LeMaitre Vascular

2016 ANNUAL REPORT

www.lemaitre.com

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
Í ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016

or

‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934
For the transition period from

to

.
Commission File Number 001-33092

LEMAITRE VASCULAR, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)

04-2825458
(I.R.S. Employer Identification No.)

63 Second Avenue, Burlington, Massachusetts
(Address of principal executive offices)

01803
(Zip Code)
Registrant’s telephone number, including area code 781-221-2266

Securities registered under Section 12(b) of the Act:

Title of each class

Name of each exchange on which registered

Common Stock, $0.01 par value per share

NASDAQ Global Market

Securities registered under Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities

Act. Yes: ‘ No: Í

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the

Act. Yes: ‘ No: Í

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

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 Í No ‘

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this
chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Í

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 Rule12b-2 of the Exchange Act.

Large accelerated filer ‘

Accelerated filer Í

Non-accelerated filer ‘ (Do not check if a small reporting

company) Smaller reporting company ‘

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the

Act). Yes: ‘ No: Í

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant, based on the
last sale price for such stock on June 30, 2016: $180,617,111. For purposes of this calculation, shares held by stockholders whose
ownership exceeded 5% of the registrant’s common stock outstanding were deemed to be held by affiliates. Exclusion of such
shares should not be construed to indicate that any such person possesses the power, direct or indirect, to direct or cause the
direction of the management or policies of the registrant or that such person is controlled by or under common control with the
registrant. At March 2, 2017, the registrant had 18,670,632 shares of common stock, par value $0.01 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Form 10-K incorporates information by reference from the registrant’s definitive proxy statement to be filed

with the Securities and Exchange Commission within 120 days after the close of the fiscal year covered by this annual report.

LEMAITRE VASCULAR

2016 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS

PART I

Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Item 3.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . .
Item 14. Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV

Item 15. Exhibits and Financial Statements Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

PART I

This Annual Report on Form 10-K contains forward-looking statements (within the meaning of the federal
securities law) that involve substantial risks and uncertainties. All statements, other than statements of historical
facts, included in this Annual Report on Form 10-K regarding our strategy, future operations, future financial
position, future net sales, gross margin expectations, projected costs, projected expenses, prospects and plans and
objectives of management are forward-looking statements. The words “anticipates,” “believes,” “estimates,”
“expects,” “intends,” “may,” “plans,” “projects,” “will,” “would,” and similar expressions are intended to
identify forward-looking statements, although not all forward-looking statements contain these identifying
words. We have based these forward-looking statements on our current expectations and projections about future
events. Although we believe that the expectations underlying any of our forward-looking statements are
reasonable, these expectations may prove to be incorrect, and all of these statements are subject to risks and
uncertainties. Should one or more of these risks and uncertainties materialize, or should underlying assumptions,
projections, or expectations prove incorrect, our actual results, performance, or financial condition may vary
materially and adversely from those anticipated, estimated, or expected. We have included important factors in
the cautionary statements included in this Annual Report on Form 10-K, particularly in the section entitled “Risk
Factors,” that we believe could cause actual results or events to differ materially from the forward-looking
statements that we make. Our forward-looking statements do not reflect the potential impact of any future
acquisitions, mergers, dispositions, joint ventures, investments or terminations of distribution arrangements that
we may make. We do not assume any obligation to update any forward-looking statements, whether as a result of
new information, future events, or otherwise, except as required by law.

The following discussion should be read in conjunction with our financial statements and the related notes
contained elsewhere in this Annual Report on Form 10-K and in our other Securities and Exchange Commission
filings.

Unless the context requires otherwise, references to “LeMaitre Vascular,” “LeMaitre,” “we,” “our,” and

“us” in this Annual Report on Form 10-K refer to LeMaitre Vascular, Inc. and its subsidiaries.

LeMaitre, AlboGraft, AnastoClip, AnastoClip GC, EndoRE, Expandable LeMaitre Valvulotome, Glow ‘N
Tell, Inahara-Pruitt, InvisiGrip, LeverEdge, LifeSpan, MollRing Cutter, MultiTASC, Omniflow, Pruitt, Pruitt F3,
Pruitt-Inahara, Reddick, VascuTape, TRIVEX, XenoSure, and the LeMaitre Vascular logo are registered
trademarks of LeMaitre Vascular or one of its subsidiaries, and AlboSure, Flexcel, Periscope, RestoreFlow and
VCS are unregistered trademarks of LeMaitre Vascular. This Annual Report on Form 10-K also includes the
registered and unregistered trademarks of other persons, which are the property of their respective owners.

Item 1.

Business

Overview

LeMaitre Vascular is a global provider of medical devices and human tissue cryopreservation services for
the treatment of peripheral vascular disease. We develop, manufacture, and market vascular devices to address
the needs of vascular surgeons. Our diversified portfolio of peripheral vascular devices consists of brand name
products that are used in arteries and veins outside of the heart and are well known to vascular surgeons, and
includes the HYDRO Expandable LeMaitre Valvulotome, the XenoSure biologic patch, the Pruitt F3 Carotid
Shunt and VascuTape Radiopaque Tape. Our principal product offerings are sold throughout the world, primarily
in the United States, Europe and, to a lesser extent, Asia and the Pacific Rim. We estimate that the annual
worldwide market which our core product lines address is approximately $840 million.

We sell our products and services primarily through a direct sales force. As of December 31, 2016 our sales
force was comprised of 96 sales representatives in North America, Europe, Japan, China and Australia. We also
sell our products in other geographies through distributors. Our worldwide headquarters is located in Burlington,

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Massachusetts. Our international operations are headquartered in Sulzbach, Germany. We also have sales offices
located in Tokyo, Japan; Mississauga, Canada; Madrid, Spain; Milan, Italy; Shanghai, China; and North
Melbourne, Australia. In 2016, approximately 92% of our net sales were generated in territories in which we
employ direct sales representatives.

The Peripheral Vascular Disease Market

Based on industry statistics, we estimate that peripheral vascular disease affects more than 20 million people

worldwide and that the annual worldwide market for all peripheral vascular devices is approximately $4 billion.
The disease encompasses a number of conditions in which the arteries or veins that carry blood to or from the
legs, arms, or organs other than the heart become narrowed, obstructed, weakened, or otherwise compromised. In
many cases peripheral vascular disease goes undetected, sometimes leading to life-threatening events including
stroke, ruptured aneurysm, pulmonary embolism or death. We believe that the peripheral vascular disease market
will grow due to the increase in the incidence and diagnosis rates of peripheral vascular disease, a shift by
doctors to prescribing higher-priced endovascular devices, and the adoption of western healthcare standards by
the developing world. We believe that our strong brands, established sales force, evolving suite of peripheral
vascular device offerings, and broad network of vascular surgeon customers position us to capture an increasing
share of this large and growing market.

Clinical studies have identified several factors that increase the risk of peripheral vascular disease, including

smoking, diabetes, obesity, high blood pressure, lack of exercise, coronary artery disease, high cholesterol, and
being over the age of 65. Demographic trends suggest an increase in the prevalence of peripheral vascular disease
over time, driven primarily by rising levels of obesity and diabetes and an aging population.

Vascular surgeons treat peripheral vascular disease and also perform vascular procedures associated with

other diseases, such as end-stage renal disease. We estimate that there are more than 2,500 board-certified
vascular surgeons and several thousand general surgeons who perform vascular procedures in the United States,
and that there are more than 3,000 vascular surgeons in Europe, Asia and the Pacific Rim. In contrast to other
medical specialists, such as interventional cardiologists and interventional radiologists, vascular surgeons
perform both conventional open vascular surgeries and endovascular procedures. Conventional open vascular
surgery involves opening the body, cutting vessels, and suturing. Endovascular procedures typically are
minimally invasive, catheter-based procedures involving repairing vessels from within using real-time imaging
technologies. We estimate that in 2016, 86% of our net sales were from devices used in open vascular
procedures.

Our Business Strategies

We have grown our business by using a three-pronged strategy: focusing on the vascular surgeon call point,

competing for sales in low rivalry niche markets, and expanding our growth platform through our worldwide
direct sales force as well as acquiring and developing complementary vascular devices.

•

•

Focused call point. We have historically directed our product offering and selling efforts towards the
vascular surgeon, and estimate that in 2016 approximately 75% of our sales were to this type of
customer. In contrast to other medical specialists, such as interventional cardiologists and
interventional radiologists, vascular surgeons are uniquely positioned to be able to perform both
conventional open vascular surgeries as well as minimally invasive endovascular procedures. We
believe that this presents our core customer with an opportunity to gain procedural market share against
competing specialists, while offering us the ability to sell devices in both the open and endovascular
markets to the same end user.

Low rivalry niche segments. We seek to build and maintain leading positions in niche product and
services segments. We believe that the relative lack of competitive focus on these segments by our
larger competitors who may have greater resources than we do, as well as the differentiated features

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and consistent quality of our products, allow for us to establish both higher selling prices and market
share gains in these markets. In recent years we have also sought to sell complementary offerings such
as the Omniflow biosynthetic graft or the RestoreFlow human tissue cryopreservation services, in
larger, more competitive market segments, particularly when we believe that our offerings in those
segments are highly differentiated.

•

Direct sales force expansion, and the addition of complementary products through acquisitions and
research and development. We sell our products primarily through a direct sales force in North
America, Europe, Asia and the Pacific Rim. Since 1998, we have built our sales force from zero to 96
direct sales representatives. We believe that direct-to-hospital sales build closer customer relationships,
allow for higher selling prices and gross margins, and are not subject to the risk of customer loss
related to distributor turnover. In countries where we do not have a direct sales force, we also sell our
products through distributors. For the year ended December 31, 2016, however, approximately 92% of
our net sales were generated through our direct-to-hospital sales force, and no single hospital customer
accounted for more than 2% of our net sales. We intend to further expand and diversify our product
offerings and add new technology platforms. We believe our significant experience in acquiring and
integrating product lines and businesses is one of our competitive advantages. We evaluate the
acquisition of additional product lines and businesses that may be complementary to our product
offerings, refine our current product lines, develop new applications for our existing technologies, and
obtain regulatory approvals for our devices in new segments and geographies in order to further access
the broader peripheral vascular device market.

Acquisition History

We were founded in 1983 by George D. LeMaitre, M.D., a vascular surgeon who designed and developed
the predecessor to our 1.5mm HYDRO LeMaitre Valvulotome. Through a combination of strategic acquisitions
and research and development efforts, we have expanded to 15 product lines.

We have completed 19 acquisitions of complementary products since 1998:

Year

Acquisition

Key Product(s) and Services

1998 Whittaker Screen Printing
1999
2001
2003
2004
2005
2007
2007
2007
2007
2010
2012
2013
2013
2014
2014
2015

Vermed
Ideas for Medicine
Credent
VCS Clip
Endomed
Vascular Innovations
Vascular Architects
UnBalloon Technology
Biomateriali
LifeSpan
XenoSure
Clinical Instruments
TRIVEX
Xenotis Pty Ltd
Angioscope
Tru-Incise (for sale
outside of the US)
ProCol
RestoreFlow Allografts

2016
2016

Radiopaque tape manufacturing operations
Balloon catheters
Carotid shunts, balloon catheters, and laparoscopic cholecystectomy devices
Polycarbonate grafts
Vessel closure system
Stent grafts
Contrast injector
Remote endarterectomy devices
Stent graft modeling catheters
Polyester grafts and patches
ePTFE grafts
Biologic patches
Carotid Shunts and Embolectomy Catheters
Powered phlebectomy system
Biosynthetic grafts
Fiberoptic catheters

Valvulotomes
Biologic vascular graft
Human tissue cryopreservation services

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With the exception of the remote endarterectomy devices, powered phlebectomy systems, the Tru-Incise
valvulotome, cryopreserved allograft services, biosynthetic grafts and our ProCol biologic vascular grafts, we
have relocated the manufacturing operations associated with our 19 acquisitions to our Burlington, Massachusetts
headquarters and we continue to look at ways to make our operations more efficient. The manufacture of our
biosynthetic vascular grafts take place in our North Melbourne, Australia facility and the human tissue
processing and cryopreservation operations associated with RestoreFlow allografts take place in our Fox River
Grove, Illinois facility.

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Our Products and Services

We have a portfolio of 15 product lines, most of which are designed for use in open vascular surgery. We
also provide services related to the processing and cryopreservation of human vascular tissue. Our products and
services address various anatomical areas including the carotid, lower extremities, upper extremities, aorta and
other areas. In 2016, the lower extremities product lines and services were 51% of revenues, the carotid product
lines comprised 31% of our revenues, and other areas combined were 18%. In 2015, the lower extremities
product lines were 53% of revenues while the carotid product lines were 29%. In 2014, the lower extremities
were 51% of revenues while the carotid product lines were 28%. The average selling price of valvulotomes,
which are included in our lower extremities product lines, increased significantly in 2015 with the introduction of
our 1.5mm HYDRO LeMaitre Valvulotome. No single product line accounted for more than 25% of our
revenues in 2016, 2015 or 2014.

Of our 15 product offerings, three are biologic devices that are implanted in the patient, and one is the
service of processing and cryopreserving human tissue for implantation into the patient. These include the
XenoSure patch (bovine pericardium), ProCol graft (bovine mesenteric vein), OmniFlow biosynthetic graft
(ovine tissue and synthetic mesh) and the RestoreFlow Allograft cryopreserved graft (human tissue). As a
percentage of sales, these product lines represented 27% in 2016, 21% in 2015 and 15% in 2014.

Angioscopes

The LeMaitre Disposable Angioscope is a fiberoptic catheter used for viewing the lumen of a blood vessel.

It also provides direct visualization of valves during in-situ bypass procedures.

Balloon Catheters for Embolectomy, Occlusion and Perfusion

Our LeMaitre line of embolectomy catheters are used to remove blood clots from arteries or veins. We
manufacture single-lumen latex and latex-free embolectomy catheters as well as dual-lumen latex embolectomy
catheters. The dual-lumen embolectomy catheter allows clot removal and simultaneous irrigation or guide-wire
trackability. Occlusion catheters temporarily occlude blood flow to allow the vascular surgeon time and space to
complete a given procedure. Perfusion catheters temporarily perfuse blood and other fluids into the vasculature.
Our Pruitt line of occlusion and perfusion catheters reduces vessel trauma by using internal balloon fixation
rather than traditional external clamp fixation.

Carotid Shunts

Our Pruitt F3, Pruitt-Inahara and Flexcel carotid shunts are used to temporarily shunt blood to the brain
while the surgeon removes plaque from the carotid artery in a carotid endarterectomy surgery. Our Pruitt F3 and
Inahara-Pruitt, shunts feature internal balloon fixation that eliminates the need for clamps, thereby reducing
vessel trauma. Our Flexcel shunt is a non-balloon shunt offered for surgeons who prefer to secure their shunt
with externally placed clamps.

Powered Phlebectomy Devices

Our TRIVEX powered phlebectomy system is comprised of capital equipment and disposables that enable

removal of varicose veins. In this procedure, an illuminator is inserted through a small incision in the leg,
enabling visualization of varicose veins. A second instrument removes the veins. Compared to conventional hook
phlebectomy, this surgical procedure is faster and results in more complete vein removal through fewer incisions.

Radiopaque Tape

Our VascuTape Radiopaque Tape is a flexible, medical-grade tape with centimeter or millimeter markings printed

with our proprietary radiopaque ink that is visible both to the eye and to an x-ray machine or fluoroscope. VascuTape
Radiopaque Tape is applied externally to the skin and provides interventionalists with a simple way to cross-reference
between the inside and the outside of a patient’s body, allowing them to locate tributaries or lesions beneath the skin.

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Remote Endarterectomy Devices

Our EndoRE line of remote endarterectomy devices are used to remove plaque from arteries in the leg in a
minimally invasive procedure requiring a single incision in the groin. Our EndoRE devices are used to separate
the plaque from the vessel, cut the far end of the plaque to free it for removal, and then withdraw it from the
vessel.

Valvulotomes

Our 1.5mm HYDRO LeMaitre Valvulotomes, Over-The-Wire LeMaitre Valvulotomes, Tru-Incise

valvulotomes, and LeMills Valvulotomes cut valves in the saphenous vein, a vein that runs from the foot to the
groin, so the vein can function as an artery to carry blood past diseased arteries to the lower leg or the foot. We
believe our valvulotomes reduce costs for hospitals by enabling less invasive bypass surgery to be performed
with several small incisions rather than one continuous ankle-to-groin incision, thereby reducing the length of
hospital stays and the likelihood of wound complications.

Vascular Grafts

Our AlboGraft woven and knitted vascular grafts are collagen-impregnated polyester grafts used to bypass

or replace diseased arteries. They are available in both straight tube and bifurcated versions.

Our LifeSpan ePTFE Vascular Graft is an expanded polytetrafluoroethylene (ePTFE) graft used to bypass or

replace diseased arteries and to create dialysis access sites. They are available in both regular and thin wall
options and with an optional full or partial external spiral support. Our stepped and tapered LifeSpan models are
designed to reduce the risk of steal syndrome and high cardiac output, complications that may arise in dialysis
access grafts.

Our Omniflow II Biosynthetic Vascular Graft is a composite of cross-linked ovine collagen with a polyester

mesh endoskeleton. It is used to bypass or replace diseased leg arteries, and to create dialysis access sites.

Our ProCol biologic graft is a bovine mesenteric vein vascular graft used for dialysis access in patients with

a previously failed synthetic graft.

Through our recently acquired RestoreFlow allograft business, we provide human tissue cryopreservation

services, in particular the processing and cryopreservation of peripheral vascular veins and arteries. Our
RestoreFlow Allografts are cryopreserved human tissue grafts, including saphenous veins, femoral veins and
arteries, and aortoiliac arteries. These allografts are used in variety of vascular reconstructions such as peripheral
bypass, hemodialysis access, and aortic infections. Currently they are only available for distribution in the United
States.

Vascular Patches

Our XenoSure Biologic Vascular Patch is made from bovine pericardium, and is used for precision

endarterectomy vascular reconstruction.

Our AlboSure Vascular Patch is a polyester patch. Vascular surgeons use patches in conjunction with

carotid endarterectomy, femoral endarterectomy, and other vascular reconstructions.

Vessel Closure Systems

Our AnastoClip AC and AnastoClip GC vessel closure systems attach vessels to one another with titanium

clips instead of sutures. These vessel closure systems create an interrupted anastomosis which expands and
contracts

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as the vessel pulses, which surgeons believe improves the durability of the anastomosis. The AnastoClip AC
closure system also facilitates compliant dura closure in neuro applications. Surgeons believe it does not
penetrate the dura, which eliminates cerebrospinal fluid leakage from suture holes allowing for reduced operating
room time.

Other Products

In some hospitals, vascular surgery procedures are sometimes performed by general surgeons. We also sell
general surgery devices, primarily laparoscopic cholecystectomy devices. Our leading general surgery product is
the Reddick Cholangiogram Catheter, which is used to inject dye into the cystic duct during laparoscopic
cholecystectomy. In this procedure, the gall bladder is dissected and removed through small punctures in the
abdomen. We also offer a laparoscopic accessory used in laparoscopic gall bladder removal.

Sales and Marketing

As of December 31, 2016, we employed 96 field sales representatives. We believe that the expansion of our

direct sales force since 1998 has been a key factor in our success, and it remains one of our primary long-term
strategies.

Outside our direct markets, we generally sell our products through country-specific distributors. We
typically sign exclusive distribution agreements with distributors for terms of up to five years, frequently
specifying minimum annual sales volumes and pricing. These agreements are renewable by mutual agreement
between us and the distributor. From time to time, when we determine that it would be financially advantageous
for us to sell directly in a country, we terminate our distributor(s) in that country. In August 2015, we agreed to
terminate our agreement with a distributor in Finland in order to begin selling direct-to-hospital in Finland as of
January 1, 2016. In December 2015, we signed a master distribution agreement with Meheco Yonstron
Pharmaceutical Co. Ltd., a Chinese distribution and logistics company, and began selling our Chinese market
products to Meheco in 2016. Meheco then sells to multiple sub-distributors who then sell our products to Chinese
hospitals.

In addition, we engage in direct marketing efforts, including direct mail and exhibitions at medical
congresses, which we believe are important to our brand development and continued success. We believe that
direct marketing allows us to market to vascular surgeons beyond the reach of our direct sales force.

We also provide training to medical professionals as means of promoting our products. We aim to add value

to our vascular surgeon customers by providing training opportunities on specific vascular surgery procedures
including, among others, in situ bypass, phlebectomy and interrupted anastomosis.

Research and Development

Our research and development has historically focused on developing enhancements and extensions to our

existing product lines. Our current product development efforts are primarily focused on the open vascular space
and are largely improvements to our existing devices. In 2016, our efforts were focused on expanding and
enhancing our biologic product lines including Xenosure and Omniflow, as well as integrating newly acquired
product lines. We continued work begun in 2015 on the development of a shunt flow monitor and furthered our
efforts around approval of our elongated anastoclip device for neurosurgery in various geographies. We also
made design changes to our powered phlebectomy device product line.

Our products are subject to our design control procedures throughout the various stages of product
development. These procedures may include bench testing, animal testing, human procedures conducted by
independent physicians, and post-market surveillance of product performance, as appropriate. We may use
feedback received from independent physicians to demonstrate product functionality before commencing full-
scale marketing of any product.

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For 2016, 2015 and 2014, our research and development expenditures were $6.1 million, $5.5 million, and
$4.7 million, respectively, representing 7% of net sales in each of the three years. As of December 31, 2016, our
research and development staff consisted of 14 full-time engineers and technicians.

Manufacturing and Processing

Our manufacturing facilities are located in Burlington, Massachusetts, where most of our product lines are

produced. We also have facilities in North Melbourne, Australia, where our Omniflow II product line is
produced, and Fox River Grove, Illinois where RestoreFlow allografts are processed, cryopreserved, stored and
distributed.

Following the acquisition of new product lines, we typically integrate manufacturing of the newly acquired

lines into our Burlington operations. In 2014 we fully transitioned XenoSure production to our Burlington
facility, and we also transferred the manufacturing of the Clinical Instruments devices, which we acquired in
2013, to our Burlington facility. Our TRIVEX, EndoRE, Tru-Incise valvulotome and ProCol biologic graft
products are currently manufactured by third parties; however, we expect to complete the transition of
manufacturing the Tru-Incise valvulotome to our Burlington facility during 2017 and we expect the transition of
manufacturing the ProCol biologic graft products to be complete in 2018, subject to regulatory approval. In
addition, we expect to complete the renovation of our manufacturing facility in Burlington in 2017, in which we
expect most of our biologic product lines will be produced or processed.

We manufacture certain proprietary components, assemble most of our devices ourselves, and inspect, test,

and package all of our finished products. By designing and manufacturing many of our products from raw
materials, and assembling and testing as many of our subassemblies and products as practical, we believe we can
maintain better quality control, ensure compliance with applicable regulatory standards and internal
specifications, limit outside access to our proprietary technology, ensure adequate product supply, and make
design modifications in a timely manner. We have custom-designed proprietary manufacturing and processing
equipment and have developed proprietary enhancements for existing production machinery. Our products are
built to stock.

We process and cryopreserve human tissue provided to us by qualified tissue procurement organizations in

the United States. Donated human tissue is procured from deceased donors by these organizations. We have strict
specifications regarding tissue we will accept for processing relating to, among other things, the physical
condition and characteristics of the tissue and the donor, the medical history of the donor and certain test results
of the donated tissue. We also use various supplies in connection with the processing and cryopreservation of
human tissue, including certain proprietary solutions and antibiotics.

Our management information systems provide us with the ability to evaluate our performance, collect
business intelligence, and make better strategic decisions. These systems include order entry, invoicing, on-line
inventory management, lot traceability, purchasing, shop floor control, and shipping and distribution analysis, as
well as various accounting-oriented functions. During day-to-day operations, these systems enable us to track our
products from the inception of an order through the manufacturing process and then ultimately through delivery
of the product to the customer.

We purchase components from, and have certain product lines manufactured by, third parties. Most of our

components are readily available from several supply sources, but we do rely on single- and limited-source
suppliers for several of our key product components and our third-party-manufactured products. We do not have
contractual arrangements with many of these suppliers and manufacturers, and we order our supplies and product
on an as-needed basis. To date, we have not experienced any material disruption in the adequate supply from
existing sources of product and components, but there is no guarantee that we will not experience such
disruptions in the future.

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Our Burlington and North Melbourne manufacturing facilities have been certified to ISO 13485:2003

quality management system standards, which enables us to satisfy certain regulatory requirements of the
European Union, Canada, and other foreign jurisdictions. Our Fox River Grove, Illinois facility has been
accredited by the American Association of Tissue Banks for the processing, storage and distribution of cardiac
and vascular tissue for transplantation and licensed by certain state agencies. Our manufacturing and processing
facilities are subject to periodic inspections by various regulatory authorities and Notified Bodies (described
below) to ensure compliance with domestic and non-U.S. regulatory requirements. See “Government Regulation”
for further information. In February 2013, our Burlington facilities were audited by the U.S. Food and Drug
Administration (FDA), and in November 2014, and July and November 2015, we underwent inspections by our
European Notified Body. In February 2016, our Fox River Grove facility was inspected by the FDA. The results
of these inspections were satisfactory.

Competition

The segments in which our product lines compete are characterized by change resulting from technological

advances and scientific discoveries. No one company competes against all of our product lines; rather, we
compete with a range of companies. Notable larger competitors include Applied Medical Resources Corporation,
Baxter International, Inc., Boston Scientific Corporation, Cardiovascular Systems, Inc., Medtronic, C.R. Bard,
Inc., CryoLife, Inc., Edwards Lifesciences Corporation, Getinge AB, LifeNet Health, Inc., Terumo Medical
Corporation, and W. L. Gore & Associates.

The success of our products relies on effective service support as well as superior product technology,

quality, product and service availability, reliability, ease of use, cost-effectiveness, physician familiarity, and
brand recognition. While we also compete on the basis of price, our products that are more technologically
advanced than those of our competitors are sometimes sold at higher prices than those of our competitors. We
believe that our continued success will depend on our ability to broaden and optimize our direct sales channel,
acquire or develop additional complementary vascular device products, obtain regulatory and reimbursement
approvals, maintain sufficient inventory, obtain patent or other product protections and attract and retain skilled
personnel. We also compete on the basis of procedure type. The treatment of peripheral vascular disease has
experienced a shift from open vascular surgery towards minimally invasive endovascular procedures, and many
of our products are used primarily or exclusively in open vascular surgery procedures. Our ability to compete
effectively with our competitors relies on keeping pace with existing or new product and technology offerings in
the vascular device market, and the minimally invasive endovascular procedure segment in particular.

Many of our competitors have substantially greater financial, technological, research and development,

regulatory, marketing, sales, and personnel resources than we do. Certain of these competitors are able to
manufacture at lower costs and may therefore offer comparable products at lower prices, especially commodity
products such as dacron and ePTFE grafts. Certain of these competitors may also have greater experience in
developing and further improving products, obtaining regulatory approvals, and manufacturing and marketing
such products. In the case of vascular allografts, certain competitors may have an advantage in sourcing tissue
due to higher volume purchases and longer term relationships from tissue procurement organizations.
Additionally, certain of our competitors may obtain patent protection or regulatory approval or clearance, or
achieve product commercialization, before us, any of which could materially adversely affect us.

Intellectual Property

We believe that our success is dependent, to a certain extent, on the development and maintenance of
proprietary aspects of our technologies. We rely on a combination of patents, trademarks, trade secret laws, and
confidentiality and invention assignment agreements to protect our intellectual property rights.

We maintain and pursue patents in the United States, Europe and other strategic locations relating to various
aspects of our products and/or manufacturing processes. The majority of our issued U.S. patents are set to expire
at various times from 2020 to 2032.

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Generally, for products that we believe are appropriate for patent protection, we will attempt to obtain
patents in the United States and key markets of the European Union. However, depending on circumstances, we
may not apply for patents in all or any of those jurisdictions, or we may pursue patent protection elsewhere.

Certain aspects of our products are covered by patents held by third parties. We manufacture, market, and

sell these products pursuant to license agreements with these third parties. These arrangements require us to pay
royalties, typically determined as a percentage of our net sales for the underlying product. If we fail to make
these payments or otherwise fail to observe the terms of these agreements, we may lose our ability to sell these
products. For example, we manufacture, market, and sell our LifeSpan Vascular Grafts, Periscope Dissectors and
TRIVEX products pursuant to licenses with third-parties.

We believe that our strong brands have been an important factor in our success. We rely on common law

and registered trademarks to protect our product brands. Some of our registered trademarks are LeMaitre,
XenoSure, Pruitt, VascuTape, Glow ‘N Tell, and Reddick, each of which is registered in the United States and
the European Union, and in certain cases in other foreign countries.

We rely on trade secret protection for certain unpatented aspects of other proprietary technology. Many of
our products are not protected by patents. Patent protection is not available where we acquire a commercialized
product that is not patented, such as the ProCol vascular graft. In the past, other companies have independently
developed or otherwise acquired comparable or substantially equivalent proprietary information and techniques,
and there can be no assurance that others will not do so in the future or otherwise gain access to our proprietary
technology or disclose such technology, or that we can meaningfully protect our trade secrets. We have a policy
of requiring employees and consultants to execute confidentiality agreements upon the commencement of an
employment or consulting relationship with us. Our confidentiality agreements also require our employees to
assign to us all rights to any inventions made or conceived during their employment with us. We also generally
require our consultants to assign to us any inventions made during the course of their engagement by us. There
can be no assurance, however, that these agreements will provide meaningful protection or adequate remedies for
us in the event of unauthorized use, transfer, or disclosure of confidential information or inventions.

The laws of foreign countries generally do not protect our proprietary rights to the same extent as do the

laws of the United States and we may experience more difficulty enforcing our proprietary rights in certain
foreign jurisdictions.

See “Item 1A. Risk Factors” for a description of certain risks associated with our intellectual property.

Government Regulation

Medical devices and human tissues are subject to regulation by the FDA, and, in some instances, other

federal and state authorities and foreign governments.

United States Regulation of Medical Devices

Most of our products are medical devices subject to extensive regulation by the FDA under 21 United States

Code Chapter 9, the Federal Food, Drug, and Cosmetic Act (the FDCA). FDA regulations govern, among other
things, product development, testing, manufacturing, packaging, labeling, storage, clearance or approval,
advertising and promotion, sales and distribution, and import and export.

Premarket Pathways

Most medical devices must receive either 510(k) clearance or Premarket Application approval (PMA
approval) from the FDA prior to commercial distribution. Devices deemed to pose relatively less risk are placed
in either class I or II, which requires the manufacturer to submit a premarket notification requesting permission

10

for commercial distribution; this is known as 510(k) clearance. Some low-risk devices are exempted from this
requirement. Class II devices may be subject to special controls, such as performance standards and FDA
guidelines that are not applied to class I devices. Devices deemed by the FDA to pose the greatest risk, such as
life-sustaining, life-supporting, or implantable devices, or devices deemed not substantially equivalent to a
previously 510(k)-cleared device or to a pre-amendment class III device (i.e., one in commercial distribution
before May 28, 1976) for which PMA applications have not been called, are placed in class III, which generally
requires PMA approval. In all cases, a user fee is required for 510(k) submissions and PMA applications, which
in the case of PMA applications can be very costly.

510(k) Clearance. To obtain 510(k) clearance, a manufacturer must submit a premarket notification

demonstrating that the proposed device is substantially equivalent in intended use and performance to a
“predicate device” (i.e., a previously 510(k)-cleared class I or class II device or a pre-amendment class III device
for which the FDA has not yet called for PMA applications). The FDA’s 510(k) clearance pathway usually takes
from three to twelve months, but it can take longer. In reviewing a premarket notification, the FDA may request
additional information, including clinical data. All of our devices currently sold in the United States are marketed
pursuant to the 510(k) clearance, with the exception of our ProCol biologic vascular graft.

After a device receives 510(k) clearance, any modification that could significantly affect its safety or
effectiveness, or that would constitute a major change as specified by FDA guidelines, requires a new 510(k)
clearance. The FDA requires each manufacturer to make this determination in the first instance, but the FDA can
review any such decision. If the FDA disagrees with a manufacturer’s decision not to seek a new 510(k)
clearance, the agency may retroactively require the manufacturer to seek 510(k) clearance. The FDA also can
require the manufacturer to cease marketing and/or recall the modified device until 510(k) clearance or PMA
approval is obtained. Also, the manufacturer may be subject to significant regulatory fines or penalties.

PMA Approval. The PMA approval pathway requires proof of the safety and effectiveness of the proposed

device to the FDA’s satisfaction, making this pathway much more costly, lengthy, and uncertain. A PMA
application must provide extensive preclinical and clinical trial data, as well as detailed information about the
device and its components regarding, among other things, device design, manufacturing, and labeling. As part of
the PMA review, the FDA will typically inspect the manufacturer’s facilities for compliance with the Quality
System Regulation (QSR) which imposes elaborate testing, control, documentation, and other quality assurance
procedures on the manufacturing process.

If the FDA approves a PMA, the approved indications or claims may be more limited than those originally

sought. The PMA can include post-approval conditions that the FDA believes to be necessary to ensure the safety
and effectiveness of the device including, among other things, restrictions on labeling, promotion, sale, and
distribution. Failure to comply with the conditions of approval can result in material adverse enforcement action,
including the loss or withdrawal of the approval. Even after approval of a PMA, a new PMA or PMA supplement
is required if the device or its labeling or manufacturing process are modified. Supplements to a PMA often
require the submission of the same type of information required for an original PMA, except that the supplement
is generally limited to that information needed to support the proposed change from the product covered by the
original PMA.

Clinical Trials. A clinical trial is typically required to support a PMA application and is sometimes required

to support 510(k) clearance. In some cases, one or more smaller feasibility Investigational Device Exemption
(IDE) studies may precede a pivotal IDE clinical trial intended to comprehensively demonstrate the safety and
effectiveness of the investigational device. All clinical studies of investigational devices must be conducted in
compliance with the FDA’s extensive requirements. If an investigational device could pose a significant risk to
patients (as defined in the regulations), the FDA, prior to initiation of clinical use, must approve an IDE
application showing that it is safe to test the device in humans and that the testing protocol is scientifically sound.
A non-significant risk device does not require submission to the FDA of an IDE application. Both significant risk
and non-significant risk investigational devices require approval from institutional review boards (IRBs) at the

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study centers where the device will be used. The FDA and the IRB at each institution at which a clinical trial is
being performed may suspend a clinical trial at any time for various reasons, including a belief that the subjects
are being exposed to an unacceptable health risk. During a study, the sponsor must comply with the FDA’s IDE
requirements for investigator selection, trial monitoring, reporting, record keeping, and prohibitions on the
promotion of investigational devices. The investigators must obtain patient informed consent, rigorously follow
the investigational plan and study protocol, control the disposition of investigational devices, and comply with all
reporting and record-keeping requirements. Required records and reports are subject to inspection by the FDA.
Prior to granting PMA approval, the FDA typically inspects the records relating to the conduct of the study and
the clinical data supporting the PMA application for compliance with IDE requirements.

Although the QSR does not fully apply to investigational devices, the requirement for controls on design
and development does apply. The sponsor also must manufacture the investigational device in conformity with
the quality controls described in the IDE application and any conditions of IDE approval that FDA may impose
with respect to manufacturing.

Historically, our products have been introduced into the market using the 510(k) clearance procedure, and
we have not used the more burdensome PMA process for any of the products that we currently market or sell in
the United States, other than our ProCol vascular graft, which had PMA approval at the time we acquired the
device. If we were to seek approval for our Omniflow II biosynthetic vascular graft, for example, we would be
required to follow the PMA process.

Postmarket Regulation

After a device is placed on the market, regardless of the classification or premarket pathway, significant

regulatory requirements apply. These include:

•

•

•

•

•

manufacturing establishment registration and device listing with the FDA;

the QSR, which requires finished device manufacturers, including third-party or contract
manufacturers, to follow stringent design, testing, control, documentation, and other quality assurance
procedures in all aspects of manufacturing;

labeling regulations and FDA prohibitions against the promotion of products for uncleared,
unapproved, or off-label uses and other requirements related to promotional activities;

medical device reporting regulations, which require that manufacturers report to the FDA if their
device may have caused or contributed to a death or serious injury or malfunctioned in a way that
would likely cause or contribute to a death or serious injury if the malfunction were to recur; and

corrections and removal reporting regulations, which require that manufacturers report to the FDA any
field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the
device or to remedy a violation of the FDCA that may present a risk to health.

We are subject to inspection and marketing surveillance by the FDA to determine our compliance with

regulatory requirements. Our most recent FDA inspection was in February 2013, the result of which was
satisfactory. Non-compliance with applicable FDA requirements can result in, among other things, public
warning letters, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of
production, failure of the FDA to grant marketing approvals, withdrawal of marketing approvals, a
recommendation by the FDA to disallow us to enter into government contracts, and criminal prosecutions. The
FDA also has the authority to request repair, replacement, or refund of the cost of any device manufactured or
distributed by us. In the event that one of our suppliers fails to maintain compliance with our quality
requirements, we may have to qualify a new supplier and could experience manufacturing delays as a result.

Non-U.S. sales of medical devices manufactured in the United States that are not approved or cleared by the

FDA for use in the United States, or are banned or deviate from lawful performance standards, are subject to
FDA export requirements. Before exporting such products to a foreign country, we must first comply with the
FDA’s regulatory procedures for exporting unapproved devices.

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United States Regulation of Human Tissue

FDA

Our allografts are subject to extensive regulation by the FDA under Title 21 of the Code of Federal

Regulations, Part 1271 (Human Cells, Tissues, and Cellular and Tissue-Based Products). These regulations were
promulgated under Section 361 of the Public Health Service Act, which authorized the FDA to issue regulations
to prevent the spread of communicable disease. Under these regulations, the FDA requires registration of
establishments that manufacture human cells, tissues, and cellular and tissue-based products and establishes
donor-eligibility, current good tissue practice and other procedures to prevent the introduction, transmission, and
spread of communicable diseases by such products, including through donor screening and testing. Our Fox
River Grove, Illinois facility is registered with the FDA’s Center for Biologics Evaluation and Research as
required by the regulations. The regulations also provide for the inspection of tissue establishments by the FDA.
The FDA most recently inspected our Fox River Grove, Illinois facility in February 2016 and the results of that
inspection were satisfactory. In the event of non-compliance with these regulations, the FDA may issue a
warning letter, order the recall and/or destruction of tissues and/or order the suspension or cessation of
processing and preservation of new tissues.

AATB

We voluntarily comply with the standards of the tissue bank industry’s accreditation organization, the
American Association of Tissue Banks (the AATB). The AATB has established standards for tissue banking and
administers an accreditation program. Compliance with the AATB’s standards are a predicate to accreditation,
which must be renewed every three years. Our Fox River Grove, Illinois facility has been accredited by the
AATB for the processing, storage and distribution of cardiac and vascular tissue for transplantation through
May 13, 2018. The AATB is entitled to inspect accredited members at any time. The AATB most recently
inspected our Fox River Grove, Illinois facility in January 2015, and the results of that inspection were
satisfactory.

NOTA

Under the National Organ Transplant Act, it is unlawful for any person or entity to knowingly acquire,
receive, or otherwise transfer any human organ for valuable consideration for use in human transplantation if the
transfer affects interstate commerce. However, “valuable consideration” excludes the reasonable payments
associated with the removal, transportation, implantation, processing, preservation, quality control, and storage of
a human organ. We believe the compensation we receive for the processing and cryopreservation services we
provide with respect to our vascular allografts falls within this statutory exception.

State Regulation

Certain states regulate the processing, storage and distribution of human tissue. We are licensed or
registered, as applicable, with California, Delaware, Florida, Illinois, Maryland, New York and Oregon. The
regulatory agencies of these states may inspect our Fox River Grove, Illinois facility from time to time to monitor
compliance with applicable state regulations.

Other U.S. Regulations

We, and our products and services, are also subject to a variety of state and local laws in those jurisdictions
where our products and services are or will be marketed or distributed, and federal, state, and local laws relating
to matters such as safe working conditions, manufacturing practices, environmental protection, fire hazard
control, and disposal of hazardous or potentially hazardous substances. We are subject to various federal and
state laws governing our relationships with the physicians and others who purchase or make referrals for our
products. For instance, federal law prohibits payments of any form that are intended to induce a referral for any

13

item payable under Medicare, Medicaid, or any other federal healthcare program. Many states have similar laws.
There can be no assurance that we will not be required to incur significant costs to comply with such laws and
regulations now or in the future or that such laws or regulations will not have a material adverse effect upon our
ability to do business.

We are subject to federal, state, and local laws, rules, regulations, and policies governing the use,

generation, manufacture, storage, air emission, effluent discharge, handling, and disposal of certain hazardous
and potentially hazardous substances used in connection with our operations. Although we believe that we have
complied with these laws and regulations in all material respects and to date have not been required to take any
action to correct any noncompliance, there can be no assurance that we will not be required to incur significant
costs to comply with environmental regulations in the future.

Non-U.S. Regulation of Medical Devices

Sales of medical devices are subject to regulatory requirements in many countries. The regulatory review
process may vary greatly from country to country. The European Union has adopted numerous directives and
standards relating to medical devices regulating their design, manufacture, clinical trials, labeling, and adverse
event reporting, including the Medical Devices Directive (93/42/EEC) (the Directive), which is applicable to our
products. Devices that comply with the requirements of the Directive are entitled to bear a CE mark, indicating
that the device conforms with the essential requirements of the applicable directive and can be commercially
distributed in countries that are members of the European Union, as well as Iceland, Lichtenstein, Norway, and
Switzerland. Each member state of the European Union has implemented the directives into its respective
national law and has each established a “Competent Authority” to apply the directive in its territory.

The Directive defines a classification system placing devices into Class I, IIa, IIb, or III, depending on the

risks and characteristics of the medical device. The Directive also defines the essential requirements that devices
must meet before being placed on the market, establishes assessment procedures for approving a device for
marketing, and creates mechanisms for national authorities to manage implementation or to intervene when
public health requires. Essential requirements include manufacturing, design, performance, labeling, and safety
requirements, and may include providing certain clinical data. These requirements vary based on the type of the
device and other related factors.

A manufacturer of low-risk devices typically may demonstrate conformity to the essential requirements
based on a self-declaration. The European Standardization Committees have adopted numerous harmonized
standards for specific types of medical devices. Compliance with relevant standards establishes a presumption of
conformity with the essential requirements. Manufacturers of higher-risk devices generally must use a “Notified
Body”—an appointed independent third party to assess conformity. This third-party assessment may consist of
an audit of the manufacturer’s quality system and specific testing of the manufacturer’s devices. An assessment
by a Notified Body in one country within the European Union is generally required in order for a manufacturer to
commercially distribute the product throughout the European Union. Most of our devices are considered higher-
risk devices that require Notified Body assessment.

The European medical device laws also address the advertising and promotion of medical devices, clinical
investigations, and requirements for handling adverse events. Post-market surveillance of medical devices in the
European Union is generally conducted on a country-by-country basis; however, the Directive sets forth certain
specific requirements for reporting adverse events. The Medical Device Vigilance system is the mechanism by
which adverse event reporting is managed and monitored in the European Union.

In the event that any of our products proves to be defective, we can voluntarily recall, or the FDA or foreign

equivalent could require us to implement a recall of, any of our products and, if someone is harmed by a
malfunction or a product defect, we may experience product liability claims for such defects. Any corrective
action, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, will require the dedication

14

of our time and capital and may harm our reputation and financial results. Future recalls or claims could also
result in significant costs to us and significant adverse publicity, which could harm our ability to market our
products in the future.

In some cases, we rely on our non-U.S. distributors or third party agents to obtain premarket approvals,

complete product registrations, comply with clinical trial requirements, and complete those steps that are
customarily taken in the applicable jurisdictions to comply with governmental and quasi-governmental
regulation. In the future, we expect to continue to rely on distributors and agents in this manner where
appropriate.

Canada regulates the import and sale of medical devices through Health Canada (HC). HC classifies
medical devices into four classifications, with Class I being the lowest risk and Class IV being the highest. Class
I and II devices are often cleared for sale after they are CE marked or listed on the company’s ISO certification
and filed via fax-back applications, which are typically processed relatively quickly. Higher classification risk
devices (Class III and IV) require filing of dossiers that resemble US 510(k) applications. These applications can
range in cost and typically take longer for approval.

In Japan, the Ministry of Health, Labor and Welfare (MHLW) regulates medical devices through the
Pharmaceutical Affairs Law, which was reformed effective April 1, 2005. The revisions to Japan’s regulations
have resulted in longer lead times for product registration.

Australia regulates the import and sale of medical devices through the Therapeutic Goods Administration
(TGA). The TGA has built its regulatory framework around similar requirements to those issued in Europe. As
such, many medical devices (those with a lower risk profile) may gain relatively fast marketing clearance using
their existing EU-issued CE marking. Higher risk devices (those in EU/Aus Class III) must go through a full
design review which can be costly and take longer to complete. Issued licenses for medical devices do not require
renewal, but do require an annual fee to remain active in the TGA registry of devices. Australia requires all
foreign manufacturers to have an in country ‘sponsor’ who must have a licensed business inside of Australia.
After the formation of our Australian subsidiary in 2013, we transferred out licenses from our third-party license
holders to our subsidiary.

In China, the China Food and Drug Administration (CFDA) Medical Device Division regulates and must

approve all medical devices to be marketed and sold in China. China has a three-class risk classification system,
with Class I being the lowest risk and Class III being the highest risk. Home country approval (510(k) or PMA
clearance) is required as a prerequisite to any application. Additionally, the CFDA often tests finished devices at
its own testing laboratory to confirm each device’s specifications. The approval process is typically lengthy. As
of December 31, 2016, CFDA licenses are valid for five years from date of issuance and require renewal prior to
expiration. The CFDA requires all companies located outside of China to appoint a legal entity who maintains a
registered business inside of China as the license holder. After the formation of our Chinese subsidiary in 2015,
we transferred our licenses from our third-party license holders to our subsidiary.

There can be no assurance that new laws or regulations or new interpretations of laws and regulations
regarding the release or sale of medical devices will not delay or prevent sale of our current or future products.

Third-Party Reimbursement

United States

Healthcare providers that purchase medical devices generally rely on third-party payors, including the

Medicare and Medicaid programs and private payors (such as indemnity insurers, employer group health
insurance programs, and managed care plans) to reimburse all or part of the cost of those products. As a result,
demand for our products is and will continue to be dependent in part on the coverage and reimbursement policies

15

of these payors. The manner in which reimbursement is sought and obtained varies based upon the type of payor
involved and the setting in which the product is furnished and utilized. For example, Medicare reimbursement
policies favor outpatient treatment. Furthermore, payments from Medicare, Medicaid, and other third-party
payors are subject to legislative and regulatory changes and are susceptible to budgetary pressures.

In the United States, third-party payors generally pay healthcare providers directly for the procedures they

perform and in certain instances for the products they use. Our sales volumes depend on the extent to which
third-party payors cover our products and the procedures in which they are used. In general, a third-party payor
only covers a medical product or procedure when the plan administrator is satisfied that the product or procedure
is medically necessary because it improves health outcomes, including quality of life or functional ability, in a
safe and cost-effective manner. Even if a device has received clearance or approval for marketing by the FDA,
there is no assurance that third-party payors will cover the cost of the device and related procedures in which the
device is used.

In many instances, third-party payors cover the procedures performed using our products using price fee
schedules that do not vary reimbursement to reflect the cost of the products and equipment used in performing
those procedures. In other instances, payment or reimbursement is separately available for the products and
equipment used, in addition to payment or reimbursement for the procedure itself. Even if coverage is available,
third-party payors may place restrictions on the circumstances in which they provide coverage or may offer
reimbursement that is not sufficient to cover the cost of our products. Many of the products that compete with
ours are less expensive. Therefore, although coverage may be available for our products and the related
procedures, the levels of approved coverage may not be sufficient to justify using our products instead of those of
competitors.

In addition, particularly in concert with the Patient Protection and Affordable Care Act, many third-party
payors are moving to managed care systems in which providers contract to provide comprehensive healthcare for
a fixed cost per person rather than the traditional fee for service model. Managed care providers often attempt to
control the cost of healthcare by authorizing fewer elective surgical procedures. Under current prospective
payment systems, such as the diagnosis-related group system and the hospital out-patient prospective payment
system, both of which are used by Medicare and in many managed care systems used by private third party
payors, the reimbursement for our products will be incorporated into the overall reimbursement of a procedure,
and there will be no separate reimbursement for our products. As a result, we cannot be certain that hospital
administrators and physicians will purchase our products.

If hospitals and physicians cannot obtain adequate reimbursement for our products or the procedures in
which they are used, our business, financial condition, and results of operations could suffer a material adverse
impact.

Non-U.S.

Our success in non-U.S. markets will depend largely upon the availability of reimbursement from the third-

party payors through which healthcare providers are paid in those markets. Reimbursement and healthcare
payment systems in non-U.S. markets vary significantly by country. The main types of healthcare payment
systems are government sponsored healthcare and private insurance. As in the United States, reimbursement is
subject to legislative and regulatory changes and is susceptible to budgetary pressures. Reimbursement approval
must be obtained individually in each country in which our products are marketed. Outside the United States, we
may pursue reimbursement approval in those countries in which we sell directly to the hospital. In other markets,
we generally rely on the distributors who sell our products to obtain reimbursement approval in those countries in
which they will sell our products. There can be no assurance that reimbursement approval will be received.

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Fraud and Abuse Laws

We may directly or indirectly be subject to various federal and state laws pertaining to healthcare fraud and

abuse, including anti-kickback laws. In particular, the federal healthcare program Anti-Kickback Statute
prohibits persons from knowingly and willfully soliciting, offering, receiving, or providing remuneration, directly
or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing, arranging for, or
recommending a good or service for which payment may be made in whole or part under federal healthcare
programs, such as the Medicare and Medicaid programs. Penalties for violations include criminal penalties and
civil sanctions such as fines, imprisonment, and possible exclusion from Medicare, Medicaid, and other federal
healthcare programs. The Anti-Kickback Statute is broad and prohibits many arrangements and practices that are
lawful in businesses outside of the healthcare industry. In implementing the statute, the Office of Inspector
General, or OIG, has issued a series of regulations, known as the “safe harbors.” These safe harbors set forth
provisions that, if all their applicable requirements are met, will assure healthcare providers and other parties that
they will not be prosecuted under the Anti-Kickback Statute. The failure of a transaction or arrangement to fit
precisely within one or more safe harbors does not necessarily mean that it is illegal or that prosecution will be
pursued. However, conduct and business arrangements that do not fully satisfy each applicable element of a safe
harbor may result in increased scrutiny by government enforcement authorities, such as the OIG.

Patient Protection and Affordable Care Act

In March 2010, significant reforms to the U.S. healthcare system were adopted in the form of the Patient
Protection and Affordable Care Act (the PPACA). In January 2017, Congress voted to adopt a budget resolution
for fiscal year 2017, or the Budget Resolution, that authorizes the implementation of legislation that would repeal
portions of the PPACA. Further, on January 20, 2017, President Trump signed an Executive Order directing
federal agencies with authorities and responsibilities under the PPACA to waive, defer, grant exemptions from,
or delay the implementation of any provision of the PPACA that would impose a fiscal or regulatory burden on
states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices.
Congress also could consider subsequent legislation to replace elements of the PPACA that are repealed. While
the future of PPACA is uncertain as of the date of the filing of this Annual Report due to the Budget Resolution
and President Trump’s executive order, we continue to comply with its requirements. For example, we continue
to comply with the Physician Payments Sunshine Act, which was enacted as part of the PPACA and requires
detailed public disclosure of certain payments and “transfers of value” from us to healthcare professionals, such
as the payment of royalties, compensation for services provided such as training, consulting, and reimbursement
for travel and meal expenses. Certain states also require us to disclose similar information or even prohibit some
forms of these payments and may continue to do so regardless of the repeal or replacement the PPACA.

Employees

We had 397 employees, including 380 full-time employees, at December 31, 2016.

Financial Information by Business Segment and Geographic Data

We operate in one reportable industry segment: the design, marketing, sales, service and technical support

of medical devices and implants for the treatment of peripheral vascular disease. Our chief operating decision
maker is our chief executive officer. Our chief executive officer reviews financial information, accompanied by
information about revenue by geographic region for purposes of allocating resources and evaluating financial
performance. Information about segment revenue is included in Note 12 to our Consolidated Financial
Statements which are included elsewhere in this Annual Report.

Customers

Our sales are not dependent on any single customer or distributor, and we continue to expand our

distribution channel worldwide through direct and indirect sales forces. No single customer accounted for more
than 2% of our net sales in 2016.

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Corporate Information

We were incorporated in Massachusetts on November 28, 1983, as Vascutech, Inc. On June 16, 1998, we

were reincorporated in Delaware, and on April 6, 2001, we changed our name to LeMaitre Vascular, Inc. On
October 19, 2006, we executed our initial public offering, and our common stock trades under the symbol
“LMAT.” Our principal executive offices are located at 63 Second Avenue, Burlington, Massachusetts 01803,
and our telephone number is (781) 221-2266.

Where You Can Find More Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 are available through the investor relations portion of our website (www.lemaitre.com) free of charge as
soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and
Exchange Commission, (SEC). Information on our investor relations page and on our website is not part of this
Annual Report on Form 10-K or any of our other securities filings unless specifically incorporated herein or
therein by reference. In addition, our filings with the Securities and Exchange Commission may be accessed
through the Securities and Exchange Commission’s Electronic Data Gathering, Analysis and Retrieval (EDGAR)
system at www.sec.gov. You may also read and copy any materials filed with the Commission at the SEC’s
Public Reference Room at 100 F Street, NE., Washington, DC 20549, on official business days during the hours
of 10 a.m. to 3 p.m. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public
Reference Room. All statements made in any of our securities filings, including all forward-looking statements
or information, are made as of the date of the document in which the statement is included, and we do not assume
or undertake any obligation to update any of those statements or documents unless we are required to do so by
law. In addition, our Corporate Governance Guidelines, Code of Business Conduct and Ethics and Charters of
our Audit, Compensation and Nominating and Corporate Governance Committees are available on our website
and are available in print to any stockholder who requests such information.

Item 1A. Risk Factors

The following important factors, among others, could cause our actual operating results to differ materially
from those indicated or suggested by forward-looking statements made in this Form 10-K or presented elsewhere
by management from time to time. Investors should carefully consider the risks described below before making
an investment decision. The risks described below are not the only ones we face. Additional risks not presently
known to us or that we currently believe are not material may also significantly impair our business operations.
Our business could be harmed by any of these risks. The trading price of our common stock could decline due to
any of these risks, and investors may lose all or part of their investment.

Risks Related to Our Business

We may experience significant fluctuations in our quarterly and annual results.

Fluctuations in our quarterly and annual financial results have resulted and will continue to result from

numerous factors, including:

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changes in demand for the products and services we sell;

increased product and price competition, due to market conditions, the regulatory landscape or other
factors;

changes in the mix of products and services we sell;

our pricing strategy with respect to different product lines and services;

strategic actions by us, such as acquisitions of businesses, products, or technologies;

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effects of domestic and foreign economic conditions and exchange rates on our industry and/or
customers;

the divestiture or discontinuation of a product line or other revenue generating activity;

the relocation and integration of manufacturing or processing operations and other strategic
restructuring;

regulatory actions that may necessitate recalls of our products or warning letters that negatively affect
the markets for our products;

our determination whether or not to continue the payment of quarterly cash dividends;

costs incurred by us in connection with the termination of contractual and other relationships, including
those of distributors or agents

our ability to collect outstanding accounts receivable in selected countries outside of the United States;

changes in tax laws in the jurisdictions in which we do business;

the expiration or utilization of deferred tax assets such as net operating loss carry-forwards;

market reception of our new or improved product and service offerings; and

the loss of any significant customer, especially in regard to any product or service that has a limited
customer base.

These factors, some of which are not within our control, may cause the price of our common stock to

fluctuate substantially. If our quarterly operating results fail to meet or exceed the expectations of securities
analysts or investors, our stock price could drop suddenly and significantly. We believe the quarterly
comparisons of our financial results are not always meaningful and should not be relied upon as an indication of
our future performance.

We may not maintain our recent levels of profitability.

While we reported growth in operating and net income in each of the years ended December 31, 2016, 2015
and 2014, there can be no assurance we will continue to achieve significant net sales growth and/or profit growth
in the future. If, for example, we are unable to effectively manage our operating expenses associated with the
increase in the number of our sales personnel in 2016, we may need to reduce our operating expenses in other
areas in order to maintain or improve operating profitability. Decreased investment levels may inhibit future
growth in net sales and earnings.

Additionally, our ability to maintain and increase profitability will be influenced by many factors, including:

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the level and timing of future sales, manufacturing costs and operating expenditures;

market acceptance of our new products and services;

the productivity of our direct sales force and distributors;

fluctuations in foreign currency exchange rates;

our ability to successfully build direct sales organizations in new markets;

our ability to successfully acquire and develop competitive products;

our ability to successfully integrate acquired businesses, products, services or technologies;

the impact on our business of competing products, technologies, and procedures;

our ability to obtain or maintain regulatory approvals for our products in new and existing markets;

the cost of litigation, if any; and

changes in tax laws.

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If we are unable to expand our product and service offerings, we may not achieve our growth objectives and
our results of operations could suffer.

The treatment of peripheral vascular disease is shifting from open vascular surgery to minimally invasive
endovascular procedures, and many of our products are used primarily or exclusively in open vascular surgery
procedures. We market and sell our products primarily to vascular surgeons, and the majority of our marketing
efforts and sales relate to products used in open vascular surgery rather than in endovascular procedures.

We may not be able to compete effectively with our competitors unless we can keep pace with existing or
new products, services and technologies in the vascular device market and the minimally invasive endovascular
procedure segment, in particular. Our success in developing and commercializing new products and new versions
of our existing products and services is affected by our ability to:

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recognize in a timely manner new market trends and customer needs;

identify products or services that address those trends or needs;

obtain regulatory clearance or approval of new products and technologies;

successfully develop cost-effective manufacturing processes for such products;

commercially introduce such products, services and technologies; and

achieve market acceptance.

If we are unable to expand our product or service offerings, we may not achieve our growth objectives and

our results of operations as well as our stock price could suffer.

Our call point focus on the vascular surgeon with a product portfolio largely used in open surgical procedures
may be too narrow, which may adversely affect our future sales.

The treatment of peripheral vascular disease continues to shift from open vascular surgery to minimally

invasive endovascular procedures. We market and sell our products primarily to vascular surgeons, and the
majority of our marketing efforts and sales relate to products used in open vascular surgery rather than in
endovascular procedures.

In addition to performing traditional open surgical procedures, vascular surgeons in growing numbers also
perform minimally invasive, image-guided interventional procedures for peripheral vascular disease. However,
vascular surgeons may not adopt these procedures in the numbers we expect and instead these procedures may be
largely performed by interventional cardiologists and interventional radiologists. Many of our competitors have
focused their sales efforts on these interventionalists. If interventional cardiologists and interventional
radiologists perform a greater percentage of these new procedures than we expect, our net sales may decline.

Moreover, demographic trends and other factors, such as reimbursement rates, are also driving vascular

surgeons in the United States and potentially in other markets to increasingly specialize in certain kinds of
procedures, such as the creation and maintenance of dialysis access sites and endovascular therapies. Vascular
surgeon training programs may focus on those therapies to the exclusion of open vascular procedures. If there is
a decline in vascular surgeons training in open vascular procedures in favor of training in minimally invasive
endovascular procedures, this could limit the number of vascular surgeons using our products due to lack skills in
of open vascular procedures. Further, even those physicians trained in open procedures may discontinue
performing them if there is a lack of demand. If this trend continues, it could lead to the fragmentation of our
customer base, which would reduce cross-selling opportunities and the efficiency of each sales call by our sales
representatives, which in turn could negatively impact our business.

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We may acquire businesses and assets in the future. We may experience difficulties in completing the
integration of these acquisitions into our business, or we may not realize the anticipated benefits of these
acquisitions.

In order to expand our product offerings, we have completed 19 acquisitions, and a key part of our strategy
is to acquire additional businesses, products, or technologies in the future. Our growth strategy depends, in part,
upon our ability to identify, negotiate, complete, and integrate suitable acquisitions. If we are unable to complete
acquisitions on satisfactory terms or at all, our growth objectives and sales could be negatively affected.

Even if we complete acquisitions, we may experience:

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difficulties in integrating any acquired businesses, personnel, and products into our existing business;

difficulties or delays in integrating manufacturing operations into our existing business or successfully
replicating manufacturing processes at new manufacturing facilities on a cost-effective basis;

the sudden reduction in volume or loss of orders from a key customer, particularly where the acquired
company had concentrated sales;

diversion of our management’s time and attention from other business concerns;

higher costs of integration than we anticipated;

unknown or unanticipated liabilities included as part of the acquisition;

disputes or litigation with former owners related to contingent payments, liabilities assumed or not
assumed or other matters;

challenges in complying with new regulatory requirements to which we were not previously subject;

increased regulatory scrutiny;

difficulties in retaining key employees of the acquired business who are necessary to manage these
acquisitions;

difficulties if the acquired company is remote or inconvenient to our Burlington, Massachusetts,
headquarters, such as the operations we acquired in 2014 in Australia;

difficulties or delays in transitioning clinical studies or unfavorable results from such clinical studies;

loss of key suppliers or issues with the ongoing supply of the acquired product from its former owners;

charges related to the acquisition of in-process research and development;

dilution as a result of equity financing required to fund acquisition costs; or

debt as a result of debt financing required to fund acquisition costs, which would be senior to our
common stock and would require interest payments to a lender.

We could also discover deficiencies withheld from us due to fraud or otherwise not uncovered in our due

diligence prior to an acquisition, including but not limited to deficiencies in internal controls, data adequacy and
integrity, product quality, and regulatory compliance, as well as undisclosed contractual or other liabilities and
product liabilities, any of which could result in us becoming subject to penalties or other liabilities. Any of these
difficulties could negatively impact our ability to realize the intended and anticipated benefits that we currently
expect from our acquisitions or from acquisitions we complete in the future and could harm our financial
condition and results of operations.

For instance, in August 2014, we acquired all of the capital stock of Xenotis Pty Ltd, the parent company of
Bio Nova International, which was the manufacturer of our Omniflow II biosynthetic vascular graft. Bio Nova’s
operations are located in North Melbourne, Australia, and we currently expect to continue operations in Australia
for the foreseeable future. Our ability to manage these operations efficiently and effectively may be impaired due
to their distance from our Burlington, Massachusetts headquarters.

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In 2014 and 2015, we acquired two product lines for which we have since then been transitioning

manufacturing to our Burlington facility. We expect to complete the transfer of manufacturing of these product
lines to Burlington in 2017; however there can be no assurances that this will be achieved on the expected
timetable or that transfer costs will not exceed our expectations.

In 2016, we acquired the ProCol vascular graft, which continues to be manufactured by the company from

which we acquired the device. While we currently rely on the former owners to continue to supply product to us,
we have initiated the transfer of manufacturing in 2016, and we expect it to be complete in 2018, subject to
regulatory approval.

We also acquired the processing, preservation and distribution operations of RestoreFlow allografts in 2016,

and we intend to continue conducting such operations at our Fox Rover Grove, Illinois facility. See “Our tissue
processing and preservation services are subject to a variety of risks, including those related to the procurement
of human tissue and regulatory requirements” below for risks associated with our tissue processing and
preservation services.

For any of these reasons or as a result of other factors, we may not realize the anticipated benefits of our

acquisitions and our operating results may be harmed.

Our tissue processing and preservation services are subject to a variety of risks, including those related to the
procurement of human tissue and regulatory requirements.

In November 2016, we acquired the processing, preservation and distribution operations for the
RestoreFlow allograft. Prior to the acquisition, we did not provide any services related to human tissue. Our
ability to successfully provide such services may be affected by the following:

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maintenance of quality standards and controls to mitigate the risk that processed tissue cannot be
sterilized;

compliance with regulatory and legal requirements specific to human tissue, with which we were
previously unfamiliar, or changes in those requirements;

maintenance of our AATB accreditation, FDA establishment registration and state licensures;

the degree to which our tissue procurement organizations are successful in procuring the gift of tissue
donation;

procurement from tissue procurement organizations of adequate amounts of human tissue of a type and
quality that meets our specifications;

processing human tissue in a cost effective manner;

controlling turnover in a workforce skilled in tissue processing and cryopreservation and any
subsequent delay necessary for the adequate training of new personnel; and

compliance of our tissue procurement organizations to current good tissue practices and our
procurement procedures.

Our failure in any one or more of these areas could adversely impact our ability to provide processing,

preservation and distribution services related to allografts and therefore our operations.

Our dependence on sole- and limited-source suppliers could hinder our ability to deliver our products and
services to our customers on a timely basis or at all and could harm our results of operations.

We rely on sole- and limited-source suppliers for some of our important product components and certain

products. For example, our TRIVEX system and associated disposables, as well as components of our EndoRE

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remote endarterectomy product line, are manufactured for us by third-party suppliers. Additionally, we rely on a
sole-source supplier for the ovine material used for our Omniflow II biosynthetic vascular graft, and the ProCol
vascular graft continues to be manufactured by the company from which we acquired the device.

There are relatively few, or in some cases no, alternative, validated sources of supply for these components
and products. And in some cases, we do not have supply agreements with these suppliers, instead placing orders
on an as-needed basis. At any time, these suppliers could discontinue or become incapable of the manufacture or
supply of these components or products on acceptable terms or otherwise. We do not ordinarily carry a
significant inventory of these components and products. Identifying and qualifying additional or replacement
suppliers, if required, may not be accomplished quickly or at all and could involve significant additional costs.
Any supply interruption from our suppliers or failure to obtain replacement suppliers would interrupt our ability
to manufacture our products and result in production delays and increased costs and may limit our ability to
deliver products to our customers. This could lead to customer dissatisfaction and damage to our reputation, and
our financial condition or results of operations may be harmed.

With respect to our RestoreFlow allografts, we rely on tissue procurement organizations to provide donated

tissue to us for processing and cryopreservation. While we have relationships with several tissue procurement
organizations, we cannot be sure that the supply of suitable human tissue will be available to us at the levels we
need, in which case our revenues from allografts could be adversely affected.

Any disruption in our manufacturing facilities could harm our results of operations.

Our principal worldwide executive, distribution, and manufacturing operations are located in three adjacent

leased facilities located in Burlington, Massachusetts. We also have a manufacturing site in North Melbourne,
Australia and a tissue processing and preservation facility in Fox River Grove, Illinois. These facilities and the
manufacturing equipment we use to produce our products would be difficult to replace and could require
substantial lead-time to repair or replace in the event of a natural or man-made disaster. In such event, we could
not shift production or processing to alternate manufacturing facilities, and we would be forced to rely on third-
party manufacturers, if available at all. Although we carry insurance for damage to our property and the
disruption of our business from casualties, such insurance may not be sufficient to cover all of our potential
losses, including potential damage to our reputation, and may not continue to be available to us on acceptable
terms, or at all.

Certain of our products contain materials derived from animal sources and may become subject to additional
regulation.

Our AlboGraft vascular graft, AlboSure vascular patch, XenoSure biologic patch and ProCol vascular graft

products contain bovine tissue or material derived from bovine tissue, and our Omniflow II Biosynthetic
Vascular Graft contains ovine tissue. Products that contain materials derived from animal sources, including
food, pharmaceuticals and medical devices, are increasingly subject to scrutiny in the media and by regulatory
authorities. Regulatory authorities are concerned about the potential for the transmission of disease from animals
to humans via those materials. This public scrutiny has been particularly acute in Japan and Western Europe with
respect to products derived from animal sources, because of concern that bovine materials infected with the agent
that causes bovine spongiform encephalopathy, otherwise known as BSE or mad cow disease, may, if ingested or
implanted, cause a variant of the human Creutzfeldt-Jakob Disease, an ultimately fatal disease with no known
cure. Cases of BSE in cattle discovered in Canada and the United States have increased awareness of the issue in
North America. Certain regions or countries have issued regulations that require products to be processed from
bovine tissue sourced from countries, like Australia or New Zealand, where no cases of BSE have occurred.
Products that contain materials derived from animals, including our products, may become subject to additional
regulation, or even be banned in certain countries, because of concern over the potential for the transmission of
infectious agents. Significant new regulation, or a ban of our products, could impair our current business or our
ability to expand our business, and in the case of a ban or suspension, could materially and adversely affect our
results of operations.

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We face intense competition from other companies, technologies, and alternative medical procedures and we
may not be able to compete effectively.

The segments in which we compete are highly competitive, subject to change, and significantly affected by

new product introductions and other activities of industry participants. Although no one company competes
against us in all of our product lines or services, a number of manufacturers of peripheral vascular devices have
substantially greater capital resources, larger customer bases, broader product lines, larger sales forces, greater
marketing and management resources, larger research and development staffs, and larger facilities than ours;
have established reputations with our target customers; and have developed worldwide distribution channels that
are more effective than ours. Our competitors could elect to devote additional resources to the segments in which
we currently enjoy less competition. Also, although we currently have leading positions in the segments for some
of our products, this is not true for all of our products. From time to time, we have experienced difficulties
competing against large companies.

Recent industry consolidation could make the competitive environment more difficult for smaller companies
like ours. Our competitors may be companies who are larger than us and who have substantially greater financial,
technological, research and development, regulatory, marketing, sales, and personnel resources than we do.
Certain of these competitors are able to manufacture at lower costs and may therefore offer comparable products
at lower prices. Certain of these competitors may also have greater experience in developing and further
improving products, obtaining regulatory approvals, and manufacturing and marketing such products. Certain of
these competitors may obtain patent protection or regulatory approval or clearance, or achieve product
commercialization, before us, any of which could materially adversely affect us. Further, if the trend towards
endovascular procedures versus open vascular procedures continues or accelerates, our competitors may be better
poised to take advantage of that trend, since our main product lines are used primarily in open vascular
procedures. Because of the size of the vascular disease market opportunity, competitors and potential competitors
have dedicated, and we believe will continue to dedicate, significant resources to aggressively promote their
products. Also, new product developments that could compete with us more effectively are likely because the
vascular disease market is characterized by extensive research efforts and technological progress. Competitors
may develop technologies and products that are safer, more effective, easier to use, less expensive, or more
readily accepted than ours. Their products could make our technology and products obsolete or noncompetitive.
Our competitors may also be able to achieve more efficient manufacturing and distribution operations than we
can. In addition, many of our products face competition from alternative procedures that utilize a different kind
of medical device that we do not currently sell. Increased competition could also result in price reductions and
loss of market share, any of which could result in lower revenues and reduced gross profits.

If we are unable to increase our selling prices to customers, or if we are required to make price concessions,
our rate of net sales growth could be reduced and our operating results could suffer.

In the years ended December 31, 2016, 2015 and 2014, a material portion of our increases in net sales was
driven by higher average selling prices to our hospital customers across several of our product lines, particularly
with respect to sales of our 1.5mm HYDRO LeMaitre Valvulotome and with respect to sales occurring in the
United States. In the past, we have been able to rely upon our intellectual property position, our well-known
brands, and our established reputation in the vascular surgery device marketplace to implement price increases.
We implemented a significant price increase in 2015 for our 1.5mm HYDRO LeMaitre Valvulotome, and our
ability to implement additional price increases with respect to that product in the future may be limited. We also
experienced an increase in net sales of our XenoSure biologic patch in 2016, which was due in part to the recall
of a competitive product. That recall has since been resolved, and we have only retained a portion of the
customers who switched to our product during the pendency of the recall. If we are unable to retain those
customers, then our XenoSure biologic patch sales could be lower than expected.

Additionally, we may become unable to implement further increases in the selling prices of our products:

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if healthcare spending is reduced, particularly in the United States, in response to government-enacted
healthcare reform, general economic conditions, or the influence of accountable care organizations;

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if the reimbursement rates for the medical procedures in which our products are used are reduced or
limited; or

if competitors introduce lower-priced products of comparable safety and efficacy.

We also expect marketplace changes to increasingly place pressure on medical device pricing as hospitals

join group purchasing organizations, integrated delivery networks, managed care organizations and other groups
that seek to aggregate purchasing power and as hospitals are given financial incentives to improve quality and
reduce costs. Due to pricing pressures, surgeons may even perform alternative procedures in which our products
are unnecessary.

If we become unable to raise selling prices, or if we are required to make price concessions, it could reduce

our rate of net sales growth and harm our operating results.

The risks inherent in operating internationally and the risks of selling and shipping our products and of
purchasing our components and products internationally may adversely impact our net sales, results of
operations, and financial condition.

We derive a significant portion of our net sales from operations in markets outside of the United States. For
the year ended December 31, 2016, 44% of our net sales were derived from our operations outside of the United
States. Our international sales operations expose us and our representatives, agents, and distributors to risks
inherent in operating in foreign jurisdictions. These risks include:

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fluctuations in foreign currency exchange rates;

the imposition of additional U.S. and foreign governmental controls or regulations, including export
licensing requirements, duties and tariffs, and other trade restrictions, whether due to, or in reaction to,
changes in U.S. trade policy under President Trump or otherwise;

the risk of non-compliance with the Foreign Corrupt Practices Act by our sales representatives or our
distributors;

changing medical device regulations that may impede our ability to register our products in a
jurisdiction;

the imposition of U.S. and/or international sanctions against a country, company, person, or entity with
whom we do business that would restrict or prohibit continued business with the sanctioned country,
company, person, or entity, whether due to , or in reaction to, changes in U.S. foreign policy under
President Trump or otherwise;

a shortage of high-quality sales personnel and distributors;

loss of any key personnel who possess proprietary knowledge, or who are otherwise important to our
success in certain international markets;

changes in third-party reimbursement policies that may require some of the patients who receive our
products to directly absorb medical costs or that may necessitate the reduction of the selling prices of
our products;

the imposition of restrictions on the activities of foreign agents, representatives, and distributors;

scrutiny of foreign tax authorities, which could result in significant fines, penalties, and additional
taxes being imposed on us;

pricing pressure that we may experience internationally;

laws and business practices favoring local companies;

longer payment cycles;

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difficulties in enforcing agreements and collecting receivables through certain foreign legal systems;

difficulties in enforcing or defending intellectual property rights;

exposure to different legal and political standards; and

political, economic, and/or social instability.

We cannot assure you that one or more of these factors will not harm our business. Any material decrease in

our international sales would adversely impact our net sales, results of operations, and financial condition.

The use or misuse of our products and tissues we distribute may result in injuries that lead to product liability
suits, which could be costly to our business.

If our products or the tissue we process and preserve are defectively designed, manufactured, processed or
labeled, contain defective components, or are misused, or if our products or the tissues we process and preserve
are found to have caused or contributed to injuries or death, we may become subject to costly litigation by our
customers or their patients. Although we offer training for physicians, we do not require that physicians be
trained in the use of our products or the tissues we distribute, and physicians may use our products or the tissues
we distribute incorrectly or in procedures not contemplated by us. We are from time to time involved in product
liability claims. Product liability claims could divert management’s attention from our core business, be
expensive to defend, and result in sizable damage awards against us. Claims of this nature may also adversely
affect our reputation, which could damage our position in the market and subject us to recalls.

We cannot assure you that our product liability insurance coverage will be sufficient to satisfy any claim

made against us. Further, we may not be able to maintain the same level of coverage, and we may not be able to
obtain adequate coverage at a reasonable cost and on reasonable terms, if at all. Any product liability claim
brought against us, with or without merit, could increase our product liability insurance rates or prevent us from
securing coverage in the future. Additionally, if any such product liability claim or series of claims is brought
against us for uninsured liabilities or is in excess of our insurance coverage, our business could be harmed.

From time to time, we are involved in litigation where the outcome is uncertain and which could entail
significant expense.

We are subject, from time to time, to legal proceedings and litigation, including, but not limited to, actions
relating to product liability, employment matters, intellectual property, contract disputes and other commercial
matters. Because the outcome of litigation is inherently difficult to predict, it is possible that the outcome of
litigation, or even simply the defense of litigation, could entail significant cost for us and harm our business. The
fact that we operate in international markets also increases the risk that we may face legal exposures as we seek
to comply with a large number of varying legal and regulatory requirements. If any such proceedings were to
result in an unfavorable outcome, it could adversely affect our business, financial condition and results of
operations.

If we fail to convert additional countries or products from distributor sales to direct sales, or encounter
difficulties in effecting such conversions, our results of operations could suffer.

We have a history of converting international distributor sales to direct-to-hospital sales by buying out our

foreign distributor agreements and selling directly to hospitals through our own established sales representatives.
In the future, we may elect to convert select additional countries and products from distributor sales to direct
sales. Such conversions sometimes result in disruptions in our sales in the applicable geographies. These
transitions may also have an adverse effect on our cash flow from operations because distributors, unlike direct
sales personnel, pay us for inventory that they stock for later sale. In addition, switching to a direct sales force
may subject us to longer customer collection times and larger bad debt expense, since we would be required to
collect customer payments directly rather than through a distributor.

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Our distribution agreements are typically exclusive with terms of up to five years. These agreements may

temporarily constrain our ability to convert certain countries or products from a distributor to a direct sales
model. In order to ensure a successful market transition, we may compensate a distributor in connection with the
termination of their distributorship, even where the payment of compensation is not required by contract or local
law.

Following termination of any distribution agreement, we may encounter difficulties in transitioning to a
direct-sales model in any country in question. It may take us longer than expected to find sufficient qualified
sales personnel to establish an effective sales force, which could negatively impact projected sales. If a
distributor sold our products through a network of sales agents, rather than exclusively through its own
personnel, we may not be able to establish relationships with all members of that network, temporarily limiting
our access to the existing market. Similarly, failure to maintain or quickly re-establish a distributor’s close
relationships with the physicians who use our products could reduce sales. Further, it may be difficult or
impossible to transfer the assignment of a distributor’s rights to sell our products, and as a result, sales to
customers may be delayed until a new agreement or approval is obtained. The transition to a direct sales model
may also require us to incur additional expenses and meet regulatory requirements that were previously the
responsibility of the distributor. As a result of these risks, there can be no assurance that we will be successful in
transitioning to a direct sales model in the countries that we select, and difficulties that we encounter in these
transitions could negatively affect our business.

Fluctuations in the exchange rate of the U.S. dollar and other currencies may adversely impact our results of
operations.

Our results of operations are reported in U.S. dollars. While the majority of our revenue is denominated in
U.S. dollars, a portion of our revenue and costs is denominated in other currencies, such as the Euro, the British
pound, the Japanese yen, the Canadian dollar and the Australian dollar. As of December 31, 2016, 44% of our net
sales were derived from our operations outside of the United States. As a result, we face exposure to movements
in currency exchange rates. Our results of operations and our operating expenses are exposed to foreign exchange
rate fluctuations as the financial results of those operations are translated from local currency into U.S. dollars
upon consolidation. If the U.S. dollar weakens against the local currency, the translation of these foreign
currency-based local operations will result in increased net assets, revenue, operating expenses, and net income.
Similarly, our local currency-based net assets, revenue, operating expenses, and net income will decrease if the
U.S. dollar strengthens against local currency. Additionally, transactions denominated in currencies other than
the functional currency may result in gains and losses that may adversely impact our results of operations.

Risks Related to the Regulatory Environment

Oversight of the medical device industry might affect the manner in which we may sell medical devices and
compete in the marketplace.

There are laws and regulations that govern the means by which companies in the healthcare industry may
market their products and services to healthcare professionals and may compete by discounting the prices of their
products and services, including for example, the federal Anti-Kickback Statute, the federal False Claims Act,
the federal Health Insurance Portability and Accountability Act of 1996, state law equivalents to these federal
laws that are meant to protect against fraud and abuse and analogous laws in foreign countries. Violations of
these laws are punishable by criminal and civil sanctions, including, but not limited to, civil and criminal
penalties, damages, fines, exclusion from participation in federal and state healthcare programs, including
Medicare and Medicaid. Although in structuring our sales and marketing practices and customer discount
arrangements we strive to comply with those laws and regulations, we cannot assure you that:

•

government officials charged with responsibility for enforcing those laws will not assert that our sales
and marketing practices or customer discount arrangements are in violation of those laws or
regulations; or

27

•

government regulators or courts will interpret those laws or regulations in a manner consistent with our
interpretation.

Federal and state laws are also sometimes open to interpretation, and from time to time we may find

ourselves at a competitive disadvantage if our interpretation differs from that of our competitors.

Our business is subject to complex, costly, and burdensome regulations. We could be subject to significant
penalties if we fail to comply.

The production and marketing of our products and services and our ongoing research and development are
subject to extensive regulation and review by numerous governmental authorities both in the United States and
abroad. U.S. and foreign regulations applicable to medical devices and human tissues are wide-ranging and
govern, among other things, the testing, marketing, and premarket clearance or approval of new medical devices
and services related to human tissues, as applicable, in addition to regulating manufacturing and processing
practices, reporting, promotion and advertising, importing and exporting, labeling, and record-keeping
procedures.

Our failure to comply with applicable regulatory requirements could result in governmental agencies or a

court taking action, including any of the following:

•

•

•

•

•

•

•

issuing public warning letters to us;

imposing fines and penalties on us;

issuing an injunction preventing us from manufacturing, processing, selling or distributing our
products;

bringing civil or criminal charges against us;

delaying the introduction of our new products into the market;

ordering a recall of, or detaining or seizing, our products or cryopreserved human tissue; or

withdrawing or denying approvals or clearances for our products.

If any or all of the foregoing were to occur, our business, results of operations, and reputation could suffer.

If we are not successful in obtaining and maintaining clearances and approvals from governmental agencies
for our medical devices, we will not be able to sell our products, and our future growth will be significantly
hampered.

Our products require premarket clearance or approval in the United States and the CE Mark or other
approvals in foreign countries where they are sold. Each medical device that we wish to market in the United
States generally must receive either 510(k) clearance or approval of a premarket application, or PMA, from the
FDA before the product can be marketed or sold. Either process can be lengthy and expensive. The FDA’s 510(k)
clearance procedure usually takes from three to twelve months from the date the FDA receives the application,
but may take significantly longer. Although 510(k) clearances have been obtained for nearly all of our current
products that require 510(k) clearances, the FDA may condition, limit or prohibit our sales of these products if
safety or effectiveness problems develop with the devices. Our new products or significantly modified marketed
products could be denied 510(k) clearance and required to undergo the more burdensome PMA approval process
if they are not found to be substantially equivalent.

The PMA approval process is much more costly, lengthy, and uncertain than the premarket notification
process. It generally takes from six months to three years from the date the application is submitted to, and filed
with, the FDA, and may take even longer. Achieving premarket approval typically requires extensive clinical
trials and may require the filing of numerous amendments with the FDA over time. We do not have significant
experience in obtaining PMA approval for our products.

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The FDA has previously proposed changes for which FDA clearance to market would possibly require
clinical data, more extensive manufacturing information and post market data. As part of the 510(k) reform, the
FDA proposes to issue regulations defining grounds and procedures for rescission of 510(k) applications that
have previously been cleared to market. The FDA may also require the more extensive PMA process for certain
products. Our ability to market our products outside the United States is also subject to regulatory approval,
including our ability to demonstrate the safety and effectiveness of our products in the clinical setting. Even if
regulatory approval or clearance of a product is granted, the approval or clearance could limit the uses or the
claims for which the product may be labeled and promoted, which may limit the market for our products. If we
do not obtain and maintain foreign regulatory or FDA approval with respect to our products, as applicable, we
will not be able to sell our products, and our future growth will be significantly hampered.

If we or some of our suppliers fail to comply with the FDA’s Quality System Regulation and other applicable
requirements, our manufacturing or processing operations could be disrupted, our sales and profitability
could suffer, and we may become subject to a wide variety of FDA enforcement actions.

We are subject to inspection and marketing surveillance by the FDA to determine our compliance with all

regulatory requirements. If the FDA finds that we have failed to comply with any regulatory requirements, it can
institute a wide variety of enforcement actions.

We and some of our suppliers must comply with the FDA’s Quality System Regulation, which governs the

methods used in, and the facilities and controls used for, the design, testing, manufacture, control, quality
assurance, installation, servicing, labeling, packaging, storage, and shipping of medical devices. Our Fox River
Grove operations must comply with the FDA’s current Good Tissue Practices, which are the FDA regulatory
requirements for the processing of human tissue. The FDA enforces its regulations through pre-announced and
unannounced inspections. We have been, and anticipate in the future being, subject to such inspections by the
FDA and other regulatory bodies. The timing and scope of future audits is unknown and it is possible, despite our
belief that our quality systems and the operation of our manufacturing facilities will remain in compliance with
U.S, and non-U.S. regulatory requirements, that a future audit may result in one or more unsatisfactory results. If
we or one of our suppliers fails an inspection, or if a corrective action plan adopted by us or one of our suppliers
is not sufficient, the FDA may bring an enforcement action against us, and our operations could be disrupted and
our manufacturing delayed.

We are also subject to the FDA’s general prohibition against promoting our products for unapproved or off-

label uses and to the medical device reporting, or MDR, regulations that require us to report to the FDA if our
products may have caused or contributed to a death or serious injury, or if our device malfunctions and a
recurrence of the malfunction would likely result in a death or serious injury. We must also file reports with the
FDA of some device corrections and removals, and we must adhere to the FDA’s rules on labeling and
promotion. If we fail to comply with these or other FDA requirements or fail to take adequate corrective action in
response to any significant compliance issue raised by the FDA, the FDA can take significant enforcement
actions, which could harm our business, results of operations, and our reputation.

In addition, most other countries, such as Japan, require us to comply with manufacturing and quality
assurance standards for medical devices that are similar to those in force in the United States before marketing
and selling our products in those countries. If we fail to comply, we would lose our ability to market and sell our
products in those foreign countries.

Even after our products have received marketing approval or clearance, our products and the tissue we
process may be subject to product recalls. Licenses, registrations, approvals and clearances could be
withdrawn or suspended due to failure to comply with regulatory standards or the occurrence of unforeseen
problems following initial approval.

Our products, services, marketing, sales and development activities, and manufacturing processes are
subject to extensive and rigorous regulation by the FDA, by comparable agencies in foreign countries, and by

29

other regulatory agencies and governing bodies. These authorities have been increasing their scrutiny of our
industry. If those regulatory bodies feel that we have failed to comply with regulatory standards or if we
encounter unforeseen problems following initial approval, licensure or registration, there can be no assurance that
any approval, licensure or registration will not be subsequently withdrawn, suspended or conditioned upon
extensive post-market study requirements, even after having received marketing approval or clearance or licenses
and registrations. Further, due to the increased scrutiny of our industry by the various regulatory agencies and the
interconnectedness of the various regulatory agencies, particularly within the European Union, there is also no
assurance that withdrawal or suspension of any of our approvals, licenses or registrations by any single
regulatory agency will not precipitate one or more additional regulatory agencies from also withdrawing or
suspending their approval, license or registration.

In the event that any of our products proves to be defective, we can voluntarily recall, or the FDA or foreign

equivalent could require us to implement a recall of or prohibit the sale of, any of our products. For example, in
2016 and in early 2017, we voluntarily recalled certain lots of our HYDRO LeMaitre valvulotome due to an issue
with the product’s closure mechanism. We were able to address the issue and we believe the recall, affecting
approximately 5,500 units, will be substantially complete by June 30, 2017. While the affected lots remain on
recall, we have continued to sell unaffected lots and we believe that we will be able to rework returned
valvulotomes at minimal expense. In February 2017, we voluntarily recalled certain lots of our Reddick
cholangiogram catheter due to a labeling issue. We are able to fix the labeling issue by placing additional stickers
on the affected product, and we believe the recall will be substantially complete by June 30, 2017. While we have
taken corrective action to address these issues, there can be no assurance that there will not be a recurrence or
that other problems related to our products will not develop in the future. And though the aggregate cost of these
recalls to us was only $0.2 million, recalls could result in significant costs to us and significant adverse publicity,
which could harm our ability to market our products in the future.

With respect to our RestoreFlow allografts, we may voluntarily recall tissue, and in the event of non-compliance
with the regulations governing human tissue, the FDA may issue a warning letter, order the recall and/or destruction of
tissues and/or order the suspension or cessation of processing and preservation of new tissues.

Additionally, if someone is harmed by a malfunction or a product defect, we may experience product
liability claims for such defects. Any corrective action, whether voluntary or involuntary, as well as defending
ourselves in a lawsuit, will require the dedication of our time and capital and may harm our reputation and
financial results. Future recalls or claims could also result in significant costs to us and significant adverse
publicity, which could harm our ability to market our products in the future.

The adoption of healthcare reform in the United States may adversely affect our business, results of
operations and/or financial condition.

In March 2010, significant reforms to the U.S. healthcare system were adopted in the form of the Patient
Protection and Affordable Care Act (PPACA). The PPACA included provisions that, among other things, reduce
and/or limit Medicare reimbursement, require all individuals to have health insurance (with limited exceptions)
and impose new and/or increased taxes (including the medical device excise tax in effect in 2013, 2014 and
2015). While the requirement that the medical device industry subsidize healthcare reform in the form of a 2.3%
excise tax on U.S. sales of most medical devices was suspended for 2016 and 2017, there is no guarantee that the
moratorium will be approved for subsequent years. In 2015, we paid an excise tax of approximately $0.7 million.

In January 2017, Congress voted to adopt a budget resolution for fiscal year 2017, or the Budget Resolution,

that authorizes the implementation of legislation that would repeal portions of the PPACA. Further, on
January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and
responsibilities under the PPACA to waive, defer, grant exemptions from, or delay the implementation of any
provision of the PPACA that would impose a fiscal or regulatory burden on states, individuals, healthcare
providers, health insurers, or manufacturers of pharmaceuticals or medical devices. Congress also could consider
subsequent legislation to replace elements of the PPACA that are repealed.

30

Various healthcare reform proposals have also emerged at the state level. The PPACA and these proposals
could reduce medical procedure volumes and impact the demand for our products or the prices at which we sell
our products. In addition, the excise tax increases our cost of doing business. While the future of PPACA is
uncertain due to the Budget Resolution and President Trump’s executive order, the impact of the PPACA, or any
replacement plan, and these proposals, as well as new state-level proposals in reaction to the executive order,
could harm our operating results and liquidity.

Domestic and foreign legislative or administrative reforms resulting in restrictive reimbursement practices of
third-party payors and cost containment measures could decrease the demand for products purchased by our
customers, the prices that our customers are willing to pay for those products and the number of procedures
using our devices.

Our products and our tissue preservation services are purchased principally by hospitals or physicians which

typically bill various third-party payors, such as governmental programs (e.g., Medicare, Medicaid and
comparable foreign programs), private insurance plans and managed care plans, for the healthcare services
provided to their patients. The ability of our customers to obtain appropriate reimbursement for products and
services from third-party payors is critical to the success of our products and services because it affects which
products customers purchase and the prices they are willing to pay. Reimbursement varies by country and can
significantly impact the acceptance of new technology. Implementation of healthcare reforms in the United
States and in significant overseas markets such as Germany, Japan, France and other countries may limit, reduce
or eliminate reimbursement for our products and services and adversely affect both our pricing flexibility and the
demand for our products and services. Even when we develop or acquire a promising new product or service, we
may find limited demand for the product or service unless reimbursement approval is obtained from private and
governmental third-party payors.

Major third-party payors for hospital services in the United States and abroad continue to work to contain

healthcare costs through, among other things, the introduction of cost containment incentives and closer scrutiny
of healthcare expenditures by both private health insurers and employers. For example, in an effort to decrease
costs, certain hospitals and other customers may resterilize our products intended for a single use or purchase
reprocessed products from third-party reprocessors in lieu of purchasing new products from us.

Further legislative or administrative reforms to the reimbursement systems in the United States and abroad,

or adverse decisions relating to our products by administrators of these systems in coverage or reimbursement,
could significantly reduce reimbursement for procedures using our medical devices or result in the denial of
coverage for those procedures. Examples of these reforms or adverse decisions include price regulation,
competitive pricing, coverage and payment policies, comparative effectiveness of therapies, technology
assessments and managed-care arrangements. Any of such reforms or adverse decisions resulting in restrictive
reimbursement practices or denials of coverage could have an adverse impact on the acceptance of our products
and the prices that our customers are willing to pay for them.

If we do not comply with foreign regulatory requirements to market our products outside the United States,
our business will be harmed.

Sales of medical devices outside the United States are subject to international regulatory requirements that
vary from country to country. These requirements and the amount of time required for approval may differ from
our experiences with the FDA in the United States. In some cases, we rely on our non-U.S. distributors to obtain
premarket approvals, complete product registrations, comply with clinical trial requirements, and complete those
steps that are customarily taken in the applicable jurisdictions to comply with governmental and quasi-
governmental regulation. In the future, we expect to continue to rely on distributors in this manner in those
countries where we continue to market and sell our products through them. Failure to satisfy these foreign
regulations would impact our ability to sell our products in these countries and could cause our business to suffer.
There can be no assurance that we will be able to obtain or maintain the required regulatory approvals in these
countries.

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Our products are regulated in the European Union under the European Medical Devices Directive (93/42/EC

as amended by 2007/47/EC). In order to market our medical devices in the European Union, we are required to
obtain CE mark certification, which denotes conformity to the essential requirements of the Medical Devices
Directive. We have received CE mark certification to sell nearly all of our products. However, there can be no
assurance that we will be able to obtain a CE mark for new products in the future or for modifications to our
existing products or in the manufacturing of our products, and obtaining a CE mark may involve a significant
amount of time and expense, stringent clinical and preclinical testing, or modification of our products and could
result in limitations being placed on the use of our products in order to obtain approval.

Maintaining a CE mark is contingent upon our continued compliance with applicable European medical
device requirements, including limitations on advertising and promotion of medical devices and requirements
governing the handling of adverse events. There can be no assurance that we will be successful in maintaining
the CE mark for any of our current products. In particular, adverse event reporting requirements in the European
Union mandate that we report incidents which led or could have led to death or serious deterioration in health.
Under certain circumstances, we could be required to or could voluntarily initiate a recall or removal of our
product from the market in order to address product deficiencies or malfunctions. Any recall of our products may
harm our reputation with customers and divert managerial and financial resources.

Failure to receive or maintain approval would prohibit us from selling these products in member countries
of the European Union, and would require significant delays in obtaining individual country approvals. If we do
not receive or maintain these approvals, our business could be harmed.

Our manufacturing facilities are subject to periodic inspection by European regulatory authorities and

Notified Bodies, and we must demonstrate compliance with the Medical Devices Directive. Our most recent
inspections by our European Notified Bodies were conducted in July and November 2015. Any failure by us to
comply with European requirements in this regard may entail our taking corrective action, such as modification
of our policies and procedures. In addition, we may be required to cease all or part of our operations for some
period of time until we can demonstrate that appropriate steps have been taken. There can be no assurance that
we will be found in compliance with such standards in future audits.

We also pursue registrations in other jurisdictions in which we sell our devices directly, such as Japan and

China. In 2015, the China Food and Drug Administration significantly increased the application fees for product
registrations and imposed additional requirements for obtaining product approval, which includes requirements
for conducting clinical trials on most new products in China. Any delay in product registrations could have a
negative impact on our results of operations.

Risks Related to Intellectual Property

If we fail to adequately protect our intellectual property rights, or prevent use of our intellectual property by
third parties, we could lose a significant competitive advantage and our business may suffer.

Our success depends in part on obtaining, maintaining, and enforcing our patents, trademarks, and other

proprietary rights, and our ability to avoid infringing on the proprietary rights of others. We take precautionary
steps to protect our technological advantages and intellectual property. We rely upon patent, trade secret,
copyright, know-how, and trademark laws, as well as license agreements and contractual provisions, to establish
our intellectual property rights and protect our products. These measures may only afford limited protection and
may not:

•

•

•

prevent our competitors from duplicating our products or services;

prevent our competitors from gaining access to our proprietary information and technology; or

permit us to gain or maintain a competitive advantage.

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The issuance of a patent is not conclusive as to its validity or enforceability. Any patents we have obtained

or will obtain in the future might also be invalidated or circumvented by third parties. In addition, our pending
patent applications may not issue as patents or, if issued, may not provide commercially meaningful protection,
as competitors may be able to design around our patents to produce alternative, non-infringing designs. Should
such challenges to our patents be successful, competitors might be able to market products and use
manufacturing processes that are substantially similar to ours. Furthermore, patents expire after a certain
duration, depending on the jurisdiction in which issued. To the extent any manufacturers are successful in
challenging our patents or they enter the market following the expiration of our patents, this could have an
adverse impact on our business and harm our sales and operating results.

Additionally, we may not be able to effectively protect our rights in unpatented technology, trade secrets,

and confidential information. We have a policy of requiring key employees and consultants and corporate
partners with access to trade secrets or other confidential information to execute confidentiality agreements. Our
confidentiality agreements also require our employees to assign to us all rights to any inventions made or
conceived during their employment with us. We also generally require our consultants to assign to us any
inventions made during the course of their engagement by us. There can be no assurance, however, that these
agreements will provide meaningful protection or adequate remedies for us in the event of unauthorized use,
transfer, or disclosure of confidential information or inventions.

In addition, the laws of foreign countries may not protect our intellectual property rights effectively or to the

same extent as the laws of the United States. If our intellectual property rights are not adequately protected, we
may not be able to commercialize our technologies, products, or services and our competitors could
commercialize similar technologies, which could result in a decrease in our sales and market share.

If third parties claim that we infringe upon their intellectual property rights, we may incur liabilities and costs,
and we may have to redesign or discontinue selling the affected product.

The medical device industry is litigious with respect to patents and other intellectual property rights.
Companies operating in our industry routinely seek patent protection for their product designs, and many of our
principal competitors have large patent portfolios. Companies in the medical device industry have used
intellectual property litigation to gain a competitive advantage. Whether a product infringes a patent involves
complex legal and factual issues, the determination of which is often uncertain. We face the risk of claims that
we have infringed on third parties’ intellectual property rights, and we cannot assure you that our products or
methods do not infringe the patents or other intellectual property rights of third parties. Our efforts to identify
and avoid infringing on third parties’ intellectual property rights may not always be successful. Any claims of
patent or other intellectual property infringement, even those without merit, could:

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•

be expensive and time consuming to defend;

result in us being required to pay significant damages to third parties for past use of the asserted
intellectual property;

harm our reputation;

cause us to cease making or selling products that incorporate the challenged intellectual property;

require us to redesign, reengineer, or rebrand our products, which may not be possible and could be
costly and time consuming if it is possible to do so at all;

require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s
intellectual property, which agreements may not be available on terms acceptable to us or at all;

divert the attention of our management and key personnel from other tasks important to the success of
our business; or

result in our customers or potential customers deferring or limiting their purchase or use of the affected
products until resolution of the litigation.

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It is also possible that one of our competitors could claim that our manufacturing process violates an

existing patent. If we were unsuccessful in defending such a claim, we may be forced to stop production at one or
more of our manufacturing facilities.

In addition, new patents obtained by our competitors could threaten a product’s continued life in the market

even after it has already been introduced. If our business is successful, the possibility may increase that others
will assert infringement claims against us.

If we believe our product is or may be the subject of a patent with a third party, we may attempt to reach a

license agreement with them to manufacture, market, and sell these products. If we fail to reach an agreement
with a third party patent holder that covers a product we offer, we could be required to pay significant damages to
third parties for past use of the asserted intellectual property and may be forced to cease making or selling
products that incorporate the challenged intellectual property.

In addition, we may become subject to interference proceedings conducted in the United States Patent
Office or opposition proceedings conducted in foreign patent offices challenging the priority of invention or the
validity of our patents.

Risks Related to Our Common Stock

Our stock price may be volatile, and your investment in our common stock could suffer a decline in value.

There can be significant volatility in the market price and trading volume of equity securities that is
unrelated to the financial performance of the companies issuing the securities. These broad market fluctuations
may negatively affect the market price of our common stock. You may not be able to resell your shares at or
above the price at which you purchased them due to fluctuations in the market price of our common stock caused
by changes in our operating performance or prospects, a reduced volume of trading in our common stock, and
other factors.

Some specific factors that may have a significant effect on our common stock market price include:

•

•

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•

•

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•

•

•

•

•

•

actual or anticipated fluctuations in our operating results or future prospects;

our announcements or our competitors’ announcements of new products;

public concern as to the safety or efficacy of our products and services;

the public’s reaction to our press releases, our other public announcements, and our filings with the
SEC;

our determination whether or not to continue the payment of quarterly cash dividends;

our determination whether or not to undertake or continue a share repurchase program;

strategic actions by us or our competitors, such as acquisitions, divestitures or restructurings;

dilutive issuances of additional securities;

changes in our growth rates or our competitors’ growth rates;

developments regarding our patents or proprietary rights or those of our competitors;

our inability to raise additional capital;

changes in financial markets or general economic conditions, including those resulting from significant
changes in governmental policy, war, incidents of terrorism, and responses to such events;

new laws or regulations or new interpretations of existing laws or regulations applicable to our
business;

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•

•

•

•

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the discontinuation of a product line or other revenue generating activity;

adverse regulatory actions which may necessitate recalls of our products or services or warning letters
that negatively affect the markets for our products or services;

sales of common stock by us or our directors, officers, or principal stockholders;

control by our affiliates and insiders of a significant percentage of our common stock;

changes in stock market analyst recommendations or earnings estimates regarding our common stock,
comparable companies, or our industry generally; and

light volume of trading in our common stock;

In the past, following periods of volatility in the market price of a company’s securities, securities class
action litigation has often been instituted. This litigation, if instituted against us, could result in substantial costs
and a diversion of our management’s attention and resources.

Our chief executive officer has significant voting power and may take actions that may not align with the
interests of our other stockholders.

Our chief executive officer and his family collectively control approximately 23% of our outstanding
common stock as of December 31, 2016. As a result, these stockholders, if they were to act together, would have
significant influence on many matters requiring stockholder approval, including the election of directors and
approval of significant corporate transactions. This concentration of ownership may have the effect of delaying
or preventing a change in control, might adversely affect the market price of our common stock, and may not be
fully aligned with the interests of our other stockholders.

We have not established a minimum dividend payment level for our common stockholders and there are no
assurances of our ability to pay dividends to common stockholders in the future.

In February 2011, our Board of Directors adopted a quarterly dividend program for the purpose of returning

capital to our stockholders. However, we have not established a minimum dividend payment level for our
common stockholders and our ability to pay dividends may be harmed by the risks and uncertainties described in
this Annual Report on Form 10-K and in the other documents we file from time to time with the SEC. Future
dividends, if any, will be authorized by our Board of Directors and declared by us based upon a variety of factors
deemed relevant by our directors, including, among other things, our financial condition, liquidity, earnings
projections and business prospects. In addition, financial covenants in any credit facility to which we become a
party may restrict our ability to pay future quarterly dividends. We can provide no assurance of our ability to pay
dividends in the future.

Item 1B. Unresolved Staff Comments

None.

Item 2.

Properties

Our principal worldwide executive, distribution, and manufacturing operations are located at three adjacent

27,098 square foot, 27,289 square foot and 15,642 square foot leased facilities in Burlington, Massachusetts.
Each of our Burlington leases expires in 2023. In addition, our international operations are headquartered at a
12,841 square foot leased facility located in Sulzbach, Germany, with a lease which expires in 2023. We also
own a 6,140 square foot manufacturing facility in North Melbourne, Australia and lease a 6,722 square foot
processing and distribution facility in Fox River Gove, Illinois. In addition, we have smaller leased sales and
marketing offices located in Canada, China, Italy, Japan, and Spain. Based on our current operating plans, we
believe our current facilities are adequate for our needs.

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Item 3.

Legal Proceedings

In the ordinary course of business, we are from time to time involved in lawsuits, claims, investigations,
proceedings, and threats of litigation consisting of intellectual property, commercial, employment, and other
matters. While the outcome of these proceedings and claims cannot be predicted with certainty, there are no
matters, as of December 31, 2016, that, in the opinion of management, would be reasonably expected to have a
material adverse effect on our financial position, results of operations or cash flows.

Item 4. Mine Safety Disclosures

Not applicable.

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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

PART II

Equity Securities

Market Information

Our common stock began trading on The NASDAQ Global Market under the symbol “LMAT” on

October 19, 2006. The following table sets forth the high and low sales prices of our common stock as reported
on The NASDAQ Global Market for the eight quarters ended December 31, 2016:

Year ended December 31, 2016:

First quarter ended March 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second quarter ended June 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third quarter ended September 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth quarter ended December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$16.44
$16.72
$21.78
$25.46

$12.50
$13.89
$13.56
$18.95

High

Low

Year ended December 31, 2015:

First quarter ended March 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second quarter ended June 30, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third quarter ended September 30, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth quarter ended December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 8.38
$12.06
$14.30
$17.77

$ 7.29
$ 8.20
$11.13
$12.01

Holders of Record

On March 2, 2017, the closing price per share of our common stock was $22.12 as reported on The
NASDAQ Global Market, and we had approximately 204 stockholders of record. In addition, we believe that a
significant number of beneficial owners of our common stock hold their shares in street name.

Dividend Policy

In February 2011, our Board of Directors approved a policy for the payment of quarterly cash dividends on

our common stock. Future declarations of quarterly dividends and the establishment of future record and
payment dates are subject to approval by our Board of Directors on a quarterly basis. The dividend activity for
the periods presented is as follows:

Record Date

Payment Date

Per Share Amount

Dividend Payment

(in thousands)

Fiscal Year 2016

March 21, 2016
May 25, 2016
August 22, 2016
November 21, 2016

April 4, 2016
June 8, 2016
September 2, 2016
December 5, 2016

Fiscal Year 2015

March 20, 2015
May 22, 2015
August 20, 2015
November 20, 2015

April 3, 2015
June 5, 2015
September 3, 2015
December 4, 2015

$0.045
$0.045
$0.045
$0.045

$0.040
$0.040
$0.040
$0.040

$825
$829
$833
$836

$700
$705
$715
$725

On February 16, 2017, our Board of Directors approved a quarterly cash dividend on our common stock of
$0.055 per share payable on April 6, 2017, to stockholders of record at the close of business on March 22, 2017,
which will total approximately $1.0 million in payments.

37

Stock Price Performance Graph

Set forth below is a graph comparing the cumulative total stockholder return on LeMaitre’s common stock

with the NASDAQ US Composite Index, the NASDAQ Medical Equipment Index and a peer group for the
period covering from December 31, 2011, through the end of LeMaitre’s fiscal year ended December 31, 2016.
The graph assumes an investment of $100.00 made on December 31, 2011, in (i) LeMaitre’s common stock,
(ii) the stocks comprising the NASDAQ US Composite Index, (iii) the stocks comprising the NASDAQ Medical
Equipment Index and (iv) the stocks comprising our peer group. This graph is not “soliciting material,” is not
deemed “filed” with the SEC and is not to be incorporated by reference into any filing of LeMaitre under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before
or after the date hereof and irrespective of any general incorporation language in any such filing.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among LeMaitre Vascular, Inc, the NASDAQ Composite Index, the NASDAQ Medical Equipment Index,
2015 Peer Group and 2016 Peer Group

$500

$450

$400

$350

$300

$250

$200

$150

$100

$50

$0

12/11

12/12

12/13

12/14

12/15

12/16

LeMaitre Vascular, Inc

NASDAQ Composite

NASDAQ Medical Equipment

2015 Peer Group

2016 Peer Group

*$100 invested on 12/31/11 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.

12/31/11

12/31/12

12/31/13

12/31/14

12/31/15

12/31/16

LeMaitre Vascular, Inc . . . . . . . . . . . .
NASDAQ Composite . . . . . . . . . . . . .
NASDAQ Medical Equipment . . . . . .
2015 Peer Group . . . . . . . . . . . . . . . . .
2016 Peer Group . . . . . . . . . . . . . . . . .

100.00
100.00
100.00
100.00
100.00

98.65
116.41
109.53
120.03
127.39

140.14
165.47
131.61
224.17
203.66

136.33
188.69
152.86
251.17
216.64

311.90
200.32
168.58
174.01
135.58

463.14
216.54
180.31
231.50
168.81

LeMaitre’s fiscal year ends on the last day of December each year; data in the above table reflects market

values for our stock and NASDAQ and peer group indices as of the close of trading on the last trading day of
year presented.

The 2015 peer group included the following companies: AtriCure, Inc., AngioDynamics, Inc.,

Cardiovascular Systems Inc., Cryolife Inc., Endologix, Inc., Spectranetics Corp., Lombard Medical Systems Inc.
and Vascular Solutions, Inc.

38

The 2016 peer group includes the following companies: AngioDynamics, Inc., Avinger, Inc.,

Cardiovascular Systems Inc., Cryolife Inc., Endologix, Inc., Spectranetics Corp., Lombard Medical Systems Inc.,
Penumbra, Inc., and Vascular Solutions, Inc. This new peer group differs from our old peer group. Specifically,
we removed AtriCure, Inc. since its products extend beyond peripheral vascular use, and we added Avinger, Inc.
and Penumbra, Inc., based upon their product offerings and recent public stock issuances.

Recent Sales of Unregistered Securities

Not Applicable.

Issuer Purchases of Equity Securities

In the quarter ended December 31, 2016, we did not repurchase any shares of our common stock.

39

Item 6.

Selected Financial Data

You should read the following selected consolidated financial data in conjunction with our consolidated

financial statements and the related notes which are included elsewhere in this Annual Report and the
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this
Annual Report. We have derived the consolidated statement of operations data for the years ended December 31,
2016, 2015 and 2014 and the consolidated balance sheet data as of December 31, 2016 and 2015, from our
audited consolidated financial statements, which are included elsewhere in this Annual Report. We have derived
the consolidated statement of operations data for the years ended December 31, 2013 and 2012, and the
consolidated balance sheet data as of December 31, 2014, 2013 and 2012 from our audited consolidated financial
statements, which are not included in this Annual Report. Our historical results for any prior period are not
necessarily indicative of results to be expected for any future period.

Year ended December 31,

2016

2015

2014

2013

2012

(in thousands, except per share data)

Consolidated Statements of Operations Data:
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$89,151
26,215

$78,352
24,186

$71,097
22,666

$64,549
19,434

$56,735
15,867

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

62,936

54,166

48,431

45,115

40,868

Operating expenses:

Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . .
Medical device excise tax . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on divestitures . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . . . .

26,105
14,354
6,141
—
—
—
—

22,780
14,010
5,479
744
—
(360)
—

22,087
13,889
4,671
689
526
—
229

22,143
12,576
5,243
635
—
—
—

20,811
10,973
5,092
—
—
(248)
—

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .

46,600

42,653

42,091

40,597

36,628

Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense):

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency gain (loss) . . . . . . . . . . . . . . . . . . . . . .

Total other income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . .

16,336

11,513

6,340

4,518

4,240

81
(14)
(161)

(94)

13
—
(102)

(89)

1
(5)
(16)

(20)

4
(12)
(182)

(190)

4,328
1,126

78
(1)
(324)

(247)

3,993
1,422

Income before income tax . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .

16,242
5,652

11,424
3,666

6,320
2,405

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$10,590

$ 7,758

$ 3,915

$ 3,202

$ 2,571

Earnings per share of common stock:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Weighted-average shares outstanding:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

0.57

0.55

$

$

0.44

0.42

$

$

0.24

0.23

$

$

0.21

0.20

$

$

0.17

0.16

18,485

17,764

16,614

15,317

15,194

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19,241

18,316

17,008

15,764

15,638

Cash dividends declared per common share . . . . . . . . . . . . .

$

0.18

$

0.16

$

0.14

$

0.12

$

0.10

40

December 31,

2016

2015

2014

2013

2012

(in thousands)

Consolidated Balance Sheet Data:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 24,288
59,027
101,924
10,482
3,942
14,424
87,500

$27,451
58,184
90,704
10,368
2,452
12,820
77,884

$18,692
48,588
81,492
10,041
3,244
13,285
68,207

$14,711
41,725
70,492
10,220
3,710
13,930
56,562

$16,448
39,131
63,060
8,394
1,778
10,172
52,888

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our consolidated financial statements and the

related notes contained elsewhere in this Annual Report on Form 10-K and in our other Securities and Exchange
Commission filings. The following discussion may contain predictions, estimates, and other forward-looking
statements that involve a number of risks and uncertainties, including those discussed under “Risk Factors” and
elsewhere in this Annual Report on Form 10-K. These risks could cause our actual results to differ materially
from any future performance suggested below.

Overview

We are a medical device company that develops, manufactures, and markets medical devices and implants

for the treatment of peripheral vascular disease. We also provide processing and cryopreservation services of
human tissue for implantation to patients. Our principal product offerings are sold throughout the world,
primarily in the United States, Europe and, to a lesser extent, Asia and the Pacific Rim. We estimate that the
annual worldwide market for all peripheral vascular devices approximates $4 billion, within which our core
product lines address roughly $840 million. We have grown our business by using a three-pronged strategy: 1)
pursuing a focused call point, 2) competing for sales of low-rivalry niche products, and 3) expanding our
worldwide direct sales force while acquiring and developing complementary vascular devices. We have used
acquisitions as a primary means of further accessing the larger peripheral vascular device market, and we expect
to continue to pursue this strategy in the future. Additionally, we have increased our efforts to expand our
vascular device offerings through new product development. We currently manufacture most of our product lines
at our Burlington, Massachusetts headquarters.

Our products are used primarily by vascular surgeons who treat peripheral vascular disease through both
open surgical methods and endovascular techniques. In contrast to interventional cardiologists and interventional
radiologists, neither of whom are certified to perform open surgical procedures, vascular surgeons can perform
both open surgical and minimally invasive endovascular procedures, and are therefore uniquely positioned to
provide a wider range of treatment options to patients.

Our principal product lines include the following: valvulotomes, biologic vascular patches, carotid shunts,

balloon catheters, biologic vascular grafts, anastomotic clips, radiopaque marking tape, powered phlebectomy
devices, laparoscopic cholecystectomy devices, prosthetic vascular grafts, and remote endarterectomy devices.
With the November 10, 2016 acquisition of the RestoreFlow allografts business from Restore Flow Allografts,
LLC, we also provide services related to the processing and cryopreservation of human vascular tissue.

To assist us in evaluating our business strategies, we regularly monitor long-term technology trends in the

peripheral vascular device market. Additionally, we consider the information obtained from discussions with the
medical community in connection with the demand for our products, including potential new product launches.
We also use this information to help determine our competitive position in the peripheral vascular device market
and our manufacturing capacity requirements.

41

Our business opportunities include the following:

•

•

•

•

•

the long-term growth of our direct sales force in North America, Europe, Asia and the Pacific Rim;

the addition of complementary products through acquisitions;

the updating of existing products and introduction of new products through research and development;

the introduction of our products in new territories upon receipt of regulatory approvals or registrations
in these territories; and

the consolidation of product manufacturing into our facilities in our Burlington, Massachusetts
corporate headquarters.

We sell our products and services primarily through a direct sales force. As of December 31, 2016 our sales

force was comprised of 96 sales representatives in North America, Europe, Japan, China, Australia and New
Zealand. We also sell our products in other countries through distributors. Our worldwide headquarters is located
in Burlington, Massachusetts. Our international operations are headquartered in Sulzbach, Germany. We also
have sales offices located in Tokyo, Japan; Mississauga, Canada; Madrid, Spain; Milan, Italy; Shanghai, China;
and North Melbourne, Australia, and we have a processing facility in Fox River Grove, Illinois and a
manufacturing facility in North Melbourne, Australia. During both of the years ended December 31, 2016 and
2015, approximately 92% of our net sales were generated in territories in which we employ direct sales
representatives.

Historically we have experienced success in lower-rivalry niche product segments, for example the market
segments for biologic vascular patches and valvulotome devices. In the biologic vascular patch market segment
the number of competitors is limited, and we believe that we have been able to increase segment share and to a
lesser extent increase selling prices, mainly due to strong sales service. In the valvulotome market segment, we
believe we have been able to materially increase our selling prices without losing significant market share. In
contrast, we have experienced less success in highly competitive segments such as laparoscopic cholecystectomy
devices and polyester grafts, where we face stronger competition from larger companies with greater resources
and lower production costs. We have also experienced less success in segments such as carotid shunts, where unit
sales in the overall market may be declining. While we believe that these challenging market dynamics can be
mitigated by our strong relationships with vascular surgeons, there can be no assurance that we will be successful
in these highly competitive market segments.

In recent years we have also experienced success in geographic markets outside of the United States, such as

Europe, where we generally offer comparatively lower average selling prices. If we continue to seek growth
opportunities outside of the United States, we will likely experience downward pressure on our gross margin.

Because we believe that direct-to-hospital sales engender closer customer relationships, and allow for higher

selling prices and gross margins, we periodically enter into transactions with our distributors to transition their
sales of our medical devices to our direct sales organization:

•

•

•

During 2014, we entered into definitive agreements with eight former Xenotis distributors in Europe in
order to terminate their distribution of our Omniflow II biosynthetic vascular grafts and we began
selling direct to hospitals in those geographies. The agreements required us to pay approximately $1.3
million in exchange for the purchase of customer lists and inventory.

During 2015, we entered into definitive agreements with seven former UreSil, LLC distributors in
Europe in order to terminate their distribution of our Tru-Incise valvulotome and we began selling
direct-to-hospital in those geographies. The termination fee was approximately $0.2 million

In August 2015, we entered into a definitive agreement with Grex Medical Oy (Grex), our distributor
in Finland, in order to terminate their distribution of our products and we began selling direct-to-
hospital in Finland as of January 1, 2016. The termination fee was approximately $0.2 million.

42

We anticipate that the expansion of our direct sales organization in China will result in increased sales,

marketing and regulatory expenses during 2017. As of December 31, 2016 we had seven employees in China.

Our strategy for growing our business includes the acquisition of complementary product lines and
companies and occasionally the discontinuance or divestiture of products or activities that are no longer
complementary:

•

•

•

•

•

•

•

•

In August 2014, we acquired all of the capital stock of Xenotis Pty Ltd (Xenotis) for $6.7 million plus
the assumption of $1.1 million of debt. Xenotis was the parent company of Bio Nova International, the
manufacturer and marketer of the Omniflow II biosynthetic vascular graft for lower extremity bypass
and AV access.

In September 2014, we acquired substantially all of the assets related to the angioscope product line
from Applied Medical Resource Corporation for $0.4 million.

In September 2014, we terminated our UnBalloon non-occlusive modeling catheter product line.

In May 2015, we acquired the production and distribution rights of UreSil LLC’s Tru-Incise
valvulotome for sales outside of the United States for $1.4 million.

In July 2015, we entered into an asset sales agreement with Merit Medical Ireland Limited to sell our
inventory, intellectual property and customer lists associated with The UnBalloon, our non-occlusive
modeling catheter product line for $0.4 million.

In December 2015, we terminated our InvisiGrip vein stripper product line, and wrote down $0.1
million of related inventory in Q3 2015.

In March 2016, we acquired substantially all of the assets as well as the production and distribution
rights of the ProCol business from Hancock Jaffe Laboratories and CryoLife, Inc. for $2.7 million plus
10% of net sales for three years following the closing. ProCol is a biologic vascular graft used for
dialysis access, and is approved for sale in the United States.

In November 2016, we acquired substantially all of the assets related to the peripheral vascular
allograft operations of Restore Flow Allografts, LLC for $12.0 million plus additional payments of up
to $6 million depending upon the satisfaction of certain contingencies.

In addition to relying upon acquisitions to grow our business, we also rely on our product development
efforts to bring differentiated technology and next-generation products to market. These efforts have led to the
following recent product developments:

•

•

•

•

•

•

In June 2014, we launched the 1.5mm HYDRO LeMaitre Valvulotome.

In October 2014, we launched the LeMaitre Aortic Occlusion Catheter.

In December 2014, we launched the LeMills Valvulotome.

In December 2015, we launched the 15-cm AnastoClip AC.

In October 2016, we launched additional sizes of our XenoSure patch.

In December 2016, we launched the 7.0mm diameter size Omniflow graft.

In addition to our sales growth strategies, we have also executed several operational initiatives designed to
consolidate and streamline manufacturing within our Burlington, Massachusetts facilities. We expect that these
plant consolidations will result in improved control over our production capacity as well as reduced costs over
the long-term. Our most recent manufacturing transitions included:

•

In January 2014, we initiated a project to transfer the manufacturing of the newly acquired Clinical
Instruments devices to our facility in Burlington. We closed the Clinical Instruments facility in March
2014 and completed the manufacturing transfer during Q2 2014.

43

•

•

•

In March 2015, we initiated a project to transfer the manufacturing of the newly acquired angioscope
product line to our facility in Burlington. We had been purchasing the devices from Applied Medical
since the September 2014 acquisition and completed the transition of manufacturing to our Burlington
facility in December 2015.

In May 2015, we initiated a project to transfer the manufacturing of the newly acquired Tru-Incise
valvulotome product line to our facility in Burlington. We have been purchasing the devices from
UreSil, LLC since the acquisition. We expect the transition of manufacturing to be completed in 2017.

In March 2016, we initiated a project to transfer the manufacturing of the newly acquired ProCol
biologic product line to our facility in Burlington. We have an agreement to purchase the product from
the seller, Hancock Jaffe Laboratories, for up to three years following the closing. We initiated the
transfer of the production line and transition of manufacturing in 2016, and we expect it to be complete
in 2018, subject to regulatory approval.

•

In 2017 we expect to complete the renovation of our manufacturing facility in Burlington, in which we
expect most of our biologic offerings, including the XenoSure patch as well as certain biologic grafts,
will be produced or processed. We believe the cost of the facility renovation will be approximately
$2.0 million.

Our execution of these business opportunities may affect the comparability of our financial results from

period to period and may cause substantial fluctuations from period to period as we incur related process
engineering and other charges, as well as longer term impacts to revenues and operating expenditures.

Fluctuations in the rate of exchange between the U.S. dollar and foreign currencies, primarily the Euro,

affect our financial results. For the year ended December 31, 2016, approximately 44% of our sales took place
outside the United States. We expect that foreign currencies will continue to represent a similarly significant
percentage of our sales in the future. Selling, marketing, and administrative costs related to these sales are largely
denominated in the same respective currency, thereby partially mitigating our exposure to exchange rate
fluctuations. However, as most of our foreign sales are denominated in local currency, if there is an increase in
the rate at which a foreign currency is exchanged for U.S. dollars, it will require more of the foreign currency to
equal a specified amount of U.S. dollars than before the rate increase. In such cases we will receive less revenue
in U.S. dollars than we did before the rate increase went into effect. For the year ended December 31, 2016, we
estimate that the effects of changes in foreign exchange rates decreased sales by approximately $0.2 million, as
compared to rates in effect for the year ended December 31, 2015.

Net Sales and Expense Components

The following is a description of the primary components of our net sales and expenses:

Net sales. We derive our net sales from the sale of our products and services, less discounts and returns. Net

sales include the shipping and handling fees paid for by our customers. Most of our sales are generated by our
direct sales force and are shipped and billed to hospitals or clinics throughout the world. In countries where we
do not have a direct sales force, sales are primarily generated by shipments to distributors, who in turn sell to
hospitals and clinics. In certain cases our products are held on consignment at a hospital or clinic prior to
purchase; in those instances we recognize revenue at the time the product is used in surgery rather than at
shipment.

Cost of sales. We manufacture nearly all of the products that we sell. Our cost of sales consists primarily of

manufacturing personnel, raw materials and components, depreciation of property and equipment, and other
allocated manufacturing overhead, as well as freight expense we pay to ship products to customers.

Sales and marketing. Our sales and marketing expense consists primarily of salaries, commissions, stock

based compensation, travel and entertainment, attendance at medical society meetings, training programs,
advertising and product promotions, direct mail and other marketing costs.

44

General and administrative. General and administrative expense consists primarily of executive, finance

and human resource expense, stock based compensation, legal and accounting fees, information technology
expense, intangible asset amortization expense and insurance expense.

Research and development. Research and development expense includes costs associated with the design,

development, testing, enhancement and regulatory approval of our products, principally salaries, laboratory
testing and supply costs. It also includes costs associated with design and execution of clinical studies, regulatory
submissions and costs to register, maintain, and defend our intellectual property, and royalty payments associated
with licensed and acquired intellectual property.

Other income (expense). Other income (expense) primarily includes interest income and expense, foreign

currency gains (losses), and other miscellaneous gains (losses).

Income tax expense. We are subject to federal and state income taxes for earnings generated in the United

States, which include operating losses in certain foreign jurisdictions for certain years depending on tax elections
made, and foreign taxes on earnings of our wholly-owned foreign subsidiaries. Our consolidated tax expense is
affected by the mix of our taxable income (loss) in the United States and foreign subsidiaries, permanent items,
discrete items, unrecognized tax benefits, and amortization of goodwill for U.S tax reporting purposes.

Results of Operations

Comparison of the year ended December 31, 2016 to the year ended December 31, 2015

The following tables set forth, for the periods indicated, our results of operations and the change between

the specified periods expressed as a percentage increase or decrease:

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net sales by geography:

2016

2015

$ Change

($ in thousands)

Percent
change

$89,151

$78,352

$10,799

14%

Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$53,710
35,441

$47,975
30,377

$ 5,735
5,064

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$89,151

$78,352

$10,799

12%
17%

14%

Net sales. Net sales increased 14% or $10.8 million to $89.2 million for the year ended December 31, 2016,

compared to $78.4 million for the year ended December 31, 2015. Sales increases were primarily driven by
increased sales of our biologic vascular patches of $5.2 million (of which we estimate that $2.3 million was
related to a safety alert initiated by a competitor), valvulotomes of $1.9 million, vessel closure systems of $1.5
million and our recently acquired ProCol biologic vascular graft of $1.0 million. We also had human tissue
cryopreservation service revenues from our recently acquired RestoreFlow allograft business of $0.5 million.
These and other product line increases were partially offset by decreased sales of radiopaque tape of $0.4 million
(related primarily to the inclusion in 2015 of $0.6 million of OEM tape sales).

Direct-to-hospital net sales were 92% for both of the years ended December 31, 2016 and December 31,

2015.

Net sales by geography. Net sales in the Americas increased $5.7 million for the year ended December 31,
2016. The increase was primarily driven by biologic vascular patches, valvulotomes, vessel closure systems and
our recently acquired ProCol biologic vascular graft, and was partially offset by decreased sales of carotid shunts
and radiopaque tape. We also had human tissue cryopreservation service revenues in the U.S. from our recently
acquired RestoreFlow allograft business of $0.5 million. International net sales increased $5.1 million for the

45

year ended December 31, 2016. The increase occurred across most product lines but was primarily driven by
sales of our biologic vascular patches and grafts, valvulotomes, ePTFE vascular grafts and shunts.

Gross profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$62,936

$54,166

70.6%

69.1%

$8,770
*

16%
1.5%

2016

2015

$ Change

($ in thousands)

Percent
change

*

Not applicable

Gross Profit. Gross profit increased $8.8 million to $62.9 million for the year ended December 31, 2016,

while gross margin increased by 150 basis points to 70.6% in the period. The gross margin was favorably
impacted by higher average selling prices across nearly all product lines, increased sales of XenoSure and
valvulotome devices, and lower per-unit manufacturing costs of our biologic patch products as well as other
products. These increases were partially offset by higher sales in Europe as well as other markets where we
sometimes realize lower gross margins than in the United States. The gross profit increase was a result of higher
sales and the improved gross margin.

2016

2015

$ change

Percent
change

2016 as a % 2015 as a %
of Net Sales
of Net Sales

Sales and marketing . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . .
Research and development
. . . . . . . . . . . . . . . .
Medical device excise tax . . . . . . . . . . . . . . . . .
Gain on divestitures . . . . . . . . . . . . . . . . . . . . . .

$26,105
14,354
6,141
—
—

$22,780
14,010
5,479
744
(360)

($ in thousands)
15%
2%
12%
(100%)
*

$3,325
344
662
(744)
360

$46,600

$42,653

$3,947

9%

29%
16%
7%
0%
*

52%

29%
18%
7%
1%
*

54%

*

Not a meaningful percentage.

Sales and marketing. For the year ended December 31, 2016, sales and marketing expense increased $3.3

million or 15% to $26.1 million. The increases were primarily driven by compensation-related expenses and
travel, due to an increase in the number of sales representatives from 81 at January 1, 2015 to 96 at December 31,
2016. As a percentage of net sales, sales and marketing expense was 29% for both comparative periods.

General and administrative. For the year ended December 31, 2016, general and administrative expense

increased $0.3 million or 2%, to $14.4 million. General and administrative expense increases were primarily
related to compensation costs and acquisition-related expenses, which were partially offset by decreases in
recruiting costs, professional fees and bad debt expense. As a percentage of net sales, general and administrative
expense decreased to 16% for the year ended December 31, 2016 as compared to 18% for the prior period.

Research and development. For the year ended December 31, 2016, research and development expense
increased $0.7 million or 12%, to $6.1 million. Product development expenses increased $0.3 million primarily
driven by compensation costs, including costs to support efforts to transition the manufacturing of certain
acquired product lines to our Burlington, Massachusetts headquarters. These increases were partially offset by
lower spending on supplies and testing. Clinical and regulatory expenses increased $0.3 million primarily related
to compensation costs and professional fees, including costs related to regulatory submission for new products in
geographies such as China.

Medical device excise tax. The medical device excise tax was $0.7 million in 2015. On December 18, 2015,

the Consolidated Appropriations Act of 2016 was signed into law, which suspended the medical device tax for
the period beginning January 1, 2016 and ending December 31, 2017.

46

Other income (expense). Foreign exchange losses for 2016 were $0.2 million as compared to $0.1 million

for 2015.

Income tax expense. We recorded a provision for taxes of $5.7 million on pre-tax income of $16.2 million

in 2016 as compared to $3.7 million on pre-tax income of $11.4 million in 2015. The 2016 provision was
comprised of Federal tax provision in the United States of $4.6 million, state tax provision of $0.6 million and a
foreign tax provision of $0.5 million. The 2015 provision was comprised of Federal tax in the United States of
$3.2 million, a state tax benefit of $0.1 million and foreign taxes of $0.6 million. Our effective tax rate differed
from the U.S. statutory tax rate in 2016 principally due to the release of valuation allowances on foreign deferred
tax assets, manufacturing deductions, uncertain tax positions, effect of foreign taxes, Subpart-F income, foreign
deferred tax liability offset, state taxes, other permanent differences, and other. While it is often difficult to
predict the final outcome or timing of the resolution of any particular tax matter, we believe that our tax reserves
reflect the probable outcome of known contingencies.

We have assessed the need for a valuation allowance against our deferred tax assets and concluded that as of

December 31, 2016, we will continue to carry a valuation allowance against $1.8 million of deferred tax assets,
principally foreign net operating loss and capital loss carry-forwards; based on the weight of available evidence,
we believe it is more likely than not that such assets will not be realized.

We expect our effective tax rate to decrease slightly in 2017, as audit adjustments and uncertain tax

positions normalize. The state rate increased in 2016 because there was a release of valuation allowance in 2015.
We expect the state rate to normalize in 2017.

In 2016, a federal tax audit resulted in a $0.2 million tax adjustment, which also required a $0.2 million

increase to our uncertain tax positions for a Massachusetts tax credit.

Comparison of the year ended December 31, 2015 to the year ended December 31, 2014

The following tables set forth, for the periods indicated, our results of operations and the change between

the specified periods expressed as a percentage increase or decrease:

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net sales by geography:

2015

2014

$ Change

($ in thousands)

Percent
change

$78,352

$71,097

$7,255

10%

Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$47,975
30,377

$43,502
27,595

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$78,352

$71,097

$4,473
2,782

$7,255

10%
10%

10%

Net sales. Net sales increased 10% to $78.4 million in 2015 from $71.1 million in 2014. Sales from newly

acquired product lines contributed 4.5% to the sales growth.

The increase in net sales of $7.3 million in 2015 was primarily driven by increased sales in biologic vascular

patches of $2.9 million, valvulotomes of $1.7 million and powered phlebectomy systems of $0.8 million. In
addition, sales of biological vascular grafts, which were acquired in 2014, increased net sales in 2015 by $2.9
million. This sales growth was partially offset by decreased sales of occlusion catheters of $0.8 million. Across
all product lines, we estimate that the strengthening U.S. dollar as compared to 2014 decreased our net sales by
$5.6 million. Average selling prices increased across nearly all product lines, particularly in the valvulotome
segment, as the 1.5mm HYDRO valvulotome was introduced in Europe.

47

Direct-to-hospital net sales were 92% of net sales in 2015 compared to 91% in 2014. This increase was

primarily driven by proportionately lower export sales to China of $0.3 million.

Net sales by geography. Net sales in the Americas increased by $4.5 million to $48.0 million in 2015. This

increase was primarily driven by increased sales of biologic vascular patches of $1.9 million, valvulotomes of
$1.0 million and vessel closure systems of $0.8 million. These increases were partially offset by decreased sales
of occlusion catheters of $0.5 million and cholangiogram catheters of $0.4 million. International net sales
increased by $2.8 million to $30.4 million in 2015. This increase was primarily driven by higher sales of biologic
vascular grafts of $2.8 million, biologic vascular patches of $0.9 million, valvulotomes of $0.6 million and
powered phlebectomy systems of $0.5 million. These increases were offset by decreased sales of vessel closure
systems of $0.7 million, radiopaque tape of $0.3 million and catheters of $0.3 million.

Gross profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$54,166

$48,431

69.1%

68.1%

$5,735
*

12%
1.0%

2015

2014

$ Change

($ in thousands)

Percent
change

*

Not applicable

Gross profit. Gross profit increased by $5.7 million to $54.2 million in 2015 from $48.4 million in 2014,
and our gross margin increased by 1.0% to 69.1% in 2015. The gross margin increase in 2015 was largely driven
by average selling price increases, particularly with respect to the introduction of our 1.5mm HYDRO
valvulotome, as well as increased manufacturing efficiencies, particularly with respect to the XenoSure and
AlboGraft product lines. These improvements were partially offset by unfavorable changes in foreign currency
exchange rates, as well as increased sales to lower margin geographies such as China and Saudi Arabia. The
gross profit increase was also a result of higher sales.

2015

2014

$ change

Percent
change

2015 as a % 2014 as a %
of Net Sales
of Net Sales

Sales and marketing . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . .
Research and development
. . . . . . . . . . . . . . . .
Medical device excise tax . . . . . . . . . . . . . . . . .
Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on divestitures . . . . . . . . . . . . . . . . . . . . . .
Impairment charges . . . . . . . . . . . . . . . . . . . . . .

$22,780
14,010
5,479
744
—
(360)
—

$22,087
13,889
4,671
689
526
—
229

($ in thousands)
3%
1%
17%
8%
*
*
*

$ 693
121
808
55
(526)
(360)
(229)

$42,653

$42,091

$ 562

1%

29%
18%
7%
1%
*
*
*

54%

31%
20%
7%
1%
1%
*
*

59%

*

Not a meaningful percentage.

Sales and marketing. Sales and marketing expenses increased to $22.8 million in 2015 from $22.1 million
in 2014. As a percentage of net sales, sales and marketing expenses were 29% in 2015, down 2% from the prior
year. Selling expenses increased $0.7 million while marketing expenses were unchanged. Selling expense
increases in 2015 were driven by higher compensation and related expenses of $0.7 million and travel and sales
meetings and related costs of $0.3 million. These increases were partially offset by lower consulting costs and
other expenses. Additionally, changes in foreign currency exchange rates reduced our sales and marketing
expense as compared to 2014.

General and administrative. General and administrative expenses increased by 1% to $14.0 million in 2015
from $13.9 million in 2014. As a percentage of net sales, general and administrative expenses were 18% in 2015
as compared to 20% in the prior year. General and administrative expense increases for 2015 were mainly driven

48

by increased compensation related expenses of $0.6 million, partially offset by decreases in acquisition related
expenses of $0.5 million as compared to the prior year. Additionally, changes in foreign currency exchange rates
reduced our general and administrative expense as compared to 2014.

Research and development. Research and development expenses increased 17% to $5.5 million in 2015
from $4.7 million in 2014. As a percentage of net sales, research and development expenses were 7% in both
2015 and 2014. Product development expenses increased $0.8 million primarily due to higher compensation and
related expense of $0.3 million, higher product testing costs of $0.2 million and higher professional services and
other expenses. Clinical and regulatory costs were unchanged.

Medical device excise tax. The medical device excise tax was $0.7 million in 2015 and 2014. On
December 18, 2015, the Consolidated Appropriations Act of 2016 was signed into law. The Consolidated
Appropriations Act of 2016 suspends the medical device tax for the period beginning January 1, 2016 and ending
December 31, 2017.

Restructuring. In February 2014, we committed to a plan intended to improve operational efficiencies,
which included a reduction in force of approximately 10% of our workforce and other cost-cutting measures,
including the transfer of our Clinical Instruments operations to our Burlington headquarters. As a result, we
recorded approximately $0.4 million of severance related restructuring expense. In April 2014, we committed to
an additional reduction in force of approximately seven employees. As a result, we recorded approximately $0.1
million of severance related restructuring expense. The cost of these plans was paid in full in 2014. There were
no restructuring charges in 2015.

Gain on divestitures. In July 2015, we entered into an asset sales agreement with Merit Medical Ireland

Limited to sell our inventory, intellectual property and customer lists associated with The UnBalloon, our non-
occlusive modeling catheter product line for $0.4 million.

Impairment charges. In 2014 we recognized impairment charges of $0.2 million related to trademarks,
technology, and manufacturing equipment upon the termination of The UnBalloon, our non-occlusive modeling
catheter product line.

Other income (expense). Foreign exchange losses for 2015 were $0.1 million as compared to $16,000 for

2014.

Income tax expense. We recorded a provision for taxes of $3.7 million on pre-tax income of $11.4 million

in 2015 as compared to $2.4 million on pre-tax income of $6.3 million in 2014. The 2015 provision was
comprised of a Federal tax provision in the United States of $3.2 million, a state tax benefit of $0.1 million and a
foreign tax provision of $0.6 million. The 2014 provision was comprised of a Federal tax provision in the United
States of $1.9 million, state taxes of $0.2 million and foreign taxes of $0.3 million. Our effective tax rate differed
from the U.S. statutory tax rate in 2015 principally due to manufacturing deductions, Subpart-F income, state
taxes, research and development tax credits, effect of foreign taxes, other permanent differences, and other.
While it is often difficult to predict the final outcome or timing of the resolution of any particular tax matter, we
believe that our tax reserves reflect the probable outcome of known contingencies.

We assessed the need for a valuation allowance against our deferred tax assets and concluded that as of
December 31, 2015, we would continue to carry a valuation allowance against $2.2 million of deferred tax assets,
principally foreign net operating loss and capital loss carry-forwards; based on the weight of available evidence,
we believed it was more likely than not that such assets would not be realized. Of the $2.2 million of valuation
allowance, $2 million resulted from the Xenotis acquisition in Australia.

In 2015, a Massachusetts valuation allowance was reversed, which lowered our overall effective tax rate by

3.5%.

49

Liquidity and Capital Resources

At December 31, 2016, our cash and cash equivalents were $24.3 million as compared to $27.5 million at
December 31, 2015. Our cash and cash equivalents are highly liquid investments with maturities of 90 days or
less at the date of purchase, consist of money market funds, and are stated at cost, which approximates fair value.
All of our cash held outside of the United States is available for corporate use, with the exception of $4.6 million
held by subsidiaries in jurisdictions for which earnings are planned to be permanently reinvested.

On July 25, 2016, our Board of Directors approved a stock repurchase program under which the Company is

authorized to repurchase up to $5 million of its common stock through transactions on the open market, in
privately negotiated purchases or otherwise. This program may be suspended or discontinued at any time, and
expires on the earlier of July 25, 2017 or when the authorized aggregate $5 million repurchase limit is reached.
To date we have not made any repurchases under this program.

Operating and Capital Expenditure Requirements

We require cash to pay our operating expenses, make capital expenditures, and pay our long-term liabilities.

Since our inception, we have funded our operations through public offerings and private placements of equity
securities, short-term and long-term borrowings, and funds generated from our operations.

We recognized operating income of $16.3 million for the year ended December 31, 2016. For the year
ended December 31, 2015, we recognized operating income of $11.5 million. We expect to fund any increased
costs and expenditures from our existing cash and cash equivalents, though our future capital requirements
depend on numerous factors. These factors include, but are not limited to, the following:

•

•

•

•

•

•

•

•

•

the revenues generated by sales of our products;

payments associated with potential future quarterly cash dividends to our common stockholders;

payments associated with our stock repurchase program;

future acquisition-related payments;

payments associated with U.S income and other taxes;

the costs associated with expanding our manufacturing, marketing, sales, and distribution efforts;

the costs associated with our initiatives to sell direct-to-hospital in new countries;

the costs of obtaining and maintaining FDA and other regulatory clearances of our existing and future
products; and

the number, timing, and nature of acquisitions and other strategic transactions.

Our cash balances may decrease as we continue to use cash to fund our operations, make acquisitions, make

payments under our quarterly dividend program, repurchase shares of our common stock and make deferred
payments related to prior acquisitions. We believe that our cash, cash equivalents, investments and the interest
we earn on these balances will be sufficient to meet our anticipated cash requirements for at least the next twelve
months. If these sources of cash are insufficient to satisfy our liquidity requirements beyond the next twelve
months, we may seek to sell additional equity or debt securities or borrow funds from, or establish a revolving
credit facility, with a financial institution. The sale of additional equity and debt securities may result in dilution
to our stockholders. If we raise additional funds through the issuance of debt securities, such securities could
have rights senior to those of our common stock and could contain covenants that would restrict our operations
and possibly our ability to pay dividends. We may require additional capital beyond our currently forecasted
amounts. Any such required additional capital may not be available on reasonable terms, if at all.

50

Cash Flows

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows provided by (used in):

Year ended December 31,

2016

2015

Net
Change

$ 24,288

($ in thousands)
$27,451

$ (3,163)

Operating activities . . . . . . . . . . . . . . . . . . . . . . . . .
Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities . . . . . . . . . . . . . . . . . . . . . . . . .

$ 16,896
(17,211)
(2,577)

$11,438
(3,480)
1,079

$ 5,458
(13,731)
(3,656)

Net cash provided by operating activities. Net cash provided by operating activities was $16.9 million for

the year ended December 31, 2016, and consisted of $10.6 million net income, adjusted for non-cash items of
$5.9 million (including depreciation and amortization of $3.6 million, stock-based compensation of $1.7 million,
provisions for inventory write-offs and doubtful accounts of $0.5 million and provision for deferred taxes of $0.1
million), as well as changes in working capital of $0.4 million. The net cash provided by changes in working
capital was driven by decreases in other current assets of $1.5 million, including primarily prepaid taxes, partially
offset by increases in accounts receivable of $0.9 million and inventory of $0.1 million, and a decrease in
accounts payable and other liabilities of $0.1 million.

Net cash provided by operating activities was $11.4 million in 2015, and consisted of $7.8 million in net
income, adjusted for non-cash items of $4.3 million (including depreciation and amortization of $3.4 million,
stock-based compensation of $1.4 million, and provision for inventory write-offs of $0.5 million) and was offset
by working capital increases of $0.7 million. Working capital increases were driven primarily by increased
prepaid expenses, including primarily prepaid taxes, of $2.0 million and accounts receivable of $1.9 million,
offset by increased accounts payable and other liabilities of $2.6 million.

Net cash used in investing activities. Net cash used in investing activities was $17.2 million for year ended

December 31, 2016, driven by $14.4 million of cash paid in connection with our acquisitions of the ProCol
biologic vascular graft and RestoreFlow allograft businesses, as well as purchases of property and equipment of
$2.8 million primarily associated with the expansion of our Burlington, Massachusetts headquarters.

Net cash used in investing activities was $3.5 million in 2015. This was driven by the purchase of property

and equipment of $2.3 million and acquisition related payments of $1.6 million, primarily related to the Tru-
Incise acquisition and related distributor buyouts, partially offset by proceeds from the sale of the UnBalloon
modeling catheter assets of $0.4 million.

Net cash used in financing activities. Net cash used in financing activities was $2.6 million for the year

ended December 31, 2016, driven primarily by payments of common stock dividends of $3.3 million, partially
offset by proceeds from stock option exercise, net of shares repurchased for taxes, of $1.1 million. We also made
payments related to our prior acquisitions of $0.4 million.

Net cash provided by financing activities was $1.1 million in 2015, driven primarily by proceeds from stock

option exercises of $4.8 million partially offset by payments of common stock dividends of $2.8 million,
payment of deferred acquisition payments of $1.1 million, and the acquisition of $0.3 million of treasury stock to
cover minimum withholding taxes of restricted stock unit vestings.

51

Dividends. In February 2011, our Board of Directors approved a policy for the payment of quarterly cash

dividends on our common stock. Future declarations of quarterly dividends and the establishment of future
record and payment dates are subject to approval by our Board of Directors on a quarterly basis. The dividend
activity for the periods presented is as follows:

Record Date

Payment Date

Per Share Amount

Dividend Payment

(in thousands)

Fiscal Year 2016

March 21, 2016
May 25, 2016
August 22,2016
November 21, 2016

April 4, 2016
June 8, 2016
September 2, 2016
December 5, 2016

Fiscal Year 2015

March 20, 2015
May 22, 2015
August 20, 2015
November 20, 2015

April 3, 2015
June 5, 2015
September 3, 2015
December 4, 2015

$0.045
$0.045
$0.045
$0.045

$0.040
$0.040
$0.040
$0.040

$825
$829
$833
$836

$700
$705
$715
$725

On February 16, 2017, our Board of Directors approved a quarterly cash dividend on our common stock of
$0.055 per share payable on April 6, 2017, to stockholders of record at the close of business on March 22, 2017,
which will total approximately $1.0 million in payments.

Contractual obligations

Less
than
1 year

Total

1-3
years

3-5
years

More
than
5 years

Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase commitments for inventory . . . . . . . . . . . . . . . . . . . . . . .

$ 8,498
2,418

(in thousands)
$2,703
25

$1,546
2,393

$2,217
—

$2,032
—

Total contractual obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$10,916

$3,939

$2,728

$2,217

$2,032

Contractual obligations. Our principal contractual obligations consist of operating leases and inventory
purchase commitments. The following table summarizes our commitments to settle contractual obligations as of
December 31, 2016:

The commitments under our operating leases consist primarily of lease payments for our corporate

headquarters and manufacturing facility in Burlington, Massachusetts, expiring in 2023; our Mississauga, Canada
office, expiring in 2018; our Sulzbach, Germany office, expiring in 2023; our Tokyo, Japan office, expiring in
2016 at which point it becomes automatically renewable for specified periods; our Milan, Italy office, expiring in
2020; our Madrid, Spain office, expiring in 2017; our two Australia facilities expiring in 2020; our Shanghai,
China office, expiring in 2020; and our Fox River Grove offices, expiring in 2018. They also include automobile
and equipment leases.

The purchase commitments for inventory are to be used in operations over the normal course of business

and do not represent excess commitments or loss contracts.

Critical Accounting Policies and Estimates

We have adopted various accounting policies to prepare our consolidated financial statements in accordance

with U.S. generally accepted accounting principles (GAAP). Our most significant accounting policies are
described in Note 1 to our consolidated financial statements included elsewhere in this Annual Report on
Form 10-K. The preparation of our consolidated financial statements in conformity with GAAP requires us to
make estimates and assumptions that affect the amounts reported in our consolidated financial statements and

52

accompanying notes. Our estimates and assumptions, including those related to bad debts, inventories, intangible
assets, sales returns and discounts, and income taxes are reviewed on an ongoing basis and updated as
appropriate. Actual results could differ from those estimates.

Certain of our more critical accounting policies require the application of significant judgment by

management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these
judgments are subject to an inherent degree of uncertainty. These judgments are based on our historical
experience, terms of existing contracts, and observance of trends in the industry, as appropriate. Different,
reasonable estimates could have been used in the current period. Additionally, changes in accounting estimates
are reasonably likely to occur from period to period. Both of these factors could have a material impact on the
presentation of our financial condition, changes in financial condition, or results of operations.

We believe that the following financial estimates and related accounting policies are both important to the

portrayal of our financial condition and results of operations and require subjective or complex judgments.
Further, we believe that the items discussed below are properly recorded in our consolidated financial statements
for all periods presented. Management has discussed the development, selection and disclosure of our most
critical financial estimates with the audit committee of our board of directors and our independent registered
public accounting firm. The judgments about those financial estimates are based on information available as of
the date of our consolidated financial statements. Those financial estimates and related policies include:

Revenue Recognition

Our revenue is derived primarily from the sale of disposable or implantable devices used during vascular

surgery. We sell primarily directly to hospitals and to a lesser extent to distributors, as described below. We also
occasionally enter into consigned inventory arrangements with either hospitals or distributors on a limited basis. In
connection with our recent acquisition of the RestoreFlow allograft business, we also derive revenues from human
tissue cryopreservation services. These revenues are recognized when services have been provided and the tissue
has been shipped to the customer, provided all other revenue recognition criteria discussed below have been met.

We recognize revenue when four basic criteria are met: (1) persuasive evidence of an arrangement exists;

(2) delivery has occurred or services have been rendered; (3) the fee is fixed or determinable; and
(4) collectability is reasonably assured. We generally use customer purchase orders or contracts to determine the
existence of an arrangement. Sales transactions are based on prices that are determinable at the time that the
customer’s purchase order is accepted by us. In order to determine whether collection is reasonably assured, we
assess a number of factors, including past transaction history with the customer and the creditworthiness of the
customer. If we determine that collection is not reasonably assured, we would defer the recognition of revenue
until collection becomes reasonably assured, which is generally upon receipt of payment. We provide for product
returns at the time revenue is recognized based on our historical product return history. Based on these policies,
we recognize revenue, net of allowances for returns and discounts, as products are shipped, based on shipping
point terms, or at the time consigned inventory is consumed at which time title passes to customers. We
recognize revenue net of allowances for returns and discounts as well as any sales and value added taxes required
to be invoiced, at the time of shipment of our products to our distributors.

Accounts Receivable

Our accounts receivable are with customers based in the United States and internationally. Accounts

receivable generally are due within 30 to 90 days of invoice and are stated at amounts due from customers, net of
an allowance for doubtful accounts and sales returns, other than in certain European markets where longer
payment terms are customary and may range from 90 to 240 days. We perform ongoing credit evaluations of the
financial condition of our customers and adjust credit limits based upon payment history and the current
creditworthiness of the customers, as determined by a review of their current credit information. We
continuously monitor aging reports, collections, and payments from customers, and maintain a provision for
estimated credit losses based upon historical experience and any specific customer collection issues we identify.

53

We closely monitor outstanding receivables for potential collection risks, including those that may arise
from economic conditions, in both the U.S. and international economies. Our European sales to government-
owned or supported customers such as hospitals, distributors and agents, in Southern Europe, specifically Italy
and Spain may be subject to significant payment delays due to government austerity measures impacting funding
and payment practices. As of December 31, 2016 our receivables in Italy and Spain totaled $0.8 million and $0.4
million, respectively. Receivables balances with certain publicly-owned hospitals and government supported
customers in these countries can accumulate over a period of time and then subsequently be settled as large lump
sum payments. While we believe our allowance for doubtful accounts in these countries is adequate as of
December 31, 2016, if significant changes were to occur in the payment practices of these European governments
or if government funding becomes unavailable, we may not be able to collect on receivables due to us from these
customers and our write offs of uncollectible amounts may increase.

We write off accounts receivable when they become uncollectible. While such credit losses have historically

been within our expectations and allowances, we cannot guarantee the same credit loss rates will be experienced
in the future. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in
our existing accounts receivable. We review our allowance for doubtful accounts on a monthly basis and all past
due balances are reviewed individually for collectability. The provision for the allowance for doubtful accounts is
recorded in general and administrative expenses.

Inventory and Other Deferred Costs

Inventory consists of finished products, work-in-process, and raw materials. We value inventory at the lower

of cost or market value. Cost includes materials, labor, and manufacturing overhead and is determined using the
first-in, first-out (FIFO) method. On a quarterly basis, we review inventory quantities on hand and analyze the
provision for excess and obsolete inventory based primarily on product expiration dating and our estimated sales
forecast, which is based on sales history and anticipated future demand. Our estimates of future product demand
may not be accurate, and we may understate or overstate the provision required for excess and obsolete
inventory. Accordingly, any significant unanticipated changes in demand could have a significant impact on the
value of our inventory and results of operations.

In connection with our recent acquisition of the RestoreFlow allograft business, other deferred costs include

costs incurred for the preservation of human vascular tissues available for shipment, tissues currently in active
processing, and tissues held in quarantine pending release to implantable status. By federal law human tissues
cannot be bought or sold. Therefore, the tissues we preserve are not held as inventory, and the costs we incur to
procure and process human vascular tissues are instead accumulated and deferred.

Stock-based Compensation

We recognize, as expense, the estimated fair value of stock options to employees which is determined using

the Black-Scholes option pricing model. We have elected to recognize the compensation cost of all share-based
awards on a straight-line basis over the vesting period of the award. In periods that we grant stock options, fair
value assumptions are based on volatility, interest rates, dividend yield, and expected term over which the stock
options will be outstanding. The computation of expected volatility is based on the historical volatility of the
company’s stock. The interest rate for periods within the contractual life of the award is based on the
U.S. Treasury risk-free interest rate in effect at the time of grant. Historical data on exercise patterns is the basis
for estimating the expected life of an option. The expected annual dividend rate was calculated by dividing our
annual dividend, based on the most recent quarterly dividend rate, by the closing stock price on the grant date.

We also issue restricted stock units (RSUs) as an additional form of equity compensation to our employees,
officers, and directors, pursuant to our stockholder-approved Second Amended and Restated 2006 Stock Option
and Incentive Plan. RSUs entitle the grantee to an issuance of stock at no cost and generally vest over a period of
time determined by our Board of Directors at the time of grant based upon the continued service to the company.

54

The fair market value of the award is determined based on the number of RSUs granted and the market value of
our common stock on the grant date and is amortized to expense over the period of vesting. Unvested RSUs are
forfeited and canceled as of the date that employment or service to the company terminates. RSUs are settled in
shares of our common stock upon vesting. We may repurchase common stock upon our employees’ vesting in
RSUs in order to cover any minimum tax withholding liability as a result of the RSUs having vested.

Share-based compensation charges had in prior years been recorded net of the estimated forfeitures based
upon historical forfeiture rates, and was adjusted in subsequent periods to reflect the results of actual forfeitures
and vesting. In March 2016, the Financial Accounting Standards Board (“FASB”) issued a new standard that
changes the accounting for certain aspects of share-based payments to employees, including a provision allowing
companies to make an election to account for award forfeitures as they occur, rather than estimating them at the
time of grant. We early-adopted the new guidance in the third quarter of fiscal year 2016, which required us to
reflect any adjustments as of January 1, 2016, the beginning of the annual period that includes the interim period
of adoption. In connection with this early adoption we made the election to account for award forfeitures as they
occur, and we recorded a cumulative-effect adjustment to beginning retained earnings of $0.1 million, net of tax.
Share-based compensation charges are recorded across the consolidated statement of operations based upon the
grantee’s primary function.

As disclosed more fully in the notes to our consolidated financial statements, we recorded expense of
approximately $1.7 million in connection with share-based payment awards for the year ended December 31,
2016. The future expense of non-vested share-based awards of approximately $6.1 million is to be recognized
over a weighted-average period of 3.8 years. During 2016, we granted stock options at a weighted average fair
value of $4.04 and RSUs with weighted average fair value of $14.14.

Valuation of Goodwill, and Other Intangibles

Goodwill represents the amount of consideration paid in connection with business acquisitions in excess of
the fair value of assets acquired and liabilities assumed. Goodwill is evaluated for impairment annually or more
frequently if indicators of impairment are present or changes in circumstances suggest that an impairment may
exist. Our assessment is performed as of December 31 each year based on a single reporting unit. We first
perform an assessment of qualitative factors to determine if it is “more likely than not” that the fair value of our
reporting unit is less than its carrying value as a basis for determining whether it is necessary to perform the two-
step goodwill impairment test. The “more likely than not” threshold is defined as having a likelihood of more
than 50 percent. If required, the next step of the goodwill impairment test is to determine the fair value of the
reporting unit. The implied fair value of goodwill is determined on the same basis as the amount of goodwill
recognized in connection with a business combination. Specifically, the fair value of a reporting unit is allocated
to all of the assets and liabilities (including any unrecognized intangible assets) as if the reporting unit had been
acquired in a business combination as of the date of the impairment review and as if the fair value of the
reporting unit was the price paid to acquire the reporting unit. The excess of the fair value of a reporting unit over
the amounts assigned to its assets and liabilities is the implied fair value of goodwill. If the carrying amount of
the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss shall be
recognized in an amount equal to that excess. Goodwill was $23.4 million and $17.8 million as of December 31,
2016 and 2015, respectively. Our annual impairment testing indicated no significant risk of impairment based
upon changes in value that are reasonably likely to occur. However, changes in these estimates and assumptions
could materially affect the estimated fair value of our reporting unit.

Other intangible assets consist primarily of purchased developed technology, patents, customer relationships

and trademarks, and are amortized over their estimated useful lives, ranging from 1 to 13 years. We review
intangible assets quarterly to determine if any adverse conditions exist for a change in circumstances has
occurred that would indicate impairment. Conditions that may indicate impairment include, but are not limited to,
a significant adverse change in legal factors or business climate that could affect the value of the asset, a change
in the operating cash flows associated with the asset, or adverse action or assessment by a regulator. If an
impairment indicator exists we test the intangible asset for recoverability. If the carrying value of the intangible

55

asset exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the
intangible asset, we will write the carrying value down to the fair value in the period in which it is identified. We
generally calculate the fair value of our intangible assets as the present value of estimated future cash flows we
expect to generate from the asset using a risk-adjusted discount rate. In determining our estimated future cash
flows associated with our intangible assets, we use estimates and assumptions about future revenue contributions,
cost structures, and remaining useful lives of the asset. These estimates and assumptions require significant
judgment and actual results may differ from assumed or estimated amounts. Other intangible assets, net of
accumulated amortization, were $9.9 million as of December 31, 2016 and $6.3 million as of December 31,
2015. In 2014, we recognized an impairment charge of $0.2 million related to trademarks and technology upon
the termination of our non-occlusive modeling catheter product line.

Contingencies

In the normal course of business, we are subject to proceedings, lawsuits, and other claims and assessments

for matters related to, among other things, patent infringement, business acquisitions, employment, product
liability and product recalls. We assess the likelihood of any adverse judgments or outcomes to these matters as
well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these
contingencies is made after careful analysis of each individual issue. The required reserves may change in the
future due to new developments in each matter or changes in approach such as a change in settlement strategy in
dealing with these matters. We record charges for the costs we anticipate incurring in connection with litigation
and claims against us when we determine a loss is probable and we can reasonably estimate these costs. During
the years ended December 31, 2016, 2015, and 2014, we were not subject to any material litigation, claims or
assessments.

Restructuring

We record restructuring charges incurred in connection with consolidation or relocation of operations,
exited business lines, reductions in force, or distributor terminations. These restructuring charges, which reflect
our commitment to a termination or exit plan that will begin within twelve months, are based on estimates of the
expected costs associated with site closure, legal matters, contract terminations, severance payments, or other
costs directly related to the restructuring. If the actual cost incurred exceeds the estimated cost, an additional
charge to earnings will result. If the actual cost is less than the estimated cost, a credit to earnings will be
recognized.

Income Taxes

As part of the process of preparing our consolidated financial statements we are required to determine our

income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current
tax expense together with assessing temporary differences resulting from recognition of items for income tax and
accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our
consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered
from taxable income during the carryback period or in the future; and to the extent we believe that recovery is not
likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase this
allowance in a period, we must reflect this increase as an expense within the tax provision in the statement of
operations. We do not provide for income taxes on undistributed earnings of foreign subsidiaries, as our current
intention is to permanently reinvest these earnings.

We recognize, measure, present and disclose in our financial statements, uncertain tax positions that we

have taken or expect to take on a tax return. We operate in multiple taxing jurisdictions, both within the United
States and outside of the United States and may be subject to audits from various tax authorities regarding
transfer pricing, the deductibility of certain expenses, intercompany transactions, and other matters. Within
specific countries, we may be subject to audit by various tax authorities operating within the country and may be

56

subject to different statutes of limitation expiration dates. Management’s judgment is required in determining our
provision for income taxes, our deferred tax assets and liabilities, liabilities for uncertain tax positions, and any
valuation allowance recorded against our net deferred tax assets. We will continue to monitor the realizability of
our deferred tax assets and adjust the valuation allowance accordingly. We have recorded a valuation allowance
on our net deferred tax assets of $1.8 million and $2.2 million as of December 31, 2016 and 2015, respectively.

Recent Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board (“FASB”) issued an accounting standards
update, ASU 2017-01, which changes the definition of a business for purposes of determining whether a business
has been acquired or sold. The amendment is intended to help companies evaluate whether transactions should be
accounted for as acquisitions (or disposals) of assets or businesses. The new standard is effective for us
beginning January 1, 2018, with early adoption permitted. The adoption of this standard is not expected to have a
material impact on our financial statements.

In August 2016, the FASB issued an accounting standards update, ASU 2016-15, which changes the
classification of certain cash receipts and cash payments within the statement of cash flows. The new standard is
effective for us beginning January 1, 2018, with early adoption permitted. The adoption of this standard is not
expected to have a material impact on our financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation — Stock Compensation, Improvements to

Employee Share-Based Payment Accounting, which the Company elected to early adopt during the third quarter
of 2016. ASU 2016-09 requires an entity to recognize all excess tax benefits and tax deficiencies in connection
with stock-based compensation as income tax expense or benefit in the income statement (previously, excess tax
benefits were recognized in additional paid-in capital). We adopted the standard prospectively, and we recorded
excess tax benefits of $0.3 million within income tax expense for the year ended December 31, 2016. The
adoption of the standard requires the Company to adjust its deferred tax assets to account for the benefit of
excess tax benefits and any adjustments to forfeitures in historical periods and record the adjustment to retained
earnings. Accordingly, the Company has recorded an adjustment of approximately $0.1 million to retained
earnings to adjust its deferred tax assets. In addition, the amendments require recognition of excess tax benefits
regardless of whether the benefit reduces taxes payable in the current period. Furthermore, the amendments
require that excess tax benefits be classified as an operating activity in the statement of cash flows (such amounts
were previously included as a financing activity in the statement of cash flows); the Company also adopted this
provision of ASU 2016-09 prospectively. As allowed by the standard, we also made an election to account for
award forfeitures as they occur, rather than estimating them at the time of grant. In connection with this election
we recorded a cumulative-effect adjustment to beginning retained earnings of $0.1 million, net of taxes.

In February 2016, the FASB issued its new lease accounting guidance in Accounting Standards Update
(ASU) No. 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the
following for all leases (with the exception of short-term leases) at the commencement date: a lease liability,
which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and a
right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset
for the lease term. The new lease guidance simplifies the accounting for sale and leaseback transactions primarily
because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source
of off-balance sheet financing. The standard is effective for public companies for fiscal years beginning after
December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year
entity). Early application is permitted. Lessees (for capital and operating leases) and lessors (for sales-type, direct
financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or
entered into after, the beginning of the earliest comparative period presented in the financial statements. The
modified retrospective approach would not require any transition accounting for leases that expired before the
earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach.
We have not yet determined the impact on our consolidated financial statements.

57

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of
Inventory, or ASU 2015-11. ASU 2015-11 requires an entity to measure in-scope inventory at the lower of cost
and net realizable value. ASU 2015-11 is effective for fiscal years beginning after December 15, 2016, and for
interim periods within those fiscal years. A reporting entity should apply ASU 2015-11 prospectively with earlier
application permitted as of the beginning of an interim or annual reporting period. We do not expect the adoption
of this ASU to have a material impact on our consolidated financial statements.

In May 2014, the FASB and the International Accounting Standards Board (the “IASB”) issued
substantially converged final standards on revenue recognition. The FASB’s Accounting Standards Update
(“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), as amended from time to time,
outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with
customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The
new revenue recognition guidance becomes effective for the Company on January 1, 2018, with early adoption
permitted for the Company on January 1, 2017. Entities have the option of using either a full retrospective or a
modified approach to adopt the guidance in the ASU. The Company does not currently expect that adoption of
the updated standard will have a material impact on its consolidated financial statements and related disclosures.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of December 31, 2016. We do not currently have,
nor have we ever had, any relationships with unconsolidated entities or financial partnerships, such as entities
often referred to as structured finance or special purpose entities, which would have been established for the
purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In
addition, we do not engage in trading activities involving non-exchange traded contracts. As a result, we are not
materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these
relationships.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

In the ordinary course of conducting business, we are exposed to certain risks associated with potential
changes in market conditions. These market risks include changes in currency exchange rates and interest rates
which could affect operating results, financial position and cash flows. We manage our exposure to these market
risks through our regular operating and financing activities and, if considered appropriate, we may enter into
derivative financial instruments such as forward currency exchange contracts, although we have not done so in
2016 or in recent years.

Foreign Currency Risk

During fiscal 2016 and 2015, 44% and 42%, respectively, of our total revenue was from customers outside

of the United States. In addition, a significant portion of our operating costs incurred outside the United States
are denominated in currencies other than the U.S. dollar. We conduct business on a worldwide basis and as a
result, a portion of our revenue, earnings, net assets, and net investments in foreign affiliates is exposed to
changes in foreign currency exchange rates. We measure our net exposure for cash balance positions and for cash
inflows and outflows in order to evaluate the need to mitigate our foreign exchange risk. We may enter into
foreign currency forward contracts to minimize the impact related to unfavorable exchange rate movements,
although we have not done so during fiscal 2016 and fiscal 2015. Our largest exposures to foreign currency
exchange rates exist primarily with the Euro, British Pound, Canadian dollar, Australian dollar and Japanese yen.

During fiscal 2016 and fiscal 2015, we recorded $0.2 million and $0.1 million of net foreign currency
exchange losses related to the settlement and remeasurement of transactions denominated in currencies other than
the functional currency of our operating subsidiaries. Our analysis of operating results transacted in various
foreign currencies indicated that a hypothetical 10% change in the foreign currency exchange rates could have
increased or decreased the consolidated results of operations by approximately $1.7 million for fiscal 2016.

58

Interest Rate Risk

At December 31, 2016, we held $24.3 million in cash and cash equivalents. Due to the short maturities on
any instruments held, a hypothetical 10% increase or decrease in interest rates would not have a material impact
on our financial position, results of operations or cash flows.

Item 8.

Financial Statements and Supplementary Data

See the consolidated financial statements filed as part of this Annual Report on Form 10-K as listed under

Item 15 below.

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not Applicable.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation and supervision of our Chief Executive Officer and Chief Financial

Officer, is responsible for our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e)
under the Exchange Act. Disclosure controls and procedures are controls and other procedures that are designed
to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified under SEC rules and forms.
Disclosure controls and procedures include controls and procedures designed to ensure that information required
to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our principal
executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required
disclosure.

Management conducted an evaluation of the effectiveness of our internal control over financial reporting

based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that
the company’s internal control over financial reporting was effective as of December 31, 2016.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) to provide reasonable assurance
regarding the reliability of our financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP.

Management assessed the effectiveness of our internal controls over financial reporting as of December 31,
2016. Management based its assessment on criteria established in the Internal Control — Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework).
Management’s assessment included evaluation of elements such as the design and operating effectiveness of key
financial reporting controls, process documentation, accounting policies, and our overall control environment. In
November 2016, we acquired substantially all of the assets of the RestoreFlow allograft business from Restore
Flow Allografts LLC. This acquired business, which during 2016 comprised 0.6% of our revenues and as of
December 31, 2016 comprised 3.3% of our total assets, is excluded from our report on internal control over
financial reporting.

Based on this assessment under the criteria set forth in the Internal Control — Integrated Framework,
management has concluded that our internal control over financial reporting was effective as of December 31,
2016.

59

Our internal control over financial reporting as of December 31, 2016 has been audited by Grant Thornton

LLP, an independent registered public accounting firm, as stated in their respective report which is included
herein.

Remediation of Prior Year Material Weakness

The material weakness that was previously disclosed as of December 31, 2015 was remediated as of

December 31, 2016. See Management’s Report on Internal Control over Financial Reporting above. As disclosed
in the quarterly reports on Form 10-Q for the first three quarters of 2016, the Company has implemented and
executed the Company’s remediation plans, and as of December 31, 2016, such remediation plans were
successfully tested and the material weakness was deemed remediated.

Changes in Internal Control over Financial Reporting

Except for the acquisition of the RestoreFlow allograft business noted above under “Management’s Report

on Internal Control Over Financial Reporting”, there was no change in our internal control over financial
reporting that occurred during the fiscal quarter ended December 31, 2016, that has materially affected, or is
reasonably likely to materially affect our internal control over financial reporting. Management is in the process
of assessing the effectiveness of internal control over financial reporting for the acquired business.

Inherent Limitations of Internal Controls

Notwithstanding the foregoing, our management, including our Chief Executive Officer and Chief Financial
Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error
and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of
fraud, if any, within the company have been detected. These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more
people, or by management override of the control. The design of any system of controls also is based in part upon
certain assumptions about the likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions. Over time, control may become
inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or
fraud may occur and not be detected.

60

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
LeMaitre Vascular, Inc.

We have audited the internal control over financial reporting of LeMaitre Vascular, Inc. (a Delaware corporation)
and subsidiaries (the “Company”) as of December 31, 2016, based on criteria established in the 2013 Internal
Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). The Company’s management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying “Management’s Report on Internal Control Over Financial Reporting”,
(“Management’s Report”). Our responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit. Our audit of, and opinion on, the Company’s internal control over
financial reporting does not include the internal control over financial reporting of the RestoreFlow allograft
business, whose financial statements reflect total assets and revenues constituting 3.3 percent and 0.6 percent,
respectively, of the related consolidated financial statement amounts as of and for the year ended December 31,
2016. As indicated in Management’s Report, the RestoreFlow allograft business was acquired during the fourth
quarter of 2016. Management’s assertion on the effectiveness of the Company’s internal control over financial
reporting excluded internal control over financial reporting of the RestoreFlow allograft business.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2016, based on criteria established in the 2013 Internal Control — Integrated
Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated financial statements of the Company as of and for the year ended December 31,
2016, and our report dated March 8, 2017 expressed an unqualified opinion on those financial statements.

/s/ GRANT THORNTON LLP

Boston, Massachusetts
March 8, 2017

61

Item 9B. Other Information

Not Applicable.

62

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information responsive to this item is incorporated by reference herein from the information to be
contained in the sections entitled “Directors, Executive Officers and Key Employees,” “Corporate Governance,”
and “Meetings and Committees of the Board of Directors” in our 2017 definitive proxy statement (2017
Definitive Proxy Statement) for the 2017 annual meeting of stockholders to be filed with the Securities and
Exchange Commission within 120 days after the year ended December 31, 2016.

The information required by this item concerning compliance with Section 16(a) of the Exchange Act is
incorporated herein by reference from the information contained in the section entitled “Section 16(a) Beneficial
Ownership Reporting Compliance” in our 2017 Definitive Proxy Statement.

Code of Ethics

Certain documents relating to our corporate governance, including our Code of Business Conduct and
Ethics, which is applicable to our directors, officers, and employees, and the charters of the Audit Committee,
Compensation Committee, and Corporate Governance and Nominating Committee of our Board of Directors, are
available on our website at http://www.lemaitre.com. We intend to disclose substantive amendments to or
waivers (including implicit waivers) of any provision of the Code of Business Conduct and Ethics that apply to
our principal executive officer, principal financial officer, principal accounting officer, or controller, or persons
performing similar functions, by posting such information on our website available at http://www.lemaitre.com.

Item 11. Executive Compensation

The information responsive to this item is incorporated herein by reference from the information to be
contained in the section entitled “Compensation of Executive Officers and Directors” in our 2017 Definitive
Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters

The information responsive to this item is incorporated herein by reference from the information to be

contained in the section entitled “Security Ownership of Certain Beneficial Owners and Management” in our
2017 Definitive Proxy Statement.

Equity Compensation Plan Information

The following table sets forth information regarding our equity compensation plans in effect as of
December 31, 2016. Each of our equity compensation plans is an “employee benefit plan” as defined by Rule
405 of Regulation C of the Securities Act of 1933, as amended.

Plan category

Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights

Weighted-average
exercise price of
outstanding
options, warrants
and rights

Number of
securities remaining
available for future
issuance under
equity
compensation plans
(excluding
securities reflected
in column (a))

Equity compensation plans approved by security

holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,218,783

Equity compensation plans not approved by security

holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,218,783

$10.25

—

$10.25

1,745,953

—

1,745,953

(a)

(b)

(c)

63

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required responsive to this item is incorporated herein by reference from the information to

be contained in the sections entitled “Certain Relationships and Related Transactions” and “Corporate
Governance” in our 2017 Definitive Proxy Statement.

Item 14. Principal Accounting Fees and Services

The information responsive to this item is incorporated herein by reference from the information to be

contained in the sections entitled “Ratification of Independent Registered Public Accounting Firm” and
“Additional Information Regarding Our Independent Registered Public Accounting Firm” in our 2017 Definitive
Proxy Statement.

64

Item 15. Exhibits and Financial Statement Schedules

a) Documents filed as part of this Report.

PART IV

(1) The following consolidated financial statements are filed herewith in Item 8 of Part II above.

(i) Report of Independent Registered Public Accounting Firm

(ii) Consolidated Balance Sheets

(iii) Consolidated Statements of Operations

(iv) Consolidated Statements of Changes in Stockholders’ Equity

(v) Consolidated Statements of Comprehensive Income

(vi) Consolidated Statements of Cash Flows

(vii) Notes to Consolidated Financial Statements

(2) Exhibits

Exhibit
Number

Exhibit Description

Incorporated By Reference

Form

Date

SEC File
Number

Filed
Herewith

1.1

2.1

2.2

2.3

2.4

2.5

2.6

2.7

Underwriting Agreement dated as of May 30, 2014, among
the Registrant, Canaccord Genuity Inc. and Stifel, Nicolaus
& Company, Incorporated.

Purchase Option Agreement dated December 30, 2008 by
and among the Registrant, Neovasc Inc. and Neovasc
Medical Inc.

Amendment No. 1 to Exclusive Distribution Agreement
and Purchase Option Agreement dated January 22, 2009 by
and among the Registrant, Neovasc Inc. and Neovasc
Medical Inc.

Amendment No. 2 to Purchase Option Agreement dated
January 5, 2012 by and among the Registrant, Neovasc Inc.
and Neovasc Medical Inc.

Amendment No. 3 to Purchase Option Agreement dated
October 1, 2012 by and among the Registrant, Neovasc
Inc. and Neovasc Medical Inc.

Amendment No. 4 to Purchase Option Agreement dated
October 1, 2012 by and among the Registrant, Neovasc
Inc. and Neovasc Medical Inc.

8-K

5/30/14

001-33092

10-K 3/27/13

001-33092

10-K 3/27/13

001-33092

10-K 3/27/13

001-33092

10-K 3/27/13

001-33092

10-Q

8/7/14

001-33092

Asset Purchase Agreement dated August 28, 2013 between
Registrant and InaVein, LLC

10-Q 11/7/13

001-33092

Share Purchase Deed dated August 14, 2014 among
Xenotis Pty Ltd, the shareholders of Xenotis Pty Ltd,
Vinogopal Ramayah (as the Selling Shareholder
Representative), the Registrant and LeMaitre Vascular Pty
Ltd.

10-Q 11/6/14

001-33092

65

Exhibit
Number

Exhibit Description

Incorporated By Reference

Form

Date

SEC File
Number

Filed
Herewith

2.8

3.1

3.2

3.3

4.1

10.1

10.2

10.3

10.4†

10.5†

10.6†

10.7†

10.8†

10.9†

10.10†

10.11†

10.12†

10.13†

Asset Purchase Agreement dated November 10, 2016
between Registrant, Restore Flow Allografts, LLC and
certain individuals named therein.

X

Amended and Restated By-laws of the Registrant

S-1/A 5/26/06

333-133532

Second Amended and Restated Certificate of
Incorporation of the Registrant

Amendment to Second Amended and Restated
Certificate of Incorporation of the Registrant

10-K 3/29/10

001-33092

8-K

6/15/12

001-33092

Specimen Certificate evidencing shares of common stock S-1/A 6/22/06

333-133532

Northwest Park Lease dated March 31, 2003, by and
between the Registrant and Roger P. Nordblom and Peter
C. Nordblom, as Trustees of Northwest Associates, as
amended

Registration Rights Agreement dated June 17, 1998, by
and between the Registrant and Housatonic Equity
Investors, L.P.

Director Compensation Policy

Executive Retention and Severance Agreement dated
October 10, 2005, by and between the Registrant and
George W. LeMaitre

Managing Director Employment Agreement dated
October 1, 2008, by and between LeMaitre Vascular
GmbH and Peter Gebauer, as amended

Employment Agreement dated June 20, 2006, by and
between the Registrant and David Roberts

Employment Agreement dated April 20, 2006, by and
between the Registrant and Joseph P. Pellegrino

1997 Stock Option Plan and form of agreements
thereunder

1998 Stock Option Plan and form of agreements
thereunder

2000 Stock Option Plan and form of agreements
thereunder

2004 Stock Option Plan and form of agreements
thereunder

S-1

4/25/06

333-133532

S-1/A 5/26/06

333-133532

10-K 3/27/12

001-33092

S-1/A 5/26/06

333-133532

10-K 3/31/09

001-33092

S-1/A 6/22/06

333-133532

S-1/A 6/22/06

333-133532

S-1

4/25/06

333-133532

S-1

4/25/06

333-133532

S-1

4/25/06

333-133532

S-1

4/25/06

333-133532

Second Amended and Restated 2006 Stock Option and
Incentive Plan and form of agreements thereunder

8-K

6/18/10

001-33092

Form of Indemnification Agreement between the
Registrant and its directors and executive officers

S-1/A 5/26/06

333-133532

66

Exhibit
Number

10.14†

10.15

10.16

10.17

10.18†

10.19†

10.20†

10.21

10.22

10.23

10.24

10.25

Exhibit Description

Incorporated By Reference

Form

Date

SEC File
Number

Filed
Herewith

Form of Restricted Stock Unit Award Agreement under
the Registrant’s 2006 Stock Option and Incentive Plan

8-K

12/26/06

001-33092

Second Amendment of Lease dated May 21, 2007, by and
between Rodger P. Nordblom and Peter C. Nordblom, as
Trustees of Northwest Associates, and Registrant

Third Amendment of Lease dated February 26, 2008, by
and between Rodger P. Nordblom and Peter C.
Nordblom, as Trustees of Northwest Associates, and
Registrant

Fourth Amendment of Lease dated October 31, 2008, by
and between Rodger P. Nordblom and Peter C.
Nordblom, as Trustees of Northwest Associates, and
Registrant

First Amendment to Executive Retention and Severance
Agreement dated December 23, 2008, by and between the
Registrant and George W. LeMaitre

First Amendment to Employment Agreement dated
December 19, 2008, by and between the Registrant and
David Roberts

First Amendment to Employment Agreement dated
December 19, 2008, by and between the Registrant and
Joseph P. Pellegrino

Fifth Amendment of Lease dated March 23, 2010, by and
between Rodger P. Nordblom and Peter C. Nordblom, as
Trustees of Northwest Associates, and Registrant

Northwest Park Lease dated March 23, 2010, by and
between Rodger P. Nordblom and Peter C. Nordblom, as
Trustees of Northwest Associates, and Registrant

First Amendment to Northwest Park Lease dated
September 14, 2010, by and between Rodger P.
Nordblom and Peter C. Nordblom, as Trustees of
Northwest Associates, and Registrant

Second Amendment to Northwest Park Lease dated
October 31, 2011, by and between NWP Building 4 LLC,
as successor-in-interest to Trustees of Northwest
Associates, and Registrant

Third Amendment of Northwest Park Lease dated
August 31, 2012, by and between NWP Building 4 LLC,
as successor-in-interest to Trustees of Northwest
Associates, and Registrant

8-K

6/15/07

001-33092

8-K

4/10/08

001-33092

10-K

3/31/09

001-33092

10-K

3/31/09

001-33092

10-K

3/31/09

001-33092

10-K

3/31/09

001-33092

10-K

3/29/10

001-33092

10-K

3/29/10

001-33092

10-K

3/27/12

001-33092

10-K

3/27/12

001-33092

10-K

3/27/13

001-33092

10.26

Lease dated December 20, 2013, by and between N.W.
Building 3 Trust and Registrant

8-K

12/23/13

001-33092

67

Exhibit
Number

10.27

10.28

10.29†

10.30†

10.31†

21.1

23.1

23.2

24.1

31.1

31.2

32.1*

32.2*

Exhibit Description

Fourth Amendment of Lease dated December 20, 2013,
by and between NWP Building 4 LLC, as successor-in-
interest to the Trustees of Northwest Associates, and
Registrant

Sixth Amendment of Lease dated December 20, 2013,
by and between NWP Building 5 LLC, as successor-in-
interest to the Trustees of Northwest Associates, and
Registrant

Amended and Restated Management Incentive
Compensation Plan

Third Amended and Restated 2006 Stock Option and
Incentive Plan

Executive Retention and Severance Agreement dated
October 26, 2015, by and between the Registrant and
Michael T. Wijas.

List of Subsidiaries

Consent of Grant Thornton LLP

Consent of Ernst & Young LLP

Power of Attorney (included on the Signatures page of
this Annual Report on Form 10-K)

Certification of Chief Executive Officer, as required by
Rule 13a-14(a) or Rule 15d-14(a)

Certification of Chief Financial Officer, as required by
Rule 13a-14(a) or Rule 15d-14(a)

Certification of Chief Executive Officer, as required by
Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of
Chapter 36 of Title 18 of the United States Code
(18 U.S.C. §1350)

Certification of Chief Financial Officer, as required by
Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of
Chapter 36 of Title 18 of the United States Code
(18 U.S.C. §1350)

101.INS

XBRL Instance Document.

101.SCH

XBRL Taxonomy Extension Schema Document.

101.CAL

101.DEF

101.LAB

XBRL Taxonomy Extension Calculation Linkbase
Document.

XBRL Taxonomy Extension Definition Linkbase
Document.

XBRL Taxonomy Extension Label Linkbase
Document.

68

Incorporated By Reference

Form

Date

SEC File
Number

Filed
Herewith

8-K

12/23/13

001-33092

8-K

12/23/13

001-33092

8-K

2/25/14

001-33092

8-K

6/8/15

001-33092

10-K

3/10/16

001-33092

X

X

X

X

X

X

X

X

X

X

X

X

X

Exhibit
Number

Exhibit Description

Incorporated By
Reference

Form Date

SEC File
Number

Filed
Herewith

101.PRE

XRBL Taxonomy Extension Presentation Linkbase Document.

X

†
*

Indicates a management contract or any compensatory plan, contract, or arrangement.
The certifications attached as Exhibit 32.1 and 32.2 that accompany this Annual Report on Form 10-K, are
not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference
into any filing of LeMaitre Vascular, Inc. under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-K, irrespective of
any general incorporation language contained in such filing.

Item 16. Form 10-K Summary.

Not applicable.

69

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, on March 8,
2017.

LEMAITRE VASCULAR, INC.

By:

/S/ GEORGE W. LEMAITRE
George W. LeMaitre,
Chief Executive Officer and Chairman of the Board

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below

constitutes and appoints George W. LeMaitre and Joseph P. Pellegrino, Jr., and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this
report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by

the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ GEORGE W. LEMAITRE
George W. LeMaitre

Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)

March 8, 2017

Chief Financial Officer (Principal

March 8, 2017

/s/

JOSEPH P. PELLEGRINO, JR.
Joseph P. Pellegrino, Jr.

Financial and Accounting
Officer) and Director

/s/ LAWRENCE J. JASINSKI
Lawrence J. Jasinski

/s/

JOHN J. O’CONNOR
John J. O’Connor

/s/ DAVID B. ROBERTS
David B. Roberts

/s/

JOHN A. ROUSH
John A. Roush

/S/ MICHAEL H. THOMAS
Michael H. Thomas

Director

Director

March 8, 2017

March 8, 2017

President and Director

March 8, 2017

Director

Director

70

March 8, 2017

March 8, 2017

INDEX TO FINANCIAL STATEMENTS

LeMaitre Vascular, Inc.

Consolidated Financial Statements

Report of Independent Registered Public Accounting – Grant Thornton LLP . . . . . . . . . . . . . . . . . . . . . . . .

Report of Independent Registered Public Accounting Firm – Ernst & Young LLP . . . . . . . . . . . . . . . . . . . .

Consolidated Balance Sheets as of December 31, 2016 and 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Operations for the Years Ended December 31, 2016, 2015 and 2014 . . . . . . . .

Page

F-2

F-3

F-4

F-5

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2016, 2015 and

2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-6

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2016, 2015 and

2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-7

Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2015 and 2014 . . . . . . . F-10

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11

F-1

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders
LeMaitre Vascular, Inc.

We have audited the accompanying consolidated balance sheets of LeMaitre Vascular, Inc. (a Delaware
corporation) and subsidiaries (the “Company”) as of December 31, 2016 and 2015, and the related consolidated
statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for each of the
two years in the period ended December 31, 2016. These consolidated financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,

the financial position of LeMaitre Vascular, Inc. and subsidiaries as of December 31, 2016 and 2015, and the
results of their operations and their cash flows for each of the two years in period ended December 31, 2016 in
conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board

(United States), the Company’s internal control over financial reporting as of December 31, 2016, based on
criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated March 8, 2017 expressed an
unqualified opinion thereon.

/s/ GRANT THORNTON LLP

Boston, Massachusetts
March 8, 2017

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of LeMaitre Vascular, Inc.

We have audited the accompanying consolidated statements of operations, comprehensive income,

stockholders’ equity, and cash flows of LeMaitre Vascular, Inc. (the Company) for the year ended December 31,
2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. We were not engaged to perform an
audit of the Company’s internal control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements of LeMaitre Vascular, Inc. referred to above present fairly, in all
material respects, the consolidated results of its operations and its cash flows for the year ended December 31,
2014, in conformity with U.S. generally accepted accounting principles.

Boston, Massachusetts
March 18, 2015

/s/ Ernst & Young LLP

F-3

LeMaitre Vascular, Inc.

Consolidated Balance Sheets

Assets
Current assets:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net of allowances of $258 at December 31, 2016,

and $243 at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory and other deferred costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . .

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangibles, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(unaudited)

December 31,
2016

December 31,
2015

(in thousands,
except share data)

$ 24,288

$27,451

13,191
19,578
1,970

59,027
8,012
23,426
9,897
1,399
163

11,971
15,205
3,557

58,184
7,022
17,789
6,336
1,205
168

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$101,924

$90,704

Liabilities and stockholders’ equity
Current liabilities:

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

1,217
8,804
461

10,482
1,941
2,001

14,424

$ 1,366
8,837
165

10,368
1,678
774

12,820

Stockholders’ equity:

Preferred stock, $0.01 par value; authorized 3,000,000 shares; none

outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

—

Common stock, $0.01 par value; authorized 37,000,000 shares; issued
20,040,348 shares at December 31, 2016, and 19,748,321 shares at
December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost; 1,452,810 shares at December 31, 2016 and

1,431,139 shares at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . .

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

200
85,378
15,335
(4,583)

(8,830)

87,500

197
82,094
8,161
(4,049)

(8,519)

77,884

Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$101,924

$90,704

See accompanying notes to consolidated financial statements.

F-4

LeMaitre Vascular, Inc.

Consolidated Statements of Operations

Year ended December 31,

2016

2015

2014

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$89,151
26,215

Gross profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development
Medical device excise tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on divestitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

62,936
26,105
14,354
6,141
—
—
—
—

46,600

16,336

Other income (expense):

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

81
(14)
(161)

Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16,242
5,652

(in thousands,
except per share data)
$78,352
24,186

$71,097
22,666

54,166
22,780
14,010
5,479
744
—
(360)
—

42,653

11,513

13
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(102)

11,424
3,666

48,431
22,087
13,889
4,671
689
526
—
229

42,091

6,340

1
(5)
(16)

6,320
2,405

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$10,590

$ 7,758

$ 3,915

Earnings per share of common stock:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Weighted-average shares outstanding:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

0.57

0.55

$

$

0.44

0.42

$

$

0.24

0.23

18,485

19,241

17,764

18,316

16,614

17,008

Cash dividends declared per common share . . . . . . . . . . . . . . . . . . . . .

$

0.18

$

0.16

$

0.14

See accompanying notes to consolidated financial statements.

F-5

LeMaitre Vascular, Inc.

Consolidated Statements of Comprehensive Income

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss):

Year ended December 31,

2016

2015

2014

$10,590

(in thousands)
$ 7,758

$ 3,915

Foreign currency translation adjustment, net

. . . . . . . . . . . . . . . . . . . . . . . . . .

(534)

(1,684)

(2,112)

Total other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(534)

(1,684)

(2,112)

Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$10,056

$ 6,074

$ 1,803

See accompanying notes to consolidated financial statements.

F-6

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LeMaitre Vascular, Inc.

Consolidated Statements of Cash Flows

Operating activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value adjustments to contingent consideration obligations . . . . . . . . . . .
Impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision (recovery) of doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for inventory write-downs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision (benefit) for deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . .
Gain on divestitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from stock-based compensation awards . . . . . . . . . . . . .
Loss on disposal of property and equipment
. . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency transaction gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory and other deferred costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing activities
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments related to acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . .
Proceeds from divestitures, net of expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of property and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of intellectual property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities
Payments of long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of deferred acquisition consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock cash dividend paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from stock-based compensation awards . . . . . . . . . . . . . . . . .

Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . . . .

Year ended December 31,

2016

2015

2014

(in thousands)

$ 10,590

$ 7,758

$ 3,915

3,591
1,680
—
—
105
362
140
—
—
—
59

3,394
1,424
—
—
182
462
(384)
(360)
(454)
5
100

3,334
1,302
138
229
54
667
(72)
—
(225)
8
60

(922)
(134)
1,528
(103)

(1,879)
608
(2,035)
2,617

(654)
(2,711)
553
(1,086)

16,896

11,438

5,512

(2,841)
(14,368)
—
—

(2)

(2,273)
(1,565)
360
15
(17)

(1,174)
(6,559)
—
—
(15)

(17,211)

(3,480)

(7,748)

—
(385)
1,442
(311)
(3,323)
—

(2,577)
(271)

—
(1,100)
4,836
(266)
(2,845)
454

1,079
(278)

(1,133)
(745)
10,834
(211)
(2,308)
225

6,662
(445)

3,981
14,711

Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3,163)
27,451

8,759
18,692

Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 24,288

$27,451

$18,692

Supplemental disclosures of cash flow information (see Note 13).

See accompanying notes to consolidated financial statements.

F-10

LeMaitre Vascular, Inc.

Notes to Consolidated Financial Statements
December 31, 2016

1. Significant Accounting Policies and Related Matters

Description of Business

Unless the context requires otherwise, references to LeMaitre Vascular, we, our, and us refer to LeMaitre
Vascular, Inc. and our subsidiaries. We develop, manufacture, and market medical devices and implants used
primarily in the field of vascular surgery. We also derive revenues from the processing and cryopreservation of
human tissues for implantation in patients. We operate in a single segment in which our principal product lines
include the following: valvulotomes, balloon catheters, carotid shunts, biologic vascular patches, biologic
vascular grafts, radiopaque marking tape, anastomotic clips, remote endarterectomy devices, laparoscopic
cholecystectomy devices, vascular grafts, angioscopes, and powered phlebectomy devices. Our offices are
located in Burlington, Massachusetts; Fox River Grove, Illinois; Mississauga, Canada; Sulzbach, Germany;
Milan, Italy; Madrid, Spain; North Melbourne, Australia; Tokyo, Japan; and Shanghai, China.

Consolidation and Basis of Presentation

Our consolidated financial statements include the accounts of LeMaitre Vascular and the accounts of our

wholly-owned subsidiaries, LeMaitre Vascular GmbH, LeMaitre Vascular GK, Vascutech Acquisition LLC,
LeMaitre Acquisition LLC, LeMaitre Vascular SAS, LeMaitre Vascular S.r.l., LeMaitre Vascular Spain SL,
LeMaitre Vascular Switzerland GmbH, LeMaitre Vascular ULC, LeMaitre Vascular AS, LeMaitre Vascular Pty
Ltd, Xenotis Pty Ltd, LeMaitre Vascular, Ltd. and LeMaitre Medical Technology (Shanghai) Co. Ltd. All
significant intercompany accounts and transactions have been eliminated in consolidation.

Foreign Currency Translation

Balance sheet accounts of foreign subsidiaries are translated into U.S. dollars at year-end exchange rates.

Operating accounts are translated at average exchange rates for each year. Net translation gains or losses are
adjusted directly to a separate component of other comprehensive income (loss) within stockholders’ equity.
Foreign exchange transaction gains (losses), substantially all of which relate to intercompany activity between us
and our foreign subsidiaries, are included in other income (expense) in the accompanying consolidated
statements of operations.

Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles

(GAAP) requires us to make estimates and assumptions that affect the amounts reported in our consolidated
financial statements and accompanying notes. Our estimates and assumptions, including those related to bad
debts, inventory and other deferred costs, intangible assets, sales returns and discounts, and income taxes are
reviewed on an ongoing basis and updated as appropriate. Actual results could differ from those estimates.

Revenue Recognition

Our revenue is derived primarily from the sale of disposable or implantable devices used during vascular

surgery. We sell primarily directly to hospitals and to a lesser extent to distributors, as described below, and,
during the periods presented in our consolidated financial statements, entered into consigned inventory
arrangements with either hospitals or distributors on a limited basis. With the recent acquisition of the
RestoreFlow allograft business, we also derive revenues from the processing and cryopreservation of human
tissues for implantation in patients. These revenues are recognized when services have been provided and the
tissue has been shipped to the customer, provided all other revenue recognition criteria discussed in the
succeeding paragraph have been met.

F-11

We recognize revenue when four basic criteria are met: (1) persuasive evidence of an arrangement exists;

(2) delivery has occurred or services have been rendered; (3) the fee is fixed or determinable; and
(4) collectability is reasonably assured. We assess whether the fee is fixed or determinable based on the terms of
the agreement associated with the transaction. Sales transactions are based on prices that are determinable at the
time the customer’s purchase order is accepted by us. Orders that are not accompanied with a purchase order are
either confirmed in writing or verbally with the customer.

After the delivery of the product, there is no uncertainty about customer acceptance due to the nature of the
product. There is no contingency for acceptance, warranty, or price protection. We do not recognize revenue on
consigned sales until the customer notifies us that the products have been used. In order to determine whether
collection is reasonably assured, we assess a number of factors, including past transaction history with the
customer and the creditworthiness of the customer. If we determine that collection is not reasonably assured, we
defer the recognition of revenue until collection becomes reasonably assured, which is generally upon receipt of
payment. We provide for product returns at the time revenue is recognized based on our product return history.

Based on these policies, we recognize revenue, net of allowances for returns and discounts, as well as any

sales and value added taxes required to be invoiced as products are shipped, based on shipping point terms, or at
the time consigned inventory is consumed at which time title passes to customers. We recognize revenue net of
allowances for returns and discounts, at the time of shipment of our products to our distributors. Customers
returning products are entitled to full or partial credit based on the condition and timing of the return. To be
accepted, a returned product must be unopened (if sterile), unadulterated, and undamaged, must have at least 18
months remaining prior to its expiration date, or twelve months for our hospital customers in Europe, and
generally be returned within 30 days of shipment. These return policies apply to sales to both hospitals and
distributors. The amount of products returned to us, either for exchange or credit, has not been material.
Nevertheless, we provide for an allowance for future sales returns based on historical return experience. Our cost
of replacing defective products has not been material and is accounted for at the time of replacement.

Research and Development Expense

Research and development costs, principally salaries, laboratory testing, and supplies, are expensed as

incurred and also include royalty payments associated with licensed and acquired intellectual property.

Shipping and Handling Costs

Shipping and handling fees paid by customers are recorded within net sales, with the related expense

recorded in cost of sales.

Advertising Costs

Advertising costs are expensed as incurred and are included as a component of sales and marketing expense

in the accompanying consolidated statements of operations. Advertising costs are as follows:

Advertising expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$378

(in thousands)
$428

$462

Year ended December 31,

2016

2015

2014

Cash and Cash Equivalents

We consider all highly liquid instruments purchased with maturity dates of 90 days or less to be cash
equivalents. Cash and cash equivalents are primarily invested in money market funds. These amounts are stated
at cost, which approximates fair value.

F-12

Concentrations of Credit Risk

Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash

equivalents and accounts receivable. Cash equivalents represent highly liquid investments with maturities of 90
days or less at the date of purchase. Credit risk related to cash and cash equivalents are limited based on the
creditworthiness of the financial institutions at which these funds are held. We maintain cash balances in several
banks. Accounts located in the United States are insured by the Federal Deposit Insurance Corporation (FDIC) up
to $250,000. Certain of our account balances exceed the FDIC limit. Cash balances held outside the United States
totaled approximately $7.1 million as of December 31, 2016.

Our accounts receivable are with customers based in the United States and internationally. Accounts

receivable generally are due within 30 to 90 days of invoice and are stated at amounts due from customers, net of
an allowance for doubtful accounts and sales returns, other than in certain European markets where longer
payment terms are customary and may range from 90 to 240 days. We perform ongoing credit evaluations of the
financial condition of our customers and adjust credit limits based upon payment history and the current
creditworthiness of the customers, as determined by a review of their current credit information. We
continuously monitor aging reports, collections, and payments from customers, and maintain a provision for
estimated credit losses based upon historical experience and any specific customer collection issues we identify.

We closely monitor outstanding receivables for potential collection risks, including those that may arise
from economic conditions, in both the U.S. and international economies. Our European sales to government-
owned or supported customers such as hospitals, distributors and agents, in Southern Europe, specifically Italy
and Spain may be subject to significant payment delays due to government austerity measures impacting funding
and payment practices. As of December 31, 2016 our receivables in Italy and Spain totaled $0.8 million and $0.4
million, respectively. Receivables balances with certain publicly-owned hospitals and government supported
customers in these countries can accumulate over a period of time and then subsequently be settled as large lump
sum payments. While we believe our allowance for doubtful accounts in these countries is adequate as of
December 31, 2016, if significant changes were to occur in the payment practices of these European governments
or if government funding becomes unavailable, we may not be able to collect on receivables due to us from these
customers and our write offs of uncollectible amounts may increase.

We write off accounts receivable when they become uncollectible. Such credit losses have historically been
within our expectations and allowances. The allowance for doubtful accounts is our best estimate of the amount
of probable credit losses in our existing accounts receivable. We review our allowance for doubtful accounts on a
monthly basis and all past due balances are reviewed individually for collectability. The provision for the
allowance for doubtful accounts is recorded in general and administrative expenses. The following is a summary
of our allowance for doubtful accounts and sales returns:

Balance at
Beginning
of Period

Additions
(recoveries)
charged to
Income

Deductions
from
Reserves

Balance at
End of
Period

(in thousands)

Allowance for doubtful accounts and sales returns:

Year ended December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . .
Year ended December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . .
Year ended December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . .

$243
242
263

$105
182
54

$ 90
181
75

258
243
242

Fair Value of Financial Instruments

Our financial instruments include cash and cash equivalents, accounts receivable and trade payables. The

fair value of the majority of these instruments approximates their carrying value based upon their short-term
nature or variable rates of interest.

F-13

Inventory and Other Deferred Costs

Inventory and Other Deferred Costs consists of finished products, work-in-process, raw materials and costs

deferred in connection with human tissue cryopreservation services of our RestoreFlow allograft business. We
value inventory and other deferred costs at the lower of cost or market value. Cost includes materials, labor and
manufacturing overhead and is determined using the first-in, first-out (FIFO) method. On a quarterly basis, we
review inventory quantities on hand and analyze the provision for excess and obsolete inventory based primarily
on product expiration dating and our estimated sales forecast, which is based on sales history and anticipated
future demand. Our estimates of future product demand may not be accurate, and we may understate or overstate
the provision required for excess and obsolete inventory. Accordingly, any significant unanticipated changes in
demand could have a significant impact on the value of our inventory and results of operations.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the

related assets using straight-line method as follows:

Description

Computers and equipment
Machinery and equipment
Leasehold improvements

Useful Life

3–5 years
3–10 years
The shorter of its useful life or lease term

Expenditures for maintenance and repairs are charged to operations when incurred, while additions and
betterments are capitalized. When assets are retired or disposed, the asset’s original cost and related accumulated
depreciation are eliminated from the accounts and any gain or loss is reflected in the statement of operations.

Valuation of Business Combinations

We assign the value of the consideration transferred to acquire a business to the tangible assets and

identifiable intangible assets acquired and liabilities assumed on the basis of their fair values at the date of
acquisition. We assess the fair value of assets, including intangible assets, using a variety of methods and are
usually performed by an independent appraiser who measures fair value from the perspective of a market
participant.

Acquisitions have been accounted for using the acquisition method, and the acquired companies’ results

have been included in the accompanying consolidated financial statements from their respective dates of
acquisition. Acquisition transaction costs have been recorded in general and administrative expenses, and are
expensed as incurred. Allocation of the purchase price for acquisitions is based on estimates of the fair value of
the net assets acquired and, for acquisitions completed within the past year, is subject to adjustment upon
finalization of the purchase price allocation.

Our acquisitions have historically been made at prices above the fair value of the acquired assets, resulting

in goodwill, due to expectations of synergies of combining the businesses. These synergies include use of our
existing commercial infrastructure to expand sales of the acquired businesses’ products, use of the commercial
infrastructure of the acquired businesses to cost-effectively expand sales of our products, and the elimination of
redundant facilities, functions and staffing.

Contingent Consideration

Contingent consideration for acquisitions is recognized at the date of acquisition, based on the fair value at

that date, and then re-measured periodically through adjustments to net income.

F-14

Impairment of Long-lived Assets

We review our long-lived assets (primarily property and equipment and intangible assets) subject to

amortization quarterly to determine if any adverse conditions exist or a change in circumstances has occurred that
would indicate impairment or a change in the remaining useful life. Conditions that may indicate impairment
include, but are not limited to, a significant adverse change in legal factors or business climate that could affect
the value of an asset, a product recall, or an adverse action or assessment by a regulator. If an impairment
indicator exists, we test the intangible asset for recoverability. We record impairment losses on long-lived assets
used in operations when events and circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those
assets. Impairment is measured based on the fair market value of the affected asset using discounted cash flows.

In 2014, we recognized an impairment charge of $0.2 million related to trademarks, technology, and
manufacturing equipment upon the termination of The UnBalloon, our non-occlusive modeling catheter product
line.

This impairment adjustment falls within Level 3 of the fair value hierarchy, due to the use of significant
unobservable inputs to determine fair value. The fair value measurements were calculated using unobservable
inputs, primarily using the income approach, specifically the discounted cash flow method. As the product line
was terminated, we concluded there would be no additional future cash flows.

Goodwill

Goodwill represents the amount of consideration paid in connection with business acquisitions in excess of
the fair value of assets acquired and liabilities assumed. Goodwill is evaluated for impairment annually or more
frequently if indicators of impairment are present or changes in circumstances suggest that an impairment may
exist. We evaluate the December 31 balance of the carrying value of goodwill based on a single reporting unit
annually. We perform an assessment of qualitative factors to determine if it is “more likely than not” that the fair
value of our reporting unit is less than its carrying value as a basis for determining whether it is necessary to
perform the two-step goodwill impairment test. The “more likely than not” threshold is defined as having a
likelihood of more than 50 percent. If required, the next step of the goodwill impairment test is to determine the
fair value of the reporting unit. The implied fair value of goodwill is determined on the same basis as the amount
of goodwill recognized in connection with a business combination. Specifically, the fair value of a reporting unit
is allocated to all of the assets and liabilities (including any unrecognized intangible assets) as if the reporting
unit had been acquired in a business combination as of the date of the impairment review and as if the fair value
of the reporting unit was the price paid to acquire the reporting unit. The excess of the fair value of a reporting
unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill. If the carrying
amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss shall be
recognized in an amount equal to that excess. We have determined that no goodwill impairment charges were
required for the years ended December 31, 2016, 2015 or 2014.

Other Intangible Assets

Other intangible assets consist primarily of patents, trademarks, technology licenses, and customer
relationships acquired in connection with business acquisitions and asset acquisitions and are amortized over
their estimated useful lives, ranging from 1 to 13 years.

Stock-based Compensation

We recognize, as expense, the estimated fair value of stock options to employees which is determined using

the Black-Scholes option pricing model. We have elected to recognize the compensation cost of all share-based
awards on a straight-line basis over the vesting period of the award. In periods that we grant stock options, fair
value assumptions are based on volatility, interest, dividend yield, and expected term over which the stock
options will be outstanding. The computation of expected volatility is based on the historical volatility of the

F-15

company’s stock. The interest rate for periods within the contractual life of the award is based on the
U.S. Treasury risk-free interest rate in effect at the time of grant. Historical data on exercise patterns is the basis
for estimating the expected life of an option. The expected annual dividend rate was calculated by dividing our
annual dividend, based on the most recent quarterly dividend rate, by the closing stock price on the grant date.

We also issue restricted stock units (RSUs) as an additional form of equity compensation to our employees,
officers, and directors, pursuant to our stockholder-approved 2006 Plan. RSUs entitle the grantee to an issuance
of stock at no cost and generally vest over a period of time determined by our Board of Directors at the time of
grant based upon the continued service to the company. The fair market value of the award is determined based
on the number of RSUs granted and the market value of our common stock on the grant date and is amortized to
expense over the period of vesting. Unvested RSUs are forfeited and canceled as of the date that employment or
service to the company terminates. RSUs are settled in shares of our common stock upon vesting. We may
repurchase common stock upon our employees’ vesting in RSUs in order to cover any minimum tax withholding
liability as a result of the RSUs having vested.

Share-based compensation charges had in prior years been recorded net of the estimated forfeitures based
upon historical forfeiture rates, and was adjusted in subsequent periods to reflect the results of actual forfeitures
and vesting. In March 2016, the Financial Accounting Standards Board (“FASB”) issued a new standard that
changes the accounting for certain aspects of share-based payments to employees, including a provision allowing
companies to make an election to account for award forfeitures as they occur, rather than estimating them at the
time of grant. We early-adopted the new guidance in the third quarter of fiscal year 2016, which required us to
reflect any adjustments as of January 1, 2016, the beginning of the annual period that includes the interim period
of adoption. In connection with this early adoption we made the election to account for award forfeitures as they
occur, and we recorded a cumulative-effect adjustment to beginning retained earnings of $0.1 million, net of tax.
Share-based compensation charges are recorded across the consolidated statement of operations based upon the
grantee’s primary function.

Commitments and Contingencies

In the normal course of business, we are subject to proceedings, lawsuits, and other claims and assessments
for matters related to, among other things, patent infringement, business acquisitions, employment, and product
recalls. We assess the likelihood of any adverse judgments or outcomes to these matters as well as potential
ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies is
made after careful analysis of each individual issue. The required reserves may change in the future due to new
developments in each matter or changes in approach such as a change in settlement strategy in dealing with these
matters. We record charges for the losses we anticipate incurring in connection with litigation and claims against
us when we conclude a loss is probable and we can reasonably estimate these losses. During the years ended
December 31, 2016, 2015 and 2014, we were not subject to any material litigation or claims and assessments.

Income Taxes

We account for income taxes under the asset and liability method of accounting for income taxes. Under the
asset and liability method, deferred taxes are determined based on the difference between the financial reporting
and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are
expected to reverse. The provision for income taxes includes taxes currently payable and deferred taxes resulting
from the tax effects of temporary differences between the financial statement and tax bases of assets and
liabilities. We maintain valuation allowances where it is more likely than not that all or a portion of a deferred
tax asset will not be realized. Changes in the valuation allowances are included in our tax provision in the period
of change. In determining whether a valuation allowance is warranted, we evaluate factors such as prior earnings
history, expected future earnings, carry-back and carry-forward periods and tax strategies that could potentially
enhance the likelihood of the realization of a deferred tax asset.

F-16

We recognize, measure, present and disclose in our financial statements, uncertain tax positions that we
have taken or expect to take on a tax return. We recognize in our financial statements the impact of tax positions
that meet a “more likely than not” threshold, based on the technical merits of the position. The tax benefits
recognized in the financial statements from such a position are measured based on the largest benefit that has a
greater than fifty percent likelihood of being realized upon ultimate settlement.

Our policy is to classify interest and penalties related to unrecognized tax benefits as income tax expense.

In 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”, which

simplified the presentation of deferred income taxes. This ASU required that deferred tax assets and liabilities be
classified as non-current in a statement of financial position. We early adopted ASU 2015-17 effective in 2015
on a prospective basis. Adoption of this ASU resulted in a reclassification of our net current deferred tax asset to
the net non-current deferred tax asset in our Consolidated Balance Sheet as of December 31, 2015.

A provision has not been made for U.S. or additional non-U.S. taxes on $1.2 million of undistributed
earnings of international subsidiaries that could be subject to taxation if remitted to the U.S. because we plan to
keep these amounts permanently reinvested overseas. To the extent such foreign earnings were remitted in the
future a deferred tax liability of $0.4 million would be recorded.

Comprehensive Income

Comprehensive income is defined as the change in equity of a business enterprise during a period from

transactions and other events and circumstances from non-owner sources. Other than reported net income,
comprehensive income includes foreign currency translation adjustments, which are disclosed in the
accompanying consolidated statements of comprehensive income. There were no reclassifications out of
comprehensive income for the years ended December 31, 2016 and 2015.

Accumulated other comprehensive loss consisted of foreign currency translation adjustment losses of $4.6

million and $4.0 million as of December 31, 2016 and 2015, respectively.

Restructuring

We record restructuring charges incurred in connection with consolidation or relocation of operations,
exited business lines, reductions in force, or distributor terminations. These restructuring charges, which reflect
our commitment to a termination or exit plan that will begin within twelve months, are based on estimates of the
expected costs associated with site closure, legal matters, contract terminations, severance payments, or other
costs directly related to the restructuring. If the actual cost incurred exceeds the estimated cost, an additional
charge to earnings will result. If the actual cost is less than the estimated cost, a credit to earnings will be
recognized.

Earnings per Share

We compute basic earnings per share by dividing net income available for common stockholders by the
weighted average number of shares outstanding during the year. Except where the result would be anti-dilutive to
net income per share, diluted earnings per share has been computed using the treasury stock method and reflects
the potential vesting of restricted common stock and the potential exercise of stock options, as well as their
related income tax effects.

F-17

The computation of basic and diluted net income per share is as follows:

Year ended December 31,

2016

2015

2014

(in thousands, except per share data)

Basic:

Net income available for common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . $10,590 $ 7,758

$ 3,915

Weighted average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18,485

17,764

16,614

Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

0.57 $

0.44

$

0.24

Diluted:

Net income available for common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . $10,590 $ 7,758

$ 3,915

Weighted-average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock equivalents, if dilutive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18,485
756

17,764
552

16,614
394

Shares used in computing diluted earnings per common share . . . . . . . . . . . . . .

19,241

18,316

17,008

Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

0.55 $

0.42

$

0.23

Shares excluded in computing diluted earnings per share as those shares would be

anti-dilutive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

45

55

277

Recent Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board (“FASB”) issued an accounting standards
update, ASU 2017-01, which changes the definition of a business for purposes of determining whether a business
has been acquired or sold. The amendment is intended to help companies evaluate whether transactions should be
accounted for as acquisitions (or disposals) of assets or businesses. The new standard is effective for us
beginning January 1, 2018, with early adoption permitted. The adoption of this standard is not expected to have a
material impact on our financial statements.

In August 2016, the FASB issued an accounting standards update, ASU 2016-15, which changes the
classification of certain cash receipts and cash payments within the statement of cash flows. The new standard is
effective for us beginning January 1, 2018, with early adoption permitted. The adoption of this standard is not
expected to have a material impact on our financial statements.

In February 2016, the FASB issued its new lease accounting guidance in Accounting Standards Update
(ASU) No. 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the
following for all leases (with the exception of short-term leases) at the commencement date: a lease liability,
which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and a
right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset
for the lease term. The new lease guidance simplifies the accounting for sale and leaseback transactions primarily
because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source
of off-balance sheet financing. The standard is effective for public companies for fiscal years beginning after
December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year
entity). Early application is permitted. Lessees (for capital and operating leases) and lessors (for sales-type, direct
financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or
entered into after, the beginning of the earliest comparative period presented in the financial statements. The
modified retrospective approach would not require any transition accounting for leases that expired before the
earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach.
We have not yet determined the impact on our consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of
Inventory, or ASU 2015-11. ASU 2015-11 requires an entity to measure in-scope inventory at the lower of cost

F-18

and net realizable value. ASU 2015-11 is effective for fiscal years beginning after December 15, 2016, and for
interim periods within those fiscal years. A reporting entity should apply ASU 2015-11 prospectively with earlier
application permitted as of the beginning of an interim or annual reporting period. We do not expect the adoption
of this ASU to have a material impact on our consolidated financial statements.

In May 2014, the FASB and the International Accounting Standards Board (the “IASB”) issued
substantially converged final standards on revenue recognition. The FASB’s Accounting Standards Update
(“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), as amended from time to time,
outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with
customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The
new revenue recognition guidance becomes effective for the Company on January 1, 2018, with early adoption
permitted for the Company on January 1, 2017. Entities have the option of using either a full retrospective or a
modified approach to adopt the guidance in the ASU. The Company does not currently expect that adoption of
the updated standard will have a material impact on its consolidated financial statements.

2. Acquisitions and Divestitures

Acquisitions are accounted for using the acquisition method and the acquired companies’ results have been

included in the accompanying consolidated financial statements from their respective dates of acquisition. In
each case for the acquisitions disclosed below, pro forma information assuming the acquisition had occurred at
the beginning of the earliest period presented is not included as the impact is immaterial.

Our acquisitions have historically been made at prices above the fair value of the acquired identifiable
assets, resulting in goodwill, due to expectations of synergies that will be realized by combining businesses.
These synergies include the use of our existing sales channel to expand sales of the acquired businesses’
products, consolidation of manufacturing facilities, and the leveraging of our existing administrative
infrastructure.

RestoreFlow Allografts

On November 10, 2016, we entered into an agreement to acquire the assets of Restore Flow Allografts,
LLC, a provider of human vascular tissue processing and cryopreservation services, for an initial purchase price
of $12 million, with additional payments of up to $6 million depending upon the satisfaction of certain
contingencies. A payment of $2 million is due not later than 15 days following the expiration of the 18 month
period following the closing date, subject to reductions as specified in the agreement for each calendar month
that certain retained employees are not employed by us due to resignation without good reason, or termination for
cause, both as defined in the agreement. The portion of this payment that will be paid to retained employees and
that is contingent on their continuing employment, approximately $0.9 million, will be accounted for as post-
combination compensation expense rather than purchase consideration. There are also two potential earn-outs
under the agreement. The first earn-out is calculated at 50% of the amount by which net revenue in the first 12
months following the closing exceeds $6 million, with such payout not to exceed $2 million. The second earn-out
is calculated at 50% of the amount by which net revenue in the second 12 months following the closing exceeds
$9 million, with such payout not to exceed $2 million.

The RestoreFlow business derives revenue from human tissue preservation services, in particular the
processing and cryopreservation of vascular veins and arteries. By federal law, human tissues cannot be bought
or sold. Therefore, the tissues we obtain and preserve are not held as inventory, and the costs we incur to procure
and process vascular tissues are instead accumulated and deferred. Revenues are recognized for the provision of
cryopreservation services rather than product sales. Revenues from the acquisition date through December 31,
2016 were $0.5 million.

The acquired assets included intellectual property, permits and approvals, data and records, equipment and
furnishings, accounts receivable, inventory, literature, and customer and supplier information. We also assumed
certain accounts payable. We accounted for the acquisition as a business combination.

F-19

The following table summarizes the preliminary purchase price allocation as of December 31, 2016:

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred cryopreservation costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill

Allocated
Fair Value

(in thousands)

$

561
2,673
125
(286)
4,544
5,342

Purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$12,959

The goodwill is deductible for tax purposes over 15 years.

The following table reflects the preliminary allocation of the acquired intangible assets and related estimated

useful lives:

Non-compete agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tradename . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Procurement contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Allocated
Fair Value

(in thousands)
$ 180
271
617
2,793
683

Weighted
Average
Useful Life

5.0 years
9.0 years
9.0 years
10.5 years
12.5 years

Total intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,544

The weighted-average amortization period of the acquired intangible assets was 10.3 years.

ProCol Biologic Graft

On March 18, 2016, we acquired the ProCol biologic vascular graft (“ProCol”) business for $2.7 million
from Hancock Jaffe Laboratories, Inc. (HJL) and CryoLife, Inc. (CRY). HJL was the owner and manufacturer of
ProCol and CRY was the exclusive distributor of the ProCol graft. CRY also owned an option to purchase the
ProCol business, which we acquired from CRY. We bought finished goods inventory and other ProCol related
assets from CRY for $2.0 million, which was paid in full at closing. We bought other ProCol assets from HJL for
$0.7 million, 50% of which was paid at closing, 25% of which was paid in the quarter ended September 30, 2016
and the remainder of which will be paid within one year of closing. Additional consideration is payable to HJL
for a three-year period following the closing, calculated at 10% of ProCol revenues. This additional consideration
was initially valued at $0.3 million and will be re-measured each reporting period until the payment requirement
ends, with any adjustments reported in income from operations. For the year ended December 31, 2016, the
amount of the adjustment was not material to our financial statements.

Assets acquired included inventory, intellectual property and a related license, the ProCol trade name,
customer lists, non-compete agreements and certain equipment and supplies. We did not assume any liabilities.
We accounted for the acquisition as a business combination.

F-20

The following table summarizes the preliminary purchase price allocation as of December 31, 2016:

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing equipment and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill

Allocated
Fair Value

(in thousands)
$2,080
25
620
318

Purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,043

The goodwill is deductible for tax purposes over 15 years.

The following table reflects the preliminary allocation of the acquired intangible assets and related estimated

useful lives:

Non-compete agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tradename . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Allocated
Fair Value

(in thousands)
$ 84
109
277
150

Weighted
Average
Useful Life

5.0 years
9.5 years
9.0 years
9.0 years

Total intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$620

The weighted-average amortization period of the acquired intangible assets was 8.6 years.

Tru-Incise Valvulotome

In May 2015, we entered into an asset purchase agreement with UreSil, LLC (UreSil) to acquire the
production and distribution rights of UreSil’s Tru-Incise valvulotome for sales outside the United States for a
purchase price of approximately $1.4 million. We paid $1.1 million at the closing and $0.2 million in 2016, with
the remaining $0.1 million payable in 2017. We accounted for the acquisition as a business combination. Assets
acquired included inventory and intellectual property. We did not assume any liabilities. The purchase
accounting is complete.

The following table summarizes the purchase price allocation at the date of the acquisition:

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill

Allocated
Fair Value

(in thousands)

$

88
545
742

Purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,375

The goodwill is deductible for tax purposes over 15 years.

F-21

The following table reflects the allocation of the acquired intangible assets and related estimated useful

lives:

Non-compete agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tradename license . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Allocated
Fair Value

(in thousands)
$120
17
391
17

Weighted
Average
Useful Life

5.0 years
3.0 years
7.0 years
3.0 years

Total intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$545

Other 2015 Items

Following the May 2015 Tru-Incise valvulotome acquisition, we entered into definitive agreements with

seven UreSil distributors to terminate their distribution of the Tru-Incise valvulotome for aggregate termination
fees of $0.2 million. We recorded approximately $0.2 million of intangible assets with a weighted-average
amortization period of 3.0 years.

In August 2015, we entered into a definitive agreement with Grex Medical Oy (Grex), our distributor in

Finland to terminate their distribution of our products, and we began selling direct to hospitals in Finland as of
January 1, 2016. The agreement required us to pay approximately $0.2 million in exchange for the purchase of
customer lists and a non-compete agreement.

Angioscope

In September 2014, we entered into an asset purchase agreement with Applied Medical Resource
Corporation (Applied Medical) to acquire substantially all the assets related to Applied Medical’s angioscope
product line for $0.4 million. We paid $0.3 million at closing and the remaining $0.1 million is payable in
December 2015. We accounted for the acquisition as a business combination. Assets acquired include inventory,
property and equipment, and intellectual property.

The following table summarizes the fair value of the assets acquired and liabilities assumed at the date of

the acquisition:

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill

Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The goodwill is deductible for tax purposes over 15 years.

Allocated
Fair Value

(in thousands)
$ 26
38
276
80

420
—

$420

F-22

The following table reflects the allocation of the acquired intangible assets and related estimated useful

lives:

Allocated
Fair Value

(in thousands)

Non-compete agreement
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tradename . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

3
28
163
82

$276

Weighted
Average
Useful Life

2.0 years
7.0 years
7.0 years
9.0 years

Xenotis Pty Ltd

In August 2014, we entered into a stock purchase agreement with the shareholders of Xenotis Pty Ltd
(Xenotis) to acquire all of the capital stock of Xenotis for $6.7 million with a mechanism for a purchase price
adjustment based on the net tangible assets of Xenotis at closing. Xenotis is the parent company of Bio Nova
International, the manufacturer and marketer of the Omniflow II biosynthetic vascular graft for lower extremity
bypass and AV access. We paid $5.1 million at the closing and the remaining $1.4 million was paid in August
2015. The net tangible asset purchase price adjustment of $0.2 million was paid in November 2014. We
accounted for the acquisition as a business combination. Assets acquired include receivables, inventory,
equipment, a building, and intellectual property. Liabilities assumed included accounts payable and debt.

The following table summarizes the fair value of the assets acquired and liabilities assumed at the date of

the acquisition:

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill

Allocated
Fair Value

(in thousands)
$ 2,110
2,054
1,794
2,475

Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,433
(1,731)

Purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 6,702

Total liabilities assumed of $1.7 million include $1.1 million of assumed debt, which we paid in full in

August 2014. The purchase accounting is complete.

The goodwill of $2.5 million is not deductible for tax purposes. In addition, we acquired deferred tax assets
of $2.4 million which consist primarily of net operating loss carry-forwards and capital loss carry-forwards. We
assessed the need for a valuation allowance on the acquired deferred tax assets in Australia. Our assessment
considered evidence such as current profitability, utilization of certain available tax assets and liabilities, and
projected future earnings. Based on this evidence, we concluded that it was more likely than not that we would
not be able to utilize the deferred tax assets in Australia. We recorded a full valuation allowance on these
deferred tax assets.

F-23

The following table reflects the allocation of the acquired intangible assets and related estimated useful

lives:

Non-compete agreement
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tradename . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Allocated
Fair Value

(in thousands)
$ 135
142
1,465
52

Weighted
Average
Useful Life

5.0 years
7.0 years
7.0 years
7.0 years

Total intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,794

In September 2014, we entered into definitive agreements with eight former Xenotis distributors in Europe

to terminate their distribution of our Omniflow II biosynthetic vascular grafts for $1.3 million. We paid
approximately $1.1 million in 2014 with the remainder due in 2015. We recorded $0.4 million of inventory and
$0.9 million of intangible assets. We allocated the payment to the tangible and intangible assets acquired based
on the estimated fair value of each of these elements to the transactions. The weighted-average amortization
period for the acquired intangible assets is 5.0 years.

InaVein, LLC

In August 2013, we entered into an Asset Purchase Agreement with InaVein, LLC (InaVein) to acquire
substantially all the assets of InaVein for $2.5 million and potential acquisition-related contingent consideration
totaling $1.4 million in 2014 and 2015 dependent on the sales performance of the acquired business and the
timing of regulatory approval in China. We paid $2.1 million at the closing and the remaining $0.4 million fixed
payment was made in September 2014. We accounted for the acquisition as a business combination. Assets
acquired include receivables, inventory, equipment, and intellectual property. Liabilities assumed include
payables and service contracts.

The following table summarizes the fair value of the assets acquired and liabilities assumed at the date of

the acquisition:

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill

Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The goodwill is deductible for tax purposes over 15 years.

Allocated
Fair Value

(in thousands)
$ 670
154
1,143
668

2,635
(100)

$2,535

F-24

The following table reflects the allocation of the acquired intangible assets and related estimated useful

lives:

Non-compete agreement
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tradename . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Allocated
Fair Value

(in thousands)

$

70
163
354
556

Weighted
Average
Useful Life

5.0 years
8.0 years
6.0 years
7.0 years

Total intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,143

The contingent consideration was initially valued at the date of acquisition and is remeasured each reporting
period until the contingency is resolved. Based upon stronger than expected sales to China, we recorded an increase of
$0.1 million related to the contingent consideration, which was dependent on the sales performance of the acquired
business in the first year following the closing of the transaction as a charge to general and administrative expense in
2014. In October 2014, we paid $0.2 million related to the first sales related milestone. Neither the milestone related to
the timing of the regulatory approval in China nor the second sales milestone was achieved.

The UnBalloon Divestiture

In July 2015, we entered into an asset sales agreement with Merit Medical Ireland Limited to sell our
inventory, intellectual property, and customer lists associated with The UnBalloon non-occlusive modeling
catheter product line for $0.4 million which was recognized as a gain on divestiture in the third quarter of 2015.
During the year ended December 31, 2014, we had recognized an impairment charge of $0.2 million on The
UnBalloon non-occlusive modeling catheter product line. Additionally, in 2014 we recognized a $0.3 million
charge to cost of sales related to the non-occlusive modeling catheter inventory.

The fair market valuations associated with these transactions fall within Level 3 (see Note 14) of the fair

value hierarchy, due to the use of significant unobservable inputs to determine fair value. The fair value
measurements were calculated using unobservable inputs, primarily using the income approach, specifically the
discounted cash flow method. The amount and timing of future cash flows within our analysis was based on our
due diligence models, most recent operational budgets, long range strategic plans and other estimates.

3. Inventory and Other Deferred Costs

Inventory consists of the following:

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other deferred costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,810
2,489
11,662
2,617

$19,578

$ 3,062
2,681
9,462
—

$15,205

December 31, 2016

December 31, 2015

(in thousands)

We held inventory on consignment of $1.1 million as of both December 31, 2016 and 2015.

In connection with our recent acquisition of the RestoreFlow allograft business, other deferred costs include

costs incurred for the preservation of human vascular tissues available for shipment, tissues currently in active
processing, and tissues held in quarantine pending release to implantable status. By federal law, human tissues
cannot be bought or sold. Therefore, the tissues we preserve are not held as inventory, and the costs we incur to
procure and process vascular tissues are instead accumulated and deferred.

F-25

4. Property and Equipment

Property and equipment consists of the following:

As of December 31,

2016

2015

(in thousands)

Computers and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Building and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,801
10,331
6,579

$ 2,560
8,264
6,143

Gross property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19,711
(11,699)

16,967
(9,945)

Property and equipment, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 8,012

$ 7,022

Depreciation expense is as follows:

Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,986

(in thousands)
$1,881

$1,795

Year ended December 31,

2016

2015

2014

5. Goodwill and Other Intangibles

Goodwill consists of the following:

As of December 31,

2016

2015

Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effects of currency exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$17,789
5,660
(23)

$17,281
742
(234)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$23,426

$17,789

Other intangibles consist of the following:

December 31, 2016

December 31, 2015

Gross

Net

Gross

Net

Carrying Accumulated Carrying Carrying Accumulated Carrying

Value Amortization Value

Value Amortization Value

Product technology and intellectual property . . . . . $10,173
1,939
Trademarks, tradenames and licenses . . . . . . . . . . .
5,216
Customer relationships . . . . . . . . . . . . . . . . . . . . . .
1,558
Other intangible assets . . . . . . . . . . . . . . . . . . . . . . .

$4,017
1,359
2,588
1,025

(in thousands)
$6,156 $ 7,113
1,560
3,801
1,297

580
2,628
533

$3,247
1,230
2,143
815

$3,866
330
1,658
482

Total identifiable intangible assets . . . . . . . . . . . . . $18,886

$8,989

$9,897 $13,771

$7,435

$6,336

These assets are being amortized over useful lives ranging from 1 to 13 years. The weighted-average

amortization period for these intangibles as of December 31, 2016, is 8.9 years. Amortization expense is included
in general and administrative expense and is as follows:

Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,605

(in thousands)
$1,513

$1,539

Year ended December 31,

2016

2015

2014

F-26

Estimated amortization expense for each of the five succeeding fiscal years, based upon the intangible assets

at December 31, 2016, is as follows:

Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,737

(in thousands)
$1,388

$1,552

$1,114

$919

Year ended December 31,

2017

2018

2019

2020

2021

6. Accrued Expenses and Other Long-term Liabilities

Accrued expenses consist of the following:

Compensation and related taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income and other taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$6,124
312
122
2,246

$8,804

$6,062
483
530
1,762

$8,837

December 31,
2016

December 31,
2015

(in thousands)

Other long-term liabilities consist of the following:

Aquisition-related liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred rent
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,253
394
200
154

$2,001

$265
281
89
139

$774

December 31,
2016

December 31,
2015

(in thousands)

7. Commitments and Contingencies

Leases

We conduct the majority of our operations in leased facilities, which are accounted for as operating leases.
Certain leases include renewal options. In addition, we lease automobiles and equipment under operating leases.
There were no assets held under capital leases at December 31, 2016 and 2015.

Purchase Commitments

As part of our normal course of business, we have purchase commitments to purchase $2.4 million of
inventory through 2018. The purchase commitments for inventory are to be used in operations over the normal
course of business and do not represent excess commitments or loss contracts.

Rent expense was as follows:

Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,580

(in thousands)
$1,506

$1,435

F-27

Year ended December 31,
2015

2014

2016

At December 31, 2016, the minimum rental commitments under all non-cancelable operating leases with

initial or remaining terms of more than one year, for each of the following fiscal years, are as follows:

Contractual obligations

Total

Less than
1 year

1-3
years

3-5
years

More than
5 years

Operating leases . . . . . . . . . . . . . . . . . . . . . . .
Purchase commitments for inventory . . . . . . .

$ 8,498
2,418

Total contractual obligations . . . . . . . . . . . . .

$10,916

$1,546
2,393

$3,939

(in thousands)
$2,703
25

$2,217
—

$2,728

$2,217

$2,032
—

$2,032

8. Income Taxes

Income (loss) before income taxes is as follows:

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$12,600
3,642

(in thousands)
$10,469
955

$5,341
979

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$16,242

$11,424

$6,320

Year ended December 31,

2016

2015

2014

Certain of our foreign subsidiaries are included in the U.S. tax return as branches but are included as foreign

for purposes of the table above.

The provision (benefit) for income taxes is as follows:

Current:
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred:
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year ended December 31,

2016

2015

2014

(in thousands)

$4,409
393
710

$3,218
333
499

$2,058
238
181

5,512

4,050

2,477

197
166
(223)

140

(12)
(466)
94

(384)

(176)
(14)
118

(72)

Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,652

$3,666

$2,405

The Company elected to early-adopt ASU 2016-09 during the third quarter of 2016. Consequently, in 2016,

the Company recorded excess tax benefits of $0.3 million within income tax expense.

We have reviewed the tax positions taken, or to be taken, in our tax returns for all tax years currently open
to examination by a taxing authority. As of December 31, 2016, the gross amount of unrecognized tax benefits
exclusive of interest and penalties was $0.4 million, which may increase within the twelve months ending
December 31, 2017. We remain subject to examination until the statute of limitations expires for each respective

F-28

tax jurisdiction. The statute of limitations will be open with respect to these tax positions through 2025. A
reconciliation of beginning and ending amount of our unrecognized tax benefits is as follows:

2016

2015

2014

(in thousands)
$ 23
Unrecognized tax benefits at the beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
95 —
Additions for tax positions of current year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
213
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Reductions for settlements with taxing authorities.
Reductions for lapses of the applicable statutes of limitations . . . . . . . . . . . . . . . . . . . . . . . . —

$111
20
59 —
—
—

$ 82

(33)
(75)

Unrecognized tax benefits at the end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$390

$ 82

$ 23

Deferred taxes are attributable to the following temporary differences:

Deferred tax assets:
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserves and accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign branch deferred offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As of December 31,

2016

2015

(in thousands)

$

753
2,272
491
1,077
655
1,299
585
35

7,167

$

589
2,786
654
1,090
631
996
355
16

7,117

(571)
(3,956)
(1,374)
(43)

(668)
(3,504)
(1,176)
—

Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5,944)

(5,348)

Net deferred tax assets before valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,223
(1,765)

1,769
(2,242)

Net deferred tax liabiltity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (542) $ (473)

Deferred tax classification

Long-term deferred tax asset
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,400
(1,942)

$ 1,205
(1,678)

Net long-term deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (542) $ (473)

We have assessed the need for a valuation allowance against our deferred tax assets and continue to carry a

valuation allowance against $1.8 million of foreign deferred tax assets; based on the weight of available
evidence, we believe it is more likely than not such assets will not be realized. The valuation allowance against
our deferred tax assets may require adjustment in the future based on changes in the mix of temporary
differences, changes in tax laws, and operating performance.

In 2015, we released approximately $400,000 of valuation allowances on certain deferred assets associated

with state research and development credits. Our assessment considered evidence such as current profitability,
utilization of certain available tax assets and liabilities, and projected future earnings. Based on this evidence, we

F-29

concluded that it was more likely than not that we would generate sufficient pre-tax income in future periods to
utilize all of our deferred tax assets related to state research and development credits. In 2016, we assessed the
need for a valuation allowance on our state research and development credits and concluded that we would have
sufficient pre-tax income in future periods to utilize all of our deferred tax assets related to our state research and
development credits.

In 2016, we released approximately $295,000 and $18,000 of valuation allowances on deferred assets in
Spain and Switzerland, respectively. Our assessment considered evidence such as current profitability, utilization
of certain available tax assets and liabilities, and projected future earnings. Based on this evidence, we concluded
that we have generated consistent profitability in Spain and Switzerland and it is more likely than not that we
would generate sufficient pre-tax income in future periods to utilize all of our deferred tax assets in Spain and
Switzerland.

Realization of our deferred tax assets is dependent on our generating sufficient taxable income in future
periods. Although we believe it is more likely than not that future taxable income will be sufficient to allow us to
recover substantially all of the value of our deferred tax assets remaining after we apply the valuation allowances,
realization is not assured and future events could cause us to change our judgment. In the event that actual results
differ from our estimates, or we adjust these estimates in the future periods, further adjustments to our valuation
allowance may be recorded, which could materially impact our financial position and net income (loss) in the
period of the adjustment. As of December 31, 2016, we have net operating loss carryforwards in Australia of
$3.3 million that do not expire, in France of $2.6 million that do not expire, in Spain of $1.0 million that do not
expire, in Italy of $0.4 million that do not expire, in Sweden of $0.1 million that do not expire, in Norway of $0.1
million that do not expire and in Switzerland of $45,000 that begin to expire in 2020. We have a capital loss
carryforward in Australia of $3.6 million that does not expire. We also have state tax credit carryforwards of
approximately $1.1 million that are available to reduce future tax liabilities, which expire at various dates
through 2031, or can be carried forward indefinitely. Ownership changes, as defined by the Internal Revenue
Code, may limit the amount of net operating losses and research and experimentation credit carryforwards that
can be utilized annually to offset future taxable income and taxes payable.

A provision has not been made for U.S. or additional non-U.S. taxes on $1.2 million of undistributed
earnings of international subsidiaries that could be subject to taxation if remitted to the U.S. because we plan to
keep these amounts permanently reinvested overseas. To the extent such foreign earnings were remitted in the
future a deferred tax liability of $0.4 million would be recorded.

A reconciliation of the Federal statutory rate to our effective tax rate is as follows:

Federal statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State tax, net of federal benefit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of foreign taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subpart F income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign deferred tax liability offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research & development tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Italian permanent differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other permanent differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2016

2015

2014

35.0% 34.0% 34.0%
1.3% (2.1%) 2.3%
(1.9%) 1.4% (1.4%)
1.6% 2.2% 1.7%
(2.6%) 0.4% 0.1%
1.5% (0.9%) (1.9%)
(2.5%) (2.8%) (3.5%)
(0.7%) (1.5%) (2.4%)
(0.7%) 0.6% 4.3%
2.0% 0.6% (0.2%)
0.0% 0.0% 3.2%
1.2% 1.3% 3.1%
0.5% (1.1%) (1.3%)

Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34.8% 32.1% 38.0%

F-30

In 2016 the Internal Revenue Service completed an audit of our 2013 and 2014 U.S. federal tax returns. As a
result of the audit we paid $0.2 million in additional federal income taxes. Additionally, the adjustment settled on
for this audit resulted in an additional $0.2 million increase to our uncertain tax provisions for a state
carryforward. We are not currently under audit in any other tax jurisdictions.

As of December 31, 2016, a summary of the tax years that remain subject to examination in our most

significant tax jurisdictions are:

United States
Foreign

9. Stockholders’ Equity

Authorized Shares

2013 and forward
2009 and forward

Our Certificate of Incorporation, as amended and restated from time to time, authorizes the issuance of up to

37,000,000 shares of common stock of 3,000,000 shares of undesignated preferred stock.

Under the terms of our certificate of incorporation, our board of directors is authorized to issue shares of the

preferred stock in one or more series without stockholder approval. Our board of directors has the discretion to
determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion
rights, redemption privileges and liquidation preferences, of each series of preferred stock. Currently, we have no
shares of preferred stock outstanding.

Share Offering

On June 4, 2014, we issued 1,644,500 shares of our common stock, $0.01 par value per share, at a price to

the public of $7.00 per share less underwriting discounts. The net proceeds, after deducting the underwriting
discounts and other estimated offering expenses, were approximately $10.5 million. We have deployed a portion
of the net proceeds from the offering on acquisitions, and have used the remainder for general corporate
purposes, including continued development of our products, working capital and capital expenditures, payments
under our quarterly dividend program and deferred payments related to prior acquisitions.

Stock Award Plans

In May 2006 we approved a 2006 Stock Option and Incentive Plan (as subsequently amended, the 2006
Plan), which became effective upon our initial public offering. In 2010 we amended the 2006 Plan to increase the
aggregate pool of available shares to 3,000,000 of common stock, and in 2015 the 2006 Plan was amended to
increase the aggregate pool to 5,500,000 shares. The 2006 Plan allows for granting of incentive stock options,
non-qualified stock options, stock appreciation rights, RSUs, unrestricted stock awards, and deferred stock
awards to our officers, employees, directors, and consultants. Incentive stock options are required to be issued at
not less than fair market value at the date of the grant and generally vest over four or five years. The term of the
options is determined by our Board of Directors but in no event will exceed ten years from date of grant. In
connection with the adoption of the 2006 Plan, no further option grants were permitted under any previous stock
option plans and any expirations, cancellations, or terminations under the previous plans are available for
issuance under the 2006 Plan. We may satisfy awards upon exercise of stock options or RSUs with either newly
issued shares or treasury shares. The total number of shares currently authorized for the 2006 Plan is 7,118,003
shares, of which 1,745,953 remain available for grant as of December 31, 2016.

F-31

We have computed the fair value of employee stock options using the following weighted average

assumptions:

2016

2015

2014

Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average expected option term (in years) . . . . . . . .
Weighted average fair value per share of options granted . . .
Aggregate intrinsic value of options exercised . . . . . . . . . . .

1.3%
34.5%
1.2%
5.5
4.04
$
$2,391,154

1.4%
28.6%
1.8%
5.6
2.80
$
$6,534,800

1.8%
45.2%
2.0%
5.5
2.81
$
$819,478

A summary of option activity as of December 31, 2016 and the year then ended is presented below:

Number of
Shares

Weighted
Average
Exercise Price

Balance outstanding at December 31, 2015 . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled / Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,735,980
510,745
(233,495)
(33,729)

Balance outstanding at December 31, 2016 . . . . . . . . . . . .

1,979,501

Vested and exercisable at December 31, 2016 . . . . . . . . . .
. . . . . . . . . . . .
Expected to vest at December 31, 2016 (3)

640,024
1,339,477

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,979,501

$ 8.39
$14.57
$ 6.17
$ 8.13

$10.25

$ 7.70
$11.47

Weighted
Average
Remaining
Contractual
Term

(in years)
4.28

4.10

2.63
4.79

Aggregate
Intrinsic
Value

$15,381,584

$ 2,391,154

$29,871,569

$11,289,709

(1) The aggregate intrinsic value represents the difference between the exercise price and the closing price of

our stock on the date of exercise.

(2) The aggregate intrinsic value represents the difference between the exercise price and $25.34, the closing

price of our stock on December 31, 2016, for all in-the-money options outstanding.

(3) Options outstanding that are expected to vest had previously been presented net of estimated future option

forfeitures; upon early adoption of ASU 2016-09, we have elected to remove the forfeiture rate from the
calculation.

Restricted Stock Units

A summary of our RSU activity is as follows:

Balance outstanding at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares

191,345
128,947
(58,341)
(22,669)

Balance outstanding at December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

239,282

Weighted
Average
Grant Date
Fair Value

$ 8.45
$14.14
$ 8.00
$ 9.60

$11.51

(1) The number of RSUs vested includes the shares that we withheld on behalf of employees to satisfy

minimum statutory tax withholding requirements.

The fair values of the RSUs that vested during 2016, 2015, and 2014 were $0.8 million, $0.7 million, and

$0.5 million, respectively.

F-32

We repurchase shares of our common stock in order to cover any minimum tax withholding liability

associated with RSU vestings. A summary of our repurchases is as follows:

Shares of common stock repurchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average per share repurchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Aggregage purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21,671
$
14.33
$310,505

23,928
$
11.12
$266,090

2016

2015

Stock-based Compensation

The components of stock-based compensation expense included in the consolidated statements of operations

are as follows:

Stock option awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,116
564

(in thousands)
$ 992
432

$ 917
385

Total stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,680

$1,424

$1,302

2016

2015

2014

Stock-based compensation is included in our statements of operations as follows:

Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2016

2015

2014

$ 175
373
983
149

(in thousands)
$ 165
284
869
106

$ 150
309
757
86

Total stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,680

$1,424

$1,302

We expect to record the unamortized portion of share-based compensation expense of $6.1 million for
existing stock options and RSUs outstanding at December 31, 2016, over a weighted-average period of 3.8 years.

Stock Repurchase Plan

On July 25, 2016, our Board of Directors approved a stock repurchase program under which the Company is

authorized to repurchase up to $5.0 million of its common stock through transactions on the open market, in
privately negotiated purchases or otherwise. This program may be suspended or discontinued at any time, and
expires on the earlier of July 25, 2017 or when the authorized aggregate $5.0 million repurchase limit is reached.
We have not made any share repurchases under this program.

F-33

Dividends

In February 2011, our Board of Directors approved a policy for the payment of quarterly cash dividends on

our common stock. Future declarations of quarterly dividends and the establishment of future record and
payment dates are subject to approval by our Board of Directors on a quarterly basis. The dividend activity for
the periods presented is as follows:

Record Date

Payment Date

Per Share Amount

Dividend Payment

Fiscal Year 2016

March 21, 2016
May 25, 2016
August 22,2016
November 21, 2016

Fiscal Year 2015

March 20, 2015
May 22, 2015
August 20, 2015
November 20, 2015

April 4, 2016
June 8, 2016
September 2, 2016
December 5, 2016

April 3, 2015
June 5, 2015
September 3, 2015
December 4, 2015

$0.045
$0.045
$0.045
$0.045

$0.040
$0.040
$0.040
$0.040

(in thousands)

$825
$829
$833
$836

$700
$705
$715
$725

On February 16, 2017, our Board of Directors approved a quarterly cash dividend on our common stock of
$0.055 per share payable on April 6, 2017, to stockholders of record at the close of business on March 22, 2017,
which will total approximately $1.0 million in payments.

10. Profit-Sharing Plan

We offer a 401(k) profit-sharing plan (the Plan) covering eligible U.S. employees to make tax deferred
contributions, a portion of which are matched by us. We may make discretionary profit sharing contributions to
the Plan in an amount determined by our Board of Directors. Our contributions vest ratably over six years of
employment and amounted to approximately $0.1 million, $50,000 and $30,000 for 2016, 2015 and 2014,
respectively.

11. Restructuring Charges

In February 2014, we committed to a plan intended to improve operational efficiencies, which included a
reduction in force of approximately 10% of our workforce and other cost-cutting measures, including the transfer
of our Clinical Instruments manufacturing to our Burlington headquarters and corresponding closure of our
Southbridge manufacturing facility. As a result, we recorded approximately $0.4 million of severance related
restructuring expense during the year ended December 31, 2014.

In April 2014, we committed to an additional reduction in force of approximately seven employees. As a result,

we recorded approximately $0.1 million of severance related restructuring expense during the year ended
December 31, 2014.

The components of the restructuring charges were as follows:

Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year ended
December 31, 2014

(in thousands)
$499
27

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$526

F-34

The 2014 restructuring plans were paid in full during the year ended December 31, 2014.

12. Segment and Enterprise-wide Disclosures

The FASB establishes standards for reporting information regarding operating segments in financial
statements. Operating segments are identified as components of an enterprise that engage in business activities
for which separate, discrete financial information is available and is regularly reviewed by the chief operating
decision-maker in making decisions on how to allocate resources and assess performance. We view our
operations and manage our business as one operating segment. No discrete operating information is prepared by
us except for sales by product line and operations by legal entity for local reporting purposes.

Most of our revenues are generated in the United States, Germany, and other European countries, Canada,
the United Kingdom and Japan, and substantially all of our assets are located in the United States. Net sales to
unaffiliated customers by country were as follows:

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$50,439
10,350
28,362

(in thousands)
$45,177
9,090
24,085

$41,545
7,639
21,913

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$89,151

$78,352

$71,097

Year ended December 31,

2016

2015

2014

Total property and equipment held by geography were as follows:

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$6,116
1,535
279
82

$5,199
1,593
170
60

Total property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$8,012

$7,022

As of December 31,

2016

2015

(in thousands)

13. Supplemental Cash Flow Information

Supplemental disclosures of cash flow information are as follows:

Cash paid for income taxes, net . . . . . . . . . . . . . . . . . . . . . . . .

$4,231

(in thousands)
$4,792

$2,088

Year ended December 31,

2016

2015

2014

14. Fair Value Measurements

The fair value accounting guidance requires that assets and liabilities carried at fair value be classified and

disclosed in one of the following three categories:

•

•

•

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar
assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets
that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted
cash flow methodologies and similar techniques that use significant unobservable inputs.

F-35

Level 1 assets being measured at fair value on a recurring basis as of December 31, 2016 included our

money market mutual fund account.

We had no Level 2 assets being measured at fair value on a recurring basis as of December 31, 2016.

As discussed in Notes 1 and 2, several measurements of acquisition-related assets and impairments of
intangible assets were measured using Level 3 techniques. The following table provides a rollforward of the fair
value, as determined by Level 3 inputs, of contingent consideration liabilities for our prior and current
acquisitions.

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value included in earnings . . . . . . . . . . . . . . . . . .

Year ended December 31,

2016

2015

2014

$ —
1,301

(in thousands)
$—
—
(68) —
—
87

$ 99
—
(237)
138

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,320

$—

$ —

15. Quarterly Financial Data (unaudited)

2016

Three months ended

March 31

June 30

September 30 December 31

(in thousands, except per share data)

Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per share

$20,258
14,356
3,300
2,166

$22,389
15,367
3,783
2,598

$23,216
17,019
5,344
3,229

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$

0.12
0.11

$
$

0.14
0.14

$
$

0.17
0.17

$23,288
16,194
3,909
2,597

$
$

0.14
0.13

2015

Three months ended

March 31

June 30

September 30 December 31

(in thousands, except per share data)

Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per share

$18,947
13,117
2,309
1,369

$19,897
13,130
2,794
1,767

$19,025
13,516
3,321
2,092

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$

0.08
0.08

$
$

0.10
0.10

$
$

0.12
0.11

$20,483
14,403
3,089
2,530

$
$

0.14
0.13

F-36

Exhibit
Number

Exhibit Description

Incorporated By Reference

Form

Date

SEC File
Number

Filed
Herewith

EXHIBIT INDEX

1.1

2.1

2.2

2.3

2.4

2.5

2.6

2.7

2.8

3.1

3.2

3.3

4.1

10.1

10.2

Underwriting Agreement dated as of May 30,
2014, among the Registrant, Canaccord Genuity Inc. and
Stifel, Nicolaus & Company, Incorporated.

Purchase Option Agreement dated December 30, 2008
by and among the Registrant, Neovasc Inc. and Neovasc
Medical Inc.

Amendment No. 1 to Exclusive Distribution Agreement
and Purchase Option Agreement dated January 22, 2009
by and among the Registrant, Neovasc Inc. and Neovasc
Medical Inc.

Amendment No. 2 to Purchase Option Agreement dated
January 5, 2012 by and among the Registrant, Neovasc
Inc. and Neovasc Medical Inc.

Amendment No. 3 to Purchase Option Agreement dated
October 1, 2012 by and among the Registrant, Neovasc
Inc. and Neovasc Medical Inc.

Amendment No. 4 to Purchase Option Agreement dated
October 1, 2012 by and among the Registrant, Neovasc
Inc. and Neovasc Medical Inc.

Asset Purchase Agreement dated August 28, 2013
between Registrant and InaVein, LLC

Share Purchase Deed dated August 14, 2014 among
Xenotis Pty Ltd, the shareholders of Xenotis Pty Ltd,
Vinogopal Ramayah (as the Selling Shareholder
Representative), the Registrant and LeMaitre Vascular
Pty Ltd.

Asset Purchase Agreement dated November 10, 2016
between Registrant, Restore Flow Allografts, LLC and
certain individuals named therein.

8-K

5/30/14

001-33092

10-K 3/27/13

001-33092

10-K 3/27/13

001-33092

10-K 3/27/13

001-33092

10-K 3/27/13

001-33092

10-Q

8/7/14

001-33092

10-Q 11/7/13

001-33092

10-Q 11/6/14

001-33092

X

Amended and Restated By-laws of the Registrant

S-1/A 5/26/06

333-133532

Second Amended and Restated Certificate of
Incorporation of the Registrant

Amendment to Second Amended and Restated
Certificate of Incorporation of the Registrant

10-K 3/29/10

001-33092

8-K

6/15/12

001-33092

Specimen Certificate evidencing shares of common stock S-1/A 6/22/06

333-133532

Northwest Park Lease dated March 31, 2003, by and
between the Registrant and Roger P. Nordblom and Peter
C. Nordblom, as Trustees of Northwest Associates, as
amended

Registration Rights Agreement dated June 17, 1998, by
and between the Registrant and Housatonic Equity
Investors, L.P.

S-1

4/25/06

333-133532

S-1/A 5/26/06

333-133532

Exhibit
Number

10.3

10.4†

10.5†

10.6†

10.7†

10.8†

10.9†

10.10†

10.11†

10.12†

10.13†

10.14†

10.15

10.16

10.17

10.18†

10.19†

Exhibit Description

Incorporated By Reference

Form

Date

SEC File
Number

Filed
Herewith

Director Compensation Policy

10-K

3/27/12

001-33092

Executive Retention and Severance Agreement dated
October 10, 2005, by and between the Registrant and
George W. LeMaitre

Managing Director Employment Agreement dated
October 1, 2008, by and between LeMaitre Vascular
GmbH and Peter Gebauer, as amended

Employment Agreement dated June 20, 2006, by and
between the Registrant and David Roberts

Employment Agreement dated April 20, 2006, by and
between the Registrant and Joseph P. Pellegrino

1997 Stock Option Plan and form of agreements
thereunder

1998 Stock Option Plan and form of agreements
thereunder

2000 Stock Option Plan and form of agreements
thereunder

2004 Stock Option Plan and form of agreements
thereunder

S-1/A

5/26/06

333-133532

10-K

3/31/09

001-33092

S-1/A

6/22/06

333-133532

S-1/A

6/22/06

333-133532

S-1

4/25/06

333-133532

S-1

4/25/06

333-133532

S-1

4/25/06

333-133532

S-1

4/25/06

333-133532

Second Amended and Restated 2006 Stock Option and
Incentive Plan and form of agreements thereunder

8-K

6/18/10

001-33092

Form of Indemnification Agreement between the
Registrant and its directors and executive officers

S-1/A

5/26/06

333-133532

Form of Restricted Stock Unit Award Agreement under
the Registrant’s 2006 Stock Option and Incentive Plan

8-K

12/26/06

001-33092

Second Amendment of Lease dated May 21, 2007, by
and between Rodger P. Nordblom and Peter C.
Nordblom, as Trustees of Northwest Associates, and
Registrant

Third Amendment of Lease dated February 26, 2008,
by and between Rodger P. Nordblom and Peter C.
Nordblom, as Trustees of Northwest Associates, and
Registrant

Fourth Amendment of Lease dated October 31, 2008,
by and between Rodger P. Nordblom and Peter C.
Nordblom, as Trustees of Northwest Associates, and
Registrant

First Amendment to Executive Retention and Severance
Agreement dated December 23, 2008, by and between
the Registrant and George W. LeMaitre

First Amendment to Employment Agreement dated
December 19, 2008, by and between the Registrant and
David Roberts

8-K

6/15/07

001-33092

8-K

4/10/08

001-33092

10-K

3/31/09

001-33092

10-K

3/31/09

001-33092

10-K

3/31/09

001-33092

Exhibit
Number

10.20†

10.21

10.22

10.23

10.24

10.25

10.26

10.27

10.28

10.29†

10.30†

10.31†

21.1

23.1

23.2

24.1

Exhibit Description

First Amendment to Employment Agreement dated
December 19, 2008, by and between the Registrant and
Joseph P. Pellegrino

Fifth Amendment of Lease dated March 23, 2010, by and
between Rodger P. Nordblom and Peter C. Nordblom, as
Trustees of Northwest Associates, and Registrant

Northwest Park Lease dated March 23, 2010, by and
between Rodger P. Nordblom and Peter C. Nordblom, as
Trustees of Northwest Associates, and Registrant

First Amendment to Northwest Park Lease dated
September 14, 2010, by and between Rodger P.
Nordblom and Peter C. Nordblom, as Trustees of
Northwest Associates, and Registrant

Second Amendment to Northwest Park Lease dated
October 31, 2011, by and between NWP Building 4 LLC,
as successor-in-interest to Trustees of Northwest
Associates, and Registrant

Third Amendment of Northwest Park Lease dated
August 31, 2012, by and between NWP Building 4 LLC,
as successor-in-interest to Trustees of Northwest
Associates, and Registrant

Lease dated December 20, 2013, by and between N.W.
Building 3 Trust and Registrant

Fourth Amendment of Lease dated December 20, 2013,
by and between NWP Building 4 LLC, as successor-in-
interest to the Trustees of Northwest Associates, and
Registrant

Sixth Amendment of Lease dated December 20, 2013, by
and between NWP Building 5 LLC, as successor-in-
interest to the Trustees of Northwest Associates, and
Registrant

Amended and Restated Management Incentive
Compensation Plan

Third Amended and Restated 2006 Stock Option and
Incentive Plan

Executive Retention and Severance Agreement dated
October 26, 2015, by and between the Registrant and
Michael T. Wijas.

List of Subsidiaries

Consent of Grant Thornton LLP

Consent of Ernst & Young LLP

Power of Attorney (included on the Signatures page of
this Annual Report on Form 10-K)

Incorporated By Reference

Form

Date

SEC File
Number

Filed
Herewith

10-K

3/31/09

001-33092

10-K

3/29/10

001-33092

10-K

3/29/10

001-33092

10-K

3/27/12

001-33092

10-K

3/27/12

001-33092

10-K

3/27/13

001-33092

8-K

12/23/13

001-33092

8-K

12/23/13

001-33092

8-K

12/23/13

001-33092

8-K

2/25/14

001-33092

8-K

6/8/15

001-33092

10-K

3/10/16

001-33092

X

X

X

X

Exhibit
Number

31.1

31.2

32.1*

32.2*

Exhibit Description

Certification of Chief Executive Officer, as required by
Rule 13a-14(a) or Rule 15d-14(a)

Certification of Chief Financial Officer, as required by
Rule 13a-14(a) or Rule 15d-14(a)

Certification of Chief Executive Officer, as required by
Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of
Chapter 36 of Title 18 of the United States Code (18 U.S.C.
§1350)

Certification of Chief Financial Officer, as required by
Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of
Chapter 36 of Title 18 of the United States Code (18 U.S.C.
§1350)

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

XRBL Taxonomy Extension Presentation Linkbase
Document.

Incorporated By Reference

Form Date

SEC File
Number

Filed
Herewith

X

X

X

X

X

X

X

X

X

X

†
*

Indicates a management contract or any compensatory plan, contract, or arrangement.
The certifications attached as Exhibit 32.1 and 32.2 that accompany this Annual Report on Form 10-K, are
not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference
into any filing of LeMaitre Vascular, Inc. under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-K, irrespective of
any general incorporation language contained in such filing.

Board of Directors

Lawrence J. Jasinski1, 2, 3

Joseph P. Pellegrino, Jr.

Michael H. Thomas2,3

Chief Executive Officer
ReWalk Robotics Ltd.
Director since 2003

George W. LeMaitre

Chairman & Chief Executive Officer
LeMaitre Vascular, Inc.
Director since 1992

John J. O’Connor1

Retired Vice Chairman of Services
PricewaterhouseCoopers LLP
Director since 2008

Chief Financial Officer & Secretary
LeMaitre Vascular, Inc.
Director since 2016

David B. Roberts

President
LeMaitre Vascular, Inc.
Director since 2001

John A. Roush1

Former Chief Executive Officer
Novanta Inc.
Director since 2014

Retired Chief Executive Officer
Bionostics, Inc.

Director since 2013

1 Member of the Audit Committee
2 Member of the Compensation Committee
3 Member of the Nominating and Corporate

Governance Committee

Stockholder Information

Price Range of Common Stock
Our common stock trades on the NASDAQ
Global Market under the symbol “LMAT”. The
following table sets forth the high and low closing
sale prices of our common stock for the periods
indicated.

Price Range

2015 HIGH

LOW

First Quarter

$ 8.38

$ 7.29

Second Quarter

$12.06

$ 8.20

Third Quarter

$14.30

$11.13

Fourth Quarter

$17.77
2016 HIGH

$12.01
LOW

First Quarter

$16.44

$12.50

Second Quarter

$16.72

$13.89

Third Quarter

$21.78

$13.56

Fourth Quarter

$25.46

$18.95

Transfer Agent
Inquiries concerning the transfer or exchange of
shares, lost stock certificates, duplicate mailings
or changes of address should be directed to our
transfer agent at:

Investor Information Requests
Investors, stockholders and security analysts
seeking information about us should refer to our
investor relations website at ir.lemaitre.com or call
Investor Relations at 781-221-2266.

Computershare Investor Services
250 Royall Street
Canton, MA 02021

Independent Auditors
Grant Thornton LLP
Boston, MA
Auditors since 2015

Annual Meeting
The annual meeting of stockholders will take
place on Monday, June 5, 2017, beginning at
10:00 a.m. at our offices at 43 Second Avenue,
Burlington, Massachusetts.

Other Information
Reports on Form 10-K and Form 10-Q, Current
Reports on Form 8-K and amendments to those
reports are available free of charge through the
investor relations section of our website at
ir.lemaitre.com. Copies of these reports are also
available by writing to us at:

Investor Relations
LeMaitre Vascular, Inc.
63 Second Avenue
Burlington, MA 01803 USA

Executive Committee

George W. LeMaitre

Laurie A. Churchill

Chairman & Chief Executive Officer

David B. Roberts

President

Joseph P. Pellegrino, Jr.

Chief Financial Officer

Peter R. Gebauer

President, International

Trent G. Kamke

Senior Vice President, Operations

Michael T. Wijas

Vice President, Sales, The Americas

Senior Vice President & General Counsel
Kimberly L. Cieslak

Vice President, Marketing
Ryan H. Connelly

Vice President, Research & Development
Giovannella Deiure

Country Manager, Italy
Maik D. Helmers

Vice President, Central European Sales
Andrew Hodgkinson

Senior Vice President, Clinical, Regulatory & Quality
Affairs

Roli Kumar-Choudhury
Director, Quality Assurance
Ste´ phane Maier
Director, International Operations
Wolfgang Meichelboeck, Dipl.-Ing.
Vice President, Marketing International
Jonathan W. Ngau
Vice President, Information Technology
Nobuhiro Okabe
Country Manager, Japan
James Russell
Director, Operations
Xiang Zhang
Vice President, Regulatory Affairs

CORPORATE
HEADQUARTERS

LeMaitre Vascular, Inc.
63 Second Avenue
Burlington, MA 01803
USA

Tel: +1-781-221-2266
Fax: +1-781-425-5049

INTERNATIONAL
HEADQUARTERS

LeMaitre Vascular GmbH
Otto-Volger-Str. 5a/b
65843 Sulzbach/Ts.
Germany

Tel: +49-(0)6196-659230
Fax: +49-(0)6196-527072

ASIA-PACIFIC
HEADQUARTERS

LeMaitre Vascular GK
1F Kubodera Twin Tower Bldg.
2-9-4 Kudan-minami, Chiyoda-ku
Tokyo 102-0074 Japan

Tel: +81-(0)3-5215-5681
Fax: +81-(0)3-5215-5682