionality of our instrumentation. Our focus has been to broaden our STD offerings deliverable through our ThinPrep bio and which can run on our automation platforms. Our CT/NG and Trichomonas assays are progressing on plan. We intend to start our clinicals this year and submit to the FDA in 2013. Now turning to our GYN Surgical business. And Glenn will report on specific financial performance, but as projected, we continue to face some headwinds with our NovaSure product line. We were encouraged, however, that sequentially the business grew 5% from last quarter but believe it's a significant subset of women and our target market are deferring these nonurgent treatments. These are the high cost of deductibles and co-pays. We are pleased with the latest IMS data, which indicated an increase of office visits specifically for excessive menstrual bleeding. We view this as very favorable, and although not a direct impact on the quarter's revenue, we believe it is an indication of increased patient awareness. And we further believe our DTC campaign is a contributor to this increased awareness. During the calendar year of 2011, we generated nearly 250,000 requests for information, almost 95% being incremental to our normal run rate. This has had a positive effect on patient awareness. We estimate the incremental revenue pull-through from our DTC campaign has been $10 million in the quarter and just over $30 million programmed to date. So one has to ask, "Why are we not seeing this in terms of incremental revenue growth?" As we have stated in the past, we believe the economic climate has delayed the uptake of these relatively expensive procedures. We firmly believe this is a temporary condition, and longer term, NovaSure will prevail based solely on its superior efficacy. In an effort to ready ourselves for this spending -- for the pending market movement, we have added to our surgical sales force and are poised to take advantage of this increasing wave of awareness. I'm optimistic we will see a definitive turn in NovaSure demand by the second half of '12 as the economy further stabilizes. Glenn will report on the performance metrics of our other products within surgical, but I wanted to comment on the continued excitement we're having over our MyoSure acquisition. This product will continue to have double-digit quarter-over-quarter growth for the balance of this year. Within the context of some other key drivers, I'd like to speak to our international expansion. As you are aware, we meaningfully entered the Chinese market last year with acquisitions of TCT and Healthcome. We believe this China business more than triples over the next 5 years and reaches annual revenue of $300 million during the same time period. TCT has already added nicely to both revenue and earnings and the recent SFDA approval of Cervista HPV will help grow our presence in China significantly. We believe this market will initially be served with manual offering, so the current version of Cervista should gain quick acceptance and when linked to an 16/18 assay will provide a powerful combination. In addition, in December, the SFDA approved our Serenity digital mammography system ahead of our expectations. Serenity enables us to penetrate the emerging entry-level market with a superior performance alternative to competitive offerings. Remember, this product incorporates the same best-in-class Selenia detector technology as our higher end products. While the initial launch of Serenity will be limited to the Chinese market, our expectations are to use this product in other price-sensitive emerging markets throughout Asia, Latin America, Eastern Europe and eventually India. I'd now like to briefly review our 4 pillars of growth. As a reminder, we expect to continue acceleration of our revenues and earnings, achieving double-digit compound growth by 2015. To achieve this, we're focused on driving solid organic growth, building out our product portfolio through continued investment in R&D, expanding internationally and pursuing our tuck-in acquisition strategy. We are on track with all of these initiatives, specifically in the quarter we posted attractive organic top line growth of 6%, excluding any acquisitions. Our successes on new product approvals over the last 12 months speak to our commitment to R&D, namely FDA approvals of tomosynthesis; our Sentinelle prostate coil and 16-channel breast coils, the Trident, especially in radiography system; and finally, our HTA system. In addition, we received SFDA approval in China of Serenity and Cervista HPV as well as CE marking in Europe for C-View and Cervista MTA. As for international expansion, I just spoke about our opportunity in China. Clearly, we are very enthusiastic about the potential and we have the building blocks now in place to even expand our growth further. We also are making ongoing investments in other countries, such as adding infrastructure and additional distribution in places like Asia and Latin America. Finally, as I believe this quarter's results will demonstrate, our recent acquisitions have provided us with important technologies to strengthen existing franchises and to fuel future growth. We will continue to invest in product line extensions, ideally those that leverage our existing sales and marketing infrastructure with leading-edge technologies that possess strong clinical advantages. In summary, we're very pleased with the first quarter's performance. Worldwide demand for our 2D and 3D Dimensions systems is extremely promising. The approval of HTA and the CE marking of MTA will enable us to drive further growth in our Diagnostic segment and we're also encouraged by the stabilization in the U.S. market of ThinPrep. We expect to reverse the softer trends of NovaSure and our GYN Surgical segment and we expect ongoing substantial growth from MyoSure. Finally, we will continue to take advantage of considerable opportunities to introduce our broad and growing portfolio of exciting products in the emerging markets we serve. Thank you very much, and with that, I'd like to turn the call over to Glenn Muir. Glenn P. Muir: Thanks, Rob. Consolidated revenues of $472.7 million this quarter versus $432.6 million in Q1 of last year grew $40.1 million or 9.3%, exceeding our expectations. We saw growth in all 4 operating segments with double-digit year-over-year growth in 3. Our Breast Health segment was the largest contributor to this overall growth, increasing $20 million or 10.2%. Diagnostics again experienced strong performance, increasing $15 million or 10.8%. GYN Surgical revenues were up 3.8% and Skeletal Health grew 10.3%. FX had no impact this quarter. If we exclude the revenues from the 3 acquisitions we made in fiscal 2011, our organic growth was approximately 6% and our acquisition-related growth was 3%. Breast Health revenues grew to $215.4 million this quarter from $195.4 million in Q1 '11. This growth of 10.2% came from a $14.1 million or 10.9% increase in product revenues and a $5.9 million or 9% increase in service revenues. Breast Health product revenues primarily benefited from the continued shift in sales from Selenia to Dimensions mammography system. In addition, our breast biopsy products continued to gain market share, and once again, we had a record quarter with sales up 24% year-over-year. Our digital mammography product sales increased to $77.3 million in the quarter, representing 36% of total Breast Health revenue. Service, at $70.9 million, was 33% of total Breast Health revenues. Looking closer at digital mammography, product sales were 8.4% higher in Q1 of last year. On a sequential basis, digital mammography revenues, as expected, were lower than Q4 '11 due to the usual delayed purchasing decisions ahead of the RSNA meeting in late November, early December. This was highlighted in the guidance we previously provided for Q1 and we actually realized stronger growth than we had expected in the quarter. The year-over-year growth was driven by a significant increase in both units and revenues of our Dimensions line, which accounted for 62% of digital mammography product revenue and 50% of units. This sales mix is consistent with Q4 '11 and sharply higher than the 37% of revenues and 30% of units just one year ago when we were still only commercializing 2D Dimensions in the U.S. These numbers do not include software upgrades to 3D from 2D Dimensions, which did increase substantially year-over-year and also sequentially. The upgrades to tomo represented approximately 15% to 20% of total tomo unit sales this quarter as existing Dimensions customers look to add 3D capability to their practices. Overall, we continue to be pleased with the adoption of 3D tomo and strongly believe that over time all 2D Dimensions sold will upgrade to 3D. As Rob indicated, at our current run rate, we are well on our way to hit our target of shipping 500 to 700 tomo systems in the U.S. within the first 2 years. Switching to our other segments, Diagnostics revenues were $154.1 million with year-over-year growth of 10.8%. Over half of the growth in Diagnostics was driven by an increase in ThinPrep revenues, the majority of which came from our acquisition of TCT with the rest coming from increased international volumes. In Q1, TCT contributed revenues of approximately $13 million, of which 85% were from sales of ThinPrep. As noted in our earnings release, TCT contributed incremental ThinPrep revenues of approximately $7.3 million in this quarter as they have been our partner and distributor for over 10 years. This was the second full quarter we owned TCT and we remain ahead of our original internal projections. We continue to expect close to 20% annual revenue growth in fiscal 2012. ThinPrep unit volume worldwide increased 6% year-over-year and surpassed last quarter's total, now making this volume level the second highest total ever on a worldwide basis. The U.S. market is currently stable and we continue to penetrate the international market. Molecular Diagnostics also contributed to the year-over-year growth in the Diagnostics segment with a 30% year-over-year increase in revenues from our Cervista HPV product line. This growth occurred both domestically and internationally. In GYN Surgical, revenues grew 3.8% year-over-year to $78.5 million. MyoSure sales contributed to this increase, while a decline in NovaSure tempered the growth. Adiana sales were essentially flat. Nonetheless, NovaSure sales improved sequentially with a mid- single-digit improvement versus Q4 of '11 as a result of our DTC campaign, which helped to drive slightly higher procedure volume. Also, on a sequential basis, we grew MyoSure revenues over 40% and we expect strong double-digit growth to continue. Skeletal Health reported solid growth of 10.3% this quarter with revenues of $24.7 million, up from $22.4 million, led by an increase in bone densitometry product sales. Regarding the international performance, we continue to experience solid growth given our focus on international expansion. This quarter, international revenues reached a new high of $117.5 million, which comprise 25% of total revenues. This represents the same percentage as last quarter and is up from 22% a year ago. Turning to the rest of the P&L. Gross margins on a non-GAAP basis were 62.5%, up 50 basis points from last year driven by improved gross margins in 3 of our 4 operating segments. This quarter, the Diagnostic Group contributed the largest gain due to increasing overall volumes and the added contribution from including TCT in China. Our overall gross margins met the high end of our guidance range of 61.5% to 62.5%. Regarding operating expenses, non-GAAP expenses of $151.4 million came in near the low end of our guidance and increased 11.1% from a year ago and 5.4% sequentially. The increase primarily rose from costs associated with our TCT, Healthcome and MyoSure acquisitions. R&D still remains an investment priority and is on track with our targeted range of 6% to 7% of revenues. OpEx was also favorably impacted by the deferral of certain clinical trial-related expenses out of Q1 and into Q2 due to timing. Non-GAAP earnings exclude certain items that are fully detailed in our earnings release. Our adjusted pretax income this quarter was $136.4 million versus $121 million last year, an increase of 13%. Using our annual effective tax rate of 34%, non-GAAP adjusted net income rose 13% to $90 million compared to $79.9 million for the same period last year. We reported fully diluted non-GAAP EPS this quarter of $0.34 versus $0.30 a year ago, an increase of $0.04 or 13% and $0.02 above our guidance of $0.32. Essentially, this $0.02 peak versus our guidance came 1/2 from better-than-expected revenues and 1/2 from lower-than-expected clinical trial expenses. Turning to the balance sheet. Our cash balance totaled $794 million, up approximately $81 million or 11% from the end of fiscal 2011. This growth is primarily due to the continued strong generation of cash from operations. Historically, we have certain large cash payments due in the first quarter of our fiscal year and this quarter was no exception. Such payments include bonuses, interest on convertible notes and the earn outs, these totaled to combined $57 million this quarter. Regarding free cash flows, we generated approximately $97 million this quarter, consistent with Q4 '11. The current quarter's cash flows were comprised of approximately $112 million of cash flows from operations, less capital expenditures of $15 million. The total dollar backlog for all of our products was $260.6 million, which was down $3.4 million or 1.3% from $264 million at the end of September. The decrease was primarily in Diagnostics and due to the timing of orders. Breast Health was up $3 million or 3%. As a reminder, due to the wide diversity in our products, the backlog is not a good indicator of our revenue trend. Moving onto guidance. For the second quarter of fiscal 2012 ending on March 24, we are expecting revenues of $470 million to $475 million. Year-over-year, this reflects a 7% to 8% increase in revenues primarily due to the contributions from our TCT acquisition, organic growth across all 4 of our business segments and increased sales of our new products, such as Dimensions and MyoSure. Our guidance assumes constant foreign-currency rates with the end of Q1 '12 this quarter. We expect gross margins of approximately 62% to 62.5% on a non-GAAP basis. We expect non-GAAP operating expenses of $150 million to $155 million or approximately 32% to 33% of revenue, which is slightly higher on a sequential basis from Q1, as the expected increase in R&D expenses from various clinical trials, some of which were pushed out from Q1, will offset the usual sequential decline we see in Q2 in sales and marketing expenses. We expect non-GAAP interest expense to be approximately $10 million, excluding $19 million of noncash interest expense related to our convertible. Our non-GAAP effective tax rate is expected to be approximately 34% and we expect non-GAAP earnings per diluted share to be approximately $0.33 on diluted shares outstanding of $267 million. We are guiding to EPS slightly below that of our first quarter due to the timing of the clinical trial costs we expected to cure in Q1 that will now cure in Q2. For fiscal 2012, which ends on September 29, we are reaffirming our total revenue guidance range of $1.9 billion to $1.925 billion, which represents growth of approximately 6% to 8%. This guidance reflects our expectations that, first, Breast Health will grow in the mid- single digits, led by Dimensions and breast biopsy; and second, Diagnostics will grow in the high single digits, led by TCT and Cervista HPV; and third, GYN Surgical will grow in the high single digits, led by MyoSure and a rebound in NovaSure. We expect contributions from our 3 fiscal 2001 acquisitions to account for approximately 200 basis points of the total top line growth. We are guiding to non-GAAP gross margins of 61.5% and 62.5% for the year. The key driver to future margin improvement is the expected increase in revenues. We continue to expect non-GAAP operating expenses to be $590 million to $600 million, up approximately 5% to 7% from fiscal 2011. This reflects the additional costs primarily associated with the full year of TCT, Healthcome and Interlace. We are expecting interest expense to be approximately $42 million, excluding $79 million of noncash interest expense related to our convert. We are expecting a non-GAAP effective tax rate of 34%, and we are increasing our non-GAAP EPS guidance by $0.01 to a range of $1.36 to $1.38, which implies growth of 8% to 10% year-over-year. We expect 269 million of diluted shares outstanding for the year. We remain mindful of the various economic headwinds and best continue to be fairly conservative with our guidance. At the same time, we do expect to grow all 4 of our operating segments. Looking into the remainder of FY '12, we are optimistic that many of our new products, such as tomo, MyoSure, Cervista and several others that Rob mentioned, along with our expanding international presence in China, will all contribute meaningfully to our performance. Turning to the cash flow guidance. We are reaffirming our free cash flow expectation of approximately $400 million to $425 million, which continues to be driven primarily by our operating earnings. As you're aware, capital expenditures are not a big part of our business and we are expecting steady CapEx of $50 million and depreciation of approximately $65 million for the year. And in summary, we are encouraged by the strong start to the year as we see contributions to growth from each of our business segments. We expect this to continue fueled by increased contributions from our recent acquisitions, our expansion into international markets and the opportunity 3D tomo presents as the replacement market develops and tomo becomes recognized as the standard of care. And with that, let me turn the call back to Rob. Robert A. Cascella: Yes. Thank you, Glenn. Just to close, we're very confident that we have one of the finest product portfolios in the company's history today. And although there are many external challenges that remain, we believe Hologic's poised for sustained growth over the next 5 years. I want to remind everyone about the upcoming ECR in March and thank you for your participation on this call. We'll now be pleased to answer all of your questions. And operator, you can open up the line for Q&A.
Operator
[Operator Instructions] And our first question will come from Amit Bhalla from Citi. Amit Bhalla - Citigroup Inc, Research Division: So I wanted to just ask you a question, Rob, on leverage for the rest of the year. I think you've talked about in the past that if you could grow the top line 6%, you could see some real leverage in the business. This quarter, you grew 9% and the outlook looks pretty stable from here on out. So can you comment on your latest views on earnings leverage? Robert A. Cascella: Yes, we'll hold to some of the estimates that we gave out earlier relative to, I think, once we cross over that 6% revenue growth or top line growth. Because not all of our expenses are variable, we start reaping the benefits at a much higher rate. So this quarter was a pretty strong top line growth at 9% and what we saw was a strong revenue -- or earnings benefit as a result of that. Now, as Glenn indicated, some of that was due to the fact that we had a deferral of some of our clinical expenses, but the -- a good 50% of that overage was because of just an operating benefit. Amit Bhalla - Citigroup Inc, Research Division: And just my follow-up is on the Surgical business. So you've made no change to your guidance of high single-digit growth. And I know you're expecting the second half of the year to be stronger, but you're also going to face some tougher comps in the Surgical business in the back half. So why not change that growth guidance at this point because you have to be growing well into the double digits to beat it? Robert A. Cascella: Yes, Dave, you're in for that. David P. Harding: Yes. I guess when you look at our business with NovaSure, there's 2 key things that you want to look at. The first is where we have lost some share over the last couple of quarters when we launched the MyoSure product and some of the peripheral accounts. Now that we've got the sales reps on, we've got them through training, we see a regained focus on these smaller accounts to make sure that not only are we bringing them MyoSure but we're keeping -- we're growing the NovaSure business there. I think more importantly, something that Rob talked about were the IMS visits. As you probably are aware, IMS tracks about 640 different codes, and the 3 that we really pay attention to are total OB/GYN visits, which are women going into an OB/GYN for any kind of visit at all. The second is really annual exams and the third is excessive menstrual bleeding visits. We've typically seen that excessive menstrual bleeding visit number going down over prior quarters and the business has kind of tracked with that. Now that we see an increase there and we couple that with the more sales force that we've put in place, I think we've got some strong catalyst for growth in that business. And that's why we didn't revise the guidance there.
Operator
And next we'll take our question from Anthony Petrone from Jefferies Group. Anthony Petrone - Jefferies & Company, Inc., Research Division: Just a couple on Diagnostics and one on NovaSure to follow-up. You mentioned just on NovaSure a second-half recovery kind of baked in there as well. So I'm wondering if that does not develop, at what point do you kind of reconsider the DTC program for that product line? And then on Cervista, can you just explain, with HTA now approved, how you avoid the potential cannibalization of the ThinPrep business now that you're selling both offerings? Robert A. Cascella: Yes, sure. I think with respect to NovaSure, Steve, why don't you give some color on that?
Steven Williamson
As far as the DTC program goes, we have really revisited it. We've changed it from getting out there and just getting information into these women's hands to focusing on conversion tactics, so getting those women to actually take action based on the information that they've received. I think this is probably one of the key contributing factors to this IMS growth rate that you've seen. Now these women have been given information. They've been told and shown how to take action and then they've taken that and they're going to the doctor and we're seeing that in the IMS visits. So we don't think that that's all going to pour through to us. We have some pharmaceutical and non-GEA competition out there, but I think this change in tactics is starting to pay off for us. And that's what we're expecting to see moving forward. Robert A. Cascella: Yes, and as far as the dynamics between our HPV business with HTA and our ThinPrep business, we think there's a long way to go with HPV. I think initially, certainly there's going to be a greater rate of co-testing and potentially an interval expansion. We have not seen that thus far and I think it's because we're coming off of a couple of very, very low years or eroded years. I think, over time, over the long term and let's say that's a 3- to 5-year period, yes, we would believe that in addition to the market growing in HPV that we'll see interval expansion and some pricing compression on our cytology business. We are not seeing that today and we do not anticipate seeing that in a meaningful way throughout '12.
Operator
We'll now go to Tycho Peterson from JPMorgan. Tycho W. Peterson - JP Morgan Chase & Co, Research Division: Just thinking about some of the data you guys presented or that was presented by Mass General and, also on others at RSNA, can you talk to the degree to which the improved sensitivity that's representative of the data that has been kind of replicated in the field? I know you're hearing this from a lot of the early adopters. You also talked about having a broader set of early tomo adapters, but to what degree are they reporting improved sensitivity that we've seen in the data thus far? Robert A. Cascella: Yes, anecdotally -- and I'll let Peter comment as well, but anecdotally, I think it clearly supports what the clinical trials have suggested and that we are hearing from sites all over the country, if not the world, about increased sensitivity or higher detection. Peter, you may want to add? Peter K. Soltani: No, I would agree with that, that we're seeing fairly similar results really globally at all of our sites. But again, right now, it's a little bit anecdotal of [indiscernible]. Tycho W. Peterson - JP Morgan Chase & Co, Research Division: And how much of that is a focus to your discussions with payers? Robert A. Cascella: It will clearly be a significant element of the arguments and positions that we present. I think the 2 pieces of our payer justification will be higher sensitivity or detection and also savings from a reduction in recall. So we're finding that these prospective trials that are being done certainly support higher sensitivity or detection and we have continued to promote the fact that there is a reduction in recall. So it is both elements that I think will be important to payers. Tycho W. Peterson - JP Morgan Chase & Co, Research Division: And then my follow-up on the China opportunity, you've put some numbers out there. Can you just help us think about how we should think about box numbers for Serenity in China? Are we talking hundreds? Or I mean, how do you think about the opportunity over the next couple of years for box placements? David P. Harding: Yes, this is David Harding. I think it's a little bit premature to give real specifics there, but I think in a couple of years' time, it should be in the hundreds for sure. We'll start it out relatively slow this year, certainly less than 100 for the remainder of this fiscal, but we hope to see that ramp very rapidly in strong double digits over time.
Operator
We'll now go to Jayson Bedford with Raymond James. Jayson T. Bedford - Raymond James & Associates, Inc., Research Division: Just one quick one on the gross margin. It looked like your fiscal '12 guidance was 61.5% to 62.5%. You just put up 62.5% with increasing revenue for the rest of the year. I guess, what would bring the gross margin line down outside of mix? Glenn P. Muir: Yes, it is the mix though, Jayson. That is primarily what will affect it. So when we look at Q2, and the reason we guided down slightly for Q2 from where ended up on Q1 was the belief that Breast Health was going to have a stronger quarter than Q1. And the Breast Health margins, I mean, we're talking mid-50% type of gross margins versus the over 70% that we have on the Diagnostic disposable products. So the mix shift is the biggest contributor. But if we are successful in driving that top line revenue, that also is going to help us hit more the top end of that range. Jayson T. Bedford - Raymond James & Associates, Inc., Research Division: Okay. And just as a quick follow-up for clarification, Dimensions, you mentioned 62% in digital product revenue, which looks like it's about, let's call it, $48 million. This doesn't include the upgraded software, is that correct? Glenn P. Muir: The 62% does include, on a revenue basis, the upgraded software. So as we look at Dimensions, which is 62% of that total, that includes both 2D and 3D, so that includes the tomo as well. And of the 3D that we're selling today, we're only converting 15% to 20% of those are really upgrades of a pre-existing Dimensions unit. So that's been slow the last few quarters. That was not where the initial focus was on 3D, it was selling new systems, but we are beginning to see an increase in that software upgrade as well.
Operator
And next we'll go to David Lewis with Morgan Stanley. William Carlile - Morgan Stanley, Research Division: This is Bill Carlile, on for David Lewis. Looking at your tomo penetration and the targeted set of centers that you've been guiding us to for a while, you're in the 500 to 700 early adopters, and now you're mentioning that there are some centers beyond that set that are starting to adopt tomo. And maybe could you clarify about what percent of the tomo placements that you're getting right now stand outside that set of 500 to 700 centers? Robert A. Cascella: Yes. I think when we look at it, and I want to also be clear because we're seeing a difference in what the definition of an early adopter is. I don't think we're seeing incremental sites, so I first want to make that statement. And if we do look at the difference between research university type versus community hospital, imaging center, it's about 50:50 today in terms of the profile of the current buyer. And I think the part that is maybe different, too, that is a bit of a surprise is, in university setting, and although that was what we believed our first target market is, I think they are struggling because they don't always know how to integrate a tomo unit into their practice where the imaging centers are doing it at a much faster rate because they see the commercial value in it. So that's where we may be trading off some of the research university type customers with private imaging centers over this very near-term period of time since we've introduced a product. William Carlile - Morgan Stanley, Research Division: And has this dynamics really taken place over the entire course of the tomo roll out? Or has it accelerated, I guess, since data came out at RSNA? Robert A. Cascella: That's a good question, Peter, I don't know if we have that kind of information, but what is... Peter K. Soltani: So I mean, first of all, it's too soon after RSNA, but I would say it's been roughly about the same. I don't think there has been any particular trend one way or the other.
Operator
And Sara Michelmore from Brean Murray has our next question. Sara Michelmore - Brean Murray, Carret & Co., LLC, Research Division: Yes. I just wanted to clarify your comments on the timing of this Oslo study. So it sounds like in 12,000 patients, that's essentially half the patients, the target patients have been screened at that point. Do you need that study to be entirely complete to have the data you need? What's the timeframe in which you could receive some of that data? And is that still the study you think is the most important as you go out and try to talk to payers about reimbursement? Peter K. Soltani: Sure, this is Peter, yes. When we spoke with Dr. Scott, who's the PI on the study at RSNA, his goal was to try to publish the data from the halfway point, which was roughly around 12,000, 13,000 patients. So we're hopeful that he will still do that sometime, say, in the next 6 months or so. And just as a reminder, it is a collaboration with folks at UPMC at Pittsburgh. So we do expect that that data will have tremendous value, both in the U.S. as well as outside of the U.S. So, yes, it will be a factor in our reimbursement efforts. Sara Michelmore - Brean Murray, Carret & Co., LLC, Research Division: Okay. And then just a clarification, Rob. You'd talked about that reimbursement may not be as big a gating factor in some of these early adopters as you might've thought. How important do you think the reimbursement is at this point? Can you just give us your updated thoughts on is this really what you need to have an inflection point? Or have your thoughts evolved on that? Robert A. Cascella: Sure. Over all, in the broadest of assessments, yes, reimbursement is going to be necessary in order to get into the far reaches of the mammography installed base. I think over this period that we are now living through, which is this pre-reimbursement 2-year cycle, it is not reimbursement that is the factor that's causing either the acceleration or non-acceleration of the product. It is much more related to customers getting comfortable with the clinical validation and we think that's happening every day. And two, as more and more sites buy tomo and we're in about 38 or 40 states today with it, it is creating a competitive dynamic in state and city or in community, which in and of itself is driving further adoption. So we think those 2 elements of the tomo rollout is what's more important today than even reimbursement.
Operator
And our next question will come from Matt Hewitt with Craig-Hallum. Matthew Hewitt - Craig-Hallum Capital Group LLC, Research Division: Just there's been some companies that are selling a little bit more capital equipment centric products that have been a little bit more conservative with their guidance from the year. And obviously, you've just put up a very strong first quarter. It sounds like you expect that to continue given the adoption. But meanwhile, you've had Moody's and both S&P are talking about some of the hospitals and their outlooks being negative. I'm just wondering how you balance the 2 sets. You've got strong growth and conversion versus issues at hospitals, sorry. Robert A. Cascella: And it was a little bit of a comment that I made during my script that we don't think the traditional capital spending trends always apply when there is a new successor technology, which has the potential to obsolete that, which is the incumbent technology, but what ends up happening as a result is that there is an urgency in buying it because it is better. It may be clinically is better, from a marketing draw, it's better. So there are monies that would be rationed towards this new technology where perhaps those same dollars would not chase after the upgrade of a new ultrasound platform, the upgrade of a new MRR platform or a CT platform, because ostensibly, you're really just -- you're getting a very measured level of improved functionality where this is a displacement technology, and as a result of that, it is garnering more dollars. So our level of confidence is, I want to say, we've seen this kind of trajectory in the days of digital and we believe that the benefits of tomo are far more compelling over digital than digital was to analog. And that's what's giving us a sense of early confidence.
Operator
We will now take a question from Isaac Ro from Goldman Sachs. Isaac Ro - Goldman Sachs Group Inc., Research Division: I wanted just to probe a little bit more on tomosynthesis. Just going through the numbers, I think you had mentioned 27% penetration of that initial market in last quarter, I think 20%. And so just given the RSNA conference and that sort of tailwind you've got, what are the expected -- maybe a little bit of an acceleration greater than you saw. So maybe if you could just help give us a view of the backhaul you've got -- you have in that business exiting the quarter. And then maybe an addition to that, give us a sense of what the impact to gross margins was from your tomo mix just given how big it is now. Robert A. Cascella: Yes, I'll take a crack at the issue of RSNA. I think as Peter said earlier, we're coming off RSNA, which was literally in the month that we were closing the quarter. So trying to see some strong activity that results from the RSNA interest probably isn't practical to think that Q1 was going to be the quarter that we would see that. As a matter of fact, I mean, as people get excited and budget dollars are reallocated, I mean, it is clearly a 3- to 6-month selling cycle. So I think we're seeing great interest and a lot of activity, but realistically, it's not like just turning the light switch on. It is going to take a few months to get that momentum behind the products. Isaac Ro - Goldman Sachs Group Inc., Research Division: Great, and if I could just kind of follow-up on that question about gross margins. You guys had obviously got a reasonable amount of mix in your Breast Health business now coming from tomo. So what impact has that had on your improvement year-over-year for gross margins? Can you maybe quantify how much that helped? Glenn P. Muir: Yes, Isaac, I mean, I don't think there's an easy answer to try to quantify the actual gross margin amount from tomo. It clearly contribute to the higher gross margin. So Dimensions themselves, those 2D or 3D units, they themselves are at a considerably higher price point than the Selenia unit, which we're now moving away from. So that's giving us the first push forward. And just to repeat, to us, selling Dimensions is really the key whether it's 2D or 3D, because we do believe that in the future, every Dimension out there is going to upgrade to 3D to be able to offer the tomo capability. So it is all contributing in a positive way to hitting that 62.5%, but it's pretty difficult to quantify this quarter exactly what the percent was. There's a lot of mix between the disposable products and the capital equipment side, but it will be significant. The tomo margins are considerably better than the older Selenia margins, which are under 50%.
Operator
We'll now go to Bill Quirk with Piper Jaffray. William R. Quirk - Piper Jaffray Companies, Research Division: Yes. First off, Rob, you're talking more positively about utilization trends, really not in just one product category but across a couple of them. And you also just speak consensus, not on the other hand touching toppling guidance. So I guess, first question, what do we need to see or I guess what are you perhaps maybe more comfortable with in terms of the business in order to bump that number up? Robert A. Cascella: Yes, I mean, it's a great question and I would say, look, this is the first quarter of our fiscal year. We're comfortable that we saw some very positive results. We also saw, I think, a bit of a recovery relative to utilization ends and it's across a couple of product lines, as you indicate. It was just a little early for us to feel as if we wanted to up our guidance on the top line at this point in time. I think we saw it on the -- obviously, we passed our earnings benefit through for the year, but I think as this year unfolds, we'll get much more confident about -- relative to revising our revenue forecast. William R. Quirk - Piper Jaffray Companies, Research Division: Understood. And then as a follow-up, if we think about the HPV space, Rob, we got a couple of new competitors here over the past couple of quarters. What are you seeing, if anything, in terms of average ASPs? Robert A. Cascella: Yes, I think the segment of the market that we're playing in has been fairly insulated. It's the low- to mid-tier lab. I think where we're going to see some more aggressive pricing is in the higher volume labs. And I think that's a market that we're now going after, but it is clearly incremental revenue for us. So I know I won't anticipate margin erosion for us, but I do believe the AEPs are going to be lower than what they've been historically.
Operator
And we'll now take a question from Rich Newitter from Leerink Swann. Richard Newitter - Leerink Swann LLC, Research Division: Just one on tomo. Glenn, you had mentioned that you're happy, of course, to sell a 2D that's 3D capable or the full thing all in and activated. Can you break down for us maybe what the mix is of the actual systems that are being placed that are fully activated? Is it most of them kind of coming in and being used or people kind of just waiting to see and getting ready to turn it on at some point in the future? Glenn P. Muir: Yes, below the -- of the Dimensions unit, the 2D and 3D, which comprise 62% of digital mammography, so the balance being the Selenia systems, which has been a big reversal on one year, so shifting to Dimensions, of that total, less than half are the 3D tomo. So the bulk of the Dimensions today are still going out in the 2D format. So I think what you're seeing happening in the marketplace is there's a lot of interest in having 3D tomo or having the capability of having in the future because of what people are hearing and not wanting to be locked out of the market. So they're moving to the Dimensions 2D to protect that upgrade path. Richard Newitter - Leerink Swann LLC, Research Division: Got you. And then just maybe to follow-up on that further, are these mostly customers that were just in the market? They were kind of among the earlier bunch to convert to digital and they're approaching their replacement cycle. Or is there just something else that's driving to make their decision? Peter K. Soltani: It's Peter. I think it's probably a little bit of both. I mean, there are certainly customers who are in their natural replacement cycle looking to update their equipment and will have sought to get additional funding to move up to 3D. So it does represent sort of the mix.
Operator
And we'll now move on to Bill Bonello from RBC Capital Markets. Bill Bonello - RBC Capital Markets, LLC, Research Division: Completely switching gears, you guys have almost $800 million of cash on the books now. I'm just curious sort of what it would take for you to rethink your capital allocation policy and perhaps become a little more active or active on share repurchase and maybe, even God forbid, a dividend? Glenn P. Muir: Yes. Well, Bill, I think I don't know if you can never have too much cash and we're very pleased with that balance. But when we look at our capital deployment strategy itself, I think we'd feel differently if we didn't think that they were tuck-in acquisitions that fit within our distribution and product categories that we might be interested in, in the future. So I think that continues to be a priority, including setting some cash aside for some of the earn outs that we have coming up during the remainder of the fiscal year. So we are still interested in looking at those tuck-ins and we're also interested, number two, in reducing the leverage from our debt, the convertible notes that we have outstanding. And, as you know, we have a piece of that due, a tranche of it due in December 2013. And, I mean, it's clearly far enough away for us to do a lot of different things. But our preference would be to begin to de-leverage a little bit with those notes. So I don't think a share repurchase is out of the question, but I think, at the moment, we believe we can drive a greater return by focusing on some of these tuck-ins. And you know what? We kind of walked through it last time. I mean, when we look at the tuck-ins, number one for us is we look at an IRR, we also look at a payback, we also look at the accretion to the EPS. So all of those factors come into play when we take a look at what we can do in the marketplace. Bill Bonello - RBC Capital Markets, LLC, Research Division: Okay. And then just as a follow-up to that, I mean, when we think about acquisition strategy, I mean, tuck-in sort of as big as we need to think about, is there any chance that you do something that's a bigger $500 million kind of spend? Robert A. Cascella: I think we would define a tuck-in by how it fits within the organization so not so much about the price of it or the value that it brings. So it's about a technology that we think we can leverage with our sales and marketing infrastructure and possibly our factories and things like that. So I mean, I think it's maybe a little bit all over the map relative to the appropriate target, the expected rate of return and how well it fits within our existing infrastructure.
Operator
And we'll now go to Thomas Kouchoukos from Stifel, Nicolaus. Thomas Kouchoukos - Stifel, Nicolaus & Co., Inc., Research Division: Just I think as following on Tycho's question from earlier about the China opportunity with Healthcome, maybe a different way of asking, I think you talked about kind of a gradual ramp out with that Serenity product. I guess another way to ask is, how much market is there today in terms of revenue for that application? And then what do you feel you're losing out on by not having a low-end system in those regions? David P. Harding: Well, I think it's a little bit premature to say what precisely the size of the China market is. This is David Harding, by the way. The mammography market in China is still really developing. It's at a very nascent stage. And so we feel that we are going to grow with that market. And certainly, as Rob indicated earlier in his comments, we hope that our overall China business will get to a $300 million mark in 5 years. So a good chunk of that will be in the Breast Health space. And we hope that the Serenity product will occupy a large chunk of that. Right now in the other emerging markets, we're really using our value-oriented Selenia offering to capture those things and really take some of that market share. So we don't feel like we're necessarily losing a lot of opportunity right now, but we feel that we can actually accelerate our growth by deploying even more value-oriented Serenity product in the future. Thomas Kouchoukos - Stifel, Nicolaus & Co., Inc., Research Division: Okay. That's helpful. And then one follow up. Just I know it's very early and I think you just rolled this out in January, but on HTA, any anecdotal info you can provide just to how the system's performing and maybe what accounts are thinking at first run at this? Robert A. Cascella: Yes, I think it's -- we're pleased with the product relative to its reliability, uptime, its performance. I mean, the FDA approval process was quite rigorous. So we know that it works well and we have a very stable assay now. So we're focusing on some of our existing customers that were using our sample transfer technology that are now going to full automation with the HTA as well as some of the sites that were still under an ASR. So we're -- I mean, it's a limited successes today, but all of the sites that we've installed, the product into today are enjoying good success with it. So it's a lengthy process, as you indicated; long validation times, a lot of extra training and so on and so forth. So I think we'll have probably more to report when we issue our second quarter results.
Operator
And we have time for one more question today and that question will come from Jason Mills from Canaccord. Jason R. Mills - Canaccord Genuity, Research Division: A lot of my questions have been asked and answered, so I have a few P&L questions. Glenn, how do you think about your sort of an esoteric line on your P&L, but your tax strategies moving forward over the long term, just given the scale of your business internationally and the growth internationally as well? Glenn P. Muir: Well, I think, Jason, there is an opportunity for us. We've never taken full advantage of any kind of offshore operation, either manufacturing or with our technology on the R&D side. And as we begin to expand in China, that is one area that we're taking a look at, the technology and transferring some of that to get some benefit. But I think you're probably referring to a 34% tax rate and how do we bring that down a little bit? Jason R. Mills - Canaccord Genuity, Research Division: Yes. Glenn P. Muir: Yes, and a part of it is 75% of our sales are here in the United States and this is where the majority of our manufacturing is. So it's harder for us to take advantage of some of the other, I think, tax strategies of offshore. But those are the areas for the future. Jason R. Mills - Canaccord Genuity, Research Division: Okay. And then in the middle of the P&L, I mean, curious to note sort of the growth over the last, say, year or so in the headcount or resources that are applied directly to selling the product, both domestically and internationally, so then how do you see that transforming over the next couple of years with the opportunities you've talked about not only in China but Latin America? Perhaps a need to add to selling resources in those geographies relative to your expectations for the top line growth that could come from those initiatives as well. Robert A. Cascella: Yes, and I don't think we'd see significant headcount additions in that area. When we talk about infrastructure additions, we're looking at really our own salespeople that would be in country supporting our dealers. So it's a handful of people on a country-by-country basis and they're really defined to assist as sales specialists. So we found that to be very, very successful in different parts of the world and we will continue on with that strategy. But I don't think there's any plan underway that would suggest that we need to add another 200 or 300 salespeople on a global basis at this point.
Operator
And ladies and gentlemen, thank you. That is all the time we have for questions today. That now concludes Hologic's Fourth Quarter and Fiscal 2012 Earnings Call. Have a good evening.