##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended July 5, 2009
 o
    
    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: 000-51348
 ev3 Inc.
  Delaware
    
    32-0138874(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 9600 54th Avenue North, Suite 100
 Plymouth, Minnesota 55442
 (763) 398-7000
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



ev3 Inc.
FORM 10-Q
For the Quarterly Period Ended July 5, 2009
 TABLE OF CONTENTS
 Description
    
    PagePART I. FINANCIAL INFORMATIONITEM 1. Financial StatementsConsolidated Balance Sheets as of July 5, 2009 (unaudited) and December 31, 2008
    
    
    1Consolidated Statements of Operations for the three and six months ended
July 5, 2009 and June 29, 2008 (unaudited)
    
    
    2Consolidated Statements of Cash Flows for the six months ended July 5, 2009
and June 29, 2008 (unaudited)
    
    
    3Notes to the Consolidated Financial Statements
    
    
    4ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    35ITEM 4. Controls and Procedures
    
    
    36PART II. OTHER INFORMATIONITEM 1. Legal Proceedings
    
    
    37ITEM 1A. Risk Factors
    
    
    37ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    44ITEM 3. Defaults Upon Senior Securities
    
    
    44ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    45ITEM 5. Other Information
    
    
    45ITEM 6. Exhibits
    
    
    46SIGNATURE PAGE
    
    
    47Exhibit Index
    
    
    48EX-10.2EX-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, the company, 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 1.
    
    FINANCIAL STATEMENTS
 ev3 Inc.
 
 CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands, except per share amounts)
 July 5,
    
    
    December 31,2009
    
    
    2008(unaudited)AssetsCurrent assetsCash and cash equivalents
    
    $
    60,356
    
    
    $
    59,652Accounts receivable, less allowances of $8,302 and $8,098, respectively
    
    
    77,178
    
    
    
    72,814Inventories, net
    
    
    45,455
    
    
    
    47,687Prepaid expenses and other assets
    
    
    6,597
    
    
    
    6,970Total current assets
    
    
    189,586
    
    
    
    187,123Restricted cash
    
    
    3,438
    
    
    
    1,531Property and equipment, net
    
    
    27,343
    
    
    
    30,681Goodwill
    
    
    367,311
    
    
    
    315,654Other intangible assets, net
    
    
    267,621
    
    
    
    185,292Other assets
    
    
    615
    
    
    
    383Total assets
    
    $
    855,914
    
    
    $
    720,664Liabilities and stockholders equityCurrent liabilitiesAccounts payable
    
    $
    19,293
    
    
    $
    15,657Accrued compensation and benefits
    
    
    24,020
    
    
    
    29,547Accrued liabilities
    
    
    22,788
    
    
    
    19,744Current portion of long-term debt
    
    
    2,500
    
    
    
    2,500Total current liabilities
    
    
    68,601
    
    
    
    67,448Long-term debt
    
    
    5,208
    
    
    
    6,458Other long-term liabilities
    
    
    56,182
    
    
    
    6,217Total liabilities
    
    
    129,991
    
    
    
    80,123Stockholders equityPreferred stock, $0.01 par value, 100,000,000 shares authorized, none
issued and outstanding as of July 5, 2009 and December 31, 2008
    
    
    
    
    
    
    Common stock, $0.01 par value, 300,000,000 shares authorized,
shares issued and outstanding: 112,063,008 shares at July 5, 2009 and
105,822,444 at December 31, 2008
    
    
    1,121
    
    
    
    1,058Additional paid in capital
    
    
    1,819,703
    
    
    
    1,756,832Accumulated deficit
    
    
    (1,094,481
    )
    
    
    (1,116,661
    )Accumulated other comprehensive loss
    
    
    (420
    )
    
    
    (688
    )Total stockholders equity
    
    
    725,923
    
    
    
    640,541Total liabilities and stockholders equity
    
    $
    855,914
    
    
    $
    720,664
  1




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##### Table of Contents



ev3 Inc.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Dollars in thousands, except per share amounts)
 (unaudited)
 Three Months Ended
    
    
    Six Months EndedJuly 5, 2009
    
    
    June 29, 2008
    
    
    July 5, 2009
    
    
    June 29, 2008SalesProduct sales
    
    $
    109,086
    
    
    $
    101,509
    
    
    $
    209,481
    
    
    $
    196,559Research collaboration
    
    
    
    
    
    
    6,208
    
    
    
    
    
    
    
    12,415Net sales
    
    
    109,086
    
    
    
    107,717
    
    
    
    209,481
    
    
    
    208,974Operating expenses:Product cost of goods sold
    
    
    30,478
    
    
    
    34,290
    
    
    
    61,466
    
    
    
    66,260Research collaboration
    
    
    
    
    
    
    1,899
    
    
    
    
    
    
    
    3,547Sales, general and administrative
    
    
    54,961
    
    
    
    65,936
    
    
    
    110,609
    
    
    
    125,764Research and development
    
    
    12,310
    
    
    
    14,054
    
    
    
    23,888
    
    
    
    25,780Amortization of intangible assets
    
    
    5,814
    
    
    
    7,941
    
    
    
    11,642
    
    
    
    16,184Contingent consideration
    
    
    196
    
    
    
    
    
    
    
    196
    
    
    
    Intangible asset impairment
    
    
    
    
    
    
    10,459
    
    
    
    
    
    
    
    10,459Total operating expenses
    
    
    103,759
    
    
    
    134,579
    
    
    
    207,801
    
    
    
    247,994Income (loss) from operations
    
    
    5,327
    
    
    
    (26,862
    )
    
    
    1,680
    
    
    
    (39,020
    )Other expense (income):Gain on investments, net
    
    
    (5
    )
    
    
    (400
    )
    
    
    (4,072
    )
    
    
    (400
    )Interest expense (income), net
    
    
    222
    
    
    
    85
    
    
    
    435
    
    
    
    (356
    )Other (income) expense, net
    
    
    (711
    )
    
    
    345
    
    
    
    1,497
    
    
    
    (2,087
    )Income (loss) before income taxes
    
    
    5,821
    
    
    
    (26,892
    )
    
    
    3,820
    
    
    
    (36,177
    )Income tax (benefit) expense
    
    
    (18,168
    )
    
    
    530
    
    
    
    (18,360
    )
    
    
    1,015Net income (loss)
    
    $
    23,989
    
    
    $
    (27,422
    )
    
    $
    22,180
    
    
    $
    (37,192
    )Earnings per share:Net income (loss) per common share:Basic
    
    $
    0.23
    
    
    $
    (0.26
    )
    
    $
    0.21
    
    
    $
    (0.36
    )Diluted
    
    $
    0.23
    
    
    $
    (0.26
    )
    
    $
    0.21
    
    
    $
    (0.36
    )Weighted average shares outstanding:Basic
    
    
    105,763,801
    
    
    
    104,247,782
    
    
    
    105,403,406
    
    
    
    104,176,206Diluted
    
    
    106,314,906
    
    
    
    104,247,782
    
    
    
    105,687,023
    
    
    
    104,176,206
  2




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ev3 Inc.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands, except per share amounts)
 (unaudited)
 Six Months EndedJuly 5, 2009
    
    
    June 29, 2008Operating activitiesNet income (loss)
    
    $
    22,180
    
    
    $
    (37,192
    )Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    17,282
    
    
    
    22,639Contingent consideration
    
    
    196
    
    
    
    Provision for bad debts and sales returns
    
    
    (588
    )
    
    
    2,304Provision for inventory obsolescence
    
    
    4,070
    
    
    
    5,367Gain on sale or disposal of investments and assets, net
    
    
    (4,057
    )
    
    
    (400
    )Stock compensation expense
    
    
    7,324
    
    
    
    8,623Intangible asset impairment
    
    
    
    
    
    
    10,459Deferred income taxes
    
    
    (18,998
    )
    
    
    Change in operating assets and liabilities, net of acquired:Accounts receivable
    
    
    (2,924
    )
    
    
    (9,064
    )Inventories
    
    
    (1,288
    )
    
    
    (7,798
    )Prepaid expenses and other assets
    
    
    1,072
    
    
    
    2,380Accounts payable
    
    
    2,498
    
    
    
    (3,714
    )Accrued expenses and other liabilities
    
    
    (303
    )
    
    
    (25,475
    )Deferred revenue
    
    
    
    
    
    
    (4,915
    )Net cash provided by (used in) operating activities
    
    
    26,464
    
    
    
    (36,786
    )Investing activitiesProceeds from investments
    
    
    4,081
    
    
    
    9,744Purchase of investments
    
    
    (300
    )
    
    
    Purchase of property and equipment
    
    
    (2,414
    )
    
    
    (6,443
    )Purchase of patents and licenses
    
    
    (1,097
    )
    
    
    (1,853
    )Proceeds from sale of assets
    
    
    
    
    
    
    49Acquisitions, net of cash acquired
    
    
    (24,735
    )
    
    
    (7,627
    )Change in restricted cash
    
    
    (1,909
    )
    
    
    524Net cash used in investing activities
    
    
    (26,374
    )
    
    
    (5,606
    )Financing activitiesPayments on long-term debt and capital lease obligations
    
    
    (1,337
    )
    
    
    (1,863
    )Debt issuance costs
    
    
    
    
    
    
    203Proceeds from exercise of stock options
    
    
    386
    
    
    
    682Proceeds from employee stock purchase plan
    
    
    2,043
    
    
    
    859Other
    
    
    
    
    
    
    (312
    )Net cash provided by (used in) financing activities
    
    
    1,092
    
    
    
    (431
    )Effect of exchange rate changes on cash
    
    
    (478
    )
    
    
    512Net increase (decrease) in cash and cash equivalents
    
    
    704
    
    
    
    (42,311
    )Cash and cash equivalents, beginning of period
    
    
    59,652
    
    
    
    81,060Cash and cash equivalents, end of period
    
    $
    60,356
    
    
    $
    38,749
  3




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##### Table of Contents



ev3 Inc.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Description of Business
  2. Basis of Presentation
     Critical Accounting Policies and Estimates
  Contingent Consideration
  New Accounting Pronouncements
 Business Combinations Noncontrolling Interests in Consolidated Financial Statements
 4




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Subsequent Events
 Determination of the Useful
Life of Intangible Assets,
 FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles FASB
Accounting Standards Codification The Hierarchy of Generally Accepted Accounting
Principles authoritative nonauthoritative
 3. Fair Value Measurements
 Fair Value Measurement
 5




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##### Table of Contents




    
    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
   Three and SixMonths EndedJuly 5, 2009Purchase price contingent consideration
    
    $
    37,275Change in fair value included in earnings
    
    
    196Balance as of July 5, 2009
    
    $
    37,471
 4. Stock-Based Compensation
  Three Months Ended
    
    
    Six Months EndedJuly 5, 2009
    
    
    June 29, 2008
    
    
    July 5, 2009
    
    
    June 29, 2008Stock-Based Compensation Charges:Product cost of goods sold
    
    $
    237
    
    
    $
    179
    
    
    $
    481
    
    
    $
    476Sales, general and administrative
    
    
    3,016
    
    
    
    3,443
    
    
    
    6,114
    
    
    
    7,036Research and development
    
    
    360
    
    
    
    270
    
    
    
    728
    
    
    
    1,111$
    3,613
    
    
    $
    3,892
    
    
    $
    7,323
    
    
    $
    8,623
  6




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##### Table of Contents



5. Chestnut Medical Acquisition
    PurchasePriceConsiderationEquity consideration
    
    $
    53,186Cash consideration
    
    
    26,240Total cash and equity
    
    $
    79,426Contingent consideration
    
    
    37,275Total purchase price consideration
    
    $
    116,701
     7




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##### Table of Contents



June 23,2009Intangible assets
    
    $
    93,070Tangible assets acquired, net of liabilities assumed
    
    
    820Deferred tax liabilities acquired, net
    
    
    (29,147
    )Goodwill
    
    
    51,957Estimated value of identifiable tangible and
intangible assets, net deferred tax liabilities and
goodwill
    
    $
    116,701
   WeightedAverageAmortizationFair Value
    
    
    PeriodIntangible Asset Description
    
    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
   8




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##### Table of Contents



6. Restructuring
 Recognition of Liabilities in Connection with a Purchase Business Combination
  AdjustmentsAdjustments to
    
    
    Reflected inBalance at
    
    
    Purchase Price
    
    
    Consolidated
    
    
    
    
    
    
    Balance atDecember 31,
    
    
    Allocation
    
    
    Statements of
    
    
    
    
    
    
    July 5,2008
    
    
    (EITF 95-3)
    
    
    Operations
    
    
    Amounts Paid
    
    
    2009Workforce reductions
    
    $
    670
    
    
    $
    (300
    )
    
    $
    (49
    )
    
    $
    (321
    )
    
    $
    Termination of
contractual commitments
    
    
    7,495
    
    
    
    
    
    
    
    3,421
    
    
    
    (1,592
    )
    
    
    9,324Total
    
    $
    8,165
    
    
    $
    (300
    )
    
    $
    3,372
    
    
    $
    (1,913
    )
    
    $
    9,324
 9




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##### Table of Contents



7. Inventories
  July 5, 2009
    
    
    December 31, 2008Raw materials
    
    $
    11,743
    
    
    $
    10,472Work in-progress
    
    
    4,770
    
    
    
    4,144Finished goods
    
    
    36,878
    
    
    
    43,40853,391
    
    
    
    58,024Inventory reserve
    
    
    (7,936
    )
    
    
    (10,337
    )Inventory, net
    
    $
    45,455
    
    
    $
    47,687
  8. Property and Equipment, Net
  July 5, 2009
    
    
    December 31, 2008Machinery and equipment
    
    $
    33,764
    
    
    $
    29,550Office furniture and equipment
    
    
    19,172
    
    
    
    18,466Leasehold improvements
    
    
    14,635
    
    
    
    14,131Construction in progress
    
    
    2,979
    
    
    
    5,67070,550
    
    
    
    67,817Less:Accumulated depreciation and amortization
    
    
    (43,207
    )
    
    
    (37,136
    )Property and equipment, net
    
    $
    27,343
    
    
    $
    30,681
  9. Goodwill and Other Intangible Assets
  PeripheralVascular
    
    
    Neurovascular
    
    
    TotalBalance as of December 31, 2008
    
    $
    230,400
    
    
    $
    85,254
    
    
    $
    315,654Adjustment to goodwill related to
acquisition of
FoxHollow (Note 6)
    
    
    (300
    )
    
    
    
    
    
    
    (300
    )Goodwill related to acquisition of
Chestnut (Note 5)
    
    
    
    
    
    
    51,957
    
    
    
    51,957Balance as of July 5, 2009
    
    $
    230,100
    
    
    $
    137,211
    
    
    $
    367,311
 10




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##### Table of Contents



Weighted
    
    
    July 5, 2009
    
    
    December 31, 2008Average
    
    
    Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetUseful Life
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying(in years)
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountPatents and licenses
    
    
    5.0
    
    
    $
    16,276
    
    
    $
    (6,990
    )
    
    $
    9,286
    
    
    $
    15,413
    
    
    $
    (6,264
    )
    
    $
    9,149Developed technology
    
    
    11.0
    
    
    
    260,147
    
    
    
    (73,873
    )
    
    
    186,274
    
    
    
    196,016
    
    
    
    (66,312
    )
    
    
    129,704Trademarks and tradenames
    
    
    8.0
    
    
    
    13,182
    
    
    
    (4,964
    )
    
    
    8,218
    
    
    
    12,222
    
    
    
    (4,457
    )
    
    
    7,765Customer relationships
    
    
    10.0
    
    
    
    56,314
    
    
    
    (20,227
    )
    
    
    36,087
    
    
    
    56,094
    
    
    
    (17,967
    )
    
    
    38,127Acquired in-process research
and development
    
    
    
    
    
    
    27,400
    
    
    
    
    
    
    
    27,400
    
    
    
    
    
    
    
    
    
    
    
    Distribution rights
    
    
    2.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,966
    
    
    
    (7,419
    )
    
    
    547Other intangible assets
    
    
    3.0
    
    
    
    360
    
    
    
    (4
    )
    
    
    356
    
    
    
    
    
    
    
    
    
    
    
    Other intangible assets
    
    
    
    
    
    $
    373,679
    
    
    $
    (106,058
    )
    
    $
    267,621
    
    
    $
    287,711
    
    
    $
    (102,419
    )
    
    $
    185,292
    2009
    
    $
    24,6322010
    
    
    25,3222011
    
    
    23,7632012
    
    
    23,5452013
    
    
    23,190
 10. Intangible Asset Impairment
  11. Long-Term Debt
  July 5, 2009
    
    
    December 31, 2008Term loan
    
    $
    7,708
    
    
    $
    8,958Less: current portion
    
    
    (2,500
    )
    
    
    (2,500
    )Total long-term debt
    
    $
    5,208
    
    
    $
    6,458
 11




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##### Table of Contents



Remaining 2009
    
    $
    1,2502010
    
    
    2,5002011
    
    
    2,5002012
    
    
    1,458Total
    
    $
    7,708
 12




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##### Table of Contents



12. Other Long-term Liabilities
  July 5, 2009
    
    
    December 31, 2008Contingent consideration (see Note 5)
    
    $
    37,471
    
    
    $
    Deferred tax liability (see Note 5 and 14)
    
    
    10,149
    
    
    
    Other long-term liabilities
    
    
    8,562
    
    
    
    6,217Total other long-term liabilities
    
    $
    56,182
    
    
    $
    6,217
 13. Gain on Investments, Net
  14. Income Taxes
 Accounting for Income Taxes for Interim Periods
and interpretation of APB Opinion No. 28
    13




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15. Other Comprehensive Income (Loss)
  Three Months Ended
    
    
    Six Months EndedJuly 5, 2009
    
    
    June 29, 2008
    
    
    July 5, 2009
    
    
    June 29, 2008Net income (loss)
    
    $
    23,989
    
    
    $
    (27,422
    )
    
    $
    22,180
    
    
    $
    (37,192
    )Changes in unrealized losses on investments
    
    
    
    
    
    
    407
    
    
    
    
    
    
    
    Changes in foreign currency translation
    
    
    (75
    )
    
    
    99
    
    
    
    269
    
    
    
    (22
    )Total comprehensive income (loss)
    
    $
    23,914
    
    
    $
    (26,916
    )
    
    $
    22,449
    
    
    $
    (37,214
    )
 16. Commitments and Contingencies
 Operating Leases
    Years ending December 31:2009
    
    $
    7,5512010
    
    
    6,7902011
    
    
    4,6102012
    
    
    3,2662013
    
    
    2,910Thereafter
    
    
    8,408$
    33,535
    14




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##### Table of Contents



Letters of Credit
  Contingent Consideration
  Other Contingencies
   damages. On
 15




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##### Table of Contents



17. Segment and Geographic Information
    16




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##### Table of Contents



(in thousands):
 Three Months Ended
    
    
    Six Months EndedJuly 5, 2009
    
    
    June 29, 2008
    
    
    July 5, 2009
    
    
    June 29, 2008Net salesNet product sales:Peripheral vascular:Atherectomy
    
    $
    22,109
    
    
    $
    24,932
    
    
    $
    40,417
    
    
    $
    47,632Stents
    
    
    29,659
    
    
    
    27,128
    
    
    
    57,833
    
    
    
    51,160Thrombectomy and embolic protection
    
    
    7,914
    
    
    
    7,097
    
    
    
    15,961
    
    
    
    13,052Procedural support and other
    
    
    12,331
    
    
    
    11,633
    
    
    
    24,004
    
    
    
    23,059Total peripheral vascular
    
    
    72,013
    
    
    
    70,790
    
    
    
    138,215
    
    
    
    134,903Neurovascular:Embolic products
    
    
    21,644
    
    
    
    17,431
    
    
    
    41,191
    
    
    
    35,295Neuro access and delivery products and other
    
    
    15,429
    
    
    
    13,288
    
    
    
    30,075
    
    
    
    26,361Total neurovascular
    
    
    37,073
    
    
    
    30,719
    
    
    
    71,266
    
    
    
    61,656Total net product sales
    
    
    109,086
    
    
    
    101,509
    
    
    
    209,481
    
    
    
    196,559Research collaboration:
    
    
    
    
    
    
    6,208
    
    
    
    
    
    
    
    12,415Total net sales
    
    $
    109,086
    
    
    $
    107,717
    
    
    $
    209,481
    
    
    $
    208,974Gross profitPeripheral vascular
    
    $
    49,736
    
    
    $
    44,554
    
    
    $
    94,131
    
    
    $
    84,962Neurovascular
    
    
    28,872
    
    
    
    22,665
    
    
    
    53,884
    
    
    
    45,337Research collaboration
    
    
    
    
    
    
    4,309
    
    
    
    
    
    
    
    8,868Total gross profit (1)
    
    $
    78,608
    
    
    $
    71,528
    
    
    $
    148,015
    
    
    $
    139,167Operating expense
    
    
    73,281
    
    
    
    98,390
    
    
    
    146,335
    
    
    
    178,187Income (loss) from operations
    
    $
    5,327
    
    
    $
    (26,862
    )
    
    $
    1,680
    
    
    $
    (39,020
    )July 5,
    
    
    December 31,2009
    
    
    2008Total assetsPeripheral vascular
    
    $
    531,504
    
    
    $
    545,588Neurovascular
    
    
    324,410
    
    
    
    175,076Total
    
    $
    855,914
    
    
    $
    720,664
 
 (1)
    
    Gross profit for internal measurement purposes is defined as net sales less cost of goods
sold excluding amortization of intangible assets.  Three Months Ended
    
    
    Six Months EndedJuly 5, 2009
    
    
    June 29, 2008
    
    
    July 5, 2009
    
    
    June 29, 2008Geographic DataNet SalesUnited States
    
    $
    67,695
    
    
    $
    71,869
    
    
    $
    129,349
    
    
    $
    138,321International
    
    
    41,391
    
    
    
    35,848
    
    
    
    80,132
    
    
    
    70,653Total net sales
    
    $
    109,086
    
    
    $
    107,717
    
    
    $
    209,481
    
    
    $
    208,974July 5,
    
    
    December 31,2009
    
    
    2008Long-lived AssetsUnited States
    
    $
    26,245
    
    
    $
    29,603International
    
    
    1,098
    
    
    
    1,078Total long-lived assets
    
    $
    27,343
    
    
    $
    30,681
 17




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##### Table of Contents



18. Related Party Transaction
  19. Net Income (Loss) Per Common Share
 Earnings Per Share
  Three Months Ended
    
    
    Six Months EndedJuly 5, 2009
    
    
    June 29, 2008
    
    
    July 5, 2009
    
    
    June 29, 2008Weighted-average number of shares outstanding, basic
    
    
    105,763,801
    
    
    
    104,247,782
    
    
    
    105,403,406
    
    
    
    104,176,206Common stock equivalents:Stock options
    
    
    165,504
    
    
    
    
    
    
    
    109,341
    
    
    
    Stock awards
    
    
    385,601
    
    
    
    
    
    
    
    174,276
    
    
    
    Weighted-average number of shares outstanding, diluted
    
    
    106,314,906
    
    
    
    104,247,782
    
    
    
    105,687,023
    
    
    
    104,176,206
   Three Months Ended
    
    Six Months EndedJuly 5, 2009
    
    June 29, 2008
    
    July 5, 2009
    
    June 29, 2008Stock options
    
    
    8,187,386
    
    
    9,425,095
    
    
    9,911,104
    
    
    9,578,373Restricted stock awards and restricted stock units
    
    
    519,120
    
    
    996,447
    
    
    826,938
    
    
    1,095,913
 18




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Business Overview
      19




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Summary of Second Fiscal Quarter 2009 Financial Results and Outlook
  20




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##### Table of Contents




    
    Net sales of our peripheral vascular products increased 2% to $72.0 million in the
second fiscal quarter 2009 compared to the second fiscal quarter 2008 primarily as a
result of increased market penetration of our EverFlex family of stents and embolic
protection devices, partially offset by a decline in sales of our atherectomy products
and sales declines in older generation products. We expect continued penetration with
our EverFlex family of stents during the remainder of 2009, although we remain cautious
of the current regulatory environment regarding the off-label  utilization of devices
and increased competition we may experience. During the second fiscal quarter 2009,
although our atherectomy sales decreased compared to the second fiscal quarter 2008,
they increased compared to the first fiscal quarter 2009 primarily as a result of the
restructuring activities and strategic programs we implemented during first fiscal
quarter 2009 to improve our sales execution and productivity, including the addition of
dedicated SilverHawk specialists, consolidation of some smaller territories and
extensive SilverHawk training of our entire U.S. peripheral vascular sales organization
and management team. One of our objectives for the remainder of 2009 and beyond is to
maximize our atherectomy sales by improving our sales execution and productivity,
adding new plaque excision products and developing definitive clinical data to support
procedural expansion.
    
    Net sales of our neurovascular products increased 21% to $37.1 million in the second
fiscal quarter 2009 compared to the second fiscal quarter 2008 primarily as a result of
increased market penetration of new and existing products, including in particular our
Onyx Liquid Embolic System and our Axium coil, and sales growth in virtually all of our
embolic and neuro access and delivery products. As a result of our acquisition of
Chestnut, we anticipate a full global launch of the Alligator retrieval device and a
launch for the Pipeline device outside the United States during the second fiscal
quarter 2009. We believe the Axium coil and Onyx Liquid Embolic System will continue
to be primary growth engines for our neurovascular business during the remainder of
2009. Our neurovascular business also should benefit during the remainder of 2009 from
new product introductions including our Pipeline, Alligator and Solitaire devices and
expanded geographic presence.
    
    On a geographic basis, 62% of our net sales for the second fiscal quarter 2009 were
generated in the United States and 38% were generated outside the United States. Our
international net sales increased 15% to $45.9 million in the second fiscal quarter
2009 compared to the second fiscal quarter 2008 driven by strong results across all
product categories. We expect our international business to continue to benefit from
our ability to sell our EverCross and NanoCross PTA balloon catheters outside the
United States since we were unable to distribute Invatecs balloon catheters outside
the United States. Changes in foreign currency exchange rates had a negative impact on
our net sales for the second fiscal quarter 2009 of approximately $4.5 million compared
to the second fiscal quarter 2008, principally resulting from the relationship of the
U.S. dollar as compared to the Euro. We expect foreign currency exchange rates to
continue to have a negative impact on our net sales during the remainder of 2009
compared to our net sales during the same periods during 2008.
    
    Sales, general and administrative expenses declined to 50% of net product sales in
the second fiscal quarter 2009 compared to 65% in the second fiscal quarter 2008
primarily due to cost management efforts. We expect our sales, general and
administrative expenses as a percentage of net product sales to continue to decline
during the remainder of 2009 compared to 2008 primarily as a result of our anticipated
continued
 21




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leverage of our cost structure. We expect to continue to focus on our vital few
programs and implement systems and processes to improve our sales execution.
    
    Our net income in the second quarter 2009 was $24.0 million, or $0.23 per basic and
diluted common share, compared to a net loss of $27.4 million, or $0.26 per share, in
the second fiscal quarter 2008. Our net income in the second quarter 2009 includes a
tax benefit of $19.0 million triggered by the purchase accounting for our acquisition
of Chestnut.
    
    Our cash and cash equivalents were $60.4 million at July 5, 2009, a decrease of $6.6
million compared to the end of the first fiscal quarter 2009. This decrease was
primarily a result of approximately $24.7 million in net cash paid in conjunction with
our acquisition of Chestnut. Cash flow from operating activities was positive for the
fourth consecutive quarter, totaling $20.0 million in the second fiscal quarter of
2009. We plan to continue to focus on generating positive cash flow from operations
during 2009.
 22




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##### Table of Contents



Results of Operations
  Three Months Ended
    
    
    Percent
    
    
    Six Months Ended
    
    
    PercentJuly 5, 2009
    
    
    June 29, 2008
    
    
    Change
    
    
    July 5, 2009
    
    
    June 29, 2008
    
    
    ChangeResults of Operations:SalesProduct sales
    
    $
    109,086
    
    
    $
    101,509
    
    
    
    7.5
    %
    
    $
    209,481
    
    
    $
    196,559
    
    
    
    6.6
    %Research collaboration
    
    
    
    
    
    
    6,208
    
    
    
    (100.0
    )%
    
    
    
    
    
    
    12,415
    
    
    
    (100.0
    )%Net sales
    
    
    109,086
    
    
    
    107,717
    
    
    
    1.3
    %
    
    
    209,481
    
    
    
    208,974
    
    
    
    0.2
    %Operating expenses:Product cost of goods sold (a)
    
    
    30,478
    
    
    
    34,290
    
    
    
    (11.1
    )%
    
    
    61,466
    
    
    
    66,260
    
    
    
    (7.2
    )%Research collaboration
    
    
    
    
    
    
    1,899
    
    
    
    (100.0
    )%
    
    
    
    
    
    
    3,547
    
    
    
    (100.0
    )%Sales, general and
administrative (a)
    
    
    54,961
    
    
    
    65,936
    
    
    
    (16.6
    )%
    
    
    110,609
    
    
    
    125,764
    
    
    
    (12.1
    )%Research and development (a)
    
    
    12,310
    
    
    
    14,054
    
    
    
    (12.4
    )%
    
    
    23,888
    
    
    
    25,780
    
    
    
    (7.3
    )%Amortization of intangible
assets
    
    
    5,814
    
    
    
    7,941
    
    
    
    (26.8
    )%
    
    
    11,642
    
    
    
    16,184
    
    
    
    (28.1
    )%Contingent consideration
    
    
    196
    
    
    
    
    
    
    
    100.0
    %
    
    
    196
    
    
    
    
    
    
    
    100.0
    %Intangible asset impairment
    
    
    
    
    
    
    10,459
    
    
    
    (100.0
    )%
    
    
    
    
    
    
    10,459
    
    
    
    (100.0
    )%Total operating expenses
    
    
    103,759
    
    
    
    134,579
    
    
    
    (22.9
    )%
    
    
    207,801
    
    
    
    247,994
    
    
    
    (16.2
    )%Income (loss) from operations
    
    
    5,327
    
    
    
    (26,862
    )
    
    
    (119.8
    )%
    
    
    1,680
    
    
    
    (39,020
    )
    
    
    (104.3
    )%Other (income) expense:Gain on investments, net
    
    
    (5
    )
    
    
    (400
    )
    
    
    (98.8
    )%
    
    
    (4,072
    )
    
    
    (400
    )
    
    
    918.0
    %Interest expense (income), net
    
    
    222
    
    
    
    85
    
    
    NM
    
    
    
    435
    
    
    
    (356
    )
    
    NMOther (income) expense, net
    
    
    (711
    )
    
    
    345
    
    
    NM
    
    
    
    1,497
    
    
    
    (2,087
    )
    
    NMIncome (loss) before income taxes
    
    
    5,821
    
    
    
    (26,892
    )
    
    
    (121.6
    )%
    
    
    3,820
    
    
    
    (36,177
    )
    
    
    (110.6
    )%Income tax (benefit) expense
    
    
    (18,168
    )
    
    
    530
    
    
    NM
    
    
    
    (18,360
    )
    
    
    1,015
    
    
    NMNet income (loss)
    
    $
    23,989
    
    
    $
    (27,422
    )
    
    
    (187.5
    )%
    
    $
    22,180
    
    
    $
    (37,192
    )
    
    
    (159.6
    )%Earnings per share:Net income (loss) per common
share:Basic
    
    $
    0.23
    
    
    $
    (0.26
    )
    
    
    
    
    
    $
    0.21
    
    
    $
    (0.36
    )Diluted
    
    $
    0.23
    
    
    $
    (0.26
    )
    
    
    
    
    
    $
    0.21
    
    
    $
    (0.36
    )Weighted average shares
outstanding:Basic
    
    
    105,763,801
    
    
    
    104,247,782
    
    
    
    
    
    
    
    105,403,406
    
    
    
    104,176,206Diluted
    
    
    106,314,906
    
    
    
    104,247,782
    
    
    
    
    
    
    
    105,687,023
    
    
    
    104,176,206(a) Includes stock-based compensation charges of:Product cost of goods sold
    
    $
    237
    
    
    $
    179
    
        
        
    
    $
    481
    
    
    $
    476Sales, general and administrative
    
    
    3,016
    
    
    
    3,443
    
        
        
    
    
    6,114
    
    
    
    7,036Research and development
    
    
    360
    
    
    
    270
    
        
        
    
    
    728
    
    
    
    1,111$
    3,613
    
    
    $
    3,892
    
    
        
        
    $
    7,323
    
    
    $
    8,623
 23




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##### Table of Contents



Three Months Ended
    
    
    Percent
    
    
    Six Months Ended
    
    
    PercentJuly 5, 2009
    
    
    June 29, 2008
    
    
    Change
    
    
    July 5, 2009
    
    
    June 29, 2008
    
    
    ChangeNET SALES BY SEGMENT:Net product sales:Peripheral vascular:Atherectomy
    
    $
    22,109
    
    
    $
    24,932
    
    
    
    (11.3
    )%
    
    $
    40,417
    
    
    $
    47,632
    
    
    
    (15.1
    )%Stents
    
    
    29,659
    
    
    
    27,128
    
    
    
    9.3
    %
    
    
    57,833
    
    
    
    51,160
    
    
    
    13.0
    %Thrombectomy and embolic
protection
    
    
    7,914
    
    
    
    7,097
    
    
    
    11.5
    %
    
    
    15,961
    
    
    
    13,052
    
    
    
    22.3
    %Procedural support and other
    
    
    12,331
    
    
    
    11,633
    
    
    
    6.0
    %
    
    
    24,004
    
    
    
    23,059
    
    
    
    4.1
    %Total peripheral vascular
    
    
    72,013
    
    
    
    70,790
    
    
    
    1.7
    %
    
    
    138,215
    
    
    
    134,903
    
    
    
    2.4
    %Neurovascular:Embolic products
    
    
    21,644
    
    
    
    17,431
    
    
    
    24.2
    %
    
    
    41,191
    
    
    
    35,295
    
    
    
    16.7
    %Neuro access and delivery
products and other
    
    
    15,429
    
    
    
    13,288
    
    
    
    16.1
    %
    
    
    30,075
    
    
    
    26,361
    
    
    
    14.1
    %Total neurovascular
    
    
    37,073
    
    
    
    30,719
    
    
    
    20.7
    %
    
    
    71,266
    
    
    
    61,656
    
    
    
    15.6
    %Total net product sales
    
    
    109,086
    
    
    
    101,509
    
    
    
    7.4
    %
    
    
    209,481
    
    
    
    196,559
    
    
    
    6.6
    %Research collaboration:
    
    
    
    
    
    
    6,208
    
    
    
    (100.0
    )%
    
    
    
    
    
    
    12,415
    
    
    
    (100.0
    )%Total net sales
    
    $
    109,086
    
    
    $
    107,717
    
    
    
    1.3
    %
    
    $
    209,481
    
    
    $
    208,974
    
    
    
    0.2
    %
 Three Months Ended
    
    
    Percent
    
    
    Six Months Ended
    
    
    PercentJuly 5, 2009
    
    
    June 29, 2008
    
    
    Change
    
    
    July 5, 2009
    
    
    June 29, 2008
    
    
    ChangeNET SALES BY GEOGRAPHY:United States
    
    $
    67,695
    
    
    $
    71,869
    
    
    
    (5.8
    )%
    
    $
    129,349
    
    
    $
    138,321
    
    
    
    (6.5
    )%InternationalBefore foreign exchange impact
    
    
    45,930
    
    
    
    35,848
    
    
    
    28.1
    %
    
    
    88,974
    
    
    
    70,653
    
    
    
    26.0
    %Foreign exchange impact
    
    
    (4,539
    )
    
    
    
    
    
    
    
    
    
    
    (8,842
    )
    
    
    
    
    
    
    Total
    
    
    41,391
    
    
    
    35,848
    
    
    
    15.4
    %
    
    
    80,132
    
    
    
    70,653
    
    
    
    13.4
    %Total net sales
    
    $
    109,086
    
    
    $
    107,717
    
    
    
    1.3
    %
    
    $
    209,481
    
    
    $
    208,974
    
    
    
    0.2
    %
 Comparison of the Three Months Ended July 5, 2009 to the Three Months Ended June 29, 2008
 Net sales
 Net sales of peripheral vascular products
 24




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##### Table of Contents



Net sales of neurovascular products
 Research collaboration (revenue).
 Net sales by geography
 Product cost of goods sold
 Research collaboration (expense).
 Sales, general and administrative
 Research and development
 Amortization of intangible assets
 25




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##### Table of Contents



Contingent consideration.
 Intangible asset impairment.
 Interest expense (income), net
 Other (income) expense, net
 Income tax (benefit) expense
 Comparison of the Six Months Ended July 5, 2009 to the Six Months Ended June 29, 2008
 Net sales
 Net sales of peripheral vascular products
 Net sales of neurovascular products
 26




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##### Table of Contents



Research collaboration (revenue).
 Net sales by geography
 Product cost of goods sold
 Sales, general and administrative.
 Research and development
 Amortization of intangible assets
 Contingent consideration.
 Intangible asset impairment.
 27




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##### Table of Contents



Gains on investments, net.
 Interest expense (income), net
 Other (income) expense, net
 Income tax expense
 Liquidity and Capital Resources
 July 5,
    
    December 31,Balance Sheet Data
    
    2009
    
    2008(in thousands)Cash and cash equivalents
    
    $
    60,356
    
    $
    59,652Total current assets
    
    
    189,586
    
    
    187,123Total assets
    
    
    855,914
    
    
    720,664Total current liabilities
    
    
    68,601
    
    
    67,448Long-term debt
    
    
    5,208
    
    
    6,458Total liabilities
    
    
    129,991
    
    
    80,123Total stockholders equity
    
    
    725,923
    
    
    640,541
 Cash and cash equivalents.
 Letters of credit and restricted cash.
 Operating activities.
 28




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##### Table of Contents



Investing activities.
 Financing activities.
 Contractual cash obligations.
   Financing history.
 Credit facility.
 29




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##### Table of Contents



Other liquidity information
  Credit risk.
 Related Party Transactions
  Critical Accounting Policies and Estimates
  Contingent Consideration
  Seasonality and Quarterly Fluctuations
   30




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##### Table of Contents



Off-Balance Sheet Arrangements
  Recently Issued Accounting Pronouncements
 Business Combinations Noncontrolling Interests in Consolidated Financial Statements
  Subsequent Events
 Determination of the Useful
Life of Intangible Assets,
 31




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##### Table of Contents



FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles FASB
Accounting Standards Codification The Hierarchy of Generally Accepted Accounting
Principles authoritative nonauthoritative
 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;
 32




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##### Table of Contents




    
    Lack of demand for our atherectomy products, due in part to increased 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 our stents and atherectomy products for a significant portion of our
product sales;
    
    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;
    
    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;
    
    Significant and unexpected claims under our EverFlex self-expanding stent worldwide
fracture-free guarantee program in excess of our reserves;
    
    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; 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;
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
    
    Changes in and failure to retain or replace senior management or other key employees
and the avoidance of business disruption and employee distraction as we continue to
execute restructuring activities;
    
    Adverse changes in applicable laws or 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.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
   Foreign Currency Exchange Rate Risk
   
 35




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ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control Over Financial Reporting
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PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  We acquired Chestnut primarily for its Pipeline Embolization Device. If the Pipeline Embolization
Device cannot be shown to be safe and effective in clinical trials, is not approvable or not
commercially successful, or if we do not receive the pre-market approval letter from the FDA for
any reason, then the benefits of our acquisition of Chestnut may never be fully realized.
  We may experience difficulties in integrating Chestnuts operations into ours and may be unable to
realize the anticipated net sales and other potential benefits of our acquisition of Chestnut in a
timely manner or at all. As a result, our business, operating results and stock price may be
adversely affected.
   
    
    executing on the strategic vision we communicated to our stockholders, investors,
employees, customers and suppliers regarding the acquisition;
    
    coordinating research and development activities to accelerate introduction of new
products and technologies with reduced costs;
    
    coordinating and consolidating geographically separated organizations, systems and
facilities;
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
    
    expanding the sale of Chestnuts current and proposed products into our
international operations and distribution network;
    
    maintaining key employees and employee morale;
    
    addressing possible differences in business backgrounds, corporate cultures and
management philosophies;
    
    preserving our customer, distribution, reseller, manufacturing, supplier, marketing
and other important relationships and resolving any potential conflicts;
    
    integrating numerous operating systems, including those involving management
information, purchasing, accounting and finance, sales, billing, payroll, employee
benefits and regulatory compliance;
    
    reconciling inconsistent standards, controls, procedures and policies; and
    
    creating a consolidated internal control over financial reporting structure to
enable us and our independent public registered accounting firm to report on the
effectiveness of our internal control over financial reporting.
  Charges resulting from the application of the acquisition method of accounting may adversely
affect our operating results and the market value of our common stock.
 Business
Combinations Fair Value Measurements
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Our products face the risk of technological obsolescence, which, if realized, could have a material
adverse effect on our business and operating results.
  Our future success depends in part on the introduction of new products. Failure to introduce and
market new products in a timely fashion that are accepted by the marketplace could adversely affect
our business and operating results.
    A number of our proposed products are in the early stages of development and some are in clinical
trials. If the development of these products is not successfully completed or if these trials are
unsuccessful, or if the FDA or other regulatory agencies require additional trials to be conducted,
these products may not be commercialized and our business prospects may suffer.
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Our inability to successfully grow through future acquisitions, our failure to integrate any
acquired businesses successfully into our existing operations or our discovery of previously
undisclosed liabilities could negatively affect our business and operating results.
  
    
    difficulties in integrating any acquired companies, personnel and products into our
existing business;
    
    delays in realizing projected efficiencies, cost savings, revenue synergies and
other benefits of the acquired company or products;
    
    inaccurate assessment of the future market size or market acceptance of any acquired
products or technologies or the hurdles in obtaining regulatory approvals of such
products;
    
    inaccurate assessment of undisclosed, contingent or other liabilities or problems;
    
    diversion of our managements time and attention from other business concerns;
    
    limited or no direct prior experience in new markets or countries we may enter;
    
    higher costs of integration than we anticipated;
    
    adverse accounting consequences under recently revised accounting rules; and
    
    difficulties in retaining key employees of the acquired business who are necessary
to manage the acquired business.
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We may require additional capital in the future, which may not be available or may be available
only on unfavorable terms. In addition, any equity financings may be dilutive to our stockholders.
  Our quarterly operating results are subject to substantial fluctuations and you should not rely on
them as an indication of our future results.
  
    
    the seasonality of our product sales, which typically results in higher demand in
our fourth fiscal quarter and lower sales volumes in our third fiscal quarter;
    
    the mix of our products sold;
    
    demand for, and pricing of, our products and the products of our competitors;
    
    timing of or failure to obtain regulatory approvals for products;
    
    costs, benefits and timing of new product introductions by us and our competitors;
    
    increased competition;
    
    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;
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
    
    changes in average selling prices;
    
    the availability and cost of components and materials;
    
    fluctuations in foreign currency exchange rates;
    
    the possible deferral of revenue under our revenue recognition policies;
    
    the timing of operating expenses in anticipation of sales;
    
    unanticipated expenses;
    
    the accounting treatment of the contingent consideration we agreed to pay in
connection with our acquisition of Chestnut;
    
    other costs related to acquisitions of technologies or businesses;
    
    restructuring, impairment and other special charges; and
    
    fluctuations in investment returns on invested cash balances.
  We may become obligated to make large milestone payments that are not reflected in our consolidated
financial statements in certain circumstances, which would negatively impact our cash flows from
operations. In addition, due to changes in applicable generally accepted accounting principles,
the milestone payment for our recent acquisition of Chestnut likely will negatively impact our
future operating results.
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Business Combinations Fair Value Measurements
 We have incurred and expect to continue to incur transaction and integration-related costs in
connection with our acquisition of Chestnut and the integration of Chestnuts operations into ours.
  Our stock price could decrease because a substantial number of shares of our common stock will be
available for sale in the future.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Recent Sales of Unregistered Equity Securities
  Issuer Purchases of Equity Securities
  Total Number
    
    
    
    
    
    
    Total Number of Shares
    
    
    Maximum Number ofof
    
    
    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
(April 6, 2009  May 10, 2009)
    
    
    51
    
    
    $
    7.31
    
    
    
    N/A
    
    
    
    N/AMonth # 2
(May 11, 2009  June 7, 2009)
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/AMonth # 3
June 8, 2009  July 5, 2009)
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/ATotal:
    
    
    51
    
    
    $
    7.31
    
    
    
    N/A
    
    
    
    N/A
 
 (1)
    
    Consists of shares repurchased from employees in connection with the required 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 withholding or employment-related tax obligations.  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 (a)
    
    Our Annual Meeting of Stockholders was held on May 26, 2009.(b)
    
    The results of the stockholder votes were as follows:
 BrokerFor
    
    Against
    
    Abstain
    
    Non-Votes1. Election of Directors 
for terms expiring at the
2012 Annual Meeting of
StockholdersJeffrey B. Child
    
    
    74,974,985
    
    
    
    19,727,285
    
    
    
    33,232
    
    
    
    John L. Miclot
    
    
    91,558,166
    
    
    
    3,134,891
    
    
    
    42,445
    
    
    
    Thomas E. Timbie
    
    
    74,963,770
    
    
    
    19,738,500
    
    
    
    33,232
    
    
    
    2. Ratification of Ernst &
Young LLP as Independent
Registered Public
Accounting Firm for Year
Ending December 31, 2009
    
    
    94,500,453
    
    
    
    198,637
    
    
    
    36,412
    
    
    
    
   
 ITEM 5. OTHER INFORMATION
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ITEM 6. EXHIBITS
  Exhibit No.
    
    Description2.1
    
    Agreement and Plan of Merger dated as of June 2, 2009 by and
among ev3 Inc., Starsky Merger Sub, Inc., Starsky Acquisition
Sub, Inc., Chestnut Medical Technologies, Inc. and CMT SR,
Inc. (Incorporated by reference to Exhibit 2.1 to ev3s
Current Report on Form 8-K as filed with the Securities and
Exchange Commission on June 3, 2009 (File No. 000-51348))*10.1
    
    Form of Voting Agreement dated as of June 2, 2009 by and
between the officers, directors and certain principal
shareholders of Chestnut Medical Technologies, Inc. and ev3
Inc. (Incorporated by reference to Exhibit 10.1 to ev3s
Current Report on Form 8-K as filed with the Securities and
Exchange Commission on June 3, 2009 (File No. 000-51348))10.2
    
    Consent Regarding Loan and Security Agreement dated June 19,
2009 between Silicon Valley Bank and ev3 Endovascular, Inc.,
ev3 International, Inc., Micro Therapeutics, Inc. and
FoxHollow Technologies, Inc. (Filed herewith)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)
 
 *
    
    All exhibits and schedules to the Agreement and Plan of Merger have been omitted pursuant
to Item 601(b) (2) of Regulation S-K. ev3 will furnish the omitted exhibits and schedules to
the Securities and Exchange Commission upon request by the Securities and Exchange Commission. 46




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SIGNATURES
  August 3, 2009
    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) 47




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ev3 Inc.
QUARTERLY REPORT ON FORM 10-Q
 
 EXHIBIT INDEX
 Exhibit No.
    
    Description
    
    Method of Filing2.1
    
    Agreement and Plan of
Merger dated as of June 2,
2009 by and among ev3 Inc.,
Starsky Merger Sub, Inc.,
Starsky Acquisition Sub,
Inc., Chestnut Medical
Technologies, Inc. and CMT
SR, Inc.*
    
    Incorporated by reference
to Exhibit 2.1 to ev3s
Current Report on Form 8-K
as filed with the
Securities and Exchange
Commission on June 3, 2009
(File No. 000-51348)10.1
    
    Form of Voting Agreement
dated as of June 2, 2009 by
and between the officers,
directors and certain
principal shareholders of
Chestnut Medical
Technologies, Inc. and ev3
Inc.
    
    Incorporated by reference
to Exhibit 10.1 to ev3s
Current Report on Form 8-K
as filed with the
Securities and Exchange
Commission on June 3, 2009
(File No. 000-51348)10.2
    
    Consent Regarding Loan and
Security Agreement dated
June 19, 2009 between
Silicon Valley Bank and ev3
Endovascular, Inc., ev3
International, Inc. , Micro
Therapeutics, Inc. and
FoxHollow Technologies,
Inc.
    
    Filed herewith31.1
    
    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
 
 *
    
    All exhibits and schedules to the Agreement and Plan of Merger have been omitted pursuant
to Item 601(b) (2) of Regulation S-K. ev3 will furnish the omitted exhibits and schedules to
the Securities and Exchange Commission upon request by the Securities and Exchange Commission. 48