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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

[X]

Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the quarterly period ended September 28, 2002

or

[   ]

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

for the transition period from __________ to ___________

COMMISSION FILE NUMBER: 1-8145

THORATEC CORPORATION

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

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

     As of November 11, 2002, registrant had 55,029,573 shares of common stock outstanding.

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THORATEC CORPORATION AND SUBSIDIARIES
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Part I. Financial Information				3
	Item 1. Condensed Consolidated Financial Statements (unaudited)
		Condensed Consolidated Balance Sheets as of September 28, 2002 and December 29, 2001		3
		Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 28, 2002 and September 29, 2001		4
		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 28, 2002 and September 29, 2001		5
		Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 28, 2002 and September 29, 2001		6
		Notes to Condensed Consolidated Financial Statements		7
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			15
	Item 3. Quantitative and Qualitative Disclosure of Market Risk			21
	Item 4. Controls and Procedures			21
Part II. Other Information				22
	Item 4. Submission of Matters to a Vote of Security Shareholders			22
	Item 6. Exhibits and Reports on Form 8-K			22
Signatures				23
Certification of Chief Executive Officer				24
Certification of Chief Financial Officer				25
Exhibits				26

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PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THORATEC CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)
(in thousands)

See notes to condensed consolidated financial statements.

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THORATEC CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

See notes to condensed consolidated financial statements.

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THORATEC CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)
(in thousands)

See notes to condensed consolidated financial statements.

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THORATEC CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)
(in thousands)

See notes to condensed consolidated financial statements.

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THORATEC CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of Presentation

     The interim condensed consolidated financial statements of Thoratec Corporation, referred to as “we”, “our”,“Thoratec”, or our “Company” have been prepared and presented in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission, or the SEC, without audit and, in our opinion, reflect all adjustments necessary (consisting only of normal recurring adjustments) to present fairly our financial position at September 28, 2002 and December 29, 2001, our results of operations for the three and nine-month periods ended September 28, 2002 and September 29, 2001 and cash flows for the nine-month periods ended September 28, 2002 and September 29, 2001. Certain information and footnote disclosures normally included in our annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The accompanying financial statements should be read in conjunction with our fiscal 2001 consolidated financial statements filed with the SEC in our Annual Report on Form 10-K.

     Our merger with Thermo Cardiosystems Inc., or TCA, was completed on February 14, 2001, which we refer to as the Merger. Because the Merger was treated as a reverse acquisition, the 2001 condensed consolidated financial information presented herein includes the financial results of TCA for the entire three and nine-month periods ended September 29, 2001 and the financial results of Thoratec for the post-merger period from February 14, 2001 through September 29, 2001. The operating results for any interim period are not necessarily indicative of the results that may be expected for any future period.

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

     We have made certain reclassifications of 2001 amounts to conform to the current presentation.

2. Merger of Thoratec and TCA

     As a result of the Merger, $76.9 million relating to in-process research and development, or IPR&D, was expensed in the first quarter of 2001. The write-off of IPR&D related to projects that were in development, had not reached technological feasibility, had no alternative future use and for which successful development was uncertain. Current estimates and assumptions related to the valuation of IPR&D remain materially consistent with our initial estimates performed at the time of the Merger.

     The fair value of Thoratec’s net assets have been estimated for purposes of allocating the purchase price. The purchase price and allocation of purchase price as of September 28, 2002 are summarized as follows (in thousands):

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3. New Accounting Pronouncements

     As of the beginning of fiscal year 2002, we adopted Statement of Financial Accounting Standards, or SFAS, No. 142, “Goodwill and Other Intangible Assets”, which addresses the financial accounting and reporting standards for the acquisition of intangible assets outside of a business combination and for goodwill and other intangible assets subsequent to their acquisition. During the second quarter of 2002, we completed our transitional goodwill impairment test as of December 30, 2001 and determined that no adjustment to the carrying value of goodwill was needed. On an ongoing basis, absent any impairment indicators, we expect to perform a goodwill impairment test as of the end of the third quarter during the fourth quarter of each year.

     In accordance with SFAS No. 142, we discontinued the amortization of goodwill effective as of the beginning of fiscal year 2002. In addition, we reassessed the useful lives of our identifiable intangible assets and determined that the lives were appropriate.

     The following table presents the impact of adopting SFAS No. 142 on net loss and net loss per share had the standard been in effect for the three and nine months ended September 29, 2001:

     In June 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs, including legal obligations. We are required to adopt SFAS No. 143 at the beginning of fiscal year 2003. We are currently evaluating the impact of the adoption of SFAS No. 143.

     In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which significantly changed the criteria required for classifying an asset as held-for-sale. We adopted SFAS No. 144 at the beginning of fiscal year 2002. The adoption of SFAS No. 144 did not have any impact on our financial position, results of operations or cash flows.

     In April 2002, the FASB issued SFAS No. 145, which, among other things, changed the presentation of gains and losses on the extinguishment of debt. Any gain or loss on extinguishment of debt that does not meet the criteria in APB Opinion 30, “Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions”, shall be included in operating earnings and not presented separately as an extraordinary item. We will adopt SFAS No. 145 at the beginning of fiscal year 2003. Upon adoption, we will reclassify the extraordinary loss incurred this year of $0.5 million to interest and other income-net as of the date of adoption.

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

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4. Inventories

     Inventories consist of the following (in thousands):

5. Property, Plant and Equipment

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

6. Goodwill and Other Intangible Assets

     The change in the carrying amount of goodwill, which is only attributable to our Cardiovascular business segment, for the nine-month period ended September 28, 2002 was as follows (in thousands):

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

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     As of the beginning of fiscal 2002, the purchased intangible asset associated with the assembled workforce in the amount of $1.3 million, net of accumulated amortization of $0.4 million and taxes of $0.9 million, was reclassified to goodwill.

     Amortization expense related to identifiable intangible assets for each of the three and nine-month periods ended September 28, 2002 and September 29, 2001 was $3.1 million, $9.3 million, $3.3 million, and $8.2 million, respectively. Estimated amortization expense for the remainder of fiscal 2002 is $3.1 million and $12.4 million for each of the five succeeding years. The purchased intangible assets have estimated useful lives of eight to twenty years.

7. Subordinated Convertible Debentures

     On March 11, 2002 we completed the redemption of our outstanding subordinated convertible debentures at par plus accrued interest using restricted cash and cash equivalents of approximately $45.9 million and cash of approximately $9.8 million. An extraordinary loss in the amount of $0.3 million net of a tax benefit of $0.2 million was recorded on the date of the redemption related to the write-off of the capitalized debt issuance costs. Upon the closing of the Merger with TCA in February 2001, $45.0 million in cash and cash equivalents was pledged as collateral for a letter of credit guarantee to Thermo Electron related to Thermo Electron’s guarantee of our subordinated debentures. As a result of the redemption, the letter of credit guarantee to Thermo Electron was extinguished.

8. Common and Preferred Stock

     We filed a registration statement on Form S-3 with the SEC to register 1,055,000 newly issued shares of our common stock and to register for resale 5,945,000 shares of our common stock held by selling shareholders, of which 5,825,000 shares were held by Thermo Electron. This registration statement became effective on February 12, 2002 and all shares registered were sold on February 15, 2002. We received $15.4 million, net of underwriting fees and discounts and other issuance costs, from the sale of the 1,055,000 newly issued shares. In addition, the underwriters exercised a 30-day option to purchase from Thermo Electron 1,050,000 additional shares of our common stock to cover any over-allotments. We received no proceeds from the sale of shares by selling shareholders or from the sale of the over-allotment shares.

     We filed another registration statement on Form S-3 with the SEC to register for resale 7,609,719 shares of our common stock held by Thermo Electron. This registration statement became effective on August 14, 2002. We will not receive any proceeds from the sale of any of these shares. As of September 28, 2002 Thermo Electron owned approximately 14% of our total outstanding common stock.

     On April 12, 2001 we announced that our Board of Directors authorized a stock repurchase program under which our common stock, with a market value up to $20 million, may be acquired in the open market or in privately negotiated transactions. During the third quarter of 2002, we completed our stock repurchase program. The number of shares purchased and the timing of purchases were based on several conditions, including the price of our common stock, general market conditions and other factors. During the nine months ended September 28, 2002, we repurchased 2,274,900 shares of our common stock on the open market for $18.3 million. From the inception of the program through September 28, 2002, we repurchased 2,467,600 shares of our common stock for $20.0 million. All repurchased common stock has been retired.

     On May 2, 2002, we adopted a shareholder rights plan, which we call the Rights Plan. Under the Rights Plan, we distributed one purchase right for each share of common stock outstanding at the close of business on May 17, 2002. If a person or group acquires 15% or more of our common stock in a transaction not pre-approved by our Board of Directors, each right will entitle its holder, other than the acquirer, to buy our common stock at 50% of its market value for the right’s then current exercise price (initially $70.00). In addition, if an unapproved party acquires more than 15% of our common stock, and our Company or our business is later acquired by the unapproved party or in a transaction in which all shareholders are not treated alike, shareholders with unexercised rights, other than the unapproved party, will be entitled to purchase common stock of the merger party or asset buyer with a value of twice the exercise price of the rights. Each right also becomes exercisable for one one-thousandth of a share of our Series RP preferred stock at the right’s then current exercise price ten days after an unapproved third party makes, or announces an intention to make, a tender offer or exchange offer that, if completed, would result in the unapproved party acquiring 15% or more of our common stock. Our Board of Directors may redeem the rights for a nominal amount before an event that causes the rights to become exercisable. The rights will expire on May 2, 2012.

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     In connection with the Rights Plan, we designated 100,000 no par shares of Series RP preferred stock. These shares, if issued, will be entitled to receive quarterly dividends and a liquidation preference. There are no shares of Series RP preferred stock issued and outstanding and we do not anticipate issuing any shares of Series RP preferred stock except as may be required under the Rights Plan.

     On May 31, 2002, our shareholders approved an Employee Stock Purchase Plan, or the ESPP. The ESPP authorizes the issuance of up to 500,000 shares of common stock to participating employees. In addition, the ESPP provides for an annual increase of up to 250,000 shares in the total number of shares available for issuance under the ESPP on March 1 of each year. As of September 28, 2002, 689 of our employees would have been eligible to participate in the ESPP.

     The ESPP is being implemented through a series of six-month offering periods, the first of which commenced on the first trading day of November 2002. A participating employee may have up to 15% of their compensation withheld during an offering period. At the end of each offering period, the accumulated payroll deductions of each employee will be used to purchase shares at the purchase price for that offering period. The purchase price of the shares will be 85% of the lower of the fair market value of the shares on the first or the last day of that offering period.

     Because participation by employees in the ESPP will be voluntary, and is subject to certain eligibility requirements, we cannot determine the number of shares of common stock that will be purchased in the future by our employees as a group.

     In August 2002, an award of 50,000 shares of restricted stock was made to one of our executive officers under our 1997 Stock Option Plan. The stock award was valued at $328,000 and was recorded as deferred compensation to be amortized to expense over the restriction lapse period. As of September 28, 2002, none of the restrictions have lapsed for shares issued under this award.

9. Merger, Restructuring and Other Costs

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

     Merger Costs

     Merger costs recorded during the three and nine months ended September 28, 2002 consisted of executive waiver agreement expenses. Merger costs recorded during the three and nine-month periods ended September 29, 2001 consisted principally of employee severance, employee retention costs and outside consulting, accounting and legal expenses associated with the Merger.

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     The following table reflects the activity in accrued merger costs for the three and nine-month periods ended September 28, 2002 and September 29, 2001 (in thousands):

     In accordance with the executive waiver agreements, payments to the executives occurred at the one-year anniversary of the Merger, although the executives continued to be restricted from exercising some of their options and selling the related stock for an additional six months following the one-year anniversary date. The total expense related to the waiver agreements of $810,000 was amortized over the 18-month waiver period. As of September 28, 2002, the ending balance of accrued merger costs has been reclassified to prepaid expenses and other in the accompanying condensed consolidated balance sheet.

     Restructuring Costs

     From the inception of the Restructuring Plan in June 2001 through September 28, 2002, we have recorded $1.6 million of restructuring charges in accordance with EITF No. 94-3, and Staff Accounting Bulletin No. 100, “Restructuring and Impairment Charges.” These charges represent estimated employee severance costs and stock option acceleration charges. Since the announcement of the Restructuring Plan in the second quarter of 2001, we have paid approximately $0.7 million in severance payments to 39 employees. The following is a summary of our accrued restructuring costs activity for the three-month and nine-month periods ended September 28, 2002 and September 29, 2001 (in thousands):

     In addition to the employee severance costs, estimated restructuring costs includes expense related to the acceleration of stock options granted to employees who will be terminated under the Restructuring Plan. The recording of such expense is subject to the timing of employee terminations, which have remained materially consistent with our initial estimates. In the three-month period ending September 28, 2002, the estimated expense was reduced by $53,000. In the nine-month period ending September 28, 2002 and the three and nine-month periods ending September 29, 2001, $99,000, $64,000 and $64,000, respectively, of stock option acceleration expense was recorded.

Other Costs

     Other costs of $0.7 million were incurred and paid in the third quarter of 2001 related to the events of September 11, 2001.

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10. Income Taxes

     Our effective tax provision rate was 40% for both the three and nine-month periods ended September 28, 2002. For the three and nine-month periods ended September 29, 2001, our effective tax benefit rate was 25% and 3%, respectively. The effective tax benefit rate for 2002 differed from the statutory federal income tax rate primarily due to the impact of state income taxes. The effective tax benefit rate for 2001 differed from the statutory federal income tax rate primarily due to the nondeductible nature of expenses related to our merger with TCA, including the write-off of in-process research and development costs, the amortization of goodwill and other nondeductible merger transaction expenses.

     At September 28, 2002 and December 29, 2001, we reported a net deferred tax liability of approximately $54.0 million and $58.6 million, respectively, comprised principally of temporary differences between the financial statement and income tax bases of intangible assets.

11. Net Loss Per Share

Basic and diluted earnings (loss) per share were calculated as follows: