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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________________
FORM 10-Q
__________________________________________________________
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 25, 2021 or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to Commission File Number: 1-
HOLOGIC, INC.
(Exact name of registrant as specified in its charter)
Delaware 04- (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 250 Campus Drive, Marlborough, Massachusetts 01752 (Address of principal executive offices) (Zip Code) (508) 263- (Registrant’s telephone number, including area code)
*Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, $0.01 par value HOLX NASDAQ Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.: Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐^ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of January 27, 2022, 249,984,116 shares of the registrant’s Common Stock, $0.01 par value, were outstanding.
HOLOGIC, INC.
INDEX
Page PART I – FINANCIAL INFORMATION Item 1. Consolidated Financial Statements (unaudited) Consolidated Statements of Income for the Three Months Ended December 25, 2021 and December 26, 2020 3 Consolidated Statements of Comprehensive Income for the Three Months Ended December 25, 2021 and December 26, 2020 4 Consolidated Balance Sheets as of December 25, 2021 and September 25, 2021 5 Consolidated Statements of Stockholders' Equity for the Three Months Ended December 25, 2021 and Year Ended September 25, 2021 6 Consolidated Statements of Cash Flows for the Three Months Ended December 25, 2021 and December 26, 2020 8 Notes to Consolidated Financial Statements 9 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 32 Item 3. Quantitative and Qualitative Disclosures About Market Risk 47 Item 4. Controls and Procedures 48 PART II – OTHER INFORMATION Item 1. Legal Proceedings 49 Item 1A. Risk Factors 49 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 50 Item 6. Exhibits 51 SIGNATURES 52 EXHIBITS
HOLOGIC, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) (In millions) Three Months Ended December 25, 2021 December 26, 2020 Net income $ 499.2 $ 653. Changes in foreign currency translation adjustment (37.8) 17. Changes in value of hedged interest rate swaps and interest rate caps, net of tax of $2.6 for the three months ended December 25, 2021 and $(0.2) for the three months ended December 26, 2020. Gain recognized in other comprehensive income, net 7.9 0. Loss reclassified from accumulated other comprehensive loss to the statements of income — 0. Other comprehensive (loss) income (29.9) 19. Comprehensive income $ 469.3 $ 672. Components of comprehensive income attributable to noncontrolling interest: Net loss attributable to noncontrolling interest — 1. Comprehensive loss attributable to noncontrolling interest — 1. Comprehensive income attributable to Hologic $^ 469.3^ $^ 673. See accompanying notes.
HOLOGIC, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited) (In millions, except number of shares, which are reflected in thousands, and par value) December 25, 2021 September 25, 2021 ASSETS Current assets: Cash and cash equivalents $ 1,420.8 $ 1,170. Accounts receivable, less reserves 975.6 942. Inventories 518.3 501. Prepaid income taxes 30.3 25. Prepaid expenses and other current assets 561.2 528. Total current assets 3,506.2 3,168. Property, plant and equipment, net 554.3 564. Intangible assets, net 1,650.5 1,659. Goodwill 3,329.4 3,281. Other assets 244.7 245. Total assets $^ 9,285.1^ $^ 8,919. LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current portion of long-term debt $ 248.7 $ 313. Accounts payable 202.2 215. Accrued expenses 632.4 596. Deferred revenue 192.1 198. Finance lease obligations 3.3 3. Total current liabilities 1,278.7 1,326. Long-term debt, net of current portion 2,819.6 2,712. Finance lease obligations, net of current portion 21.3 22. Deferred income tax liabilities 242.9 250. Deferred revenue, net of current portion 20.2 20. Other long-term liabilities 383.3 368. Stockholders’ equity: Preferred stock, $0.01 par value – 1,623 shares authorized; 0 shares issued — — Common stock, $0.01 par value –750,000 shares authorized; 297,885 and 297,306 shares issued, respectively 3.0 3. Additional paid-in-capital 5,964.0 5,965. Retained earnings 797.5 298. Treasury stock, at cost – 45,988 and 43,653 shares, respectively (2,156.4) (1,989.4) Accumulated other comprehensive loss (89.0) (59.1) Total stockholders’ equity 4,519.1 4,218. Total liabilities and stockholders’ equity $^ 9,285.1^ $^ 8,919. See accompanying notes.
Stock-based compensation — — 13.9 — — — — — 13. Net income — — — 328.8 — — — — 328. Other comprehensive income activity — — — — (16.9) — — — (16.9) Balance at September 25, 2021 297,306 $ 3.0 $ 5,965.8 $ 298.3 $ (59.1) 43,653 $ (1,989.4) $ — $ 4,218. Exercise of stock options (^45) — 1.9 — — — — — 1. Vesting of restricted stock units, net 534 — (22.4) — — — — — (22.4) Stock-based compensation — — 18.7 — — — — — 18. Net income — — — 499.2 — — — — 499. Other comprehensive income activity — — — — (29.9) — — — (29.9) Repurchase of common stock — — — — — 2,335 (167.0) — (167.0) Balance at December 25, 2021 (^) 297,885 $ 3.0 $ 5,964.0 $ 797.5 $ (89.0) 45,988 $ (2,156.4) $ — $ 4,519.
HOLOGIC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In millions) Three Months Ended December 25, 2021 December 26, 2020 OPERATING ACTIVITIES Net income $ 499.2 $ 653. Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 22.3 21. Amortization of acquired intangibles 85.7 71. Stock-based compensation expense 18.7 18. Deferred income taxes (21.9) (12.0) Debt extinguishment losses 0.7 21. Other adjustments and non-cash items 5.7 29. Changes in operating assets and liabilities, excluding the effect of acquisitions: Accounts receivable (48.1) (175.5) Inventories (17.4) (21.2) Prepaid income taxes (4.6) 8. Prepaid expenses and other assets 0.3 (18.3) Accounts payable (13.8) 4. Accrued expenses and other liabilities 42.4 58. Deferred revenue (5.0) (10.5) Net cash provided by operating activities 564.2 650. INVESTING ACTIVITIES Acquisition of businesses, net of cash acquired (157.3) (4.9) Capital expenditures, net 0.8 (32.4) Increase in equipment under customer usage agreements (17.0) (12.4) Other activity — (0.2) Net cash used in investing activities (173.5) (49.9) FINANCING ACTIVITIES Proceeds from long-term debt, net of issuance costs 1,491.2 — Repayment of long-term debt (1,387.5) (18.8) Proceeds from senior notes, net of issuance costs — 936. Repayment of senior notes — (970.8) Repayment under revolving credit line — (250.0) Payment of acquired long-term debt (63.6) — Repurchase of common stock (167.0) (101.3) Proceeds from issuance of common stock pursuant to employee stock plans 6.4 23. Payment of minimum tax withholdings on net share settlements of equity awards (22.4) (46.4) Payments under finance lease obligations (0.6) (0.5) Net cash used in financing activities (143.5) (428.2) Effect of exchange rate changes on cash and cash equivalents 3.3 (4.2) Net increase in cash and cash equivalents 250.5 167. Cash and cash equivalents, beginning of period 1,170.3 701. Cash and cash equivalents, end of period $^ 1,420.8^ $^ 868. See accompanying notes.
(2) Revenue The Company accounts for revenue pursuant to ASC Update No. 2014-09, Revenue from Contracts with Customer (ASC 606) and generates revenue from the sale of its products, primarily medical imaging systems and related components and software, diagnostic tests and assays and surgical disposable products, and related services, which are primarily support and maintenance services on its medical imaging systems, and to a lesser extent installation, training and repairs. The Company's products are sold primarily through a direct sales force, and within international markets, there is more reliance on distributors and resellers. Revenue is recorded net of sales tax. The following tables provide revenue from contracts with customers by business and geographic region on a disaggregated basis: Three Months Ended December 25, 2021 Business ( in millions ) United States International Total Diagnostics: Cytology & Perinatal $ 80.9 $ 49.8 $ 130. Molecular Diagnostics 528.0 285.3 813. Blood Screening 6.4 — 6. Total $ 615.3 $ 335.1 $ 950. Breast Health: Breast Imaging $ 208.9 $ 73.4 $ 282. Interventional Breast Solutions 62.1 14.9 77. Total $ 271.0 $ 88.3 $ 359. GYN Surgical $ 109.3 $ 25.0 $ 134. Skeletal Health $ 16.8 $ 10.3 $ 27. $ 1,012.4 $ 458.7 $ 1,471. Three Months Ended December 26, 2020 Business (in millions) United States International Total Diagnostics: Cytology & Perinatal $ 80.1 $ 44.7 $ 124. Molecular Diagnostics 675.3 320.0 995. Blood Screening 8.1 — 8. Total $ 763.5 $ 364.7 $ 1,128. Breast Health: Breast Imaging $ 203.0 $ 64.7 $ 267. Interventional Breast Solutions 55.2 9.8 65. Total $ 258.2 $ 74.5 $ 332. GYN Surgical $ 101.0 $ 23.0 $ 124. Skeletal Health $ 15.1 $ 9.8 $ 24. $ 1,137.8 $ 472.0 $ 1,609.
Three Months Ended Geographic Regions ( in millions ) December 25, 2021 December 26, 2020 United States $ 1,012.4 $ 1,137. Europe 295.1 338. Asia-Pacific 119.7 88. Rest of World 43.9 45. $ 1,471.1 $ 1,609. The following table provides revenue recognized by source: Three Months Ended Revenue by type (in millions) December 25, 2021 December 26, 2020 Disposables $ 1,106.3 $ 1,263. Capital equipment, components and software 197.0 192. Service 162.8 137. Other 5.0 17. $ 1,471.1 $ 1,609. The Company considers revenue to be earned when all of the following criteria are met: the Company has a contract with a customer that creates enforceable rights and obligations; promised products or services are identified; the transaction price, or the amount the Company expects to receive, including an estimate of uncertain amounts subject to a constraint to ensure revenue is not recognized in an amount that would result in a significant reversal upon resolution of the uncertainty, is determinable; and the Company has transferred control of the promised items to the customer. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in the contract. The transaction price for the contract is measured as the amount of consideration the Company expects to receive in exchange for the goods and services expected to be transferred. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, control of the distinct good or service is transferred. Transfer of control for the Company's products is generally at shipment or delivery, depending on contractual terms, but occurs when title and risk of loss transfers to the customer which represents the point in time when the customer obtains the use of and substantially all of the remaining benefit of the product. As such, the Company's performance obligation related to product sales is satisfied at a point in time. Revenue from support and maintenance contracts, extended warranty and professional services for installation, training and repairs is recognized over time based on the period contracted or as the services are performed as these methods represent a faithful depiction of the transfer of goods and services. The Company recognizes a receivable when it has an unconditional right to payment, which represents the amount the Company expects to collect in a transaction and is most often equal to the transaction price in the contract. Payment terms are typically 30 days in the U.S. but may be longer in international markets. The Company treats shipping and handling costs performed after a customer obtains control of the good as a fulfillment cost and records these costs within costs of product revenue when the corresponding revenue is recognized. The Company also places instruments (or equipment) at customer sites but retains title to the instrument. The customer has the right to use the instrument for a period of time, and the Company recovers the cost of providing the instrument through the sales of disposables, namely tests and assays in Diagnostics and handpieces in GYN Surgical. These types of agreements include an embedded lease, which is generally an operating lease, for the right to use an instrument and no instrument revenue is recognized at the time of instrument delivery. The Company recognizes a portion of the revenue allocated to the embedded lease concurrent with the sale of disposables over the term of the agreement. Some of the Company's contracts have multiple performance obligations. For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation using its best estimate of the standalone selling price of each distinct good or service in the contract. The Company determines its best estimate of standalone selling price using average selling prices over 3-to 12-month periods of data depending on the products or nature of the services coupled with current market considerations. If the product or service does not have a history of sales or if sales volume is not sufficient, the Company relies on prices set by its pricing committees or applicable marketing department adjusted for expected discounts. Variable Consideration
Assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following at December 25, 2021: Fair Value at Reporting Date Using Balance as of December 25, 2021 Quoted Prices in Active Market for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: Forward foreign currency contracts $ 9.8 $ — $ 9.8 $ — Total $^ 9.8^ $^ —^ $^ 9.8^ $^ — Liabilities: Contingent consideration $ 71.0 $ — $ — $ 71. Interest rate swap 8.2 — 8.2 — Forward foreign currency contracts 1.4 — 1.4 — Total $^ 80.6^ $^ —^ $^ 9.6^ $^ 71. Liabilities Measured and Recorded at Fair Value on a Recurring Basis Changes in the fair value of recurring fair value measurements using significant unobservable inputs (Level 3), which solely consisted of contingent consideration liabilities, during the three month periods ended December 25, 2021 and December 26, 2020 were as follows: Three Month Ended December 25, 2021 December 26, 2020 Balance at beginning of period $ 75.1 $ 81. Contingent consideration recorded at acquisition — — Fair value adjustments (4.1) 4. Payments — — Balance at end of period $^ 71.0^ $^ 86. Assets Measured and Recorded at Fair Value on a Nonrecurring Basis The Company remeasures the fair value of certain assets and liabilities upon the occurrence of certain events. Such assets are comprised of equity investments and long-lived assets, including property, plant and equipment, intangible assets, goodwill and right of use assets. There were no such remeasurements in the three months ended December 25, 2021 and December 26, 2020. Disclosure of Fair Value of Financial Instruments The Company’s financial instruments mainly consist of cash and cash equivalents, accounts receivable, equity investments, an interest rate swap, forward foreign currency contracts, insurance contracts, accounts payable and debt obligations. The carrying amounts of the Company’s cash and cash equivalents, accounts receivable and accounts payable approximate their fair value due to the short-term nature of these instruments. The Company’s interest rate swap and forward foreign currency contracts are recorded at fair value. The carrying amount of the insurance contracts are recorded at the cash surrender value, as required by GAAP, which approximates fair value. The Company believes the carrying amounts of its equity investments approximate fair value. Amounts outstanding under the Company’s 2021 Credit Agreement (as defined below) of $1.5 billion aggregate principal and the Asset Securitization of $248.5 million as of December 25, 2021 are subject to variable interest rates based on current market rates, and as such, the Company believes the carrying amount of these obligations approximates fair value, representing Level 1 Measurements. The Company’s 2028 Senior Notes and 2029 Senior Notes had fair values of $420. million and $953.7 million, respectively, as of December 25, 2021 based on their trading prices, representing Level 1 measurements. Refer to Note 8 for the carrying amounts of the various components of the Company’s debt.
(5) Business Combinations Fiscal 2022 Acquisitions Bolder Surgical On November 29, 2021, the Company completed the acquisition of Bolder Surgical Holdings, Inc. ("Bolder"), for a purchase price of $160.1 million. Bolder, located in Louisville, Colorado, is a developer and manufacturer of energy vessel sealing surgical devices in both laparoscopic and open procedures. Bolder's results of operations are reported in the Company's GYN Surgical reportable segment from the date of acquisition. The total purchase price was allocated to Bolder's preliminary tangible and identifiable intangible assets and liabilities based on the estimated fair values as of November 29, 2021, as set forth below. Cash $ 1. Accounts receivable 1. Inventory 3. Other assets 3. Accounts payable and accrued expenses (3.2) Identifiable intangible assets: Developed technology 73. Customer relationship 21. Trade names 1. Deferred income taxes, net (10.5) Goodwill 67. Purchase Price $^ 160. In performing the preliminary purchase price allocation, the Company considered, among other factors, the intended future use of acquired assets, analysis of historical financial performance and estimates of future performance of Bolder's business. The allocation of the purchase price is preliminary as the Company continues to gather information supporting the acquired assets and liabilities, including, but not limited to, the estimate of fair value of identifiable intangible assets and deferred income taxes. As part of the preliminary purchase price allocation, the Company determined the identifiable intangible assets are developed technology, customer relationships, and trade names. The preliminary fair value of the intangible assets was estimated using the income approach, and the cash flow projections were discounted using a 16% rate. The cash flows were based on estimates used to price the transaction, and the discount rate applied was benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital. The developed technology assets are comprised of know-how, patents and technologies embedded in Bolder's products and relate to currently marketed products. The developed technology assets comprise the primary product families under the JustRight and CoolSeal technology platforms. The preliminary estimate of the weighted average life for the developed technology, customer relationship, and trade name assets is 10 years. The preliminary calculation of the excess of the purchase price over the estimated fair value of the tangible net assets and intangible assets acquired was recorded to goodwill. Factors contributing to the recognition of the preliminary amount of goodwill were primarily based on anticipated strategic and synergistic benefits that are expected to be realized from the Bolder acquisition. These benefits include expanding the Company's surgical portfolio and utilizing GYN Surgical's sales and regulatory expertise to drive adoption and revenue growth. None of the goodwill is expected to be deductible for income tax purposes.
contributing to the recognition of the preliminary amount of goodwill were primarily based on anticipated strategic and synergistic benefits that are expected to be realized from the Mobidiag acquisition. These benefits include expanding the Company's molecular diagnostics portfolio into the near-patient testing market and utilizing Diagnostic's commercial sales, manufacturing and regulatory expertise to drive adoption and revenue growth. None of the goodwill is expected to be deductible for income tax purposes. Biotheranostics On February 22, 2021, the Company completed the acquisition of Biotheranostics, Inc. ("Biotheranostics"), for a purchase price of $231.3 million. Biotheranostics, located in San Diego, California, manufactures molecular diagnostic tests for breast and metastatic cancers and performs the lab testing procedures at its facility. Biotheranostics' results of operations are reported in the Company's Diagnostics reportable segment from the date of acquisition and its revenues are reported within Service and other revenue in the Company's Consolidated Statements of Income and within service revenue in the disclosure of disaggregated revenue in Note 2. The total purchase price was allocated to Biotheranostics' preliminary tangible and identifiable intangible assets and liabilities based on the estimated fair values as of February 22, 2021, as set forth below. Cash $ 9. Accounts receivable 6. Other assets 6. Accounts payable and accrued expenses (8.2) Other liabilities (8.1) Identifiable intangible assets: Developed technology 160. Trade names 2. Deferred income taxes, net (18.4) Goodwill 80. Purchase Price $^ 231. In performing the preliminary purchase price allocation, the Company considered, among other factors, the intended future use of acquired assets, analysis of historical financial performance and estimates of future performance of Biotheranostics' business. The allocation of the purchase price is preliminary as the Company continues to gather information supporting the acquired assets and liabilities, primarily deferred income taxes. As part of the preliminary purchase price allocation, the Company determined the identifiable intangible assets are developed technology and trade names. The preliminary fair value of the intangible assets was estimated using the income approach, and the cash flow projections were discounted using a 18.0% rate. The cash flows were based on estimates used to price the transaction, and the discount rate applied was benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital. The weighted average life of developed technology and trade names is 10 years. The preliminary calculation of the excess of the purchase price over the estimated fair value of the tangible net assets and intangible assets acquired was recorded to goodwill. Factors contributing to the recognition of the preliminary amount of goodwill were primarily based on anticipated synergistic benefits of adding Biotheranostics' Clinical Laboratory Improvement Amendments (CLIA) lab to the Company's portfolio of offerings and utilizing Diagnostic's marketing and regulatory expertise to drive adoption and revenue growth. None of the goodwill is expected to be deductible for income tax purposes. Diagenode On March 1, 2021, the Company completed the acquisition of Diagenode SA ("Diagenode") for a purchase price of $155.1 million. Diagenode, located in Belgium, is a developer and manufacturer of molecular diagnostic assays based on PCR (polymerase chain reaction) technology to detect infectious diseases of bacterial, viral or parasite origin. Diagenode's results of operations are reported in the Company's Diagnostics reportable segment from the date of acquisition. The total purchase price was allocated to Diagenode's preliminary tangible and identifiable intangible assets and
liabilities based on the estimated fair values as of March 1, 2021, as set forth below. Cash $ 5. Accounts receivable 9. Inventory 9. Other assets 13. Accounts payable and accrued expenses (16.7) Other liabilities (9.2) Identifiable intangible assets: Developed technology 69. Customer relationships 9. Deferred income taxes, net (19.3) Goodwill 83. Purchase Price $^ 155. In performing the preliminary purchase price allocation, the Company considered, among other factors, the intended future use of acquired assets, analysis of historical financial performance and estimates of future performance of Diagenode's business. The allocation of the purchase price is preliminary as the Company continues to gather information supporting the acquired assets and liabilities, primarily deferred income taxes. As part of the preliminary purchase price allocation, the Company determined the identifiable intangible assets are developed technology and customer relationships. The preliminary fair value of the intangible assets was estimated using the income approach, and the cash flow projections were discounted using a 14.5% rate for developed technology and a 13.5% rate for customer relationships. The cash flows were based on estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital. The weighted average life of developed technology and customer relationships is 10 years. The preliminary calculation of the excess of the purchase price over the estimated fair value of the tangible net assets and intangible assets acquired was recorded to goodwill. Factors contributing to the recognition of the preliminary amount of goodwill were based on anticipated synergistic benefits of Diagenode's products broadening the Diagnostics portfolio of molecular diagnostics products primarily in the transplant and acute care gastrointestinal and respiratory space as customers seek a broader menu of tests, utilizing Diagnostic's sales force to drive menu expansion and revenue growth and gaining additional PCR assay development expertise. None of the goodwill is expected to be deductible for income tax purposes. Somatex Medical Technologies On December 30, 2020, the Company completed the acquisition of Somatex Medical Technologies GmbH ("Somatex") for a purchase price of $62.9 million. Somatex, located in Germany, is a manufacturer of biopsy site markers, including the Tumark product line of tissue markers, which were distributed by the Company in the U.S. prior to the acquisition. The allocation of the purchase price was based on the Company's valuation, and it allocated $38.0 million to the value of developed technology with a weighted average life of 8 years, $1.2 million to customer relationships, $0.9 million to trade names and $32.4 million to goodwill. The remaining $9.6 million of the purchase price was allocated to the net acquired tangible assets and liabilities. Somatex' results of operations are reported in the Company's Breast Health reportable segment from the date of acquisition. None of the goodwill is expected to be deductible for income tax purposes. NXC Imaging On September 28, 2020, the Company completed the acquisition of assets from NXC Imaging, for a purchase price of $5.6 million. NXC Imaging was a long- standing distributor of the Company's Breast and Skeletal products in the U.S. The majority of the purchase price was allocated to a customer relationships intangible asset with a useful life of 5 years. Contingent Consideration The Company has a contingent consideration liability related to its acquisition of Acessa Health, Inc. ("Acessa") acquisition, which occurred in August 2020. Acessa was the developer of the ProVu laparoscopic radiofrequency ablation system. The Company estimated the fair value of this liability to be $81.8 million as of the measurement date. The contingent
On September 27, 2021, the Company and certain of its subsidiaries refinanced its term loan and revolving credit facility under its then credit agreement (the " Credit Agreement") by entering into Refinancing Amendment No. 2 dated as of September 27, 2021, to the Amended and Restated Credit and Guaranty Agreement as of October 3, 2017, as amended (the "2021 Credit Agreement") with Bank of America, N.A. in its capacity as Administrative Agent, Swing Line Lender and L/C Issuer, and certain other lenders. Substantially all of the proceeds under the 2021 Credit Agreement of $1.5 billion were used to repay the amounts outstanding under the 2018 Credit Agreement. Borrowings under the 2021 Credit Agreement are secured by first-priority liens on, and a first-priority security interest in, substantially all of the Company's and its Subsidiary Guarantors' U.S. assets. These liens are subject to release during the term of the facilities if the Company is able to achieve certain corporate or corporate family ratings and other conditions are met. The credit facilities under the 2021 Credit Agreement consist of:
- A $1.5 billion secured term loan ("2021 Term Loan") with a maturity date of September 25, 2026; and
- A secured revolving credit facility ("2021 Revolver") under which the Company may borrow up to $2.0 billion, subject to certain sublimits, with a maturity date of September 25, 2026. Borrowings under the 2021 Credit Agreement, other than Swing Line Loans, bear interest, at the Company's option, at the Base Rate, at the Eurocurrency Rate, at the Alternative Currency Daily Rate, or at the LIBOR Daily Floating Rate, in each case plus the Applicable Rate (as such terms are defined in the 2021 Credit Agreement). The Applicable Rate in regards to the Base Rate, the Eurocurrency Rate, the Alternative Currency Daily Rate, the Alternative Currency Term Rate, and the LIBOR Daily Floating Rate is subject to change depending on the Total Net Leverage Ratio (as defined in the 2021 Credit Agreement). As of December 25, 2021, the interest rate under the 2021 Term Loan was 1.10% per annum. The Company is also required to pay a quarterly commitment fee calculated on daily basis equal to the Applicable Rate as of such day multiplied by the undrawn committed amount available under the 2021 Revolver (taking into account any outstanding amounts under the LC Sublimit). As of December 25, 2021, this commitment fee was 0.15% per annum. Upon the earliest to occur of June 30, 2023 (as such date may be extended under certain circumstances) and certain specified events, relating to the planned phase out of LIBOR by the UK Financial Conduct Authority, the interest rate applicable to the loans under the 2021 Credit Agreement denominated in U.S. Dollars will convert to a variant of the secured overnight financing rate (“SOFR”), as established from time to time by the Federal Reserve Bank of New York, plus a corresponding spread. The Company is required to make scheduled principal payments under the 2021 Term Loan in increasing amounts ranging from $3.75 million per three-month period commencing with the three-month period ending on December 29, 2022 to $18.75 million per three-month period commencing with the three month period ending on December 26, 2025. The remaining balance of $1.335 billion (or such lesser aggregate principal amount of Term Loans then outstanding) on the 2021 Term Loan and any amounts outstanding under the 2021 Revolver are due at maturity. In addition, subject to the terms and conditions set forth in the 2021 Credit Agreement, the Company is required to make certain mandatory prepayments from the net proceeds of specified types of asset sales (subject to certain reinvestment rights), debt issuances (excluding permitted debt) and insurance recoveries (subject to certain reinvestment rights). Certain of the mandatory prepayments are subject to reduction or elimination if certain financial covenants are met. These mandatory prepayments are required to be applied by the Company, first to the 2021 Term Loan, second to any outstanding amount under any Swing Line Loans, third to the 2021 Revolver, fourth to prepay any outstanding reimbursement obligations with respect to letters of credit and fifth to cash collateralize such letters of credit. Subject to certain limitations, the Company may voluntarily prepay any of the 2021 Credit Facilities without premium or penalty. As of December 25, 2021, the outstanding principal balance of the 2021 Term Loan was $1.5 billion, and there were no amounts outstanding under the 2021 Revolver. The 2021 Credit Agreement contains affirmative and negative covenants customarily applicable to senior secured credit facilities, including covenants restricting the ability of the Company, subject to negotiated exceptions, to incur additional indebtedness and grant additional liens on its assets, engage in mergers or acquisitions or dispose of assets, enter into sale-leaseback transactions, pay dividends or make other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments, and change the nature of their businesses. In addition, the 2021 Credit Agreement requires the Borrowers to maintain certain financial ratios. The 2021 Credit Agreement also contains customary representations and warranties and events of default, including payment defaults, breach of representations and warranties, covenant defaults, cross defaults and an event of default upon a change of control of the Company.
The Company evaluated the 2021 Credit Agreement for derivatives pursuant to ASC 815, Derivatives and Hedging , and identified embedded derivatives that required bifurcation as the features are not clearly and closely related to the host instrument. The embedded derivatives were a default provision, which could require additional interest payments, and a provision requiring contingent payments to compensate the lenders for changes in tax deductions. The Company determined that the fair value of these embedded derivatives was immaterial as of December 25, 2021. Pursuant to ASC 470, Debt (ASC 470), the accounting for the refinancing was evaluated on a creditor-by-creditor basis to determine whether each transaction should be accounted for as a modification or extinguishment. Certain creditors under the 2021 Credit Agreement did not participate in this refinancing transaction and ceased being creditors of the Company. As a result, the Company recorded a debt extinguishment loss of $0.7 million in the first quarter of fiscal 2022 to write-off the pro-rata amount of unamortized debt discount and deferred issuance costs related to these creditors. For the remainder of the creditors, this transaction was accounted for as a modification based on performing a creditor-by-creditor analysis. Pursuant to ASC 470, third-party costs of $7.0 million was recorded as a reduction to debt representing deferred issuance costs and fees paid directly to the lenders. Interest expense, weighted average interest rates, and the interest rate at the end of period under the 2021 and 2018 Credit Agreements were as follows: Three Months Ended December 25, 2021 December 26, 2020 Interest expense $ 5.3 $ 6. Weighted average interest rate 1.09 % 1.23 % Interest rate at end of period 1.10 % 1.15 % The 2021 Credit Agreement contains two financial covenants; a total leverage ratio and an interest coverage ratio, both of which are measured as of the last day of each fiscal quarter. These terms, and calculations thereof, are defined in further detail in the 2021 Credit Agreement. As of December 25, 2021, the Company was in compliance with these covenants. Senior Notes On September 28, 2020, the Company completed a private placement of $950 million aggregate principal amount of its 3.250% Senior Notes due 2029 (the " Senior Notes") at an offering price of 100% of the aggregate principal amount of the 2029 Senior Notes. The Company used the net proceeds of the 2029 Senior Notes offering and cash on hand to redeem in full its 4.375% Senior Notes due 2025 (the "2025 Senior Notes") in the aggregate principal amount of $950.0 million on October 15, 2020 at an aggregate redemption price of $970.8 million, which included a premium payment $20.8 million. 2025 Senior Notes Immediately prior to redemption in full of the 2025 Senior Notes on October 15, 2020, the total aggregate principal balance of 2025 Senior Notes was $950. million. As the Company used the proceeds from the 2029 Senior Notes offering to redeem the 2025 Senior Notes, the Company evaluated the accounting for this transaction under ASC 470 to determine modification versus extinguishment accounting on a creditor-by-creditor basis. Certain 2025 Senior Note holders either did not participate in this refinancing transaction or reduced their holdings, and these transactions were accounted for as extinguishments. As a result, the Company recorded a debt extinguishment loss in the first quarter of fiscal 2021 of $21.6 million. For the remaining 2025 Senior Notes holders who participated in the refinancing, these transactions were accounted for as modifications because on a creditor-by-creditor basis the present value of the cash flows between the debt instruments before and after the transaction was less than 10%. The Company recorded a portion of the transaction expenses of $5.8 million to interest expense pursuant to ASC 470, subtopic 50-40. The remaining debt issuance costs of $7.9 million and debt discount of $6.4 million related to the modified debt is being amortized over the new term of the 2029 Senior Notes using the effective interest method. 2028 Senior Notes As of December 25, 2021, the Company had 4.625% Senior Notes due 2028 (the "2028 Senior Notes") outstanding in the aggregate principal balance of $ million. The 2028 Senior Notes are general senior unsecured obligations of the Company and are guaranteed on a senior unsecured basis by certain of the Company's domestic subsidiaries and mature on February 1, 2028.
