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U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q

(Mark one)

|    |  |                                                                                         
|--- |  | ----------------------------------------------------------------------------------------
|[X] |  | Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the quarterly period ended June 28, 2003

or

|    |  |                                                                                          
|--- |  | -----------------------------------------------------------------------------------------
|[ ] |  | Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

for the transition period from     to

COMMISSION FILE NUMBER: 1-8145

THORATEC CORPORATION

(Exact name of registrant as specified in its charter)


|                                                                          |  |                                                
|------------------------------------------------------------------------- |  | -----------------------------------------------
|California
(State or Other Jurisdiction of
Incorporation or Organization) |  | 94-2340464
(I.R.S.
Employer Identification No.)

|                                                                                       |  |                 
|-------------------------------------------------------------------------------------- |  | ----------------
|6035 Stoneridge Drive, Pleasanton, California
(Address of Principal Executive Offices) |  | 94588
(Zip Code)

Registrants telephone number, including area code: (925) 847-8600

Indicate by check mark whether the registrant:(1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes  [X]  No  [  ]

As of August 5, 2003 registrant 55,640,106 shares of common stock
outstanding.



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TABLE OF CONTENTS



|                                                                                              |                                                                  |                                                                  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ---------------------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                                                                
|                                                                                              | ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS             
|                                                                                              |                                                                  | CONDENSED CONSOLIDATED BALANCE SHEETS                           
|                                                                                              |                                                                  | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                 
|                                                                                              |                                                                  | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                 
|                                                                                              |                                                                  | CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|                                                                                              |                                                                  | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS            
|ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                                                              | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK  
|                                                                                              | ITEM 4. CONTROLS AND PROCEDURES                                 
|PART II. OTHER INFORMATION                                                                   
|                                                                                              | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY SHAREHOLDERS
|                                                                                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                        
|SIGNATURES                                                                                   
|Exhibit Index                                                                                
|Exhibit 31.1                                                                                 
|Exhibit 32.1                                                                                 



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THORATEC CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS

|                              |  |         |  |                                                                                                                                    
|----------------------------- |  | ------- |  | -----------------------------------------------------------------------------------------------------------------------------------
|Part I. Financial Information
|                              |  | Item 1. |  | Condensed Consolidated Financial Statements (unaudited)                                                                            
|                              |  |         |  | Condensed
Consolidated Balance Sheets as of June 28, 2003 and
December 28, 2002                                                    
|                              |  |         |  | Condensed Consolidated Statements of Operations for the Three and Six Months Ended
June 28,
2003 and June 29, 2002                 
|                              |  |         |  | Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 28,
2003 and June 29, 2002                           
|                              |  |         |  | Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three
and Six Months Ended June 28, 2003 and June 29, 2002
|                              |  |         |  | Notes to Condensed Consolidated Financial Statements                                                                               
|                              |  | Item 2. |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                              
|                              |  | Item 3. |  | Quantitative and Qualitative Disclosure of Market Risk                                                                             
|                              |  | Item 4. |  | Controls and Procedures                                                                                                            
|Part II. Other Information   
|                              |  | Item 4. |  | Submission of Matters to a Vote of Security Shareholders                                                                           
|                              |  | Item 6. |  | Exhibits and Reports on Form 8-K                                                                                                   
|Signatures                   
|Exhibits                     

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##### Table of Contents






PART I. FINANCIAL INFORMATION




ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THORATEC CORPORATION AND SUBSIDIARIES




CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)
(in thousands)

|                                           |                                                                 |                                                                                             |                                                     |        |          |         |              |        |         |         | 
|------------------------------------------ | --------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | --------------------------------------------------- | ------ | -------- | ------- | ------------ | ------ | ------- | ------- | 
|                                           |                                                                 |                                                                                             |                                                     |        | June 28, |         | December 28,
|                                           |                                                                 |                                                                                             |                                                     |        | 2003     |         | 2002        
|                                           |                                                                 |                                                                                             |                                                     |        |          |         |             
|Assets                                     |                                                                 |                                                                                             |                                                     |        |          |         |              |       
|Current Assets:                            |                                                                 |                                                                                             |                                                     |        |          |         |              |       
|                                           | Cash and cash equivalents                                       |                                                                                             | $                                                   | 57,545 |          |         | $            | 42,044 |        
|                                           | Short-term available-for-sale investments                       |                                                                                             |                                                     |      |          |         |              | 3,439  |        
|                                           | Receivables, net of allowances of $221 in 2003 and $238 in 2002 |                                                                                             |                                                     | 26,433 |          |         |              | 27,593 |        
|                                           | Inventories                                                     |                                                                                             |                                                     | 37,409 |          |         |              | 38,835 |        
|                                           | Deferred tax asset                                              |                                                                                             |                                                     | 11,546 |          |         |              | 12,182 |        
|                                           | Prepaid expenses and other assets                               |                                                                                             |                                                     | 2,772  |          |         |              | 2,517  |        
|                                           |                                                                 |                                                                                             |                                                     |        |          |         |              |       
|                                           |                                                                 |                                                                                             | Total Current Assets                                |        |          | 135,705 |              |        |         | 126,610 | 
|                                           |                                                                 |                                                                                             |                                                     |        |          |         |              |       
|Property, plant and equipment, net         |                                                                 |                                                                                             | 24,808                                              |        |          |         | 24,715       |       
|Long-term available-for-sale investments   |                                                                 |                                                                                             | 31,731                                              |        |          |         | 30,051       |       
|Goodwill                                   |                                                                 |                                                                                             | 96,492                                              |        |          |         | 96,492       |       
|Purchased intangible assets, net           |                                                                 |                                                                                             | 178,235                                             |        |          |         | 184,282      |       
|Long-term deferred tax asset               |                                                                 |                                                                                             | 3,242                                               |        |          |         | 5,244        |       
|Other assets                               |                                                                 |                                                                                             | 1,056                                               |        |          |         | 1,038        |       
|                                           |                                                                 |                                                                                             |                                                     |        |          |         |              |       
|                                           |                                                                 |                                                                                             | Total Assets                                        |        | $        | 471,269 |              |        | $       | 468,432 | 
|                                           |                                                                 |                                                                                             |                                                     |        |          |         |              |        |        
|Liabilities and Shareholders Equity       |                                                                 |                                                                                             |                                                     |        |          |         |              |       
|Current Liabilities:                       |                                                                 |                                                                                             |                                                     |        |          |         |              |       
|                                           |                                                                 | Accounts payable                                                                            |                                                     | $      | 5,207    |         |              | $      | 6,319   |        
|                                           |                                                                 | Accrued compensation                                                                        |                                                     |        | 5,939    |         |              |        | 6,372   |        
|                                           |                                                                 | Accrued merger, restructuring and other                                                     |                                                     |        |        |         |              |        | 1,208   |        
|                                           |                                                                 | Estimated liabilities for warranty, legal and other                                         |                                                     |        | 1,411    |         |              |        | 1,304   |        
|                                           |                                                                 | Other accrued liabilities                                                                   |                                                     |        | 3,193    |         |              |        | 3,435   |        
|                                           |                                                                 |                                                                                             |                                                     |        |          |         |              |       
|                                           |                                                                 |                                                                                             | Total Current Liabilities                           |        |          | 15,750  |              |        |         | 18,638  | 
|                                           |                                                                 |                                                                                             |                                                     |        |          |         |              |       
|Long-term deferred tax liability and other |                                                                 |                                                                                             | 73,001                                              |        |          |         | 75,454       |       
|                                           |                                                                 |                                                                                             |                                                     |        |          |         |              |       
|                                           |                                                                 |                                                                                             | Total Liabilities                                   |        |          | 88,751  |              |        |         | 94,092  | 
|                                           |                                                                 |                                                                                             |                                                     |        |          |         |              |       
|Shareholders Equity:                      |                                                                 |                                                                                             |                                                     |        |          |         |              |       
|                                           |                                                                 | Common shares; 100,000 authorized; issued and outstanding 55,570 in 2003 and 55,037 in 2002 |                                                     |        | 415,330  |         |              |        | 410,266 |        
|                                           |                                                                 | Deferred compensation                                                                       |                                                     |        | (3,136   | )       |              |        | (3,735  | )      
|                                           |                                                                 | Accumulated deficit                                                                         |                                                     |        | (29,972  | )       |              |        | (32,412 | )      
|                                           |                                                                 | Accumulated other comprehensive income:                                                     |                                                     |        |          |         |              |        |         |        
|                                           |                                                                 |                                                                                             | Cumulative foreign currency translation adjustments |        |          | 147     |              |        |         | 91      | 
|                                           |                                                                 |                                                                                             | Unrealized gain on investment                       |        |          | 149     |              |        |         | 130     | 
|                                           |                                                                 |                                                                                             |                                                     |        |          |         |              |       
|                                           |                                                                 |                                                                                             | Total accumulated other comprehensive income        |        |          | 296     |              |        |         | 221     | 
|                                           |                                                                 |                                                                                             |                                                     |        |          |         |              |       
|                                           |                                                                 |                                                                                             | Total Shareholders Equity                          |        |          | 382,518 |              |        |         | 374,340 | 
|                                           |                                                                 |                                                                                             |                                                     |        |          |         |              |       
|                                           |                                                                 |                                                                                             | Total Liabilities and Shareholders Equity          |        | $        | 471,269 |              |        | $       | 468,432 | 
|                                           |                                                                 |                                                                                             |                                                     |        |          |         |              |        |        

See notes to condensed consolidated
financial statements.

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THORATEC CORPORATION AND SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)
(in thousands, except per share data)

|                                                    |         |                                             |        |                    |        |                  |        |          |       |          |        |        |        |   |        |        |        | 
|--------------------------------------------------- | ------- | ------------------------------------------- | ------ | ------------------ | ------ | ---------------- | ------ | -------- | ----- | -------- | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                                                    |         |                                             |        | Three Months Ended |        | Six Months Ended
|                                                    |         |                                             |        |                    |        |                 
|                                                    |         |                                             |        | June 28,           |        | June 29,         |        | June 28, |       | June 29,
|                                                    |         |                                             |        | 2003               |        | 2002             |        | 2003     |       | 2002    
|                                                    |         |                                             |        |                    |        |                  |        |          |       |         
|Product sales                                       |         | $                                           | 36,156 |                    |        | $                | 31,034 |          |       | $        | 72,218 |        |        | $ | 60,673 |       
|Cost of product sales                               |         |                                             | 14,651 |                    |        |                  | 13,281 |          |       |          | 29,542 |        |        |   | 26,445 |       
|                                                    |         |                                             |        |                    |        |                  |        |          |       |          |        |        |        |   |        |       
|Gross profit                                        |         |                                             | 21,505 |                    |        |                  | 17,753 |          |       |          | 42,676 |        |        |   | 34,228 |       
|                                                    |         |                                             |        |                    |        |                  |        |          |       |          |        |        |        |   |        |       
|Operating expenses:                                 |         |                                             |        |                    |        |                  |        |          |       |          |        |        |        |   |        |       
|                                                    |         | Selling, general and administrative         |        |                    | 11,169 |                  |        |          | 9,847 |          |        |        | 21,229 |   |        |        | 18,566 | 
|                                                    |         | Research and development                    |        |                    | 6,279  |                  |        |          | 6,083 |          |        |        | 12,539 |   |        |        | 12,985 | 
|                                                    |         | Amortization of purchased intangible assets |        |                    | 3,096  |                  |        |          | 3,096 |          |        |        | 6,192  |   |        |        | 6,192  | 
|                                                    |         | Merger, restructuring and other costs       |        |                    | (67    | )                |        |          | 506   |          |        |        | (124   | ) |        |        | 827    | 
|                                                    |         |                                             |        |                    |        |                  |        |          |       |          |        |        |        |   |        |       
|Total operating expenses                            |         |                                             | 20,477 |                    |        |                  | 19,532 |          |       |          | 39,836 |        |        |   | 38,570 |       
|                                                    |         |                                             |        |                    |        |                  |        |          |       |          |        |        |        |   |        |       
|Income (loss) from operations                       |         |                                             | 1,028  |                    |        |                  | (1,779 | )        |       |          | 2,840  |        |        |   | (4,342 | )     
|Interest and other income  net                     |         |                                             | 649    |                    |        |                  | 854    |          |       |          | 1,160  |        |        |   | 485    |       
|                                                    |         |                                             |        |                    |        |                  |        |          |       |          |        |        |        |   |        |       
|Income (loss) before income tax expense (benefit)   |         |                                             | 1,677  |                    |        |                  | (925   | )        |       |          | 4,000  |        |        |   | (3,857 | )     
|Income tax expense (benefit)                        |         |                                             | 654    |                    |        |                  | (369   | )        |       |          | 1,560  |        |        |   | (1,543 | )     
|                                                    |         |                                             |        |                    |        |                  |        |          |       |          |        |        |        |   |        |       
|Net income (loss)                                   |         | $                                           | 1,023  |                    |        | $                | (556   | )        |       | $        | 2,440  |        |        | $ | (2,314 | )     
|                                                    |         |                                             |        |                    |        |                  |        |          |       |          |        |        |        |   |        |       
|Net income (loss) per share, basic and diluted      |         | $                                           | 0.02   |                    |        | $                | (0.01  | )        |       | $        | 0.04   |        |        | $ | (0.04  | )     
|                                                    |         |                                             |        |                    |        |                  |        |          |       |          |        |        |        |   |        |       
|Shares used to compute net income (loss) per share: |         |                                             |        |                    |        |                  |        |          |       |          |        |        |        |   |        |       
|                                                    | Basic   |                                             |        | 55,394             |        |                  |        | 56,799   |       |          |        | 55,226 |        |   |        | 56,725 |       
|                                                    | Diluted |                                             |        | 56,891             |        |                  |        | 56,799   |       |          |        | 56,240 |        |   |        | 56,725 |       

See notes to condensed consolidated financial statements.

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THORATEC CORPORATION AND SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)
(in thousands)

|                                                                        |                                                                                                    |                                                     |                                                     |        |                  |        |          |         |         |      |  
|----------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------- | ------ | ---------------- | ------ | -------- | ------- | ------- | ---- | -
|                                                                        |                                                                                                    |                                                     |                                                     |        | Six Months Ended
|                                                                        |                                                                                                    |                                                     |                                                     |        |                 
|                                                                        |                                                                                                    |                                                     |                                                     |        | June 28,         |        | June 29,
|                                                                        |                                                                                                    |                                                     |                                                     |        | 2003             |        | 2002    
|                                                                        |                                                                                                    |                                                     |                                                     |        |                  |        |         
|Cash flows from operating activities:                                   |                                                                                                    |                                                     |                                                     |        |                  |        |          |        
|                                                                        | Net income (loss)                                                                                  |                                                     | $                                                   | 2,440  |                  |        | $        | (2,314  | )      
|                                                                        | Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |                                                     |                                                     |        |                  |        |          |         |        
|                                                                        | Depreciation and amortization                                                                      |                                                     |                                                     | 9,234  |                  |        |          | 8,365   |        
|                                                                        | Amortization of deferred compensation                                                              |                                                     |                                                     | 599    |                  |        |          | 559     |        
|                                                                        | Non-cash compensation                                                                              |                                                     |                                                     | 4      |                  |        |          | 152     |        
|                                                                        | Change in net deferred tax liability                                                               |                                                     |                                                     | 1,140  |                  |        |          | (1,261  | )      
|                                                                        | Changes in assets and liabilities:                                                                 |                                                     |                                                     |        |                  |        |          |         |        
|                                                                        |                                                                                                    | Receivables                                         |                                                     |        | 1,225            |        |          |         | 3,639   |     
|                                                                        |                                                                                                    | Inventories                                         |                                                     |        | 1,499            |        |          |         | (7,052  | )   
|                                                                        |                                                                                                    | Prepaid expenses and other assets                   |                                                     |        | (274             | )      |          |         | (106    | )   
|                                                                        |                                                                                                    | Accounts payable and other liabilities              |                                                     |        | (3,022           | )      |          |         | (2,936  | )   
|                                                                        |                                                                                                    |                                                     |                                                     |        |                  |        |          |        
|                                                                        |                                                                                                    |                                                     | Net cash provided by (used in) operating activities |        |                  | 12,845 |          |         |         | (954 | )
|                                                                        |                                                                                                    |                                                     |                                                     |        |                  |        |          |        
|Cash flows from investing activities:                                   |                                                                                                    |                                                     |                                                     |        |                  |        |          |        
|                                                                        | Purchases of available-for-sale investments                                                        |                                                     |                                                     | (4,439 | )                |        |          |        |        
|                                                                        | Sales of available-for-sale investments                                                            |                                                     |                                                     | 5,709  |                  |        |          |        |        
|                                                                        | Reclassification from restricted cash and cash equivalents                                         |                                                     |                                                     |      |                  |        |          | 45,884  |        
|                                                                        | Purchases of property, plant and equipment                                                         |                                                     |                                                     | (2,831 | )                |        |          | (3,666  | )      
|                                                                        |                                                                                                    |                                                     |                                                     |        |                  |        |          |        
|                                                                        |                                                                                                    | Net cash provided by (used in) investing activities |                                                     |        | (1,561           | )      |          |         | 42,218  |     
|                                                                        |                                                                                                    |                                                     |                                                     |        |                  |        |          |        
|Cash flows from financing activities:                                   |                                                                                                    |                                                     |                                                     |        |                  |        |          |        
|                                                                        | Proceeds from stock option exercises                                                               |                                                     |                                                     | 3,571  |                  |        |          | 643     |        
|                                                                        | Proceeds from common stock offering                                                                |                                                     |                                                     |      |                  |        |          | 15,446  |        
|                                                                        | Proceeds from common stock issued under ESPP                                                       |                                                     |                                                     | 578    |                  |        |          |       |        
|                                                                        | Repayment of convertible debentures                                                                |                                                     |                                                     |      |                  |        |          | (54,838 | )      
|                                                                        | Repurchase of common stock                                                                         |                                                     |                                                     |      |                  |        |          | (6,033  | )      
|                                                                        |                                                                                                    |                                                     |                                                     |        |                  |        |          |        
|                                                                        |                                                                                                    | Net cash provided by (used in) financing activities |                                                     |        | 4,149            |        |          |         | (44,782 | )   
|                                                                        | Effect of exchange rate changes on cash                                                            |                                                     |                                                     | 68     |                  |        |          | 48      |        
|                                                                        |                                                                                                    |                                                     |                                                     |        |                  |        |          |        
|                                                                        | Net increase (decrease) in cash and cash equivalents                                               |                                                     |                                                     | 15,501 |                  |        |          | (3,470  | )      
|                                                                        | Cash and cash equivalents at beginning of period                                                   |                                                     |                                                     | 42,044 |                  |        |          | 91,726  |        
|                                                                        |                                                                                                    |                                                     |                                                     |        |                  |        |          |        
|                                                                        | Cash and cash equivalents at end of period                                                         |                                                     | $                                                   | 57,545 |                  |        | $        | 88,256  |        
|                                                                        |                                                                                                    |                                                     |                                                     |        |                  |        |          |         |        
|Supplemental Cash Flow Disclosure:                                      |                                                                                                    |                                                     |                                                     |        |                  |        |          |        
|                                                                        | Cash paid for taxes                                                                                |                                                     | $                                                   | 722    |                  |        | $        | 180     |        
|                                                                        | Cash paid for interest                                                                             |                                                     |                                                     |      |                  |        |          | 839     |        
|Supplemental Disclosure of Non-Cash Investing and Financing Activities: |                                                                                                    |                                                     |                                                     |        |                  |        |          |        
|                                                                        | Reclassification of assembled workforce, net of taxes                                              |                                                     | $                                                   |      |                  |        | $        | 1,334   |        
|                                                                        | Tax benefit related to stock option exercises                                                      |                                                     |                                                     | 911    |                  |        |          | 147     |        

See notes to condensed consolidated financial statements.

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THORATEC CORPORATION AND SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)
(in thousands)

|                                       |                                          |   |                    |    |                  |   |          |    |          |   |       |    |  |   |        |    | 
|-------------------------------------- | ---------------------------------------- | - | ------------------ | -- | ---------------- | - | -------- | -- | -------- | - | ----- | -- |  | - | ------ | -- | 
|                                       |                                          |   | Three Months Ended |    | Six Months Ended
|                                       |                                          |   |                    |    |                 
|                                       |                                          |   | June 28,           |    | June 29,         |   | June 28, |    | June 29,
|                                       |                                          |   | 2003               |    | 2002             |   | 2003     |    | 2002    
|                                       |                                          |   |                    |    |                  |   |          |    |         
|Net income (loss)                      |                                          | $ | 1,023              |    |                  | $ | (556     | )  |          | $ | 2,440 |    |  | $ | (2,314 | ) 
|                                       |                                          |   |                    |    |                  |   |          |    |          |   |       |    |  |   |        |   
|Other net comprehensive income (loss): |                                          |   |                    |    |                  |   |          |    |          |   |       |    |  |   |        |   
|                                       | Unrealized gain (loss) on investments    |   |                    | (2 | )                |   |          |   |          |   |       | 19 |  |   |        |   | 
|                                       | Foreign currency translation adjustments |   |                    | 84 |                  |   |          | 60 |          |   |       | 56 |  |   |        | 50 | 
|                                       |                                          |   |                    |    |                  |   |          |    |          |   |       |    |  |   |        |   
|Comprehensive income (loss)            |                                          | $ | 1,105              |    |                  | $ | (496     | )  |          | $ | 2,515 |    |  | $ | (2,264 | ) 
|                                       |                                          |   |                    |    |                  |   |          |    |          |   |       |    |  |   |        |   

See notes to condensed consolidated financial statements.

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THORATEC CORPORATION AND SUBSIDIARIES




NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of Presentation

The interim condensed consolidated financial statements of Thoratec
Corporation, referred to as we, our, Thoratec, or the Company have been
prepared and presented in accordance with accounting principles generally
accepted in the United States of America and the rules and regulations of the
Securities and Exchange Commission, or the SEC, without audit and, in our
opinion, reflect all adjustments necessary (consisting only of normal recurring
adjustments) to present fairly our financial position at June 28, 2003 and
December 28, 2002, our results of operations for the three-month and six-month
periods ended June 28, 2003 and June 29, 2002 and cash flows for the six-month
periods ended June 28, 2003 and June 29, 2002. Certain information and footnote
disclosures normally included in our annual financial statements prepared in
accordance with accounting principles generally accepted in the United States
of America have been condensed or omitted. The accompanying financial
statements should be read in conjunction with our fiscal 2002 consolidated
financial statements filed with the SEC in our Annual Report on Form 10-K. The
operating results for any interim period are not necessarily indicative of the
results that may be expected for any future period.

The preparation of our condensed consolidated financial statements
included herein necessarily requires us to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the consolidated balance sheet dates and
the reported amounts of revenues and expenses for the periods presented.

We have made certain reclassifications of 2002 amounts to conform to the
current presentation.

2. Merger of Thoratec and TCA

Our merger with Thermo Cardiosystems Inc., or TCA, was completed on
February 14, 2001, which we refer to as the Merger. The Merger was accounted
for under the purchase method of accounting and was treated as a reverse
acquisition because the shareholders of TCA owned the majority of our common
stock after the Merger. TCA was considered the acquiror for accounting and
financial reporting purposes. Due to the reverse acquisition, Thoratecs assets
and liabilities were recorded based upon their estimated fair market values at
the date of acquisition.

As a result of the Merger, $76,858,000 relating to in-process research and
development, or IPR&D, was expensed in the first quarter of 2001. The one-time
write-off of IPR&D related to four technology projects that were in
development, had not reached technological feasibility, had no alternative
future use and for which successful development was uncertain. One of the
projects was completed in 2002. There have been no significant developments
subsequent to the Merger related to the current status of any of the three
remaining IPR&D projects that would result in material changes to the
assumptions or resulting valuation performed at the time of the Merger.
Development of IPR&D projects continues and while the timing of completion of
these projects may vary due to the highly regulated and technical nature of our
products, current estimates remain materially consistent with our initial
estimates.

3. New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards, or SFAS, No. 143, Accounting for
Asset Retirement Obligations. SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs, including legal obligations.
The adoption of SFAS No. 143 as of the beginning of fiscal year 2003 did not
have any impact on our financial position, results of operations or cash flows.

In April 2002, the FASB issued SFAS No. 145, (Rescission of FASB
Statements 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections) which, among other things, changed the presentation of gains and
losses on the extinguishment of debt. Any gain or loss on extinguishment of
debt that does not meet the criteria in Accounting Principle Board, or APB,
Opinion No. 30, Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions, shall be included in operating
earnings and not presented separately as an extraordinary item. We adopted SFAS
No. 145 at the beginning of fiscal year 2003. Upon adoption, we reclassified
the extraordinary loss on extinguishment of debt incurred in the first quarter
of 2002 of $515,000 to interest and other income (expense)-net.

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In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities, which addresses accounting for
restructuring and similar costs. SFAS No. 146 supersedes previous accounting
guidance, principally Emerging Issues Task Force Issue, or EITF, No. 94-3
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit on Activity (Including Certain Costs Incurred in a
Restructuring). The Company will adopt the provisions of SFAS No. 146 for any
restructuring activities initiated after December 31, 2002. SFAS No. 146 may
affect the timing of recognizing future restructuring costs as well as the
amounts recognized.

In November 2002, the FASB issued Financial Interpretation, or FIN, No.
45, Guarantors Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others. FIN No. 45 requires a
liability to be recognized at the time a company issues a guarantee for the
fair value of the obligations assumed under certain guarantee agreements.
Additional disclosures about guarantee agreements are also required in the
interim and annual financial statements, including a roll forward of the
entitys product warranty liabilities. The disclosure provisions of FIN No. 45
were effective for us as of fiscal year end 2002. The provisions for initial
recognition and measurement of guarantee agreements are effective on a
prospective basis for guarantees that are issued or modified after December 28,
2002. We do not expect that the recognition provisions of FIN No. 45 will have
a material impact upon our consolidated financial statements.

In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure. SFAS No. 148 amends SFAS
No. 123, Accounting for Stock-Based Compensation, to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements of the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. SFAS No. 148 is effective for fiscal years beginning
after December 15, 2002. We adopted the disclosure provisions of SFAS No. 148
at the beginning of fiscal 2003. Currently we are evaluating the impact of the
adoption of the use of the fair value based method of accounting for
stock-based financial position, results of operations and cash flows.

We account for stock-based compensation to employees using the intrinsic
value method in accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees. Accordingly, no accounting
recognition is given to stock options granted at fair market value until they
are exercised. Upon exercise, net proceeds, including tax benefits realized,
are recorded in common stock. Similarly, no accounting recognition is given to
our recently implemented employee stock purchase plan until a purchase occurs.
Upon purchase, net proceeds are recorded in common stock. Under fair value
recognition provisions of SFAS No. 123, the fair value of each option granted
as a stock option or as an option to purchase shares under the employee stock
purchase plan is estimated using the Black-Scholes option pricing model. If
compensation cost for our stock-based plans had been determined based on the
fair value at the grant dates for awards under those plans, consistent with the
method of SFAS No. 123, our reported net income (loss) would have been
adversely affected, as shown in the following table (in thousands, except per
share data):

|                                             |                                                                                                                                             |   |                    |        |                  |   |          |        |          |   |       |        |   |   |        |        |  
|-------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------------ | ------ | ---------------- | - | -------- | ------ | -------- | - | ----- | ------ | - | - | ------ | ------ | -
|                                             |                                                                                                                                             |   | Three Months Ended |        | Six Months Ended
|                                             |                                                                                                                                             |   |                    |        |                 
|                                             |                                                                                                                                             |   | June 28,           |        | June 29,         |   | June 28, |        | June 29,
|                                             |                                                                                                                                             |   | 2003               |        | 2002             |   | 2003     |        | 2002    
|                                             |                                                                                                                                             |   |                    |        |                  |   |          |        |         
|Net income (loss):                           |                                                                                                                                             |   |                    |        |                  |   |          |        |          |   |       |        |   |   |        |       
|As reported                                  |                                                                                                                                             | $ | 1,023              |        |                  | $ | (556     | )      |          | $ | 2,440 |        |   | $ | (2,314 | )     
|                                             | Add: Stock-based compensation expense
included in reported net income, net of
related tax effects                                           |   |                    |      |                  |   |          | 55     |          |   |       | 4      |   |   |        | 93     |  
|                                             | Deduct: Total stock-based employee
compensation expense determined under
fair
value based method for all awards, net
of related tax effects |   |                    | (1,670 | )                |   |          | (2,459 | )        |   |       | (3,448 | ) |   |        | (4,528 | )
|                                             |                                                                                                                                             |   |                    |        |                  |   |          |        |          |   |       |        |   |   |        |       
|                                             | Pro forma                                                                                                                                   |   | $                  | (647   | )                |   | $        | (2,960 | )        |   | $     | (1,004 | ) |   | $      | (6,749 | )
|                                             |                                                                                                                                             |   |                    |        |                  |   |          |        |          |   |       |        |   |   |        |       
|Basic and diluted earnings (loss) per share: |                                                                                                                                             |   |                    |        |                  |   |          |        |          |   |       |        |   |   |        |       
|                                             | As reported                                                                                                                                 |   | $                  | 0.02   |                  |   | $        | (0.01  | )        |   | $     | 0.04   |   |   | $      | (0.04  | )
|                                             | Pro forma                                                                                                                                   |   | $                  | (0.01  | )                |   | $        | (0.05  | )        |   | $     | (0.04  | ) |   | $      | (0.12  | )

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In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities. This statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under FASB
Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities. This statement is effective for contracts entered into or modified
after June 30, 2003. The adoption of this statement is not expected to have an
impact on Thoratecs financial position, results of operations or cash flows.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity.
This statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. This statement is effective for financial instruments entered into or
modified after May 31, 2003 and for hedging relationships designated after June
30, 2003. The adoption of this statement is not expected to have an impact on
Thoratecs financial position, results of operations or cash flows.

4. Inventories

Inventories consist of the following (in thousands):

|                |       |   |          |        |              |   |        |        | 
|--------------- | ----- | - | -------- | ------ | ------------ | - | ------ | ------ | 
|                |       |   | As of   
|                |       |   |         
|                |       |   | June 28, |        | December 28,
|                |       |   | 2003     |        | 2002        
|                |       |   |          |        |             
|Finished goods  |       | $ | 20,830   |        |              | $ | 22,119 |       
|Work in process |       |   | 5,544    |        |              |   | 6,645  |       
|Raw materials   |       |   | 11,035   |        |              |   | 10,071 |       
|                |       |   |          |        |              |   |        |       
|                | Total |   | $        | 37,409 |              |   | $      | 38,835 | 
|                |       |   |          |        |              |   |        |       

5. Property, Plant and Equipment

Property, plant, and equipment consist of the following (in thousands):

|                                       |  |          |         |              |  |   |         |  
|-------------------------------------- |  | -------- | ------- | ------------ |  | - | ------- | -
|                                       |  | As of   
|                                       |  |         
|                                       |  | June 28, |         | December 28,
|                                       |  | 2003     |         | 2002        
|                                       |  |          |         |             
|Property, plant and equipment, at cost |  | $        | 51,510  |              |  | $ | 49,355  |  
|Less accumulated depreciation          |  |          | (26,702 | )            |  |   | (24,640 | )
|                                       |  |          |         |              |  |   |         |  
|Total                                  |  | $        | 24,808  |              |  | $ | 24,715  |  
|                                       |  |          |         |              |  |   |         |  

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6. Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill, which is only attributable
to our Cardiovascular business segment, for the six-month periods ended June
28, 2003 and June 29, 2002 were as follows (in thousands):

|                                                           |  |                  |        |          |  |   |        |   |  |  |  | 
|---------------------------------------------------------- |  | ---------------- | ------ | -------- |  | - | ------ | - |  |  |  | 
|                                                           |  | Six Months Ended
|                                                           |  |                 
|                                                           |  | June 28,         |        | June 29, |  |   |        |  
|                                                           |  | 2003             |        | 2002     |  |   |        |  
|                                                           |  |                  |        |          |  |   |        |  
|Beginning balance                                          |  | $                | 96,492 |          |  | $ | 95,209 |  
|Reclassification of assembled workforce, net of taxes      |  |                  |      |          |  |   | 1,334  |  
|Adjustment to reflect resolution of pre-merger contingency |  |                  |      |          |  |   | (51    | )
|                                                           |  |                  |        |          |  |   |        |  
|Ending balance                                             |  | $                | 96,492 |          |  | $ | 96,492 |  
|                                                           |  |                  |        |          |  |   |        |  

The components of identifiable intangible assets, consisting primarily of
patents and trademarks, core technology and developed technology, which are
included in purchased intangible assets on the consolidated balance sheets, were
as follows (in thousands):

|                       |                                   |   |                     |         |              |   |                     |         |   |   |         |         | 
|---------------------- | --------------------------------- | - | ------------------- | ------- | ------------ | - | ------------------- | ------- | - | - | ------- | ------- | 
|                       |                                   |   | As of June 28, 2003
|                       |                                   |   |                    
|                       |                                   |   | Gross Carrying      |         | Accumulated  |   |                     |         |  
|                       |                                   |   | Amount              |         | Amortization |   | Net Carrying Amount
|                       |                                   |   |                     |         |              |   |                    
|Developed Technology   |                                   | $ | 132,301             |         |              | $ | (15,710             | )       |   | $ | 116,591 |        
|Core Technology        |                                   |   | 37,181              |         |              |   | (4,415              | )       |   |   | 32,766  |        
|Patents and Trademarks |                                   |   | 37,478              |         |              |   | (8,600              | )       |   |   | 28,878  |        
|                       |                                   |   |                     |         |              |   |                     |         |   |   |         |        
|                       | Total Purchased Intangible Assets |   | $                   | 206,960 |              |   | $                   | (28,725 | ) |   | $       | 178,235 | 
|                       |                                   |   |                     |         |              |   |                     |         |   |   |         |        

|                       |                                   |   |                         |         |              |   |                     |         |   |   |         |         | 
|---------------------- | --------------------------------- | - | ----------------------- | ------- | ------------ | - | ------------------- | ------- | - | - | ------- | ------- | 
|                       |                                   |   | As of December 28, 2002
|                       |                                   |   |                        
|                       |                                   |   | Gross Carrying          |         | Accumulated  |   |                     |         |  
|                       |                                   |   | Amount                  |         | Amortization |   | Net Carrying Amount
|                       |                                   |   |                         |         |              |   |                    
|Developed Technology   |                                   | $ | 132,301                 |         |              | $ | (12,403             | )       |   | $ | 119,898 |        
|Core Technology        |                                   |   | 37,181                  |         |              |   | (3,486              | )       |   |   | 33,695  |        
|Patents and Trademarks |                                   |   | 37,478                  |         |              |   | (6,789              | )       |   |   | 30,689  |        
|                       |                                   |   |                         |         |              |   |                     |         |   |   |         |        
|                       | Total Purchased Intangible Assets |   | $                       | 206,960 |              |   | $                   | (22,678 | ) |   | $       | 184,282 | 
|                       |                                   |   |                         |         |              |   |                     |         |   |   |         |        

As of the beginning of fiscal 2002, the purchased intangible asset
associated with the assembled workforce in the amount of $1,334,000, net of
accumulated amortization of $381,000 and taxes of $897,000, was reclassified to
goodwill.

Amortization expense related to identifiable intangible assets for the
three month and six month periods ended June 28, 2003 and June 29, 2002 was
$3,096,000, $6,192,000, $3,096,000 and $6,192,000, respectively. For the three
and six months ended June 28, 2003 and June 20, 2002, purchased intangible
assets amortization expense also included $72,000, $144,000, $72,000 and
$144,000, respectively, of amortization of deferred compensation recorded at
the time of the Merger related to the valuation of stock options. Amortization
expense is expected to be approximately $12,300,000 for each of the next five
years. The purchased intangible assets have estimated useful lives of eight to
twenty years.

7. Common Stock

On May 30, 2003, our 1996 Nonemployee Directors Stock Option Plan
(Directors Option Plan) and our 1997 Stock Option Plan (1997 SOP) were
amended by approval of a vote of our Companys shareholders. These amendments
increased the number of shares of our common stock reserved for issuance of
options granted under the Directors Option Plan and the 1997 SOP by 200,000 and
4,500,000, respectively. These increases assist us in attracting and retaining
employees and non-employee directors.

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8. Merger, Restructuring and Other Costs

Merger, restructuring and other costs were recorded in the condensed
consolidated statements of operations as follows (in thousands):

|              |  |                    |     |                  |  |          |     |          |  |      |  |      |  |   |      |   |  |   |     | 
|------------- |  | ------------------ | --- | ---------------- |  | -------- | --- | -------- |  | ---- |  | ---- |  | - | ---- | - |  | - | --- | 
|              |  | Three Months Ended |     | Six Months Ended
|              |  |                    |     |                 
|              |  | June 28,           |     | June 29,         |  | June 28, |     | June 29,
|              |  | 2003               |     | 2002             |  |          |     |          |  | 2003 |  | 2002
|              |  |                    |     |                  |  |          |     |          |  |      |  |     
|Merger        |  | $                  |   |                  |  | $        | 152 |          |  |      |  |      |  | $ |    |   |  | $ | 289 | 
|Restructuring |  |                    | (61 | )                |  |          | 354 |          |  |      |  |      |  |   | (118 | ) |  |   | 538 | 
|Other         |  |                    | (6  | )                |  |          |   |          |  |      |  |      |  |   | (6   | ) |  |   |   | 
|              |  |                    |     |                  |  |          |     |          |  |      |  |      |  |   |      |   |  |   |     | 
|Total         |  | $                  | (67 | )                |  | $        | 506 |          |  |      |  |      |  | $ | (124 | ) |  | $ | 827 | 
|              |  |                    |     |                  |  |          |     |          |  |      |  |      |  |   |      |   |  |   |     | 

Merger Costs

All merger activities and related expenses were completed in the third
quarter of 2002. Merger costs recorded during the three and six months ended
June 29, 2002 consisted of executive waiver agreement expenses. In accordance
with the executive waiver agreements, payments to the executives occurred at
the one-year anniversary of the Merger, although the executives continued to be
restricted from exercising some of their options and selling the related stock
for an additional six months following the one-year anniversary date. The total
expense related to the waiver agreements of $811,000 was amortized over the
18-month waiver period. As of June 29, 2002, the ending balance of accrued
merger costs was reclassified to prepaid expenses and other in the accompanying
condensed consolidated balance sheet.

The following table reflects the activity in accrued merger costs for the
three-month and six-month periods ended June 29, 2002 (in thousands):

|                  |                                                  |   |              |     |            |   |     |      |  
|----------------- | ------------------------------------------------ | - | ------------ | --- | ---------- | - | --- | ---- | -
|                  |                                                  |   | Three Months |     | Six Months
|                  |                                                  |   | Ended        |     | Ended     
|                  |                                                  |   | June 29,     |     | June 29,  
|                  |                                                  |   | 2002         |     | 2002      
|                  |                                                  |   |              |     |           
|Beginning balance |                                                  | $ | (198         | )   |            | $ | 472 |     
|Add:              |                                                  |   |              |     |            |   |     |     
|                  | Accruals pursuant to executive waiver agreements |   |              | 135 |            |   |     | 270  |  
|                  | Accruals of other merger costs                   |   |              | 17  |            |   |     | 19   |  
|Less:             |                                                  |   |              |     |            |   |     |     
|                  | Payments pursuant to executive waiver agreements |   |              |    |            |   |     | (810 | )
|                  | Payments of other merger costs                   |   |              | (17 | )          |   |     | (14  | )
|                  |                                                  |   |              |     |            |   |     |     
|Ending balance    |                                                  | $ | (63          | )   |            | $ | (63 | )   
|                  |                                                  |   |              |     |            |   |     |     

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Restructuring Costs

All restructuring activities and related expenses were completed in the
second quarter of 2003. From the inception of our plan to consolidate all of
our ventricular assist device, or VAD, manufacturing operations, which we call
the Restructuring Plan, through June 28, 2003, we recorded $1,495,000 of
restructuring charges in accordance with EITF Issue No. 94-3, and Staff
Accounting Bulletin No. 100, Restructuring and Impairment Charges. These
charges represented estimated employee severance costs and stock option
acceleration charges. Total severance payments under the Restructuring Plan
were $1,297,000 to 78 employees. The following is a summary of our accrued
restructuring costs activity for the three-month and six-month periods ended
June 28, 2003 and June 29, 2002 (in thousands):

|                             |                                |   |                    |     |                  |   |               |      |               |   |     |      |   |   |     |      |  
|---------------------------- | ------------------------------ | - | ------------------ | --- | ---------------- | - | ------------- | ---- | ------------- | - | --- | ---- | - | - | --- | ---- | -
|                             |                                |   | Three Months Ended |     | Six Months Ended
|                             |                                |   |                    |     |                 
|                             |                                |   | June 28, 2003      |     | June 29, 2002    |   | June 28, 2003 |      | June 29, 2002
|                             |                                |   |                    |     |                  |   |               |      |              
|Accrued Restructuring Costs: |                                |   |                    |     |                  |   |               |      |               |   |     |      |   |   |     |     
|Beginning balance            |                                | $ | 97                 |     |                  | $ | 881           |      |               | $ | 679 |      |   | $ | 863 |     
|                             | Employee severance accrual     |   |                    |   |                  |   |               | 242  |               |   |     |     |   |   |     | 386  |  
|                             | Reduction of severance accrual |   |                    | (61 | )                |   |               |    |               |   |     | (122 | ) |   |     |    |  
|                             | Payments of employee severance |   |                    | (36 | )                |   |               | (284 | )             |   |     | (557 | ) |   |     | (410 | )
|                             |                                |   |                    |     |                  |   |               |      |               |   |     |      |   |   |     |     
|Ending balance               |                                | $ |                  |     |                  | $ | 839           |      |               | $ |   |      |   | $ | 839 |     
|                             |                                |   |                    |     |                  |   |               |      |               |   |     |      |   |   |     |     

For the three months and six months ended June 28, 2003 and June 29, 2002,
in addition to the employee severance costs, estimated restructuring costs
included expense related to the acceleration of stock options granted to
employees who were terminated under the Restructuring Plan. Stock option
acceleration expense recorded in the three-month and six-month periods ending
June 28, 2003 and June 29, 2002, were nil, $4,000, $112,000 and $152,000,
respectively.

Other Costs

Other costs of $529,000 were accrued in the fourth quarter of 2002 related
to the termination of a European distribution agreement. In the first quarter
of 2003, $523,000 of this amount was paid. The remaining $6,000 of the original
accrual was reversed from expense in the second quarter of 2003 as an
adjustment to estimated settlement costs.

9. Income Taxes

Our effective tax provision rate was 39% for the three-month and six-month
periods ended June 28, 2003. For both the three and six-months periods ended
June 29, 2002, our effective tax benefit rate was 40%. The effective tax
provision rate for the first quarter of 2003 and the effective tax benefit rate
for the first quarter of 2002 both differed from the statutory federal income
tax rate primarily due to the impact of state taxes.

At June 28, 2003 and December 28, 2002, we reported a net deferred tax
liability of approximately $56,885,000 and $56,655,000, respectively, comprised
principally of temporary differences between the financial statement and income
tax bases of intangible assets.

10. Net Income (Loss) Per Share

Basic and diluted net income (loss) per share were calculated as follows
(in thousands, except per share amounts):

|                                                     |  |                    |        |                  |  |          |        |          |  |   |        |  |  |   |        |  
|---------------------------------------------------- |  | ------------------ | ------ | ---------------- |  | -------- | ------ | -------- |  | - | ------ |  |  | - | ------ | -
|                                                     |  | Three Months Ended |        | Six Months Ended
|                                                     |  |                    |        |                 
|                                                     |  | June 28,           |        | June 29,         |  | June 28, |        | June 29,
|                                                     |  | 2003               |        | 2002             |  | 2003     |        | 2002    
|                                                     |  |                    |        |                  |  |          |        |         
|Net income (loss)                                    |  | $                  | 1,023  |                  |  | $        | (556   | )        |  | $ | 2,440  |  |  | $ | (2,314 | )
|                                                     |  |                    |        |                  |  |          |        |          |  |   |        |  |  |   |        |  
|Weighted average number of common shares-basic       |  |                    | 55,394 |                  |  |          | 56,799 |          |  |   | 55,226 |  |  |   | 56,725 |  
|Dilutive effect of employee stock plans              |  |                    | 1,497  |                  |  |          |      |          |  |   | 1,014  |  |  |   |      |  
|                                                     |  |                    |        |                  |  |          |        |          |  |   |        |  |  |   |        |  
|Weighted average number of common shares-diluted     |  |                    | 56,891 |                  |  |          | 56,799 |          |  |   | 56,240 |  |  |   | 56,725 |  
|                                                     |  |                    |        |                  |  |          |        |          |  |   |        |  |  |   |        |  
|Net income (loss) per common share-basic and
diluted |  | $                  | 0.02   |                  |  | $        | (0.01  | )        |  | $ | 0.04   |  |  | $ | (0.04  | )
|                                                     |  |                    |        |                  |  |          |        |          |  |   |        |  |  |   |        |  

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Basic income (loss) per share is computed by dividing net income (loss) by
the weighted average number of common shares outstanding during the period.
Diluted income (loss) per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock. Of the options to purchase shares of common stock
outstanding as of June 28, 2003, options covering 3,512,000 shares and
3,979,000 shares of common stock were not included in the computation of the
diluted income (loss) per share for the three-month and six-month periods
ending June 28, 2003, respectively, as their inclusion would be antidilutive.
Of the options to purchase shares of common stock outstanding as of June 29,
2002, all shares were excluded from the computation of diluted net loss per
share for both the three-month and the six-month periods as their inclusion
would be antidilutive due to our net losses during these periods.

11. Business Segment and Geographical Data

We organize and manage our business by functional operating entities. Our
functional entities operate in two segments: (1) Cardiovascular and (2) ITC.
The Cardiovascular segment develops, manufactures and markets proprietary
medical devices used for circulatory support and vascular graft applications.
The ITC segment develops, manufactures and markets near-patient, whole-blood
coagulation testing equipment and related disposables, as well as premium
quality, single-use skin incision devices.

Business Segments (in thousands):

|                                   |                                                        |                               |     |                    |        |                  |     |               |        |               |       |        |        |  |     |        |        |  
|---------------------------------- | ------------------------------------------------------ | ----------------------------- | --- | ------------------ | ------ | ---------------- | --- | ------------- | ------ | ------------- | ----- | ------ | ------ |  | --- | ------ | ------ | -
|                                   |                                                        |                               |     | Three Months Ended |        | Six Months Ended
|                                   |                                                        |                               |     |                    |        |                 
|                                   |                                                        |                               |     | June 28, 2003      |        | June 29, 2002    |     | June 28, 2003 |        | June 29, 2002
|                                   |                                                        |                               |     |                    |        |                  |     |               |        |              
|Product sales:                     |                                                        |                               |     |                    |        |                  |     |               |        |               |       |        |        |  |     |       
|                                   | Cardiovascular                                         |                               | $   | 23,559             |        |                  | $   | 19,829        |        |               | $     | 47,467 |        |  | $   | 38,520 |       
|                                   | ITC                                                    |                               |     | 12,597             |        |                  |     | 11,205        |        |               |       | 24,751 |        |  |     | 22,153 |       
|                                   |                                                        |                               |     |                    |        |                  |     |               |        |               |       |        |        |  |     |       
|                                   |                                                        | Total product sales           |     | $                  | 36,156 |                  |     | $             | 31,034 |               |       | $      | 72,218 |  |     | $      | 60,673 |  
|                                   |                                                        |                               |     |                    |        |                  |     |               |        |               |       |        |        |  |     |        |       
|Income (loss) before income taxes: |                                                        |                               |     |                    |        |                  |     |               |        |               |       |        |        |  |     |       
|                                   | Cardiovascular                                         |                               | $   | 3,453              |        |                  | $   | 1,747         |        |               | $     | 7,242  |        |  | $   | 1,875  |       
|                                   | ITC                                                    |                               |     | 2,138              |        |                  |     | 2,149         |        |               |       | 4,487  |        |  |     | 4,381  |       
|                                   | Corporate (a)                                          |                               |     | (1,534             | )      |                  |     | (2,073        | )      |               |       | (2,821 | )      |  |     | (3,579 | )     
|Purchase accounting entries:       |                                                        |                               |     |                    |        |                  |     |               |        |               |       |        |        |  |     |       
|                                   | Amortization of goodwill and purchased intangibles (b) |                               |     | (3,096             | )      |                  |     | (3,096        | )      |               |       | (6,192 | )      |  |     | (6,192 | )     
|                                   | Merger, restructuring and other costs (b)              |                               |     | 67                 |        |                  |     | (506          | )      |               |       | 124    |        |  |     | (827   | )     
|                                   |                                                        |                               |     |                    |        |                  |     |               |        |               |       |        |        |  |     |       
|                                   |                                                        | Total operating income (loss) |     |                    | 1,028  |                  |     |               | (1,779 | )             |       |        | 2,840  |  |     |        | (4,342 | )
|Interest and other income, net     |                                                        |                               | 649 |                    |        |                  | 854 |               |        |               | 1,160 |        |        |  | 485 |       
|                                   |                                                        |                               |     |                    |        |                  |     |               |        |               |       |        |        |  |     |       
|                                   | Income (loss) before income taxes                      |                               | $   | 1,677              |        |                  | $   | (925          | )      |               | $     | 4,000  |        |  | $   | (3,857 | )     
|                                   |                                                        |                               |     |                    |        |                  |     |               |        |               |       |        |        |  |     |        |       



---



|(a) |  | Represents primarily general and administrative expenses not specifically
identified to any particular business segment.
|--- |  | ------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Related to the Cardiovascular segment.                                                                                  

Geographic Areas (in thousands):

|               |                         |                     |   |                    |       |                  |   |               |       |               |   |        |        |  |   |        |        | 
|-------------- | ----------------------- | ------------------- | - | ------------------ | ----- | ---------------- | - | ------------- | ----- | ------------- | - | ------ | ------ |  | - | ------ | ------ | 
|               |                         |                     |   | Three Months Ended |       | Six Months Ended
|               |                         |                     |   |                    |       |                 
|               |                         |                     |   | June 28, 2003      |       | June 29, 2002    |   | June 28, 2003 |       | June 29, 2002
|               |                         |                     |   |                    |       |                  |   |               |       |              
|Product sales: |                         |                     |   |                    |       |                  |   |               |       |               |   |        |        |  |   |       
|               | Domestic                |                     | $ | 30,247             |       |                  | $ | 25,324        |       |               | $ | 60,251 |        |  | $ | 50,075 |       
|               |                         |                     |   |                    |       |                  |   |               |       |               |   |        |        |  |   |        |       
|               | Europe                  |                     |   | 4,046              |       |                  |   | 3,263         |       |               |   | 8,237  |        |  |   | 6,544  |       
|               | All other international |                     |   | 1,863              |       |                  |   | 2,447         |       |               |   | 3,730  |        |  |   | 4,054  |       
|               |                         |                     |   |                    |       |                  |   |               |       |               |   |        |        |  |   |       
|               |                         | Total international |   |                    | 5,909 |                  |   |               | 5,710 |               |   |        | 11,967 |  |   |        | 10,598 | 
|               |                         |                     |   |                    |       |                  |   |               |       |               |   |        |        |  |   |       
|               | Total                   |                     | $ | 36,156             |       |                  | $ | 31,034        |       |               | $ | 72,218 |        |  | $ | 60,673 |       
|               |                         |                     |   |                    |       |                  |   |               |       |               |   |        |        |  |   |        |       

12. Legal Matters

In May 2003, a patent infringement complaint was filed against us by Bodycote
Materials Testing Canada, Inc. and David C. MacGregor, M.D. We have not yet
responded to the complaint. We are currently evaluating the claims set forth
in the complaint as well as the validity of the plaintiffs underlying patents.
As a result, an estimate of any potential loss or range of losses cannot be
made at this time. However, we intend to investigate the claims thoroughly and
take all necessary steps to appropriately defend ourselves against the claims
set forth in the complaint.

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13. Subsequent Events

On July 17, 2003, we entered into an asset purchase agreement to acquire
the Immediate Response Mobile Analysis, or IRMA, point-of-care blood analysis
system product line from
Diametrics Medical, Inc. (Diametrics). We will pay approximately $5,000,000
in cash and assume certain trade payables related to the assets. The
acquisition is subject to a number of conditions, including approval from
Diametrics's shareholders, and is expected to close in the second half of 2003.

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

Forward-Looking Statements

This Form 10-Q may contain statements that we believe are, or may be
considered to be, forward-looking statements, within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. These forward-looking statements generally can be identified by
use of statements that include phrases such as believe, expect,
anticipate, intend, plan, foresee, may, hope, will, estimates,
potential, continue or other similar words or phrases. Similarly,
statements that describe our objectives, plans or goals also are
forward-looking statements. All of these forward-looking statements are subject
to risks and uncertainties that could cause our actual results to differ
materially from those contemplated by the relevant forward-looking statement.
The principal risk factors that could cause actual performance and future
actions to differ materially from the forward-looking statements include, but
are not limited to, the results of clinical trials, governmental regulatory
approval processes, plans to develop and market new products, market acceptance
of new products, announcements by our competitors, an intensely competitive
market, the ability to improve financial performance, and other factors
identified in our Annual Report on Form 10-K for 2002 which we filed with the
Securities and Exchange Commission, or the SEC. Readers are urged to consider
these factors carefully in evaluating the forward-looking statements. The
forward-looking statements included in this Form 10-Q are made only as of the
date of this report and we undertake no obligation to publicly update these
forward-looking statements to reflect subsequent events or circumstances.

The following presentation of managements discussion and analysis of our
financial condition and results of operations should be read together with our
consolidated financial statements included in this Form 10-Q, and our Annual
Report on Form 10-K for 2002 filed with the SEC.

Overview

We are a leading manufacturer of circulatory support products for use by
patients with congestive heart failure, or CHF. According to the American Heart
Association, 4.9 million patients in the United States suffer from CHF and an
additional 550,000 patients are diagnosed with this disease annually. We were
the first company to receive U.S. Food and Drug Administration, or FDA,
approval to commercially market a ventricular assist device, or VAD, to treat
patients with late-stage heart failure, which comprises approximately 5% to 10%
of the CHF patient population. Our VADs are used primarily by these CHF
patients to perform some or all of the pumping function of the heart and we
currently offer the widest range of products to serve this market. We believe
that our long-standing reputation for quality and innovation and our excellent
relationships with leading cardiovascular surgeons worldwide position us to
capture growth opportunities in the expanding congestive heart failure market.
We also develop and sell products that are used by physicians and hospitals for
vascular and diagnostic applications that include vascular grafts, blood
coagulation testing and skin incision devices. We conduct business both
domestically and internationally.

The Merger with Thermo Cardiosystems

The Merger of Thoratec with Thermo Cardiosystems, Inc., or TCA, was
completed on February 14, 2001. We issued new shares of our common stock to the
shareholders of TCA in exchange for all the outstanding common stock of TCA at
an exchange ratio of 0.835 shares of Thoratec stock for each share of TCA
stock. The Merger was accounted for as a reverse acquisition because former
shareholders of TCA owned a majority of our outstanding stock subsequent to the
Merger. For accounting purposes, TCA is deemed to have acquired Thoratec.

Restructuring Plan

All restructuring activities and related expenses were completed in the
second quarter of 2003. From the inception of our plan to consolidate all of
our VAD manufacturing operations, which we call the Restructuring Plan, through
June 28, 2003, we recorded $1.5 million of restructuring charges in accordance
with Emerging Issues Task Force, or EITF, Issue No. 94-3, and Staff Accounting
Bulletin No. 100, Restructuring and Impairment Charges. These charges
represented estimated employee severance costs and stock option acceleration
charges. Total severance payments under the Restructuring Plan were $1.3
million to 78 employees.

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Other Recent Events

In May 2003, a patent infringement claim was filed against us by Bodycote
Materials Testing Canada, Inc. and David C. MacGregor, M.D. We have not yet
responded to the complaint. We are currently evaluating the claims set forth
in the complaint as well as the validity of the plaintiffs underlying patents.
As a result, an estimate of any potential loss or range of loss cannot be made
at this time. We intend to vigorously defend ourselves against the claims set
forth in the complaint.

On
July 17, 2003, we entered into an asset purchase agreement to acquire
the IRMA (Immediate Response Mobile Analysis) point-of-care blood
analysis system product line from Diametrics
Medical, Inc. (Diametrics). We will pay approximately $5,000,000 and assume
certain trade payables related to the assets. The acquisition is subject to a
number of conditions, including approval from Diametrics's shareholders, and is
expected to close in the second half of 2003.

On July 28, 2003, we received CE Mark certification, which provides us
with approval to market our Thoratec Implantable Ventricular Assist Device, or
IVAD, in Europe. The IVAD is the only currently approved implantable cardiac
assist device that can provide left, right or biventricular support.

Results of Operations

Three months ended June 2003 and 2002

Product Sales

Product sales in the second quarter of 2003 were $36.2 million compared to
$31.0 million in the second quarter of 2002, an increase of approximately $5.2
million, or 17%. This increase is primarily attributable to an increase in the
number of VAD units sold both domestically and internationally of $3.3 million,
higher sales of graft products of $0.5 million, and higher sales of blood
coagulation testing equipment products of $1.4 million.

Gross Profit

Gross profit was $21.5 million, representing 59% of product sales, for the
second quarter of 2003 compared to $17.8 million, representing 57% of product
sales, for the second quarter of 2002. The increase in gross profit percentage
was primarily a result of lower merger related employee retention costs, higher average selling prices for VAD
products due principally to customer mix between the two periods and higher sales of higher margin coagulation
products, slightly offset by lower average selling prices on skin incision
products.

Selling, General and Administrative

Selling, general and administrative expenses increased to $11.2 million,
or 31% of product sales, in the second quarter of 2003, from $9.8 million, or
32% of product sales, in the second quarter of 2002. While selling, general and
administrative expenses were generally consistent as a percentage of sales from
period to period, the increase in expense dollars was primarily due to higher
employee related costs, expenses related to increased marketing efforts and
higher insurance costs.

Research and Development

Research and development expenses increased to $6.3 million, or 17% of
product sales, in the second quarter of 2003, from $6.1 million, or 20% of
product sales, in the second quarter of 2002. This increase was primarily due
to slightly higher spending on certain cardiovascular projects.

Amortization of Purchased Intangible Assets

Amortization of identified purchased intangible assets remained consistent
from the second quarter of 2002 to the second quarter of 2003 at $3.1 million.
Intangible assets are being amortized over their estimated useful lives of
eight to twenty years.

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Merger, Restructuring and Other Costs

Merger, restructuring and other costs in the second quarter of 2003 were
$0.1 million of reduction in expense compared to $0.5 million of expense in the
second quarter of 2002. Restructuring activities and related expenses were
completed in the second quarter of 2003 and the restructuring accrual was reduced to reflect no remaining liability as of the end of
the second quarter of 2003. Merger activities and related expenses were completed in the third
quarter of 2002.

Interest and Other Income
(Expense) - Net

Interest
and other income (expense)  net was $0.6 million in the second
quarter of 2003 compared to $0.9 million in the second quarter of 2002. This
decrease is primarily attributable to a decrease in other income (expense) of
$0.1 million resulting from lower foreign currency gains and decrease in
interest income of $0.1 million due to lower interest rates.

Income Taxes

Our effective income tax expense rate was 39% for the three-month period
ended June 28, 2003. For the three-month period ended June 29, 2002, our
effective income tax benefit rate was 40%. The effective income tax expense
rate for the current fiscal quarter and the effective income tax benefit rate
for the prior fiscal quarter differed from the statutory federal income tax
rate primarily due to the impact of state taxes.

Six months ended June 2003 and 2002

Product Sales

Product sales in the first six months of 2003 were $72.2 million compared
to $60.7 million in the first six months of 2002, an increase of approximately
$11.5 million, or 19%. This increase is primarily attributable to an increase
in the number of VAD units sold of $7.7
million, higher sales of graft products of $1.3 million, and higher sales of
blood coagulation testing equipment of $2.6 million.

Gross Profit

Gross profit was $42.7 million, representing 59% of product sales, for the
first six months of 2003 compared to $34.2 million, representing 56% of product
sales, for the first six months of 2002. The increase in gross profit
percentage was primarily a result of lower merger related employee retention costs, higher average selling prices for
VAD products due principally to customer mix between the two
periods and higher sales of
higher margin coagulation products, slightly offset by lower average selling
prices on skin incision products.

Selling, General and Administrative

Selling, general and administrative expenses increased to $21.2 million,
or 29% of product sales, in the first six months of 2003, from $18.6 million,
or 31% of product sales, in the first six months of 2002. While selling,
general and administrative expenses decreased as a percentage of sales from
period to period, the increase in expense dollars was primarily due to higher
employee related costs, expenses related to increased marketing efforts and
business development activities and increased insurance costs.

Research and Development

Research and development expenses decreased to $12.5 million, or 17% of
product sales, in the first six months of 2003, from $13.0 million, or 21% of
product sales, in the first six months of 2002. This decrease was primarily due
to lower spending on certain cardiovascular projects, partially offset by
slightly higher spending on the development of a new hand-held point of care
blood analyzer product.

Amortization of Purchased Intangible Assets

Amortization of identified purchased intangible assets remained consistent
from the first six months of 2002 to the first six months of 2003 at $6.2
million. Intangible assets are being amortized over their estimated useful
lives of eight to twenty years.

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Merger, Restructuring and Other Costs

Merger, restructuring and other costs in the second quarter of 2003 were
$0.1 million of reduction in expense compared to $0.5 million of expense in the
second quarter of 2002. Restructuring activities and related expenses were
completed in the second quarter of 2003 and the restructuring accrual was reduced to reflect no remaining liability as of the end of
the second quarter of 2003. Merger activities and related expenses were completed in the third
quarter of 2002.

Interest and Other Income
(Expense) - Net

Interest
and other income (expense)  net was $1.2 million in the first
six months of 2003 compared to $0.5 million in the first six months of 2002.
Interest expense decreased by $0.5 million and other income (expense) increased
by $0.5 million from 2002 to 2003 primarily due to the repayment of our
subordinated debentures in the first six months of 2002 and the related
write-off of unamortized debt issuance costs. These increases were partially
offset by a decrease in interest income from 2002 to 2003 due to lower interest
rates.

Income Taxes

Our effective income tax expense rate was 39% for the six-month period
ended June 28, 2003. For the six-month period ended June 29, 2002, our
effective income tax benefit rate was 40%. The effective income tax expense
rate for the current fiscal quarter and the effective income tax benefit rate
for the prior fiscal quarter differed from the statutory federal income tax
rate primarily due to the impact of state taxes.

Liquidity and Capital Resources

At June 28, 2003, we had working capital of $120.0 million compared with
$108.0 million at December 28, 2002. Cash and cash equivalents at June 28, 2003
were $57.5 million compared to $42.0 million at December 28, 2002, an increase
of $15.5 million.

During the first six months of 2003, cash provided by operating activities
was $12.8 million. This results from the combination of our net income of $2.4
million and $11.0 million of items not affecting second quarter 2003 cash
flows, primarily depreciation and amortization expenses, less changes in
working capital of $0.6 million. The change in working capital in the second
quarter of 2003 was due principally to a decrease in accounts payable and other
accrued liabilities and an increase in prepaid and other assets, partially
offset by a decrease in inventory and accounts receivable. Net cash used in
operating activities was $1.0 million in the second quarter of 2002. This
resulted from the combination of our net loss of $2.3 million and $7.8 million
of items not affecting second quarter 2002 cash flows, primarily depreciation
and amortization expenses, less changes in working capital of $6.5 million.

During the first six months of 2003, $1.6 million of cash was used in our
investing activities compared to $42.2 million of cash provided in the first
six months of 2002. During the first six months of 2003, we purchased $4.4
million in short-term and long-term investments and $2.8 million of cash was
used for capital expenditures. These uses of cash for investing activities were
partially offset by sales of short-term and long-term investments of $5.7
million. Cash provided in the second quarter of 2002 was due to the
reclassification of $45.9 million from restricted cash to retire our
subordinated debentures, partially offset by $3.7 million used for capital
expenditures.

During the first six months of 2003, $4.1 million of cash was provided by
financing activities compared to $44.8 million of cash used in financing
activities in the first six months of 2002. Cash provided in the second quarter
of 2003 was due to proceeds from the exercise of common stock options and stock
purchased under our employee stock purchase plan. Cash used in the second
quarter of 2002 was due to $54.8 million used to retire our subordinated
debentures and $6.0 million used to repurchase our common stock, partially
offset by $15.5 million net proceeds received in a public stock offering and
$0.6 million provided from exercises of common stock options.

We believe that our cash on-hand, short-term available-for-sale
investments and expected cash flow from operations will be sufficient to fund
our operations and capital requirements for the foreseeable future. We expect
that our operating expenses will increase in future periods as we spend more on
product manufacturing, sales and marketing and research and development of new product
lines.

The impact of inflation on our financial position and results of
operations was not significant during the three and six-month periods ended
June 28, 2003 and June 29, 2002.

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Critical Accounting Policies

We have identified certain accounting policies as critical to our business
operations and the understanding of our results of operations. The impact and
associated risks related to those policies on our business operations is
discussed below and in our fiscal 2002 consolidated financial statements filed
with the SEC in our annual report on Form 10-K.

In April 2002, the FASB issued SFAS No. 145, (Rescission of FASB
Statements 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections) which, among other things, changed the presentation of gains and
losses on the extinguishment of debt. Any gain or loss on extinguishment of
debt that does not meet the criteria in Accounting Principle Board, or APB,
Opinion No. 30, Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions, shall be included in operating
earnings and not presented separately as an extraordinary item. We adopted SFAS
No. 145 at the beginning of fiscal year 2003. Upon adoption, we reclassified
the extraordinary loss incurred in 2002 of $0.5 million to interest and other
income (expense)-net.

In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure. SFAS No. 148 amends SFAS
No. 123, Accounting for Stock-Based Compensation, to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements of the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. SFAS No. 148 is effective for fiscal years beginning
after December 15, 2002. We adopted the disclosure provisions of SFAS No. 148
at the beginning of fiscal 2003. Currently we are evaluating the impact of the
adoption of the use of the fair value based method of accounting for
stock-based financial position, results of operations and cash flows.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

Short-Term and Long-Term Investments

Our exposure to market risk for changes in interest rates relates to our
investment portfolio. The investment portfolio is made up of cash equivalent
and marketable security investments in money market funds and debt instruments
of government agencies and high quality corporate issuers. All investments are
carried at market value and are treated as available-for-sale. All investments
mature within two years or less from the date of purchase. The holdings of any
one issuer, except government agencies, do not exceed 10% of the portfolio. If
interest rates rise, the market value of our investments may decline which
could result in a loss if we are forced to sell an investment before the
scheduled maturity. We do not utilize derivative financial instruments to
manage interest rate risks.

Foreign Currency Rate Fluctuations

We conduct business in foreign countries. Our international operations
consist primarily of sales and service personnel for our ventricular assist
products. The employees report into our U.S. sales and marketing group and are
internally reported as part of that group. All assets and liabilities of our
non-U.S. operations are translated into U.S. dollars at the period-end exchange
rates. The resulting translation adjustments are included in comprehensive
income. The period-end translation of the non-functional currency balances (the
result of foreign sales, foreign expenses, and intercompany transactions) in
our wholly owned subsidiary in the United Kingdom at the period-end exchange
rate into the functional currency of our subsidiary results in foreign currency
exchange gains and losses. These foreign currency exchange gains and losses are
included in interest and other income-net and were not material for the
three-month and six-month periods ended June 28, 2003 and June 29, 2002.
Currently, we do not expect to be subject to material foreign currency risk
with respect to future costs or cash flows from our foreign operations. To
date, we have not entered into any significant foreign currency hedging
contracts or other derivative financial instruments to hedge the effects of
adverse fluctuations in foreign currency exchange, however, we are currently
evaluating possible future use of such contracts and instruments.




ITEM 4. CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the
participation of our management, including our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures as of June 28, 2003. Based on that evaluation, our management, including the
Chief Executive Officer and Chief Financial Officer, concluded that as of June 28, 2003 the
Companys disclosure controls and procedures were effective in providing reasonable assurance that information required to be
disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms. There have been no
changes in our internal controls during the fiscal quarter ended June
28, 2003 that have materially affected or are reasonably likely to
materially affect the Company's internal control over financial
reporting.

Our management, including the Chief Executive Officer and the Chief
Financial Officer, do not expect that the disclosure controls and procedures or
internal controls will prevent all error and all fraud. A control system, no
matter how well conceived and operated, can only provide reasonable assurances
that the objectives of the control system are met. The design of a control
system reflects resource constraints; the benefits of controls must be
considered relative to their costs. Because there are inherent limitations in
all control systems, no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, within the Company have
been or will be detected. These inherent limitations include the realities that
judgments in decision-making can be faulty and that breakdowns occur because of
simple error or mistake. Controls can be circumvented by the individual acts of
some persons, by collusion of two or more people, or by management override of
the control. The design of any system of controls is based in part upon certain
assumptions about the likelihood of future events. There can be no assurance
that any design will succeed in achieving its stated goals under all future
conditions; over time, controls may become inadequate because of changes in
conditions or deterioration in the degree of compliance with the policies or
procedures. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.

We intend to review and evaluate the design and effectiveness of our
disclosure controls and procedures on an ongoing basis and to improve our
controls and procedures over time and to correct any deficiencies that we may
discover in the future. Our senior management have timely access to all material financial and non-financial information
concerning our business. While we believe the present design of our disclosure
controls and procedures is effective, future events
affecting our business may cause us to significantly modify our disclosure
controls and procedures.

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PART II. OTHER INFORMATION




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY SHAREHOLDERS

The annual meeting of Shareholders was held on May 30, 2003. The following
items were voted upon and approved at the meeting:

To elect directors to serve for the ensuing year until their successors
are elected.

|                       |  |                 |            |          |  |  |           | 
|---------------------- |  | --------------- | ---------- | -------- |  |  | --------- | 
|                       |  | Number of Votes
|                       |  |                
|                       |  | For             |            | Withheld
|                       |  |                 |            |         
|Howard E. Chase        |  |                 | 50,241,346 |          |  |  | 2,019,890 | 
|J. Daniel Cole         |  |                 | 50,241,380 |          |  |  | 2,019,856 | 
|D. Keith Grossman      |  |                 | 50,241,133 |          |  |  | 2,020,103 | 
|J. Donald Hill         |  |                 | 50,241,380 |          |  |  | 2,019,856 | 
|William M. Hitchcock   |  |                 | 50,241,380 |          |  |  | 2,019,856 | 
|George W. Holbrook Jr. |  |                 | 50,241,247 |          |  |  | 2,019,989 | 
|Theo Melas-Kyriazi     |  |                 | 50,206,388 |          |  |  | 2,054,898 | 
|Daniel M. Mulvena      |  |                 | 50,241,413 |          |  |  | 2,019,823 | 

To approve the amendment to the Companys 1997 Stock Option Plan as
described in the Proxy Statement.

|                |  |         |            |         |  |           |         |  |  |  |            | 
|--------------- |  | ------- | ---------- | ------- |  | --------- | ------- |  |  |  | ---------- | 
|Number of Votes |  |         |            |        
|                |  |         |            |        
|For             |  | Against |            | Abstain |  | Not Voted
|                |  |         |            |         |  |          
|31,549,871      |  |         | 10,010,465 |         |  |           | 337,810 |  |  |  | 10,363,090 | 

To approve the amendment to the Companys 1996 Nonemployee Directors Stock
Option Plan as described in the Proxy Statement.

|                |  |         |           |         |  |           |         |  |  |  |            | 
|--------------- |  | ------- | --------- | ------- |  | --------- | ------- |  |  |  | ---------- | 
|Number of Votes |  |         |           |        
|                |  |         |           |        
|For             |  | Against |           | Abstain |  | Not Voted
|                |  |         |           |         |  |          
|35,382,072      |  |         | 6,515,772 |         |  |           | 341,074 |  |  |  | 10,022,318 | 




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:



| |  | 31.1 Section 302 Certifications of Chief Executive Officer and Chief Financial Officer
| |  | --------------------------------------------------------------------------------------
|
| |  | 32.1 Section 906 Certifications of Chief Executive Officer and Chief Financial Officer

(b) Reports on Form 8-K:

On April 22, 2003, the Company filed a Current Report on Form 8-K,
reporting under Items 7, 9 and 12, announcing the companys results for the
fiscal quarter ended March 29, 2003.

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SIGNATURES

In accordance with the requirements of the Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

|                     |  |                                              |  | 
|-------------------- |  | -------------------------------------------- |  | 
|                     |  | THORATEC CORPORATION                        
|                     |  |                                              |  | 
|Date: August 8, 2003 |  | /s/ D. Keith Grossman                        |  | 
|                     |  |                                              |  | 
|                     |  | D. Keith Grossman,                           |  | 
|                     |  | Chief Executive Officer                      |  | 
|                    
|Date: August 8, 2003 |  | /s/ M. Wayne Boylston                        |  | 
|                     |  |                                              |  | 
|                     |  | M. Wayne Boylston,                           |  | 
|                     |  | Senior Vice President,                       |  | 
|                     |  | Chief Financial Officer and Secretary        |  | 
|                     |  | (Principal Financial and Accounting Officer) |  | 

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##### Table of Contents






Exhibit Index

|            |  |                                                                                  
|----------- |  | ---------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                      
|            |  |                                                                                  
|31.1        |  | Section 302 Certifications of Chief Executive Officer and Chief Financial Officer
|            |  |                                                                                  
|32.1        |  | Section 906 Certifications of Chief Executive Officer and Chief Financial Officer

23