##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended April 4, 2010o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from _________ to _________.
 Commission file number: 000-51348
 ev3 Inc.
  Delaware
    
    32-0138874(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 3033 Campus Drive
Plymouth, Minnesota 55441
 (763) 398-7000
 x o
 o o
  Large accelerated filer x
    
    Accelerated filer oNon-accelerated filer (Do not check if smaller reporting company) o
    
    Smaller reporting company o
 o x




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##### 



ev3 Inc.
 FORM 10-Q
 For the Quarterly Period Ended April 4, 2010
 TABLE OF CONTENTS
 Description
    
    PagePART I.
    
    FINANCIAL INFORMATIONITEM 1.
    
    Financial StatementsConsolidated Balance Sheets as of April 4, 2010 and December 31, 2009 (unaudited)
    
    
    1Consolidated Statements of Operations for the three months ended April 4, 2010
and April 5, 2009 (unaudited)
    
    
    2Consolidated Statements of Cash Flows for the three months ended April 4, 2010
and April 5, 2009 (unaudited)
    
    
    3Notes to the Consolidated Financial Statements
    
    
    4ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14ITEM 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    26ITEM 4.
    
    Controls and Procedures
    
    
    27PART II.
    
    OTHER INFORMATIONITEM 1.
    
    Legal Proceedings
    
    
    28ITEM 1A.
    
    Risk Factors
    
    
    28ITEM 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28ITEM 3.
    
    Defaults Upon Senior Securities
    
    
    29ITEM 4.
    
    [Removed and Reserved]
    
    
    29ITEM 5.
    
    Other Information
    
    
    29ITEM 6.
    
    Exhibits
    
    
    30SIGNATURE PAGE
    
    
    31Exhibit Index
    
    
    32EX-31.1EX-31.2EX-32.1EX-32.2
  
 This report contains not only historical information, but also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created by those
sections. We refer you to the information under the heading Part I. Item 2. Managements
Discussion and Analysis of Financial Condition and Results of OperationsForward-Looking
Statements.
 In this report, references to ev3, we, our or us in this report, unless the context
otherwise requires, refer to ev3 Inc. and its subsidiaries.
 All trademarks or trade names referred to in this report are the property of their respective
owners.




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##### Table of Contents



PART I.
    
    FINANCIAL INFORMATION
 
 ITEM I.
    
    FINANCIAL STATEMENTS
 
 ev3 Inc.
 CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands, except per share amounts)
 (unaudited)
 April 4,
    
    
    December 31,2010
    
    
    2009AssetsCurrent assetsCash and cash equivalents
    
    $
    116,801
    
    
    $
    98,050Accounts receivable, less allowance of $6,843 and $7,260, respectively
    
    
    87,454
    
    
    
    90,711Inventories, net
    
    
    46,138
    
    
    
    45,054Prepaid expenses and other assets
    
    
    9,736
    
    
    
    6,645Total current assets
    
    
    260,129
    
    
    
    240,460Restricted cash
    
    
    4,187
    
    
    
    4,346Property and equipment, net
    
    
    27,909
    
    
    
    29,159Goodwill
    
    
    367,575
    
    
    
    367,486Intangible assets, net
    
    
    248,473
    
    
    
    254,288Other assets
    
    
    509
    
    
    
    550Total assets
    
    $
    908,782
    
    
    $
    896,289Liabilities and stockholders equityCurrent liabilitiesCurrent portion of long-term debt
    
    $
    2,500
    
    
    $
    2,500Accounts payable
    
    
    14,375
    
    
    
    16,737Accrued compensation and benefits
    
    
    24,662
    
    
    
    32,239Accrued liabilities
    
    
    24,892
    
    
    
    22,453Total current liabilities
    
    
    66,429
    
    
    
    73,929Long-term debt
    
    
    3,333
    
    
    
    3,958Other long-term liabilities
    
    
    66,425
    
    
    
    63,908Total liabilities
    
    
    136,187
    
    
    
    141,795Stockholders equityPreferred stock, $0.01 par value, 100,000,000 shares authorized, none
issued and outstanding as of April 4, 2010 and December 31, 2009
    
    
    
    
    
    
    Common stock, $0.01 par value, 300,000,000 shares authorized,
112,956,788 and 112,345,500 shares issued and outstanding as of April
4, 2010 and December 31, 2009, respectively
    
    
    1,130
    
    
    
    1,123Additional paid-in capital
    
    
    1,836,789
    
    
    
    1,828,655Accumulated deficit
    
    
    (1,064,880
    )
    
    
    (1,074,744
    )Accumulated other comprehensive loss
    
    
    (444
    )
    
    
    (540
    )Total stockholders equity
    
    
    772,595
    
    
    
    754,494Total liabilities and stockholders equity
    
    $
    908,782
    
    
    $
    896,289
  1




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ev3 Inc.
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Dollars in thousands, except per share amounts)
 (unaudited)
 Three Months EndedApril 4, 2010
    
    April 5,  2009Net sales
    
    $
    123,854
    
    
    $
    100,395Operating expenses:Cost of goods sold
    
    
    29,227
    
    
    
    30,988Sales, general and administrative
    
    
    61,827
    
    
    
    55,648Research and development
    
    
    13,839
    
    
    
    11,578Amortization of intangible assets
    
    
    6,656
    
    
    
    5,828Contingent consideration
    
    
    2,498
    
    
    
    Total operating expenses
    
    
    114,047
    
    
    
    104,042Income (loss) from operations
    
    
    9,807
    
    
    
    (3,647
    )Other expense (income):Gain on investments, net
    
    
    
    
    
    
    (4,067
    )Interest expense, net
    
    
    197
    
    
    
    213Other expense, net
    
    
    354
    
    
    
    2,208Income (loss) before income taxes
    
    
    9,256
    
    
    
    (2,001
    )Income tax benefit
    
    
    (608
    )
    
    
    (192
    )Net income (loss)
    
    $
    9,864
    
    
    $
    (1,809
    )Earnings per share:Net income (loss) per common share:Basic
    
    $
    0.09
    
    
    $
    (0.02
    )Diluted
    
    $
    0.09
    
    
    $
    (0.02
    )Weighted average common shares outstanding:Basic
    
    
    112,674,997
    
    
    
    105,030,020Diluted
    
    
    114,386,308
    
    
    
    105,030,020
  2




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ev3 Inc.
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands)
 (unaudited)
 Three Months EndedApril 4, 2010
    
    
    April 5, 2009Operating activitiesNet income (loss)
    
    $
    9,864
    
    
    $
    (1,809
    )Adjustments to reconcile net income (loss) to net cash provided by operating activities:Depreciation and amortization
    
    
    9,188
    
    
    
    8,628Contingent consideration
    
    
    2,498
    
    
    
    Provision for bad debts and sales returns
    
    
    (293
    )
    
    
    (321
    )Provision for inventory obsolescence
    
    
    987
    
    
    
    1,148Gain on sale or disposal of investments and assets, net
    
    
    (4
    )
    
    
    (4,067
    )Stock compensation expense
    
    
    3,314
    
    
    
    3,711Change in operating assets and liabilities, net of acquired:Accounts receivable
    
    
    3,594
    
    
    
    277Inventories
    
    
    (2,072
    )
    
    
    795Prepaid expenses and other assets
    
    
    (3,265
    )
    
    
    21Accounts payable
    
    
    (2,022
    )
    
    
    2,060Accrued expenses and other liabilities
    
    
    (4,482
    )
    
    
    (3,990
    )Net cash provided by operating activities
    
    
    17,307
    
    
    
    6,453Investing activitiesPurchase of property and equipment
    
    
    (1,360
    )
    
    
    (732
    )Purchase of patents and licenses
    
    
    (841
    )
    
    
    (681
    )Proceeds from sale of assets
    
    
    24
    
    
    
    Proceeds from sale of investments
    
    
    
    
    
    
    4,081Change in restricted cash
    
    
    (85
    )
    
    
    (1,440
    )Net cash (used in) provided by investing activities
    
    
    (2,262
    )
    
    
    1,228Financing activitiesPayments on long-term debt and capital lease obligations
    
    
    (625
    )
    
    
    (668
    )Proceeds from exercise of stock options
    
    
    4,830
    
    
    
    347Proceeds from employee stock purchase plan
    
    
    
    
    
    
    884Other
    
    
    (3
    )
    
    
    Net cash provided by financing activities
    
    
    4,202
    
    
    
    563Effect of exchange rate changes on cash
    
    
    (496
    )
    
    
    (982
    )Net increase in cash and cash equivalents
    
    
    18,751
    
    
    
    7,262Cash and cash equivalents, beginning of period
    
    
    98,050
    
    
    
    59,652Cash and cash equivalents, end of period
    
    $
    116,801
    
    
    $
    66,914
  3




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ev3 Inc.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    Description of Business
  2.
    
    Basis of Presentation
    New Accounting Pronouncements
   4




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3.
    
    Stock-Based Compensation
  Stock-Based Compensation Charges:
    
    April 4, 2010
    
    
    April 5, 2009Cost of goods sold
    
    $
    142
    
    
    $
    245Sales, general and administrative
    
    
    2,864
    
    
    
    3,098Research and development
    
    
    308
    
    
    
    368Total stock-based compensation charges
    
    $
    3,314
    
    
    $
    3,711
    4.
    
    Chestnut Acquisition
     Equity consideration
    
    
    $
    53,186Cash consideration
    
    
    
    26,240Total cash and equity
    
    
    
    79,426Contingent consideration
    
    
    
    37,275Total purchase price consideration
    
    
    $
    116,701
  5




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Intangible assets
    
    $
    93,070Tangible assets acquired, net of liabilities assumed
    
    
    733Deferred tax liabilities acquired, net
    
    
    (29,323
    )Goodwill
    
    
    52,221Estimated fair value of net assets acquired
    
    $
    116,701
   Weighted AverageAmortizationPeriodIntangible Asset Description
    
    Fair Value Assigned
    
    
    (in years)Developed and core technology
    
    $
    64,130
    
    
    
    12Customer and distributor relationships
    
    
    220
    
    
    
    3Trademarks and tradenames
    
    
    960
    
    
    
    5Non-compete agreements
    
    
    360
    
    
    
    3Total amortizable intangible assets acquired
    
    
    65,670
    
    
    
    11Acquired in-process research and development
    
    
    27,400
    
    
    IndefiniteTotal intangible assets acquired (excluding goodwill)
    
    $
    93,070
   6




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5.
    
    Fair Value Measurements
  
    
    Level 1.Observable inputs such as quoted prices in active markets;
 
    
    Level 2.Inputs, other than the quoted prices in active markets, that are observable
either directly or indirectly; and
 
    
    Level 3.Unobservable inputs in which there is little or no market data, which require
the reporting entity to develop its own assumptions.
 Assets and Liabilities Measured at Fair Value on a Recurring Basis
    Balance as of December 31, 2009
    
    $
    42,151Change in fair value of contingent consideration
    
    
    2,498Balance as of April 4, 2010
    
    $
    44,649
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##### Table of Contents



6.
    
    Restructuring
    Termination of contractual commitments as of December 31, 2009
    
    $
    7,705Amounts paid
    
    
    (689
    )Termination of contractual commitments as of April 4, 2010
    
    $
    7,016
 7.
    
    Inventories, Net
  April 4, 2010
    
    
    December 31, 2009Raw materials
    
    $
    10,399
    
    
    
    $
    10,927Work in-progress
    
    
    5,244
    
    
    
    
    4,849Finished goods
    
    
    40,031
    
    
    
    
    40,25255,674
    
    
    
    
    56,028Inventory reserve
    
    
    (9,536
    )
    
    
    
    (10,974
    )Inventory, net
    
    $
    46,138
    
    
    
    $
    45,054
  8




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8.
    
    Property and Equipment, Net
  April 4, 2010
    
    December 31, 2009Machinery and equipment
    
    $
    32,858
    
    
    $
    32,126Office furniture and equipment
    
    
    22,334
    
    
    
    21,508Leasehold improvements
    
    
    16,735
    
    
    
    16,846Construction in progress
    
    
    3,242
    
    
    
    3,56775,169
    
    
    
    74,047Less:Accumulated depreciation and amortization
    
    
    (47,260
    )
    
    
    (44,888
    )Property and equipment, net
    
    $
    27,909
    
    
    $
    29,159
  9.
    
    Goodwill and Intangible Assets
  PeripheralVascular

    
    Neurovascular

    
    TotalBalance as of December 31, 2009
    
    $
    230,100
    
    
    $
    137,386
    
    
    $
    367,486Adjustments to goodwill related to
acquisition of Chestnut
    
    
    
    
    
    
    89
    
    
    
    89Balance as of April 4, 2010
    
    $
    230,100
    
    
    $
    137,475
    
    
    $
    367,575
  Weighted
    
    April 4, 2010

    
    December 31, 2009Average

    
    Gross

    
    
    
    
    
    Net

    
    Gross

    
    
    
    
    
    NetUseful Life

    
    Carrying

    
    Accumulated

    
    Carrying

    
    Carrying

    
    Accumulated

    
    Carrying(in years)

    
    Amount

    
    Amortization

    
    Amount

    
    Amount

    
    Amortization

    
    AmountPatents and licenses
    
    
    5.0
    
    
    $
    16,750
    
    
    $
    (8,132
    )
    
    $
    8,618
    
    
    $
    16,016
    
    
    $
    (7,743
    )
    
    $
    8,273Developed technology
    
    
    11.0
    
    
    
    260,147
    
    
    
    (87,926
    )
    
    
    172,221
    
    
    
    260,147
    
    
    
    (83,242
    )
    
    
    176,905Trademarks and tradenames
    
    
    8.0
    
    
    
    13,182
    
    
    
    (5,861
    )
    
    
    7,321
    
    
    
    13,182
    
    
    
    (5,562
    )
    
    
    7,620Customer relationships
    
    
    10.0
    
    
    
    56,314
    
    
    
    (23,667
    )
    
    
    32,647
    
    
    
    56,314
    
    
    
    (22,520
    )
    
    
    33,794Acquired in-process
research and development
    
    
    
    
    
    
    27,400
    
    
    
    
    
    
    
    27,400
    
    
    
    27,400
    
    
    
    
    
    
    
    27,400Other intangible assets
    
    
    3.0
    
    
    
    360
    
    
    
    (94
    )
    
    
    266
    
    
    
    360
    
    
    
    (64
    )
    
    
    296Intangible assets, net
    
    
    
    
    
    $
    374,153
    
    
    $
    (125,680
    )
    
    $
    248,473
    
    
    $
    373,419
    
    
    $
    (119,131
    )
    
    $
    254,288
  10.
    
    Gain on Investments, Net
  11.
    
    Income Taxes
  9




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12.
    
    Other Comprehensive Income (Loss)
  Three Months EndedApril 4, 2010

    
    April 5, 2009Net income (loss)
    
    $
    9,864
    
    
    $
    (1,809
    )Changes in foreign currency translation
    
    
    96
    
    
    
    344Total comprehensive income (loss)
    
    $
    9,960
    
    
    $
    (1,465
    )
 13.
    
    Commitments and Contingencies
 Contingent Consideration
  Other Contingencies
    10




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14.
    
    Segment and Geographic Information
     Three Months EndedApril 4, 2010

    
    April 5, 2009Net salesPeripheral vascularPlaque excision
    
    $
    20,485
    
    
    $
    18,308Stents
    
    
    29,873
    
    
    
    28,174Thrombectomy and embolic protection
    
    
    9,445
    
    
    
    8,047Procedural support and other
    
    
    14,974
    
    
    
    11,673Total peripheral vascular
    
    
    74,777
    
    
    
    66,202NeurovascularEmbolic products and stents
    
    
    32,470
    
    
    
    19,547Neuro access and delivery products and other
    
    
    16,607
    
    
    
    14,646Total neurovascular
    
    
    49,077
    
    
    
    34,193Total net sales
    
    $
    123,854
    
    
    $
    100,395Gross profitPeripheral vascular
    
    $
    54,054
    
    
    $
    44,395Neurovascular
    
    
    40,573
    
    
    
    25,012Total gross profit (1)
    
    
    94,627
    
    
    
    69,407Operating expense
    
    
    84,820
    
    
    
    73,054Income (loss) from operations
    
    $
    9,807
    
    
    $
    (3,647
    )
 Total assets
    
    April 4, 2010

    
    December 31, 2009Peripheral vascular
    
    $
    553,674
    
    
    $
    548,641Neurovascular
    
    
    355,108
    
    
    
    347,648Total
    
    $
    908,782
    
    
    $
    896,289
 (1)
    
    Gross profit for internal measurement purposes is defined as net sales less cost of
goods sold excluding amortization of intangible assets.
 11




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Three Months EndedApril 4, 2010
    
    April 5, 2009Geographic DataNet salesUnited States
    
    $
    72,957
    
    
    $
    61,654International
    
    
    50,897
    
    
    
    38,741Total net sales
    
    $
    123,854
    
    
    $
    100,395
 Long-lived assets
    
    April 4, 2010

    
    December 31, 2009United States
    
    $
    26,683
    
    
    $
    27,823International
    
    
    1,226
    
    
    
    1,336Total long-lived assets
    
    $
    27,909
    
    
    $
    29,159
 15.
    
    Related Party Transaction
  16.
    
    Net Income (Loss) Per Common Share
   Three Months EndedApril 4, 2010
    
    April 5, 2009Weighted average number of shares outstanding, basic
    
    
    112,674,997
    
    
    
    105,030,020Incremental effect of stock options and awards
    
    
    1,711,311
    
    
    
    Weighted average number of shares outstanding, diluted
    
    
    114,386,308
    
    
    
    105,030,020
   12




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13




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Business Overview
      14




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Summary of First Quarter of 2010 Financial Results and Outlook
   
    
    Net sales of our peripheral vascular products increased 13% to $74.8 million in the
first quarter of 2010 compared to the first quarter of 2009 primarily as a result of
the recent launch of our new TurboHawk Plaque Excision System, the ongoing launch of
our EverCross, NanoCross and new PowerCross PTA balloons, and increased market penetration of our embolic protection devices,
including our EverFlex family of self-expanding stents and Visi-Pro balloon expandable stents. We
expect the recent launches of our new products, TurboHawk Plaque Excision System,
Trailblazer Support Catheter and PowerCross PTA balloon, to have a positive impact on
sales going forward. We also expect continued growth of our EverFlex and Visi-Pro family
of stents during the remainder of 2010, although we are prohibited from marketing and
promoting these devices in the U.S. outside of their approved indication and, we remain
cautious of the current regulatory environment regarding the off-label utilization of
our stents and the increased competition we may experience.
    
    Net sales of our neurovascular products increased 44% to $49.1 million in the first
quarter of 2010 compared to the first quarter of 2009 primarily as a result of the
launch of our Pipeline Embolization Device in Europe and other international markets
and continued market penetration of the Axium coil, Solitaire neuro stent and the Onyx
Liquid Embolic System, partly offset by sales declines in older generation products. We
believe our neurovascular business should continue to benefit from new product
introductions, including our Pipeline and Solitaire FR devices, from the continued
market penetration of the Axium coil and Onyx Liquid Embolic System, and expanded
geographic presence during the remainder of 2010.
    
    On a geographic basis, 59% of our net sales for the first quarter of 2010 were
generated in the United States and 41% were generated outside the United States. Our
international net sales increased 31% to $50.9 million in the first quarter of 2010
compared to the first quarter of 2009 as a result of the launch of our Pipeline
Embolization Device and an increase in market penetration of our Solitaire neuro stent,
Axium coil and Onyx Liquid Embolic System. We expect our international business to
continue to benefit from our ability to sell our EverCross, NanoCross and PowerCross
PTA balloon catheters, the recent launch of our Pipeline Embolization Device, the
launch of our Axium MicroFx PGLA and Nylon microfilament coils and Marksman delivery catheter,
and expansion of sales of our plaque excision devices during the remainder of 2010.
Changes in foreign currency exchange rates had a positive impact on our net sales for
the first quarter of 2010 of approximately $2.9 million compared to the first quarter
of 2009, principally resulting from the relationship of the U.S. dollar as compared to
the euro. At current exchange rates, we expect foreign currency exchange rates to have
a minimal impact on our net sales during 2010 compared to our net sales during 2009.
    
    Gross margin increased to 76.4% in the first quarter of 2010 compared to 69.1% in
the first quarter of 2009 primarily attributable to realized manufacturing efficiencies
and volume growth. Product mix, margin improvement associated with selling our own line
of PTA balloons, and favorable foreign exchange also contributed to the increase. We
expect our gross margins to increase through our focus on manufacturing efficiencies
and opportunities to increase product pricing. Gross margin for internal measurement
purposes is defined as net sales less cost of goods sold, which excludes the
amortization of intangible assets, divided by net sales.
    
    Sales, general and administrative expenses declined to 50% of net sales in the first
quarter of 2010 compared to 55% of net sales in the first quarter of 2009 primarily as
a result of leverage on sales growth and cost management efforts. The first quarter of
2009 included a $3.4 million adjustment to increase reserves on our vacated FoxHollow
leased facilities. See Note 6 to our consolidated financial statements for further
discussion. We expect our sales, general and administrative expenses as a percentage
of net sales to
 15




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continue to decline during the remainder of 2010 compared to 2009 primarily as a result
of our ability to leverage our infrastructure to grow expenses at a lesser rate than our
anticipated revenue growth.
 
    
    Our net income in the first quarter of 2010 was $9.9 million, or $0.09 per diluted
common share, compared to a net loss of $1.8 million, or $0.02 per diluted share, in
the first quarter of 2009.
    
    We had $116.8 million of cash and cash equivalents at April 4, 2010, an increase of
$18.8 million compared to December 31, 2009. This increase was primarily due to $17.3
million of cash provided by operating activities, which was driven by our operating
performance partly offset by cash used for working capital. We plan to continue to
focus on generating cash flow from operations during the remainder of 2010.
 Items Impacting Comparability
  First Quarter of 2010
 
    
    Charges relating to the estimated change in fair value of the contingent
consideration of $2.5 million associated with the Chestnut acquisition.
    
    Income tax benefit of $1.0 million from the reduction in U.S. federal income tax due
to recently passed legislation enabling us to utilize additional net operating loss
carryforwards for alternative minimum tax purposes.
 First Quarter of 2009
 
    
    Charge of $3.4 million to increase reserves on our vacated FoxHollow lease
facilities.
    
    Gain of $4.1 million attributed to the divestiture of non-strategic investments.
 16




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Results of Operations
  Three Months EndedPercentResults of Operations:
    
    April 4, 2010
    
    April 5, 2009
    
    ChangeNet sales
    
    $
    123,854
    
    
    $
    100,395
    
    
    
    23.4
    %Operating expenses:Cost of goods sold (a)
    
    
    29,227
    
    
    
    30,988
    
    
    
    -5.7
    %Sales, general and administrative (a)
    
    
    61,827
    
    
    
    55,648
    
    
    
    11.1
    %Research and development (a)
    
    
    13,839
    
    
    
    11,578
    
    
    
    19.5
    %Amortization of intangible assets
    
    
    6,656
    
    
    
    5,828
    
    
    
    14.2
    %Contingent consideration
    
    
    2,498
    
    
    
    
    
    
    NMTotal operating expenses
    
    
    114,047
    
    
    
    104,042
    
    
    
    9.6
    %Income (loss) from operations
    
    
    9,807
    
    
    
    (3,647
    )
    
    NMOther expense (income):Gain on investments, net
    
    
    
    
    
    
    (4,067
    )
    
    
    -100.0
    %Interest expense, net
    
    
    197
    
    
    
    213
    
    
    
    -7.5
    %Other expense, net
    
    
    354
    
    
    
    2,208
    
    
    
    -84.0
    %Income (loss) before income taxes
    
    
    9,256
    
    
    
    (2,001
    )
    
    NMIncome tax benefit
    
    
    (608
    )
    
    
    (192
    )
    
    
    216.7
    %Net income (loss)
    
    $
    9,864
    
    
    $
    (1,809
    )
    
    NMEarnings per share:Net income (loss) per common share:Basic
    
    $
    0.09
    
    
    $
    (0.02
    )Diluted
    
    $
    0.09
    
    
    $
    (0.02
    )Weighted average shares outstanding:Basic
    
    
    112,674,997
    
    
    
    105,030,020Diluted
    
    
    114,386,308
    
    
    
    105,030,020
 
 (a)     Includes stock-based compensation charges of:
 Cost of goods sold
    
    $
    142
    
    
    $
    245Sales, general and administrative
    
    
    2,864
    
    
    
    3,098Research and development
    
    
    308
    
    
    
    368$
    3,314
    
    
    $
    3,711
 17




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##### Table of Contents



Three Months EndedPercentNET SALES BY SEGMENT:
    
    April 4, 2010
    
    
    April 5, 2009
    
    
    ChangePeripheral vascular:Plaque excision
    
    $
    20,485
    
    
    $
    18,308
    
    
    
    11.9
    %Stents
    
    
    29,873
    
    
    
    28,174
    
    
    
    6.0
    %Thrombectomy and embolic protection
    
    
    9,445
    
    
    
    8,047
    
    
    
    17.4
    %Procedural support and other
    
    
    14,974
    
    
    
    11,673
    
    
    
    28.3
    %Total peripheral vascular
    
    
    74,777
    
    
    
    66,202
    
    
    
    13.0
    %Neurovascular:Embolic products and stents
    
    
    32,470
    
    
    
    19,547
    
    
    
    66.1
    %Neuro access and delivery products and other
    
    
    16,607
    
    
    
    14,646
    
    
    
    13.4
    %Total neurovascular
    
    
    49,077
    
    
    
    34,193
    
    
    
    43.5
    %Total net sales
    
    $
    123,854
    
    
    $
    100,395
    
    
    
    23.4
    %
 Three Months EndedPercentNET SALES BY GEOGRAPHY:
    
    April 4, 2010
    
    
    April 5, 2009
    
    
    ChangeUnited States
    
    $
    72,957
    
    
    $
    61,654
    
    
    
    18.3
    %  `International
    
    
    50,897
    
    
    
    38,741
    
    
    
    31.4
    %Total net sales
    
    $
    123,854
    
    
    $
    100,395
    
    
    
    23.4
    %
 Comparison of the Three Months Ended April 4, 2010 to the Three Months Ended April 5, 2009
 Net sales.
 Net sales of peripheral vascular products
 Net sales of neurovascular products.
 Net sales by geography.
 18




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Cost of goods sold.
 Sales, general and administrative expense.
 Research and development.
 Amortization of intangible assets.
 Contingent consideration.
 Gain on investments, net.
 Interest expense, net.
 Other expense, net
 19




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##### Table of Contents



Income tax benefit
 Liquidity and Capital Resources
  April 4,
    
    
    December 31,Balance
Sheet Data
    
    2010
    
    
    2009Cash and cash equivalents
    
    $
    116,801
    
    
    $
    98,050Total current assets
    
    
    260,129
    
    
    
    240,460Total assets
    
    
    908,782
    
    
    
    896,289Total current liabilities
    
    
    66,429
    
    
    
    73,929Long-term debt
    
    
    3,333
    
    
    
    3,958Total liabilities
    
    
    136,187
    
    
    
    141,795Total stockholders equity
    
    
    772,595
    
    
    
    754,494
 Working capital
 Cash and cash equivalents.
 Letters of credit and restricted cash.
 Financing history.
 Credit facility
 Cash flows
 Operating activities.
 20




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Investing activities.
 Financing activities.
 Contractual cash obligations
  Other liquidity information
   Credit risk
  21




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Related Party Transactions
  Critical Accounting Policies and Estimates
  Seasonality and Quarterly Fluctuations
   Off-Balance Sheet Arrangements
  Recently Issued Accounting Pronouncements
   22




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Forward-Looking Statements
   




    
    The effect of current worldwide economic conditions on our business, operating
results and financial condition, including reduced demand for procedures using our
products, the volatility and uncertainty in the capital markets and the availability of
credit to our distributors, customers and suppliers;
    
    Recent history of operating losses, negative cash flow and failure to achieve our
goal of sustained profitability;
    
    Failure of our business strategy, which relies on assumptions about the market for
our products;
    
    Failure to obtain and maintain required regulatory approvals for our products in a
cost-effective manner or at all or to comply with other applicable laws and
regulations, including without limitation the Federal Anti-Kickback Statute and similar
healthcare fraud and abuse laws, the Foreign Corrupt Practices Act and regulations
prohibiting the promotion of off-label uses and products for which marketing clearance
has not been obtained;
    
    Fluctuations in foreign currency exchange rates, especially the effect of a stronger
U.S. dollar against the euro, and interest rates;
    
    Lack of market acceptance of new products;
    
    Lack of demand for our plaque excision products, due in part to competition and lack
of long-term clinical data regarding their safety and efficacy;
    
    Failure of our customers or patients to obtain third party reimbursement for their
purchases of our products;
    
    Dependence upon certain products for a significant portion of our product sales;
    
    Dependence upon our relationships with group purchasing organizations, or GPOs, and
our ability to renew our existing GPO contracts, several of which are up for renewal
during 2010;
    
    Risk of technological obsolescence, failure to develop innovative and successful new
products and technologies and delays in product introduction;
    
    Risks associated with clinical trials;
    
    Risks inherent in operating internationally and selling and shipping our products
and purchasing our products and components internationally;
    
    Future additional charges associated with the impairment in the value of our
goodwill and other intangible assets;
 23




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##### Table of Contents




    
    Exposure to assertions of intellectual property claims and failure to protect our
intellectual property;
    
    Disruption in our ability to manufacture our products;
    
    Ability of our key suppliers to provide us products or components or raw materials
for products resulting in our inability to supply market demand for our products;
    
    Increases in prices for raw materials;
    
    Risks associated with previous and future acquisitions, including the incurrence of
additional debt, contingent liabilities and expenses and obligations to make
significant milestone payments not currently reflected in our financial statements and
the effect of contingent consideration on our operating results;
    
    Consolidation in the healthcare industry, which could lead to demands for price
concessions or to the exclusion of some suppliers from certain of our markets;
    
    Exposure to adverse side effects from our products and product liability claims;
    
    Failure to obtain additional capital when needed or on acceptable terms;
    
    Fluctuations in quarterly operating results as a result of seasonality and other
items, such as the number and mix of products sold in the quarter; competition;
regulatory actions; the timing of new product introductions; the timing and extent of
promotional pricing or volume discounts; the timing of larger orders by customers and
the timing of shipment of such orders; field inventory levels; changes in average
selling prices; the availability and cost of components and materials; the number of
selling days; foreign currency exchange rate fluctuations; effect of revenue
recognition policies; timing of operating expenses in anticipation of sales;
unanticipated expenses; costs related to acquisitions; special charges and fluctuations
in investment returns on cash balances;
    
    Reliance on independent sales distributors and sales associates to market and sell
our products in certain countries, their reliance on credit to purchase our products
and their recent tendency to reduce their inventories of our products in light of the
tightened credit markets;
    
    Highly competitive nature of the markets in which we sell our products and the
introduction of competing products;
    
    Reliance on our management information systems for inventory management,
distribution and other functions and to maintain our research and development and
clinical data;
    
    Failure to comply with our covenants under our loan and security agreement with
Silicon Valley Bank or inability to access funds under our revolving line of credit due
to borrowing base limitations;
    
    Inability to renew or secure alternative financing prior to the expiration of our
line of credit with Silicon Valley Bank;
    
    Adverse changes in applicable laws or regulations, including in particular the
recently enacted healthcare reform legislation and any other future health or tax laws
and regulations;
    
    Inability to use net operating losses to reduce tax liability if we become
profitable;
    
    Changes in generally accepted accounting principles;
    
    Effects of pending and threatened litigation;
    
    Conflicts of interests due to our ownership structure; or
    
    Ineffectiveness of our internal controls.
   24




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25




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##### Table of Contents



ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
   Foreign Currency Exchange Rate Risk
   26




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ITEM 4.   CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control Over Financial Reporting
  27




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##### Table of Contents



PART II.    OTHER INFORMATION
 
 ITEM 1.      LEGAL PROCEEDINGS
  
 ITEM 1A.    RISK FACTORS
  Our business, financial condition, results of operations and cash flows could be significantly and
adversely affected by the recently adopted legislation reforming the United States healthcare
system and if other administration and legislative proposals are enacted into law.
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Recent Sales of Unregistered Equity Securities
  28




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##### Table of Contents



Issuer Purchases of Equity Securities
  Total
    
    
    
    
    
    Total Number of Shares
    
    Maximum Number ofNumber of
    
    Average
    
    Purchased as Part of
    
    Shares that May Yet BeShares
    
    Price Paid
    
    Publicly Announced Plans or
    
    Purchased Under thePeriod
    
    Purchased (1)
    
    Per Share
    
    Programs (2)
    
    Plans or Programs (2)Month # 1
(January 1, 2010  February 7,
2010)
    
    
    177
    
    
    $
    14.39
    
    
    N/A
    
    N/AMonth # 2
(February 8, 2010  March 7,
2010)
    
    
    
    
    
    
    
    
    
    N/A
    
    N/AMonth # 3
(March 8, 2010  April 4, 2010)
    
    
    
    
    
    
    
    
    
    N/A
    
    N/ATotal:
    
    
    177
    
    
    $
    14.39
    
    
    N/A
    
    N/A
 
 (1)
    
    Consists of shares repurchased from employees in connection with the required minimum payment
of withholding or employment-related tax obligations due in connection with the vesting of
restricted stock awards.(2)
    
    Our Board of Directors has not authorized any repurchase plan or program for purchase of our
shares of common stock or other equity securities on the open market or otherwise, other than
an indefinite number of shares in connection with the cashless exercise of outstanding stock
options and the surrender of shares of common stock upon the issuance or vesting of stock
grants to satisfy any required minimum withholding or employment-related tax obligations.  
 ITEM 3.   DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4.   [REMOVED AND RESERVED]
 
 ITEM 5.   OTHER INFORMATION
  29




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ITEM 6. EXHIBITS
  Exhibit No.
    
    Description10.1
    
    Letter Agreement Regarding Foreign Assignment dated January
20, 2010 between ev3 Inc. and Brett Wall (Incorporated by
reference to Exhibit 10.21 to ev3s Annual Report on Form 10-K
for the fiscal year ended December 31, 2009 (File No.
000-51348))31.1
    
    Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 and SEC Rule 13a-14(a)
(Filed herewith)31.2
    
    Certification of Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 and SEC Rule 13a-14(a)
(Filed herewith)32.1
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (Furnished herewith)32.2
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (Furnished herewith)
 30




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##### Table of Contents



SIGNATURES
  May 7, 2010
    ev3 Inc.By:
    /s/ Robert J. PalmisanoRobert J. PalmisanoPresident and Chief Executive Officer
(principal executive officer)By:
    /s/ Shawn McCormickShawn McCormickSenior Vice President and Chief Financial Officer
(principal financial and accounting officer) 31




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##### Table of Contents



ev3 Inc.
QUARTERLY REPORT ON FORM 10-Q
EXHIBIT INDEX
 Exhibit No.
    
    
    Description
    
    
    Method of Filing10.1
    
    
    Letter Agreement Regarding
Foreign Assignment dated
January 20, 2010 between
ev3 Inc. and Brett Wall
    
    
    Incorporated by
reference to Exhibit 10.21
to ev3s Annual Report on
Form 10-K for the fiscal
year ended December 31,
2009
(File No. 000-51348)31.1
    
    
    Certification of Chief
Executive Officer Pursuant
to Section 302 of the
Sarbanes-Oxley Act of 2002
and SEC Rule 13a-14(a)
    
    
    Filed herewith31.2
    
    
    Certification of Chief
Financial Officer Pursuant
to Section 302 of the
Sarbanes-Oxley Act of 2002
and SEC Rule 13a-14(a)
    
    
    Filed herewith32.1
    
    
    Certification of Chief
Executive Officer Pursuant
to 18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the
Sarbanes-Oxley Act of 2002
    
    
    Furnished herewith32.2
    
    
    Certification of Chief
Financial Officer Pursuant
to 18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the
Sarbanes-Oxley Act of 2002
    
    
    Furnished herewith
 32