10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED

September 30, 2013

o 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 0-19711

The Spectranetics Corporation

(Exact name of Registrant as specified in its charter)

Delaware	84-0997049
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

9965 Federal Drive

Colorado Springs, Colorado 80921

(719) 633-8333

(Address of principal executive offices and telephone number)

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 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer x
Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x

As of October 25, 2013, there were 41,017,222 outstanding shares of Common Stock. 

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
ITEM 1.	Financial Statements
	Condensed Consolidated Balance Sheets (unaudited) as of September 30, 2013 and December 31, 2012	1
	Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and nine months ended September 30, 2013 and September 30, 2012	2
	Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2013 and September 30, 2012	3
	Notes to Condensed Consolidated Financial Statements (unaudited)	4
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	33
ITEM 4.	Controls and Procedures	33
PART II — OTHER INFORMATION
ITEM 1.	Legal Proceedings	34
ITEM 1A.	Risk Factors	34
ITEM 6.	Exhibits	34
	Signatures	35

ii

Part I—FINANCIAL INFORMATION

Item 1.       Financial Statements

THE SPECTRANETICS CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In Thousands, Except Share Amounts)

(Unaudited)

	September 30, 2013			December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	123,570		$	37,775
Trade accounts receivable, less allowance for doubtful accounts and sales returns of $522 and $589, respectively	23,928			19,945
Inventories, net	10,008			9,288
Deferred income taxes, net	869			313
Prepaid expenses and other current assets	2,898			2,506
Total current assets	161,273			69,827
Property and equipment, net	26,565			27,006
Goodwill	14,846			13,296
Other intangible assets, net	10,345			20
Other assets	610			620
Total assets	$	213,639		$	110,769
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,878		$	1,996
Accrued liabilities	15,130			16,001
Deferred revenue	1,922			2,196
Total current liabilities	18,930			20,193
Accrued liabilities, net of current portion	1,106			991
Contingent consideration, net of current portion	6,288			—
Deferred income taxes	1,057			888
Total liabilities	27,381			22,072
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $.001 par value; authorized 5,000,000 shares; none issued	—			—
Common stock, $.001 par value; authorized 60,000,000 shares; issued and outstanding 40,994,056 and 34,887,763 shares, respectively	41			35
Additional paid-in capital	281,785			183,140
Accumulated other comprehensive loss	(455		)	(618		)
Accumulated deficit	(95,113		)	(93,860		)
Total stockholders’ equity	186,258			88,697
Total liabilities and stockholders’ equity	$	213,639		$	110,769

The accompanying notes are an integral part of the condensed consolidated financial statements.

1

THE SPECTRANETICS CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2013			2012		2013			2012
Revenue	$	39,763		$	35,230	$	116,891		$	103,534
Cost of products sold	10,053			9,624		30,997			28,112
Gross profit	29,710			25,606		85,894			75,422
Operating expenses:
Selling, general and administrative	22,223			20,324		68,089			61,287
Research, development and other technology	5,664			4,181		16,320			12,134
Medical device excise tax	537			—		1,568			—
Contingent consideration	234			—		638			—
Acquisition-related intangible asset amortization	246			—		656			—
Total operating expenses	28,904			24,505		87,271			73,421
Operating income (loss)	806			1,101		(1,377		)	2,001
Other income (expense):	0
Interest (expense) income, net	(1		)	2		1			8
Foreign currency transaction gain (loss)	35			34		10			(7		)
Other income, net	—			10		8			10
Total other income	34			46		19			11
Income (loss) before income taxes	840			1,147		(1,358		)	2,012
Income tax expense (benefit)	406			242		(105		)	459
Net income (loss)	$	434		$	905	$	(1,253	)	$	1,553
Net income (loss) per share —
Basic	$	0.01		$	0.03	$	(0.03	)	$	0.05
Diluted	$	0.01		$	0.03	$	(0.03	)	$	0.04
Other comprehensive income (loss) net of tax
Foreign currency translation adjustments	220			118		$	163		$	(37	)
Comprehensive income (loss), net of tax	$	654		$	1,023	$	(1,090	)	$	1,516
Weighted average common shares outstanding —
Basic	40,837,191			34,548,777		38,210,098			34,267,597
Diluted	42,376,181			35,945,453		38,210,098			35,550,565

The accompanying notes are an integral part of the condensed consolidated financial statements.

2

THE SPECTRANETICS CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)

	Nine Months Ended   September 30,
	2013			2012
Cash flows from operating activities:
Net (loss) income	$	(1,253	)	$	1,553
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization	7,952			7,365
Stock-based compensation expense	2,839			2,283
Provision for excess and obsolete inventories	213			134
Deferred income taxes	(351		)	213
Accrued indemnification costs	—			(3,225		)
License agreement settlement	—			(3,000		)
Net change in operating assets and liabilities	(10,216		)	(5,865		)
Net cash used in operating activities	(816		)	(542		)
Cash flows from investing activities:
Capital expenditures	(2,721		)	(2,314		)
Acquisition-related payments	(6,500		)	(7,727		)
Net cash used in investing activities	(9,221		)	(10,041		)
Cash flows from financing activities:
Net proceeds from stock offering	92,034			—
Proceeds from the exercise of stock options and employee stock purchase plan	3,778			2,604
Net cash provided by financing activities	95,812			2,604
Effect of exchange rate changes on cash	20			(13		)
Net increase (decrease) in cash and cash equivalents	85,795			(7,992		)
Cash and cash equivalents at beginning of period	37,775			39,638
Cash and cash equivalents at end of period	$	123,570		$	31,646
Supplemental disclosures of cash flow information:
Cash paid for interest	$	31		$	49
Cash paid for income taxes	$	297		$	122

The accompanying notes are an integral part of the condensed consolidated financial statements.

3

THE SPECTRANETICS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 — GENERAL

The accompanying condensed consolidated financial statements include the accounts of The Spectranetics Corporation, a Delaware corporation, and its wholly-owned Dutch subsidiary, Spectranetics International, B.V., including the accounts of two wholly-owned subsidiaries of Spectranetics International, B.V., Spectranetics Deutschland GmbH and Spectranetics Austria GmbH (collectively, the “Company”). All intercompany balances and transactions have been eliminated in consolidation.

The Company develops, manufactures, markets, and distributes single-use medical devices used in minimally invasive procedures within the cardiovascular system. The Company’s Vascular Intervention products include a range of laser catheters to ablate blockages in arteries above and below the knee (peripheral atherectomy); support catheters to facilitate crossing of peripheral and coronary arterial blockages, retrograde access and guidewire retrieval devices used in the treatment of peripheral arterial blockages, including chronic total occlusions (crossing solutions); and aspiration and cardiac laser catheters to treat blockages in the heart (coronary atherectomy and thrombectomy). The Company’s Lead Management products include excimer laser sheaths and cardiac lead management accessories for the removal of pacemaker and defibrillator cardiac leads. The Company also sells, rents, and services its CVX-300^® laser systems.

The Company prepares its condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Management must make certain estimates, judgments, and assumptions based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, intangible assets and goodwill, valuation allowances and reserves for receivables, inventories, and deferred income tax assets, contingent consideration liabilities for acquisitions, stock-based compensation expense, estimated clinical trial expenses, accrued estimates for incurred but not reported claims under partially self-insured employee health benefit programs, and loss contingencies, including those related to litigation. Actual results could differ from those estimates.

The information included in the accompanying condensed consolidated interim financial statements is unaudited and should be read with the audited financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. In the opinion of management, all adjustments necessary for a fair presentation of the assets, liabilities and results of operations for the interim periods presented have been reflected herein and are of a normal, recurring nature. The results of operations for interim periods are not necessarily indicative of the results to be expected for the entire year.

The Patient Protection and Affordable Care Act of 2010 imposes a medical device excise tax on medical device manufacturers on their sales in the U.S. of certain devices beginning on January 1, 2013. The excise tax is 2.3% of the taxable base and applies to a substantial majority of the Company’s U.S. sales. For the three and nine months ended September 30, 2013, the Company incurred $0.5 million and $1.6 million of excise tax, respectively, which is recorded in the condensed consolidated statements of comprehensive income (loss) as an operating expense under the caption “Medical device excise tax.”

New significant accounting policy

Valuation of Business Combinations

The fair value of consideration, including contingent consideration, transferred in acquisitions accounted for as business combinations is first allocated to the identifiable tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. Any excess purchase consideration is allocated to goodwill. Further, for those arrangements that involve liability classified contingent consideration, the Company records on the date of acquisition a liability equal to the discounted fair value of the estimated additional consideration it may be obligated to make in the future. Liability classified contingent consideration is adjusted to its fair value each reporting period through earnings. Acquisition

4

THE SPECTRANETICS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

transaction costs are expensed as incurred. The fair value of identifiable intangible assets uses management estimates and judgments based on market participant assumptions.

Contingent consideration liabilities are remeasured to fair value each reporting period using projected revenues, discount rates, probabilities of payment and projected payment dates. Increases or decreases in the fair value of the contingent consideration liability can result from changes in the timing and amount of revenue estimates or in the timing or likelihood of achieving intellectual property milestones, and changes in discount periods and rates. Projected contingent payment amounts are discounted back to the current period using a discounted cash flow model. See Note 2 for further discussion.

The Company has considered recently issued accounting pronouncements and does not believe such pronouncements are of significance, or potential significance, to the Company.  

NOTE 2 — BUSINESS COMBINATION

On January 7, 2013, the Company acquired certain products from Upstream Peripheral Technologies Ltd. (“Upstream”). Prior to the acquisition, these products had generated no revenue. The primary reason for the acquisition was to address customer needs by extending the Company’s product offering in the area of retrograde access tools and leveraging its existing sales organization. The Company began selling these products in the U.S. in February 2013 and in Europe in March 2013. Transaction costs associated with this acquisition of approximately $0.3 million were primarily incurred in the fourth quarter of 2012.

Total consideration includes an initial $5.5 million at closing of the transaction, $1.0 million at the time of transfer of product, manufacturing, and regulatory related documentation in February 2013, and additional payments for manufacturing and intellectual property milestones and revenue-based earn-outs for 2014, 2015 and 2016 product sales, subject to an overall cap of $35.5 million.

The Company accounted for the acquisition as a business combination and recorded the assets acquired and the estimated future consideration obligations at their respective fair values as of the acquisition date. The components of the aggregate purchase price for the acquisition were as follows (in thousands):

Cash	$	6,500
Fair value of contingent consideration:
Milestone payable, current	500
Long-term contingent consideration	5,650
Total purchase price	$	12,650

The Company recorded total contingent consideration liabilities of $6.2 million. The Company used a probability-weighted approach to estimate the achievement of the intellectual property milestones and the future revenue, and a discount rate of 15%.

5

THE SPECTRANETICS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The aggregate purchase price was allocated to the net assets acquired as follows (in thousands):

	Amount assigned		Amortization period (in years)
Tangible assets (inventory and fixed assets)	$	100
Amortizable intangible assets:
Acquired core technologies	10,600		12
Non-compete agreement	400		4
Goodwill	1,550
Total purchase price	$	12,650

The acquired core technology intangible assets consist of technical processes, intellectual property and know-how with respect to the products and processes acquired, and are being amortized on a straight-line basis over their assigned estimated useful lives. The Company primarily used the discounted cash flow model approach to derive the fair value of the amortizable intangible assets. These fair value measurements are based on significant unobservable inputs, including management estimates and assumptions and, accordingly, are classified as Level 3 within the fair value hierarchy prescribed by U.S. GAAP.

The Company recorded the excess of the aggregate purchase price over the estimated fair values of the identifiable assets acquired as goodwill, which is deductible for tax purposes. Goodwill was established primarily based on revenue and cash flow projections associated with future technologies, as well as synergies expected to be gained from the integration of these products into the Company’s existing operations, and has been allocated to the Company’s operating segments based on the relative expected benefit as follows (in thousands):

	Amount allocated
U.S. Medical	$	1,240
International Medical	310
Total goodwill	$	1,550

Had the Company acquired the Upstream products at the beginning of 2012, net income would have been reduced from $0.9 million to $0.5 million for the three months ended September 30, 2012 and from $1.6 million to $0.5 million for the nine months ended September 30, 2012, respectively, considering amortization and contingent consideration expense associated with the acquisition. No revenue has been assumed for 2012 as the Upstream products were not commercially available at that time.

Contingent Consideration

As discussed above, this acquisition involves contingent consideration arrangements. From the acquisition date to September 30, 2013, the Company recorded $0.6 million of contingent consideration expense related to the passage of time (i.e. accretion) and made no changes to the underlying estimates used to calculate the initial acquisition date contingent consideration liability.

As of September 30, 2013, the Company believes that the range of future contingent consideration (undiscounted) that the Company will likely be required to make related to the manufacturing milestone, the intellectual property milestones and the revenue earn-out is between $6 million and $13 million.

6

THE SPECTRANETICS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 3 — COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS

Inventories

Inventories, net, consisted of the following (in thousands): 

	September 30, 2013		December 31, 2012
Raw materials	$	3,894	$	2,573
Work in process	2,564		1,887
Finished goods	3,550		4,828
	$	10,008	$	9,288

Property and Equipment

Property and equipment, net, consisted of the following (in thousands): 

	September 30, 2013			December 31, 2012
Equipment held for rental or loan	$	41,286		$	40,180
Manufacturing equipment and computers	23,386			22,888
Leasehold improvements	5,381			5,024
Furniture and fixtures	2,395			2,102
Building and improvements	1,276			1,276
Land	270			270
Less: accumulated depreciation and amortization	(47,429		)	(44,734		)
	$	26,565		$	27,006

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands): 

	September 30, 2013			December 31, 2012
Accrued payroll and employee-related expenses	$	8,883		$	9,951
Accrued taxes	1,156			1,003
Deferred rent	1,105			800
Accrued clinical study expense	639			671
Accrued royalties	509			528
Contingent consideration, current portion	500			—
Employee stock purchase plan liability	441			602
Accrued legal costs	307			489
Other accrued expenses	2,696			2,948
Less: long-term portion	(1,106		)	(991		)
Accrued liabilities: current portion	$	15,130		$	16,001

7

THE SPECTRANETICS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 4 — GOODWILL AND INTANGIBLE ASSETS

The change in the carrying amount of goodwill by reporting unit for the nine months ended September 30, 2013 was as follows (in thousands):

	U.S. Medical		International Medical		Total
Balance as of December 31, 2012	$	6,925	$	6,371	$	13,296
Additional goodwill (Note 2)	1,240		310		1,550
Balance as of September 30, 2013	$	8,165	$	6,681	$	14,846

Acquired intangible assets consisted of the following (in thousands):

	September 30, 2013			December 31, 2012
Acquired core technologies (Note 2)	$	10,600		$	—
Non-compete agreement (Note 2)	400			—
Patents	4,273			4,273
Less: accumulated amortization	(4,928		)	(4,253		)
	$	10,345		$	20

The Company evaluates goodwill for impairment at least annually and whenever events or circumstances indicate the carrying amount of the asset may not be recoverable. There have been no events or circumstances since the last analysis as of December 31, 2012 to indicate that the goodwill may not be recoverable.

NOTE 5 — COMMON STOCK OFFERING

On May 1, 2013, the Company completed an offering of 5,462,500 shares of its common stock at a public offering price of $18.00 per share minus the underwriters’ discount of $1.08 per share. The Company received net proceeds of approximately $92.0 million, after deducting underwriting discounts and commissions and offering expenses (approximately $0.4 million) paid by the Company.

NOTE 6 — STOCK-BASED COMPENSATION

The Company maintains stock option plans that provide for the grant of incentive stock options, nonqualified stock options, restricted stock awards, restricted stock units, and stock appreciation rights. The plans provide that stock options may be granted with exercise prices not less than the fair market value at the date of grant. Options granted through September 30, 2013 generally vest over four years and expire ten years from the date of grant. Restricted stock awards granted to non-employee members of the Board of Directors vest over one year. Restricted stock units granted to certain officers of the Company vest over four years. At September 30, 2013, there were 1.1 million shares available for future issuance under these plans. 

Valuation and Expense Information

The Company recognized stock-based compensation expense of $1.2 million and $0.9 million for the three months ended September 30, 2013 and 2012, respectively, and $2.8 million and $2.3 million for the nine months ended September 30, 2013 and 2012, respectively.  This expense consisted of compensation expense related to (1) employee stock options based on the value of share-based payment awards that is ultimately expected to vest during the period, (2) restricted stock awards issued

8

THE SPECTRANETICS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

to the Company’s directors, (3) restricted stock units issued to certain of the Company’s officers, and (4) the estimated fair value of shares expected to be issued under the Company’s employee stock purchase plan. Stock-based compensation expense is recognized based on awards ultimately expected to vest and is reduced for estimated forfeitures. The Company recognizes compensation expense for these awards on a straight-line basis over the service period.

For all options not subject to a market condition, the fair value of each share option award is estimated on the date of grant using the Black-Scholes pricing model based on assumptions noted in the following table. The Company’s employee stock options have various restrictions, including vesting provisions and restrictions on transfers, hedging and pledging, among others, and are often exercised prior to their contractual expiration. Expected volatilities used in the fair value estimate are based on the historical volatility of the Company’s common stock. The Company uses historical data to estimate share option exercises, expected term and employee departure behavior used in the Black-Scholes pricing model. The risk-free rate for periods within the contractual term of the share option is based on the U.S. Treasury yield in effect at the time of grant. The following is a summary of the assumptions used for the stock options granted during the three and nine months ended September 30, 2013 and 2012, respectively, using the Black-Scholes pricing model:

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2013		2012		2013		2012
Expected life (years)	5.84		5.90		5.84		5.90
Risk-free interest rate	1.39	%	0.63	%	1.35	%	0.75	%
Expected volatility	65.54	%	65.86	%	65.55	%	66.42	%
Expected dividend yield	—		—		—		—

The weighted average grant date fair value of options granted during the three months ended September 30, 2013 and 2012 was $10.68 and $6.76, respectively, and during the nine months ended September 30, 2013 and 2012 was $10.65 and $5.84, respectively.

The following table summarizes stock option activity during the nine months ended September 30, 2013: 

	Shares		Weighted Average Exercise Price		Weighted Avg. Remaining Contractual Term (In Years)	Aggregate Intrinsic Value
Options outstanding at January 1, 2013	3,263,830		$	7.02
Granted	684,980		18.09
Exercised	(486,837	)	5.98
Canceled	(61,512	)	10.41
Options outstanding at September 30, 2013	3,400,461		$	9.34	7.24	$	26,319,147
Options exercisable at September 30, 2013	1,759,856		$	6.52	5.75	$	18,086,044

The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on the Company’s stock price of $16.80 as of September 30, 2013, which would have been received by the option holders had all option holders exercised their options as of that date. In-the-money options exercisable as of September 30, 2013 totaled approximately 1.8 million, as all options exercisable were in the money as of that date.  The total intrinsic value of options exercised was $5.7 million and $3.3 million during the nine months ended September 30, 2013 and 2012, respectively.

9

THE SPECTRANETICS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table summarizes restricted stock award activity during the nine months ended September 30, 2013: 

	Shares		Weighted Average Grant Date Fair Value
Restricted stock awards outstanding at January 1, 2013	48,632		$	9.87
Awarded	22,190		18.93
Vested/Released	(48,632	)	9.87
Restricted stock awards outstanding at September 30, 2013	22,190		$	18.93

The following table summarizes restricted stock unit activity during the nine months ended September 30, 2013: 

	Shares		Weighted  Average  Purchase Price		Weighted Avg. Remaining Contractual Term (In Years)	Aggregate Intrinsic Value
Restricted stock units outstanding at January 1, 2013	126,350		$	—
Awarded	89,512		—
Vested/Released	(46,700	)	—
Restricted stock units outstanding at September 30, 2013	169,162		$	—	1.71	$	2,841,922

As of September 30, 2013, there was $10.0 million of total unrecognized compensation expense related to non-vested share-based compensation arrangements granted under the Company’s stock option plans. This expense is based on an assumed future forfeiture rate of approximately 13.37% per year for Company employees and is expected to be recognized over a weighted-average period of approximately 2.8 years.

Employee Stock Purchase Plan

In June 2010, the Company’s stockholders approved The Spectranetics Corporation 2010 Employee Stock Purchase Plan (“ESPP”).  The ESPP provides for the sale of up to 700,000 shares of common stock to eligible employees, limited to the lesser of 2,500 shares per employee per six-month period or a fair market value of $25,000 per employee per calendar year. Stock purchased under the ESPP is restricted from sale for one year following the date of purchase. Stock can be purchased from amounts accumulated through payroll deductions during each six-month period. The purchase price is equal to 85% of the lower of the fair market value of the Company’s common stock at the beginning or end of the respective six-month offering period.  This discount does not exceed the maximum discount rate permitted for plans of this type under Section 423 of the Internal Revenue Code of 1986, as amended.  The ESPP is compensatory for financial reporting purposes. At September 30, 2013, there were 0.3 million shares available for future issuance under this plan. 

The fair value of the offerings under the ESPP is determined on the first day of the semi-annual purchase period using the Black-Scholes option-pricing model. The expected term of six months was based upon the offering period of the ESPP. Expected volatility was determined based on the historical volatility from daily share price observations for the Company’s stock covering a period commensurate with the expected term of the ESPP. The risk-free interest rate was based on the six-month U.S. Treasury daily yield rate. The expected dividend yield was based on the Company’s historical practice of electing not to pay dividends to its stockholders. For the three months ended September 30, 2013 and 2012, the Company recognized $111,000 and $75,000, respectively, and for the nine months ended September 30, 2013 and 2012, the Company recognized $307,000 and $215,000, respectively, of compensation expense related to the ESPP.

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THE SPECTRANETICS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 7 — NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding (excluding restricted shares). Shares issued during the period and shares reacquired during the period are weighted for the portion of the period they were outstanding. Diluted net income (loss) per share is computed in a manner consistent with that of basic net income (loss) per share while giving effect to all potentially dilutive common shares outstanding during the period, which include the assumed exercise of stock options and the assumed vesting of restricted stock using the treasury stock method.

For the three months ended September 30, 2013, a weighted average of 0.6 million stock options were excluded from the computation of diluted net income per share because their inclusion would have been anti-dilutive. Diluted net loss per share was the same as basic net loss per share for the nine months ended September 30, 2013 as shares issuable upon the exercise of stock options and the vesting of restricted stock were anti-dilutive because of the net loss for that period.  As a result, the stock options and restricted stock outstanding representing 2.0 million weighted average shares for the nine months ended September 30, 2013 were excluded from the diluted net loss per share calculation because their inclusion would have been anti-dilutive.

For the three and nine months ended September 30, 2012, a weighted average of 0.7 million and 0.9 million stock options, respectively, were excluded from the computation of diluted net income per share because their inclusion would have been anti-dilutive.

A summary of the net income (loss) per share calculation is shown below for the periods indicated:

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2013		2012		2013			2012
Net income (loss)	$	434	$	905	$	(1,253	)	$	1,553
Common shares outstanding:
Historical common shares outstanding at beginning of period	40,719,581		34,437,996		34,839,131			33,883,378
Weighted average common shares issued	117,610		110,781		3,370,967			384,219
Weighted average common shares outstanding — basic	40,837,191		34,548,777		38,210,098			34,267,597
Effect of dilution — stock options	1,538,990		1,396,676		—			1,282,968
Weighted average common shares outstanding — diluted	42,376,181		35,945,453		38,210,098			35,550,565
Net income (loss) per share — basic	$	0.01	$	0.03	$	(0.03	)	$	0.05
Net income (loss) per share — diluted	$	0.01	$	0.03	$	(0.03	)	$	0.04

NOTE 8 — SEGMENT REPORTING

The Company operates in one distinct line of business consisting of developing, manufacturing, marketing, and distributing a proprietary excimer laser system and disposable products to treat certain vascular and coronary conditions.

Within this line of business, the Company has identified two operating segments, which were identified geographically: (1) U.S. Medical and (2) International Medical. U.S. Medical and International Medical offer the same products and services but operate in different geographic regions, have different distribution networks, and different regulatory environments. The Company aggregates its two product lines, Vascular Intervention and Lead Management, based on their similar economic, operational, and regulatory characteristics, consistent with the authoritative guidance on segment reporting.

11

THE SPECTRANETICS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Additional information regarding each operating segment is discussed below.

U. S. Medical

This segment includes customers in the United States and Canada. Products offered by this segment include single-use medical devices used in minimally invasive procedures within the cardiovascular system, including fiber-optic devices and non-fiber-optic products (disposables), an excimer laser system (equipment), and the service of the excimer laser system (service). The Company is subject to product approvals from the U.S. Food and Drug Administration (“FDA”) and Health Canada. The Company’s products are used in multiple vascular procedures, including peripheral atherectomy, crossing arterial blockages, coronary atherectomy and thrombectomy, and the removal of cardiac lead wires from patients with pacemakers and cardiac defibrillators.

U.S. Medical is also corporate headquarters for the Company. All manufacturing, research and development, and corporate administrative functions are performed within this operating segment. For the three and nine months ended September 30, 2013 and 2012, a portion of research, development and other technology expenses, and general and administrative expenses incurred in the U.S. has been allocated to International Medical based on a percentage of revenue because these expenses support the Company’s ability to generate revenue within the International Medical segment.

Manufacturing activities are performed entirely within the U.S. Medical segment. Revenue associated with intersegment product transfers to International Medical was $1.7 million and $1.6 million for the three months ended September 30, 2013 and 2012, respectively, and $5.5 million and $5.4 million for the nine months ended September 30, 2013 and 2012, respectively. Revenue is based upon transfer prices, which provide for intersegment profit eliminated upon consolidation.

International Medical

The International Medical segment has its headquarters in the Netherlands, and serves Europe and the Middle East, Latin America (including Puerto Rico), Japan, and the Pacific Rim. Products offered by this segment are substantially the same as those offered by U.S. Medical. The Company is subject to product approvals from various international regulatory bodies. The International Medical segment is engaged primarily in distribution activities, with no manufacturing or product development functions. Certain U.S.-incurred research, development and other technology expenses, and general and administrative expenses have been allocated to International Medical based on a percentage of revenue because these expenses support the Company’s ability to generate revenue within the International Medical segment.

12

THE SPECTRANETICS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Summary financial information relating to operating segment operations is shown below. Intersegment transfers as well as intercompany assets and liabilities are excluded from the information provided (in thousands):

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2013		2012		2013		2012
Revenue:
U.S. Medical:
Disposable products	$	29,212	$	26,368	$	84,400	$	76,334
Service and other, net of allowance for sales returns	2,397		2,132		7,429		6,679
Equipment sales and rentals	923		1,126		3,804		3,604
Subtotal	32,532		29,626		95,633		86,617
International Medical:
Disposable products	5,819		4,371		16,878		14,130
Service and other, net of allowance for sales returns	454		376		1,188		1,003
Equipment sales and rentals	958		857		3,192		1,784
Subtotal	7,231		5,604		21,258		16,917
Total revenue	$	39,763	$	35,230	$	116,891	$	103,534

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2013			2012		2013			2012
Segment operating income (loss):
U.S. Medical	$	(26	)	$	719	$	(2,572	)	$	768
International Medical	832			382		1,195			1,233
Total operating income (loss)	$	806		$	1,101	$	(1,377	)	$	2,001

	As of September 30, 2013		As of December 31, 2012
Segment assets:
U.S. Medical	$	195,933	$	95,181
International Medical	17,706		15,588
Total assets	$	213,639	$	110,769

For the nine months ended September 30, 2013 and 2012, no individual customer represented 10% or more of consolidated revenue.  No individual countries, other than the United States, represented at least 10% of consolidated revenue in the nine months ended September 30, 2013 or 2012.

13

THE SPECTRANETICS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Revenue by Product Line

	Three Months Ended   September 30,				Nine Months Ended   September 30,
(in thousands)	2013		2012		2013		2012
Revenue
Disposable products revenue:
Vascular intervention	$	18,956	$	16,821	$	55,046	$	50,652
Lead management	16,075		13,918		46,232		39,812
Total disposable products revenue	35,031		30,739		101,278		90,464
Service and other, net of allowance for sales returns	2,851		2,508		8,617		7,682
Equipment sales and rentals	1,881		1,983		6,996		5,388
Total revenue	39,763		35,230		116,891		103,534

NOTE 9 — INCOME TAXES

The Company maintains a valuation allowance of approximately $12.7 million, as of September 30, 2013, for substantially all of its deferred tax assets, including its U.S. net operating losses, and therefore does not expect to incur a current U.S. federal tax expense or benefit against its pretax income during the year ending December 31, 2013. The Company does, however, expect to incur current state and foreign tax expense during the year. In addition, the Company expects to incur deferred U.S. federal and state tax expense in 2013, representing a deferred tax liability related to the difference between tax and book accounting for its goodwill, which is amortized over 15 years for tax purposes but not amortized for book purposes.

The Company’s ability to realize the benefit of its deferred tax assets in future periods will depend on the generation of taxable income through profitable operations. Due to the Company’s history of losses and the lack of sufficient certainty of generating future taxable income, the Company has recorded a full valuation allowance against substantially all of its deferred tax assets. The Company does not expect to reduce the valuation allowance against its deferred tax assets to below 100% of its gross amount until it has a sufficient historical trend of taxable income and can predict future income with a higher degree of certainty.

NOTE 10 — COMMITMENTS AND CONTINGENCIES

Indemnification of Former Officer

The Company is obligated to indemnify its present and former directors and officers against certain losses and to advance their reasonable legal defense expenses, including in connection with a federal investigation. The Company maintains insurance for claims of this nature, which does not apply in all such circumstances, may be denied, or may not be adequate to cover the legal costs or any settlement or judgment for those proceedings.

The Company has an indemnification obligation with one former officer charged in connection with a previous federal investigation of the Company. In February 2012, a trial resulted in the acquittal of the defendant on all charges except for one count of making false statements to federal investigators. The sentencing hearing for this defendant occurred in May 2012, and in June 2012, the defendant filed a notice of appeal. The Company paid its indemnification obligations through the trial during 2012. Additional expenses may be incurred in future periods depending upon the success or failure of this appeal, particularly if a successful appeal results in the order of a new trial.

14

THE SPECTRANETICS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Litigation

The Company is from time to time subject to, and is presently involved in, various pending or threatened legal actions and proceedings, including those that arise in the ordinary course of its business. Such matters are subject to many uncertainties and to outcomes and the financial impacts of which are not predictable with assurance and that may not be known for extended periods of time. The Company records a liability in its consolidated financial statements for costs related to claims, settlements, and judgments, where management has assessed that a loss is probable and an amount can be reasonably estimated. The Company’s significant legal proceedings are discussed below. The costs associated with such proceedings or other legal proceedings that may be commenced could have a material adverse effect on the Company’s future consolidated results of operations, financial position, or cash flows.

Fox/Sopkin

The Company and Spectranetics B.V., the Company’s Dutch subsidiary, are defendants in a lawsuit brought in the District Court of Utrecht, the Netherlands (the “Dutch District Court”) by Kenneth Fox in 2004. Mr. Fox is an inventor named on patents licensed to the Company under a license agreement assigned to Interlase LP. Mr. Fox claims an interest in royalties payable under the license and seeks alleged back royalties of approximately $2.2 million. In June 2010, the Dutch District Court issued a ruling, followed by a decision that dismissed Mr. Fox’s claims in their entirety against both the Company and its Dutch subsidiary.  The Dutch District Court also awarded the Company a nominal amount as attorney’s fees.  In September 2010, Mr. Fox filed and served a notice of appeal to the Dutch Court of Appeals. Under Dutch law, the appeal entitled Mr. Fox to a new trial on the merits, though still taking into evidence the record already in the Dutch court system. A hearing on the merits of the appeal occurred in November 2012. In September 2013, the Dutch Court of Appeals ruled in the Company’s favor and upheld the ruling of the Dutch District Court. The Court of Appeals also awarded the Company a nominal amount as the prevailing party in the appeal. Each party has until December 10, 2013 to file a cassation complaint (appeal) to the Supreme Court of The Netherlands. The Company intends to continue to vigorously defend against Mr. Fox’s claims.

In May 2011, the Company was served with a lawsuit that names the Company and the Company’s Dutch subsidiary as defendants. The lawsuit was brought in the Dutch District Court by Barbara Joy Sopkin. Ms. Sopkin claims royalties on a license agreement, certain rights to which were allegedly transferred to her, which claims are similar to the claims of Mr. Fox in his litigation. Ms. Sopkin claims damages of approximately $2 million and also claims interest on that amount from January 1, 2011. The proceedings formally commenced in July 2011, and a hearing on the claims was held in September 2012. In October 2012, the Dutch District Court rejected Ms. Sopkin’s claims for damages in their entirety and awarded the Company a nominal amount as attorney’s fees. In January 2013, Ms. Sopkin served the Company with a notice of her intent to appeal to the Dutch Court of Appeals. The Company intends to continue to vigorously defend against Ms. Sopkin’s claims.

The Company has no amounts accrued for the Fox or Sopkin lawsuits.

Other

The Company is involved in other legal proceedings in the normal course of business and does not expect them to have a material adverse effect on its business.

15

Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, and is subject to the safe harbor created by those sections. Forward-looking statements include statements about our future plans, estimates, beliefs, and anticipated, expected or projected performance. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Such statements may include words such as “anticipate,” “will,” “estimate,” “seek,” “expect,” “project,” “intend,” “should,” “plan,” “believe,” “hope,” “enable,” “potential,” and other words and terms of similar meaning in connection with any discussion of, among other things, future operating or financial performance, strategic initiatives and business strategies, clinical trials, regulatory or competitive environments, our intellectual property, and product development. You are cautioned not to place undue reliance on these forward-looking statements and to note that they speak only as of the date hereof. Such statements are based on current assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially.  For a description of such risks and uncertainties, which could cause our actual results, performance, or achievements to materially differ from any anticipated results, performance, or achievements, please see the risk factors in our Annual Report on Form 10-K for the year ended December 31, 2012.  Readers are urged to carefully review and consider the various disclosures made in this report and in our other reports filed with the Securities and Exchange Commission (“SEC”) that disclose certain risks and factors that may affect our business.  This analysis should be read with our consolidated financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2012.  We disclaim any intention or obligation to update or revise any financial projections or forward-looking statements due to new information or other events. To assist the reader in understanding certain terms relating to our business used in this quarterly report, we refer you to the glossary included following Part III of our Annual Report on Form 10-K for the year ended December 31, 2012.

Corporate Overview

We develop, manufacture, market and distribute single-use medical devices used in minimally invasive procedures within the cardiovascular system. Our products are sold in over 40 countries and are used to access and treat arterial blockages in the legs and heart and to remove pacemaker and defibrillator cardiac leads. During the nine months ended September 30, 2013, approximately 68% of our disposable product revenue was from products used in connection with our proprietary CVX-300^® excimer laser system. Our single-use laser catheters contain up to 250 small diameter, flexible optical fibers that can access difficult to reach peripheral and coronary anatomy and produce evenly distributed laser energy at the tip of the catheter. Our excimer laser system is the only laser system approved in the United States, Europe, Japan, and Canada for use in multiple minimally invasive cardiovascular procedures.

Our Vascular Intervention (“VI”) products include a range of laser catheters to ablate blockages in arteries above and below the knee (peripheral atherectomy); support catheters to facilitate crossing of peripheral and coronary arterial blockages, and retrograde access and guidewire retrieval devices used to treat peripheral arterial blockages, including chronic total occlusions (crossing solutions); and aspiration and cardiac laser catheters to treat of blockages in the heart (coronary atherectomy and thrombectomy). Our Lead Management (“LM”) products include excimer laser sheaths and cardiac lead management accessories for the removal of pacemaker and defibrillator cardiac leads. We also sell, rent, and service our CVX-300 laser systems.

For the nine months ended September 30, 2013, our disposable products generated 87% of our revenue, of which VI accounted for 54% and LM accounted for 46%. The remainder of our revenue is derived from sales and rental of our laser system and related services. 

16

Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations (Cont’d)

Recent Developments

Common Stock Offering

On May 1, 2013, we completed an offering of 5,462,500 shares of our common stock at a public offering price of $18.00 per share minus the underwriters’ discount of $1.08 per share. We received net proceeds of approximately $92 million, after deducting underwriting discounts and commissions and offering expenses paid by us. We expect to use the net proceeds from this offering for general corporate purposes, including working capital. We may use all or a portion of the net proceeds to acquire or invest in complementary businesses, technologies, or assets.

Acquisition

In January 2013, we acquired certain products from Upstream Peripheral Technologies Ltd. (“Upstream”). We are marketing these products as the Quick-Access™ Needle Holder and the Quick-Cross Capture™ Guidewire Retriever, included in our VI crossing solutions product category. The products were developed to minimize radiation exposure in peripheral vascular procedures and decrease procedure time in retrograde access procedures. Besides addressing these customer needs, acquiring these products extends our product offering in the area of retrograde access tools while leveraging our existing sales organization. We began selling these products in the U.S. and Europe in the first quarter of 2013. See further discussion of the acquisition in Note 2, “Business Combination,” to the condensed consolidated financial statements included in this report.

Medical Device Excise Tax

The Patient Protection and Affordable Care Act of 2010 imposes a medical device excise tax on medical device manufacturers on their sales in the U.S. of certain devices beginning on January 1, 2013. The excise tax is 2.3% of the taxable base and applies to a substantial majority of our U.S. sales. For the three and nine months ended September 30, 2013, we incurred $0.5 million and $1.6 million of excise tax, respectively, which is recorded in our condensed consolidated statements of comprehensive income (loss) as an operating expense under the caption “Medical device excise tax.”

Current Clinical Trials

During the second quarter of 2011, the FDA granted approval for an investigational device exemption (“IDE”) related to a multi-center, randomized trial to treat in-stent restenosis (“ISR”) in the legs under the study name EXCITE ISR. The study compares (i) laser ablation using our Turbo-Tandem and Turbo Elite laser ablation devices followed by adjunctive balloon angioplasty with (ii) balloon angioplasty alone. The first enrollment in the study occurred in June 2011. The planned enrollment is 318 subjects in the randomized control trial arm of the study at up to 35 active sites in the U.S. Subjects enrolled will be followed at one, six and 12 months after the procedure. The primary endpoint is freedom from Target Lesion Revascularization (“TLR”) through six months following the procedure. The primary safety endpoint is freedom from major adverse events, such as death, major amputation, or TLR, at 30 days following the procedure. On May 6, 2013, we received approval from the FDA for an adjunct analysis plan that allows us to explore achievement of an ISR indication prior to full enrollment of the EXCITE ISR study. This may involve use of the PATENT registry, which is discussed below, in combination with patients enrolled in the EXCITE ISR study. If we meet the study endpoints, we plan to submit a 510(k) to the FDA based on the six month follow-up data. Our primary focus is increasing enrollment in the study. As of October 24, 2013, 35 sites are approved to enroll in the study and 216 subjects have been enrolled. There is no assurance that the FDA will provide clearance for the ISR indication.

In January 2013, we presented preliminary results from the Photo Ablation Using the Turbo-Booster® and Excimer Laser for In-Stent Restenosis Treatment, or PATENT, registry. A total of 90 patients were included by December 2011 at five centers in Germany. Seventy-three patients were followed through 12 months. The study population included patients with PAD ranging from intermittent claudication to critical limb ischemia (Rutherford class 2-5). Lesions ranged from 1cm to 38cm with average total lesion length of 12.3cm, and 94.4% were in the superficial femoral artery.

17

Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations (Cont’d)

The results of the PATENT registry are being reviewed and finalized for publication in a medical journal later this year. The design of the PATENT registry was similar to the design of the treatment arm of the EXCITE ISR trial, and the PATENT results exceeded the expected freedom from TLR rate.

We believe the PATENT registry serves as a feasibility study for the EXCITE ISR trial. Although we believe the interim PATENT registry results are favorable, these results may not predict the results of the EXCITE ISR trial, a controlled clinical trial. Because there is no control group in a registry, registry results are not as reliable as the results of a controlled clinical trial.

We are supporting a multi-center, physician-sponsored pilot study in Europe evaluating the use of laser ablation followed by a paclitaxel-coated angioplasty balloon (“PTX PTA”) compared with the use of PTX PTA alone in the treatment of in-stent restenosis in above-the-knee arteries. This pilot study, Photoablation Followed by a Paclitaxel-Coated Balloon to Inhibit Restenosis in Instent Femoro-popliteal Obstructions, or PHOTOPAC, is not intended to be used to gain an indication in the U.S. for using PTX PTA with laser, but to determine whether using laser with PTX PTA potentially provides a benefit over PTX PTA alone and to provide data for potential future studies. In April 2013, we announced that the planned enrollment for the PHOTOPAC trial would be expanded. We now plan to expand the study from 50 to 145 subjects, who will be followed at one, six, 12 and 24 months after the procedure. We are initiating several new European sites. Our support of the PHOTOPAC trial is in the form of an unrestricted research grant. As of October 24, 2013, two sites are approved to enroll in the study and 52 subjects have been enrolled.

Results of Operations

Financial Results by Geographical Segment

Our two operating segments consist of U.S. Medical, which includes the U.S. and Canada, and International Medical, which includes Europe, the Middle East, Asia Pacific, Latin America, and Puerto Rico. U.S. Medical also includes all expenses for our corporate headquarters, research and development, and corporate administrative functions. The International Medical segment is engaged primarily in distribution activities, with no local manufacturing or product development functions. For the three and nine months ended September 30, 2013 and 2012, a portion of research, development and other technology expenses, and general and administrative expenses incurred in the U.S. has been allocated to International Medical based on a percentage of revenue because these expenses support our ability to generate revenue in the International Medical segment.

Summary financial information relating to operating segments is shown below. Intersegment transfers are excluded from the information provided (in thousands):

	Three Months Ended   September 30,								Nine Months Ended   September 30,
	2013				2012				2013				2012
Revenue
United States	$	32,532	82	%	$	29,626	84	%	$	95,633	82	%	$	86,617	84	%
International	7,231		18		5,604		16		21,258		18		16,917		16
Total revenue	$	39,763	100	%	$	35,230	100	%	$	116,891	100	%	$	103,534	100	%

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2013			2012		2013			2012
Operating income (loss)
United States	$	(26	)	$	719	$	(2,572	)	$	768
International	832			382		1,195			1,233
Total operating income (loss)	$	806		$	1,101	$	(1,377	)	$	2,001

18

Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations (Cont’d)

Selected Consolidated Statements of Comprehensive Income (Loss) Data

The following table presents selected Consolidated Statements of Comprehensive Income (Loss) data for the three months ended September 30, 2013 and 2012 based on the percentage of revenue for each line item, and the dollar and percentage change of each of the items.

Three Months Ended September 30, 2013 Compared with Three Months Ended September 30, 2012

	Three Months Ended   September 30,
(Dollars in thousands)	2013			% of revenue (1)		2012		% of revenue (1)		$ change			% change
Revenue
Disposable products revenue:
Vascular Intervention	$	18,956		48	%	$	16,821	48	%	$	2,135		13	%
Lead Management	16,075			40		13,918		40		2,158			16
Total disposable products revenue	35,031			88		30,739		87		4,292			14
Service and other revenue	2,851			7		2,508		7		343			14
Laser equipment revenue:
Equipment sales	906			2		910		3		(4		)	—
Rental fees	975			2		1,073		3		(98		)	(9	)
Total laser equipment revenue	1,881			5		1,983		6		(102		)	(5	)
Total revenue	39,763			100		35,230		100		4,533			13
Gross profit	29,710			75		25,606		73		4,104			16
Operating expenses
Selling, general and administrative	22,223			56		20,324		58		1,899			9
Research, development and other technology	5,664			14		4,181		12		1,483			35
Medical device excise tax	537			1		—		—		537			nm
Contingent consideration	234			1		—		—		234			nm
Acquisition-related intangible asset amortization	246			1		—		—		246			nm
Total operating expenses	28,904			73		24,505		70		4,399			18
Operating (loss) income	806			2		1,101		3		(295		)	(27	)
Other income (expense)
Interest income (expense), net	(1		)	—		2		—		(3		)	nm
Foreign currency transaction loss	35			—		34		—		1			3
Other income, net	—			—		10		—		(10		)	nm
(Loss) income before income taxes	840			2		1,147		3		(307		)	(27	)
Income tax expense	406			1		242		1		164			68
Net (loss) income	$	434		1	%	$	905	3	%	$	(471	)	(52	)%
Worldwide installed base of laser systems	1,119					1,048				71

___________________________________

 (1) Percentage amounts may not add due to rounding.

nm = not meaningful

19

Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations (Cont’d)

Revenue and gross margin

Revenue increased 13% to $39.8 million for the three months ended September 30, 2013 as compared with $35.2 million for the three months ended September 30, 2012. On a constant currency basis, total revenue increased 12% as compared with the three months ended September 30, 2012 (see the “Non-GAAP Financial Measures” section below for a discussion of how we use the constant currency financial measure). Approximately 95% of the increase was due to increased disposables revenue, with the remainder of the increase due to higher service revenue compared with the three months ended September 30, 2012, partially offset by a small decrease in laser equipment sales and rentals.

VI revenue, which includes products used in both the peripheral and coronary vascular systems, increased 13% (12% on a constant currency basis) to $19.0 million for the third quarter of 2013 as compared with $16.8 million in the third quarter of 2012. VI revenue includes three product categories: peripheral atherectomy, which increased 19%, crossing solutions, which decreased 1%, and coronary atherectomy and thrombus management, which increased 17%, all compared with the three months ended September 30, 2012. Increased peripheral atherectomy product sales were primarily related to unit volume increases supported, to a lesser extent, by a price increase on our Turbo Elite^® catheters. The unit volume increases were largely due to higher sales to office-based physician clinics in the U.S., which contributed to a 20% increase in U.S. peripheral atherectomy sales. Office-based physician clinics, supported by our peripheral artery disease (“PAD”) awareness program, provide increased access for patients at a potentially lower cost to the healthcare system. In July 2013, the Center for Medicare and Medicaid Services (“CMS”) proposed reimbursement changes. The proposed changes would increase hospital outpatient reimbursement for procedures involving our peripheral and coronary atherectomy products, and would decrease reimbursement for procedures in an office-based facility. Comments on the proposed rules were accepted through September 2013, and the rules are expected to be finalized or modified in late November 2013 and to be effective on January 1, 2014. Based on discussions with our physician customers, we do not anticipate these changes to have a significant, adverse impact on our business; however, we cannot provide assurances to this effect. Any adverse impact to office-based clinics will depend on the final rules and changes in clinical practice. The slight decline in crossing solutions product sales was due primarily to increased competition. The increase in coronary atherectomy and thrombus management revenues was primarily due to increased sales of our coronary atherectomy products in Japan, which were launched in May 2012. Given the relatively small proportion of our VI revenue and our focus on treating PAD, we do not expect revenue from the coronary product category to be a meaningful growth driver in the future.

LM revenue grew 16% (15% on a constant currency basis) to $16.1 million for the three months ended September 30, 2013 as compared with $13.9 million for the three months ended September 30, 2012. The GlideLight sheath, our next generation lead extraction tool, was launched in the second quarter of 2012 as an upgrade from its predecessor product, the SLS II. Due to its increased functionality, GlideLight carries a higher selling price than the SLS II. In the third quarter of 2013, LM revenue growth was due predominantly to unit volume growth and, to a lesser extent, the incremental revenue from conversions from the SLS II to GlideLight. The GlideLight sheath accounted for 75% of our total sheath unit volume in the three months ended September 30, 2013.

Service and other revenue increased 14% to $2.9 million for the three months ended September 30, 2013 compared with $2.5 million for the three months ended September 30, 2012, due primarily to our increased installed base of laser systems.

Laser equipment revenue decreased 5% to $1.9 million in the three months ended September 30, 2013 compared with $2.0 million for the three months ended September 30, 2012. Rental revenue decreased 9% as compared with the three months ended September 30, 2012, primarily because higher disposables purchases by certain customers under volume-based rental agreements led to lower rent due.

We placed 40 laser systems with new customers during the three months ended September 30, 2013 compared with 30 during the three months ended September 30, 2012. The increased placements were primarily due to increased demand in the U.S., and to a lesser extent, in Europe and Japan. Of these laser placements, 26 were direct transfers from the existing installed base or were deployments of remanufactured lasers from our factory, compared with 19 transfers or deployments of remanufactured systems in the third quarter of 2012. The new placements this quarter brought our worldwide installed base of

20

Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations (Cont’d)

laser systems to 1,119 (821 in the U.S.) as of September 30, 2013, compared to 1,048 (784 in the U.S.) as of September 30, 2012. 

Geographically, revenue in the U.S. was $32.5 million for the three months ended September 30, 2013, an increase of 10% from the three months ended September 30, 2012.  International revenue totaled $7.2 million, an increase of 29% from the third quarter of 2012, and an increase of 26% on a constant currency basis.  The increase in international revenue was due primarily to an increase in LM disposables revenue, primarily in Europe, and to a lesser extent, an increase in VI disposables revenue, primarily in Japan.

Gross margin percentage for the third quarter of 2013 was 75% as compared with 73% for the third quarter of 2012. The increase was primarily due to (1) higher production volumes and improved manufacturing efficiencies in the third quarter of 2013 as compared with the third quarter of 2012, which resulted in lower unit costs for our disposable products, (2) the increased average selling price of the Turbo Elite and GlideLight (as compared to SLS) products, and (3) product mix, with a higher percentage of higher margin disposables products than laser systems sales in the third quarter of 2013 as compared with the third quarter of 2012.

Operating expenses

Operating expenses increased 18% to $28.9 million in the three months ended September 30, 2013 compared with $24.5 million in the three months ended September 30, 2012. Operating expenses represented 73% of total revenue for the third quarter of 2013 as compared with 70% of total revenue for the third quarter of 2012.  Operating expenses for the third quarter of 2013 included $1.0 million of operating expenses that were not incurred in 2012. These expenses included the medical device excise tax, contingent consideration expense, and acquisition-related intangible asset amortization. These and other operating expense changes are further described below.

Selling, general and administrative. Selling, general and administrative (“SG&A”) expenses increased 9% to $22.2 million for the three months ended September 30, 2013 compared with $20.3 million for the three months ended September 30, 2012.  SG&A expenses represented 56% of revenue in the third quarter of 2013 compared with 58% of revenue in the third quarter of 2012.

Within SG&A, marketing and selling expenses increased $0.6 million, or 4%, compared with the three months ended September 30, 2012, primarily due to:

• A $0.5 million increase in international sales and marketing expense, primarily due to increased incentive compensation on higher revenue and additional field sales positions. International revenue was 26% higher than the prior year quarter on a constant currency basis.

• A $0.1 million increase in U.S. VI and LM sales and marketing expense, primarily due to an increase in our field sales team, partially offset by lower commissions expense.

Also within SG&A, general and administrative expenses increased $1.3 million, or 28%, compared with the three months ended September 30, 2012, with increased personnel expenses and an increase in legal and insurance expense.

Research, development and other technology. Research, development and other technology expenses of $5.7 million for the three months ended September 30, 2013 increased $1.5 million, or 35%, compared with the three months ended September 30, 2012. As a percentage of revenue, research, development and other technology expenses increased to 14% in the third quarter of 2013 from 12% in the third quarter of 2012. Costs included within research, development and other technology expenses are product development costs, clinical studies costs and royalty costs associated with various license agreements with third-party licensors. Fluctuations in these costs were:

21

Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations (Cont’d)

• Product development costs increased by approximately $1.5 million compared with the third quarter of 2012 due to increased new product development project spending, including associated increased headcount, and additional patent-related legal costs;

• Clinical studies costs decreased by approximately $0.1 million compared with the third quarter of 2012, primarily due to the end of certain smaller clinical studies that were ongoing in the prior year period; and

• Royalty costs increased by approximately $0.1 million compared with the third quarter of 2012, due to increased revenue.

Medical device excise tax. The third quarter of 2013 included $0.5 million of expense attributed to the medical device excise tax, which became effective January 1, 2013.

Contingent consideration. As part of the product acquisition described above under “Recent Developments,” we recorded a contingent consideration liability of $6.2 million, representing the estimated fair value of the future contingent payments we expect to make. For the three months ended September 30, 2013, we recorded $0.2 million of contingent consideration expense related to the increase in that liability due to the passage of time (i.e., accretion) and made no changes to the underlying estimates used to calculate the initial acquisition date contingent consideration liability. See Note 2, “Business Combination,” to the condensed consolidated financial statements for further discussion.

Acquisition-related intangible asset amortization. As part of the product acquisition, we acquired certain core technology intangible assets, which are being amortized over periods from four to 12 years. We therefore recorded $0.2 million of amortization expense related to these intangibles in the third quarter of 2013. See Note 2, “Business Combination,” to the condensed consolidated financial statements for further discussion.

Income before income taxes

Pre-tax income for the three months ended September 30, 2013 was $0.8 million, compared with $1.1 million for the three months ended September 30, 2012.

Income taxes

We maintain a valuation allowance of approximately $12.7 million, as of September 30, 2013, for substantially all of our deferred tax assets, including our U.S. net operating losses, and therefore we do not expect to incur a current U.S. federal tax expense or benefit against our pretax income during the year ending December 31, 2013. We do, however, expect to incur current state and foreign tax expense during the year. In addition, we expect to incur deferred U.S. federal and state tax expense in 2013, representing a deferred tax liability related to the difference between book and tax accounting for our goodwill, which is amortized over 15 years for tax purposes but not amortized for book purposes.

We recorded income tax expense of $0.4 million for the three months ended September 30, 2013, consisting of current foreign and state income tax expense and deferred federal income tax expense.

Our ability to realize the benefit of our deferred tax assets in future periods will depend on the generation of taxable income through profitable operations. Due to our history of losses and the lack of sufficient certainty of generating future taxable income, we have recorded a full valuation allowance against substantially all of our deferred tax assets. We do not expect to reduce the valuation allowance against our U.S. deferred tax assets to below 100% of its gross amount until we have a sufficient historical trend of taxable income and can predict future income with a higher degree of certainty.

22

Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations (Cont’d)

Net income

We recorded net income for the three months ended September 30, 2013 of $0.4 million, or $0.01 per fully diluted share, compared with net income of $0.9 million, or $0.03 per fully diluted share, for the three months ended September 30, 2012.

Functional currency

The functional currency of Spectranetics International B.V., Spectranetics Deutschland GmbH and Spectranetics Austria GmbH is the euro. All revenue and expenses are translated to U.S. dollars in the condensed consolidated statements of comprehensive income (loss) using weighted average exchange rates during the period.  The fluctuation in currency rates during the three months ended September 30, 2013 as compared with the three months ended September 30, 2012 caused an increase in consolidated revenue of approximately $0.2 million and an increase in consolidated net income of approximately $0.1 million.

23

Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations (Cont’d)

Selected Consolidated Statements of Comprehensive Income (Loss) Data

The following table presents selected Consolidated Statements of Comprehensive Income (Loss) data for the nine months ended September 30, 2013 and 2012 based on the percentage of revenue for each line item, and the dollar and percentage change of each of the items.

Nine Months EndedSeptember 30, 2013 Compared with Nine Months EndedSeptember 30, 2012

	Nine Months Ended   September 30,
(Dollars in thousands)	2013			% of revenue (1)		2012			% of revenue (1)		$ change			% change
Revenue
Disposable products revenue:
Vascular Intervention	$	55,046		47	%	$	50,652		49	%	$	4,394		9	%
Lead Management	46,232			40		39,812			38		6,420			16
Total disposable products revenue	101,278			87		90,464			87		10,814			12
Service and other revenue	8,617			7		7,682			7		935			12
Laser equipment revenue:
Equipment sales	3,682			3		1,910			2		1,772			93
Rental fees	3,314			3		3,478			3		(164		)	(5	)
Total laser equipment revenue	6,996			6		5,388			5		1,608			30
Total revenue	116,891			100		103,534			100		13,357			13
Gross profit	85,894			73		75,422			73		10,472			14
Operating expenses
Selling, general and administrative	68,089			58		61,287			59		6,802			11
Research, development and other technology	16,320			14		12,134			12		4,186			34
Medical device excise tax	1,568			1		—			—		1,568			nm
Contingent consideration	638			1		—			—		638			nm
Acquisition-related intangible asset amortization	656			1		—			—		656			nm
Total operating expenses	87,271			75		73,421			71		13,850			19
Operating (loss) income	(1,377		)	(1	)	2,001			2		(3,378		)	(169	)
Other income (expense)
Interest income, net	1			—		8			—		(7		)	(88	)
Foreign currency transaction loss	10			—		(7		)	—		17			(243	)
Other income, net	8			—		10			—		(2		)	(20	)
(Loss) income before income taxes	(1,358		)	(1	)	2,012			2		(3,370		)	(167	)
Income tax (benefit) expense	(105		)	—		459			—		(564		)	(123	)
Net (loss) income	$	(1,253	)	(1	)%	$	1,553		1	%	$	(2,806	)	(181	)%
Worldwide installed base of laser systems	1,119					1,048					71

___________________________________

 (1) Percentage amounts may not add due to rounding.

nm = not meaningful

24

Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations (Cont’d)

Revenue and gross margin

Revenue increased 13% (both as reported and on a constant currency basis) to $116.9 million for the nine months ended September 30, 2013 as compared with $103.5 million for the nine months ended September 30, 2012. Approximately 81% of the increase was due to increased disposables revenue, with the remainder of the increase due to higher equipment sales and service revenue compared with the nine months ended September 30, 2012.

VI revenue increased 9% (both as reported and on a constant currency basis) to $55.0 million for the first nine months of 2013 as compared with $50.7 million for the first nine months of 2012. Peripheral atherectomy increased 17%, crossing solutions increased 3%, and coronary atherectomy and thrombus management decreased 7%, all compared with the nine months ended September 30, 2012. Increased peripheral atherectomy product sales were primarily related to unit volume increases supported, to a lesser extent, by a price increase on our Turbo Elite catheters. The unit volume increases were largely due to higher sales to office-based physician clinics in the U.S., which contributed to an 18% increase in U.S. peripheral atherectomy sales. Office-based physician clinics, supported by our PAD awareness program, provide increased access for patients at a potentially lower cost to the healthcare system. CMS has proposed reimbursement changes, which would increase hospital outpatient reimbursement for procedures involving our peripheral and coronary atherectomy products, and would decrease reimbursement for procedures in an office-based facility. Comments on the proposed rules were accepted through September 2013, and the rules are expected to be finalized or modified in late November 2013 and to be effective on January 1, 2014. Based on discussions with our physician customers, we do not anticipate these changes to have a significant, adverse impact on our business; however, we cannot provide assurances to this effect. Any adverse impact to office-based clinics will depend on the final rules and changes in clinical practice. The growth in crossing solutions product sales was due primarily to sales of the recently acquired Quick-Cross Capture Guidewire Retriever and Quick-Access Needle Holder products. Given the relatively small proportion of our VI revenue and our focus on treating PAD, we do not expect revenue from the coronary product category to be a meaningful growth driver in the future, which is reflected in the decrease in revenue for these products.

LM revenue grew 16% (both as reported and on a constant currency basis) to $46.2 million for the nine months ended September 30, 2013 as compared with $39.8 million for the nine months ended September 30, 2012. In the first nine months of 2013, LM revenue increased due to both unit volume growth and the incremental revenue from conversions from the SLS II to GlideLight.

Service and other revenue increased 12%, to $8.6 million for the nine months ended September 30, 2013 compared with $7.7 million for the nine months ended September 30, 2012, due primarily to our increased installed base of laser systems.

Laser equipment revenue increased 30%, to $7.0 million in the nine months ended September 30, 2013 compared with $5.4 million in the nine months ended September 30, 2012. Rental revenue decreased 5% as compared with the nine months ended September 30, 2012, primarily because higher disposables purchases by certain customers under volume-based rental agreements led to lower rent due.

We placed 127 laser systems with new customers during the nine months ended September 30, 2013 compared with 83 during the nine months ended September 30, 2012.  The increase in laser placements was due to increased demand in the U.S., Europe, and Japan. Of these laser placements, 74 were direct transfers from the existing installed base or were deployments of remanufactured lasers from our factory, compared with 45 transfers or deployments of remanufactured systems in the first nine months of 2012. The new placements this quarter brought our worldwide installed base of laser systems to 1,119 (821 in the U.S.) as of September 30, 2013, compared to 1,048 (784 in the U.S.) as of September 30, 2012. 

Geographically, revenue in the U.S. was $95.6 million for the nine months ended September 30, 2013, an increase of 10% from the prior year period.  International revenue totaled $21.3 million, an increase of 26% from the first nine months of 2012, or 25% on a constant currency basis.  The increase in international revenue was primarily due to an increase in LM revenue in Europe and laser equipment sales in Japan in the nine months ended September 30, 2013 as compared with the nine months ended September 30, 2012.

25

Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations (Cont’d)

Gross margin percentage for both the nine months ended September 30, 2013 and 2012 was 73%. The additional margin generated by higher production volumes and the increased selling price of the GlideLight and Turbo Elite products in the first nine months of 2013 was offset by increased laser sales, which carry a lower gross margin percentage than disposable products. Although they carry a lower gross margin percentage, laser system sales and placements have historically resulted in increased sales of higher margin disposable products.

Operating expenses

Operating expenses increased 19% to $87.3 million for the nine months ended September 30, 2013 compared with $73.4 million for the nine months ended September 30, 2012. Operating expenses represented 75% of total revenue for the first nine months of 2013 as compared with 71% of total revenue for the first nine months of 2012.  Operating expenses for the first nine months of 2013 included $2.9 million of operating expenses that were not incurred in 2012. These expenses included the medical device excise tax, contingent consideration expense, and acquisition-related intangible asset amortization. These and other operating expense changes are further described below.

Selling, general and administrative. SG&A expenses increased 11% to $68.1 million for the nine months ended September 30, 2013 compared with $61.3 million for the nine months ended September 30, 2012.  SG&A expenses represented 58% of revenue for the first nine months of 2013 compared with 59% of revenue for the first nine months of 2012.

Within SG&A, marketing and selling expenses increased $4.5 million, or 9%, compared with the nine months ended September 30, 2012, primarily due to:

• A $2.8 million increase in U.S. VI and LM sales and marketing expense, primarily due to an increase in our field sales team; the expansion of our marketing capabilities to include strategy and product portfolio management; costs associated with the continued launch of the GlideLight lead extraction laser sheath, the initial launch of the products acquired from Upstream, and increased marketing and physician training events; and outside consulting expenses related to a strategic analysis of our field sales team’s deployment.

• A $1.6 million increase in international sales and marketing expense, primarily due to additional field sales positions and increased incentive compensation on higher revenue.

Also within SG&A, general and administrative expenses increased $2.3 million, or 17%, compared with the nine months ended September 30, 2012, with increased personnel expenses and an increase in insurance, compliance and legal costs.

Research, development and other technology. Research, development and other technology expenses of $16.3 million for the nine months ended September 30, 2013 increased $4.2 million, or 34%, compared with the nine months ended September 30, 2012. As a percentage of revenue, research, development and other technology expenses increased to 14% in the first nine months of 2013 from 12% in the first nine months of 2012. Fluctuations in these costs were:

• Product development costs increased by approximately $4.6 million compared with the first nine months of 2012 due to increased new product development project spending, including associated increased headcount, and additional patent-related legal costs;

• Clinical studies costs decreased by approximately $0.6 million compared with the first nine months of 2012, primarily due to eliminating certain non-recurring and start-up costs incurred in the prior year period; and

• Royalty costs increased by approximately $0.2 million compared with the third quarter of 2012 due to increased revenue.

Medical device excise tax. The nine months ended September 30, 2013 included $1.6 million of expense attributed to the medical device excise tax, which became effective January 1, 2013.

26

Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations (Cont’d)

Contingent consideration. In the nine months ended September 30, 2013, we recorded $0.6 million of contingent consideration expense. See Note 2, “Business Combination,” to the condensed consolidated financial statements for further discussion.

Acquisition-related intangible asset amortization. We recorded $0.7 million of amortization expense related to acquired intangible assets in the first nine months of 2013. See Note 2, “Business Combination,” to the condensed consolidated financial statements for further discussion.

Income (loss) before income taxes

The pre-tax loss for the nine months ended September 30, 2013 was $1.4 million, compared with pre-tax income of $2.0 million for the nine months ended September 30, 2012.

Income taxes

We maintain a valuation allowance of approximately $12.7 million, as of September 30, 2013, for substantially all of our deferred tax assets, including our U.S. net operating losses, and therefore we do not expect to incur a current U.S. federal tax expense or benefit against our pretax income during the year ending December 31, 2013. We do, however, expect to incur current state and foreign tax expense during the year. In addition, we expect to incur deferred U.S. federal and state tax expense in 2013, representing a deferred tax liability related to the difference between book and tax accounting for our goodwill, which is amortized over 15 years for tax purposes but not amortized for book purposes.

For the nine months ended September 30, 2013, we recorded an income tax benefit of $0.1 million, consisting of a deferred federal and state income tax benefit, net of current foreign and state income tax expense.

Our ability to realize the benefit of our deferred tax assets in future periods will depend on the generation of taxable income through profitable operations. Due to our history of losses and the lack of sufficient certainty of generating future taxable income, we have recorded a full valuation allowance against substantially all of our deferred tax assets. We do not expect to reduce the valuation allowance against our U.S. deferred tax assets to below 100% of its gross amount until we have a sufficient historical trend of taxable income and can predict future income with a higher degree of certainty.

Net (loss) income

As a result of the items discussed above, we recorded a net loss for the nine months ended September 30, 2013 of $1.3 million, or $(0.03) per share, compared with net income of $1.6 million, or $0.04 per fully diluted share, in the nine months ended September 30, 2012.

Functional currency

The functional currency of Spectranetics International B.V., Spectranetics Deutschland GmbH and Spectranetics Austria GmbH is the euro. All revenue and expenses are translated to U.S. dollars in the condensed consolidated statements of comprehensive income (loss) using weighted average exchange rates during the period.  The fluctuation in currency rates during the nine months ended September 30, 2013 as compared with the nine months ended September 30, 2012 caused an increase of approximately $0.2 million in consolidated revenue and an increase of approximately $0.1 million in consolidated net income.

27

Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations (Cont’d)

Liquidity and Capital Resources

As of September 30, 2013, we had cash and cash equivalents of $123.6 million, an increase of $85.8 million from $37.8 million at December 31, 2012.

On May 1, 2013, we completed an offering of 5,462,500 shares of our common stock at a public offering price of $18.00 per share minus the underwriters’ discount of $1.08 per share. We received net proceeds of approximately $92 million, after deducting underwriting discounts and commissions and offering expenses of approximately $0.4 million paid by us. We expect to use the net proceeds from this offering for general corporate purposes, including working capital. We may use all or a portion of the net proceeds to acquire or invest in complementary businesses, technologies, or assets. Pending the application of the net proceeds to these uses, we have invested the net proceeds from this offering in short-term, highly liquid investments which are readily convertible to cash.

We believe that our cash and cash equivalents, anticipated funds from operations, and other sources of liquidity will be sufficient to meet our liquidity requirements for the foreseeable future based on our expected level of operations. However, we may need or seek additional funding earlier than anticipated. If we require additional working capital to fund future operations and any future acquisitions, we may access available borrowings under our revolving line of credit with Wells Fargo Bank described below. We also may sell additional shares of our common stock or other equity or debt securities or enter into credit and financing arrangements with one or more independent institutional lenders. A financing transaction may not be available on terms acceptable to us, or at all, and a financing transaction may be dilutive to our current stockholders.

Operating Activities. For the nine months ended September 30, 2013, cash used in operating activities totaled $0.8 million.  The primary sources and uses of cash were:

(1) Our net loss of $1.3 million included approximately $10.7 million of non-cash expenses, net of a non-cash tax benefit of $0.4 million. Non-cash expenses included $8.0 million of depreciation and amortization, $2.8 million of stock-based compensation and $0.2 million of provision for excess and obsolete inventories.

(2) Cash used as a result of the net change in operating assets and liabilities of approximately $10.2 million was primarily due to:

• An increase in equipment held for rental or loan of $4.4 million as a result of placement activity of our laser systems through our rental and evaluation programs;

• An increase in accounts receivable of approximately $3.7 million, primarily due to higher sales in the third quarter of 2013;

• An increase in inventory of approximately $0.9 million, primarily due to increased sales demand and higher laser inventory to meet increasing demand for our laser systems;

• An increase in prepaid expenses and other current assets of $0.4 million, due primarily to the payment of annual insurance premiums and clinical trial milestone payments;

• A decrease in deferred revenue of approximately $0.3 million, due primarily to the timing of collections of deferred service contract revenue; and

• A decrease in accounts payable and accrued liabilities of $0.5 million, due to the timing of vendor payments.

28

Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations (Cont’d)

The table below presents the change in receivables and inventory in relative terms, through the presentation of financial ratios.  Days sales outstanding are calculated by dividing the ending accounts receivable balance, net of reserves for sales returns and doubtful accounts, by the average daily sales for the quarter.  Inventory turns are calculated by dividing annualized cost of sales for the quarter by ending inventory. 

	September 30, 2013	December 31, 2012
Days Sales Outstanding	54	49
Inventory Turns	4.0	4.2

Investing Activities. For the nine months ended September 30, 2013, cash used by investing activities was $9.2 million, consisting of $6.5 million of payments for the Upstream product acquisition and capital expenditures of $2.7 million.  The capital expenditures included manufacturing equipment upgrades and replacements, additional capital items for research and development projects, and additional computer equipment and software purchases.

Financing Activities. Cash provided by financing activities for the nine months ended September 30, 2013 was $95.8 million, including $92.0 million of net proceeds from the common stock offering and $3.8 million of proceeds from exercises of stock options and sales of common stock under our employee stock purchase plan.

We may be required to make future payments related to the Upstream acquisition. The purchase agreement with Upstream provides for additional payments for manufacturing and intellectual property milestones and revenue-based earn-outs. We believe the next milestone payment of $0.5 million will be payable in the first half of 2014. The total purchase price, including the contingent milestone and revenue-based payments, is subject to an overall cap of $35.5 million. See Note 2, “Business Combination,” to the condensed consolidated financial statements for further discussion.

At September 30, 2013, we had no significant debt or capital lease obligations.

Line of Credit

On February 25, 2011, we entered into a Credit and Security Agreement (“Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”), acting through its Wells Fargo Business Credit operating division, for a three-year $15.0 million revolving line of credit. Under the Credit Agreement, we may borrow under the revolving line of credit subject to borrowing base limitations.  These limitations allow us to borrow, subject to specified reserves, up to 85% of eligible domestic accounts receivable, defined as receivables aged less than 90 days from the invoice date along with specific exclusions for contra-accounts, concentrations, and other accounts otherwise deemed ineligible by Wells Fargo Business Credit.  Borrowings under the revolving line bear interest at a variable rate equal to the lesser of the Wells Fargo prime rate plus 0.25% or the daily three month LIBOR plus 3.25%.  The margins on the base interest rates are subject to reduction if we achieve certain annual net income levels. Accrued interest on any outstanding balance under the revolving line is payable monthly in arrears.  Our borrowing base, which represents the amount we can borrow under the revolving line of credit, was $10.5 million as of September 30, 2013.

The revolving line of credit is secured by a first priority security interest in substantially all of our assets. The Credit Agreement requires us to maintain a minimum of $10.0 million in cash and investments at Wells Fargo and requires a lockbox arrangement. We must pay customary fees under the facility, including a 0.25% fee on the average unused portion of the revolving line. If there are borrowings under the revolving line of credit, we will be subject to certain financial covenants including rolling 12-month adjusted EBITDA and minimum book net worth covenants. 

The Credit Agreement contains customary events of default, including the failure to make required payments, the failure to comply with certain covenants or other agreements, the occurrence of a material adverse change, failure to pay certain other indebtedness and certain events of bankruptcy or insolvency. Upon the occurrence and continuation of an event of default, amounts due under the Credit Agreement may be accelerated.

29

Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations (Cont’d)

We had no events of default and no borrowings under the revolving line of credit, and there were no borrowings under the revolving line of credit during the nine months ended September 30, 2013.

Off-Balance Sheet Arrangements

We maintain no off-balance sheet arrangements that have, or that are reasonably likely to have, a material current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. We maintain operating leases for our offices based in Colorado, the Netherlands and Germany.

Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), we use certain non-GAAP financial measures in this report. Reconciliations of these non-GAAP financial measures to the most directly comparable U.S. GAAP measures for the respective periods can be found in the tables below. An explanation of the manner in which our management uses these non-GAAP measures to conduct and evaluate our business and the reasons why management believes that these non-GAAP measures provide useful information to investors is provided following the reconciliation tables.

Reconciliation of revenue by geography to non-GAAP revenue by geography on a constant currency basis (000’s, except percentages) (unaudited)
	Three Months Ended
	September 30, 2013							September 30, 2012		Change
	Revenue, as reported		Foreign exchange impact as compared to prior period			Revenue on a constant currency basis		Revenue, as reported		As reported		Constant currency basis
United States	$	32,532	$	—		$	32,532	$	29,626	10	%	10	%
International	7,231		(195		)	7,036		5,604		29	%	26	%
Total revenue	$	39,763	$	(195	)	$	39,568	$	35,230	13	%	12	%
	Nine Months Ended
	September 30, 2013							September 30, 2012		Change
	Revenue, as reported		Foreign exchange impact as compared to prior period			Revenue on a constant currency basis		Revenue, as reported		As reported		Constant currency basis
United States	$	95,633	$	—		$	95,633	$	86,617	10	%	10	%
International	21,258		(185		)	21,073		16,917		26	%	25	%
Total revenue	$	116,891	$	(185	)	$	116,706	$	103,534	13	%	13	%

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Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations (Cont’d)

Reconciliation of revenue by product line to non-GAAP revenue by product line on a constant currency basis (000’s, except percentages) (unaudited)
	Three Months Ended
	September 30, 2013							September 30, 2012		Change
	Revenue, as reported		Foreign exchange impact as compared to prior period			Revenue on a constant currency basis		Revenue, as reported		As reported		Constant currency basis
Vascular Intervention	$	18,956	$	(43	)	$	18,913	$	16,821	13	%	12	%
Lead Management	16,075		(124		)	15,951		13,918		16	%	15	%
Laser Equipment, Service & Other	4,732		(28		)	4,704		4,491		5	%	5	%
Total revenue	$	39,763	$	(195	)	$	39,568	$	35,230	13	%	12	%
	Nine Months Ended
	September 30, 2013							September 30, 2012		Change
	Revenue, as reported		Foreign exchange impact as compared to prior period			Revenue on a constant currency basis		Revenue, as reported		As reported		Constant currency basis
Vascular Intervention	$	55,046	$	(19	)	$	55,027	$	50,652	9	%	9	%
Lead Management	46,232		(133		)	46,099		39,812		16	%	16	%
Laser Equipment, Service & Other	15,613		(33		)	15,580		13,070		19	%	19	%
Total revenue	$	116,891	$	(185	)	$	116,706	$	103,534	13	%	13	%

The impact of foreign exchange rates is highly variable and difficult to predict. We use a constant currency basis to show the impact from foreign exchange rates on current period revenue compared to prior period revenue using the prior period’s foreign exchange rates. In order to properly understand the underlying business trends and performance of our ongoing operations, we believe that investors may find it useful to consider the impact of excluding changes in foreign exchange rates from our revenue.

We believe that presenting the non-GAAP financial measures used in this report provides investors greater transparency to the information used by our management for financial and operational decision-making and allows investors to see our results “through the eyes” of management. We also believe that providing this information better enables our investors to understand our operating performance and evaluate the methodology used by management to evaluate and measure such performance.

Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for our financial results prepared in accordance with U.S. GAAP. For example, revenue growth rates stated on a constant currency basis, by their nature, exclude the impact of foreign exchange, which may have a material impact on U.S. GAAP revenue. Non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles and therefore other companies may calculate similarly titled non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.

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Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations (Cont’d)

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We prepare our condensed consolidated financial statements in conformity with U.S. GAAP. We must make certain estimates, judgments and assumptions that we believe are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented.  Significant items subject to estimates and assumptions include the carrying amount of property and equipment, goodwill and intangible assets, valuation allowances and reserves for receivables, inventories and deferred income tax assets, stock-based compensation expense, accrued indemnification costs, estimated clinical trial expenses, accrued estimates for incurred but not reported claims under partially self-insured employee health benefit programs, contingent consideration liabilities, and loss contingencies, including those related to litigation. Actual results could differ from those estimates.

Our critical accounting policies and estimates are included in our 2012 Annual Report on Form 10-K.  During the first nine months of 2013, the only significant change to our critical accounting policies and estimates was:

Valuation of Business Combinations

The fair value of consideration, including contingent consideration, transferred in acquisitions accounted for as business combinations is first allocated to the identifiable tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. Any excess purchase consideration is allocated to goodwill. Further, for those arrangements that involve liability classified contingent consideration, we record on the date of acquisition a liability equal to the discounted fair value of the estimated additional consideration we may be obligated to make in the future. Liability classified contingent consideration is adjusted to its fair value each reporting period through earnings. Acquisition transaction costs are expensed as incurred.

The fair value of identifiable intangible assets uses management estimates and judgments based on market participant assumptions. Using alternative valuation assumptions, including estimated revenue projections, growth rates, cash flows, discount rates, estimated useful lives, and probabilities surrounding the achievement of milestones could result in different fair value estimates of our net tangible and intangible assets and related amortization expense in current and future periods.

Contingent consideration liabilities are remeasured to fair value each reporting period using projected revenues, discount rates, probabilities of payment, and projected payment dates. Increases or decreases in the fair value of the contingent consideration liability can result from changes in the timing and amount of revenue estimates or in the timing or likelihood of achieving intellectual property milestones, and changes in discount periods and rates. Projected contingent payment amounts are discounted back to the current period using a discounted cash flow model. See Note 2, “Business Combination,” to the condensed consolidated financial statements for further discussion.

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Item 3.Quantitative and Qualitative Disclosures About Market Risk

We are exposed to a variety of risks, primarily including foreign currency fluctuations. Our exposure to foreign currency fluctuations is primarily related to sales of our products in Europe, which are denominated primarily in the euro.  Changes in the exchange rate between the euro and the U.S. dollar could adversely affect our revenue and net income.  Exposure to foreign currency exchange rate risk may increase over time as our business evolves and our products continue to be introduced into international markets. We do not hedge against any foreign currencies and, as a result, we could incur gains or losses.  Fluctuation in currency rates during the three and nine months ended September 30, 2013 as compared with the three and nine months ended September 30, 2012 caused an increase of approximately $0.2 million in consolidated revenue and an increase of approximately $0.1 million in consolidated net income.

Based on our overall foreign currency exchange rate exposure as of September 30, 2013, a 10% appreciation or depreciation of the U.S. dollar would have a positive or negative impact on our consolidated revenue for the three and nine months ended September 30, 2013 of approximately $0.5 million and $1.4 million, respectively.

The current economic environment is highly volatile, and there is continuing instability in global markets, including in Europe. During both the three and nine months ended September 30, 2013, 13% of our revenue was generated in Europe. The European economic and financial situation could impact our revenue and results of operations. We are actively monitoring the situation in Europe.

Item 4.Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.  In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Exchange Act Rule 13a-15(b), we carried out an evaluation, under the supervision of and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2013. Our Chief Executive Officer and Chief Financial Officer concluded our disclosure controls and procedures were effective as of September 30, 2013.

There has been no change in our internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Part II—OTHER INFORMATION

Item 1.Legal Proceedings

For a discussion of the Company’s legal proceedings, please refer to Note 10, “Commitments and Contingencies” to the condensed consolidated financial statements in Part I, Item 1 of this report.

Item 1A.   Risk Factors

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

Item 6.Exhibits

3.1	Amended and Restated Certificate of Incorporation. Incorporated by reference to exhibit previously filed by the Company with its Current Report on Form 8-K filed on June 16, 2009.
3.2	Amended and Restated Bylaws. Incorporated by reference to exhibit previously filed by the Company with its Current Report on Form 8-K filed on April 4, 2011.
4.1	Form of Common Stock Certificate of the Company. Incorporated by reference to exhibit previously filed by the Company with its Amendment No. 2 to the Registration Statement, filed January 24, 1992 (File No. 33-44367).
10.1	First Amendment to Agreement of Lease by and between COPT Interquest Hybrid I, LLC and The Spectranetics Corporation, dated as of October 23, 2013.
10.2	Third Amendment to Agreement of Lease by and between 9965 Federal Drive, LLC and The Spectranetics Corporation, dated as of October 23, 2013.
31.1	Rule 13(a)-14(a)/15d-14(a) Certification of Chief Executive Officer.
31.2	Rule 13(a)-14(a)/15d-14(a) Certification of Chief Financial Officer.
32.1	Section 1350 Certification of Chief Executive Officer.
32.2	Section 1350 Certification of Chief Financial Officer.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

34

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	The Spectranetics Corporation
	(Registrant)
October 31, 2013		/s/ Scott Drake
		Scott Drake
		President and Chief Executive Officer
October 31, 2013		/s/ Guy A. Childs
		Guy A. Childs
		Chief Financial Officer

35

EX-10.1

Exhibit 10.1

FIRST AMENDMENT TO AGREEMENT OF LEASE

THIS FIRST AMENDMENT TO AGREEMENT OF LEASE (this “Amendment”) is made this 23rd day of October, 2013, by COPT INTERQUEST HYBRID I, LLC, a Colorado limited liability company (“Landlord”) and THE SPECTRANETICS CORPORATION, a Delaware corporation (“Tenant”).

W I T N E S S E T H:

WHEREAS, Landlord and Tenant entered into that Agreement of Lease dated September 30, 2012 (the “Lease”), by the terms of which Tenant leases from Landlord and Landlord leases to Tenant that certain premises containing an agreed upon equivalent of 20,000 rentable square feet known as Suite 190 and located within the office building (the “Building”) located at the property known as 9945 Federal Drive, Colorado Springs, Colorado (as defined in the Lease, the “Property”), all as more particularly described in the Lease, for an Initial term which expires on September 30, 2023;

WHEREAS, pursuant to that certain Agreement of Lease dated December 29, 2006 (as amended, the “9965 Lease”), Tenant leases from 9965 Federal Drive, LLC, an affiliate of Landlord, the entire building (the “9965 Building”) known as 9965 Federal Drive which is located in the vicinity of the Building (the “9965 Property”);

WHEREAS, Tenant has constructed and installed a new sidewalk located on the Property and the 9965 Property in order for Tenant’s agents, employees, invitees and contractors to traverse back and forth between each property and each building (the “New Sidewalk”);

WHEREAS, Landlord and Tenant mutually desire to amend the Lease as more particularly set forth below; and

WHEREAS, all capitalized terms used in this Amendment which are not defined herein shall have the meanings given to them in the Lease, unless the context otherwise requires.

NOW, THEREFORE, in consideration of the above Recitals and the mutual covenants and conditions contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Landlord and Tenant agree as follows:

1.Definition of “Allowance”.    Landlord and Tenant agree that as the term “Allowance” as defined in Section 1.1.13 of the Lease is hereby amended to mean the sum of One Million Nineteen Thousand Eighty Hundred Ninety Four and 00/100 Dollars ($1,019,894.00). In no event shall any part of the Allowance be applied to the costs incurred by Tenant to construct and install the New Sidewalk.

2.New Sidewalk. Landlord and Tenant hereby acknowledge and agree that as of the date of this Amendment, Tenant, at its sole cost and expense, has completed construction and installation of the New Sidewalk. Landlord and Tenant hereby further acknowledge and agree that Landlord shall perform the operation, repair, replacement and maintenance of the New Sidewalk as part of its maintenance of the Common Areas pursuant to Section 23 of the Lease; provided, however, Tenant hereby agrees that throughout the remainder of the Term, including any Renewal Term, all costs and expenses incurred by Landlord in the operation, maintenance and repair of the New Sidewalk shall not be included within Building Expenses but rather shall be reimbursed solely by Tenant (without any contribution from Landlord or any other tenant or occupant) within thirty (30) days following receipt of written invoice, or in the alternative, set forth as a separate line item on Tenant’s Annual Statement and paid along with its payment of Building Expenses in accordance with Section 6 of the Lease. Landlord and Tenant hereby agree that the electricity associated with the heating element of the New Sidewalk has been separately metered between the Property and the 9965 Property and as a result thereof, throughout the remainder of the Term, including any Renewal Term, Tenant shall pay directly all electric charges applicable to the Property directly to the applicable utility company in accordance with Section 24 of the Lease.

1

3.    Insurance. In addition to the requirements set forth in Section 13.1 of the Lease, Tenant shall keep in force at its own expense, so long as the Lease remains in effect, commercial general liability insurance, including insurance against assumed or contractual liability under the Lease, with respect to the New Sidewalk, to afford protection with limits, per person and for each occurrence, of not less than Two Million Dollars ($2,000,000), combined single limit, with respect to bodily injury and death and property damage, such insurance to provide for only a reasonable deductible. Such policy shall be maintained in companies and in form reasonably acceptable to Landlord and shall be written as primary policy coverage and not contributing with, or in excess of, any coverage which Landlord shall carry. Tenant shall deposit evidence of the policy of such required insurance or certificates thereof with Landlord simultaneously with the execution of this Amendment, which policy shall name Landlord or its designee and, at the request of Landlord, its mortgagees, as additional insured and shall also contain a provision stating that such policy shall not be canceled except after thirty (30) days’ written notice to Landlord or its designees. If Tenant fails to comply with its covenants made in this Section, if such insurance would terminate or if Landlord has reason to believe such insurance is about to be terminated, Landlord may at its option cause such insurance as it in its sole judgment deems necessary to be issued, and in such event Tenant agrees to pay promptly upon Landlord’s demand, as additional rent the premiums for such insurance.

4.    Indemnification. In addition to the requirements set forth in Section 40 of the Lease, and except as arising out of the intentional, reckless or negligent act of Landlord, Tenant shall indemnify and hold harmless Landlord and all of its and their respective members, partners, directors, officers, agents and employees from any and all liability, loss, cost or expense arising from all third-party claims resulting from or in connection with any accident, injury or damage whatever occurring in, at or upon the New Sidewalk and together with all costs and expenses reasonably incurred or paid in connection with each such claim or action or proceeding brought thereon, including, without limitation, all reasonable attorney's fees and expenses.

In case any action or proceeding is brought against Landlord and/or any of its and their respective partners, directors, officers, agents or employees and such claim is a claim from which Tenant is obligated to indemnify Landlord pursuant to this Section, Tenant, upon written notice from Landlord shall resist and defend such action or proceeding (by counsel reasonably satisfactory to Landlord). The obligations of Tenant under this Section shall survive termination of the Lease.

5.    Pollution Coverage. Landlord and Tenant hereby agree that Section 13.1 of the Lease is hereby amended such that Tenant shall not be required to carry the pollution coverage described in Section 13.1(f) of the Lease.

6.    Ratification of Lease.    All other terms, covenants and conditions of the Lease shall remain the same and continue in full force and effect, and shall be deemed unchanged, except as such terms, covenants and conditions of the Lease have been amended or modified by this Amendment and this Amendment shall, by this reference, constitute a part of the Lease.

[SIGNATURES ON FOLLOWING PAGE]

2

IN WITNESS WHEREOF, Landlord and Tenant have respectively affixed their hands and seals to this Amendment as of the day and year first above written.    

WITNESS:	LANDLORD:
	COPT INTERQUEST HYBRID I, LLC, a Colorado limited liability company
/s/ [Unreadable]	BY: /s/ Stephen E. Budorick (SEAL)
	Stephen E. Budorick
	Executive Vice President

WITNESS:	TENANT:
	THE SPECTRANETICS CORPORATION
/s/ Relene Harmon	BY: /s/ Guy Childs (SEAL)
	Name:Guy Childs
	Title:CFO

STATE OF MARYLAND, COUNTY OF HOWARD, TO WIT:

I HEREBY CERTIFY, that on this 23rd day of October, 2013, before me, the undersigned Notary Public of said State, personally appeared STEPHEN E. BUDORICK, who acknowledged himself to be Executive Vice President of COPT INTERQUEST HYBRID I, LLC, a Colorado limited liability company, known to me (or satisfactorily proven) to be the person whose name is subscribed to the within instrument, and acknowledged that he executed the same for the purposes therein contained as the duly authorized Executive Vice President by signing the name of the company by himself as Executive Vice President.

WITNESS my hand and Notarial Seal.

Monique Y. Jones
Notary Public
Anne Arundel County, MD	/s/ Monique Y. Jones
My Commission Expires 11-21-2016	Notary Public

My Commission Expires: 11/21/2016

STATE OF COLORADO COUNTY OF EL PASO to wit:

I HEREBY CERTIFY, that on this 10th day of October, 2013, before me, the subscriber, a Notary Public of the State of Colorado, personally appeared Guy Childs, known to me or satisfactorily proven to be the Chief Financial Officer of THE SPECTRANETICS CORPORATION, a Delaware corporation, and acknowledged that he/she executed the foregoing instrument for the purposes therein contained by signing the name of the corporation by him/herself as such Chief Financial Officer.

WITNESS my hand and Notarial Seal.

Betty J Wiggins
Notary Public
State of Colorado	/s/ Betty J Wiggins
Notary ID 20044022093	Notary Public

My Commission Expires: July 25, 2016

3

EX-10.2

Exhibit 10.2

THIRD AMENDMENT TO AGREEMENT OF LEASE

THIS THIRD AMENDMENT TO AGREEMENT OF LEASE (this “Amendment”) is made this 23rd day of October, 2013, and is effective as of June 7, 2013 (the “Effective Date”), by 9965 FEDERAL DRIVE, LLC, a Colorado limited liability company (the “Landlord”) and THE SPECTRANETICS CORPORATION, a Delaware corporation(“Tenant”).

RECITALS:

WHEREAS, Landlord and Tenant entered into that Agreement of Lease dated December 29, 2006, as amended by that certain First Amendment to Agreement of Lease dated January 9, 2012 and that certain Second Amendment to Agreement of Lease dated September 30, 2012 (the “Second Amendment”) and that certain Letter Agreement dated May 2, 2013 (the “Letter Agreement”) (collectively, the “Lease”), by the terms of which Tenant leases from Landlord and Landlord leases to Tenant that certain premises containing 79,903 square feet of rentable area (the “Original Premises”) located within the office building (the “Building”) located at the property known as 9965 Federal Drive, Colorado Springs, Colorado 80921 (as defined in the Lease, the “Property”), all as more particularly described in the Lease, for a Term which expires on September 30, 2023;

WHEREAS, pursuant to Section 4 of the Second Amendment, Tenant has completed construction of Tenant’s Loading Dock containing approximately 2,835 square feet of rentable area;

WHEREAS, pursuant to that certain Agreement of Lease dated September 30, 2012 (the “9945 Lease”), Tenant leases from COPT Interquest Hybrid I, LLC, an affiliate of Landlord, certain premises located in that office building (the “9945 Building”) known as 9945 Federal Drive which is located in the vicinity of the Building (the “9945 Property”);

WHEREAS, Tenant has constructed and installed a new sidewalk located on the Property and the 9945 Property in order for Tenant’s agents, employees, invitees and contractors to traverse back and forth between each property and each building (the “New Sidewalk”);

WHEREAS, Landlord and Tenant mutually desire to amend the Lease as more particularly set forth below; and

WHEREAS, all capitalized terms used in this Amendment which are not defined herein shall have the meanings given to them in the Lease, unless the context otherwise requires.

NOW, THEREFORE, in consideration of the above Recitals and the mutual covenants and conditions contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Landlord and Tenant agree as follows:

1.    Definition of “Premises”. As of the Effective Date, the Original Premises shall be increased by the 2,835 rentable square feet contained in the Expansion Space and every reference in the Lease to the “Premises” shall be construed to mean the Original Premises and the Expansion Space, containing the agreed upon equivalent of 82,738 square feet of rentable area.

2.    Definition of “Rentable Area of the Building” As of the Effective Date, the term “Rentable Area of the Building” (as defined in Section 1.1.2 of the Lease and previously amended) shall be amended to mean 82,738 rentable square feet, subject to adjustment in accordance with BOMA standards. Notwithstanding the foregoing, Landlord and Tenant hereby acknowledge and agree that for purposes of calculating Tenant’s Proportionate Share of Building Expenses, Taxes and other charges due under the Lease, (i) the Rentable Area of the Building and the Rentable Area of the Premises shall be deemed to contain 77,584 rentable square feet and (ii) Tenant’s Proportionate Share shall remain at 100%.

3.    Base Rent. As of the Effective Date and continuing thereafter throughout the remainder of the Term, Tenant shall pay as Base Rent for the entire Premises the amounts set forth below:

1

Period	Annual Base Rent	Monthly Installment of Annual Base Rent
6/7/13 – 2/28/14	$1,001,129.80*	$83,427.48
3/1/14 – 2/28/15	$1,040,016.66	$86,668.06
3/1/15 – 2/29/16	$1,116,963.00	$93,080.25
3/1/16 – 2/28/17	$1,119,445.14	$93,287.10
3/1/17 – 2/28/18	$1,159,159.38	$96,596.62
3/1/18 – 2/28/19	$1,198,873.62	$99,906.14
3/1/19 – 2/29/20	$1,238,587.86	$103,215.66
3/1/20 – 2/28/21	$1,278,302.10	$106,525.18
3/1/21 – 2/28/22	$1,318,016.34	$109,834.70
3/1/22 – 2/28/23	$1,357,730.58	$113,144.22
3/1/23 – 9/30/23	$1,397,444.82*	$116,453.74

*Annualized based on a full year.

4.    Allowance. Landlord and Tenant agree that as the term “Allowance” as defined in Section 3 of the Second Amendment is hereby amended to mean the sum of Five Hundred Seventy Nine Thousand Two Hundred Fifty Seven and 00/100 Dollars ($579,257.00). Landlord and Tenant hereby further agree that the Allowance may be applied to the costs incurred by Tenant in performing the construction and build-out of the Expansion Space; provided, however, in no event shall any part of the Allowance be applied to the costs incurred by Tenant to construct and install the New Sidewalk. Landlord and Tenant hereby agree that the Allowance has been disbursed and paid in full by Landlord and there is no unused portion remaining as of the date of this Amendment.

5.    New Sidewalk. Landlord and Tenant hereby acknowledge and agree that as of the date of this Amendment, Tenant, at its sole cost and expense, has completed construction and installation of the New Sidewalk. Landlord and Tenant hereby further acknowledge and agree that Landlord shall perform the operation, repair, replacement and maintenance of the New Sidewalk as part of its maintenance of the Common Areas pursuant to Section 23 of the Lease; provided, however, Tenant hereby agrees that throughout the remainder of the Term, including any Renewal Term, all costs and expenses incurred by Landlord in the operation, maintenance and repair of the New Sidewalk shall not be included within Building Expenses but rather shall be reimbursed solely by Tenant (without any contribution from Landlord or any other tenant or occupant) within thirty (30) days following receipt of written invoice, or in the alternative, set forth as a separate line item on Tenant’s Annual Statement and paid along with its payment of Building Expenses in accordance with Section 6 of the Lease. Landlord and Tenant hereby agree that the electricity associated with the heating element of the New Sidewalk has been separately metered between the Property and the 9945 Property and as a result thereof, throughout the remainder of the Term, including any Renewal Term, Tenant shall pay directly all electric charges applicable to the Property directly to the applicable utility company in accordance with Section 24 of the Lease.

6.    Insurance. In addition to the requirements set forth in Section 13.1 of the Lease, Tenant shall keep in force at its own expense, so long as the Lease remains in effect, commercial general liability insurance, including insurance against assumed or contractual liability under the Lease, with respect to the New Sidewalk, to afford protection with limits, per person and for each occurrence, of not less than Two Million Dollars ($2,000,000), combined single limit, with respect to bodily injury and death and property damage, such insurance to provide for only a reasonable deductible. Such policy shall be maintained in companies and in form reasonably acceptable to Landlord and shall be written as primary policy coverage and not contributing with, or in excess of, any coverage which Landlord shall carry. Tenant shall deposit evidence of the policy of such required insurance or certificates thereof with Landlord simultaneously with the execution of this Amendment, which policy shall name Landlord or its designee and, at the request of Landlord, its mortgagees, as additional insured and shall also contain a provision stating that such policy shall not be canceled except after thirty (30) days’ written notice to Landlord or its designees. If Tenant fails to comply with its covenants made in this Section, if such insurance would terminate or if Landlord has reason to believe such insurance is about to be terminated, Landlord may at its option cause such insurance as it in its sole judgment deems necessary to be issued, and in such event Tenant agrees to pay promptly upon Landlord’s demand, as additional rent the premiums for such insurance.

2

7.    Indemnification. In addition to the requirements set forth in Section 40 of the Lease, and except as arising out of the intentional, reckless or negligent act of Landlord, Tenant shall indemnify and hold harmless Landlord and all of its and their respective members, partners, directors, officers, agents and employees from any and all liability, loss, cost or expense arising from all third-party claims resulting from or in connection with any accident, injury or damage whatever occurring in, at or upon the New Sidewalk and together with all costs and expenses reasonably incurred or paid in connection with each such claim or action or proceeding brought thereon, including, without limitation, all reasonable attorney's fees and expenses.

In case any action or proceeding is brought against Landlord and/or any of its and their respective partners, directors, officers, agents or employees and such claim is a claim from which Tenant is obligated to indemnify Landlord pursuant to this Section, Tenant, upon written notice from Landlord shall resist and defend such action or proceeding (by counsel reasonably satisfactory to Landlord). The obligations of Tenant under this Section shall survive termination of the Lease.

8.    Right of Expansion. Landlord and Tenant hereby agree that Tenant’s right to expand the Building pursuant to Section 53 of the Lease (as amended by the Second Amendment) is hereby ratified and shall remain in full force and effect.

9.    Health Clinic. Landlord hereby agrees that notwithstanding anything to the contrary contained in the Lease, Tenant may, at its sole cost and expense, may operate a health clinic in a portion of the Premises containing not more than 900 rentable square feet for the provision of medical services to its employees and their dependants (the “Health Clinic”). The final location of the Health Clinic and all plans and specifications for the construction of the Health Clinic shall be subject to Landlord’s prior approval, not to be unreasonably withheld, condition or delayed. Tenant shall obtain all necessary governmental licenses, permits and approvals to construct and operate the Health Clinic. Landlord makes no representation or warranty to Tenant that the Property is suitable for the operation of the Health Clinic. Tenant shall operate the Health Clinic in accordance with Applicable Laws including, without limitation, any Environmental Laws pertaining to the removal of any Hazardous Materials. Tenant shall cause the Health Clinic to be operated and maintained in a professional manner comparable to other first class health clinics located in the vicinity of the Property.

10.    Parking. Landlord and Tenant hereby agree that Section 52 of the Lease is hereby deleted in its entirety and the following is hereby inserted in lieu thereof:

“52.     Parking. Parking is available free and in common on the surface lot, which parking shall be sufficient to meet Tenant’s business needs but in no event more than is required by applicable zoning codes. Landlord shall not be responsible or liable for any damage to Tenant’s vehicles as a result of fire, theft, vandalism and/or collision. It is understood and agreed that Landlord’s sole obligation hereunder is to make available to Tenant said parking spaces, and it is hereby understood and agreed that Landlord shall not be responsible for “monitoring” or “policing” the parking area so as to ensure Tenant’s use thereof.”

11.    Water Line Relocation. Tenant shall prosecute completion of the Water Line Relocation in a commercially reasonable manner following the date of this Amendment and complete such work on or before October 31, 2013.

12.    Broker. Tenant represents that Tenant has not dealt with any broker in connection with this Amendment, and Tenant warrants that no broker negotiated this Amendment or is entitled to any commissions in connection with this Amendment. Tenant shall indemnify and hold Landlord harmless for any breach of the foregoing representations.

13.    Ratification of Lease. Except to the extent modified by the terms of this Amendment, all other terms, covenants and conditions of the Lease shall remain the same and continue in full force and effect and this Amendment shall, by this reference, constitute a part of the Lease.

[SIGNATURES ON FOLLOWING PAGE]

3

IN WITNESS WHEREOF, the parties hereto have executed this Amendment under their respective seals as of the day and year first-above written.

WITNESS/ATTEST:	LANDLORD:
	9965 FEDERAL DRIVE, LLC
/s/ [Unreadable]	BY: /s/ Stephen E. Budorick (SEAL)
	Stephen E. Budorick
	Executive Vice President

WITNESS OR ATTEST:	TENANT:
	THE SPECTRANETICS CORPORATION
/s/ Relene Harmon	BY: /s/ Guy Childs
	Guy Childs, Chief Financial Officer

STATE OF MARYLAND, COUNTY OF HOWARD, to wit:

I HEREBY CERTIFY, that on this 23rd day of October, 2013, before me, the subscriber, a Notary Public of the State of Maryland, personally appeared Stephen E. Budorick, known to me or satisfactorily proven to be the Executive Vice President of9965 FEDERAL DRIVE, LLC, a Colorado limited liability company, and acknowledged that he executed the foregoing instrument for the purposes therein contained by signing the name of the company by himself as such President.

WITNESS my hand and Notarial Seal.

Monique Y. Jones
Notary Public
Anne Arundel County, MD	/s/ Monique Y. Jones
My Commission Expires 11-21-2016	Notary Public

My Commission Expires: 11/21/2016

STATE OF COLORADO COUNTY OF EL PASO to wit:

I HEREBY CERTIFY, that on this 10th day of October, 2013, before me, the subscriber, a Notary Public of the State of Colorado, personally appeared Guy Childs, known to me or satisfactorily proven to be the Chief Financial Officer of THE SPECTRANETICS CORPORATION, a Delaware corporation, and acknowledged that he/she executed the foregoing instrument for the purposes therein contained by signing the name of the corporation by him/herself as such Chief Financial Officer.

WITNESS my hand and Notarial Seal.

Betty J Wiggins
Notary Public
State of Colorado	/s/ Betty J Wiggins
Notary ID 20044022093	Notary Public

My Commission Expires: July 25, 2016

4

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Scott Drake, certify that:

1.I have reviewed this quarterly report on Form 10-Q of The Spectranetics Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

October 31, 2013
	/s/ Scott Drake
	Scott Drake
	Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Guy A. Childs, certify that:

1.        I have reviewed this quarterly report on Form 10-Q of The Spectranetics Corporation;

2.        Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.        Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.        The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.        The registrant’s other certifying officer(s) and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

October 31, 2013
	/s/ Guy A. Childs
	Guy A. Childs
	Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer

Pursuant to 18 U.S.C. §1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of The Spectranetics Corporation (the “Company”) hereby certifies, to such officer's knowledge, that:

(i) the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2013 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

October 31, 2013	/s/ Scott Drake
	Scott Drake
	Chief Executive Officer

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. section 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer

Pursuant to 18 U.S.C. §1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of The Spectranetics Corporation (the “Company”) hereby certifies, to such officer's knowledge, that:

(i) the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2013 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

October 31, 2013	/s/ Guy A. Childs
	Guy A. Childs
	Chief Financial Officer

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. section 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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Composition of Certain Financial Statement Items (Tables)

9 Months Ended

Sep. 30, 2013

Balance Sheet Related Disclosures [Abstract]

Schedule of Inventory, Current

Inventories, net, consisted of the following (in thousands): 

	September 30, 2013		December 31, 2012
Raw materials	$	3,894	$	2,573
Work in process	2,564		1,887
Finished goods	3,550		4,828
	$	10,008	$	9,288

Property, Plant and Equipment

Property and equipment, net, consisted of the following (in thousands): 

	September 30, 2013			December 31, 2012
Equipment held for rental or loan	$	41,286		$	40,180
Manufacturing equipment and computers	23,386			22,888
Leasehold improvements	5,381			5,024
Furniture and fixtures	2,395			2,102
Building and improvements	1,276			1,276
Land	270			270
Less: accumulated depreciation and amortization	(47,429		)	(44,734		)
	$	26,565		$	27,006

Schedule of Accrued Liabilities

Accrued liabilities consisted of the following (in thousands): 

	September 30, 2013			December 31, 2012
Accrued payroll and employee-related expenses	$	8,883		$	9,951
Accrued taxes	1,156			1,003
Deferred rent	1,105			800
Accrued clinical study expense	639			671
Accrued royalties	509			528
Contingent consideration, current portion	500			—
Employee stock purchase plan liability	441			602
Accrued legal costs	307			489
Other accrued expenses	2,696			2,948
Less: long-term portion	(1,106		)	(991		)
Accrued liabilities: current portion	$	15,130		$	16,001

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Condensed Consolidated Statements of Comprehensive Income (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Revenue	$ 39,763	$ 35,230	$ 116,891	$ 103,534
Cost of products sold	10,053	9,624	30,997	28,112
Gross profit	29,710	25,606	85,894	75,422
Operating expenses:
Selling, general and administrative	22,223	20,324	68,089	61,287
Research, development and other technology	5,664	4,181	16,320	12,134
Medical device excise tax	537	0	1,568	0
Contingent consideration	234	0	638	0
Acquisition-related intangible asset amortization	246	0	656	0
Total operating expenses	28,904	24,505	87,271	73,421
Operating income (loss)	806	1,101	(1,377)	2,001
Other income (expense):
Interest (expense) income, net	(1)	2	1	8
Foreign currency transaction gain (loss)	35	34	10	(7)
Other income, net	0	10	8	10
Total other income	34	46	19	11
Income (loss) before income taxes	840	1,147	(1,358)	2,012
Income tax expense (benefit)	406	242	(105)	459
Net income (loss)	434	905	(1,253)	1,553
Net income (loss) per share —
Basic	$ 0.01	$ 0.03	$ (0.03)	$ 0.05
Diluted	$ 0.01	$ 0.03	$ (0.03)	$ 0.04
Other comprehensive income (loss) net of tax
Foreign currency translation adjustments	220	118	163	(37)
Comprehensive income (loss), net of tax	$ 654	$ 1,023	$ (1,090)	$ 1,516
Weighted average common shares outstanding —
Basic	40,837,191	34,548,777	38,210,098	34,267,597
Diluted	42,376,181	35,945,453	38,210,098	35,550,565

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Common Stock Offering (Notes)

9 Months Ended

Sep. 30, 2013

Equity [Abstract]

Common Stock Offering

COMMON STOCK OFFERING

On May 1, 2013, the Company completed an offering of 5,462,500 shares of its common stock at a public offering price of $18.00 per share minus the underwriters’ discount of $1.08 per share. The Company received net proceeds of approximately $92.0 million, after deducting underwriting discounts and commissions and offering expenses (approximately $0.4 million) paid by the Company.

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Business Combination (Recognized Identified Assets Acquired and Liabilities Assumed) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended		9 Months Ended
	Mar. 31, 2013	Sep. 30, 2013	Jan. 07, 2013	Dec. 31, 2012	Sep. 30, 2013 Acquired core technologies	Jan. 07, 2013 Acquired core technologies	Sep. 30, 2013 Non-compete agreement	Jan. 07, 2013 Non-compete agreement
Aggregate Preliminary Purchase Price Components [Abstract]
Cash	$ 6,500
Milestone payable, current		500	500	0
Long-term contingent consideration			5,650
Total purchase price			12,650
Recognized Identifiable Assets Acquired and Liabilities Assumed, Assets [Abstract]
Tangible assets (inventory and fixed assets)			100
Amortizable intangible assets						10,600		400
Amortization period (years)					12 years		4 years
Goodwill		14,846	1,550	13,296
Total purchase price			$ 12,650

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Goodwill and Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

The change in the carrying amount of goodwill by reporting unit for the nine months ended September 30, 2013 was as follows (in thousands):

	U.S. Medical		International Medical		Total
Balance as of December 31, 2012	$	6,925	$	6,371	$	13,296
Additional goodwill (Note 2)	1,240		310		1,550
Balance as of September 30, 2013	$	8,165	$	6,681	$	14,846

Acquired Intangible Assets

Acquired intangible assets consisted of the following (in thousands):

	September 30, 2013			December 31, 2012
Acquired core technologies (Note 2)	$	10,600		$	—
Non-compete agreement (Note 2)	400			—
Patents	4,273			4,273
Less: accumulated amortization	(4,928		)	(4,253		)
	$	10,345		$	20

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Segment Reporting (Narrative) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Segment Reporting Information [Line Items]
Number of Lines of Business			1
Number of Reportable Segments			2
Number of Product Lines			2
Sales Revenue, Goods, Net | Customer Concentration Risk
Segment Reporting Information [Line Items]
Number of Customers			0	0
Sales Revenue, Goods, Net | Geographic Concentration Risk
Segment Reporting Information [Line Items]
Number of Customers			0	0
U.S. Medical
Segment Reporting Information [Line Items]
Segment Reporting Information, Intersegment Revenue	$ 1.7	$ 1.6	$ 5.5	$ 5.4

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Composition of Certain Financial Statement Items (Property and Equipment) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Property, Plant and Equipment [Line Items]
Less: accumulated depreciation and amortization	$ (47,429)	$ (44,734)
Property and equipment, net	26,565	27,006
Equipment held for rental or loan
Property, Plant and Equipment [Line Items]
Property and equipment, gross	41,286	40,180
Manufacturing equipment and computers
Property, Plant and Equipment [Line Items]
Property and equipment, gross	23,386	22,888
Leasehold improvements
Property, Plant and Equipment [Line Items]
Property and equipment, gross	5,381	5,024
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Property and equipment, gross	2,395	2,102
Building and improvements
Property, Plant and Equipment [Line Items]
Property and equipment, gross	1,276	1,276
Land
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 270	$ 270

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Composition of Certain Financial Statement Items (Inventories) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Balance Sheet Related Disclosures [Abstract]
Raw Materials	$ 3,894	$ 2,573
Work in Process	2,564	1,887
Finished Goods	3,550	4,828
Inventory, Net	$ 10,008	$ 9,288

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Stock-Based Compensation (Weighted Average Grant Date Fair Value) (Details) (Common Stock, USD $)	9 Months Ended
	Sep. 30, 2013
Common Stock
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Options outstanding at January 1, 2013 (shares)	3,263,830
Granted (shares)	684,980
Exercised (shares)	(486,837)
Canceled (shares)	(61,512)
Options outstanding at September 30, 2013	3,400,461
Options exercisable at September 30, 2013	1,759,856
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
Options outstanding at January 1, 2013, Weighted Average Exercise Price	$ 7.02
Granted, Weighted Average Exercise Price	$ 18.09
Exercised, Weighted Average Exercise Price	$ 5.98
Canceled, Weighted Average Exercise Price	$ 10.41
Options outstanding at September 30, 2013, Weighted Average Exercise Price	$ 9.34
Options exercisable at September 30, 2013, Weighted Average Exercise Price	$ 6.52
Options outstanding at September 30, 2013, Weighted Average Remaining Contractual Term (In Years)	7 years 2 months 27 days
Options exercisable at September 30, 2013, Weighted Average Remaining Contractual Term	5 years 9 months
Options outstanding at September 30, 2013, Aggregate Intrinsic Value	$ 26,319,147
Options exercisable at September 30, 2013, Aggregate Intrinsic Value	$ 18,086,044

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Segment Reporting (Segment Reporting) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Segments, Geographical Areas [Abstract]
Operating (loss) income	$ 806	$ 1,101	$ (1,377)	$ 2,001
Assets	213,639		213,639		110,769
U.S. Medical
Segments, Geographical Areas [Abstract]
Operating (loss) income	(26)	719	(2,572)	768
Assets	195,933		195,933		95,181
International Medical
Segments, Geographical Areas [Abstract]
Operating (loss) income	832	382	1,195	1,233
Assets	$ 17,706		$ 17,706		$ 15,588

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Common Stock Offering (Details) (USD $)	3 Months Ended	9 Months Ended
	Jun. 30, 2013	Sep. 30, 2013	Sep. 30, 2012	May 01, 2013
Equity [Abstract]
Stock Issued During Period, Shares, New Issues	5,462,500
Sale of Stock, Price Per Share				$ 18.00
Underwriting Fees and Commissions, Per Share				$ 1.08
Net proceeds from stock offering	$ 92,000,000	$ 92,034,000	$ 0
Payments of Stock Issuance Costs	$ 400,000

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Business Combination (Goodwill Allocation by Operating Segment) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Jan. 07, 2013	Dec. 31, 2012
Business Acquisition [Line Items]
Goodwill	$ 14,846	$ 1,550	$ 13,296
U.S. Medical
Business Acquisition [Line Items]
Goodwill		1,240
International Medical
Business Acquisition [Line Items]
Goodwill		$ 310

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General (Notes)

9 Months Ended

Sep. 30, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

General

GENERAL

The accompanying condensed consolidated financial statements include the accounts of The Spectranetics Corporation, a Delaware corporation, and its wholly-owned Dutch subsidiary, Spectranetics International, B.V., including the accounts of two wholly-owned subsidiaries of Spectranetics International, B.V., Spectranetics Deutschland GmbH and Spectranetics Austria GmbH (collectively, the “Company”). All intercompany balances and transactions have been eliminated in consolidation.

The Company develops, manufactures, markets, and distributes single-use medical devices used in minimally invasive procedures within the cardiovascular system. The Company’s Vascular Intervention products include a range of laser catheters to ablate blockages in arteries above and below the knee (peripheral atherectomy); support catheters to facilitate crossing of peripheral and coronary arterial blockages, retrograde access and guidewire retrieval devices used in the treatment of peripheral arterial blockages, including chronic total occlusions (crossing solutions); and aspiration and cardiac laser catheters to treat blockages in the heart (coronary atherectomy and thrombectomy). The Company’s Lead Management products include excimer laser sheaths and cardiac lead management accessories for the removal of pacemaker and defibrillator cardiac leads. The Company also sells, rents, and services its CVX-300^® laser systems.

The Company prepares its condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Management must make certain estimates, judgments, and assumptions based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, intangible assets and goodwill, valuation allowances and reserves for receivables, inventories, and deferred income tax assets, contingent consideration liabilities for acquisitions, stock-based compensation expense, estimated clinical trial expenses, accrued estimates for incurred but not reported claims under partially self-insured employee health benefit programs, and loss contingencies, including those related to litigation. Actual results could differ from those estimates.

The information included in the accompanying condensed consolidated interim financial statements is unaudited and should be read with the audited financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. In the opinion of management, all adjustments necessary for a fair presentation of the assets, liabilities and results of operations for the interim periods presented have been reflected herein and are of a normal, recurring nature. The results of operations for interim periods are not necessarily indicative of the results to be expected for the entire year.

The Patient Protection and Affordable Care Act of 2010 imposes a medical device excise tax on medical device manufacturers on their sales in the U.S. of certain devices beginning on January 1, 2013. The excise tax is 2.3% of the taxable base and applies to a substantial majority of the Company’s U.S. sales. For the three and nine months ended September 30, 2013, the Company incurred $0.5 million and $1.6 million of excise tax, respectively, which is recorded in the condensed consolidated statements of comprehensive income (loss) as an operating expense under the caption “Medical device excise tax.”

New significant accounting policy

Valuation of Business Combinations

The fair value of consideration, including contingent consideration, transferred in acquisitions accounted for as business combinations is first allocated to the identifiable tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. Any excess purchase consideration is allocated to goodwill. Further, for those arrangements that involve liability classified contingent consideration, the Company records on the date of acquisition a liability equal to the discounted fair value of the estimated additional consideration it may be obligated to make in the future. Liability classified contingent consideration is adjusted to its fair value each reporting period through earnings. Acquisition transaction costs are expensed as incurred. The fair value of identifiable intangible assets uses management estimates and judgments based on market participant assumptions.

Contingent consideration liabilities are remeasured to fair value each reporting period using projected revenues, discount rates, probabilities of payment and projected payment dates. Increases or decreases in the fair value of the contingent consideration liability can result from changes in the timing and amount of revenue estimates or in the timing or likelihood of achieving intellectual property milestones, and changes in discount periods and rates. Projected contingent payment amounts are discounted back to the current period using a discounted cash flow model. See Note 2 for further discussion.

The Company has considered recently issued accounting pronouncements and does not believe such pronouncements are of significance, or potential significance, to the Company.

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Composition of Certain Financial Statement Items (Notes)

9 Months Ended

Sep. 30, 2013

Balance Sheet Related Disclosures [Abstract]

Composition of Certain Financial Statement Items

COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS

Inventories

Inventories, net, consisted of the following (in thousands): 

	September 30, 2013		December 31, 2012
Raw materials	$	3,894	$	2,573
Work in process	2,564		1,887
Finished goods	3,550		4,828
	$	10,008	$	9,288

Property and Equipment

Property and equipment, net, consisted of the following (in thousands): 

	September 30, 2013			December 31, 2012
Equipment held for rental or loan	$	41,286		$	40,180
Manufacturing equipment and computers	23,386			22,888
Leasehold improvements	5,381			5,024
Furniture and fixtures	2,395			2,102
Building and improvements	1,276			1,276
Land	270			270
Less: accumulated depreciation and amortization	(47,429		)	(44,734		)
	$	26,565		$	27,006

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands): 

	September 30, 2013			December 31, 2012
Accrued payroll and employee-related expenses	$	8,883		$	9,951
Accrued taxes	1,156			1,003
Deferred rent	1,105			800
Accrued clinical study expense	639			671
Accrued royalties	509			528
Contingent consideration, current portion	500			—
Employee stock purchase plan liability	441			602
Accrued legal costs	307			489
Other accrued expenses	2,696			2,948
Less: long-term portion	(1,106		)	(991		)
Accrued liabilities: current portion	$	15,130		$	16,001

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Stock-Based Compensation (Notes)

9 Months Ended

Sep. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

STOCK-BASED COMPENSATION

The Company maintains stock option plans that provide for the grant of incentive stock options, nonqualified stock options, restricted stock awards, restricted stock units, and stock appreciation rights. The plans provide that stock options may be granted with exercise prices not less than the fair market value at the date of grant. Options granted through September 30, 2013 generally vest over four years and expire ten years from the date of grant. Restricted stock awards granted to non-employee members of the Board of Directors vest over one year. Restricted stock units granted to certain officers of the Company vest over four years. At September 30, 2013, there were 1.1 million shares available for future issuance under these plans. 

Valuation and Expense Information

The Company recognized stock-based compensation expense of $1.2 million and $0.9 million for the three months ended September 30, 2013 and 2012, respectively, and $2.8 million and $2.3 million for the nine months ended September 30, 2013 and 2012, respectively.  This expense consisted of compensation expense related to (1) employee stock options based on the value of share-based payment awards that is ultimately expected to vest during the period, (2) restricted stock awards issued to the Company’s directors, (3) restricted stock units issued to certain of the Company’s officers, and (4) the estimated fair value of shares expected to be issued under the Company’s employee stock purchase plan. Stock-based compensation expense is recognized based on awards ultimately expected to vest and is reduced for estimated forfeitures. The Company recognizes compensation expense for these awards on a straight-line basis over the service period.

For all options not subject to a market condition, the fair value of each share option award is estimated on the date of grant using the Black-Scholes pricing model based on assumptions noted in the following table. The Company’s employee stock options have various restrictions, including vesting provisions and restrictions on transfers, hedging and pledging, among others, and are often exercised prior to their contractual expiration. Expected volatilities used in the fair value estimate are based on the historical volatility of the Company’s common stock. The Company uses historical data to estimate share option exercises, expected term and employee departure behavior used in the Black-Scholes pricing model. The risk-free rate for periods within the contractual term of the share option is based on the U.S. Treasury yield in effect at the time of grant. The following is a summary of the assumptions used for the stock options granted during the three and nine months ended September 30, 2013 and 2012, respectively, using the Black-Scholes pricing model:

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2013		2012		2013		2012
Expected life (years)	5.84		5.90		5.84		5.90
Risk-free interest rate	1.39	%	0.63	%	1.35	%	0.75	%
Expected volatility	65.54	%	65.86	%	65.55	%	66.42	%
Expected dividend yield	—		—		—		—

The weighted average grant date fair value of options granted during the three months ended September 30, 2013 and 2012 was $10.68 and $6.76, respectively, and during the nine months ended September 30, 2013 and 2012 was $10.65 and $5.84, respectively.

The following table summarizes stock option activity during the nine months ended September 30, 2013: 

	Shares		Weighted Average Exercise Price		Weighted Avg. Remaining Contractual Term (In Years)	Aggregate Intrinsic Value
Options outstanding at January 1, 2013	3,263,830		$	7.02
Granted	684,980		18.09
Exercised	(486,837	)	5.98
Canceled	(61,512	)	10.41
Options outstanding at September 30, 2013	3,400,461		$	9.34	7.24	$	26,319,147
Options exercisable at September 30, 2013	1,759,856		$	6.52	5.75	$	18,086,044

The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on the Company’s stock price of $16.80 as of September 30, 2013, which would have been received by the option holders had all option holders exercised their options as of that date. In-the-money options exercisable as of September 30, 2013 totaled approximately 1.8 million, as all options exercisable were in the money as of that date.  The total intrinsic value of options exercised was $5.7 million and $3.3 million during the nine months ended September 30, 2013 and 2012, respectively.

The following table summarizes restricted stock award activity during the nine months ended September 30, 2013: 

	Shares		Weighted Average Grant Date Fair Value
Restricted stock awards outstanding at January 1, 2013	48,632		$	9.87
Awarded	22,190		18.93
Vested/Released	(48,632	)	9.87
Restricted stock awards outstanding at September 30, 2013	22,190		$	18.93

The following table summarizes restricted stock unit activity during the nine months ended September 30, 2013: 

	Shares		Weighted  Average  Purchase Price		Weighted Avg. Remaining Contractual Term (In Years)	Aggregate Intrinsic Value
Restricted stock units outstanding at January 1, 2013	126,350		$	—
Awarded	89,512		—
Vested/Released	(46,700	)	—
Restricted stock units outstanding at September 30, 2013	169,162		$	—	1.71	$	2,841,922

As of September 30, 2013, there was $10.0 million of total unrecognized compensation expense related to non-vested share-based compensation arrangements granted under the Company’s stock option plans. This expense is based on an assumed future forfeiture rate of approximately 13.37% per year for Company employees and is expected to be recognized over a weighted-average period of approximately 2.8 years.

Employee Stock Purchase Plan

In June 2010, the Company’s stockholders approved The Spectranetics Corporation 2010 Employee Stock Purchase Plan (“ESPP”).  The ESPP provides for the sale of up to 700,000 shares of common stock to eligible employees, limited to the lesser of 2,500 shares per employee per six-month period or a fair market value of $25,000 per employee per calendar year. Stock purchased under the ESPP is restricted from sale for one year following the date of purchase. Stock can be purchased from amounts accumulated through payroll deductions during each six-month period. The purchase price is equal to 85% of the lower of the fair market value of the Company’s common stock at the beginning or end of the respective six-month offering period.  This discount does not exceed the maximum discount rate permitted for plans of this type under Section 423 of the Internal Revenue Code of 1986, as amended.  The ESPP is compensatory for financial reporting purposes. At September 30, 2013, there were 0.3 million shares available for future issuance under this plan. 

The fair value of the offerings under the ESPP is determined on the first day of the semi-annual purchase period using the Black-Scholes option-pricing model. The expected term of six months was based upon the offering period of the ESPP. Expected volatility was determined based on the historical volatility from daily share price observations for the Company’s stock covering a period commensurate with the expected term of the ESPP. The risk-free interest rate was based on the six-month U.S. Treasury daily yield rate. The expected dividend yield was based on the Company’s historical practice of electing not to pay dividends to its stockholders. For the three months ended September 30, 2013 and 2012, the Company recognized $111,000 and $75,000, respectively, and for the nine months ended September 30, 2013 and 2012, the Company recognized $307,000 and $215,000, respectively, of compensation expense related to the ESPP.

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Goodwill and Intangible Assets (Notes)

9 Months Ended

Sep. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

GOODWILL AND INTANGIBLE ASSETS

The change in the carrying amount of goodwill by reporting unit for the nine months ended September 30, 2013 was as follows (in thousands):

	U.S. Medical		International Medical		Total
Balance as of December 31, 2012	$	6,925	$	6,371	$	13,296
Additional goodwill (Note 2)	1,240		310		1,550
Balance as of September 30, 2013	$	8,165	$	6,681	$	14,846

Acquired intangible assets consisted of the following (in thousands):

	September 30, 2013			December 31, 2012
Acquired core technologies (Note 2)	$	10,600		$	—
Non-compete agreement (Note 2)	400			—
Patents	4,273			4,273
Less: accumulated amortization	(4,928		)	(4,253		)
	$	10,345		$	20

The Company evaluates goodwill for impairment at least annually and whenever events or circumstances indicate the carrying amount of the asset may not be recoverable. There have been no events or circumstances since the last analysis as of December 31, 2012 to indicate that the goodwill may not be recoverable.

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Income Tax Disclosure (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2013
Income Tax Disclosure [Abstract]
Valuation Allowance	$ 12.7
Goodwill Amortization Period, Tax Purposes	15 years

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Composition of Certain Financial Statement Items (Accrued Liabilities) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Jan. 07, 2013	Dec. 31, 2012
Accrued Liabilities, Current [Abstract]
Accrued payroll and employee-related expenses	$ 8,883		$ 9,951
Accrued taxes	1,156		1,003
Deferred rent	1,105		800
Accrued clinical study expense	639		671
Accrued royalties	509		528
Contingent consideration, current portion	500	500	0
Employee stock purchase plan liability	441		602
Accrued legal costs	307		489
Other accrued expenses	2,696		2,948
Less: long-term portion	(1,106)		(991)
Accrued liabilities: current portion	$ 15,130		$ 16,001

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Stock-Based Compensation (Narrative) (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated Share-based Compensation Expense	$ 1,200,000	$ 900,000	$ 2,800,000	$ 2,300,000
Unrecognized compensation expense	10,000,000		10,000,000
Weighted-average recognition period			2 years 9 months 4 days
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award Vesting Period			4 years
Award Expiration Period			10 years
Restricted Stock Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award Vesting Period			1 year
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award Vesting Period			4 years
Common Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share Price	$ 16.80		$ 16.80
Estimated Forfeiture Rate	13.37%		13.37%
Common Stock | Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average grant date fair value of options	$ 10.68	$ 6.76	$ 10.65	$ 5.84
In-the-money options exercisable amount	1,800,000		1,800,000
Total intrinsic value of options exercised			5,700,000	3,300,000
Expected term	5 years 10 months 2 days	5 years 10 months 24 days	5 years 10 months 2 days	5 years 10 months 24 days
Common Stock | Spectranetics Corporation 2006 Incentive Award Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available for future issuance	1,100,000		1,100,000
Common Stock | ESPP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available for future issuance	300,000		300,000
Allocated Share-based Compensation Expense	111,000	75,000	307,000	215,000
Number of shares authorized	700,000		700,000
Maximum Number of Shares Per Employee			2,500
Maximum Fair Value Per Employee			$ 25,000
Purchase Price of Common Stock, Percent			85.00%
Expected term			6 months

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Net Income (Loss) Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012	Dec. 31, 2011
Earnings Per Share [Abstract]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	600,000	700,000	2,000,000	900,000
Earnings Per Share Reconciliation [Abstract]
Net income (loss)	$ 434	$ 905	$ (1,253)	$ 1,553
Historical common shares outstanding at beginning of period					40,719,581	34,839,131	34,437,996	33,883,378
Weighted average common shares issued	117,610	110,781	3,370,967	384,219
Weighted average common shares outstanding — basic	40,837,191	34,548,777	38,210,098	34,267,597
Effect of dilution — stock options	1,538,990	1,396,676	0	1,282,968
Weighted average common shares outstanding — diluted	42,376,181	35,945,453	38,210,098	35,550,565
Net income (loss) per share — basic	$ 0.01	$ 0.03	$ (0.03)	$ 0.05
Net income (loss) per share — diluted	$ 0.01	$ 0.03	$ (0.03)	$ 0.04

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Trade accounts receivable, less allowance for doubtful accounts and sales returns	$ 522	$ 589
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	60,000,000	60,000,000
Common stock, shares issued	40,994,056	34,887,763
Common stock, shares outstanding	40,994,056	34,887,763

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Income Taxes (Notes)

9 Months Ended

Sep. 30, 2013

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The Company maintains a valuation allowance of approximately $12.7 million, as of September 30, 2013, for substantially all of its deferred tax assets, including its U.S. net operating losses, and therefore does not expect to incur a current U.S. federal tax expense or benefit against its pretax income during the year ending December 31, 2013. The Company does, however, expect to incur current state and foreign tax expense during the year. In addition, the Company expects to incur deferred U.S. federal and state tax expense in 2013, representing a deferred tax liability related to the difference between tax and book accounting for its goodwill, which is amortized over 15 years for tax purposes but not amortized for book purposes.

The Company’s ability to realize the benefit of its deferred tax assets in future periods will depend on the generation of taxable income through profitable operations. Due to the Company’s history of losses and the lack of sufficient certainty of generating future taxable income, the Company has recorded a full valuation allowance against substantially all of its deferred tax assets. The Company does not expect to reduce the valuation allowance against its deferred tax assets to below 100% of its gross amount until it has a sufficient historical trend of taxable income and can predict future income with a higher degree of certainty.

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Cash flows from operating activities:
Net (loss) income	$ (1,253)	$ 1,553
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization	7,952	7,365
Stock-based compensation expense	2,839	2,283
Provision for excess and obsolete inventories	213	134
Deferred income taxes	(351)	213
Accrued indemnification costs	0	(3,225)
License agreement settlement	0	(3,000)
Net change in operating assets and liabilities	(10,216)	(5,865)
Net cash used in operating activities	(816)	(542)
Cash flows from investing activities:
Capital expenditures	(2,721)	(2,314)
Acquisition-related payments	(6,500)	(7,727)
Net cash used in investing activities	(9,221)	(10,041)
Cash flows from financing activities:
Net proceeds from stock offering	92,034	0
Proceeds from the exercise of stock options and employee stock purchase plan	3,778	2,604
Net cash provided by financing activities	95,812	2,604
Effect of exchange rate changes on cash	20	(13)
Net increase (decrease) in cash and cash equivalents	85,795	(7,992)
Cash and cash equivalents at beginning of period	37,775	39,638
Cash and cash equivalents at end of period	123,570	31,646
Supplemental disclosures of cash flow information:
Cash paid for interest	31	49
Cash paid for income taxes	$ 297	$ 122

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 123,570	$ 37,775
Trade accounts receivable, less allowance for doubtful accounts and sales returns of $522 and $589, respectively	23,928	19,945
Inventories, net	10,008	9,288
Deferred income taxes, net	869	313
Prepaid expenses and other current assets	2,898	2,506
Total current assets	161,273	69,827
Property and equipment, net	26,565	27,006
Goodwill	14,846	13,296
Other intangible assets, net	10,345	20
Other assets	610	620
Total assets	213,639	110,769
Current liabilities:
Accounts payable	1,878	1,996
Accrued liabilities	15,130	16,001
Deferred revenue	1,922	2,196
Total current liabilities	18,930	20,193
Accrued liabilities, net of current portion	1,106	991
Contingent consideration, net of current portion	6,288	0
Deferred income taxes	1,057	888
Total liabilities	27,381	22,072
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $.001 par value; authorized 5,000,000 shares; none issued	0	0
Common stock, $.001 par value; authorized 60,000,000 shares; issued and outstanding 40,994,056 and 34,887,763 shares, respectively	41	35
Additional paid-in capital	281,785	183,140
Accumulated other comprehensive loss	(455)	(618)
Accumulated deficit	(95,113)	(93,860)
Total stockholders’ equity	186,258	88,697
Total liabilities and stockholders’ equity	$ 213,639	$ 110,769

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Goodwill and Intangible Assets (Schedule of Goodwill) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Jan. 07, 2013
Goodwill [Roll Forward]
Balance as of December 31, 2012	$ 13,296	$ 1,550
Additional goodwill	1,550
Balance as of September 30, 2013	14,846	1,550
U.S. Medical
Goodwill [Roll Forward]
Balance as of December 31, 2012	6,925
Additional goodwill	1,240
Balance as of September 30, 2013	8,165
International Medical
Goodwill [Roll Forward]
Balance as of December 31, 2012	6,371
Additional goodwill	310
Balance as of September 30, 2013	$ 6,681

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Business Combination (Narrative) (Details) (USD $)	3 Months Ended			9 Months Ended		12 Months Ended
	Sep. 30, 2013	Mar. 31, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012	Jan. 07, 2013
Business Acquisition [Line Items]
Pro forma revenue					$ 0	$ 0
Transaction costs	300,000			300,000
Cash		6,500,000
Total purchase price cap	35,500,000			35,500,000
Contingent consideration, liability	6,288,000			6,288,000		0	6,200,000
Discount rate				15.00%
Net income (loss)	434,000		905,000	(1,253,000)	1,553,000
Pro forma net income (loss)			500,000		500,000
Contingent consideration	234,000		0	638,000	0
Range of future contingent consideration outcomes, low	6,000,000			6,000,000
Range of future contingent consideration outcomes, high	13,000,000			13,000,000
Base Purchase Price
Business Acquisition [Line Items]
Cash		5,500,000
Successful Transfer of Product Documentation
Business Acquisition [Line Items]
Cash		$ 1,000,000

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Segment Reporting (Revenue by Product Line) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Revenue from External Customer [Line Items]
Revenue	$ 39,763	$ 35,230	$ 116,891	$ 103,534
Disposable Products
Revenue from External Customer [Line Items]
Revenue	35,031	30,739	101,278	90,464
Service and other, net of allowance for sales returns
Revenue from External Customer [Line Items]
Revenue	2,851	2,508	8,617	7,682
Equipment sales and rentals
Revenue from External Customer [Line Items]
Revenue	1,881	1,983	6,996	5,388
Vascular intervention | Disposable Products
Revenue from External Customer [Line Items]
Revenue	18,956	16,821	55,046	50,652
Lead management | Disposable Products
Revenue from External Customer [Line Items]
Revenue	16,075	13,918	46,232	39,812
U.S. Medical
Revenue from External Customer [Line Items]
Revenue	32,532	29,626	95,633	86,617
U.S. Medical | Disposable Products
Revenue from External Customer [Line Items]
Revenue	29,212	26,368	84,400	76,334
U.S. Medical | Service and other, net of allowance for sales returns
Revenue from External Customer [Line Items]
Revenue	2,397	2,132	7,429	6,679
U.S. Medical | Equipment sales and rentals
Revenue from External Customer [Line Items]
Revenue	923	1,126	3,804	3,604
International Medical
Revenue from External Customer [Line Items]
Revenue	7,231	5,604	21,258	16,917
International Medical | Disposable Products
Revenue from External Customer [Line Items]
Revenue	5,819	4,371	16,878	14,130
International Medical | Service and other, net of allowance for sales returns
Revenue from External Customer [Line Items]
Revenue	454	376	1,188	1,003
International Medical | Equipment sales and rentals
Revenue from External Customer [Line Items]
Revenue	$ 958	$ 857	$ 3,192	$ 1,784

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Stock-Based Compensation (Restricted Stock Award Activity) (Details) (Restricted Stock, Common Stock, USD $)	9 Months Ended
	Sep. 30, 2013
Restricted Stock | Common Stock
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Restricted stock awards/units outstanding at January 1, 2013	48,632
Awarded	22,190
Vested/Released	(48,632)
Restricted stock awards/units outstanding at September 30, 2013	22,190
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]
Restricted stock awards/units outstanding at January 1, 2013, Weighted Average Grant Date Fair Value	$ 9.87
Awarded, Weighted Average Grant Date Fair Value	$ 18.93
Vested/Released, Weighted Average Grant Date Fair Value	$ 9.87
Restricted stock awards/units outstanding at September 30, 2013, Weighted Average Grant Date Fair Value	$ 18.93

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Stock-Based Compensation (Restricted Stock Unit Activity) (Details) (Restricted Stock Units (RSUs), Common Stock, USD $)	9 Months Ended
	Sep. 30, 2013
Restricted Stock Units (RSUs) | Common Stock
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Restricted stock awards/units outstanding at January 1, 2013	126,350
Awarded	89,512
Vested/Released	(46,700)
Restricted stock awards/units outstanding at September 30, 2013	169,162
Share-based Compensation Arrangement by Share-based Payment Award, Per Share Weighted Average Price of Shares Purchased [Abstract]
RSU's outstanding at January 1, 2013, Weighted Average Purchase Price	$ 0.00
Awarded, Weighted Average Grant Date Fair Value	$ 0.00
Exercised, Weighted Average Purchase Price	$ 0.00
RSU's outstanding at September 30, 2013, Weighted Average Purchase Price	$ 0.00
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
RSU's exercisable at September 30, 2013, Weighted Average Remaining Contractual Term (In Years)	1 year 8 months 16 days
RSU's exercisable at September 30, 2013, Aggregate Intrinsic Value	$ 2,841,922

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Segment Reporting (Notes)

9 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Segment Reporting

SEGMENT REPORTING

The Company operates in one distinct line of business consisting of developing, manufacturing, marketing, and distributing a proprietary excimer laser system and disposable products to treat certain vascular and coronary conditions.

Within this line of business, the Company has identified two operating segments, which were identified geographically: (1) U.S. Medical and (2) International Medical. U.S. Medical and International Medical offer the same products and services but operate in different geographic regions, have different distribution networks, and different regulatory environments. The Company aggregates its two product lines, Vascular Intervention and Lead Management, based on their similar economic, operational, and regulatory characteristics, consistent with the authoritative guidance on segment reporting.

Additional information regarding each operating segment is discussed below.

U. S. Medical

This segment includes customers in the United States and Canada. Products offered by this segment include single-use medical devices used in minimally invasive procedures within the cardiovascular system, including fiber-optic devices and non-fiber-optic products (disposables), an excimer laser system (equipment), and the service of the excimer laser system (service). The Company is subject to product approvals from the U.S. Food and Drug Administration (“FDA”) and Health Canada. The Company’s products are used in multiple vascular procedures, including peripheral atherectomy, crossing arterial blockages, coronary atherectomy and thrombectomy, and the removal of cardiac lead wires from patients with pacemakers and cardiac defibrillators.

U.S. Medical is also corporate headquarters for the Company. All manufacturing, research and development, and corporate administrative functions are performed within this operating segment. For the three and nine months ended September 30, 2013 and 2012, a portion of research, development and other technology expenses, and general and administrative expenses incurred in the U.S. has been allocated to International Medical based on a percentage of revenue because these expenses support the Company’s ability to generate revenue within the International Medical segment.

Manufacturing activities are performed entirely within the U.S. Medical segment. Revenue associated with intersegment product transfers to International Medical was $1.7 million and $1.6 million for the three months ended September 30, 2013 and 2012, respectively, and $5.5 million and $5.4 million for the nine months ended September 30, 2013 and 2012, respectively. Revenue is based upon transfer prices, which provide for intersegment profit eliminated upon consolidation.

International Medical

The International Medical segment has its headquarters in the Netherlands, and serves Europe and the Middle East, Latin America (including Puerto Rico), Japan, and the Pacific Rim. Products offered by this segment are substantially the same as those offered by U.S. Medical. The Company is subject to product approvals from various international regulatory bodies. The International Medical segment is engaged primarily in distribution activities, with no manufacturing or product development functions. Certain U.S.-incurred research, development and other technology expenses, and general and administrative expenses have been allocated to International Medical based on a percentage of revenue because these expenses support the Company’s ability to generate revenue within the International Medical segment.

Summary financial information relating to operating segment operations is shown below. Intersegment transfers as well as intercompany assets and liabilities are excluded from the information provided (in thousands):

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2013		2012		2013		2012
Revenue:
U.S. Medical:
Disposable products	$	29,212	$	26,368	$	84,400	$	76,334
Service and other, net of allowance for sales returns	2,397		2,132		7,429		6,679
Equipment sales and rentals	923		1,126		3,804		3,604
Subtotal	32,532		29,626		95,633		86,617
International Medical:
Disposable products	5,819		4,371		16,878		14,130
Service and other, net of allowance for sales returns	454		376		1,188		1,003
Equipment sales and rentals	958		857		3,192		1,784
Subtotal	7,231		5,604		21,258		16,917
Total revenue	$	39,763	$	35,230	$	116,891	$	103,534

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2013			2012		2013			2012
Segment operating income (loss):
U.S. Medical	$	(26	)	$	719	$	(2,572	)	$	768
International Medical	832			382		1,195			1,233
Total operating income (loss)	$	806		$	1,101	$	(1,377	)	$	2,001

	As of September 30, 2013		As of December 31, 2012
Segment assets:
U.S. Medical	$	195,933	$	95,181
International Medical	17,706		15,588
Total assets	$	213,639	$	110,769

For the nine months ended September 30, 2013 and 2012, no individual customer represented 10% or more of consolidated revenue.  No individual countries, other than the United States, represented at least 10% of consolidated revenue in the nine months ended September 30, 2013 or 2012.

Revenue by Product Line

	Three Months Ended   September 30,				Nine Months Ended   September 30,
(in thousands)	2013		2012		2013		2012
Revenue
Disposable products revenue:
Vascular intervention	$	18,956	$	16,821	$	55,046	$	50,652
Lead management	16,075		13,918		46,232		39,812
Total disposable products revenue	35,031		30,739		101,278		90,464
Service and other, net of allowance for sales returns	2,851		2,508		8,617		7,682
Equipment sales and rentals	1,881		1,983		6,996		5,388
Total revenue	39,763		35,230		116,891		103,534

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Goodwill and Intangible Assets (Acquired Intangible Assets) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Acquired Finite-Lived Intangible Assets [Line Items]
Less: accumulated amortization	$ (4,928)	$ (4,253)
Total	10,345	20
Acquired core technologies
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets	10,600	0
Non-compete agreement
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets	400	0
Patents
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets	$ 4,273	$ 4,273

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Commitments and Contingencies (Details) (USD $) In Millions, unless otherwise specified	1 Months Ended	9 Months Ended	29 Months Ended	117 Months Ended
	Feb. 29, 2012 Indemnification Agreement Former Employee Defendants	Sep. 30, 2013 Indemnification Agreement Former Employee Defendants	Sep. 30, 2013 Disputes Pending Litigation Dutch District Court	Sep. 30, 2013 Disputes Pending Litigation Dutch District Court
Loss Contingencies [Line Items]
Number of Defendants		1
Adverse Judgments	1
Damages Sought, Value			$ 2.0	$ 2.2

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Business Combination (Tables)

9 Months Ended

Sep. 30, 2013

Business Combinations [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The components of the aggregate purchase price for the acquisition were as follows (in thousands):

Cash	$	6,500
Fair value of contingent consideration:
Milestone payable, current	500
Long-term contingent consideration	5,650
Total purchase price	$	12,650

The Company recorded total contingent consideration liabilities of $6.2 million. The Company used a probability-weighted approach to estimate the achievement of the intellectual property milestones and the future revenue, and a discount rate of 15%.

The aggregate purchase price was allocated to the net assets acquired as follows (in thousands):

	Amount assigned		Amortization period (in years)
Tangible assets (inventory and fixed assets)	$	100
Amortizable intangible assets:
Acquired core technologies	10,600		12
Non-compete agreement	400		4
Goodwill	1,550
Total purchase price	$	12,650

Schedule of Goodwill Allocation by Operating Segment Based on Expected Benefit

Goodwill was established primarily based on revenue and cash flow projections associated with future technologies, as well as synergies expected to be gained from the integration of these products into the Company’s existing operations, and has been allocated to the Company’s operating segments based on the relative expected benefit as follows (in thousands):

	Amount allocated
U.S. Medical	$	1,240
International Medical	310
Total goodwill	$	1,550

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Net Income (Loss) Per Share (Notes)

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Net (Loss) Income Per Share

NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding (excluding restricted shares). Shares issued during the period and shares reacquired during the period are weighted for the portion of the period they were outstanding. Diluted net income (loss) per share is computed in a manner consistent with that of basic net income (loss) per share while giving effect to all potentially dilutive common shares outstanding during the period, which include the assumed exercise of stock options and the assumed vesting of restricted stock using the treasury stock method.

For the three months ended September 30, 2013, a weighted average of 0.6 million stock options were excluded from the computation of diluted net income per share because their inclusion would have been anti-dilutive. Diluted net loss per share was the same as basic net loss per share for the nine months ended September 30, 2013 as shares issuable upon the exercise of stock options and the vesting of restricted stock were anti-dilutive because of the net loss for that period.  As a result, the stock options and restricted stock outstanding representing 2.0 million weighted average shares for the nine months ended September 30, 2013 were excluded from the diluted net loss per share calculation because their inclusion would have been anti-dilutive.

For the three and nine months ended September 30, 2012, a weighted average of 0.7 million and 0.9 million stock options, respectively, were excluded from the computation of diluted net income per share because their inclusion would have been anti-dilutive.

A summary of the net income (loss) per share calculation is shown below for the periods indicated:

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2013		2012		2013			2012
Net income (loss)	$	434	$	905	$	(1,253	)	$	1,553
Common shares outstanding:
Historical common shares outstanding at beginning of period	40,719,581		34,437,996		34,839,131			33,883,378
Weighted average common shares issued	117,610		110,781		3,370,967			384,219
Weighted average common shares outstanding — basic	40,837,191		34,548,777		38,210,098			34,267,597
Effect of dilution — stock options	1,538,990		1,396,676		—			1,282,968
Weighted average common shares outstanding — diluted	42,376,181		35,945,453		38,210,098			35,550,565
Net income (loss) per share — basic	$	0.01	$	0.03	$	(0.03	)	$	0.05
Net income (loss) per share — diluted	$	0.01	$	0.03	$	(0.03	)	$	0.04

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Business Combination (Notes)

9 Months Ended

Sep. 30, 2013

Business Combinations [Abstract]

Business Combination

BUSINESS COMBINATION

On January 7, 2013, the Company acquired certain products from Upstream Peripheral Technologies Ltd. (“Upstream”). Prior to the acquisition, these products had generated no revenue. The primary reason for the acquisition was to address customer needs by extending the Company’s product offering in the area of retrograde access tools and leveraging its existing sales organization. The Company began selling these products in the U.S. in February 2013 and in Europe in March 2013. Transaction costs associated with this acquisition of approximately $0.3 million were primarily incurred in the fourth quarter of 2012.

Total consideration includes an initial $5.5 million at closing of the transaction, $1.0 million at the time of transfer of product, manufacturing, and regulatory related documentation in February 2013, and additional payments for manufacturing and intellectual property milestones and revenue-based earn-outs for 2014, 2015 and 2016 product sales, subject to an overall cap of $35.5 million.

The Company accounted for the acquisition as a business combination and recorded the assets acquired and the estimated future consideration obligations at their respective fair values as of the acquisition date. The components of the aggregate purchase price for the acquisition were as follows (in thousands):

Cash	$	6,500
Fair value of contingent consideration:
Milestone payable, current	500
Long-term contingent consideration	5,650
Total purchase price	$	12,650

The Company recorded total contingent consideration liabilities of $6.2 million. The Company used a probability-weighted approach to estimate the achievement of the intellectual property milestones and the future revenue, and a discount rate of 15%.

The aggregate purchase price was allocated to the net assets acquired as follows (in thousands):

	Amount assigned		Amortization period (in years)
Tangible assets (inventory and fixed assets)	$	100
Amortizable intangible assets:
Acquired core technologies	10,600		12
Non-compete agreement	400		4
Goodwill	1,550
Total purchase price	$	12,650

The acquired core technology intangible assets consist of technical processes, intellectual property and know-how with respect to the products and processes acquired, and are being amortized on a straight-line basis over their assigned estimated useful lives. The Company primarily used the discounted cash flow model approach to derive the fair value of the amortizable intangible assets. These fair value measurements are based on significant unobservable inputs, including management estimates and assumptions and, accordingly, are classified as Level 3 within the fair value hierarchy prescribed by U.S. GAAP.

The Company recorded the excess of the aggregate purchase price over the estimated fair values of the identifiable assets acquired as goodwill, which is deductible for tax purposes. Goodwill was established primarily based on revenue and cash flow projections associated with future technologies, as well as synergies expected to be gained from the integration of these products into the Company’s existing operations, and has been allocated to the Company’s operating segments based on the relative expected benefit as follows (in thousands):

	Amount allocated
U.S. Medical	$	1,240
International Medical	310
Total goodwill	$	1,550

Had the Company acquired the Upstream products at the beginning of 2012, net income would have been reduced from $0.9 million to $0.5 million for the three months ended September 30, 2012 and from $1.6 million to $0.5 million for the nine months ended September 30, 2012, respectively, considering amortization and contingent consideration expense associated with the acquisition. No revenue has been assumed for 2012 as the Upstream products were not commercially available at that time.

Contingent Consideration

As discussed above, this acquisition involves contingent consideration arrangements. From the acquisition date to September 30, 2013, the Company recorded $0.6 million of contingent consideration expense related to the passage of time (i.e. accretion) and made no changes to the underlying estimates used to calculate the initial acquisition date contingent consideration liability.

As of September 30, 2013, the Company believes that the range of future contingent consideration (undiscounted) that the Company will likely be required to make related to the manufacturing milestone, the intellectual property milestones and the revenue earn-out is between $6 million and $13 million.

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Stock-Based Compensation (Summary of Assumptions Used) (Details) (Stock Options, Common Stock)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Stock Options | Common Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected life (years)	5 years 10 months 2 days	5 years 10 months 24 days	5 years 10 months 2 days	5 years 10 months 24 days
Risk-free interest rate	1.39%	0.63%	1.35%	0.75%
Expected volatility	65.54%	65.86%	65.55%	66.42%
Expected dividend yield	0.00%	0.00%	0.00%	0.00%

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

The following is a summary of the assumptions used for the stock options granted during the three and nine months ended September 30, 2013 and 2012, respectively, using the Black-Scholes pricing model:

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2013		2012		2013		2012
Expected life (years)	5.84		5.90		5.84		5.90
Risk-free interest rate	1.39	%	0.63	%	1.35	%	0.75	%
Expected volatility	65.54	%	65.86	%	65.55	%	66.42	%
Expected dividend yield	—		—		—		—

Schedule of Share-based Compensation, Stock Options, Activity

The following table summarizes stock option activity during the nine months ended September 30, 2013: 

	Shares		Weighted Average Exercise Price		Weighted Avg. Remaining Contractual Term (In Years)	Aggregate Intrinsic Value
Options outstanding at January 1, 2013	3,263,830		$	7.02
Granted	684,980		18.09
Exercised	(486,837	)	5.98
Canceled	(61,512	)	10.41
Options outstanding at September 30, 2013	3,400,461		$	9.34	7.24	$	26,319,147
Options exercisable at September 30, 2013	1,759,856		$	6.52	5.75	$	18,086,044

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity

The following table summarizes restricted stock award activity during the nine months ended September 30, 2013: 

	Shares		Weighted Average Grant Date Fair Value
Restricted stock awards outstanding at January 1, 2013	48,632		$	9.87
Awarded	22,190		18.93
Vested/Released	(48,632	)	9.87
Restricted stock awards outstanding at September 30, 2013	22,190		$	18.93

The following table summarizes restricted stock unit activity during the nine months ended September 30, 2013: 

	Shares		Weighted  Average  Purchase Price		Weighted Avg. Remaining Contractual Term (In Years)	Aggregate Intrinsic Value
Restricted stock units outstanding at January 1, 2013	126,350		$	—
Awarded	89,512		—
Vested/Released	(46,700	)	—
Restricted stock units outstanding at September 30, 2013	169,162		$	—	1.71	$	2,841,922

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Commitments and Contingencies (Notes)

9 Months Ended

Sep. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

Indemnification of Former Officer

The Company is obligated to indemnify its present and former directors and officers against certain losses and to advance their reasonable legal defense expenses, including in connection with a federal investigation. The Company maintains insurance for claims of this nature, which does not apply in all such circumstances, may be denied, or may not be adequate to cover the legal costs or any settlement or judgment for those proceedings.

The Company has an indemnification obligation with one former officer charged in connection with a previous federal investigation of the Company. In February 2012, a trial resulted in the acquittal of the defendant on all charges except for one count of making false statements to federal investigators. The sentencing hearing for this defendant occurred in May 2012, and in June 2012, the defendant filed a notice of appeal. The Company paid its indemnification obligations through the trial during 2012. Additional expenses may be incurred in future periods depending upon the success or failure of this appeal, particularly if a successful appeal results in the order of a new trial.

Litigation

The Company is from time to time subject to, and is presently involved in, various pending or threatened legal actions and proceedings, including those that arise in the ordinary course of its business. Such matters are subject to many uncertainties and to outcomes and the financial impacts of which are not predictable with assurance and that may not be known for extended periods of time. The Company records a liability in its consolidated financial statements for costs related to claims, settlements, and judgments, where management has assessed that a loss is probable and an amount can be reasonably estimated. The Company’s significant legal proceedings are discussed below. The costs associated with such proceedings or other legal proceedings that may be commenced could have a material adverse effect on the Company’s future consolidated results of operations, financial position, or cash flows.

Fox/Sopkin

The Company and Spectranetics B.V., the Company’s Dutch subsidiary, are defendants in a lawsuit brought in the District Court of Utrecht, the Netherlands (the “Dutch District Court”) by Kenneth Fox in 2004. Mr. Fox is an inventor named on patents licensed to the Company under a license agreement assigned to Interlase LP. Mr. Fox claims an interest in royalties payable under the license and seeks alleged back royalties of approximately $2.2 million. In June 2010, the Dutch District Court issued a ruling, followed by a decision that dismissed Mr. Fox’s claims in their entirety against both the Company and its Dutch subsidiary.  The Dutch District Court also awarded the Company a nominal amount as attorney’s fees.  In September 2010, Mr. Fox filed and served a notice of appeal to the Dutch Court of Appeals. Under Dutch law, the appeal entitled Mr. Fox to a new trial on the merits, though still taking into evidence the record already in the Dutch court system. A hearing on the merits of the appeal occurred in November 2012. In September 2013, the Dutch Court of Appeals ruled in the Company’s favor and upheld the ruling of the Dutch District Court. The Court of Appeals also awarded the Company a nominal amount as the prevailing party in the appeal. Each party has until December 10, 2013 to file a cassation complaint (appeal) to the Supreme Court of The Netherlands. The Company intends to continue to vigorously defend against Mr. Fox’s claims.

In May 2011, the Company was served with a lawsuit that names the Company and the Company’s Dutch subsidiary as defendants. The lawsuit was brought in the Dutch District Court by Barbara Joy Sopkin. Ms. Sopkin claims royalties on a license agreement, certain rights to which were allegedly transferred to her, which claims are similar to the claims of Mr. Fox in his litigation. Ms. Sopkin claims damages of approximately $2 million and also claims interest on that amount from January 1, 2011. The proceedings formally commenced in July 2011, and a hearing on the claims was held in September 2012. In October 2012, the Dutch District Court rejected Ms. Sopkin’s claims for damages in their entirety and awarded the Company a nominal amount as attorney’s fees. In January 2013, Ms. Sopkin served the Company with a notice of her intent to appeal to the Dutch Court of Appeals. The Company intends to continue to vigorously defend against Ms. Sopkin’s claims.

The Company has no amounts accrued for the Fox or Sopkin lawsuits.

Other

The Company is involved in other legal proceedings in the normal course of business and does not expect them to have a material adverse effect on its business.

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General (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Medical Device Excise Tax, Percent of Taxable Base			2.30%
Medical Device Excise Tax	$ 537	$ 0	$ 1,568	$ 0

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Net Income (Loss) Per Share (Tables)

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

A summary of the net income (loss) per share calculation is shown below for the periods indicated:

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2013		2012		2013			2012
Net income (loss)	$	434	$	905	$	(1,253	)	$	1,553
Common shares outstanding:
Historical common shares outstanding at beginning of period	40,719,581		34,437,996		34,839,131			33,883,378
Weighted average common shares issued	117,610		110,781		3,370,967			384,219
Weighted average common shares outstanding — basic	40,837,191		34,548,777		38,210,098			34,267,597
Effect of dilution — stock options	1,538,990		1,396,676		—			1,282,968
Weighted average common shares outstanding — diluted	42,376,181		35,945,453		38,210,098			35,550,565
Net income (loss) per share — basic	$	0.01	$	0.03	$	(0.03	)	$	0.05
Net income (loss) per share — diluted	$	0.01	$	0.03	$	(0.03	)	$	0.04

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Document and Entity Information	9 Months Ended
	Sep. 30, 2013	Oct. 25, 2013
Entity Information [Line Items]
Entity Registrant Name	SPECTRANETICS CORP
Entity Central Index Key	0000789132
Document Type	10-Q
Document Period End Date	Sep. 30, 2013
Amendment Flag	false
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		41,017,222

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Segment Reporting (Tables)

9 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Schedule of Revenue by Reporting Segments

Summary financial information relating to operating segment operations is shown below. Intersegment transfers as well as intercompany assets and liabilities are excluded from the information provided (in thousands):

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2013		2012		2013		2012
Revenue:
U.S. Medical:
Disposable products	$	29,212	$	26,368	$	84,400	$	76,334
Service and other, net of allowance for sales returns	2,397		2,132		7,429		6,679
Equipment sales and rentals	923		1,126		3,804		3,604
Subtotal	32,532		29,626		95,633		86,617
International Medical:
Disposable products	5,819		4,371		16,878		14,130
Service and other, net of allowance for sales returns	454		376		1,188		1,003
Equipment sales and rentals	958		857		3,192		1,784
Subtotal	7,231		5,604		21,258		16,917
Total revenue	$	39,763	$	35,230	$	116,891	$	103,534

Reconciliation of Operating Profit (Loss) from Segments to Consolidated

	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2013			2012		2013			2012
Segment operating income (loss):
U.S. Medical	$	(26	)	$	719	$	(2,572	)	$	768
International Medical	832			382		1,195			1,233
Total operating income (loss)	$	806		$	1,101	$	(1,377	)	$	2,001

Reconciliation of Assets from Segment to Consolidated

	As of September 30, 2013		As of December 31, 2012
Segment assets:
U.S. Medical	$	195,933	$	95,181
International Medical	17,706		15,588
Total assets	$	213,639	$	110,769

Revenue from External Customers by Products and Services

Revenue by Product Line

	Three Months Ended   September 30,				Nine Months Ended   September 30,
(in thousands)	2013		2012		2013		2012
Revenue
Disposable products revenue:
Vascular intervention	$	18,956	$	16,821	$	55,046	$	50,652
Lead management	16,075		13,918		46,232		39,812
Total disposable products revenue	35,031		30,739		101,278		90,464
Service and other, net of allowance for sales returns	2,851		2,508		8,617		7,682
Equipment sales and rentals	1,881		1,983		6,996		5,388
Total revenue	39,763		35,230		116,891		103,534