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Thoratec® Reports Fourth Quarter And Full Year Fiscal 2012 Financial Results

February 5, 2013

PLEASANTON, Calif., Feb. 5, 2013 /PRNewswire/ — Thoratec Corporation (NASDAQ: THOR), a world leader in device-based mechanical circulatory support therapies to save, support and restore failing hearts, today reported its financial results for the fourth quarter of 2012.

“Thoratec had an impressive year in 2012, with sales growth of 16 percent driven by our HeartMate II® and CentriMag® product lines, highlighting our leadership positions in chronic and acute mechanical circulatory support,” said Gary F. Burbach, President and Chief Executive Officer. “We were particularly pleased to finish the year with strong fourth quarter results, including 20 percent unit growth for HeartMate II on a worldwide basis, reflecting continued adoption in the U.S. Destination Therapy indication as well as in international markets.”

For the quarter ended December 29, 2012, Thoratec reported revenues of $128.5 million, a 17 percent increase over revenues of $109.4 million in the fourth quarter of 2011. Net loss on a GAAP basis was $(14.4) million, or $(0.25) per diluted share, compared with GAAP net income of $15.3 million, or $0.25 per diluted share, in the same period a year ago. 2012 results include a pre-tax impairment charge of $50.2 million related to certain purchased intangible assets associated with the PVAD(TM) and IVAD(TM) product line. Non-GAAP net income, which is described later in this press release, was $22.6 million, or $0.38 per diluted share, compared with non-GAAP net income of $22.7 million, or $0.38 per diluted share, in the same period a year ago.

For the year ended December 29, 2012, revenues were $491.7 million, an increase of 16 percent over revenues of $422.7 million for fiscal year 2011. Net income from continuing operations on a GAAP basis was $56.2 million, or $0.94 per diluted share, compared with GAAP net income from continuing operations of $72.6 million, or $1.20 per diluted share, for fiscal year 2011. Non-GAAP net income from continuing operations was $109.2 million, or $1.83 per diluted share, compared with non-GAAP net income from continuing operations of $97.0 million, or $1.56 per diluted share, for fiscal year 2011.

“We look forward to driving continued market growth and solidifying our leadership position in chronic and acute mechanical circulatory support during 2013,” Burbach commented. “Additionally, we remain focused on investing in longer-term strategic initiatives, including late-stage development activities related to HeartMate III(TM) and HeartMate PHP(TM), both of which we plan to bring into pivotal clinical trials later this year.”

Fourth Quarter and Fiscal Year 2012 Financial Results

For the fourth quarter of 2012, Thoratec reported revenues of $128.5 million, an increase of 17 percent compared to the same quarter last year. The HeartMate product line contributed $110.8 million, an increase of 18 percent, while the CentriMag product line contributed $11.5 million, an increase of 31 percent. The PVAD and IVAD product line contributed $5.6 million, a decrease of 8 percent.

For the fiscal year ended December 29, 2012, Thoratec reported revenues of $491.7 million, an increase of 16 percent compared to fiscal year 2011. The HeartMate product line contributed $434.6 million to revenues, an increase of 19 percent, while the CentriMag product line contributed $35.7 million, an increase of 39 percent, including revenues of $6.1 million related to the acquisition of Levitronix Medical. The PVAD and IVAD product line contributed $19.0 million, a decrease of 33 percent.

For the fourth quarter of 2012, GAAP gross margin was 30.6 percent compared to 67.1 percent in the same quarter last year. The decrease in GAAP gross margin was due primarily to an impairment of purchased intangible assets related to the PVAD and IVAD product line. Non-GAAP gross margin, described later in this press release, was 71.7 percent compared to 71.4 percent in the same quarter last year. The increase in non-GAAP gross margin was primarily driven by volume-based efficiencies and favorable product mix, offset in part by a volume-based tax on our VAD sales in France, which we recorded for the first time in the fourth quarter of 2012.

GAAP gross margin in 2012 was 59.3 percent versus 68.0 percent a year ago. The year-over-year decrease in GAAP gross margin was mainly attributable to the impairment of PVAD and IVAD intangible assets. Non-GAAP gross margin was 71.7 percent versus 71.2 percent in 2011. The year-over-year increase in gross margin was due to volume-based efficiencies, favorable product mix, and the contribution from the acquisition of Levitronix Medical.

For the fourth quarter of 2012, GAAP operating expenses were $64.1 million compared to $48.3 million in the same quarter last year. Non-GAAP operating expenses, described later in this press release, were $57.6 million compared to $43.0 million in the same quarter last year. The increase in non-GAAP operating expenses was due primarily to product and market development initiatives, project-related payments, and incentive compensation.

Operating expenses on a GAAP basis in 2012 were $215.7 million versus $173.5 million a year ago. On a non-GAAP basis, operating expenses in 2012 were $192.6 million versus $153.6 million in 2011. The year-over-year increase in operating expenses was due primarily to project-related payments, spending on product and market development initiatives, the addition of research and development personnel, and acquisition-related charges. Non-GAAP operating expenses are described later in this press release.

On a GAAP basis, other income was $1.7 million in 2012 versus other expense of $2.3 million in 2011. On a non-GAAP basis, other income totaled $1.7 million versus other income of $0.8 million a year ago. Other income and expense on a non-GAAP basis is described later in this press release.

The company’s GAAP effective tax rate in 2012 was 27.4 percent versus 35.1 percent in 2011. The non-GAAP tax rate, which is described later in this press release, was 32.4 percent in 2012 compared with 34.5 percent in 2011. The decrease in the GAAP effective tax rate was primarily due to the impairment of purchased intangible assets related to the PVAD and IVAD product line, and a greater percentage of earnings generated in lower-tax jurisdictions. The decrease in the non-GAAP effective tax rate was primarily attributable to a greater percentage of earnings generated in lower-tax jurisdictions.

Cash and investments were $260.4 million as of December 29, 2012, compared to $307.9 million as of September 29, 2012 and $209.5 million as of December 31, 2011. During the fourth quarter of 2012 the company used $75.0 million in cash to fund an accelerated share repurchase agreement as part of our stock repurchase program.

GUIDANCE FOR FISCAL YEAR 2013

The following statements are based on current expectations. These statements are forward-looking and actual results may differ materially. For a more detailed discussion of forward-looking statements, please see additional information below.

The company expects revenues will be in the range of $490 to $510 million, driven by growth of the HeartMate and CentriMag product lines, and partially offset by a continued decline in the PVAD and IVAD product line.

Gross margin is expected to be approximately 68.5 percent on a GAAP basis and approximately 70.5 percent on a non-GAAP basis. Included in these estimates for gross margin is the impact of the U.S. medical device excise tax, which we estimate will contribute approximately $6 million to cost of goods sold in 2013.

We expect the effective tax rate to be approximately 30.5 to 31.0 percent on both a GAAP and non-GAAP basis.

GAAP net income per diluted share is expected to be in the range of $1.32 to $1.42 and non-GAAP net income per diluted share is expected to be in the range of $1.76 to $1.86.

CONFERENCE CALL/WEBCAST INFORMATION

Thoratec will hold a conference call to discuss its financial results and operating activities for all interested parties at 1:30 p.m., Pacific Standard Time (4:30 p.m., Eastern Standard Time), today. The teleconference can be accessed by calling (719) 457-2638, passcode 4837615. Please dial in 10-15 minutes prior to the beginning of the call. The webcast will be available via the Internet at http://www.thoratec.com. A replay of the conference call will be available through Tuesday, February 12, via http://www.thoratec.com or by telephone at (719) 457-0820, passcode 4837615.

GAAP TO NON-GAAP RECONCILIATION

Thoratec management evaluates and makes operating decisions using various measures. These measures are generally based on revenues generated by the company’s products and certain costs of producing those revenues, such as costs of product sales, research and development and selling, general and administrative expenses. We use the following measures, which are not calculated in accordance with Generally Accepted Accounting Principles (“GAAP”): non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP other income and expense, non-GAAP tax rate, non-GAAP net income, non-GAAP net income per diluted share and non-GAAP shares used to compute diluted net income per share. These are non-GAAP financial measures under Section 101 of Regulation G under the Securities Exchange Act of 1934, as amended. These non-GAAP financial measures are calculated by excluding certain GAAP financial items that we believe have less significance to the day-to-day operation of our business. The company has outlined below the type and scope of these exclusions and the limitations on the use of the non-GAAP financial measures as a result of these exclusions.

Management uses these non-GAAP financial measures for financial and operational decision making, including in the determination of employee annual cash incentive compensation, as a means to evaluate period-to-period comparisons, as well as comparisons to our competitors’ operating results. Management also uses this information internally for forecasting and budgeting, as it believes that the measures are indicative of Thoratec core operating results. Management also believes that non-GAAP financial measures provide useful supplemental information to management and investors regarding the performance of the company’s business operations, provide a greater transparency with respect to key metrics used by management in its decision making, facilitate comparisons of results for current periods and guidance for future periods with our historical operating results, and assist in analyzing future trends.

Non-GAAP net income consists of GAAP net income, excluding, as applicable, the tax effected impact of share-based compensation expense, the write-down and amortization of purchased intangible assets, expenses associated with the accounting for convertible debt instruments that may be settled in cash upon conversion, including partial settlements in accordance with Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) 470-20, Debt, Levitronix Medical fair market value (FMV) inventory adjustments, and acquisition related charges.

Non-GAAP net income per diluted share is defined as non-GAAP net income divided by the weighted average number of shares on a fully-diluted basis.

Non-GAAP shares used to compute diluted net income per share consists of GAAP shares used to compute diluted net income per share adjusted for any inclusions made in conjunction with dilutive impact of Thoratec’s convertible debt instruments and any exclusions made in conjunction with the application of the two-class method for calculating net income per share.

Non-GAAP gross profit and gross margin consist of GAAP gross profit and gross margin excluding share-based compensation expense, the write-down and amortization of purchased intangible assets, and Levitronix Medical FMV inventory adjustments related to the acquisition.

Non-GAAP operating expenses consist of GAAP operating expenses excluding share-based compensation expense, amortization of purchased intangible assets, and acquisition-related transaction costs.

Non-GAAP other income and expense consists of GAAP other income and expenses excluding expenses related to the accounting for convertible debt instruments that may be settled in cash upon conversion, including partial settlements, in accordance with ASC 470-20, Debt.

Non-GAAP tax expense consists of the GAAP tax expense adjusted for the tax effect of the adjustments from GAAP net income to non-GAAP net income.

Management believes that it is useful in measuring Thoratec’s operations to exclude the write-down and amortization of purchased intangible assets. These costs are primarily fixed at the time of an acquisition and, unlike other fixed costs that result from ordinary operations, are the result of infrequent and irregular events.

Because of varying valuation methodologies, subjective assumptions and the variety of award types that companies can use, Thoratec management believes that providing non-GAAP financial measures that exclude share-based compensation allows investors to compare Thoratec’s recurring core business operating results to those of other companies and over multiple periods. The exclusion also enhances investors’ ability to review Thoratec’s business from the same perspective as Thoratec management, which believes that share-based compensation expense is not directly attributable to the underlying performance of the company’s business operations.

Due to the subjective assumptions used to develop non-cash interest expense related to the accounting for convertible debt instruments that may be settled in cash upon conversion, including partial settlements, in accordance with ASC 470-20, Debt, Thoratec management believes that providing non-GAAP financial measures that exclude such expense allows investors to compare Thoratec’s recurring core business operating results to those of other companies and over multiple periods. The exclusion also enhances investors’ ability to review Thoratec’s business from the same perspective as Thoratec management.

To enable investors to compare Thoratec’s recurring core business operating results to those of other companies and over multiple periods, Thoratec has excluded Levitronix Medical FMV inventory adjustments and acquisition-related costs as they are infrequent in nature.

There are a number of limitations related to the use of non-GAAP financial measures. First, non-GAAP financial measures exclude some costs, namely share-based compensation, that are recurring expenses. Second, share-based compensation is part of an employee’s compensation package and as such may be useful for investors to consider. Third, the components of costs that we exclude in our non-GAAP financial measures calculations may differ from components that our peer companies exclude when they report their results from operations.

Non-GAAP financial measures should not be considered as a substitute for measures of financial performance in accordance with GAAP. However, these measures may provide additional insight into Thoratec’s financial results. Investors and potential investors are strongly encouraged to review the reconciliation of non-GAAP financial measures contained within this press release with their most directly comparable GAAP financial results and not to rely on any single financial measure to evaluate our business.

The reconciliations of the forward looking non-GAAP financial measures to the most directly comparable GAAP financial measures in the tables below include all information reasonably available to Thoratec at the date of this press release. These tables include adjustments that we can reasonably predict. Events that could cause the reconciliation to change include acquisitions and divestitures of business, goodwill and other asset impairments and sales of marketable equity securities.

The following table includes the GAAP income statement for continuing operations for the three and twelve months ended December 29, 2012 and December 31, 2011:

                                                                         THORATEC CORPORATION
                                                            Condensed Consolidated Statements of Operations
                                                                              (Unaudited)
                                                               (in thousands, except for per share data)

                                      Three Months Ended                      Twelve Months Ended
                                      ------------------                     -------------------
                                      December 29, 2012                       December 31, 2011             December 29, 2012        December 31, 2011
                                      -----------------                       -----------------             -----------------        -----------------

    Product sales                                    $128,458                                $109,378                      $491,654                 $422,713
    Cost of product sales                              38,966                                  36,012                       150,037                  135,062
    Impairment of intangible assets                    50,242                                       0                        50,242                        0
    Gross profit                                       39,250                                  73,366                       291,375                  287,651
                                                       ------                                  ------                       -------                  -------
    Operating expenses:
    Selling, general and
     administrative                                    36,292                                  29,800                       127,984                  107,177
    Research and development                           27,843                                  18,488                        87,729                   66,314
    Total operating expenses                           64,135                                  48,288                       215,713                  173,491
                                                       ------                                  ------                       -------                  -------
    Income (loss) from operations                     (24,885)                                 25,078                        75,662                  114,160
    Other income and (expense):
    Interest expense                                        -                                      (1)                           (3)                  (4,651)
    Interest income and other                             257                                     835                         1,658                    2,362
    Income (loss) before income taxes                 (24,628)                                 25,912                        77,317                  111,871
    Income tax expense (benefit)                      (10,242)                                 10,567                        21,154                   39,296
                                                      -------                                  ------                        ------                   ------
    Net income (loss) from continuing
     operations                                       (14,386)                                 15,345                        56,163                   72,575
    Net loss from discontinued
     operations (net of tax)                                -                                       -                             -                   (1,031)
                                                          ---                                     ---                           ---                   ------

    Net Income (loss)                                $(14,386)                                $15,345                       $56,163                  $71,544
                                                     ========                                 =======                       =======                  =======

    Net income (loss) per share-
     Basic:
    Continuing operations                              $(0.25)                                  $0.26                         $0.96                    $1.23
    Discontinued operations                                 -                                       -                             -                    (0.02)
                                                          ---                                     ---                           ---                    -----
    Net Income (loss)                                  $(0.25)                                  $0.26                         $0.96                    $1.21
                                                       ======                                   =====                         =====                    =====

    Net income (loss) per share-
     Diluted:
    Continuing operations                              $(0.25)                                  $0.25                         $0.94                    $1.20
    Discontinued operations                                 -                                       -                             -                    (0.01)
                                                          ---                                     ---                           ---                    -----
    Net Income (loss)                                  $(0.25)                                  $0.25                         $0.94                    $1.19
                                                       ======                                   =====                         =====                    =====

    Shares used to compute net income
     (loss) per share:
    Basic                                              58,322                                  59,210                        58,563                   58,777
    Diluted                                            58,322                                  60,111                        59,580                   62,524

The following table presents our quarterly and annual revenues by source for fiscal 2011 and 2012:

                                                                                            THORATEC CORPORATION
                                                                                         Quarterly Revenue Analysis
                                                                                                (Unaudited)
                                                                                               (in millions)

                                                    Three Months                            Twelve Months
                                                       Ended                                   Ended
                                                       -----                                   -----
                                               Apr 2, 2011            Jul 2, 2011                                    Oct 1, 2011         Dec 31, 2011        Dec 31, 2011
                                               -----------            -----------                                    -----------         ------------        ------------

    Revenue by Product Line
    HeartMate                                                  $87.3               $97.6                                           $87.6               $93.8              $366.3
    PVAD & IVAD                                                  7.3                 7.6                                             7.2                 6.1                28.2
    CentriMag (1)                                                4.4                 5.3                                             7.2                 8.8                25.7
    Other                                                        0.5                 0.7                                             0.6                 0.7                 2.5
    Total                                                      $99.5              $111.2                                          $102.6              $109.4              $422.7
                                                               =====              ======                                          ======              ======              ======

    Revenue by Category
    Pump                                                       $70.8               $77.8                                           $72.2               $77.4              $298.2
    Non-Pump                                                    28.2                32.7                                            29.8                31.3               122.0
    Other                                                        0.5                 0.7                                             0.6                 0.7                 2.5
                                                                 ---                 ---                                             ---                 ---                 ---
    Total                                                      $99.5              $111.2                                          $102.6              $109.4              $422.7
                                                               =====              ======                                          ======              ======              ======

    Revenue by Geography
    United States                                              $82.5               $93.0                                           $83.9               $88.2              $347.6
    International                                               17.0                18.2                                            18.7                21.2                75.1
                                                                ----                ----                                            ----                ----                ----
    Total                                                      $99.5              $111.2                                          $102.6              $109.4              $422.7
                                                               =====              ======                                          ======              ======              ======

                                                  Three Months                           Twelve Months
                                                     Ended                                  Ended
                                                     -----                                  -----
                                              Mar 31, 2012           Jun 30, 2012                                   Sept 29, 2012        Dec 29, 2012        Dec 29, 2012
                                              ------------           ------------                                   -------------        ------------        ------------

    Revenue by Product Line
    HeartMate                                                 $111.7              $106.2                                          $105.9              $110.8              $434.6
    PVAD & IVAD                                                  5.8                 3.8                                             3.8                 5.6                19.0
    CentriMag (1)                                                8.7                 8.0                                             7.5                11.5                35.7
    Other                                                        0.6                 0.6                                             0.6                 0.6                 2.4
    Total                                                     $126.8              $118.6                                          $117.8              $128.5              $491.7
                                                              ======              ======                                          ======              ======              ======

    Revenue by Category
    Pump                                                       $92.6               $85.7                                           $85.0               $93.0              $356.3
    Non-Pump                                                    33.6                32.3                                            32.2                34.9               133.0
    Other                                                        0.6                 0.6                                             0.6                 0.6                 2.4
                                                                 ---                 ---                                             ---                 ---                 ---
    Total                                                     $126.8              $118.6                                          $117.8              $128.5              $491.7
                                                              ======              ======                                          ======              ======              ======

    Revenue by Geography
    United States                                             $103.9               $97.1                                           $97.5              $102.0              $400.5
    International                                               22.9                21.5                                            20.3                26.5                91.2
                                                                ----                ----                                            ----                ----                ----
    Total                                                     $126.8              $118.6                                          $117.8              $128.5              $491.7
                                                              ======              ======                                          ======              ======              ======

    (1) CentriMag includes PediMag/PediVAS(R) sales

The following table presents our quarterly and annual pump units by geography for fiscal 2011 and 2012:

                                                                   THORATEC CORPORATION
                                                                   Quarterly Pump Units
                                                                        (Unaudited)
                                            Three Months                    Twelve Months
                                               Ended                            Ended
                                               -----                           -----
    Units by
     Geography                            Apr 2,            Jul 2,                           Oct 1,      Dec 31, 2011   Dec 31,
                                                 2011              2011                             2011                         2011
                                                 ----              ----                             ----                         ----
    United States                                 677               753                              665            704         2,799
    International                                 182               193                              188            213           776
    Total (1)                                     859               946                              853            917         3,575
                                                  ===               ===                              ===            ===         =====

                                          Three Months                   Twelve Months
                                              Ended                          Ended
                                             -----                          -----
    Units by
     Geography                         Mar 31, 2012      Jun 30, 2012                     Sept 29, 2012  Dec 29, 2012   Dec 29,
                                                                                                                                 2012
                                                                                                                                 ----
    United States                                 838               773                              781            812         3,204
    International                                 219               212                              208            254           893
    Total (1)                                   1,057               985                              989          1,066         4,097
                                                =====               ===                              ===          =====         =====

    (1) Excludes CentriMag and PediMag/PediVAS units

The following table reconciles the specific items excluded from GAAP net income from continuing operations in the calculation of non-GAAP net income from continuing operations and diluted net income per share from continuing operations for the periods shown below:

                                                                                       THORATEC CORPORATION
                                                                          Reconciliation of GAAP to Non-GAAP Net Income
                                                                                           (Unaudited)
                                                                            (in thousands, except for per share data)

                                                Three Months Ended                            Twelve Months Ended
                                                ------------------                           -------------------
    Net income (loss) reconciliation               December 29,                                  December 31,             December 29,           December 31,
                                                                      2012                                          2011                   2012                  2011
                                                                      ----                                          ----                   ----                  ----

    Net income (loss) from continuing
     operations on a GAAP basis                                   $(14,386)                                      $15,345                $56,163               $72,575
    Share-based compensation expense:
    - Cost of product sales                                            605                                           424                  2,130                 1,505
    - Selling, general and administrative                            3,406                                         2,810                 13,235                10,387
    - Research and development                                       1,649                                         1,098                  6,327                 4,171
    Amortization of purchased intangibles
    - Cost of product sales                                          2,070                                         2,075                  8,279                 8,081
    - Selling, general and administrative                              697                                           700                  2,486                 1,802
    - Research and development                                          83                                             -                    329                     -
    Intangibles impairment charge related to
     PVAD and IVAD                                                  50,242                                             -                 50,242                     -
    Impact of ASC 470-20 (Debt)                                          -                                             -                      -                 3,127
    Levitronix Medical FMV inventory
     adjustments                                                         0                                         2,195                    528                 3,582
    Acquisition related transaction costs                              705                                           724                    705                 3,583
    Income tax effect of non-GAAP adjustments                      (22,513)                                       (2,667)               (31,250)              (11,774)
    Net income from continuing operations on a
     Non-GAAP basis                                                $22,558                                       $22,704               $109,174               $97,039
                                                                   =======                                       =======               ========               =======

                                                Three Months Ended                            Twelve Months Ended
                                                ------------------                           -------------------
    Diluted net income (loss)per share
     reconciliation                                December 29,                                  December 31,             December 29,           December 31,
                                                                      2012                                          2011                   2012                  2011
                                                                      ----                                          ----                   ----                  ----

    Diluted net income (loss) from continuing
     operations per share on a GAAP basis                           $(0.25)                                        $0.25                  $0.94                 $1.20
    Share-based compensation expense:
    - Cost of product sales                                           0.01                                          0.01                   0.03                  0.02
    - Selling, general and administrative                             0.06                                          0.05                   0.22                  0.16
    - Research and development                                        0.03                                          0.02                   0.11                  0.07
    Amortization of purchased intangibles
    - Cost of product sales                                           0.04                                          0.04                   0.14                  0.13
    - Selling, general and administrative                             0.01                                          0.01                   0.04                  0.03
    - Research and development                                        0.00                                             -                   0.01                     -
    Intangibles impairment charge related to
     PVAD and IVAD                                                    0.85                                             -                   0.84                     -
    Levitronix Medical FMV inventory
     adjustments                                                      0.00                                          0.04                   0.01                  0.06
    Acquisition related transaction costs                             0.01                                          0.01                   0.01                  0.06
    Income tax effect of non-GAAP adjustments                        (0.38)                                        (0.05)                 (0.52)                (0.17)
    Diluted net income from continuing
     operations per share on a Non-GAAP basis                        $0.38                                         $0.38                  $1.83                 $1.56
                                                                     =====                                         =====                  =====                 =====

                                                Three Months Ended                            Twelve Months Ended
                                                ------------------                           -------------------
                                                   December 29,                                  December 31,             December 29,           December 31,
                                                                      2012                                          2011                   2012                  2011
                                                                      ----                                          ----                   ----                  ----
    Shares used to compute diluted net income
     (loss) per share reconciliation

    Shares used in calculation of diluted net
     income (loss) per share --GAAP                                 58,322                                        60,111                 59,580                62,524
    Dilutive effect of share based compensation
     plans included in Non-GAAP diluted EPS
     for three months ended December 29, 2012                        1,044                                             -                      -                     -
    Weighted average unvested restricted stock
     awards (1)                                                          -                                            71                     13                   100
    Shares used in calculation of diluted net
     income per share -- Non-GAAP                                   59,366                                        60,182                 59,593                62,624
                                                                    ======                                        ======                 ======                ======


    (1)            The company adopted the two-
                   class method in calculating net
                   income per share on a GAAP
                   basis, which excludes the
                   weighted average unvested
                   restricted stock awards
                   outstanding of 0 and 71,368 for
                   the three months ended December
                   29, 2012 and December 31, 2011,
                   respectively and 12,693 and
                   99,870 for the twelve months
                   ended  December 29, 2012 and
                   December 31, 2011,
                   respectively.

The following table reconciles the specific items excluded from GAAP gross profit and gross margin from continuing operations in the calculation of non-GAAP gross profit and gross margin from continuing operations for the periods shown below:

                  THORATEC CORPORATION
    Reconciliation of GAAP to Non-GAAP Gross Profit
                      (Unaudited)
                     (in thousands)

                                                    Three Months Ended            Twelve Months Ended
                                                    ------------------           -------------------
                                                       December 29,                  December 31,              December 29,                December 31,
                                                                      2012                          2011                        2012                        2011
                                                                      ----                          ----                        ----                        ----

    Gross profit on a GAAP
     basis                                                         $39,250 30.6%                 $73,366 67.1%              $291,375 59.3%              $287,651 68.0%
    Share-based compensation
     expense                                                           605                           424                       2,130                       1,505
    Amortization of
     intangibles                                                     2,070                         2,075                       8,279                       8,081
    Intangibles impairment
     related to PVAD and IVAD                                       50,242                             -                      50,242                           -
    Levitronix Medical FMV
     inventory adjustments                                               0                         2,195                         528                       3,582
    Gross profit on a Non-
     GAAP basis                                                    $92,167 71.7%                 $78,060 71.4%              $352,554 71.7%              $300,819 71.2%
                                                                   =======                       =======                    ========                    ========

The following table reconciles the specific items excluded from GAAP operating expenses from continuing operations in the calculation of non-GAAP operating expenses from continuing operations for the periods shown below:

                                                                              THORATEC CORPORATION
                                                              Reconciliation of GAAP to Non-GAAP Operating Expenses
                                                                                   (Unaudited)
                                                                                 (in thousands)

                                        Three Months Ended                            Twelve Months Ended
                                        ------------------                           -------------------
                                           December 29,                               December 31, 2011             December 29, 2012           December 31,
                                                              2012                                                                                               2011
                                                              ----                                                                                               ----

     Operating expenses on a GAAP basis                    $64,135                                       $48,288                      $215,713               $173,491
    Share-based compensation expense:
    -Selling, general and
     administrative                                         (3,406)                                       (2,810)                      (13,235)               (10,387)
    - Research and development                              (1,649)                                       (1,098)                       (6,327)                (4,171)
    Amortization of purchased
     intangibles
    -Selling, general and
     administrative                                           (697)                                         (700)                       (2,486)                (1,802)
    - Research and development                                 (83)                                            -                          (329)                     -
    Acquisition related transaction
     costs                                                    (705)                                         (724)                         (705)                (3,583)
     Operating expenses on a Non-GAAP
      basis                                                $57,595                                       $42,956                      $192,631               $153,548
                                                           =======                                       =======                      ========               ========

The following table reconciles the specific items excluded from GAAP other income and expense from continuing operations in the calculation of non-GAAP other income and expense from continuing operations for the periods shown below:

                                                                     THORATEC CORPORATION
                                                  Reconciliation of GAAP to Non-GAAP Other Income and Expense
                                                                          (Unaudited)
                                                                        (in thousands)

                          Three Months Ended                     Twelve Months Ended
                          ------------------                    -------------------
                             December 29,                        December 31, 2011                            December 29, 2012        December 31,
                                             2012                                                                                                      2011
                                             ----                                                                                                      ----

     Other income
      (expense) on a GAAP
      basis                                  $257                                      $834                                     $1,655              $(2,289)
    Impact of ASC 470-20
     (Debt)                                     -                                         -                                          -                3,127
     Other income on a
      Non-GAAP basis                         $257                                      $834                                     $1,655                 $838
                                             ====                                      ====                                     ======                 ====

The following table reconciles the GAAP tax expense (benefit) adjusted for the tax effect of the adjustments from GAAP net income from continuing operations to non-GAAP net income from continuing operations:

                  THORATEC CORPORATION
    Reconciliation of GAAP to Non-GAAP Tax Expense
                      (Unaudited)
                     (in thousands)

                                                   Three Months Ended              Twelve Months Ended
                                                   ------------------             -------------------
                                                      December 29,                    December 31,               December 29,               December 31,
                                                                      2012                           2011                       2012                       2011
                                                                      ----                           ----                       ----                       ----

    Tax expense (benefit) on a
     GAAP basis                                                   $(10,242) 41.6%                 $10,567  40.8%             $21,154  27.4%             $39,296  35.1%
    Share-based compensation
     expense                                                         2,394                          1,681                      8,666                      5,765
    Amortization of purchased
     intangibles                                                       898                          1,110                      3,929                      3,953
    Intangibles impairment
     related to PVAD and IVAD                                       19,269                              -                     19,269                          -
    Impact of adoption of ASC
     470-20 (Debt)                                                       -                              -                          -                      1,251
    Excess compensation
     limitations and other                                            (218)                          (150)                      (995)                      (918)
    Levitronix Medical FMV
     inventory adjustments                                            (100)                           879                        111                      1,433
    Acquisition related
     transaction costs                                                 270                           (854)                       270                        289
    Tax expense on a Non-GAAP
     basis                                                         $12,271  35.2%                 $13,233  36.8%             $52,404  32.4%             $51,069  34.5%
                                                                   =======                        =======                    =======                    =======


The following table reconciles 2013 guidance on a GAAP basis and non-GAAP basis.

                                                   THORATEC CORPORATION
                               Reconciliation of GAAP to Non-GAAP  Forward-Looking Guidance
                                                       (Unaudited)
                                        (in thousands, except for per share data)

    Gross margin                                                   For the Fiscal Year
                                                                        Ended 2013
                                                                  --------------------

    Gross margin on a GAAP
     basis                                                                        68.5%
    Amortization of purchased
     intangibles                                                                   1.5%
    Share-based compensation
     expense                                                                       0.5%
    Gross margin on a Non-
     GAAP basis                                                                   70.5%
                                                                                  ====

    Net income per diluted             For the Fiscal Year Ended
     share reconciliation                          2013
                                      --------------------------
                                                 From                                        To
                                                 ----                                       ---

    Net income from continuing
     operations per diluted
     share on a GAAP basis                                 $1.32                                 $1.42
    Share-based compensation
     expense                                                0.32                                  0.31
    Amortization of purchased
     intangibles                                            0.13                                  0.13
    Tax rate effect on Non-
     GAAP earnings                                         (0.01)                                    -
    Net income from continuing
     operations per diluted
     share on a Non-GAAP
     basis                                                 $1.76                                 $1.86
                                                           =====                                 =====

    Shares used in calculation
     of net income per diluted
     share - GAAP and Non-
     GAAP                                                 59,000                                59,000

About Thoratec

Thoratec is the world leader in mechanical circulatory support with the broadest product portfolio to treat the full range of clinical needs for patients suffering from advanced heart failure. The company’s products include the HeartMate LVAS and Thoratec VAD, with more than 20,000 devices implanted in patients suffering from heart failure. Thoratec also manufactures and markets the CentriMag and PediMag / PediVAS product lines. Thoratec is headquartered in Pleasanton, California. For more information, visit www.thoratec.com.

Thoratec, the Thoratec logo, HeartMate and HeartMate II are registered trademarks of Thoratec Corporation and HeartMate PHP and IVAD are trademarks of Thoratec Corporation. CentriMag and PediMag are registered trademarks of Thoratec LLC, and PediVAS is a registered trademark of Thoratec Switzerland GmbH.

Many of the preceding paragraphs, particularly but not exclusively those addressing guidance for fiscal 2012 financial results or future performance contain forward-looking statements within the meaning of Sections 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements can be identified by the words, “believes,” “views,” “expects,” “plans,” “projects,” “hopes,” “could,” “will,” “estimates,” and other similar words. Actual results, events or performance could differ materially from these forward-looking statements based on a variety of factors, many of which are beyond Thoratec’s control. Therefore, readers are cautioned not to put undue reliance on these statements. Investors are cautioned that all such statements involve risks and uncertainties, including risks related to regulatory approvals, the development of new products, including development and clinical trial timing, and new markets including Destination Therapy, the growth of existing markets for our products, customer and physician acceptance of Thoratec products, changes in the mix of existing markets for our products and related gross margin for such product sales, the ability to improve financial performance, the effects of FDA regulatory requirements, our ability to address issues raised by FDA inspections adequately and on a timely basis without a resulting recall of products or interruption of manufacturing or shipment of products, the effects of healthcare reimbursement and coverage policies, the effects of seasonality on Thoratec product sales, the effects of competition and the effects of any merger, acquisition and divestiture related activities. Forward-looking statements contained in this press release should be considered in light these factors and those factors discussed from time to time in Thoratec’s public reports filed with the Securities and Exchange Commission, such as those discussed under the heading, “Risk Factors,” in Thoratec’s most recent annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and other SEC filings. These forward-looking statements speak only as of the date hereof. Thoratec undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events.

SOURCE Thoratec Corporation


Source: PR Newswire