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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
  þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended January 2, 2010
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 000-49798
 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
 Securities registered pursuant to Section 12(b) of the Exchange Act:
 Title of Each Class
    
    Name of Each Exchange of which RegisteredCommon Stock, no par value per share
    
    NASDAQ Global Select Market
 Securities registered pursuant to Section 12(g) of the Exchange Act: None
 þ o
 o þ
 þ o
 o o
 þ
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
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TABLE OF CONTENTS
 PagePART IItem 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    17Item 1B. Unresolved Staff Comments
    
    
    32Item 2. Properties
    
    
    32Item 3. Legal Proceedings
    
    
    33Item 4. Submission of Matters to a Vote of Security Holders
    
    
    33PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    34Item 6. Selected Consolidated Financial Data
    
    
    37Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    38Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    49Item 8. Financial Statements and Supplementary Data
    
    
    50Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    86Item 9A. Controls and Procedures
    
    
    86Item 9B. Other Information
    
    
    87PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    87Item 11. Executive Compensation
    
    
    87Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    87Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    88Item 14. Principal Accounting Fees and Services
    
    
    88PART IVItem 15. Exhibits, Financial Statement Schedules
    
    
    88Exhibit Index
    
    
    90EX-10.23EX-10.24EX-10.25EX-10.26EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2
  DOCUMENTS INCORPORATED BY REFERENCE
     2




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PART I
 
 Item 1:
    
    Business
 OVERVIEW
   OUR PRODUCTS
 Cardiovascular Division
     The HeartMate II
    3




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The
HeartMate XVE
   The
Paracorporeal Ventricular Assist Device
    The
Implantable Ventricular Assist Device
   The
CentriMag
  Vascular
Graft Products
  4




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ITC Division
   Hospital point-of-care
 The HEMOCHRON Whole Blood Coagulation System
  The IRMA TRUpoint Blood Analysis System
  The AVOXimeter Whole Blood Co-Oximeter/Oximeter System
   Alternate site point-of-care
 The ProTime Microcoagulation System
  The Hgb Pro Professional Hemoglobin Testing System
   5




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Incision Products
   PRODUCT SEGMENTS
  OUR MARKETS
 Cardiovascular Division
     Destination Therapy
  6




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Bridge-to-Transplantation
  Post-Cardiotomy Myocardial Recovery Following Cardiac Surgery
  Cardiac Surgery Support
  ITC Division
 Point-of-Care Diagnostics Products
  Incision Products
  7




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OUR STRATEGY
  Focus on and partner with leading heart centers
 Expand the use of VADs in existing segments .
 
    
    Destination Therapy Expansion. On January 20, 2010, we received approval to
market the HeartMate II for Destination Therapy in the treatment of late-stage HF patients
who are not candidates for heart transplant. In October 2003, the Centers of Medicare and
Medicaid Services (CMS) issued a favorable National Coverage decision covering
reimbursement for the use of left ventricular assist systems that are approved by the FDA
for treating Destination Therapy in late-stage HF patients.
    
    Mechanical Circulatory Support Expansion.We continue to expand awareness of MCS
through education and outreach programs. We continue to enhance current products and
develop new products including a miniaturized pump based on the HeartMate II platform and
the HeartMate III, a magnetically levitated centrifugal continuous pump.
    
    Center Expansion. In 2009, we added nineteen new HeartMate II centers, bringing
the total to 120 centers in North America. Outside of North America, we added fourteen new
HeartMate II centers, bringing the total to 91 centers.
 Increase
our market presence through strategic alliances, joint ventures and
acquisitions.
 
    
    Acute HF segment.In August 2006, we entered into a distribution agreement with
Levitronix to distribute the CentriMag in the U.S. This agreement allows us to expand more
broadly beyond transplant centers and enables us to better address opportunities in
short-term patient recovery.
    
    Point-of-Care segment.In October 2006, we acquired A-VOX Systems, Inc. (Avox), a
point-of-care company that developed and manufactured portable, bedside AVOXimeter systems
to assist clinicians in assessing a patients oxygenation status. We sell these systems
along with our HEMOCHRON and IRMA point-of-care products and our data management system that
connects all of these systems together.
    
    Chronic HF segment.In December 2007, we made a nominal investment in Acorn
Cardiovascular, Inc., a medical device company that has intellectual property rights to the
CorCapTM Cardiac Support Device (CSD), to support patients with heart failure. The CorCap
CSD is a mesh wrap that is placed around the heart to support and relieve stress on the
heart muscle. The CorCap CSD is intended to improve the hearts size, shape and function.
The CorCap CSD is CE Mark approved in Europe and is in clinical trials in the U.S.
 Obtain approval for new products.
  8




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Offer a broad range of products .
 Develop new products .
    Increase cost effectiveness of the therapies that employ our products .
 SALES AND MARKETING
 Mechanical Circulatory Support Products
    9




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Vascular Graft Products
  Point-of-Care Diagnostics
  Incision Products
  COMPETITION
    
    
    New competitors might enter the market with broader test menus. To address this risk, in
the fourth quarter of 2006, we acquired Avox, which increased our test menu offering, and
has also offered us the opportunity to develop the next generation system that combines
blood gas, electrolyte and oxygenation testing in one machine.
    
    New drug therapies under development may not require the intense monitoring of a
patients coagulation necessary with the current anticoagulation drug of choice, Heparin. To
try to mitigate this risk, we participate in clinical trials with key pharmaceutical
companies to provide the hemostasis monitoring that will ultimately be required for new drug
therapies.
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PATENTS AND PROPRIETARY RIGHTS
      Our inability to protect our proprietary technologies or an infringement of others
patents could harm our competitive position
  GOVERNMENT REGULATIONS
  11




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U.S. Regulations
 www.clinicaltrials.gov
      12




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Healthcare Regulation
  Fraud and Abuse Laws
    13




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Federal False Claims Act
   Health Insurance Portability and Accountability Act of 1996
  14




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International Regulations
   Other Regulations
  THIRD PARTY COVERAGE AND REIMBURSEMENT
  15




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MANUFACTURING
      16




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RESEARCH AND DEVELOPMENT
  MAJOR CUSTOMERS AND FOREIGN SALES
   EMPLOYEES
  ADDITIONAL INFORMATION
  
 Item 1A.
    
    Risk Factors
 Our businesses face many risks. The risks described below are what we believe to be the
material risks facing our company, however, they may not be the only risks we face. Additional
risks that we do not yet know of or that we currently believe are immaterial may also impair our
business operations. If any of the events or circumstances described in the following risk factors
actually occur, our business, financial condition or results of operations could suffer, and the
trading price of our common stock could decline significantly. Investors should consider the
following risks, as well as the other information included in this Annual Report on Form 10-K , and
other documents we file from time to time with the SEC, such as our quarterly reports on Form 10-Q ,
our current reports on Form 8-K and any public announcements we make from time to time.
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If we fail to obtain approval from the FDA and from foreign regulatory authorities, we cannot
market and sell our products under development in the U.S. and in other countries, and if we fail
to comply with government regulations, including FDA Quality System Regulations, or our products
experience certain adverse events, the FDA or foreign regulatory authorities may withdraw our
market clearance or take other enforcement action.
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If hospitals do not conduct Destination Therapy procedures using our VADs, market opportunities for
our product will be diminished.
   
    
    the number of CMS sites approved for Destination Therapy;
    
    the clinical outcomes of Destination Therapy procedures relative to pharmacological,
gene- and cell-based therapies, and other device-based alternatives;
    
    cardiologists and referring physicians education regarding, and their commitment to,
Destination Therapy;
    
    the economics of the Destination Therapy procedure for individual hospitals, which
include the costs of the VAD and related pre- and post-operative procedures and their
reimbursement;
    
    the impact of changes in reimbursement rates on the timing of purchases of VADs for
Destination Therapy; and
    
    the economics for individual hospitals of not conducting a Destination Therapy procedure,
including the costs and related reimbursements of long-term hospitalization.
  Physicians may not accept or continue to accept our current products and products under
development.
 
 We rely on specialized suppliers for certain components and materials in our products and
alternative suppliers may not be available.
   19




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
    
    pay premium prices to our suppliers to keep their production lines open or to obtain
alternative suppliers;
    
    buy substantial inventory to last through the scheduled end of life of our product, or
through such time that we expect to have a replacement product developed and approved by the
FDA; or
    
    stop shipping the product in which the legacy component is used once our inventory of the
discontinued component is exhausted.
  We may encounter problems manufacturing our products.
  Identified quality problems can result in substantial costs and write-downs.
    If we fail to successfully introduce new products, our future growth may suffer.
  20




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If we are unable to successfully complete the pre-clinical studies or clinical trials necessary to
support our PMA applications or PMA supplements, our ability to obtain new approvals will be
limited.
  
    
    the FDA or other regulatory authorities do not approve a clinical trial protocol or a
clinical trial, or place a clinical trial on hold;
    
    patients do not enroll in clinical trials at the rate we expect;
    
    patients do not comply with trial protocols;
    
    patient follow-up is not at the rate we expect;
    
    patients experience adverse side effects;
    
    patients die during a clinical trial, even though their death may not be related to our
product candidates;
    
    institutional review boards and third-party clinical investigators may delay or reject
our trial protocol;
    
    third-party clinical investigators decline to participate in a trial or do not perform a
trial on our anticipated schedule or consistent with the clinical trial protocol, good
clinical practices or other regulatory requirements;
    
    third-party organizations do not perform data collection and analysis in a timely or
accurate manner;
    
    regulatory inspections of our clinical trials or manufacturing facilities, which may,
among other things, require us to undertake corrective action or suspend or terminate our
clinical trials;
    
    changes in governmental regulations or administrative actions;
    
    the interim or final results of a clinical trial are inconclusive or unfavorable as to
safety or efficacy; and
    
    the FDA concludes that our trial design is inadequate to demonstrate safety and efficacy.
  21




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Our inability to protect our proprietary technologies or an infringement of others patents could
harm our competitive position.
     Our future disposable cuvette test product sales by ITC could be affected by changes in monitoring
requirements for medical procedures.
  Since we depend upon distributors, if we lose a distributor or a distributor fails to perform, our
operations may be harmed.
   22




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If we fail to compete successfully against our existing or potential competitors, our product sales
or operating results may be harmed.
   
    
    develop products;
    
    complete clinical testing;
    
    receive regulatory approvals;
    
    achieve market acceptance; and
    
    manufacture and sell commercial quantities of products.
  
    
    New drug therapies under development may not require the intense monitoring of a
patients coagulation that the current anti-coagulation drug of choice (Heparin) requires.
    
    New competitors might enter the market with broader test menus.
  Our non-U.S. sales present special risks.
  
    
    we sell some of our products at a lower price outside the U.S.;
    
    sales agreements with foreign customers may be difficult to enforce;
    
    receivables may be difficult to collect through a foreign countrys legal system;
    
    foreign customers may have longer payment cycles;
    
    foreign countries may impose additional withholding taxes or otherwise tax our foreign
income, impose tariffs or adopt other restrictions on foreign trade;
 23




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
    
    U.S. export licenses may be difficult to obtain;
    
    intellectual property rights may be (and often are) more difficult to enforce in foreign
countries;
    
    terrorist activity or war may interrupt distribution channels or adversely impact our
customers or employees; and
    
    fluctuations in exchange rates may affect product demand and adversely affect the
profitability, in U.S. dollars, of products sold in foreign markets where payments are made
in local currencies.
  Fluctuations in foreign currency exchange rates could result in declines in our reported sales and
earnings.
  The long and variable sales and deployment cycles for our VAD systems may cause our product sales
and operating results to vary significantly, which increases the risk of an operating loss for any
given fiscal period.
  24




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Since our physician and hospital customers depend on third party reimbursement, if third party
payors fail to provide appropriate levels of reimbursement for our products, our results of
operations will be harmed.
    Complying with federal and state regulations is an expensive and time-consuming process, and any
failure to comply could result in substantial penalties.
    25




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We depend on HeartMate II for a significant portion of our Cardiovascular division revenues.
  
    
    failure to obtain approval from the FDA and foreign regulatory authorities or to comply
with government regulations, or the withdrawal of market clearance or other the taking of
other enforcement actions;
    
    lack of Destination Therapy procedures conducted by hospitals using our VADs;
    
    lack of acceptance or continued acceptance by physicians;
    
    reliance on specialized suppliers for certain components and materials;
    
    manufacturing problems;
    
    any identified quality problems;
    
    inability to protect our proprietary technologies or an infringement of others patents;
    
    loss of a distributor or distributor failure to perform;
    
    failure to compete successfully against our existing or potential competitors;
    
    special risks associated with non-U.S. sales;
    
    long and variable sales and deployment cycles;
    
    failure by third party payors to provide appropriate levels of reimbursement;
    
    failure to comply with federal and state regulations; and
    
    product liability claims.
  26




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Federal and state anti-kickback laws may adversely affect our operations and income.
    Our debt obligations expose us to risks that could adversely affect our business, operating results
and financial condition.
  
    
    make it difficult for us to make payments on our debt;
    
    make it difficult for us to obtain any necessary financing in the future for working
capital, capital expenditures, debt service, acquisitions or general corporate purposes;
    
    limit our flexibility in planning for or reacting to changes in our business;
    
    reduce funds available for use in our operations;
    
    make us more vulnerable in the event of a downturn in our business or an increase in
interest rates;
    
    impair our ability to incur additional debt because of financial and other restrictive
covenants proposed for any such additional debt; or
    
    place us at a possible competitive disadvantage relative to less leveraged competitors
and competitors that have better access to capital resources.
  27




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We may be unable to repay or repurchase our senior subordinated convertible notes or our other
indebtedness.
  Conversion of the senior subordinated convertible notes or other future issuances of our stock will
dilute the ownership interests of existing shareholders.
  Amortization of our intangible assets, which represent a significant portion of our total assets,
will adversely affect our net income and we may never realize the full value of our intangible
assets.
  Product liability claims could damage our reputation and hurt our financial results.
  28




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The competition for qualified personnel is particularly intense in our industry. If we are unable
to retain or hire key personnel, we may not be able to sustain or grow our business.
  The price of our common stock may fluctuate significantly.
  
    
    future announcements concerning us or our competitors;
    
    regulatory developments, including ongoing healthcare reform initiatives, enforcement
actions bearing on advertising, marketing or sales, and disclosure regarding completed
ongoing or future clinical trials;
    
    quarterly variations in operating results, which we have experienced in the past and
expect to experience in the future;
    
    introduction of new products or changes in product pricing policies by us or our
competitors;
    
    acquisition or loss of significant customers, distributors or suppliers;
    
    reaction to estimates of business operations, product development or financial
performance made public by our management;
    
    business acquisitions or divestitures;
    
    changes in earnings estimates by analysts;
    
    changes in third party reimbursement practices;
    
    charges, amortization and other financial effects relating to our business; and
    
    fluctuations in the economy, world political events or general market conditions, such as
the current economic recession.
   29




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Current global economic conditions could harm our business and liquidity.
  If we make acquisitions or divestitures, we could encounter difficulties that harm our business.
  The occurrence of a catastrophic disaster or other similar events could cause damage to our
facilities and equipment, which would require us to cease or curtail operations.
  We have a history of net losses.
  We have experienced rapid growth and changes in our business, and our failure to manage this and
any future growth could harm our business.
  30




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Revisions to accounting standards, financial reporting and corporate governance requirements and
tax laws could result in changes to our standard practices and could require a significant
expenditure of time, attention and resources, especially by senior management.
   
    
    fair value measurement;
    
    accounting for convertible debt instruments;
    
    accounting for income taxes; and
    
    accounting for business combinations.
 We are subject to taxation in a number of jurisdictions and changes to the corporate tax rate and
laws of any of these jurisdictions could increase the amount of corporate taxes we have to pay.
    Any claims relating to improper handling, storage or disposal of hazardous chemicals and
biomaterials could be time consuming and costly.
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Anti-takeover defenses in our governing documents could prevent an acquisition of our company or
limit the price that investors might be willing to pay for our common stock.
  
    
    Our Articles of Incorporation allow our Board of Directors to issue, at any time and
without shareholder approval, preferred stock with such terms as it may determine. No shares
of preferred stock are currently outstanding. However, the rights of holders of any of our
preferred stock that may be issued in the future may be superior to the rights of holders of
our common stock.
    
    We have a shareholder rights plan, commonly known as a poison pill, which would make it
difficult for someone to acquire us without the approval of our Board of Directors.
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
   
    
    Approximately 62,000 square feet of office, manufacturing and research facilities in
Pleasanton, California, expiring in 2012.
    
    Approximately 6,400 square feet of warehouse space in Dublin, California, expiring in
2011.
    
    Approximately 21,800 square feet of warehouse space in San Ramon, California,
expiring in 2016.
    
    Approximately 11,000 square feet of office and research facilities in Rancho Cordova,
California, expiring in 2012.
    
    Approximately 45,000 square feet of office, manufacturing, warehouse and research
facilities in Edison, New Jersey, expiring through 2017.
    
    Approximately 53,500 square feet of office and research facilities in Piscataway, New
Jersey, expiring in 2014.
    
    Approximately 35,000 square feet of office, manufacturing and research facilities in
Roseville, Minnesota, expiring in 2013.
    
    Approximately 39,000 square feet of office and research facilities in Burlington,
Massachusetts, expiring in 2011.
    
    Approximately 8,700 square feet of office and warehouse facilities in the U.K. expiring
in 2022.
   32




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Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  Our Executive Officers
 Gerhard F. Burbach, 47, President, Chief Executive Officer and Director,
 David V. Smith, 50, Executive Vice President and Chief Financial Officer,
 Lawrence Cohen, 60, President of ITC,
 David A. Lehman, 49, Senior Vice President, General Counsel and Secretary
 33




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PART II
 
 Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
  High
    
    
    LowFiscal Year 2008First Quarter
    
    $
    18.44
    
    
    $
    13.09Second Quarter
    
    
    18.50
    
    
    
    14.08Third Quarter
    
    
    28.87
    
    
    
    16.67Fourth Quarter
    
    
    32.49
    
    
    
    19.48Fiscal Year 2009First Quarter
    
    $
    31.72
    
    
    $
    20.40Second Quarter
    
    
    30.38
    
    
    
    23.83Third Quarter
    
    
    31.08
    
    
    
    23.96Fourth Quarter
    
    
    31.06
    
    
    
    26.26
   34




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Stock Price Performance Graph
   
 
 
 *
    
    $100 invested on December 31, 2004 in stock or index-including reinvestment of dividends. 12/04
    
    
    12/05
    
    
    12/06
    
    
    12/07
    
    
    12/08
    
    
    12/09Thoratec Corporation
    
    
    100.00
    
    
    
    198.56
    
    
    
    168.71
    
    
    
    174.57
    
    
    
    311.80
    
    
    
    258.35NASDAQ Composite
    
    
    100.00
    
    
    
    101.33
    
    
    
    114.01
    
    
    
    123.71
    
    
    
    73.11
    
    
    
    105.61NASDAQ Medical Equipment
    
    
    100.00
    
    
    
    117.06
    
    
    
    122.50
    
    
    
    159.63
    
    
    
    88.67
    
    
    
    122.59
 35




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Issuer Purchases of Equity Securities
  Total numberof shares
    
    
    Approximate dollarpurchased
    
    
    value of sharesas part of
    
    
    that may yet beTotal number
    
    
    
    
    
    
    publicly
    
    
    purchased underof shares
    
    
    Average price
    
    
    announced plans or
    
    
    the plans orpurchased
    
    
    paid per share
    
    
    programs (1)
    
    
    programs(in thousands, except per share data)October 4, 2009 through October 31, 2009
    
    
    3.1
    
    
    $
    27.54
    
    
    
    
    
    
    $
    November 1, 2009 through November 28, 2009
    
    
    2.1
    
    
    
    28.36
    
    
    
    
    
    
    
    November 29, 2009 through January 2, 2010
    
    
    3.8
    
    
    
    27.42
    
    
    
    
    
    
    
    Total
    
    
    9.0
    (2)
    
    $
    27.68
    
    
    
    
    
    
    $
    
 
 (1)
    
    Our share repurchase programs, which authorized us to repurchase up to a total of $130
million of the Companys common shares, were announced on February 11, 2004 as a $25 million
program, on May 12, 2004 as a $60 million program, on July 29, 2004 as a $25 million program
and on February 2, 2006 as a $20 million program. These programs authorize us to acquire
shares in the open market or in privately negotiated transactions and do not have an
expiration date. No shares were repurchased under these programs during the three months ended
January 2, 2010. As of January 2, 2010, we have $10.1 million remaining on our share
repurchase programs.(2)
    
    Shares purchased that were not part of our publicly announced repurchase programs represent
the surrender value of shares of restricted stock awards and restricted stock units used to
pay income taxes due upon vesting, and do not reduce the dollar value that may yet be
purchased under our publicly announced repurchase programs. 36




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Item 6. Selected Consolidated Financial Data
   Fiscal Years2009(1)(2)
    
    
    2008(1)(2)
    
    
    2007(1)(2)
    
    
    2006(1)(2)
    
    
    2005(1)(In thousands, except per share data)Statement of Operations:Product sales
    
    $
    373,937
    
    
    $
    313,564
    
    
    $
    234,780
    
    
    $
    214,133
    
    
    $
    201,712Gross profit
    
    
    219,834
    
    
    
    185,998
    
    
    
    136,264
    
    
    
    125,485
    
    
    
    123,340Amortization of purchased intangible assets
    
    
    10,663
    
    
    
    13,183
    
    
    
    12,582
    
    
    
    12,055
    
    
    
    11,204In-process research and development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,120
    
    
    
    Litigation, merger, restructuring and other costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    447
    
    
    
    95Net income (loss)
    
    $
    28,584
    
    
    $
    18,331
    
    
    $
    (603
    )
    
    $
    470
    
    
    $
    9,994Basic net income (loss) per common share
    
    $
    0.50
    
    
    $
    0.33
    
    
    $
    (0.01
    )
    
    $
    0.01
    
    
    $
    0.20Diluted net income (loss) per common share
    
    $
    0.49
    
    
    $
    0.33
    
    
    $
    (0.01
    )
    
    $
    0.01
    
    
    $
    0.20Cash and cash equivalents and short term
available-for-sale investments
    
    $
    305,635
    
    
    $
    248,651
    
    
    $
    218,350
    
    
    $
    194,478
    
    
    $
    210,936Working capital
    
    
    412,155
    
    
    
    332,378
    
    
    
    301,736
    
    
    
    265,691
    
    
    
    269,293Total assets
    
    
    746,557
    
    
    
    684,085
    
    
    
    613,009
    
    
    
    590,215
    
    
    
    572,792Subordinated convertible debentures
    
    
    131,929
    
    
    
    124,115
    
    
    
    116,959
    
    
    
    110,407
    
    
    
    104,406Long-term deferred tax liability (3)
    
    
    31,720
    
    
    
    38,842
    
    
    
    46,254
    
    
    
    59,226
    
    
    
    63,862Total shareholders equity (3)
    
    $
    525,128
    
    
    $
    466,279
    
    
    $
    413,809
    
    
    $
    384,691
    
    
    $
    371,268
 
 (1)
    
    On January 4, 2009, we adopted Financial Accounting Standards (FASB) issued Accounting
Standards Codification (ASC) 470-20, Debt, and retrospectively included the accounting for
convertible debt instruments that may be settled in cash upon conversion, including partial
settlements.(2)
    
    On January 1, 2006, we adopted ASC 718, Share-Based Payment, and included share-based
compensation for employee stock-based awards in our results of operations.(3)
    
    On December 31, 2006, we adopted ASC 740, Income Taxes, and as a result we reported a
cumulative effect adjustment of $0.5 million, which increased our December 31, 2006
Accumulated deficit balance offset by a Long-term deferred tax liability balance. 37




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##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
  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 elsewhere in this Annual Report on Form 10-K .
 Overview
  Our Business Model
   
    
    Circulatory Support Products.Our mechanical circulatory support products include the
HeartMate II, HeartMate XVE, PVAD, IVAD and CentriMag for acute, intermediate and long-term
mechanical circulatory support for patients with advanced HF. We also manufacture and sell
small diameter grafts using our proprietary materials to address the vascular access market
for hemodialysis.
  
    
    Point-of-Care Diagnostics.Our point-of-care products include diagnostic test systems
that monitor blood coagulation while a patient is being administered certain anticoagulants,
as well as monitor blood gas/electrolytes, oxygenation and chemistry status.
    
    Incision. Our incision products include devices used to obtain a patients blood sample
for diagnostic testing and screening for platelet function.
 Critical Accounting Policies and Estimates
  38




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Revenue Recognition
    Reserves
     Income Taxes
   39




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##### Table of Contents



Evaluation of Purchased Intangible Assets and Goodwill for Impairment
   Valuation of Share-Based Awards
  Fair Value Measurements
   
    
    Level 1  Valuations based on quoted prices in active markets for identical assets or
liabilities that we have the ability to access. Assets and liabilities utilizing Level 1
inputs include broker-dealer quoted securities that are traded in an active market. Since
valuations are based on quoted prices that are readily and regularly available in an active
market, a significant degree of judgment is not required.
    
    Level 2  Valuations based on quoted prices of similar investments in active markets, of
similar or identical investments in markets that are not active or model based valuations
for which all significant inputs and value drivers are observable, directly or indirectly.
Assets and liabilities utilizing Level 2 inputs primarily include municipal bonds, variable
demand notes, corporate bonds and our senior subordinated convertible notes, except the
make-whole provision, which uses Level 3 inputs, described below.
 40




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##### Table of Contents




    
    Level 3  Valuations based on inputs that are unobservable and significant to the overall
fair value measurement. Assets and liabilities utilizing Level 3 inputs include auction rate
securities, our convertible debenture with Levitronix, our purchased intangible asset valuations and
the make-whole feature of our senior subordinated convertible notes. Given the current
credit market illiquidity for auction rate securities, our estimates are subject to
significant judgment by management.
   Results of Operations
  Fiscal Years2009
    
    
    2008
    
    
    2007(in thousands, except percentages)Product sales
    
    $
    373,937
    
    
    
    100
    %
    
    $
    313,564
    
    
    
    100
    %
    
    $
    234,780
    
    
    
    100
    %Cost of product sales
    
    
    154,103
    
    
    
    41
    
    
    
    127,566
    
    
    
    41
    
    
    
    98,516
    
    
    
    42Gross margin
    
    
    219,834
    
    
    
    59
    
    
    
    185,998
    
    
    
    59
    
    
    
    136,264
    
    
    
    58Operating expenses:Selling, general and administrative
    
    
    107,927
    
    
    
    29
    
    
    
    94,142
    
    
    
    30
    
    
    
    82,044
    
    
    
    35Research and development
    
    
    54,227
    
    
    
    14
    
    
    
    52,943
    
    
    
    17
    
    
    
    43,835
    
    
    
    19Amortization of purchased intangible assets
    
    
    10,663
    
    
    
    3
    
    
    
    13,183
    
    
    
    4
    
    
    
    12,582
    
    
    
    5Total operating expenses
    
    
    172,817
    
    
    
    46
    
    
    
    160,268
    
    
    
    51
    
    
    
    138,461
    
    
    
    59Income (loss) from operations
    
    
    47,017
    
    
    
    13
    
    
    
    25,730
    
    
    
    8
    
    
    
    (2,197
    )
    
    
    (1
    )Other income and (expense):Interest expense (1)
    
    
    (12,307
    )
    
    
    (3
    )
    
    
    (10,984
    )
    
    
    (4
    )
    
    
    (10,428
    )
    
    
    (4
    )Interest income and other
    
    
    6,043
    
    
    
    2
    
    
    
    9,146
    
    
    
    3
    
    
    
    8,624
    
    
    
    4Income (loss) before taxes
    
    
    40,753
    
    
    
    12
    
    
    
    23,892
    
    
    
    7
    
    
    
    (4,001
    )
    
    
    (1
    )Income tax expense (benefit)
    
    
    12,169
    
    
    
    3
    
    
    
    5,561
    
    
    
    2
    
    
    
    (3,398
    )
    
    
    (1
    )Net income (loss)
    
    $
    28,584
    
    
    
    9
    %
    
    $
    18,331
    
    
    
    5
    %
    
    $
    (603
    )
    
    
    
    %
 
 (1)
    
    Includes non-cash interest expense of $7.8 million, $7.2 million and $6.6 million for fiscal
years 2009, 2008 and 2007, respectively. 41




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Product Sales
  Fiscal Years
    
    
    Annual Percentage Change2009
    
    
    2008
    
    
    2007
    
    
    2009/2008
    
    
    2008/2007(in thousands)Cardiovascular
    
    $
    279,967
    
    
    $
    214,976
    
    
    $
    144,220
    
    
    
    30.2
    %
    
    
    49.1
    %ITC
    
    
    93,970
    
    
    
    98,588
    
    
    
    90,560
    
    
    
    4.7
    
    
    
    8.9Total product sales
    
    $
    373,937
    
    
    $
    313,564
    
    
    $
    234,780
    
    
    
    19.3
    
    
    
    33.6
    Gross Profit
  Fiscal Years
    
    
    Annual Percentage Change2009
    
    
    2008
    
    
    2007
    
    
    2009/2008
    
    
    2008/2007(in thousands)Total gross profit
    
    $
    219,834
    
    
    $
    185,998
    
    
    $
    136,264
    
    
    
    18.2
    %
    
    
    36.5
    %Total gross margin
    
    
    58.8
    %
    
    
    59.3
    %
    
    
    58.0
    %
    
    
    0.5
    %
    
    
    1.3
    %
   42




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##### Table of Contents



Selling, General and Administrative
  Fiscal Years
    
    
    Annual Percentage Change2009
    
    
    2008
    
    
    2007
    
    
    2009/2008
    
    
    2008/2007(in thousands)Total selling, general and administrative expenses
    
    $
    107,927
    
    
    $
    94,142
    
    
    $
    82,044
    
    
    
    14.6
    %
    
    
    14.7
    %
   Research and Development
  Fiscal Years
    
    
    Annual Percentage Change2009
    
    
    2008
    
    
    2007
    
    
    2009/2008
    
    
    2008/2007(in thousands)Total research and development expenses
    
    $
    54,227
    
    
    $
    52,943
    
    
    $
    43,835
    
    
    
    2.4
    %
    
    
    20.8
    %
    Amortization of Purchased Intangible Assets
   43




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##### Table of Contents



Interest Expense
  Fiscal Years
    
    
    Annual Percentage Change2009
    
    
    2008
    
    
    2007
    
    
    2009/2008
    
    
    2008/2007(in thousands)Interest expense
    
    $
    11,897
    
    
    $
    10,574
    
    
    $
    10,018
    
    
    
    12.5
    %
    
    
    5.6
    %Amortization of debt
issuance costs
related to senior
subordinated
convertible notes
    
    
    410
    
    
    
    410
    
    
    
    410
    
    
    
    
    
    
    
    Total interest expense
    
    $
    12,307
    
    
    $
    10,984
    
    
    $
    10,428
    
    
    
    12.0
    
    
    
    5.3
 Interest Income and Other
  Fiscal Years
    
    
    Annual Percentage Change2009
    
    
    2008
    
    
    2007
    
    
    2009/2008
    
    
    2007/2006(in thousands)Interest income
    
    $
    5,713
    
    
    $
    8,744
    
    
    $
    8,063
    
    
    
    34.7
    %
    
    
    8.4
    %Foreign currency, net
    
    
    (628
    )
    
    
    73
    
    
    
    347
    
    
    
    960.3
    
    
    
    79.0Other
    
    
    958
    
    
    
    329
    
    
    
    214
    
    
    
    191.1
    
    
    
    53.7Total interest income and other
    
    $
    6,043
    
    
    $
    9,146
    
    
    $
    8,624
    
    
    
    33.9
    
    
    
    6.1
   Income Taxes
   Liquidity and Capital Resources
 Cash, Cash Equivalents and Investments
   44




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##### Table of Contents



January 2, 2010
    
    
    January 3, 2009
    
    
    December 29, 2007(in thousands)Cash and cash equivalents
    
    $
    26,461
    
    
    $
    107,053
    
    
    $
    20,689Short-term available-for-sale investments
    
    
    279,174
    
    
    
    141,598
    
    
    
    197,661Long-term available-for-sale investments
    
    
    24,634
    
    
    
    29,959
    
    
    
    Total cash and equivalents and available-for-sale investments
    
    $
    330,269
    
    
    $
    278,610
    
    
    $
    218,350
      45




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##### Table of Contents



Long-term obligation
  Cash Flow Activities
  Fiscal Years2009
    
    
    2008
    
    
    2007(in thousands)Net cash provided by operating activities
    
    $
    49,074
    
    
    $
    51,040
    
    
    $
    14,364Net cash (used in) provided by investing activities
    
    
    (141,249
    )
    
    
    7,331
    
    
    
    (78,041
    )Net cash provided by financing activities
    
    
    11,727
    
    
    
    28,064
    
    
    
    16,960Effect of exchange rate changes on cash and cash equivalents
    
    
    (144
    )
    
    
    (71
    )
    
    
    (47
    )Net (decrease) increase in cash and cash equivalents
    
    $
    (80,592
    )
    
    $
    86,364
    
    
    $
    (46,764
    )
 Cash Provided by Operating Activities
  Cash Provided by or Used in Investing Activities
  46




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Cash Provided by Financing Activities
  Off Balance Sheet Arrangements
 Letter of Credit 
 Contractual Obligations
  Total
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    Thereafter(in millions)Long-Term Debt Obligations (a)
    
    $
    252.5
    
    
    $
    3.4
    
    
    $
    1.7
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    247.4Operating Lease Obligations (b)
    
    
    31.2
    
    
    
    3.7
    
    
    
    3.9
    
    
    
    3.7
    
    
    
    3.7
    
    
    
    2.6
    
    
    
    13.6Purchase Obligations (c)
    
    
    78.2
    
    
    
    47.5
    
    
    
    11.1
    
    
    
    9.8
    
    
    
    9.8
    
    
    
    
    
    
    
    Total
    
    $
    361.9
    
    
    $
    54.6
    
    
    $
    16.7
    
    
    $
    13.5
    
    
    $
    13.5
    
    
    $
    2.6
    
    
    $
    261.0
 
 (a)
    
    Includes interest of $5.1 million and original issue discount of $103.7 million. See note 10
to our consolidated financial statements included in this Annual Report on Form 10-K related
to our long-term debt.(b)
    
    Our operating lease obligations of $31.2 million were comprised of our various leased
facilities and office equipment.(c)
    
    Our purchase obligations include $78.2 million of supply agreements in effect at January 2,
2010.  Recently Issued Accounting Pronouncements
 Fair Value
Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements
 Revenue Recognition (Topic 605):
Multiple-Deliverable Revenue Arrangements (a consensus of the FASB Emerging Issues Task Force Revenue Recognition: Multiple-Element Arrangements
 47




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##### Table of Contents



Fair Value Measurements and Disclosures
(Topic 820): Investments in Certain Entities That Calculate Net Asset Value per Share (or Its
Equivalent) Fair Value Measurements and DisclosuresOverall
 Topic 105  Generally Accepted Accounting
Principles Generally Accepted Accounting Principles
 Investments  Debt and Equity Securities
 Fair Value Measurements and Disclosures
 Business Combinations Income Taxes
 Risks and Uncertainties Intangibles  Goodwill and Other
 48




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##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate Risk
    Foreign Currency Rate Fluctuations
   
 49




---



##### 



Item 8. Financial Statements and Supplementary Data
 THORATEC CORPORATION
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
  
 PageFinancial Statements:Reports of Independent Registered Public Accounting Firm
    
    
    51Consolidated Balance Sheets
    
    
    53Consolidated Statements of Operations
    
    
    54Consolidated Statements of Shareholders Equity
    
    
    55Consolidated Statements of Cash Flows
    
    
    56Notes to Consolidated Financial Statements
    
    
    57
  50




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     Internal Control Integrated Framework
 DELOITTE & TOUCHE LLP
 
 51




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  Internal
Control Integrated Framework
    Internal Control 
Integrated Framework
  DELOITTE & TOUCHE LLP
 
 52




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##### Table of Contents



THORATEC CORPORATION
 
 CONSOLIDATED BALANCE SHEETS

(In thousands)
 January 2, 2010
    
    
    January 3, 2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    26,461
    
    
    $
    107,053Short-term available-for-sale investments
    
    
    279,174
    
    
    
    141,598Receivables, net of allowances of $844 in 2009 and $947 in 2008
    
    
    66,088
    
    
    
    55,065Inventories
    
    
    66,935
    
    
    
    61,373Deferred tax assets
    
    
    12,261
    
    
    
    8,397Short-term income taxes receivable
    
    
    1,234
    
    
    
    2,514Prepaid expenses and other assets
    
    
    5,713
    
    
    
    4,901Total current assets
    
    
    457,866
    
    
    
    380,901Property, plant and equipment, net
    
    
    51,852
    
    
    
    50,138Goodwill
    
    
    99,287
    
    
    
    99,287Purchased intangible assets, net
    
    
    99,859
    
    
    
    108,584Long-term available-for-sale investments
    
    
    24,634
    
    
    
    29,959Other long-term assets
    
    
    13,059
    
    
    
    15,216Total Assets
    
    $
    746,557
    
    
    $
    684,085LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    8,532
    
    
    $
    10,563Accrued compensation
    
    
    22,407
    
    
    
    25,550Other accrued liabilities
    
    
    14,772
    
    
    
    12,410Total current liabilities
    
    
    45,711
    
    
    
    48,523Senior subordinated convertible notes
    
    
    131,929
    
    
    
    124,115Long-term deferred tax liability
    
    
    31,720
    
    
    
    38,842Other long-term liabilities
    
    
    12,069
    
    
    
    6,326Total Liabilities
    
    
    221,429
    
    
    
    217,806Contingencies (Note 9)Shareholders equity:Common shares: no par, authorized 100,000; issued and
outstanding 57,043 in 2009 and 56,395 in 2008
    
    
    
    
    
    
    Additional paid-in-capital
    
    
    557,418
    
    
    
    528,657Accumulated deficit
    
    
    (30,321
    )
    
    
    (56,634
    )Accumulated other comprehensive income (loss):Unrealized loss on investments
    
    
    (648
    )
    
    
    (3,337
    )Cumulative translation adjustments
    
    
    (1,321
    )
    
    
    (2,407
    )Total accumulated other comprehensive loss
    
    
    (1,969
    )
    
    
    (5,744
    )Total Shareholders Equity
    
    
    525,128
    
    
    
    466,279Total Liabilities and Shareholders Equity
    
    $
    746,557
    
    
    $
    684,085
  53




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THORATEC CORPORATION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
 Fiscal Years2009
    
    
    2008
    
    
    2007Product sales
    
    $
    373,937
    
    
    $
    313,564
    
    
    $
    234,780Cost of product sales
    
    
    154,103
    
    
    
    127,566
    
    
    
    98,516Gross profit
    
    
    219,834
    
    
    
    185,998
    
    
    
    136,264Operating expenses:Selling, general and administrative
    
    
    107,927
    
    
    
    94,142
    
    
    
    82,044Research and development
    
    
    54,227
    
    
    
    52,943
    
    
    
    43,835Amortization of purchased intangible assets
    
    
    10,663
    
    
    
    13,183
    
    
    
    12,582Total operating expenses
    
    
    172,817
    
    
    
    160,268
    
    
    
    138,461Income (loss) from operations
    
    
    47,017
    
    
    
    25,730
    
    
    
    (2,197
    )Other income and (expense):Interest expense
    
    
    (12,307
    )
    
    
    (10,984
    )
    
    
    (10,428
    )Interest income and other
    
    
    6,043
    
    
    
    9,146
    
    
    
    8,624Income before taxes
    
    
    40,753
    
    
    
    23,892
    
    
    
    (4,001
    )Income tax expense (benefit)
    
    
    12,169
    
    
    
    5,561
    
    
    
    (3,398
    )Net income (loss)
    
    $
    28,584
    
    
    $
    18,331
    
    
    $
    (603
    )Net income(loss) per common share (1):Basic
    
    $
    0.50
    
    
    $
    0.33
    
    
    $
    (0.01
    )Diluted
    
    $
    0.49
    
    
    $
    0.33
    
    
    $
    (0.01
    )Shares used to compute net income (loss) per common share (1):Basic
    
    
    55,910
    
    
    
    54,144
    
    
    
    52,777Diluted
    
    
    57,322
    
    
    
    55,243
    
    
    
    52,777
 
   54




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THORATEC CORPORATION
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(In thousands)
 AccumulatedOther
    
    
    Total
    
    
    TotalCommon
    
    
    Additional
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Shareholders
    
    
    ComprehensiveShares
    
    
    Paid-in Capital
    
    
    Deficit
    
    
    Income (Loss)
    
    
    Equity
    
    
    Income (Loss)BALANCE, DECEMBER 31, 2006,
as previously reported
    
    
    52,329
    
    
    $
    427,941
    
    
    $
    (63,675
    )
    
    $
    807
    
    
    $
    365,073Retrospective application of FSP
APB 14-1, net of taxes
    
    
    
    
    
    
    28,462
    
    
    
    (8,844
    )
    
    
    
    
    
    
    19,618BALANCE, DECEMBER 31, 2006, as
adjusted
    
    
    52,329
    
    
    $
    456,403
    
    
    $
    (72,519
    )
    
    $
    807
    
    
    $
    384,691Cumulative adoption effect of FIN 48
    
    
    
    
    
    
    
    
    
    
    (534
    )
    
    

    
    
    
    
    (534
    )Exercise of common stock options
for cash
    
    
    1,178
    
    
    
    14,036
    
    
    
    
    
    
    
    
    
    
    
    14,036Issuance of common shares under
Employee Stock Purchase Plan
    
    
    137
    
    
    
    1,958
    
    
    
    
    
    
    
    
    
    
    
    1,958Tax benefit related to employees
and directors stock plans
    
    
    
    
    
    
    3,327
    
    
    
    
    
    
    
    
    
    
    
    3,327Repurchase of common shares, net
    
    
    464
    
    
    
    (411
    )
    
    
    (603
    )
    
    
    
    
    
    
    (1,014
    )Share-based compensation
    
    
    
    
    
    
    11,532
    
    
    
    
    
    
    
    
    
    
    
    11,532Comprehensive income:Unrealized gain on
available-for-sale investments (net
of taxes of $222)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    333
    
    
    
    333
    
    
    
    333Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83
    
    
    
    83
    
    
    
    83Net loss
    
    
    
    
    
    
    
    
    
    
    (603
    )
    
    
    
    
    
    
    (603
    )
    
    
    (603
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (187
    )BALANCE, DECEMBER 29, 2007
    
    
    54,108
    
    
    $
    486,845
    
    
    $
    (74,259
    )
    
    $
    1,223
    
    
    $
    413,809Exercise of common stock options
for cash
    
    
    1,768
    
    
    
    22,914
    
    
    
    
    
    
    
    
    
    
    
    22,914Issuance of common shares under
Employee Stock Purchase Plan
    
    
    149
    
    
    
    2,062
    
    
    
    
    
    
    
    
    
    
    
    2,062Tax benefit related to employees
and directors stock plans
    
    
    
    
    
    
    6,926
    
    
    
    
    
    
    
    
    
    
    
    6,926Repurchase of common shares, net
    
    
    370
    
    
    
    (715
    )
    
    
    (706
    )
    
    
    
    
    
    
    (1,421
    )Share-based compensation
    
    
    
    
    
    
    10,625
    
    
    
    
    
    
    
    
    
    
    
    10,625Comprehensive income:Unrealized loss on
available-for-sale investments (net
of taxes of $2,436)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,654
    )
    
    
    (3,654
    )
    
    
    (3,654
    )Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,313
    )
    
    
    (3,313
    )
    
    
    (3,313
    )Net income
    
    
    
    
    
    
    
    
    
    
    18,331
    
    
    
    
    
    
    
    18,331
    
    
    
    18,331Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    11,364BALANCE, JANUARY 3, 2009
    
    
    56,395
    
    
    $
    528,657
    
    
    $
    (56,634
    )
    
    $
    (5,744
    )
    
    $
    466,279Exercise of common stock options
for cash
    
    
    652
    
    
    
    9,184
    
    
    
    
    
    
    
    
    
    
    
    9,184Issuance of common shares under
Employee Stock Purchase Plan
    
    
    133
    
    
    
    2,898
    
    
    
    
    
    
    
    
    
    
    
    2,898Tax benefit related to employees
and directors stock plans
    
    
    
    
    
    
    3,932
    
    
    
    
    
    
    
    
    
    
    
    3,932Repurchase of common shares, net
    
    
    (137
    )
    
    
    (1,236
    )
    
    
    (2,271
    )
    
    
    
    
    
    
    (3,507
    )Share-based compensation
    
    
    
    
    
    
    13,983
    
    
    
    
    
    
    
    
    
    
    
    13,983Comprehensive income:Unrealized gain on
available-for-sale investments (net
of taxes of $1,753)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,689
    
    
    
    2,689
    
    
    
    2,689Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,086
    
    
    
    1,086
    
    
    
    1,086Net income
    
    
    
    
    
    
    
    
    
    
    28,584
    
    
    
    
    
    
    
    28,584
    
    
    
    28,584Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    32,359BALANCE, JANUARY 2, 2010
    
    
    57,043
    
    
    $
    557,418
    
    
    $
    (30,321
    )
    
    $
    (1,969
    )
    
    $
    525,128
  55




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THORATEC CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Fiscal Years2009
    
    
    2008
    
    
    2007Cash flows from operating activities:Net income (loss)
    
    $
    28,584
    
    
    $
    18,331
    
    
    $
    (603
    )Adjustments to reconcile net income (loss) to net cash provided by operating activities:Depreciation and amortization
    
    
    21,681
    
    
    
    23,731
    
    
    
    21,836Investment premium amortization (net)
    
    
    3,115
    
    
    
    2,307
    
    
    
    977Non-cash interest income and other
    
    
    1,050
    
    
    
    893
    
    
    
    424Non-cash interest expense
    
    
    7,814
    
    
    
    7,156
    
    
    
    6,554Write-down of investment
    
    
    
    
    
    
    
    
    
    
    500Write-down of capitalized costs
    
    
    
    
    
    
    490
    
    
    
    161Tax benefit related to stock options
    
    
    3,932
    
    
    
    6,926
    
    
    
    3,327Share-based compensation expense
    
    
    13,898
    
    
    
    10,866
    
    
    
    11,414Excess tax benefits from share-based compensation
    
    
    (3,152
    )
    
    
    (4,509
    )
    
    
    (1,980
    )Loss on disposal of asset
    
    
    233
    
    
    
    573
    
    
    
    254Change in net deferred tax liability
    
    
    (12,538
    )
    
    
    (9,512
    )
    
    
    (12,015
    )Changes in assets and liabilities:Receivables
    
    
    (10,668
    )
    
    
    (12,635
    )
    
    
    (3,373
    )Inventories
    
    
    (7,760
    )
    
    
    (10,433
    )
    
    
    (8,804
    )Prepaid expenses and other assets
    
    
    (1,609
    )
    
    
    1,069
    
    
    
    (1,124
    )Accounts payable
    
    
    (2,141
    )
    
    
    998
    
    
    
    (3,661
    )Accrued compensation and other accrued liabilities
    
    
    602
    
    
    
    15,191
    
    
    
    3,587Accrued income taxes
    
    
    6,033
    
    
    
    (402
    )
    
    
    (2,976
    )Other
    
    
    
    
    
    
    
    
    
    
    (134
    )Net cash provided by operating activities
    
    
    49,074
    
    
    
    51,040
    
    
    
    14,364Cash flows from investing activities:Purchases of available-for-sale investments
    
    
    (346,715
    )
    
    
    (153,238
    )
    
    
    (257,668
    )Sales of available-for-sale investments
    
    
    156,398
    
    
    
    96,471
    
    
    
    175,475Maturities of available-for-sale
    
    
    59,333
    
    
    
    74,475
    
    
    
    12,803Issuance of HeartWare loan
    
    
    (20,000
    )
    
    
    
    
    
    
    Investment in convertible debentures and preferred shares
    
    
    
    
    
    
    
    
    
    
    (2,000
    )Purchased intangibles
    
    
    (1,440
    )
    
    
    
    
    
    
    Loan collections
    
    
    23,000
    
    
    
    
    
    
    
    Purchases of property, plant and equipment, net
    
    
    (11,825
    )
    
    
    (10,377
    )
    
    
    (6,651
    )Net cash (used in) provided by investing activities
    
    
    (141,249
    )
    
    
    7,331
    
    
    
    (78,041
    )Cash flows from financing activities:Proceeds from stock option exercises
    
    
    9,184
    
    
    
    22,914
    
    
    
    14,036Proceeds from stock issued under employee stock purchase plan
    
    
    2,898
    
    
    
    2,062
    
    
    
    1,958Excess tax benefits from share-based compensation
    
    
    3,152
    
    
    
    4,509
    
    
    
    1,980Repurchase and retirement of common shares
    
    
    (3,507
    )
    
    
    (1,421
    )
    
    
    (1,014
    )Net cash provided by financing activities
    
    
    11,727
    
    
    
    28,064
    
    
    
    16,960Effect of exchange rate changes on cash and cash equivalents
    
    
    (144
    )
    
    
    (71
    )
    
    
    (47
    )Net (decrease) increase in cash and cash equivalents
    
    
    (80,592
    )
    
    
    86,364
    
    
    
    (46,764
    )Cash and cash equivalents at beginning of fiscal year
    
    
    107,053
    
    
    
    20,689
    
    
    
    67,453Cash and cash equivalents at end of fiscal year
    
    $
    26,461
    
    
    $
    107,053
    
    
    $
    20,689Supplemental disclosure of cash flow information:Cash paid for taxes
    
    $
    15,178
    
    
    $
    8,947
    
    
    $
    9,345Cash paid for interest
    
    $
    3,414
    
    
    $
    3,414
    
    
    $
    3,414Supplemental disclosure of non-cash investing and financing activities:Transfers of equipment from inventory
    
    $
    2,642
    
    
    $
    3,055
    
    
    $
    3,698Purchases of property, plant and equipment through accounts payable and other
accrued liabilities
    
    $
    1,573
    
    
    $
    1,938
    
    
    $
    170Purchase of intangibles through other accrued liabilities
    
    $
    500
    
    
    $
    
    
    
    $
    
  56




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THORATEC CORPORATION
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Operations and Significant Accounting Policies
 The Company and Basis of Presentation
    Principles of Consolidation
  Use of Estimates
  Major Customers and Concentration of Credit Risk
   57




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##### Table of Contents



Certain Risks and Uncertainties
  Cash and Cash Equivalents
 Fair Value Measurements and Disclosures
 Investments
    58




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##### Table of Contents



Fair Value Measurement
   Inventories
  Property, Plant and Equipment
  Capitalized Software Held for Internal Use
  Valuation of Long-Lived Assets and Purchased Intangible Assets
   59




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##### Table of Contents



Goodwill
   Deferred Compensation Plan
  Debt Issuance Costs
  Foreign Currency Translation
  Revenue Recognition and Product Warranty
  60




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##### Table of Contents



Balance
    
    Accruals
    
    
    
    
    
    BalanceBeginning
    
    for Warranties
    
    Settlements
    
    Endof Year
    
    Issued
    
    Made
    
    of Year( in thousands)Fiscal 2009
    
    $
    1,071
    
    
    $
    4,537
    
    
    $
    (3,136
    )
    
    $
    2,472Fiscal 2008
    
    $
    1,006
    
    
    $
    1,925
    
    
    $
    (1,860
    )
    
    $
    1,071Fiscal 2007
    
    $
    1,032
    
    
    $
    634
    
    
    $
    (660
    )
    
    $
    1,006
 Research and Development Expense
  Share-Based Compensation
     Income Taxes
   61




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##### Table of Contents



Other Comprehensive Income
  Letter of Credit
  Recently Issued Accounting Pronouncements
 Fair Value
Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements
 Revenue Recognition (Topic 605):
Multiple-Deliverable Revenue Arrangements (a consensus of the FASB Emerging Issues Task Force Revenue Recognition: Multiple-Element Arrangements
 Fair Value Measurements and Disclosures
(Topic 820): Investments in Certain Entities That Calculate Net Asset Value per Share (or Its
Equivalent) Fair Value Measurements and DisclosuresOverall
 Topic 105  Generally Accepted Accounting
Principles Generally Accepted
Accounting Principles
 62




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##### Table of Contents



Investments  Debt and Equity Securities
 Fair Value Measurements and Disclosures
 Business Combinations Income Taxes
 Risks and Uncertainties Intangibles  Goodwill and Other
 2. Investments
    63




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##### Table of Contents



GrossAmortized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains (Losses)
    
    
    Value(in thousands)As of January 2, 2010:Short-term investments:Municipal bonds, variable demand notes and corporate bonds
    
    $
    277,300
    
    
    $
    1,874
    
    
    $
    279,174Long-term investments:Auction rate securities
    
    $
    27,700
    
    
    $
    (3,066
    )
    
    $
    24,634As of January 3, 2009:Short-term investments:Municipal bonds
    
    $
    139,931
    
    
    $
    1,667
    
    
    $
    141,598Long-term investments:Auction rate securities
    
    $
    37,200
    
    
    $
    (7,241
    )
    
    $
    29,959
  Amortized
    
    
    FairCost
    
    
    Value(in thousands)As of January 2, 2010:Maturing within one year
    
    $
    179,998
    
    
    $
    180,620Due after one year through two years
    
    
    97,302
    
    
    
    98,554Short-term available-for sale investments
    
    
    277,300
    
    
    
    279,174Auction rate securities maturing within five years or greater
    
    
    27,700
    
    
    
    24,634$
    305,000
    
    
    $
    303,808As of January 3, 2009:Maturing within one year
    
    $
    55,552
    
    
    $
    56,093Due after one year through two years
    
    
    84,379
    
    
    
    85,505Short-term available-for sale investments
    
    
    139,931
    
    
    
    141,598Auction rate securities maturing within five years or greater
    
    
    37,200
    
    
    
    29,959$
    177,131
    
    
    $
    171,557
 64




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##### Table of Contents



3. Fair Value Measurement
 Fair Value Measurements and Disclosure.
  65




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##### Table of Contents



Level 1:
    
    Quoted prices in active markets for identical assets or liabilities.
 Level 2:
    
    Quoted prices of similar investments in active markets, of similar or identical
investments in markets that are not active or model based valuations for which all
significant inputs and valuable drivers are observable, directly or indirectly.
 Level 3:
    
    Inputs that are unobservable and significant to the overall fair value measurement.
  January 2, 2010Assets and

    
    
    
    
    
    
    
    
    
    Significantliabilities at

    
    
    
    
    
    Quoted prices in

    
    Other

    
    Significantcarrying

    
    Total

    
    active markets for

    
    observable

    
    unobservablevalue

    
    fair value

    
    identical assets

    
    inputs

    
    inputs(Level 1)

    
    (Level 2)

    
    (Level 3)(in thousands)AssetsShort-term investments  municipal bonds, variable
demand notes and corporate bonds
    
    $
    279,174
    
    
    $
    279,174
    
    
    $
    
    
    
    $
    279,174
    
    
    $
    Long-term investments  auction rate securities
    
    
    24,634
    
    
    
    24,634
    
    
    
    
    
    
    
    
    
    
    
    24,634Mark to market on foreign exchange instruments (Note 4)
    
    
    8
    
    
    
    8
    
    
    
    
    
    
    
    8
    
    
    
    Cash value of investment vehicle  deferred
compensation plan (Note 13)
    
    
    2,436
    
    
    
    2,436
    
    
    
    
    
    
    
    2,436
    
    
    
    Convertible debenture with Levitronix LLC (disclosure
only)
    
    
    2,812
    
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    3,000LiabilitiesMake-whole provision (Note 10)
    
    
    23
    
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    23Senior subordinated convertible notes (fair value for
purposes of disclosure in Note 10)
    
    
    131,929
    
    
    
    205,364
    
    
    
    
    
    
    
    205,364
    
    
    
    
 January 3, 2009Assets and

    
    
    
    
    
    
    
    
    
    Significantliabilities at

    
    
    
    
    
    Quoted prices in

    
    Other

    
    Significantcarrying

    
    Total

    
    active markets for

    
    observable

    
    unobservablevalue

    
    fair value

    
    identical assets

    
    inputs

    
    inputs(Level 1)

    
    (Level 2)

    
    (Level 3)(in thousands)AssetsShort-term investments  municipal bonds
    
    $
    141,598
    
    
    $
    141,598
    
    
    $
    
    
    
    $
    141,598
    
    
    $
    Long-term investments  auction rate securities
    
    
    29,959
    
    
    
    29,959
    
    
    
    
    
    
    
    
    
    
    
    29,959Cash value of investment vehicle  deferred
compensation plan (Note 13)
    
    
    1,708
    
    
    
    1,708
    
    
    
    
    
    
    
    1,708
    
    
    
    Convertible debenture with Levitronix LLC (disclosure
only)
    
    
    5,711
    
    
    
    4,200
    
    
    
    
    
    
    
    
    
    
    
    4,200LiabilitiesMark to market on foreign exchange instruments (Note 4)
    
    
    73
    
    
    
    73
    
    
    
    
    
    
    
    73
    
    
    
    Make-whole provision (Note 10)
    
    
    46
    
    
    
    46
    
    
    
    
    
    
    
    
    
    
    
    46Senior subordinated convertible notes (fair value for
purposes of disclosure in Note 10)
    
    
    124,115
    
    
    
    215,880
    
    
    
    
    
    
    
    215,880
    
    
    
    
  66




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##### Table of Contents



Fair Value Measurement UsingSignificant Unobservable Inputs(Level 3)AuctionRateSecurities
    
    
    Liabilities(in thousands)Balance as of December 29, 2007
    
    $
    
    
    
    $
    96Transfer to Level 3
    
    
    46,050
    
    
    
    Settlements at par
    
    
    (8,850
    )
    
    
    Unrealized holding gain on
make-whole provision, included in
interest income and other
    
    
    
    
    
    
    (50
    )Unrealized holding loss on auction
rate securities, included in other
comprehensive income(loss)
    
    
    (7,241
    )
    
    
    Balance as of January 3, 2009
    
    $
    29,959
    
    
    $
    46Settlements at par
    
    
    (9,400
    )
    
    
    Transfer to Level 2
    
    
    (100
    )
    
    
    Unrealized holding gain on
make-whole provision, included in
interest income and other
    
    
    
    
    
    
    (23
    )Unrealized holding gain on auction
rate securities, included in other
comprehensive income (loss)
    
    
    4,175
    
    
    
    Balance as of January 2, 2010
    
    $
    24,634
    
    
    $
    23
   4. Foreign Exchange Instruments
  Derivatives and Hedging
 Notional AmountsFiscal Years2009
    
    
    2008(in thousands)Purchases
    
    $
    
    
    
    $
    7,250Sales
    
    
    2,707
    
    
    
    10,138
 67




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##### Table of Contents



 
  Fiscal Years2009
    
    
    2008
    
    
    2007(in thousands)Foreign currency exchange gain (loss) on foreign currency contracts
    
    $
    334
    
    
    $
    (1,984
    )
    
    $
    (702
    )Foreign currency exchange (loss) gain on foreign translation adjustments
    
    
    (961
    )
    
    
    2,057
    
    
    
    1,049
 5. Inventories
  January 2, 2010
    
    
    January 3, 2009(in thousands)Finished goods
    
    $
    18,003
    
    
    $
    24,373Work-in-process
    
    
    10,418
    
    
    
    9,174Raw materials
    
    
    38,514
    
    
    
    27,826Total
    
    $
    66,935
    
    
    $
    61,373
 6. Purchased Intangible Assets and Goodwill
  Intangibles  Goodwill and Other
    Fiscal Year 2009Gross Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Net Carrying Amount(in thousands)Patents and trademarks
    
    $
    40,454
    
    
    $
    (30,008
    )
    
    $
    10,446Core technology
    
    
    37,485
    
    
    
    (15,737
    )
    
    
    21,748Developed technology
    
    
    125,742
    
    
    
    (58,448
    )
    
    
    67,294Customer and distributor relationships and other
    
    
    897
    
    
    
    (526
    )
    
    
    371Total purchased intangible assets
    
    $
    204,578
    
    
    $
    (104,719
    )
    
    $
    99,859
 68




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##### Table of Contents



Fiscal Year 2008Gross Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Net Carrying Amount(in thousands)Patents and trademarks
    
    $
    38,515
    
    
    $
    (28,803
    )
    
    $
    9,712Core technology
    
    
    37,485
    
    
    
    (13,765
    )
    
    
    23,720Developed technology
    
    
    125,742
    
    
    
    (51,098
    )
    
    
    74,644Customer and distributor relationships and other
    
    
    897
    
    
    
    (389
    )
    
    
    508Total purchased intangible assets
    
    $
    202,639
    
    
    $
    (94,055
    )
    
    $
    108,584
    Fiscal year:
    
    (in thousands)2010
    
    $
    10,4522011
    
    
    9,5522012
    
    
    9,3292013
    
    
    8,9352014
    
    
    8,831Thereafter
    
    
    52,760Total
    
    $
    99,859
 7. Property, Plant and Equipment, Net
  January 2, 2010
    
    
    January 3, 2009(in thousands)Land, building and improvements
    
    $
    22,740
    
    
    $
    21,187Equipment and capitalized software
    
    
    73,746
    
    
    
    68,029Furniture and leasehold improvements
    
    
    23,753
    
    
    
    22,372Total
    
    
    120,239
    
    
    
    111,588Less accumulated depreciation
    
    
    (68,387
    )
    
    
    (61,450
    )Total
    
    $
    51,852
    
    
    $
    50,138
  69




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##### Table of Contents



8. Other Assets
 Levitronix Convertible Debenture:
   HeartWare Loan Agreement
    70




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##### Table of Contents



9. Commitments and Contingencies
 Legal Proceedings
  Leases
  Fiscal year ended:
    
    (in thousands)2010
    
    $
    3,7182011
    
    
    3,8902012
    
    
    3,7262013
    
    
    3,6522014
    
    
    2,568Thereafter
    
    
    13,626Total
    
    $
    31,180
  Commitments
  10. Long-Term Debt
   71




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##### Table of Contents



Debt
  Fiscal Years2009
    
    2008
    
    
    2007Interest expense  cash component
    
    $
    3,414
    
    $
    3,414
    
    
    $
    3,414Interest expense  non-cash component
    
    
    8,224
    
    
    7,566
    
    
    
    6,964
  January 2, 2010
    
    
    January 3, 2009(in thousands)Long-term debtPrincipal amount
    
    $
    143,750
    
    
    $
    143,750Unamortized discount
    
    
    (11,821
    )
    
    
    (19,635
    )Net carrying amount
    
    $
    131,929
    
    
    $
    124,115Equity component, net of income tax benefit
    
    $
    28,462
    
    
    $
    28,462
   72




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11. Share-Based Compensation
   Fiscal Years2009
    
    
    2008
    
    
    2007(in thousands)Cost of product sales
    
    $
    2,023
    
    
    $
    1,749
    
    
    $
    1,598Selling, general and administrative
    
    
    8,383
    
    
    
    6,491
    
    
    
    7,232Research and development
    
    
    3,492
    
    
    
    2,626
    
    
    
    2,584Total share-based compensation expense before tax
    
    
    13,898
    
    
    
    10,866
    
    
    
    11,414Tax benefit for share-based compensation expense
    
    
    5,348
    
    
    
    4,351
    
    
    
    3,525Total share-based compensation expense (net of taxes)
    
    $
    8,550
    
    
    $
    6,515
    
    
    $
    7,889
    Equity Plans
   73




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##### Table of Contents



Stock Options
   Fiscal Years2009
    
    
    2008
    
    
    2007Risk-free interest rate
    

    2.34%
    
    3.25%
    
    4.79%Expected volatility
    
    53%
    
    40%
    
    40%Expected option life
    
    4.89-6.03 years
    
    5.08-6.07 years
    
    5.08-6.05 yearsDividends
    
    None
    
    None
    
    None
    74




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##### Table of Contents



Number of
    
    
    Weighted
    
    
    Weighted AverageOptions
    
    
    Average Exercise
    
    
    Remaining Contract(in thousands)
    
    
    Price Per Share
    
    
    Life (years)Outstanding as of December 30, 2006 (4,064 exercisable at $12.75
weighted average price per share)
    
    
    6,585
    
    
    $
    14.65
    
    
    
    6.74Granted
    
    
    583
    
    
    
    18.32Cancelled and expired
    
    
    (242
    )
    
    
    17.70Exercised
    
    
    (1,178
    )
    
    
    11.91Outstanding as of December 29, 2007 (3,940 exercisable at $13.72
weighted average price per share)
    
    
    5,748
    
    
    $
    15.46
    
    
    
    6.19Granted
    
    
    383
    
    
    
    14.98Cancelled and expired
    
    
    (104
    )
    
    
    18.76Exercised
    
    
    (1,768
    )
    
    
    12.96Outstanding as of January 3, 2009 (2,775 exercisable at $15.23
weighted average price per share)
    
    
    4,259
    
    
    $
    16.37
    
    
    
    5.98Granted
    
    
    345
    
    
    
    24.03Cancelled and expired
    
    
    (95
    )
    
    
    22.44Exercised
    
    
    (652
    )
    
    
    14.08Outstanding as of January 2, 2010 (2,687 exercisable at $16.17
weighted average price per share)
    
    
    3,857
    
    
    $
    17.29
    
    
    
    5.60Outstanding options vested at fiscal year end 2009 and expected to vest
    
    
    3,762
    
    
    $
    17.22
    
    
    
    5.53
    Options Outstanding
    
    
    Options Exercisable(in thousands, except contractual life and exercise price)WeightedAverage
    
    
    Weighted
    
    
    
    
    
    
    WeightedExercise
    
    
    
    
    
    Remaining
    
    
    Average
    
    
    
    
    
    
    AveragePrice
    
    
    
    
    
    Contractual Life
    
    
    Exercise
    
    
    
    
    
    
    ExerciseRange
    
    Number
    
    
    (In Years)
    
    
    Price
    
    
    Number
    
    
    Price$5.60 $11.80
    
    
    236
    
    
    
    2.79
    
    
    $
    9.68
    
    
    
    236
    
    
    $
    9.6811.88  12.45
    
    
    603
    
    
    
    4.26
    
    
    
    12.43
    
    
    
    603
    
    
    
    12.4312.61  14.97
    
    
    624
    
    
    
    6.16
    
    
    
    14.56
    
    
    
    347
    
    
    
    14.2514.98  15.92
    
    
    400
    
    
    
    2.74
    
    
    
    15.71
    
    
    
    387
    
    
    
    15.7115.95  17.84
    
    
    223
    
    
    
    5.47
    
    
    
    16.76
    
    
    
    196
    
    
    
    16.6717.91  17.91
    
    
    393
    
    
    
    7.06
    
    
    
    17.91
    
    
    
    180
    
    
    
    17.9118.01  19.90
    
    
    54
    
    
    
    5.83
    
    
    
    19.31
    
    
    
    33
    
    
    
    19.4320.34  20.34
    
    
    453
    
    
    
    6.14
    
    
    
    20.34
    
    
    
    312
    
    
    
    20.3420.60  23.62
    
    
    471
    
    
    
    6.12
    
    
    
    23.15
    
    
    
    343
    
    
    
    23.2023.64  29.00
    
    
    400
    
    
    
    8.64
    
    
    
    24.06
    
    
    
    50
    
    
    
    24.093,857
    
    
    
    5.60
    
    
    
    17.29
    
    
    
    2,687
    
    
    
    16.17
 Restricted Stock Awards and Units
  75




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Restricted Stock Awards
   Number of
    
    
    Weighted AverageShares
    
    
    Grant Date Fair(in thousands)
    
    
    ValueOutstanding unvested restricted stock as of December 30, 2006
    
    
    422
    
    
    $
    17.63Granted
    
    
    570
    
    
    
    18.39Vested
    
    
    (165
    )
    
    
    16.93Forfeited or expired
    
    
    (59
    )
    
    
    18.31Outstanding unvested restricted stock as of December 29, 2007
    
    
    768
    
    
    
    18.29Granted
    
    
    496
    
    
    
    15.41Vested
    
    
    (231
    )
    
    
    18.40Forfeited or expired
    
    
    (50
    )
    
    
    17.90Outstanding unvested restricted stock as of January 3, 2009
    
    
    983
    
    
    
    16.83Granted
    
    
    
    
    
    
    Vested
    
    
    (326
    )
    
    
    17.12Forfeited or expired
    
    
    (48
    )
    
    
    17.36Outstanding unvested restricted stock as of January 2, 2010
    
    
    609
    
    
    
    16.63
 Restricted Stock Units
   Number of
    
    
    Weighted Average
    
    
    Weighted AverageUnits
    
    
    Grant Date Fair
    
    
    Remaining Contract(in thousands)
    
    
    Value
    
    
    (in Years)Outstanding units as of December 30, 2006
    
    
    10
    
    
    $
    19.08
    
    
    
    1.74Granted
    
    
    15
    
    
    
    18.27Released
    
    
    (3
    )
    
    
    19.10Forfeited or expired
    
    
    (1
    )
    
    
    18.14Outstanding units as of December 29, 2007
    
    
    21
    
    
    
    18.58
    
    
    
    2.82Granted
    
    
    15
    
    
    
    15.00Released
    
    
    (7
    )
    
    
    18.68Forfeited or expired
    
    
    (1
    )
    
    
    18.05Outstanding units as of January 3, 2009
    
    
    28
    
    
    
    16.66
    
    
    
    2.46Granted
    
    
    498
    
    
    
    24.63Released
    
    
    (49
    )
    
    
    24.70Forfeited or expired
    
    
    (14
    )
    
    
    23.93Outstanding units as of January 2, 2010
    
    
    463
    
    
    
    24.17
    
    
    
    3.12
 76




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##### Table of Contents



Employee Stock Purchase Plan
   Fiscal Years2009
    
    
    2008
    
    
    2007Risk-free interest rate
    
    
    0.17
    %
    
    
    1.07
    %
    
    
    4.80
    %Expected volatility
    
    
    40
    %
    
    
    60
    %
    
    
    40
    %Expected option life
    
    0.50 years
    
    0.50 years
    
    0.50 yearsDividends
    
    None
    
    None
    
    None
  12. Common and Preferred Stock
     77




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13. Retirement Savings Plans
   14. Taxes on Income
   Fiscal Years2009
    
    
    2008
    
    
    2007(in thousands)Current:Federal
    
    $
    18,721
    
    
    $
    11,578
    
    
    $
    5,284State
    
    
    3,636
    
    
    
    3,192
    
    
    
    1,968Foreign
    
    
    415
    
    
    
    2,122
    
    
    
    1,17922,772
    
    
    
    16,892
    
    
    
    8,431Deferred:Federal
    
    
    (7,010
    )
    
    
    (8,843
    )
    
    
    (10,366
    )State
    
    
    (3,373
    )
    
    
    (2,281
    )
    
    
    (1,585
    )Foreign
    
    
    (220
    )
    
    
    (207
    )
    
    
    122(10,603
    )
    
    
    (11,331
    )
    
    
    (11,829
    )Total income tax expense (benefit)
    
    $
    12,169
    
    
    $
    5,561
    
    
    $
    (3,398
    )
 78




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##### Table of Contents



Fiscal Years2009
    
    
    2008
    
    
    2007(in thousands)Domestic
    
    $
    38,185
    
    
    $
    17,990
    
    
    $
    (7,962
    )Foreign
    
    
    2,568
    
    
    
    5,902
    
    
    
    3,961Income before taxes
    
    $
    40,753
    
    
    $
    23,892
    
    
    $
    (4,001
    )
  Fiscal Years2009
    
    
    2008
    
    
    2007(in thousands, except percentages)U.S. federal statutory income tax expense (benefit)
    
    $
    14,264
    
    
    
    35.0
    %
    
    $
    8,362
    
    
    
    35.0
    %
    
    $
    (1,400
    )
    
    
    35.0
    %State income tax expense/(benefit), net of federal tax
expense or benefit
    
    
    750
    
    
    
    1.8
    
    
    
    (144
    )
    
    
    (0.6
    )
    
    
    (700
    )
    
    
    (17.5
    )Share-based compensation
    
    
    161
    
    
    
    0.4
    
    
    
    (4
    )
    
    
    
    
    
    
    910
    
    
    
    22.7Non-deductible expenses
    
    
    326
    
    
    
    0.8
    
    
    
    527
    
    
    
    2.2
    
    
    
    291
    
    
    
    7.3Research and development credits
    
    
    (1,203
    )
    
    
    (3.0
    )
    
    
    (1,097
    )
    
    
    (4.6
    )
    
    
    (436
    )
    
    
    (10.9
    )Foreign earnings permanently reinvested
    
    
    (138
    )
    
    
    (0.3
    )
    
    
    (99
    )
    
    
    (0.4
    )
    
    
    (58
    )
    
    
    (1.4
    )Tax advantaged investment income
    
    
    (1,599
    )
    
    
    (3.9
    )
    
    
    (2,575
    )
    
    
    (10.8
    )
    
    
    (2,560
    )
    
    
    (64.0
    )Return-to-provision true-up
    
    
    448
    
    
    
    1.1
    
    
    
    (528
    )
    
    
    (2.2
    )
    
    
    552
    
    
    
    13.8CA rate change
    
    
    (927
    )
    
    
    (2.3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchased intangible rate change
    
    
    (973
    )
    
    
    (2.4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Section 162(m) write-down
    
    
    1,424
    
    
    
    3.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Prior period purchase price correction
    
    
    
    
    
    
    
    
    
    
    (36
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    Domestic production activities
    
    
    (1,268
    )
    
    
    (3.1
    )
    
    
    (304
    )
    
    
    (1.3
    )
    
    
    (123
    )
    
    
    (3.1
    )Other
    
    
    118
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Tax reserves
    
    
    786
    
    
    
    1.9
    
    
    
    1,459
    
    
    
    6.1
    
    
    
    126
    
    
    
    3.1$
    12,169
    
    
    
    29.9
    %
    
    $
    5,561
    
    
    
    23.3
    %
    
    $
    (3,398
    )
    
    
    (85.0
    )%
  79




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##### Table of Contents



January 2, 2010
    
    
    January 3, 2009(in thousands)Deferred tax assets:Write-off of acquired technology
    
    $
    247
    
    
    $
    376Reserves and accruals
    
    
    4,699
    
    
    
    3,119Depreciation and amortization
    
    
    2,645
    
    
    
    1,746Inventory basis difference
    
    
    6,469
    
    
    
    2,583Share-based compensation
    
    
    5,618
    
    
    
    5,170Research and development and other credit carryforwards
    
    
    2,835
    
    
    
    5,861Net operating loss carryforwards
    
    
    
    
    
    
    59Other, net
    
    
    674
    
    
    
    2,348Total deferred tax assets
    
    
    23,187
    
    
    
    21,262Deferred tax liabilities:Purchased intangibles
    
    
    (37,009
    )
    
    
    (42,779
    )Interest expense
    
    
    (4,430
    )
    
    
    (7,557
    )Other, net
    
    
    (46
    )
    
    
    (9
    )Total deferred tax liabilities
    
    
    (41,485
    )
    
    
    (50,345
    )Net deferred tax liabilities
    
    $
    (18,298
    )
    
    $
    (29,083
    )Reported As:Net current deferred tax assets
    
    $
    12,261
    
    
    $
    8,397Net long-term deferred tax assets (included in Other long-term assets)
    
    
    1,161
    
    
    
    1,362Net long-term deferred tax liabilities
    
    
    (31,720
    )
    
    
    (38,842
    )Net deferred tax liabilities
    
    $
    (18,298
    )
    
    $
    (29,083
    )
         80




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##### Table of Contents



Fiscal Years2009
    
    
    2008
    
    
    2007(in thousands)Balance at beginning of fiscal year
    
    $
    8,860
    
    
    $
    6,853
    
    
    $
    9,300Additions based on tax positions related to the current year
    
    
    732
    
    
    
    725
    
    
    
    445Additions for tax positions, related to prior years
    
    
    725
    
    
    
    1,406
    
    
    
    264Reductions for tax positions, related to prior years
    
    
    (145
    )
    
    
    (29
    )
    
    
    (2,627
    )Settlements
    
    
    (9
    )
    
    
    (9
    )
    
    
    (527
    )Reductions for statute of limitations lapses
    
    
    (144
    )
    
    
    (86
    )
    
    
    (2
    )Balance at end of fiscal year
    
    $
    10,019
    
    
    $
    8,860
    
    
    $
    6,853
   Fiscal Years2009
    
    
    2008
    
    
    2007(in thousands)Interest
    
    $
    126
    
    
    $
    148
    
    
    $
    141Penalties
    
    
    (6
    )
    
    
    47
    
    
    
    10
  January 2, 2010
    
    
    January 3, 2009
    
    
    December 29, 2007(in thousands)Interest
    
    $
    765
    
    
    $
    638
    
    
    $
    490Penalties
    
    
    188
    
    
    
    195
    
    
    
    149
  81




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##### Table of Contents



15. Enterprise and Related Geographic Information
  Business segments:
 Fiscal Years2009
    
    
    2008
    
    
    2007(in thousands)Product sales:Cardiovascular
    
    $
    279,967
    
    
    $
    214,976
    
    
    $
    144,220ITC
    
    
    93,970
    
    
    
    98,588
    
    
    
    90,560Total product sales
    
    $
    373,937
    
    
    $
    313,564
    
    
    $
    234,780Income (loss) before taxes:Cardiovascular(a)(c)
    
    $
    80,311
    
    
    $
    39,156
    
    
    $
    5,188ITC(a)(c)
    
    
    (3,489
    )
    
    
    2,614
    
    
    
    6,787Corporate (b)(c)
    
    
    (29,805
    )
    
    
    (16,040
    )
    
    
    (14,172
    )Total operating income (loss)
    
    
    47,017
    
    
    
    25,730
    
    
    
    (2,197
    )Other income and (expense):Interest expense
    
    
    (12,307
    )
    
    
    (10,984
    )
    
    
    (10,428
    )Interest income and other
    
    
    6,043
    
    
    
    9,146
    
    
    
    8,624Total income (loss) before taxes
    
    $
    40,753
    
    
    $
    23,892
    
    
    $
    (4,001
    )Depreciation and amortization:Cardiovascular
    
    $
    16,481
    
    
    $
    18,277
    
    
    $
    17,218ITC
    
    
    4,348
    
    
    
    4,589
    
    
    
    4,174Corporate (b)
    
    
    852
    
    
    
    865
    
    
    
    444Total depreciation and amortization
    
    $
    21,681
    
    
    $
    23,731
    
    
    $
    21,836
 January 2, 2010
    
    
    January 3, 2009
    
    
    December 29, 2007(in thousands)Total assets:Cardiovascular
    
    $
    327,038
    
    
    $
    321,605
    
    
    $
    312,691ITC
    
    
    61,145
    
    
    
    61,552
    
    
    
    62,642Corporate (b)
    
    
    358,374
    
    
    
    300,928
    
    
    
    237,676Total assets
    
    $
    746,557
    
    
    $
    684,085
    
    
    $
    613,009Capital expenditures (d):Cardiovascular
    
    $
    5,644
    
    
    $
    7,128
    
    
    $
    5,654ITC
    
    
    3,127
    
    
    
    4,412
    
    
    
    4,435Corporate (b)
    
    
    1,481
    
    
    
    774
    
    
    
    99Total capital expenditures
    
    $
    10,252
    
    
    $
    12,314
    
    
    $
    10,188
 82




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##### Table of Contents



(a)
    
    Includes amortization expense of $9.9 million, $12.4 million and $11.7 million for fiscal
2009, 2008 and 2007 respectively, related to the Cardiovascular division. The ITC
division had amortization expense of $0.8 million, $0.8 million and $0.9 million for fiscal
ended 2009, 2008 and 2007, respectively.(b)
    
    Represents unallocated items, not specifically identified to any particular business segment.(c)
    
    Includes share-based compensation expense of $8.3 million, $4.0 million and $1.6 million for
Cardiovascular, ITC and Corporate, respectively, for fiscal 2009, $6.4 million, $2.9
million and $1.6 million for Cardiovascular, ITC and Corporate, respectively, for fiscal 2008 and $6.9 million, $3.0 million and $1.5 million for Cardiovascular, ITC and Corporate,
respectively, for fiscal 2007.(d)
    
    Capital expenditures include inventory transfers of $2.2 million, $2.5 million and $2.7
million for fiscal 2009, 2008 and 2007 respectively, related to our Cardiovascular
division and $0.4 million, $0.6 million and $1.0 million for fiscal 2009, 2008 and 2007
respectively, related to our ITC division. Geographic Areas:
  Fiscal Years2009
    
    
    2008
    
    
    2007(in thousands)Product sales:Domestic
    
    $
    281,762
    
    
    $
    232,567
    
    
    $
    169,786International
    
    
    92,175
    
    
    
    80,997
    
    
    
    64,994Total
    
    $
    373,937
    
    
    $
    313,564
    
    
    $
    234,780
 16. Net Income (Loss) Per Share
  83




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Fiscal Years2009
    
    
    2008
    
    
    2007(in thousands, except per share data)Basic net income per common share calculationNet income (loss)
    
    $
    28,584
    
    
    $
    18,331
    
    
    $
    (603
    )Net income (loss) allocated to participating securities
    
    
    356
    
    
    
    317
    
    
    
    (8
    )Net income (loss) attributable to common shareholders
    
    $
    28,228
    
    
    $
    18,014
    
    
    $
    (595
    )Weighted average number of common shares used to
compute basic net income (loss) per common share
    
    
    55,910
    
    
    
    54,144
    
    
    
    52,777Basic net income (loss) per common share
    
    $
    0.50
    
    
    $
    0.33
    
    
    $
    (0.01
    )Diluted net income per common share calculationNet income (loss)
    
    $
    28,584
    
    
    $
    18,331
    
    
    $
    (603
    )Net income (loss) allocated to participating securities
    
    
    347
    
    
    
    311
    
    
    
    (8
    )Net income (loss) attributable to common shareholders
    
    $
    28,237
    
    
    $
    18,020
    
    
    $
    (595
    )Weighted average number of common shares used to
compute basic net income (loss) per common share
attributable to common shares
    
    
    55,910
    
    
    
    54,144
    
    
    
    52,777Dilutive effect of stock-based compensation plans
    
    
    1,412
    
    
    
    1,099
    
    
    
    Weighted average number of common shares used to
compute diluted net income (loss) per common share
    
    
    57,322
    
    
    
    55,243
    
    
    
    52,777Diluted net income (loss) per common share
    
    $
    0.49
    
    
    $
    0.33
    
    
    $
    (0.01
    )
   Fiscal Years2009
    
    
    2008
    
    
    2007(in thousands)Options to purchase shares not
included in the computation of diluted net
income per common share because their
inclusion would be antidilutive
    
    
    294
    
    
    
    1,284
    
    
    
    3,215
  84




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17. Quarterly Results of Operations (Unaudited)
  First
    
    
    Second
    
    
    Third
    
    
    Fourth(in thousands, except per share data)Fiscal Year 2009:Product sales
    
    $
    89,466
    
    
    $
    92,059
    
    
    $
    87,917
    
    
    $
    104,495Gross profit
    
    
    54,027
    
    
    
    50,755
    
    
    
    53,732
    
    
    
    61,320Net income
    
    
    5,627
    
    
    
    1,832
    
    
    
    11,777
    (1)
    
    
    9,348
    (1)Net income
per common share:Basic
    
    $
    0.10
    
    
    $
    0.03
    
    
    $
    0.21
    
    
    $
    0.16Diluted
    
    $
    0.10
    
    
    $
    0.03
    
    
    $
    0.20
    
    
    $
    0.16Fiscal Year 2008:Product sales
    
    $
    64,427
    
    
    $
    82,648
    
    
    $
    80,815
    
    
    $
    85,674Gross profit
    
    
    35,837
    
    
    
    50,823
    
    
    
    48,770
    
    
    
    50,568Net income (loss)
    
    
    (678
    )
    
    
    7,624
    
    
    
    6,108
    
    
    
    5,277Net income
(loss) per common share:Basic
    
    $
    (0.01
    )
    
    $
    0.14
    
    
    $
    0.11
    
    
    $
    0.10Diluted
    
    $
    (0.01
    )
    
    $
    0.14
    
    
    $
    0.11
    
    
    $
    0.09
 
 (1)
    
    Net income (loss) per share in the third quarter of 2009 includes the fair value of a
conversion option gain of $5.2 million ($3.1 million, net of
tax) related to the intended
HeartWare agreement, which was reversed in the fourth quarter of 2009, upon the extinguishment
of the HeartWare loan agreement. For further details related to the termination of the merger
agreement with HeartWare and the extinguishment of the loan agreement, please refer to Note 8,
Other Assets. 18. Subsequent Event
  85




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##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
  Disclosure Controls and Procedures
   Managements Report on Internal Control Over Financial Reporting
     86




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##### Table of Contents



Changes to Internal Controls
  Inherent Limitations on Controls and Procedures
   
 Item 9B. Other Information
  
 PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters
  87




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##### Table of Contents



Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accounting Fees and Services
  
 PART IV
 
 Item 15. Exhibit and Financial Statement Schedules
 (a)
    
    List of documents filed as part of this report:1.
    
    Financial Statements and Reports of Independent Registered Public Accounting Firm.Reference is made to the Index to Financial Statements under Item 8 of Part II of this Annual
Report on Form 10-K, where these documents are included.2.
    
    Financial Statement SchedulesSchedule II  Valuation and Qualifying Accounts and Reserves for each of the three fiscal years
ended January 2, 2010, January 3, 2009 and December 29, 2007. Other financial statement
schedules are not included either because they are not required or the information is otherwise
shown in our audited consolidated financial statements or the notes thereto.3.
    
    ExhibitsReference is made to the Exhibit Index on page 90 of this Annual Report on Form 10-K, where
these documents are included.
 88




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##### Table of Contents



THORATEC CORPORATION
 SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
 For Each of the Three Fiscal Years:
 Balance
    
    
    Additions
    
    
    
    
    
    
    BalanceBeginning
    
    
    (charges
    
    
    
    
    
    
    End ofof Year
    
    
    to expense)
    
    
    Deductions
    
    
    Year(in thousands)Year Ended January 2, 2010:Allowance for doubtful accounts
    
    $
    947
    
    
    $
    699
    
    
    $
    (802
    )(1)
    
    $
    844Year Ended January 3, 2009:Allowance for doubtful accounts
    
    $
    861
    
    
    $
    298
    
    
    $
    (212
    )(1)
    
    $
    947Year Ended December 29, 2007:Allowance for doubtful accounts
    
    $
    491
    
    
    $
    690
    
    
    $
    (320
    )(1)
    
    $
    861
 
 (1)
    
    Accounts written off. 89




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Exhibit3.1
    
    Thoratecs Articles of Incorporation, as amended.(1)3.2
    
    Thoratecs By-Laws, as amended February 25, 2005.(2)4.1
    
    Rights Agreement between Thoratec Corporation and Computershare Trust Company, Inc. as Rights Agent dated as of
May 2, 2002.(3)4.2
    
    Indenture, dated as of May 24, 2004, by and between Thoratec Corporation and U.S. Bank, National Association, as
Trustee.(4)4.3
    
    Form of Senior Subordinated Convertible Note due 2034.(5)4.4
    
    Pledge Agreement, dated as of May 24, 2004, between Thoratec Corporation and U.S. Bank, National Association,
and Pledge Agreement Supplement, dated as of June 7, 2004.(4)4.5
    
    Control Agreement, dated as of May 24, 2004, between Thoratec Corporation and U.S. Bank, National Association,
and Control Agreement Amendment, dated as of June 7, 2004.(4)4.6
    
    Registration Rights Agreement, dated May 24, 2004, by and among Thoratec Corporation and Merrill Lynch Pierce
Fenner & Smith Incorporated as Initial Purchaser of the Senior Subordinated Convertible Notes due 2034.(4)10.1
    
    Form of Indemnification Agreement between Thoratec Cardiosystems and its officers and directors.(6)10.2
    
    Thoratecs 1996 Nonemployee Directors Stock Option Plan, as amended.(7)10.3
    
    Lease Agreement dated July 25, 1996, between Main Street Associates and Thoratec, as amended.(8)10.4
    
    First Amendment to Lease Agreement originally between Main Street Associates and Thoratec dated July 25, 1996.(9)10.5
    
    Second Amendment to Lease Agreement originally between Main Street Associates and Thoratec dated July 25,
1996.(10)10.6
    
    Thoratecs 1997 Stock Option Plan, as amended.(11)10.7
    
    Lease agreement dated August 16, 1995, between International Technidyne Corporation and BHBMC, as amended.(12)10.8
    
    Thoratecs 2002 Employee Stock Purchase Plan.(13)10.9
    
    Grantor Trust Agreement between Thoratec and Wachovia Bank, National Association effective as of November 21,
2003.(7)10.10
    
    Commercial Lease between International Technidyne Corporation and Roseville Properties Management Company dated
September 26, 2003.(7)10.11
    
    Lease Agreement between International Technidyne Corporation and NJ Mortgage Association dated February 21,
2003.(15)10.12
    
    Description of the Executive Disability Income Protection Program.(14)10.13
    
    Amended and Restated Thoratec Corporation 2006 Incentive Stock Plan.(16)10.14
    
    Amended and Restated Employment Agreement by and between Thoratec and Gerhard F. Burbach, dated April 23,
2007.(17)*10.15
    
    Amended and Restated Employment Agreement by and between Thoratec and Lawrence Cohen, dated April 23, 2007.(17)*10.16
    
    Amended and Restated Separation Benefits Agreement by and between Thoratec and David A. Lehman, dated April 23,
2007.(17)*10.17
    
    Amended and Restated Separation Benefits Agreement by and between Thoratec and David V. Smith, dated April 23,
2007.(17)*10.18
    
    Thoratec Corporation Amended and Restated Deferred Compensation Plan Effective January 1, 2005.(18)10.19
    
    First Amendment to Lease between International Technidyne Corporation and Roseville Properties Management
Company effective January 1, 2009.(19)10.20
    
    Description of Director Compensation Program.(19)10.21
    
    Thoratec Corporation Corporate Executive Incentive Plan FY 2009, effective for certain executive officer of the
Company.(20)*10.22
    
    International Technidyne Corporation Executive Incentive Plan FY 2009, effective for certain executive officers
of the Company.(20)*10.23
    
    Amendment to the Amended and Restated Employment Agreement by and between Thoratec and Gerhard F. Burbach, dated
November 16, 2009. *10.24
    
    Amendment to the Amended and Restated Employment Agreement by and between Thoratec and Lawrence Cohen, dated
November 16, 2009. *10.25
    
    Amendment to the Amended and Restated Separation Benefits Agreement by and between Thoratec and David A. Lehman,
dated November 16, 2009. *10.26
    
    Amendment to the Amended and Restated Separation Benefits Agreement by and between Thoratec and David V. Smith,
dated November 16, 2009. *21
    
    Subsidiaries of Thoratec.(21)23.1
    
    Consent of Independent Registered Public Accounting Firm.24
    
    Power of Attorney  Reference
is made to page 93 hereof.31.1
    
    Section 302 Certification of Chief Executive Officer31.2
    
    Section 302 Certification of Chief Financial Officer32.1
    
    Section 906 Certification of Chief Executive Officer32.2
    
    Section 906 Certification of Chief Financial Officer
 90




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##### Table of Contents



(1)
    
    Filed as an Exhibit to Thoratecs Annual Report on Form 10-K for the fiscal
year ended December 28, 2002 filed with the SEC on March 20, 2003 and
incorporated herein by reference.(2)
    
    Filed as an Exhibit to Thoratecs Form 8-K filed with the SEC on March 3, 2005.(3)
    
    Filed as an Exhibit to Thoratecs Form 8-A12G filed with the SEC on May 3, 2002
(Registration No. 000-49798), and incorporated herein by reference.(4)
    
    Filed as an Exhibit to Thoratecs Quarterly Report on Form 10-Q for the fiscal
quarter ended July 3, 2004 filed with the SEC on August 12, 2004, and
incorporated herein by reference.(5)
    
    Included as an exhibit to Exhibit 4.2.(6)
    
    Filed as an Exhibit to Thoratec Cardiosystems Registration Statement on Form
S-1 (Registration No. 33-25144) and incorporated herein by reference.(7)
    
    Filed as an Exhibit to Thoratecs Annual Report on Form 10-K for the fiscal
year ended January 3, 2004 filed with the SEC on March 17, 2004 and
incorporated herein by reference.(8)
    
    Filed as an Exhibit to Thoratecs Quarterly Report on Form 10-Q for the fiscal
quarter ended June 29, 1996, filed with the SEC on August 13, 1996, and
incorporated herein by reference.(9)
    
    Filed as an Exhibit to Thoratecs Quarterly Report on Form 10-Q for the fiscal
quarter ended June 28, 1997, filed with the SEC on July 30, 1997, and
incorporated herein by reference.(10)
    
    Filed as an Exhibit to Thoratecs Quarterly Report on Form 10-Q for the fiscal
quarter ended September 27, 1997 filed with the SEC on November 12, 1997, and
incorporated herein by reference.(11)
    
    Filed as an Exhibit to Thoratecs Registration Statement on Form S-8 filed with
the SEC on June 18, 2003 (Registration No. 333-106238), and incorporated herein
by reference.(12)
    
    Filed as an Exhibit to Thoratecs Form 10-K405 filed with the SEC on March 15,
2002 (Registration No. 033-72502), and incorporated herein by reference.(13)
    
    Filed as an Exhibit to Thoratecs Form S-8 POS filed with the SEC on July 1,
2002 (Registration No. 333-90768), and incorporated herein by reference.(14)
    
    Filed as an Exhibit to Thoratecs Annual Report on Form 10-K for the fiscal
year ended January 1, 2005 filed with the SEC on March 16, 2005 and
incorporated herein by reference.(15)
    
    Filed as an Exhibit to Thoratecs Quarterly Report on Form 10-Q for the fiscal
quarter ended March 29, 2003 filed with the SEC on May 13, 2003, and
incorporated herein by reference.(16)
    
    Filed as an Exhibit to Thoratecs Form 8-K filed with the SEC on May 22, 2008.(17)
    
    Filed as an Exhibit to Thoratecs Form 8-K filed with the SEC on April 27, 2007.(18)
    
    Filed as an Exhibit to Thoratecs Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 2007 filed with the SEC on August 9, 2007 and
incorporated herein by reference.(19)
    
    Filed as an Exhibit to Thoratecs Annual Report on Form 10-K for the fiscal
year ended January 3, 2009 filed with the SEC on February 27, 2009 and
incorporated herein by reference.(20)
    
    Filed as an Exhibit to Thoratecs Quarterly Report on Form 10-Q for the fiscal
quarter ended April 4, 2009 filed with the SEC on May 14, 2009 and incorporated
herein by reference.(21)
    
    Filed as an Exhibit to Thoratecs Annual Report on Form 10-K for the fiscal
year ended December 29, 2001 filed with the SEC on March 15, 2002 and
incorporated herein by reference.*
    
    Indicates a management contract or compensatory plan. 91




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##### Table of Contents



SIGNATURES
  THORATEC CORPORATIONBy:
    /s/ Gerhard F. BurbachGerhard F. BurbachPresident and Chief Executive Officer  92




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##### Table of Contents



POWER OF ATTORNEY
   Signature
    
    Title
    
    Date/s/ Gerhard F. Burbach
    
    Chief Executive Officer, President and Director
    
    February 24, 2010Gerhard F. Burbach
    
    (Principal Executive Officer)/s/ David V. Smith
    
    Executive Vice President and Chief Financial Officer
    
    February 24, 2010David V. Smith
    
    (Principal Financial and Accounting Officer)/s/ Neil F. Dimick
    
    Director and Chairman of the Board of Directors
    
    February 24, 2010Neil F. Dimick/s/ J. Daniel Cole
    
    Director
    
    February 24, 2010J. Daniel Cole/s/ Steven H. Collis
    
    Director
    
    February 24, 2010Steven H. Collis/s/ Elisha W. Finney
    
    Director
    
    February 24, 2010Elisha W. Finney/s/ D. Keith Grossman
    
    Director
    
    February 24, 2010D. Keith Grossman/s/ Paul A. LaViolette
    
    Director
    
    February 24, 2010Paul A. LaViolette/s/ Daniel M. Mulvena
    
    Director
    
    February 24, 2010Daniel M. Mulvena
 93