| Operations and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
| Jan. 03, 2015 |
| Operations and Summary of Significant Accounting Policies | |
| Basis of Presentation | Basis of Presentation |
| Thoratec Corporation (referred to in these Notes as "we," "our," "us," or the "Company"), is headquartered in Pleasanton, California and is a manufacturer of mechanical circulatory support products for use by patients with heart failure. Thoratec develops, manufactures and markets products that are used by physicians and hospitals for cardiac assist applications. Thoratec conducts business both domestically and internationally. |
| We report on a 52 or 53 week fiscal year, which ends on the Saturday closest to December 31. The fiscal year ended December 29, 2012, ("Fiscal 2012") included 52 weeks, the fiscal year ended December 28, 2013, ("Fiscal 2013") included 52 weeks and the fiscal year ended January 3, 2015, ("Fiscal 2014") included 53 weeks. Our consolidated financial statements include our wholly owned subsidiaries: Thoratec LLC Continuum Services, Inc., Apica Cardiovascular Technologies, Inc., and APK Advanced Medical Technologies, Inc. based in the U.S., Thoratec Europe Limited, based in the United Kingdom, Thoratec Switzerland GmbH, based in Switzerland, and Apica Cardiovascular Limited, based in Ireland. All intercompany transactions and balances have been eliminated in consolidation. |
| The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of net sales and expenses during the reported periods. Significant items subject to management's estimates include revenue recognition, the useful lives of property and equipment, allowance for doubtful accounts, valuation allowance for deferred tax assets, stock-based compensation, income tax uncertainties, valuation of goodwill and intangible assets, warranty accrual and contingent consideration. Actual results could differ materially from those estimates and assumptions. |
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| Balance Sheet Reclassification | Balance Sheet Reclassification |
| We have reclassified the warranty and related accrual balance from other accrued liabilities in the prior year consolidated balance sheet to conform to the current year presentation. |
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| Cash and Cash Equivalents | Cash and Cash Equivalents |
| Cash equivalents are defined as short-term, highly liquid investments with original maturities of 90 days or less at the date of purchase, consisting of money market funds and/or municipal bonds. The fair value of these investments is classified at Level 1 or Level 2. Refer to Note 3 for further discussion. |
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| Investments | Investments |
| Our available for sale investments consist primarily of asset-backed securities, municipal bonds, corporate bonds, commercial paper, U. S. government agency securities, and auction rate securities. These are reported as short-term available-for-sale investments on the consolidated balance sheets, with the exception of auction rate securities, which are classified as long-term available-for-sale investments. |
| Our investments in available-for-sale securities are reported at fair value. Unrealized gains and losses, net of tax, related to changes in the fair value of securities are recognized in accumulated other comprehensive loss on our consolidated balance sheets. Changes in the fair value of available-for-sale securities impact the net income only when such securities are sold or an other-than-temporary impairment is recognized. Realized gains and losses on the sale of securities are determined by specific identification of each security's cost basis. We regularly review our investment portfolio to determine if any security is other-than-temporarily impaired, which would require us to record an impairment charge in the period any such determination is made. In making this judgment, we evaluate, among other things, the duration and extent to which the fair value of a security is less than its cost, the financial condition of the issuer and any changes thereto, and our intent to sell, or whether it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. Our assessment on whether a security is other-than-temporarily impaired could change in the future due to new developments or changes in assumptions related to any particular security. |
| Investments in privately held companies are included in Other long-term assets on our consolidated balance sheets and are accounted for using the cost method. We monitor these investments for impairments and make reductions in carrying values if we determine that an impairment charge is required based primarily on the financial condition and near-term prospects of these companies. In 2014, we invested $5.9 million in certain privately-held entities, which are included in "Other long-term assets" on our consolidated balance sheet. No impairment was reported for these investments in 2014. |
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| Fair Value Measurement | Fair Value Measurement |
| The carrying amounts of certain of our financial instruments including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value due to their short maturities. Short-term investments are comprised of available-for-sale securities, which are carried at fair value. Other non-current assets, which include auction rate securities, deferred compensation plan assets, and marketable equity securities are carried at fair value. Foreign exchange contracts are stated at fair value based on prevailing financial market information. |
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| Contingent Consideration | Contingent Consideration |
| In connection with certain acquisitions, we may be required to pay future consideration that is contingent upon the achievement of specified development, regulatory approval or commercial sales-based milestone events. We record contingent consideration resulting from a business combination at its fair value on the acquisition date. At the end of each reporting period, we assess the valuation of the contingent consideration and record re-measurement adjustments as operating expenses in our consolidated statements of operations. |
| Increases or decreases in fair value of the contingent consideration liabilities can result from updates to assumptions such as the expected timing or probability of achieving the specified milestones, changes in projected revenues or changes in discount rates. Significant judgment is employed in determining these assumptions as of the acquisition date and for each subsequent period. Updates to assumptions could have a significant impact on our results of operations in any given period. Actual results may differ from estimates. Refer to Note 2 for further information. |
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| Concentration of Credit Risks and Certain Other Risks | Concentration of Credit Risks and Certain Other Risks |
| We sell our products primarily to large hospitals and distributors. Credit is extended to our customers; however credit risks are mitigated by our credit valuation process and reasonably short collection terms. We generally do not require collateral or other security to support accounts receivable and maintain allowances for potential credit losses. To date, credit losses have not been significant. Uncollectible accounts, if any, are written off against the allowance when it is deemed that a customer account is uncollectible. |
| We place cash and cash equivalents in the custody of financial institutions that management believes are of high credit quality, and at times, these balances may be in excess of the amount insured by the Federal Deposit Insurance Corporation. We also have short and long-term investments in municipal bonds, variable demand notes and auction rate securities, backed by U.S. Government or private insurers, which can be subject to certain credit risks. However, we mitigate the risks by investing in high-grade instruments, limiting our exposure to any one issuer, and monitoring the ongoing creditworthiness of the financial institutions and issuers. |
| We operate internationally and have significant operations and assets in the United Kingdom and Switzerland. We remain exposed to changes in law (including changes that result from international treaties and accords) that could adversely affect our results, such as increases in taxes or government fees; price controls; changes in health, environmental and medical regulations or other laws that increase our cost of compliance or reduce or delay available business opportunities. We are subject to certain risks and uncertainties and believe that changes in any of the following areas could have a material adverse effect on future financial position or results of operations: the ability to receive and maintain U.S. Food and Drug Administration ("FDA") and foreign regulatory authorities approvals to manufacture, market and sell our products; our ability to adequately and timely address issues raised by FDA inspections; the ability to direct and manage current and future growth and physician acceptance of our current or future products; our reliance on specialized suppliers; the ability to manufacture products on an efficient and timely basis and at a reasonable cost and in sufficient volume, including the ability to obtain timely deliveries of parts from suppliers; our ability to identify and correct quality issues in a timely manner and at a reasonable cost; new product development and introduction, including FDA approval and market receptiveness; the ability to protect our proprietary technologies or an infringement by us of others' patents; the number of heart transplants conducted; our dependence upon distributors and any changes made to our method of distribution; competition from other products; worldwide demand for circulatory support and graft products and the management of risks inherent in selling in foreign countries; foreign currency fluctuations; the long and variable sales and deployment cycle of our mechanical circulatory support ("MCS") products; the willingness of third party payors to cover and provide appropriate levels of reimbursement for our products; the ability to realize the full value of our intangible assets; product liability or other claims; the ability to attract and retain talented employees; stock price volatility due to general economic conditions or future issuances and sales of our stock; the integration of any current and future acquisitions of companies or technologies; the occurrence of catastrophic disasters; the ability to maintain profitability; claims relating to the handling, storage or disposal of hazardous chemicals and biomaterials; changes in legal and accounting regulations and standards; changes in tax regulations; and limitations on potential acquisitions and price of our common stock. |
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| Inventories | Inventories |
| Inventories are valued at the lower of cost (first-in, first-out) or market. Products may become obsolete due to market or economic conditions, technology changes, new product introductions or changes in strategic direction and may require estimates that include uncertain elements. Based on management's estimate, adjustments to reduce the value of inventory to its net realizable value, if required, are made for estimated excess or obsolete inventory or lower of cost of market. |
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| Property, Plant, and Equipment | Property, Plant, and Equipment |
| Property, plant, and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method based on estimated useful lives of two to 30 years. Leasehold improvements are amortized over the lesser of the useful life or the remaining term of the lease. Property, plant, and equipment also include certain medical devices rented to customers. Depreciation expense of all rental equipment included in our rental program is recognized ratably over two to three years and is recorded in cost of product sales. |
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| Valuation of Long-Lived Assets and Purchased Intangible Assets | Valuation of Long-Lived Assets and Intangible Assets |
| We evaluate the carrying value of long-lived assets, including intangible assets (subject to amortization), whenever events, changes in business circumstances or our planned use of long-lived assets indicate that their carrying amounts may not be fully recoverable or that their useful lives are no longer appropriate. If these facts and circumstances exist, we assess for recovery by comparing the carrying values of long-lived assets with their future undiscounted net cash flows. If the comparison indicates that impairment exists, long-lived assets are written down to their respective fair value based on discounted cash flows. Significant management judgment is required in the forecast of future operating results that is used in the preparation of expected undiscounted cash flows. In 2012, we recorded an impairment charge of $50.2 million related to intangibles associated with the PVAD and IVAD product lines. Additionally, in the fourth quarter of 2014, we recorded an impairment charge of $4.5 million related to the Apica ASC intangible asset. No impairment indicators were present for other intangible assets (subject to amortization) in 2014, 2013 and 2012. Refer to Note 6 for further discussion. |
| We also evaluate the carrying value of intangible assets (not subject to amortization) related to in-process research and development ("IPR&D") assets, which are considered to be indefinite-lived until the completion or abandonment of the associated research and development efforts. Accordingly, amortization of the IPR&D assets will not occur until the product reaches commercialization. During the period the assets are considered indefinite-lived, they will be tested for impairment on an annual basis in the fourth quarter, as well as between annual tests if we become aware of any events occurring or changes in circumstances that would indicate that the fair values of the IPR&D assets are less than their carrying amounts. If and when development is complete, which generally occurs when regulatory approval to market the product is obtained, the associated IPR&D assets would be deemed definite-lived and would then be amortized based on their estimated useful lives at that point in time. If the related project is terminated or abandoned, we may have an impairment related to the IPR&D asset, calculated as the excess of their carrying value over fair value. In the fourth quarter of 2014, we recorded an impairment charge of $7.7 million related to the DuraHeart II IPR&D—Refer to Note 6 for further discussion. No impairment of IPR&D assets was identified in our annual assessment in the fourth quarter of fiscal 2013. There were no IPR&D assets recorded in our consolidated financial statements in fiscal 2012. |
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| Goodwill | Goodwill |
| We test goodwill for impairment on an annual basis in the fourth quarter of each fiscal year or more frequently if we believe indicators of impairment exist. The performance of the test involves a two-step process. The first step requires comparing the fair value of the reporting unit to its net book value, including goodwill. A potential impairment exists if the fair value of the reporting unit is lower than its net book value. The second step of the process is only performed if a potential impairment exists, and it involves comparing the aggregate fair value of the reporting unit's net assets other than goodwill to the fair value of the reporting unit as a whole. Goodwill is considered impaired, and an impairment charge is recorded, if the excess of the fair value of the reporting unit over the fair value of the net assets is less than the carrying value of goodwill. We found no impairment as a result of our fiscal 2014, 2013, and 2012 annual impairment reviews, as the fair value of our reporting unit was in excess of the carrying value. |
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| Deferred Compensation Plan | Deferred Compensation Plan |
| We established a non-qualified, unfunded deferred compensation plan for certain management employees and our Board of Directors. Amounts deferred and contributed under the deferred compensation plan are credited or charged with the performance of investment options offered under the plan as elected by the participants. The liability for compensation deferred under this plan is included in "Other long-term liabilities" on our consolidated balance sheets. We manage the risk of changes in the fair value of the liability for deferred compensation by electing to match the liability under the plan with an investment that offsets a substantial portion of our exposure. The investments associated with the deferred compensation plan are included in "Other long-term assets" on our consolidated balance sheets at the cash surrender value of our corporate owned life insurance policies and the fair value of the mutual fund investments. Changes in the cash surrender value of our corporate owned life insurance policies and the fair value of mutual fund investments are included in our consolidated statements of operations for all periods presented. |
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| Revenue Recognition and Accounts Receivable | Revenue Recognition and Accounts Receivable |
| We recognize revenue from product sales to customers when persuasive evidence of an arrangement exists, the product has been delivered or service has been performed, the selling price is fixed or determinable, collection is reasonably assured, and there are no further obligations to customers. Delivery of the product is considered to have occurred generally when shipped. Sales from products are not subject to rights of return and, historically, actual sales returns have not been significant. We sell products through our direct sales force and through distributors. Sales through distributors are recognized as revenue upon sale to the distributor as these sales are considered to be final and no right of return or price protection exists. We recognize sales of certain products to first-time customers when it has been determined that the customer has the ability to use the products. |
| Accounts receivable are recorded at the invoiced amount and do not bear interest. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to pay amounts due. The allowance for doubtful accounts is management's best estimate of the amount of probable credit losses in existing accounts receivable. We determine the allowance based on specific identification and historical write-off experience. Past due balances are reviewed individually for collectability. Account balances are charged off against the allowance when we believe it is probable the receivable will not be recovered. |
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| Product Warranty | Product Warranty |
| The sales of our products generally include a limited one-year warranty on product quality. Warranty and related costs are accrued for based on our best estimates when management determines that it is probable a charge or liability has been incurred and the amount of loss can be reasonably estimated. For new product introductions in which we may not have any historical experience, we make our estimates for warranty claims based on a combination of historical experience of other similar products sold and qualitative and quantitative information. While we believe that historical experience provides a reliable basis for estimating such warranty cost, unforeseen quality issues or component failure rates could result in future costs in excess of such estimates, or alternatively, improved quality and reliability in our products could result in actual expenses that are below those currently estimated. |
| The table below represents the changes in the warranty provision included in "Warranty and related accrual" on our consolidated balance sheets. The change in estimates was not significant for each of the fiscal years 2013 and 2012. |
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| | 2014 | | 2013 | | 2012 | |
| | (in thousands) | |
| Balance, beginning of the fiscal year | | $ | 9,899 | | $ | 2,212 | | $ | 2,452 | |
| Additions | | | 13,494 | | | 10,464 | | | 1,492 | |
| Change in estimate | | | (907 | ) | | — | | | — | |
| Settlements | | | (11,847 | ) | | (2,777 | ) | | (1,732 | ) |
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| Balance, end of the fiscal year | | $ | 10,639 | | $ | 9,899 | | $ | 2,212 | |
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| Warranty activity in fiscal 2014 and 2013 includes new warranty additions and settlements related to sales of our HeartMate II Pocket Controller, which was introduced in 2013. Additionally, in September 2014 we made available a new version of the Pocket Controller to customers who purchased a previous version. We recorded an incremental $10.7 million expense based on the number of units which we estimated will be exchanged. |
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| Advertising | Advertising |
| All advertising costs are expensed as incurred and are included in selling, general and administrative in the consolidated statements of operations. Advertising expenses were $5.3 million, $5.8 million, and $5.9 million for fiscal 2014, 2013, and 2012, respectively. |
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| Research and Development Expense | Research and Development Expense |
| Research and development costs are charged to expense when incurred. Major components of research and development expenses consist of personnel costs, including salaries and benefits, and regulatory and clinical costs associated with our compliance with FDA regulations. Research and development costs are largely project driven, and the level of spending depends on the level of project activity planned and subsequently approved and conducted. |
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| Share-Based Compensation | Share-Based Compensation |
| We account for share-based compensation costs in accordance with the accounting standards for share-based compensation, which require that all share-based payments to employees be recognized in the statements of operations based on their fair values. |
| • | The fair value of stock options ("options") on the grant date is estimated using the Black-Scholes option-pricing model using the multiple-option approach. The Black-Scholes option pricing model requires the use of highly subjective and complex assumptions, including the option's expected term and the price volatility of the underlying stock, to determine the fair value of award. We recognize the expense associated with options on an accelerated attribution method over the requisite service period. | | | | | | | | | |
| • | The fair value of Restricted Stock Units ("RSUs") is based on the stock price on the grant date using a single-award approach. The RSUs are subject to a service vesting condition and are recognized on a straight-line basis over the requisite service period. Certain RSUs are accounted for as liability awards and are re-measured at fair value at the end of each reporting period, with the changes in fair value recorded to stock-based compensation expense in the period in which the change occurs. | | | | | | | | | |
| • | The fair value of Performance Share Units ("PSUs") with service and performance conditions is based on the estimated number of PSUs anticipated to be received by the recipient at the end of the performance period. Expense is recognized when it is probable that the performance condition will be met using the accelerated attribution method over the requisite service period. | | | | | | | | | |
| • | The fair value of PSUs with service and market conditions is estimated using a Monte Carlo simulation model applying multiple awards approach. Expense is recognized using the accelerated attribution method over the requisite service period. | | | | | | | | | |
| We recognize share-based compensation expense for the portion of the equity award that is expected to vest over the requisite service period for those awards. We develop an estimate of the number of share-based awards which will ultimately vest, primarily based on historical experience. The estimated forfeiture rate is reassessed periodically throughout the requisite service period. Such estimates are revised if they differ materially from actual forfeitures. As required, the forfeiture estimates will be adjusted to reflect actual forfeitures when an award vests. For the award types discussed above, if an employee terminates employment prior to being vested in their award, then the award is forfeited. |
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| Income Taxes | Income Taxes |
| Income taxes are recorded under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the consolidated financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. |
| We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available positive and negative evidence including future taxable income and ongoing prudent and feasible tax planning strategies. In the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of our net recorded amount, an adjustment to the valuation allowance for the deferred tax asset would increase net income in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, an adjustment to the valuation allowance for the deferred tax asset would be charged to net income in the period such determination was made. |
| We record uncertain tax positions in accordance with accounting standards on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (2) those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is greater than 50% likely to be realized upon ultimate settlement with the related tax authority. |
| We recognize interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying consolidated statements of operations. Accrued interest and penalties are included within the related tax liability line on our consolidated balance sheets. |
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| Other Comprehensive Income (Loss) | Other Comprehensive Income (Loss) |
| Other comprehensive income (loss) includes net income, unrealized gains and losses on available-for-sale investments and foreign currency translation adjustments. |
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| Foreign Currency Translation | Foreign Currency Translation |
| All assets and liabilities of our non-U.S. operations are translated into U.S. dollars at the period-end exchange rates and the resulting translation adjustments are included in other comprehensive income. The functional currencies of our non-U.S. operations are generally designated in their respective local currencies. The period-end translation of the non-functional currency assets and liabilities at the period-end exchange rates result in foreign currency gains and losses, which are included in "interest income and other" on the consolidated statement of operations. |
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements |
| In August 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40). This ASU provides guidance to determine when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date that the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity's ability to continue as a going concern. The standard will be effective for us starting in fiscal 2017. We do not expect the adoption of this ASU to have an impact on our consolidated financial statements. |
| In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which provides guidance for revenue recognition. This ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets. The guidance in this ASU supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance. This ASU also supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition-Construction-Type and Production-Type Contracts. The standard will be effective for us starting in fiscal 2017. We have not yet evaluated the impact of the adoption of this ASU on our consolidated financial statements. |
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