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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 April 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
(State or other jurisdiction of 
incorporation or organization)
    
    32-0138874
(I.R.S. Employer Identification No.)
 9600
54 th 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(Do not check if a smaller reporting company)
Smaller reporting company o o þ




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##### 



ev3 Inc.
FORM 10-Q
For the Quarterly Period Ended April 5, 2009
 TABLE OF CONTENTS
 Description
    
    PagePART I.
    
    FINANCIAL INFORMATIONITEM 1.
    
    Financial StatementsConsolidated Balance Sheets as of April 5, 2009 (unaudited) and December 31, 2008
    
    
    1Consolidated Statements of Operations for the three months ended April 5, 2009
and March 30, 2008 (unaudited)
    
    
    2Consolidated Statements of Cash Flows for the three months ended April 5, 2009
and March 30, 2008 (unaudited)
    
    
    3Notes to the Consolidated Financial Statements
    
    
    4ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15ITEM 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    27ITEM 4.
    
    Controls and Procedures
    
    
    27PART II.
    
    OTHER INFORMATIONITEM 1.
    
    Legal Proceedings
    
    
    29ITEM 1A.
    
    Risk Factors
    
    
    29ITEM 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29ITEM 3.
    
    Defaults Upon Senior Securities
    
    
    29ITEM 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    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, 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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PART I. FINANCIAL INFORMATION
 
 ITEM I. FINANCIAL STATEMENTS
 
 ev3
Inc.  CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands, except per share amounts)
 April 5,
    
    
    December 31,2009
    
    
    2008(unaudited)AssetsCurrent assetsCash and cash equivalents
    
    $
    66,914
    
    
    $
    59,652Accounts receivable, less allowance of $7,701 and $8,098, respectively
    
    
    72,751
    
    
    
    72,814Inventories
    
    
    45,743
    
    
    
    47,687Prepaid expenses and other assets
    
    
    6,863
    
    
    
    6,970Total current assets
    
    
    192,271
    
    
    
    187,123Restricted cash
    
    
    2,852
    
    
    
    1,531Property and equipment, net
    
    
    28,023
    
    
    
    30,681Goodwill
    
    
    315,354
    
    
    
    315,654Other intangible assets, net
    
    
    180,146
    
    
    
    185,292Other assets
    
    
    355
    
    
    
    383Total assets
    
    $
    719,001
    
    
    $
    720,664Liabilities and stockholders equityCurrent liabilitiesAccounts payable
    
    $
    16,577
    
    
    $
    15,657Accrued compensation and benefits
    
    
    20,837
    
    
    
    29,547Accrued liabilities
    
    
    20,089
    
    
    
    19,744Current portion of long-term debt
    
    
    2,500
    
    
    
    2,500Total current liabilities
    
    
    60,003
    
    
    
    67,448Long-term debt
    
    
    5,833
    
    
    
    6,458Other long-term liabilities
    
    
    9,147
    
    
    
    6,217Total liabilities
    
    
    74,983
    
    
    
    80,123Stockholders equityPreferred stock, $0.01 par value, 100,000,000 shares authorized, none
issued and outstanding as of April 5, 2009 and December 31, 2008
    
    
    
    
    
    
    Common stock, $0.01 par value, 300,000,000 shares authorized, shares
issued and outstanding: 106,714,505 shares at April 5, 2009 and
105,822,444 at December 31, 2008
    
    
    1,067
    
    
    
    1,058Additional paid in capital
    
    
    1,761,765
    
    
    
    1,756,832Accumulated deficit
    
    
    (1,118,469
    )
    
    
    (1,116,661
    )Accumulated other comprehensive loss
    
    
    (345
    )
    
    
    (688
    )Total stockholders equity
    
    
    644,018
    
    
    
    640,541Total liabilities and stockholders equity
    
    $
    719,001
    
    
    $
    720,664
  1




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ev3 Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(unaudited)
 Three Months EndedApril 5, 2009
    
    
    March 30, 2008SalesProduct sales
    
    $
    100,395
    
    
    $
    95,050Research collaboration
    
    
    
    
    
    
    6,207Net sales
    
    
    100,395
    
    
    
    101,257Operating expenses:Product cost of goods sold
    
    
    30,988
    
    
    
    31,970Research collaboration
    
    
    
    
    
    
    1,648Sales, general and administrative
    
    
    55,648
    
    
    
    59,828Research and development
    
    
    11,578
    
    
    
    11,726Amortization of intangible assets
    
    
    5,828
    
    
    
    8,243Total operating expenses
    
    
    104,042
    
    
    
    113,415Loss from operations
    
    
    (3,647
    )
    
    
    (12,158
    )Other (income) expense:Gain on investments, net
    
    
    (4,067
    )
    
    
    Interest expense (income), net
    
    
    213
    
    
    
    (441
    )Other expense (income), net
    
    
    2,208
    
    
    
    (2,432
    )Loss before income taxes
    
    
    (2,001
    )
    
    
    (9,285
    )Income tax (benefit) expense
    
    
    (192
    )
    
    
    485Net loss
    
    $
    (1,809
    )
    
    $
    (9,770
    )Earnings per share:Net loss per common share (basic and diluted):
    
    $
    (0.02
    )
    
    $
    (0.09
    )Weighted average common shares outstanding (basic and diluted)
    
    
    105,030,020
    
    
    
    104,094,790
  2




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ev3 Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands, except per share amounts)
(unaudited)
 Three Months EndedApril 5,
    
    
    March 30,2009
    
    
    2008Operating activitiesNet loss
    
    $
    (1,809
    )
    
    $
    (9,770
    )Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Depreciation and amortization
    
    
    8,628
    
    
    
    11,176Provision for bad debts and sales returns
    
    
    (321
    )
    
    
    1,518Provision for inventory obsolescence
    
    
    1,148
    
    
    
    1,677Gain on investments, net
    
    
    (4,067
    )
    
    
    Stock compensation expense
    
    
    3,711
    
    
    
    4,731Change in operating assets and liabilities, net of acquired:Accounts receivable
    
    
    277
    
    
    
    (12,816
    )Inventories
    
    
    795
    
    
    
    (4,214
    )Prepaid expenses and other assets
    
    
    21
    
    
    
    397Accounts payable
    
    
    2,060
    
    
    
    (5,754
    )Accrued expenses and other liabilities
    
    
    (3,990
    )
    
    
    (11,705
    )Deferred revenue
    
    
    
    
    
    
    (6,207
    )Net cash provided by (used in) operating activities
    
    
    6,453
    
    
    
    (30,967
    )Investing activitiesProceeds from sale of short-term investments
    
    
    
    
    
    
    2,044Purchase of property and equipment
    
    
    (732
    )
    
    
    (3,082
    )Purchase of patents and licenses
    
    
    (681
    )
    
    
    (579
    )Proceeds from sale of investments
    
    
    4,081
    
    
    
    Payments for the acquisition of FoxHollow, net of cash acquired
    
    
    
    
    
    
    (136
    )Decrease in restricted cash
    
    
    (1,440
    )
    
    
    68Net cash provided by (used in) investing activities
    
    
    1,228
    
    
    
    (1,685
    )Financing activitiesPayments on long-term debt
    
    
    (625
    )
    
    
    (893
    )Payments on capital lease obligations
    
    
    (43
    )
    
    
    (38
    )Proceeds from exercise of stock options
    
    
    347
    
    
    
    454Proceeds from employee stock purchase plan
    
    
    884
    
    
    
    859Net cash provided by financing activities
    
    
    563
    
    
    
    382Effect of exchange rate changes on cash
    
    
    (982
    )
    
    
    510Net increase (decrease) in cash and cash equivalents
    
    
    7,262
    
    
    
    (31,760
    )Cash and cash equivalents, beginning of period
    
    
    59,652
    
    
    
    81,060Cash and cash equivalents, end of period
    
    $
    66,914
    
    
    $
    49,300
  3




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ev3 Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Description of Business
  2. Basis of Presentation
   New Accounting Pronouncements
 Fair Value Measurements
 Effective Date of FASB
Statement No. 157
 Determining the Fair Value of a Financial Asset
When the Market for That Asset Is Not Active,
 Business Combinations Noncontrolling Interests in Consolidated Financial Statements
 4




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3. Fair Value Measurements
 Fair Value Measurement
 
    
    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
  4. Stock-Based Compensation
  Stock-Based Compensation Charges:
    
    April 5, 2009
    
    
    March 30, 2008Product cost of goods sold
    
    $
    245
    
    
    $
    297Sales, general and administrative
    
    
    3,098
    
    
    
    3,594Research and development
    
    
    368
    
    
    
    840Total stock-based compensation charges
    
    $
    3,711
    
    
    $
    4,731
  5




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5. Restructuring
 Recognition of Liabilities in Connection with a Purchase Business Combination
  AdjustmentsAdjustments to
    
    
    Reflected inBalance at
    
    
    Purchase Price
    
    
    ConsolidatedDecember 31,
    
    
    Allocation
    
    
    Statements of
    
    
    
    
    
    
    Balance at2008
    
    
    (EITF 95-3)
    
    
    Operations
    
    
    Amounts Paid
    
    
    April 5, 2009Workforce reductions
    
    $
    670
    
    
    $
    (300
    )
    
    $
    
    
    
    $
    (299
    )
    
    $
    71Termination of
contractual
commitments
    
    
    7,495
    
    
    
    
    
    
    
    3,421
    
    
    
    (811
    )
    
    
    10,105Total
    
    $
    8,165
    
    
    $
    (300
    )
    
    $
    3,421
    
    
    $
    (1,110
    )
    
    $
    10,176
 Employers Accounting for Postemployment Benefits
 6




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6. Inventories
  April 5, 2009
    
    
    December 31, 2008Raw materials
    
    $
    10,277
    
    
    $
    10,472Work in-progress
    
    
    5,105
    
    
    
    4,144Finished goods
    
    
    40,264
    
    
    
    43,40855,646
    
    
    
    58,024Inventory reserve
    
    
    (9,903
    )
    
    
    (10,337
    )Inventory, net
    
    $
    45,743
    
    
    $
    47,687
  7. Property and Equipment, Net
  April 5, 2009
    
    
    December 31, 2008Machinery and equipment
    
    $
    33,137
    
    
    $
    29,550Office furniture and equipment
    
    
    18,636
    
    
    
    18,466Leasehold improvements
    
    
    14,135
    
    
    
    14,131Construction in progress
    
    
    1,898
    
    
    
    5,67067,806
    
    
    
    67,817Less:Accumulated depreciation and amortization
    
    
    (39,783
    )
    
    
    (37,136
    )Property and equipment, net
    
    $
    28,023
    
    
    $
    30,681
  8. Goodwill and Other Intangible Assets
  PeripheralVascular
    
    
    Neurovascular
    
    
    TotalBalance as of December 31, 2008
    
    $
    230,400
    
    
    $
    85,254
    
    
    $
    315,654Adjustment to FoxHollow
purchase price allocation
(Note 5)
    
    
    (300
    )
    
    
    
    
    
    
    (300
    )Balance as of April 5, 2009
    
    $
    230,100
    
    
    $
    85,254
    
    
    $
    315,354
 Recognition of Liabilities in Connection with a Purchase Business Combination ,
 7




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Weighted
    
    
    April 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
    
    
    $
    16,093
    
    
    $
    (6,617
    )
    
    $
    9,476
    
    
    $
    15,413
    
    
    $
    (6,264
    )
    
    $
    9,149Developed technology
    
    
    10.0
    
    
    
    196,018
    
    
    
    (69,997
    )
    
    
    126,021
    
    
    
    196,016
    
    
    
    (66,312
    )
    
    
    129,704Trademarks and tradenames
    
    
    9.0
    
    
    
    12,222
    
    
    
    (4,706
    )
    
    
    7,516
    
    
    
    12,222
    
    
    
    (4,457
    )
    
    
    7,765Customer relationships
    
    
    10.0
    
    
    
    56,094
    
    
    
    (19,096
    )
    
    
    36,998
    
    
    
    56,094
    
    
    
    (17,967
    )
    
    
    38,127Distribution rights
    
    
    2.5
    
    
    
    7,966
    
    
    
    (7,831
    )
    
    
    135
    
    
    
    7,966
    
    
    
    (7,419
    )
    
    
    547Other intangible assets
    
    
    
    
    
    $
    288,393
    
    
    $
    (108,247
    )
    
    $
    180,146
    
    
    $
    287,711
    
    
    $
    (102,419
    )
    
    $
    185,292
    2009
    
    $
    21,5272010
    
    
    19,5632011
    
    
    18,0042012
    
    
    17,8862013
    
    
    17,596
 9. Long-Term Debt
  April 5, 2009
    
    
    December 31, 2008Equipment term loan
    
    $
    8,333
    
    
    $
    8,958Less: current portion
    
    
    (2,500
    )
    
    
    (2,500
    )Total long-term debt
    
    $
    5,833
    
    
    $
    6,458
  8




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Remaining 2009
    
    $
    1,8752010
    
    
    2,5002011
    
    
    2,5002012
    
    
    1,458Total
    
    $
    8,333
 10. Gain on Investments, Net
  11. Income Taxes
 Accounting for Income Taxes for Interim Periods and
interpretation of APB Opinion No. 28
 9




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12. Other Comprehensive Loss
  Three Months EndedApril 5, 2009
    
    
    March 30, 2008Net loss
    
    $
    (1,809
    )
    
    $
    (9,770
    )Changes in
unrealized losses on investments
    
    
    
    
    
    
    (407
    )Changes in foreign currency translation
    
    
    344
    
    
    
    (121
    )Total comprehensive loss
    
    $
    (1,465
    )
    
    $
    (10,298
    )
 13. Commitments and Contingencies
 Operating Leases
    Years ending December 31:2009
    
    $
    7,0292010
    
    
    6,0092011
    
    
    4,5172012
    
    
    3,2142013
    
    
    2,901Thereafter
    
    
    8,409$
    32,079
   10




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Letters of Credit
  Contingencies
    11




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14. Segment and Geographic Information
    12




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Three Months EndedApril 5, 2009
    
    
    March 30, 2008Net salesNet product sales:Peripheral vascularAtherectomy
    
    $
    18,308
    
    
    $
    22,700Stents
    
    
    28,174
    
    
    
    24,032Thrombectomy and embolic protection
    
    
    8,047
    
    
    
    5,955Procedural support and other
    
    
    11,673
    
    
    
    11,426Total peripheral vascular
    
    
    66,202
    
    
    
    64,113NeurovascularEmbolic products
    
    
    19,547
    
    
    
    17,864Neuro access and delivery products and other
    
    
    14,646
    
    
    
    13,073Total neurovascular
    
    
    34,193
    
    
    
    30,937Total net product sales
    
    $
    100,395
    
    
    $
    95,050Research collaboration
    
    
    
    
    
    
    6,207Total net sales
    
    $
    100,395
    
    
    $
    101,257Gross profitPeripheral vascular
    
    $
    44,395
    
    
    $
    40,408Neurovascular
    
    
    25,012
    
    
    
    22,672Research collaboration
    
    
    
    
    
    
    4,559Total gross profit (1)
    
    $
    69,407
    
    
    $
    67,639Operating expense
    
    
    73,054
    
    
    
    79,797Loss from operations
    
    $
    (3,647
    )
    
    $
    (12,158
    )April 5, 2009
    
    
    December 31, 2008Total assetsPeripheral vascular
    
    $
    540,709
    
    
    $
    545,588Neurovascular
    
    
    178,292
    
    
    
    175,076Total
    
    $
    719,001
    
    
    $
    720,664
 
 (1)
    
    Gross profit for internal measurement purposes is defined as net sales less cost
of goods sold excluding amortization of intangible assets. 13




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Three Months EndedApril 5, 2009
    
    
    March 30, 2008Geographic DataNet salesUnited States
    
    $
    61,654
    
    
    $
    66,452International
    
    
    38,741
    
    
    
    34,805Total net sales
    
    $
    100,395
    
    
    $
    101,257April 5, 2009
    
    
    December 31, 2008Long-lived assetsUnited States
    
    $
    27,025
    
    
    $
    29,603International
    
    
    998
    
    
    
    1,078Total long-lived assets
    
    $
    28,023
    
    
    $
    30,681
 15. Related Party Transaction
  16. Net Loss Per Common Share
   April 5, 2009
    
    March 30, 2008Stock options
    
    
    10,018,896
    
    
    
    9,400,650Non-vested shares
    
    
    1,021,993
    
    
    
    870,625
 14




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Business Overview
      15




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Summary of First Fiscal Quarter 2009 Financial Results and Outlook
   16




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
    
    Net sales of our peripheral vascular products increased 3% to $66.2 million in the
first fiscal quarter 2009 compared to the first 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 are cautious of
the current regulatory environment regarding the promotion of off-label devices and
increased competition we may experience. Although we continued to experience
competition with respect to our atherectomy products during the first fiscal quarter,
we began to implement a number of proactive programs designed 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
focuses for the remainder of 2009 and beyond is to increase 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 11% to $34.2 million in the first
fiscal quarter 2009 compared to the first fiscal quarter 2008 primarily as a result
of increased penetration of new and existing products, including in particular our Onyx
Liquid Embolic System for the treatment of brain arterial-venous malformations, or
AVMs, and our Axium coil, and sales growth in virtually all of our embolic and neuro
access and delivery products. We believe the Onyx Liquid Embolic System and Axium coil
will continue to be primary growth engines for our neurovascular business during the
remainder of 2009 and that our neurovascular business also should benefit during the
remainder of 2009 by new product introductions, expanded geographic presence and
improved pricing.
    
    On a geographic basis, 61% of our net sales for the first fiscal quarter 2009 were
generated in the United States and 39% were generated outside the United States. Our
international net sales increased 11% to $38.7 million in the first fiscal quarter 2009
compared to the first fiscal quarter 2008 primarily due to increased market penetration
of Embolic Protection Devices and atherectomy products. We expect our international
business to benefit from our ability to sell our recently launched PTA balloon
catheters, the EverCross and the NanoCross, 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 first
fiscal quarter 2009 of approximately $4.3 million compared to the first 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.
    
    As a percentage of net product sales, product costs of goods sold was 31% of net
product sales in the first fiscal quarter 2009 compared 34% of net product sales in the
first fiscal quarter 2008. In our peripheral vascular segment, product cost of goods
sold as a percentage of net product sales decreased to 33% in the first fiscal quarter
2009 compared to 37% in the first fiscal quarter 2008 primarily attributable to
increased sales volume and improved manufacturing efficiencies. In our neurovascular
segment, product cost of goods sold as a percentage of net product sales was 27% in
both the first fiscal quarter 2009 and 2008. We expect our product cost of goods sold
as a percentage of net product sales to continue to decrease in 2009 compared to 2008
primarily as a result of increased sales volume, synergies related to the consolidation
of the FoxHollow facility and continued benefits from our focus on lean manufacturing
programs.
    
    Sales, general and administrative expenses declined to 55% of net product sales in
the first fiscal quarter 2009 compared to 63% of net product sales in the first fiscal
quarter 2008 primarily due to strong cost management efforts slightly offset by $3.4
million of expense recorded in the first quarter 2009 to increase reserves on our
vacated FoxHollow leased facilities. See Note 5 to our consolidated financial
statements for further discussion. 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
optimization 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 loss in the first fiscal quarter 2009 was $1.8 million, or $0.02 per common
share, compared to a net loss of $9.8 million, or $0.09 per share, in the first fiscal
quarter 2008. Our goal for the remainder of 2009 and beyond is to obtain sustained
profitability.
 17




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##### Table of Contents




    
    Our cash and cash equivalents were $66.9 million at April 5, 2009, an increase of
$7.3 million compared to December 31, 2008. This increase was primarily due to cash
provided by operating activities during the first fiscal quarter 2009 and proceeds of
$4.1 million from a realized gain on the sale of certain investments. We believe our
cash and cash equivalents and current financing arrangements will be sufficient to meet
our liquidity requirements through at least the next 12 months. We expect to continue
to focus on improving our cash flow from operations during 2009.
 Results of Operations
  Three Months EndedResults of Operations:
    
    April 5, 2009
    
    
    March 30, 2008
    
    
    Percent ChangeSalesProduct sales
    
    $
    100,395
    
    
    $
    95,050
    
    
    
    5.6
    %Research collaboration
    
    
    
    
    
    
    6,207
    
    
    
    -100.0
    %Net sales
    
    
    100,395
    
    
    
    101,257
    
    
    
    -0.9
    %Operating expenses:Product cost of goods sold (a)
    
    
    30,988
    
    
    
    31,970
    
    
    
    -3.1
    %Research collaboration
    
    
    
    
    
    
    1,648
    
    
    
    -100.0
    %Sales, general and administrative (a)
    
    
    55,648
    
    
    
    59,828
    
    
    
    -7.0
    %Research and development (a)
    
    
    11,578
    
    
    
    11,726
    
    
    
    -1.3
    %Amortization of intangible assets
    
    
    5,828
    
    
    
    8,243
    
    
    
    -29.3
    %Total operating expenses
    
    
    104,042
    
    
    
    113,415
    
    
    
    -8.3
    %Loss from operations
    
    
    (3,647
    )
    
    
    (12,158
    )
    
    
    -70.0
    %Other (income) expense:Gain on investments, net
    
    
    (4,067
    )
    
    
    
    
    
    
    100.0
    %Interest expense (income), net
    
    
    213
    
    
    
    (441
    )
    
    
    -148.3
    %Other expense (income), net
    
    
    2,208
    
    
    
    (2,432
    )
    
    
    -190.8
    %Loss before income taxes
    
    
    (2,001
    )
    
    
    (9,285
    )
    
    
    -78.4
    %Income tax (benefit) expense
    
    
    (192
    )
    
    
    485
    
    
    
    -139.6
    %Net loss
    
    $
    (1,809
    )
    
    $
    (9,770
    )
    
    
    -81.5
    %Earnings per share:
    
    $
    (0.02
    )
    
    $
    (0.09
    )Net loss per common share (basic and diluted):Weighted average common shares outstanding:(basic and diluted)
    
    
    105,030,020
    
    
    
    104,094,790(a)  Includes stock-based compensation charges of:Product cost of goods sold
    
    $
    245
    
    
    $
    297Sales, general and administrative
    
    
    3,098
    
    
    
    3,594Research and development
    
    
    368
    
    
    
    840$
    3,711
    
    
    $
    4,731
 18




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##### Table of Contents



Three Months EndedNET SALES BY SEGMENT:
    
    April 5, 2009
    
    
    March 30, 2008
    
    
    Percent ChangePeripheral vascular:Atherectomy
    
    $
    18,308
    
    
    $
    22,700
    
    
    
    (19.3
    )%Stents
    
    
    28,174
    
    
    
    24,032
    
    
    
    17.2
    %Thrombectomy and embolic protection
    
    
    8,047
    
    
    
    5,955
    
    
    
    35.1
    %Procedural support and other
    
    
    11,673
    
    
    
    11,426
    
    
    
    2.2
    %Total peripheral vascular
    
    
    66,202
    
    
    
    64,113
    
    
    
    3.3
    %Neurovascular:Embolic products
    
    
    19,547
    
    
    
    17,864
    
    
    
    9.4
    %Neuro access and delivery products and other
    
    
    14,646
    
    
    
    13,073
    
    
    
    12.0
    %Total neurovascular
    
    
    34,193
    
    
    
    30,937
    
    
    
    10.5
    %Total net product sales
    
    $
    100,395
    
    
    $
    95,050
    
    
    
    5.6
    %Research collaboration:
    
    
    
    
    
    
    6,207
    
    
    
    (100.0
    )%Total net sales
    
    $
    100,395
    
    
    $
    101,257
    
    
    
    (0.9
    )%Three Months EndedNET SALES BY GEOGRAPHY:
    
    April 5, 2009
    
    
    March 30, 2008
    
    
    Percent ChangeUnited States
    
    $
    61,654
    
    
    $
    66,452
    
    
    
    (7.2
    )%InternationalBefore foreign exchange impact
    
    
    43,044
    
    
    
    34,805
    
    
    
    23.7
    %Foreign exchange impact
    
    
    (4,303
    )
    
    
    
    
    
    NMTotal
    
    
    38,741
    
    
    
    34,805
    
    
    
    11.3
    %Total net sales
    
    $
    100,395
    
    
    $
    101,257
    
    
    
    (0.9
    )%
 Comparison of the Three Months Ended April 5, 2009 to the Three Months Ended March 30, 2008
 Net sales
 Net sales of peripheral vascular products
 Net sales of neurovascular products
 Research collaboration (revenue).
 Net sales by geography
 19




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Product cost of goods sold
 Research collaboration (expense)
 Sales, general and administrative expense
 Research and development
 Amortization of intangible assets
 Gain on investments, net.
 Interest expense (income), net
 20




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##### Table of Contents



Other expense (income), net
 Income tax (benefit) expense Accounting for Income Taxes for Interim Periods and interpretation
of APB Opinion No. 28
  Liquidity and Capital Resources
 April 5,
    
    December 31,Balance Sheet Data
    
    2009
    
    2008(in thousands)Cash and cash equivalents
    
    $
    66,914
    
    
    $
    59,652Total current assets
    
    
    192,271
    
    
    
    187,123Total assets
    
    
    719,001
    
    
    
    720,664Total current liabilities
    
    
    60,003
    
    
    
    67,448Long-term debt
    
    
    5,833
    
    
    
    6,458Total liabilities
    
    
    74,983
    
    
    
    80,123Total stockholders equity
    
    
    644,018
    
    
    
    640,541
 Cash and cash equivalents.
 Letters of credit and restricted cash.
 Operating activities.
 Investing activities.
 21




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##### Table of Contents



Financing activities.
 Contractual cash obligations.
 Financing history.
 Credit facility
 Other liquidity information
  22




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##### Table of Contents



Credit risk.
 Related Party Transactions
  Critical Accounting Policies and Estimates
  Seasonality and Quarterly Fluctuations
   Off-Balance Sheet Arrangements
  Recent Accounting Pronouncements
 Fair Value Measurements
 Effective Date of FASB
Statement No. 157
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##### Table of Contents



Determining the Fair Value of a Financial Asset
When the Market for That Asset Is Not Active,
 Business Combinations Noncontrolling Interests in Consolidated Financial Statements
  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;
    
    History of operating losses, negative cash flow and failure to achieve our goal of
sustained profitability;
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##### Table of Contents




    
    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 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;
    
    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;
 25




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##### Table of Contents




    
    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;
    
    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.
   26




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
   Foreign Currency Exchange Rate Risk
   
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  27




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##### Table of Contents



Changes in Internal Control Over Financial Reporting
  28




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Recent Sales of Unregistered Equity Securities
  Issuer Purchases of Equity Securities
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
 Not applicable.
 29




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##### Table of Contents



ITEM 6. EXHIBITS
  Exhibit No.
    
    Description10.1
    
    Office Lease for Atria Corporate Center, dated April 2, 2009,
by and between Talcott III Atria, LLC 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 April 7, 2009 (File No. 000-51348))10.2
    
    ev3 Inc. Employee Performance Incentive Compensation Plan
Effective January 1, 2009 (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 February 20, 2009
(File No. 000-51348))10.3
    
    Offer Letter dated January 5, 2009 between ev3 Inc. and Shawn
McCormick (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 January 9, 2009 (File No. 000-51348))10.4
    
    Employment Agreement effective as of January 19, 2009 between
ev3 Endovascular, Inc. and Shawn McCormick (Incorporated by
reference to Exhibit 10.2 to ev3s Current Report on Form 8-K
as filed with the Securities and Exchange Commission on
January 9, 2009 (File No. 000-51348))10.5
    
    Form of Change in Control Agreement effective as of January
19, 2009 among ev3 Inc., ev3 Endovascular, Inc. and Shawn
McCormick (Incorporated by reference to Exhibit 10.3 to ev3s
Current Report on Form 8-K as filed with the Securities and
Exchange Commission on January 9, 2009 (File No. 000-51348))10.6
    
    Form of Indemnification Agreement effective as of January 19,
2009 between ev3 Inc. and Shawn McCormick (Incorporated by
reference to Exhibit 10.4 to ev3s Current Report on Form 8-K
as filed with the Securities and Exchange Commission on
January 9, 2009 (File No. 000-51348))10.7
    
    Separation Agreement and Release of Claims effective as of
January 19, 2009 between ev3 Endovascular, Inc. and Patrick D.
Spangler (Incorporated by reference to Exhibit 10.5 to ev3s
Current Report on Form 8-K as filed with the Securities and
Exchange Commission on January 9, 2009 (File No. 000-51348))10.8
    
    Consulting Agreement effective as of January 20, 2009 between
ev3 Endovascular, Inc. and Patrick D. Spangler (Incorporated
by reference to Exhibit 10.6 to ev3s Current Report on Form
8-K as filed with the Securities and Exchange Commission on
January 9, 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 5, 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) 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
    
    Office Lease for Atria
Corporate Center, dated
April 2, 2009, by and
between Talcott III Atria,
LLC 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 April 7, 2009
(File No. 000-51348)10.2
    
    ev3 Inc. Employee
Performance Incentive
Compensation Plan Effective
January 1, 2009
    
    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 February 20,
2009 (File No. 000-51348)10.3
    
    Offer Letter dated January
5, 2009 between ev3 Inc.
and Shawn McCormick
    
    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 January 9,
2009 (File No. 000-51348)10.4
    
    Employment Agreement
effective as of January 19,
2009 between ev3
Endovascular, Inc. and
Shawn McCormick
    
    Incorporated by reference
to Exhibit 10.2 to ev3s
Current Report on Form 8-K
as filed with the
Securities and Exchange
Commission on January 9,
2009 (File No. 000-51348)10.5
    
    Form of Change in Control
Agreement effective as of
January 19, 2009 among ev3
Inc., ev3 Endovascular,
Inc. and Shawn McCormick
    
    Incorporated by reference
to Exhibit 10.3 to ev3s
Current Report on Form 8-K
as filed with the
Securities and Exchange
Commission on January 9,
2009 (File No. 000-51348)10.6
    
    Form of Indemnification
Agreement effective as of
January 19, 2009 between
ev3 Inc. and Shawn
McCormick
    
    Incorporated by reference
to Exhibit 10.4 to ev3s
Current Report on Form 8-K
as filed with the
Securities and Exchange
Commission on January 9,
2009 (File No. 000-51348)10.7
    
    Separation Agreement and
Release of Claims effective
as of January 19, 2009
between ev3 Endovascular,
Inc. and Patrick D.
Spangler
    
    Incorporated by reference
to Exhibit 10.5 to ev3s
Current Report on Form 8-K
as filed with the
Securities and Exchange
Commission on January 9,
2009 (File No. 000-51348)10.8
    
    Consulting Agreement
effective as of January 20,
2009 between ev3
Endovascular, Inc. and
Patrick D. Spangler
    
    Incorporated by reference
to Exhibit 10.6 to ev3s
Current Report on Form 8-K
as filed with the
Securities and Exchange
Commission on January 9,
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