Well, good afternoon, ladies and gentlemen, and welcome to Hologic Incorporated Third Quarter Fiscal 2013 Earnings Conference Call. My name is Kelsey, and I'm your operator for today's conference. Today's conference call is also being recorded and all the lines have been placed on mute. I would now like to introduce Deborah Gordon, Vice President, Investor Relations, to begin the conference. Please go ahead, Ms. Gordon.

Thank you, Kelsey. Good afternoon and thank you for joining us for Hologic's Third Quarter Fiscal 2013 Earnings Call. The replay of this call will be archived on our website through Friday, August 23, and a copy of our press release discussing our third quarter results, as well as our fourth quarter and fiscal 2013 guidance, is available in the Overview section of the Investor Relations section of our website. Also in that section is the PowerPoint presentation related to the comments that will be made during today's opening remarks. Before we begin, I would like to inform you that certain statements made by Hologic during the course of this call may constitute forward-looking statements. These statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from any future results implied by such statements. Such factors include those referenced in our Safe Harbor statement in our third quarter fiscal 2013 earnings release and in the company's filings with the Securities and Exchange Commission. 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 also be found in our third quarter earnings release, including the financial tables in the release. [Operator Instructions] I would now like to turn the call over to Jack Cumming, President and Chief Executive Officer.

Well, thank you very much, Deb, and thank you all for joining us today. Joining me here in Bedford is Glenn Muir, our Executive VP and CFO; Dr. Rohan Hastie, our Group Vice President of Diagnostics; and David Harding, our Group Vice President of Women's Health. It's now been just over 2 weeks since I returned to the role of CEO at Hologic, and I've spent this time meeting with many of our key members to better understand the challenges Hologic faces today and the many opportunities ahead. But first, I'd be very remiss if I did not thank Rob Cascella, our former President and CEO, for his many years of service to Hologic and for his leadership. I worked with Rob for more than a decade and appreciate his many contributions to the company, our customers, the senior team and the board. Rob was instrumental in Hologic's efforts to grow its footprint in the women's health industry and position itself to succeed in the rapidly growing molecular diagnostics market. For myself, obviously, I'm truly excited to return to the company as CEO. I say return, but as many of you know, I really never left. Since 2009, I served as Global Strategic Adviser, primarily focused on our international business. During this period, I spent considerable time meeting with Hologic's key clinical opinion leaders and important customers around the world, which has given me a unique perspective on our business. I intend to use this experience to foster more innovation, improve our execution, develop a more balanced plan for uses of our cash and increase shareholder value. Hologic's success is rooted in our team's acute focus on delivering the most technologically advanced medical products the industry has to offer. My recent meetings with the associates from all of our operating…

Thank you, Jack. Before I begin, some of you may have seen in the 8-K that was filed today that I have resigned from the Hologic Board of Directors. As you know, it is considered best practice for our company's board not to include the company's CFO, and the board and I agreed that this made sense for Hologic as well. I will continue to serve as CFO. I will begin tonight with a review of our third quarter results, including a detailed update on our segment results, our balance sheet and cash flow profile. I will then discuss fourth quarter and full fiscal year guidance. Unless otherwise noted, my commentary on third quarter changes will be on a year-over-year basis. Third quarter revenues increased 33.2% due to the addition of Gen-Probe and, to a lesser extent, due to a record number of placements of our 3D tomo systems. Foreign currency had a negligible impact on revenues. On a pro forma basis, revenue growth was 2% compared to the prior year, when adjusted to include Gen-Probe for Q3 of last year. Legacy Hologic revenues were up 2% and Gen-Probe revenues were up 2% as well. All the aforementioned growth rates exclude divested businesses, such as LIFECODES and Adiana, in both quarters. Now turning to the segment results, starting with our largest segment. Diagnostics revenues of $297.4 million represented 47% of total revenues this quarter, increasing $138.7 million or 87%. Keep in mind that Diagnostics revenues no longer include LIFECODES, which historically contributed approximately $10 million to $12 million per quarter. Within our legacy Diagnostics business, our overall ThinPrep revenues declined approximately 6% year-over-year as a result of the continued adoption of extended screening intervals in the U.S. and lower international pricing. However, worldwide ThinPrep volumes were up sequentially and year-over-year.…

Thank you, Glenn. Today's Hologic platforms and products are unique to the industry, which together, will drive organic growth and strong free cash flows. While in the past, we have focused our cash flows on fueling growth through transformative acquisitions, our clear direction going forward will be on maximizing the value of our existing assets and technologies. We intend to utilize our free cash flow to pay down debt and we are evaluating ways to distribute capital to shareholders, as we have spoken on this call. I look forward to updating you on our progress and providing the additional details on our new vision for the future of Hologic on our next call. Lastly, I'd like to thank our incredible team of highly passionate associates. Making a difference in the lives of women is what drives us. It permeates every aspect of the company and is the fabric that binds us together. I want to thank them again. And with that, we'll ask for questions.

[Operator Instructions] We'll go first to Amit Bhalla with Citi.

This is Nick in for Amit. First, let's talk about guidance for fourth quarter. It seems like you're lowering about $30 million at the top. You said it was a mix between 3D tomo and Panther pull-through. Can you talk about the mix between both of those back, forward, and how is that going to impact 2014 and how we think about guidance going there?

Look, as we discussed in our call, we're seeing good results in our key growth products, which is 3D tomo and Panther. But having said that, as we sit here today, we don't have the acceleration in growth rates necessary to achieve that prior guidance. And we're seeing pricing pressures in Diagnostics, as well as pressure in the ThinPrep business due to testing intervals. And based on the trend, I believe our revised guidance represents what I think is a realistic expectation for the fourth quarter. Do you want to add more color?

Yes, no. Jack, that's right. Nick, let me see if I can help fill that in a little bit. I think our Q4 guidance is meant to provide a more realistic view, especially after our Q3 results. I mean, as you know, our Q3 results, even though we were within the range of guidance that we had provided, it was at the low end and that is not what we were expecting. So we did do a full reset for Q4. If we think about the decrease going into Q4, there's really 3 pieces to keep in mind, and 1/3 of the decrease does relate to the 3D tomo product itself. And we had embedded in our original guidance a much greater acceleration for tomo at the back end of the year, the back half of the year. We were expecting a bit stronger adoption, thinking that the clinical studies would be a little bit further along. And as Jack said, we're getting tremendous feedback on tomo itself. I think it was just slow to materialize in the back half of the year. The other 1/3, really as you mentioned, does have something to do with Panther, really the pull-through of assay sales on the Panther itself. And to a certain extent, we were expecting a faster ramp-up as labs began to adopt the Panther itself. We had a record Panther placement quarter. We're well on track for the 1,000 PANTHERs we're expecting. The assay pull-through was a little bit slower than we had originally felt it would be. And then finally, the last 1/3, Nick, would relate to the ThinPrep. I think the interval expansion is having a bit more of an effect than we originally assumed that it would have during the year. At the same time, we are seeing much in the way of competitive takeaways on that ThinPrep product. But nonetheless, the market decline is high-single digit on the product itself. Hopefully, that wasn't too much color on Q4. As it relates to FY '14, I think that's going to be something we'd be more comfortable talking about at the November call.

Okay, I appreciate it. If I can sneak one more in, maybe on tomo. What is the reimbursement update there? Is there -- what is the latest timing assumptions? Has that changed at all? And talk about the dynamics with the premium pay, what are you expecting to get paid on the premium? And is there any potential that, that may not be a premium pay?

Well, if I worked for CMS, I'd probably have the best answer for you. The reality is that we don't know. I can tell you on a today basis that, through private payers, there's a range of anywhere from $30 to $70, and that's from a pretty broad cross-section of major insurance companies across the country. Where CMS goes, I can't tell you that. But there is a lot of data that they can look at because of discussions with payers, with discussions of women's groups, etc. The timing again is -- it's really in their hands. I'll be going to Washington, as I said in my script, and talking with the stakeholders that have certainly helped us, and that is the women's groups. There are congresswomen and men and senators in both parties that are firmly behind us, because they've looked at all these clinical papers and they see the benefit to it. Obviously, we're optimistic. But we -- I just can't put a date in it on what I have today.

Our next question is from Isaac Ro with Goldman Sachs.

If I could ask a 2-parter. On the first part, just given your earlier comment there on the ThinPrep, what is your operating assumption in the current utilization, kind of, procedure environment for the growth rate on a global basis for ThinPrep? And the second question would be on the financials. Can you put some kind of gating factors around your expectations on capital -- on cash use going forward? And specifically, should we assume that share repurchase or anything of that nature will be sort of mutually exclusive to debt service? In other words, you're going to kind of pay down the debt to your target before you do anything on the repurchase?

Well, we'll let Roe answer the first one on ThinPrep and you are correct on the second one. But go ahead.

This is Roe. So yes -- and in answer to the question on ThinPrep, obviously, the majority of the market is here in the U.S. And right now, I think we're seeing adoption of intervals occurring at about a high-single-digit, low-double-digit rate year-over-year for the market as a whole. And I think when you look at our business, that we're not seeing a rate of decline to that extent right now, and that primarily due to share shift that we're seeing or to it taking some market share away, both at the physician level, from the physician selling efforts, but also at the lab level. We're trying to -- we're getting market share there. So we're not seeing rates quite that high right now. In terms of the international markets, it really does depend on where you are. There are headwinds in certain of our markets, for example, Belgium, Holland, United Kingdom, where you're seeing more of an adoption of HPV within the cervical cancer screening guidelines, where previously you may have had a reflex test onto cytology, where we would have double-dipped, if you will. Now that is being taken up by HPV. But then there are other markets in the world where the growth opportunity is tremendous. So for example, Latin America, Japan, and places like that, mostly China, where we see a lot of growth for those markets, where the conventional path is the test of choice for cervical cancer screening right now.

Thanks, Roe. And Isaac, maybe I could answer the second part of your question on the cash use, share repurchase and the net debt, whether it's exclusive or whether you can do both. And I mean that's a great question but -- and I wish I could be a little bit more specific. But that is what we're currently running an analysis for, for the board. I mean, that is exactly what we're looking at. I mean, our first priority is to continue to rapidly deleverage the company. And what we believe is that there will be a point in time, and that is what we're analyzing, that we can, in fact, be returning capital to shareholders. I'd like it -- I'd like to believe it could be earlier rather than later, but we do have to finish the analysis. I think what's important here though, is it's a commitment on our part not -- really not to do acquisitions. I mean I think that's what the signal here is. And for us to find better ways to use our strong cash flow, because I think that is what's really important to in Hologic and something we've always had is very strong cash flow.

Moving on to Tycho Peterson with JPMorgan. Tycho W. Peterson - JP Morgan Chase & Co, Research Division: Just wanted -- as we think about the portfolio review, I'm just wondering if you can talk a little bit about how you're approaching that process, your willingness to maybe sell businesses for less than the acquisition price you'd originally paid for them. Maybe just talk about how you're thinking about the portfolio review and any sense of timing on when you might communicate things?

Well, I don't think that we want to sell anything that -- for less than we paid and we have not certainly made any decisions in -- with that regard. Tycho, we're going to look. There's going to be full-blown presentations by the key leaders in the businesses. Obviously, today we made an announcement installing Roe and David to run our 2 core businesses. And they are going to assemble their team this week, next week. They're putting together their strat plans, which were already in progress for 2014. And we're going tick and turn every one of the numbers, and we're going to look at the R&D pipeline and where it's going, what is commercially the most viable products to invest in. Obviously, we look at OpEx, but we're looking at where we can drive revenues over the course of the next 3 to 5 years, what we've done right, what we could have done better. So it's going to be a full analysis of every product that we have and what its value is as part of our entire portfolio. Tycho W. Peterson - JP Morgan Chase & Co, Research Division: And then in your comments earlier, you addressed realigning the management comp. Should we just assume that this factors in a higher component on ROIC or any specific color you can provide on that?

I really can't. This has been at -- the board has handled this themselves for the past year and we have a meeting with them in September, where this is going to be reviewed. They have brought in outside experts to work with them on this. And at that point in time, we'll be going through this with them. But everything is going to be aligned, as I said in my talk.

David Lewis of Morgan Stanley has the next question.

Jack, it's pretty clear that change is the theme of this call and you're clearly a key part of that change. And one thing that strikes us is that you had the CEO title, but you have a shorter contract than your peer CEOs. You don't have board representation. So can you help us understand and shareholders understand how those various dynamics make sense in light of the need for strategic change and frankly, in light of the time it may take to create that change? And I had one follow-up.

Okay. So David, are you offering to be my agent? Is that what you're saying?

I'm always available, Jack.

Thank you. Well, I've been here for, I guess, almost 12, 13 years. And every year, it's a 1-year contract. So it's no different this year than any other year. So I'm pleased with that. If I do well, then I'll be here for the year after that. But it's certainly, you're here at the board's will. I think that there is going to be a lot of -- there's no doubt there's going to be a lot of work ahead of myself and David and Roe over the course of the next year, and we're going to do our best to get our arms around the business and make sure our dollars are spent judiciously in what's going to give us the biggest return on our investment. We're going to add people to the team, which is going to help us. Certainly, the board wants succession planning in place for all major managers, including myself, and that is going to be addressed for this year. So I think we're going to be in good shape. Again, I'm here to do the job. And as long as the board is pleased with it, then I'll continue.

Jack, that's very clear. Then maybe just a follow-up question. In your prepared remarks, this commentary of management has come up several times. You talked about bolstering management, but it did sound from your remarks that it was more incremental, more associate-driven hiring. Does this mean no material senior-level hires? And how are sure you that's the right decision, just because you've been there only 2 weeks?

Exactly the opposite. We're looking to bring in -- we have -- we've got some great products here, and to make them even greater with the team that we have, to bring in some very creative innovative people, especially in the technology area, so those are senior people. As we go through the portfolio, as we understand where the drivers are for our business, it will be, again, people on the senior team that will be added from the industry. It will be outside the company. Certainly, we look within the company and we'll promote from within because that is what every company wants to do, and we'll fill some of those slots. But we are going outside and we want people with a different perspective from like industries that can add something and give us a new slant and help us bring products to the market more efficiently, help us in the downstream marketing of these products. And so it has to be senior people.

Our next question will come from Vijay Kumar with ISI Group.

A lot of moving parts on the call and then Jack, maybe I want to get back to the earlier question that Tycho asked and your answer was interesting, that you said you would not consider selling any assets less than what you paid for. Now I just want to go back to that comment because maybe the market conditions when you made these deals were different, maybe the growth assumptions were different. It's a different market environment now. I just wanted your sort of thoughts and how you value [indiscernible] in the current [indiscernible]

Vijay, I don't know if that's you breaking up or... [Technical Difficulty]

I don't know if that was you breaking up on the phone. But to answer your question, first of all, the board and the company has made no decisions on divesting any of our products. What they've asked for is a full review. In the full review, obviously, you're establishing value and how that fits into your product portfolio. That's number one. Number two, where we're going to go over the next 3 to 5 years drives some of those decisions? But we would not announce to the Street anything that we're going to divest if we -- if, in fact, we ever did, nor that we would announce until we were going to do an acquisition. That's what all companies do unless they're going to hold an auction. So consequently, this company is not entertaining any of that. We're looking at each product and its contribution to the company, how it fits to the overall portfolio and how it's going to fit with the overall portfolio over the next 3 to 5 years. I don't want anyone in our company thinking that we're going to sell out a division from them and I certainly don't want that to be a Street assumption. But we're going to look at everything, and we're going to then determine where it fits in our strategic objectives.

We'll now hear from Shaun Rodriguez of Cowen and Company.

So the Quest deal clearly got a lot of focus, I think, primarily initially in the context of assessing HPV dynamics. But as you noted, there's a lot of potential outside of that. So can you speak more specifically about the opportunity within Chlamydia and gonorrhea, what the incremental share potential is within that customer in Chlamydia and gonorrhea and maybe what the timelines for when this might materialize would look like?

Shaun, thanks for the question. It's Roe again. Yes, so obviously, this is an important partnership for us and we're very, very happy that we signed it and we're working with Quest. We didn't actually have that much CT/NG revenue in Quest. They did do some of it and they did very little of our HPV. They did a little bit of our Cervista testing. And obviously, they do ThinPrep. But with this agreement right now, the hope is that -- it is a 5-year, nonexclusive agreement, that the hope is that the majority of the Chlamydia and gonorrhea will be migrated over to our platforms, and then a majority of our HPV testing will be carried over as well. But CT/GC, you can expect that to probably occur and start to see material contribution from that next quarter. HPV will be a little bit slower than that just because of the time it takes to validate HPV tests. It is -- it takes longer to migrate an HPV test over than it does for Chlamydia and gonorrhea. So HPV will take a little bit more time in that regard. And in Trichomonas, Quest did very little Trichomonas testing with us. So we hope that, that will start to contribute materially again next quarter. So it will take them time to ramp up. I will tell you that we're working very hard. Our service organization is working very hard in getting instruments installed and getting ready to get the switch on over there at Quest.

So this is a related follow-up. So that sounds like a pretty good opportunity for you, guys. So I guess the other related question would be, how should we think about the impact of -- on pricing for this relationship? If it does expand beyond HPV as you just described, how should we think about the pricing impact over the next, call it, 18 months or so, as they get fully ramped?

Well, Shaun, I think -- I won't speak about the specifics of the Quest engagement. But I think if we look at the market in general, I think our peer groups have alluded to this and spoken about this as well, but there is no doubt that CT/GC pricing is coming under pressure in the market right now, which is of very little surprise considering the number of vendors that are chasing that business. So I think that CT/GC AUPs will come under some pressure. I think from the flip side and the positive side for us is now having Panther Chlamydia and gonorrhea and Panther HPV. I think we're going to target that mid-volume market segment, where AUPs tend to be higher anyway. So I think any offset that -- we should like to see a little bit of the offset from the AUP compression in those higher-volume labs that is purely, purely driven by competition.

Moving on to Rich Newitter with Leerink Swann.

I just want to start off, maybe Glenn or Jack, either of you, can you give us a little bit more behind the tempered kind of 3D outlook for the fourth quarter? It sounds like you had your record quarter. Just maybe help us understand, is it a little bit more on the hospital spending or capital spending environment that maybe got a little bit more cautious with respect to your outlook or more just on some of the catalysts you were looking for? And is there anything with reimbursement that factors into that?

I'll let David answer this.

Yes, thank you. So I think while we are still very bullish about the overall tomo growth pattern, there are a couple of things that happen as we increase our overall tomo sales level. First of all, we begin to reduce our service revenues. So for each new tomo system that is sold, those obviously go on warranty and reduce our service revenue. So a lot of the reduction in overall Breast Health revenues going into Q4 is a close function of the reduction in service revenues and not necessarily an indicator of declining tomo sales. That being said, the capital spending environment in hospitals, across the U.S. and internationally, is under great pressure. We certainly see that in a lot of international markets as well. And in addition to that, Q4 tends to be a challenging quarter for the international markets, where places like Europe, Middle East and other places tend to go on extended holidays. So there are a number of things driving that. But I would say the vast majority of the challenge that we're facing is really along the service revenue side of things.

And reimbursement has not had played any role in that at all.

Okay. And then just maybe, looking to your fourth -- fiscal fourth quarter call, Jack, it sounds like you will have had a little bit more time to regroup, potentially, the board to make some decisions. Can you give us a sense of what we can expect? Is that the call where we might get a detailed kind of longer-term plans for debt pay-downs, what the capital allocation priorities will be and the timelines for all of those, or adjusted timelines?

Yes, certainly. You -- especially, when it comes to capital allocation, that will certainly be one of the highlights of the fourth quarter call. We also -- with our guidance that we're going to give you at that point in time, we'll be able to give you greater insight into the markets looking forward, depending on what the headwinds are. It's only a couple of months from now but -- or actually, 1.5 months, what's going to be happening. We're all facing, lots of different companies, the same headwinds. Luckily, I mean, we have -- and it shouldn't be minimized, we had a very strong quarter in tomo. We had a good quarter in Panther. We continue to see that. So those are really the highlights. What's offsetting it is when you get AUP pressure and volume reduction in the ThinPrep area just because of the extended interval. But we'll get a better look at that and we'll give you some better insight on that call.

And Jayson Bedford with Raymond James has the next question. Jayson T. Bedford - Raymond James & Associates, Inc., Research Division: I'll just keep it to one question here. The cost structure exiting the year here will be $175 million, $180 million on the OpEx line, by your guidance. It's obviously down quite a bit since the beginning of the year. Are there any big expenditures planned in fiscal '14? Or could this level even come down further?

Glenn?

Well, we weren't really prepared to talk about FY '14, Jason, but I think we've reset a new base for the company. I think the expectation would be for growth in FY '14. Jayson T. Bedford - Raymond James & Associates, Inc., Research Division: Expense growth off the fourth quarter level?

Expense growth off the Q4, yes. Jayson T. Bedford - Raymond James & Associates, Inc., Research Division: But are there any big expenditures or...

We don't have -- yes, well, we -- I think we've done -- as we talked about on the cost side, I think throughout all of FY '13, we've been very successful in driving down costs with our internal cost initiatives and then second of all, with the Gen-Probe synergies. And at this point in time, we're now over $65 million in Gen-Probe synergies. So we've been successful in driving a lot of cost out of that business. It's unlikely, going into FY '14, there's anything else to drive a lower expense rate. But on the converse, there's really no big expenses that we're looking at, other than the normal operating increases.

Yes. And you might see some things in the -- classic with SAP and Oracle. You have -- as we -- as you buy a company, there are some benefits and then there's some spikes. And we're looking at that right now to see where that's going to be. I mean, we could see a blip in that for next year. But that's the only major one that I see right now.

And ladies and gentlemen, we do have time for one further question. That's from Anthony Petrone with Jefferies Group.

Just one on Clinical Diagnostics, one on Breast Health. I think, Glenn, you referenced low-single-digit growth in Chlamydia and gonorrhea in the quarter and it sounds like there was some pricing pressure. So I'm wondering if that step-down was all pricing pressure. And if not, is there something else going on there in the quarter that we should be aware of?

No, it is all pricing pressure that we're seeing out there. We're holding well on our volumes. We do see a little bit of AUP uptick when we place PANTHERS over our older DTS systems. So that's positive for us from an AUP perspective. But volumes are holding steady for us as a business. The major effect is the decrease in AUP.

Then maybe just a quick follow-up there in terms of Quest. How many systems actually do you expect to place with that contract over time? Is it a substantial number of systems or are the systems largely in place and we'll just see an uptick in reagent volume as we move forward with that contract?

I can't give specific numbers, but there will be a considerable number of instruments that one would expect, with Quest being 25% of the Chlamydia and gonorrhea testing market within the U.S. There will be a commensurate number of new instrument placements for service in that volume. And I should add that, that is really what is happening this very moment, is those instruments are actually being placed across the Quest network of testing.

And Ladies and gentlemen, we thank you so much. That is the time -- all the time we have for questions today. And this concludes our Hologic's Third Quarter Fiscal 2013 Earnings Conference Call. Have a good evening.

Thank you.